International Trade in Djibouti

News Related to International Trade in Djibouti

Business outline for Djibouti

Main Industry Sectors

Agriculture carries no weight in the economy.
Industry accounts for a fifth of the Djiboutian gross domestic product.
The tertiary activity contributes to more than 80% of Djibouti's wealth. The manufacturing and services sectors completely depend on the port activities.

Economic Overview

The country's macro-economic stability has significantly improved in recent years. GDP growth has progressed regularly going from 3% in 2004 to 5.8% in 2008. Despite the crisis, growth remained at 5% in 2009 nad 4.5% in 2010. This growth comes from trade and investments, especially in the services sector (ports, airports and to a certain extent, financial institutions), which contributes almost three-fourths of the country's GDP.

In 2008, Djibouti and the IMF made a new three-year PRGF agreement (The Poverty Reduction and Growth Facility). This economic and structural adjustment program is based on the national initiative for social development (INDS - website in French), launched by the government in January 2007, and considered as a new social-economic development program's reference frame. The PRGF has been replaced by the Extended Credit Facility, the general objective of which is to reduce poverty. This progrem entails budget improvement measures and the modrenisation of the monitoring of the country's banking system.

Even so, Djibouti remains a poor country, with an unemployment rate of 50%, vast inequalities and a low level of education, in which the population has been laboring under the weight of high food prices since the 2008 crisis.

FDI in Figures

The Djibouti government having created a climate favorable to business, FDI value increased six fold between 2003 and 2008, attaining 31% of the GDP in 2008. However, in 2009, the global economic crisis has curbed this FDI influx, although in the climate of the economic recovery these should progressively return to their previously strong performce.,

Djibouti's main strong points are its strategic geographical location, its international port, which is at the maritime crossroads between the far-east, the Arab-Persian Gulf, Africa, Europe and the Eastern coast of the United States. The government offers significant tax reductions to foreign investors, in addition to offering a stable currency, which is freely convertible and linked to the American dollar by a fixed parity.

Factors which restrict foreign investment include administrative complexities, corruption, high labor costs, the slowness of the judicial system and the relatively high cost of living.

Most of the FDI is received by the services sector (particularly ports and telecommunication). The main investor countries are Ethiopia, Yemen, the USA and France.

FDI Government Measures

The Djibouti government has reviewed the labor law with a view of improving the business climate. Additionally, renovation projects for road infrastructures are planned.

Country Strong Points

Djibouti's strong points are:
- a strategic location: the country is the entry way to numerous markets, located on the world's second most travelled maritime route. In addition, the construction of a bridge linking it to Yemen will reinforce its status of the area's hub;
- a port of political stability in an unstable region;
- freedom of investment;
- an economic system that is resolutely liberal;
- modern infrastructures.

Country Weak Points

Djibouti's weak points are:
- one of the African continent's heaviest tax burdens;
- significant red tape;
- low rate of new company formation;
- high production costs;
- a fixed exchange rate in relation to the dollar.

Foreign Trade Overview

Djibouti has a liberal trade regime, with an unrestricted banking and commercial sector. The country has a free-trade zone status in eastern Africa. It is a member of the WTO, the IGAD (Inter-Governmental Authority on Development), the COMESA (Common Market for Eastern and Southern Africa), the Arab League, the African Union and has signed a number of bilateral agreements. The share of trade on the GDP is of more than 50%.

Djibouti is characterized by the almost total absence of export goods and having imports on a sharp rise. The country is showing a budget deficit, a trend which should continue in the coming years.

The country mainly imports food, beverages, transport equipment, chemical products and petroleum products from Saudi Arabia, India, China, the United States and Malaysia. Djibouti's main trading partners are France, Ethiopia, U.A.E., Somalia, Brazil and Saudi Arabia.