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EXECUTIVE SUMMARY

Djibouti, a country with few resources, recognizes the crucial need for foreign direct investment (FDI) to stimulate economic development. The country’s assets include a strategic geographic location, free zones, an open trade regime, and a stable currency. Djibouti has identified a number of priority sectors for investment, including transport and logistics, real estate, energy, and tourism. Djibouti’s investment climate has improved in recent years, which has led to interest by U.S. and other foreign firms. There are, however, a number of reforms still needed to promote investment.

In 2019, according to the UN Conference of Trade and Development, FDI stock represented 52.5% of GDP, up slightly from 52.2% in 2018. Real GDP growth has remained between 5% and a little over 8% per year for the last five years. Inflation decreased to 0.1 % in 2018 then peaked at an estimated 3.3% in 2019 and is expected to decrease in 2020. In recent years, Djibouti undertook a surge of foreign-backed infrastructure loans to posture themselves as the “Singapore of Africa.” Major projects have included a new gas terminal and pipeline to Ethiopia, a new port, improved road systems, a railroad connecting Djibouti and Addis Ababa, and a water pipeline from Ethiopia. In April 2018, the Government of Djibouti presented tax labor, and financial reforms to improve their investment climate.

Djibouti remains below regional and world averages in the World Bank’s “Doing Business” reports but has been steadily improving in recent years from 171 in 2017 to 112 (of 190 countries) in the 2020 ranking. Various business climate reforms were introduced in 2020 with the objectives of improving competitiveness both regionally and internationally. These reforms included starting online registration for companies and the creation of Djibouti Port Community System platform which is a portal that provides a comprehensive set of online services to the business community.

Economic development and foreign investment is hindered by high electricity costs, high unemployment, an unskilled workforce, regional instability, opaque business practices, compliance risks, corruption, and a weak financial sector. The World Bank estimated the government’s public debt-to-GDP ratio was 66.7 in 2019 with a projection of 69.9 % in 2020 which will gradually decrease over the years. The majority of the debt is owed to Chinese entities.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 126 of 175 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 112 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 N/A https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 N/A https://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2019 USD 3,540 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Djibouti’s laws encourage FDI, with state-run media providing favorable coverage of projects funded by foreign entities. The government sees FDI as a driving force behind Djibouti’s economic growth. Faced with high unemployment rates of over 39%, FDI is expected to generate jobs.

There are no laws, practices, or mechanisms that discriminate against foreign investors. Navigating the bureaucracy, however, can be complicated. Certain sectors, most notably public utilities, are state-owned and are not open to investors. The state-owned company Djibouti Electricity (EDD) had a monopoly on electricity production for decades, however in July 2015, the Djiboutian government approved a bill liberalizing the production of electricity. The energy sector is now open to competition through Power Purchase Agreements, however EDD retains all rights to the transmission and distribution of electricity. The liberalization of production has been a positive step in promoting private investment in the energy sector.

Djibouti’s National Investment Promotion Agency (NIPA), created in 2001 under the Ministry of Finance, promotes private-sector investment, facilitates investment operations, and works to modernize the country’s regulatory framework. NIPA assists foreign and domestic investors by disseminating information and streamlining administrative procedures. In March 2017, NIPA’s one-stop-shop was officially inaugurated. The NIPA is the main coordinator of the one-stop-shop which houses several agencies. NIPA has identified several priority sectors for investment, including infrastructure and renewable energy.

A new Minister of Investment position was created in 2016 to further attract and reach out to potential investors. The Minister reports directly to the presidency.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities have equal rights in establishing and owning business enterprises and engaging in all forms of remunerative activity. Furthermore, foreign investors are not required by law to have a local partner except in the insurance industry, and there, only if the company is registered as a local company and not a branch of an existing foreign company. There is no established screening process for FDI; it is encouraged and given favorable tax status. Specific terms are negotiated on a case-by-case basis. Many companies therefore have a unique status created by agreement with varying preferences and advantages.

Other Investment Policy Reviews

N/A

Business Facilitation

The government of Djibouti has facilitated the registration of business by reducing the capital needed for investment, simplifying the formalities needed to register with the Intellectual Property office, and simplifying certain tax procedures. The most important result is the finalization of a one-stop shop, managed by NIPA. The one-stop-shop brings together all the agencies with which a company must register.

