djibouti-review-2015

Keeping an eye on the key players, emerging sectors, alluring opportunities, and featured trends shaping the future of Djibouti.
DJIBOUTI
REVIEW
Adapting to the Future
Diplomacy & Politics
Economy
Finance
Energy
Transport
ICT
Higher Education
The Guide
GROUP
AN INVEST EYE ON THE EMERGING WORLD IN GROUP
AN EYE ON THE EMERGING WORLD

Keeping an eye on the key players, emerging sectors, alluring opportunities, and featured trends shaping the future of Djibouti.
Diplomacy & Politics
Economy
Finance
Energy
Transport
ICT
Higher Education
The Guide
GROUP
AN INVEST EYE ON THE EMERGING WORLD IN GROUP
AN EYE ON THE EMERGING WORLD
Djibouti Review
Keeping an eye on the alluring leaders, emerging sectors, leading companies, and rising
trends shaping the future of the Djibouti.
CONTENTS
6-8
The Review: Diplomacy & Politics
A Logistical Center For International Security Forces
22-24
The Review: ICT
Competition needed for growth
Djibouti:
Adapting to the Future
DJIBOUTI
REVIEW
Adapting to the Future
Published in July 2015
Copyright © Invest in Group 2015
Goldcrest Executive, Cluster C,
JLT, Dubai, UAE
info@investingroup.org
www.investingroup.org
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sustained by any person using this publication.
The Republic of Djibouti has
undergone significant changes in the
last 20 years, playing to its increasingly
geostrategic location at the base of
the Red Sea, and long history of
regional peace-making efforts. These
factors have provided the country
with opportunities to attract over $2
billion in FDI from the Gulf States, the EU, and Asia, notably in
transshipment and logistics infrastructure. In 2015, the country is
home to one of the most technologically sophisticated ports on the
African continent, serving the 85 million Ethiopia market, and a
COMESA hinterland of more than 250 million people.
As highlighted by Djibouti’s hosting of the 2015 East Africa
Environmental Risk & Opportunities Summit, Djibouti has made
a bid to increased environmental policy for the East Africa-South
Arabia region, recalling its founding role in the eight-country
Intergovernmental Authority on Development (IGAD), and strong
feed in both the Francophone and Anglophone worlds. Further,
Djibouti is naturally positioned to be a regional hub for renewable
energy, having significant geothermal deposits, and being very
favorably positioned with respect to wind and solar energy.
While not a large market (800,000 persons), Djibouti's future
will undoubtedly be liked to realizing its potential as a regional hub
for IT and educational services, and a demonstration venue for
projects that may have broad application elsewhere. An island of
stability in a volatile region, it likewise can become a pole for flight
capital. Its business amenity base is growing, with high-end hotel,
conference and business office capabilities, and a cornice that is
starting to be reminiscent of an 'early Dubai'.
Managing Director: Can Yirik | Production Director: Daphne Rosenstein
Creative Director: Mustafa Gülsün | Marketing Director: Rachael Walsh
Editors: George Dyson, Utku Bayrak, Sabine Ofer
Public Relations Alexandra Meier | Design: Catherine Bergman
11-15
The Review: Economy
Target: Regional Economic Integration
16
The Review: Finance
Islamic Banking On The Rise
18-20
The Review:
Energy
Aiming at self-suffiency
26
The Review: Higher Education
Needs Time
28-31
The Review: Transport
Setting Higher Goals
32
Top Transportation Projects in Djibouti
We keep an eye on the top projects and companies shaping
the future of transportation sector in Djibouti.
34
Investment Opportunities in Djibouti
Djibouti encourages foreign investment by ensuring 100%
foreign ownership in the private sector.
2 — Djibouti Review Invest in Group — 3

