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, agriculture, 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 2020, according to the UN Conference of Trade and Development, FDI stock represented 58.53% of GDP, up from 52.5% 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 decreased to 2.9% 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, free zones, improved road systems, a railroad connecting Djibouti and Addis Ababa, and a water pipeline from Ethiopia. Djibouti launched the first phase of an ambitious port and free zone project, Djibouti Damerjog Industrial Development (DDID) free-trade zone, scheduled to be built in three phases of five years each. The project includes a multipurpose port, a liquefied natural gas terminal, a livestock terminal, dry docks and a ship repair area, a power plant and a factory that will produce construction materials. DDID, which is expected to attract foreign investors, will offer all the preferential policies guaranteed by the free zone authority, such as tax exemption, minimized restrictions on foreign labor and competitive water and electricity rates. In April 2018, the Government of Djibouti enacted tax, labor, and financial reforms to improve its investment climate.
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 the 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 are hindered by high electricity costs, high unemployment, an unskilled workforce, a large informal sector, 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.
|TI Corruption Perception Index||2021||128 of 180|
|U.S. FDI in partner country ($M USD, historical stock positions)||N/A||N/A||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||$3,310||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|