Typically, a company registers with the following offices: Djibouti Office of Intellectual Property, Tax office, and the Social Security office. Online registration is not possible; the normal registration process takes 14 days, according to the World Bank. In Djibouti, new businesses must have every document notarized to begin operations. Djibouti ranked 112 out of 190 countries in the World Bank 2020 Ease of Doing Business report.

Outward Investment

The government neither promotes nor restricts outward investment.

2. Bilateral Investment and Taxation Treaties

Djibouti does not have a bilateral investment treaty (BIT) nor does it have a bilateral taxation treaty with the United States. However, Djibouti is eligible to benefit from the African Growth and Opportunity Act (AGOA). The Common Market for Eastern and Southern Africa (COMESA), which Djibouti is a member of, signed a Trade and Investment Framework Agreement (TIFA) with the United States in 2001.

In March 2018, Djibouti signed the trade agreement for the African Continental Free Trade Area (AfCFTA), paving the way for a liberalized market for goods and services across the continent. A total of 54 countries have signed the agreement and Djibouti is one of 30 countries to have ratified the agreement. Djibouti has signed bilateral investment treaties with several countries. There is no publicly available list of these treaties, and the terms are not standardized from one treaty to the next. Other treaties to which Djibouti is a party include: ESA (Eastern and South Eastern Africa)-EU Interim Economic Partnership Agreement, COMESA, Agreement for the Promotion, Protection and Guarantee of Investment among Member States of the Organization of Islamic Conference, Cotonou Agreement, AU Treaty, League of Arab States Investment, Arab League Investment Agreement, and Arab Economic Unity Agreement.

Business tax exoneration is given to all newly registered foreign and Djiboutian companies for the first three years of operations for those operating in Classes V through VIII (110,000 DJF to 513,000 DJF worth of annual business taxes). For those above Class VIII (>513,000 DFJ worth of annual business taxes) and for all banks, they are exonerated from the “proportional” business tax which is equivalent to 20% of their business revenues. Business value added tax (VAT) and consumption tax exoneration is provided to foreign and domestic businesses working in the hospitality, heavy- and light-industrial, real estate and land development sectors during the construction and onboarding phases of the project. As soon as the project begins operations, then the tax exoneration ends. For example, a hotel that is undergoing construction may receive VAT and consumption tax exonerations until the hotel is open for business.

Real estate and sales tax reduction from 10% to 3% is provided for all sales and purchases of land, buildings, and homes for all transactions made by any entity including individuals, foreign or domestic businesses, organizations, schools, etc. Previously, only businesses could receive a tax break of paying 5% sales or purchase tax on land and buildings in their first purchase.

Corporate (profit) tax exoneration is provided for all businesses that enter the market with an initial investment of 50 million DJF or more, for up to seven years.

3. Legal Regime

Transparency of the Regulatory System

Government policies are sometimes not transparent, and do not foster competition on a non-discriminatory basis. Likewise, the legal, regulatory, and accounting systems are not always transparent nor are they consistent with international norms. Rule-making and regulatory authority exists at the state level.

The Djiboutian accounting system is loosely based on the French accounting system as it existed at independence (1977) and has been updated since that time. Legal and regulatory procedures are complex and unevenly enforced. Draft bills are initiated in a process of public consultation in which stakeholders participate. Regulatory actions including laws and decrees are available online at the following site: https://www.presidence.dj/recherchetexte.php 

The State General Inspection (SGI) is tasked with ensuring human and material resources in the public sector are properly utilized. It also acts as the enforcement mechanism.

The regulatory regime is written in a way that promotes open competition, at least in the sectors that are open to private investment. Implementation of the law is sometimes not transparent, and public functions such as licensing and issuing permits are not always done in a systematic fashion. Application of the rules is not always consistent. The laws are proposed by the ministry, and then debated and passed by the parliament. The promulgation by the president is the last stage. Public finances and the terms of debt obligations are opaque. Ministries and regulatory agencies do not develop forward regulatory plans – that is, a public list of anticipated regulatory changes or proposals intended to be adopted/implemented within a specified time frame.