5 Minute Reading
DJIBOUTI
Facts & Figures
GDP
$1.456B
GDP Growth
5%
GDP Per Capita
$1.668
GDPPC Growth
5.5%
Djibouti City
Djibouti-Ambouli
International Airport
Revenues
$512.7M
FDI Inflows
$286M
Expenditures
$532.9M
FDI Stock
$1.352B
Inflation
2.49%
Total Investment
$6Billion
Major FDI
Partners
the UAE,
the US,
China,
Ethiopia,
France,
Yemen
Area
23.200 km 2
Location
East Africa
Capital
Djibouti City
Borders
Eritrea (109 km),
Ethiopia (349 km),
Somalia (58 km)
Established
1977
Government
Unicameral Parliament
Status
Semi-Presidential
Republic
Administration structure
6 districts
Population
913.713 (2013)
Population Growth Rate
2.8 % (2013)
Life expectancy
62
Official Languages
French, Arabic
Religions
Islam, Christianity
Currency
Djiboutian Franc (DJF)
Traffic flow
Right
Time Zone
GMT +3
Tel Code
+253
Top level domain
.dj
Climate
Semi-arid tropical
Labor Force
300K
Total Exports
$90.8M
Unemployment
62%
Total Imports
$593.3M
Banks
11
Transport
Revenue
22.5%
Mobile
Penetration
244.123
Total Arrivals
31.510
*Based on 2013-2015 Data
4 — Djibouti Review Invest in Group — 5

D & P DIPLOMACY & POLITICS
THE REVIEW
Diplomacy & Politics
DJIBOUTI
AT A GLANCE
Established
27 June 1977
First Elections
1981 (Presidential)
1982 (Parliamentary)
5 Year Electoral Term
(Both Presidential &
Parliamentary)
Next Elections
2016 (Presidential)
2018 (Parliamentary)
Representations
36 Worldwide
37 Diplomatic
Representations in
Djibouti
Government:
Unicameral Parliament
Political Structure:
Semi-Presidential Republic
Capital: Djibouti City
YYA Logistical Center For International
Security Forces
Djibouti’s political stability and its strategic location
in the Horn of Africa mean the country has the opportunity
to become a unique partner at the international
level.
The Djibouti Government is the
governing authority over the six
regions of the country. The legislative
branch in Djibouti is unicameral
and is composed of 65 members from
six different electoral constituencies.
Article 58 of the Constitution endows
the Assembly with the right of amendment
and the right to make laws. Djibouti
has its own military force, consisting of
a small modern army supported by the
French Foreign Legion. As the Head
of the Government, the President of
Djibouti serves as the Commander-in-
Chief both of the Djibouti military forces
and the National Police.
Presidential elections in Djibouti are
based on a two-round system where
the candidate must receive an absolute
majority of votes in order to win the
election. The President enjoys broad
authority under Articles 30 and 40 of the
Constitution whereby he can appoint or
dismiss the cabinet from the Assembly,
The country takes a
strong position against
terrorism and piracy in
the Red Sea by hosting
the US and French
military facilities on
its soil. During the last
decade, their presence
has helped maintain
regional security as
well as stability in
Djibouti.
including the Prime Minister and other
Ministers. Although there is no veto
process in the country’s political system,
the President has the authority to amend
a law and refer to the Constitutional
Council to reconsider the decision. In
addition, he is responsible for negotiating
and approving international treaties.
The current president Ismael Omar
Guelleh is the second president in the
country’s history since it gained independence
from France. He came to power
in 1999. He was re-elected in 2005 as the
National Assembly
Djibouti is governed by a unicameral
legislative branch. In total, there are 65
representatives from six districts, directly
elected by the people of Djibouti every
five years. Each district is identified as
a multi-member electoral constituency,
which receives varying numbers of seats
based on population. These seats are
distributed amongst the six districts: Ali
Sabieh, Arta, Dikhil, Obock, Tadjourah,
and Djibouti.
The Assembly was established during
the French Colonial period, but the first
independent parliamentary elections
were held in 1982. Under the leadership
of Hassan Gouled Aptidon, Djibouti was
governed as a single-party state until it
was reformed into a multi-party system in
1992. Currently, the National Assembly is
elected under a mixed system, which was
constituted in 2012. Accordingly, 80% of
the seats are elected by a plural voting
system, while 20% of the seats are elected
by proportional representation.
There are three political coalitions
within the Assembly. The majority coalition,
The Union for the Presidential
Majority (UMP), which is led by
President Guelleh’s party, The People’s
Rally for Progress (RPP), dominates the
political system and receives the largest
share of the total seats.
sole candidate in the presidential elections.
Furthermore, his terms in office
were extended under a special measure by
the National Assembly in 2010, as presidents
were previously legally limited to
two terms. In addition to extending the
presidential term limits, the constitutional
amendment specifies that candidates
for the presidency must be aged between
40 and 75. As such, Guelleh began his
third and last term as president after his
election victory in 2011.
As per Article 51 of the Constitution,
the National Assembly meets for two
ordinary sessions in a year. The first session
begins in March and the second session
is held in October, with each lasting
four months. Additionally, Article 56
defines the extent of legislative power,
including its power to make laws concerning
the organization of public powers
and the division of power between the
state and local authorities.
The population of Djibouti is formed
of two dominant ethnicities, Issa (a clan of
Somali origin) and the Afar people who
make up more than 95% of the total population.
Although the Issa community
makes up the majority of the population
of Djibouti, the Assembly is fairly evenly
balanced between these groups. The
current President is from the Issa clan,
while the Prime Minister is an Afar. The
number of women in Djiboutian politics
has been growing since the introduction
of a gender quota system, whereby
at least 10% of positions are to be held
by women. In the 2013 parliamentary
elections, women held 12.7% of the total
seats, but this share is still the lowest in
the region (Eritrea 22%; Ethiopia 27.8%;
Kenya 19.1%; Somalia 13.8%; South
Sudan 26.5%).
6 — Djibouti Review Invest in Group — 7