International Regulatory Considerations

Djibouti is a member of the Intergovernmental Authority on Development (IGAD) and the Common Market for Eastern and Southern Africa (COMESA). The regulatory systems in these countries are not yet harmonized. The European norms and standards are referenced in Djibouti. Djibouti is a member of the WTO.

Legal System and Judicial Independence

Djibouti’s legal system is based on Civil law, inherited from the French Napoleonic Code. It consists of three courts: a Court of First Instance presided over by a single judge; a Court of Appeals, with three judges; and the Supreme Court. In addition, Islamic law (shariah) and traditional law is practiced. Djibouti has a written commercial code and specialized courts, including criminal court, administrative court, and civilian court as well.

The court system is de jure independent from executive power. However, this is not always the case in practice so most investors in the market request the right to counsel including agreements for arbitration in a recognized international court. International lawyers practicing in Djibouti have reported effective application of maritime and other commercial laws, but in the past, foreign companies operating in Djibouti have reported that court deliberations were biased or delayed.

Laws and Regulations on Foreign Direct Investment

The country’s legal system has no discriminatory policy against foreign investment, and frequently negotiates extended tax breaks and other incentives to attract larger investments. The National Investment Promotion Agency (NIPA) website has useful information and acts as a guide for investors: www.djiboutinvest.com. The agency bills itself as the one stop shop for investing in Djibouti.

The Djibouti Office of Industrial and Commercial Protection (ODPIC) is the agency in charge of registering businesses. Its website contains information about the registration process:  https://odpic.net/ 

Competition and Anti-Trust Laws

In 2008, Djibouti adopted a law on competition and consumer protection, which does not cover State-Owned Enterprises. Under this law, the Government of Djibouti regulates prices in areas where competition remains limited. For example, the government regulates postal services, telecommunications, utilities and urban transport services. Djibouti does not have an agency that specifically promotes competition and does not have a comprehensive strategy to restrict market monopolies.

Expropriation and Compensation

Foreign companies enjoy the same benefits as domestic companies under Djibouti’s Investment Code. Djibouti’s Investment Code stipulates that “no partial or total, temporary or permanent expropriation will take place without equitable compensation for the damages suffered.” There are no known recent cases of U.S. companies in Djibouti being subject to expropriation. There have been cases of foreign companies facing de facto expropriation via fines, while other companies have had their concession to run a public service unilaterally revoked.

Dispute Settlement

ICSID Convention and New York Convention

Djibouti recently became a member state of ICSID. On April 12, 2019, Djibouti signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention, also known as the Washington Convention). Djibouti made its deposit of ratification on June 9, 2020 for an entry into force on July 9, 2020.

Djibouti is a contracting member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

Djibouti’s government has had only a few investment disputes in the past several years, none with U.S. businesses. In some cases, the disputes have been settled in international arbitration courts and the government has abided by those decisions. In other cases, there has been de facto expropriation through large fines. As in any country, a strong, enforceable contract is important.

The government passed a law in November 2017 permitting the government to unilaterally alter or terminate contracts. Using this law, in February 2018, Djibouti’s President issued a decree abrogating the government’s contract with DP World concerning the Doraleh Container Terminal, later nationalizing the equipment, physical assets, and land. DP World continued to hold 33.33% of shares until July 2018, when the government terminated the shareholders’ agreement with DP World and later nationalized all shares. Throughout, DP World has continued to claim that the 30-year 2006 Doraleh Container Terminal concession agreement remains in force.

In January 2020, the London Court of International Arbitration decided Djibouti should restore DP World’s rights to operate Doraleh Container Terminal for 25 years, in line with the original deal. It was the court’s fifth ruling in favor of DP World since Djibouti nationalized the port. In response, Djibouti’s President released an official communiqué rejecting the court ruling, stating “As the Republic of Djibouti has consistently indicated since the termination of the concession, the only possible outcome is allocation of fair compensation in accordance with international law.”

International Commercial Arbitration and Foreign Courts

There is no domestic arbitration body within the country. In February 2014, the IGAD countries agreed to set up an international Business Arbitration Center in Djibouti. This institution provides a mechanism for resolving business disputes and helps create a more transparent business environment in the region by reinforcing the principles of contract law and increasing the number of lawyers practicing commercial and contract law in Djibouti. Djibouti’s rule of law is weak as it relates to business disputes involving non-Djiboutian. Investment dispute cases are not made public.

Bankruptcy Regulations

Djibouti does have bankruptcy laws, and bankruptcy is not criminalized. Insolvency laws are a bright spot in Djibouti’s investment climate, as it was ranked 44 out of 190 by the World Bank in 2020 in this area.

4. Industrial Policies

Investment Incentives

Tax benefits and incentives fall under two categories detailed in the investment code. Investments greater than USD 280,000 that create a number of permanent jobs may be exempted from license and registration fees, property taxes, taxes on industrial and commercial profits, and taxes on the profits of corporate entities. Imported raw materials used in manufacturing are exempted from the internal consumption tax. These exemptions apply for up to a maximum of ten years after companies start producing materials in Djibouti. Incentives are often unique to an individual company or investment and are agreed upon with relevant ministries. Projects can be delayed if all relevant ministries are not consulted during negotiations. In order to promote exports, Djibouti has multiple free zones where companies enjoy full exemption from direct and indirect taxes for a period of up to ten years.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Djibouti Free Zone (DFZ) is located on 40 hectares and offers office space, warehouses, light industrial units, and hangars. Businesses located in the Free Zone do not pay corporate taxes, have a simplified registration process, and receive other benefits such as assistance obtaining work permits and visas. Currently, 180 companies from more than 30 countries operate out of the Free Zone. In December 2013, the DAM Commercial Free Zone opened in the Damerjog region, south of Djibouti City. In March 2018, the Djibouti Ports and Free Zone Authority and China Merchants Group began construction on a large free zone called Djibouti International Free Trade Zone (DIFTZ). As of mid-2020 this free zone was partially opened. When complete it will cover 48 square kilometers and offer office space, warehouses, industrial units, and will be connected directly with the ports in later phases. It will be the largest free zone in Africa.

Performance and Data Localization Requirements

The government mandates local employment as long as the qualifications or expertise is available locally. However, these schemes are not equally applied to senior management and board of directors where foreign employment is more readily accepted. The process for visas, work permits, and other requirements in order to operate as a foreign employee is not onerous and is easily accessible through Djibouti’s One Stop Shop. Work permits follow a graduated fee schedule: 200,000 Djibouti francs (USD 1,124), 100,000 Djibouti francs (USD 563) and 50,000 Djibouti francs (USD 281) according to the qualifications required for a position.

The government does not follow “forced localization.” The Djiboutian investment code guarantees investors the right to freely import all goods, equipment, products, or material necessary for their investments; display products and services; determine and run marketing policy and production; choose customers and suppliers; and set prices. Performance requirements are not a pre-condition for establishing, maintaining, or expanding foreign direct investments. Incentives do, however, increase with the size of the investment and the number of jobs created.

There are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory. However, there are no mechanisms that are used to enforce rules on local data storage within Djibouti.

5. Protection of Property Rights

Real Property

Djibouti’s legal system officially protects the acquisition and disposition of all property rights. Mortgages exist and are often guaranteed by the employer, who signs a form indicating the employee’s status and salary. The employer is then obliged to inform the bank if the employee leaves the company. Local workers rely on this mechanism to secure mortgages and they expect that their employer will perform this role. Typically, the government originally owns and sells the land. There are no specific restrictions on foreign ownership of land. All property owners who have legally obtained their land are registered. Even if unoccupied, the property belongs to the owner who legally purchased it. Djibouti is 117 of 190 on the World Bank’s Registering Property ranking:  http://www.doingbusiness.org/data/exploreeconomies/djibouti#registering-property .

Intellectual Property Rights (IPR)

Djibouti’s legal structure for protecting and enforcing IPR within Djibouti is weak but developing. There are few existing protections. However, the government passed a law that protects artists’ copyrights.

Djibouti ratified the World Intellectual Property Organization (WIPO) Convention, the Paris Convention on the Protection of Industrial Rights, and the Berne Convention on the Protection of Literature and Art Works. The Ministry of Communication and the Djibouti Office for Intellectual Property Rights are responsible for safeguarding intellectual property after registering products. Counterfeit products are commonly available in Djibouti’s markets. Infringing products include clothing, watches, electronics, and bags. Because of the nascent nature of IPR protections, counterfeit products are rarely seized, and no statistics on seizures are published There have been reports of seizures of counterfeit money. However, statistics are unavailable.

Djibouti is not listed in the U.S Trade Representative (USTR)Special 301 report or the Notorious Markets List. Compared to other industries, the sale of counterfeit goods does not appear to be at higher risk of labor rights violations, including child labor, forced labor, and dangerous working conditions. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ 

The Embassy POC is Political Economic Officer Christopher Canellakis at DjiboutiCommerce@state.gov

For a list of local lawyers, see: https://dj.usembassy.gov/u-s-citizen-services/attorneys/

6. Financial Sector

Capital Markets and Portfolio Investment

In recent years, Djibouti has relied heavily on foreign investment, and the government is open and receptive to foreign investors. Portfolio investment in Djibouti is primarily done through private equity. Some multinational companies with investments in Djibouti are publicly traded. Investments in Djibouti are inherently illiquid for that reason, and the purchase or sale of any sizeable investment in Djibouti affects the market accordingly. Djibouti does not have its own stock market. Existing policies facilitate the free flow of financial resources into the product and factor markets.

Credit is allocated on market terms, and foreign companies do not face discrimination in obtaining it. Generally, however, only well-established businesses obtain bank credit, as the cost of credit is high. Credit is available to the private sector, whether foreign or domestic. Where credit is not available, it is primarily due to the associated risk and not structural factors.

Money and Banking System

Three large banks – Bank of Africa (BOA), Bank for Commerce and Industry – Mer Rouge (BCI-MR), and CAC bank dominate Djibouti’s banking sector. While these three banks account for the majority share of deposits in-country, there are 12 total banks, all established in the last fourteen years. Two of the new banks closed in the last eight years —WARKA Bank from Iraq and Shura Bank from Egypt. In 2011 a new banking law went into effect, fixing the minimum capital requirement for financial institutions at DJF 1 billion (USD 5,651,250) and extended the scope of the law to include financial auxiliaries, such as money transfer agencies and Islamic financial institutions. Two additional banks, Commercial Bank of Djibouti and Silkroad Bank were established in 2015 and 2017 respectively, bringing the total number of banks operating in Djibouti to 12. Bank of China was established in 2019, however the Commercial Bank of Djibouti is in the process of ceasing its activities so the number of banks in operation remains at twelve.

The banking sector suffers from a lack of consistent supervision but it has been improving. Non-performing loans decreased from 18.06% in 2018 to 16.26% in 2019. The total assets of the economy’s five largest banks were estimated to be USD 2.148 billion in 2019. The country has a Central Bank, which is in charge of delivering licenses to banks and supervising them.

Foreign banks or branches are allowed to establish operations in the country. They are subject to the same regulations as local banks. Djibouti has not announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions. Some banks have begun to provide mobile and e-banking services.

Foreign Exchange and Remittances

Foreign Exchange

Djibouti has no foreign exchange restrictions. Businesses are free to repatriate profits. There are no limitations on converting or transferring funds, or on the inflow and outflow of cash. The Djibouti franc, which has been pegged to the U.S. dollar since 1949, is stable. The fixed exchange rate is 177.71 Djibouti francs to the U.S. dollar. Funds can be transferred by using banks or international money transfer companies such as Western Union which are both monitored by the Central Bank.

Remittance Policies

There are no recent changes or plans to change investment remittance policies. There are no time limitations on remittances. The government does not issue bonds on the open market, and cash-like instruments are not in common use in Djibouti, so direct currency transfers are the only practical method of remitting profits.

Sovereign Wealth Funds

In mid-2020 the Djiboutian Government announced the creation of a Sovereign Wealth Fund. According to a government statement, the state-owned fund will target investments locally and in neighboring countries in the Horn of Africa. It will focus on industries including telecommunications, technology, energy and logistics. The fund will act as a long-term investor and is required to reinvest the entire net profits of its activity. The government aims to fund it to $1.5 billion within ten years.

7. State-Owned Enterprises

Wholly-owned SOEs control telecommunications, water, and electricity distribution in Djibouti. Major print, television, and radio outlets are also state-run. Additionally, Djibouti’s ports, airport, and free zones are managed by an SOE. There is a state-owned national airline that is wholly managed by the ports and free zones authority. SOEs are required by law to publish an annual report. The Court of Auditors is charged with auditing SOEs, but they have not yet released assets, income, employment, or other details about the SOEs. There is no publicly available list of SOEs.

State-run services, such as municipal garbage collection and real estate, do not hold legal monopolies, but are afforded material advantages by the government (e.g., government-backed loan guarantees for the real estate sector). Djibouti is not party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO).

In order to exercise ownership in SOEs, the government uses several laws and decrees, most of which were promulgated in the 1990s. The established practices are not consistent with OECD guidelines. No centralized ownership entity exists. SOE senior management reports directly to the relevant line ministry. There is also an independent board of directors whose members are chosen from other ministries.

Privatization Program

A few SOEs have been privatized such as a milk factory several years ago and a water bottling plant in 2015. No particular sector is targeted. The bidding process is not clear and transparent, which makes the participation of foreign investors difficult.

8. Responsible Business Conduct

There is nascent but growing awareness among both companies and consumers in Djibouti of Responsible Business Conduct (RBC). Businesses which may harm the environment are, in general obligated to conduct studies on the environmental impact before proceeding with their project. The government does not promote RBC in a systematic way, although it does acknowledge good corporate social responsibility and covers it favorably in state media. However, the government does not factor RBC policies or practices into its procurement decisions. There are no corporate governance, accounting, or executive compensation standards to protect stakeholders. The government does not adhere to OECD guidelines in RBC matters. There have been reports that the government does not effectively and fairly enforce domestic laws relating to labor rights, environmental protections, consumer protections, and human rights. There are no independent NGOs, investment funds, worker organizations or associations that monitor RBC in Djibouti. Djibouti has a salt extraction industry, but it does not participate in the Extractive Industries Transparency Initiative or the Voluntary Principles on Security and Human Rights.

9. Corruption

Djibouti has several laws to combat corruption by public officials. These laws were either passed by the government or contained in the Penal Code. However, there have been no records of cases to combat corruption by public officials. Corruption laws are extended to all family members of officials and across political parties, but they have not been applied in a non-discriminatory manner. Djibouti does not have laws or regulations to counter conflict-of-interest in awarding contracts or government procurement.

Djibouti is a party to the United Nations Convention against Corruption. There are two government entities responsible for investigating corruption and enforcing the regulations. The State General Inspection (SGI) is tasked with ensuring human and material resources in the public sector are properly utilized. The Court of Auditors is mandated to verify and audit all public establishments for transparency and accountability, and to implement necessary legal sanctions. Both institutions are mandated to produce annual corruption reports. Despite the legal mandates, both institutions lack the authority to push for meaningful reform. The newly-created National Commission for Anti-Corruption is also mandated to enforce the laws on combatting corruption and provide safe haven for whistleblowers. This Commission launched a program in March 2018 to urge high-ranking government officials to publicly declare all of their assets. However, its effectiveness has not been proven so far. The contracting code and other laws passed by Djibouti contain provisions to counter conflict-of-interest contracts or government procurement.

According to a law passed in 2013, the government requires private and public companies to establish internal codes of conduct that prevent and prohibit bribery of public officials. However, these codes have not been implemented. Likewise, the government requirement that private companies use internal controls, ethics, and compliance to detect and prevent bribery of government officials is not enforced. Djibouti is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Djibouti is a signatory country of the UN Convention against Corruption.

U.S. firms have not specifically noted corruption as an obstacle to foreign direct investment in Djibouti, but there were allegations of foreign companies having to meet requirements such as renting houses of high dignitaries or hiring certain employees as a condition of receiving government procurement contracts. In addition, one company reported harassment of employees by local competitors. Prosecution and punishment for corruption is rare.

Resources to Report Corruption

Contact at government agency responsible for combating corruption is listed below:

Fatouma Mahamoud Abdillahi
President
Commission Nationale Independante pour la Prevention et de Lutte Contre la Corruption
Plateau du Serpent+253 21 35 16 03
anticorruption@intnet.dj

No “watchdog” organization is present in Djibouti.

10. Political and Security Environment

Djibouti has seen only very limited episodes of political violence over the last two decades. In the last ten years, there have been no known incidents of political violence leading to damage to foreign investments. Both the ruling coalition party and the recognized opposition parties favor foreign direct investment into Djibouti and local attitudes towards foreigners are positive.

Djibouti was recently awarded the International Peace Award by the journal Jeune Afrique for its secure environment, despite being surrounded by countries facing instability. According to data acquired by the Armed Conflict Location and Event Data Project, Djibouti’s instances of violence and disordered has significantly declined in the past three years.

11. Labor Policies and Practices

Djibouti’s official unemployment rate is 39%. Youth unemployment, defined locally as the share of the labor force between age 15 and 24 without work but is available and actively seeing employment, has remained between 11% and 12% in the past three decades. Estimates of a sizeable informal labor market of up to 75% exist in Djibouti, with a larger informal market outside of the capital city of Djibouti. The formal labor market is heavily service- or government-oriented with growing markets in construction, logistics, and transportation. However, skilled Djiboutian workers, especially in high-demand trades such as construction, are in short supply.

Djibouti has complicated labor laws that favor the employee, especially in the areas of disputes and termination. Vocational and professional training facilities remain limited. The World Bank, the Ministry of Finance, USAID, and other entities are working on a variety of initiatives to address the shortage of workforce development programs. The government has promoted entrepreneurship as a means of stimulating the economy. In addition, the government plans to open a new center to assist start-up companies.

Foreign workers are legally allowed to work in Djibouti only if their qualifications or expertise are not available among the nationals. In January 2017, the cost for a work permit was reviewed and classified in three different categories based on the type of profession with respective annual fees of 50,000 Djibouti francs (USD 281), 100,000 Djibouti francs (USD 563) and Djibouti francs 200,000 (USD 1,125). The National Agency for Employment, Training, and Professional Integration (ANEFIP) maintains a database of Djiboutian job-seekers and issues work permits to foreign workers. No unemployment insurance or other social safety net programs exist for workers laid off for economic reasons. Only those workers who contributed to the social insurance for 25 years and are sixty years of age are entitled to retirement benefits.

Employers have to abide by the Labor Code. Workers who are laid off get more compensation than employees who are fired. No unemployment insurance or other social safety net programs exist for workers laid off for economic reasons. Only those workers who contributed to the social insurance for 25 years and are sixty years of age are entitled to retirement benefits.

Minimum wage is USD 250 per month. By law, all employers are obligated to make social security payments on behalf of their employees, through the National Council for Social Security. Two large labor unions exist in Djibouti, but only the Djiboutian Workers Union (UDT) is recognized by international organizations.

Labor laws are not waived to attract investment, but the investment code and free zones have separate legal provisions to attract investment. By law, labor unions are independent of the government and employers. In practice they can be influenced by the government and/or employers. In case of labor disputes, the Labor Inspector will bring together the employer and the employee to settle the case acting as a mediator. If the mediation fails, then the case will be sent to the Court. The process is opaque and the results are not publicized.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

Djibouti is eligible for Development Finance Corporation (DFC) programs. DFC is authorized to do business in Djibouti with an active bilateral agreement. Djibouti is a member of the Multilateral Investment Guarantee Agency (MIGA), which guaranteed the loan for the construction of the Doraleh Container Terminal in 2009. Chinese firms have made significant investment financing in Djibouti, making it difficult for U.S. firms to compete.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2019 $3,319 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A N/A N/A BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2019 52.5% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

Table 3: Sources and Destination of FDI
Data not available.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

Christopher Canellakis
Political Economic Officer
U.S. Embassy Djibouti
+253-2145-3000
DjiboutiCommerce@state.gov

2020 Investment Climate Statements: Djibouti
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