D & P DIPLOMACY & POLITICS
Foreign Relations
Djibouti’s political stability and its strategic
location in the Horn of Africa
mean the country has the opportunity
to become a unique partner at the international
level. The country has successfully
cooperated with foreign entities
and has been praised for undertaking a
major role in stabilizing the region. In
fact, Djibouti is extremely dependent on
both regional and international cooperation
as a small state sandwiched between
various conflicts. Since its independence,
it has experienced several disagreements
with neighbors over its borders. Djibouti
has been the only country to benefit from
these conflicts by becoming the regional
hub for trade and logistics as its port has
become the principal sea route for many
countries.
The Ministry of Foreign Affairs and
International Cooperation is the main
body responsible for directing Djibouti’s
foreign relations. Recently, the Ministry
has outlined four pillars for its regional
policy in order to increase Djibouti’s ties
with its neighbors, including economic
prosperity, democracy, the rule of law and
religious tolerance. As such, Ethiopia’s
role in transit trade is seen as the key
to sustainable economic prosperity.
Djibouti’s port exports Ethiopian goods
to the rest of the world and the partnership
between these countries is extremely
beneficial for both. Additionally, Djibouti
hopes to become the major trade center
of East Africa by improving its relations
with the newly-independent oil producer
South Sudan.
Djibouti is willing to improve its ties
with its neighbors in order to ensure
peace and security within the region.
There are 37 countries in total that have
established diplomatic representations
in Djibouti. International organizations
including the African Union, the Arab
League, IGAD, and the United Nations
have active offices in the country. In addition
to strengthening its foreign relations,
Djibouti is seeking to become a logistical
center for international security forces.
The country takes a strong position
against terrorism and piracy in the Red
Sea by hosting the US and French military
facilities on its soil. During the last
decade, their presence has helped maintain
regional security as well as stability
in Djibouti. A
Diplomatic Representations
in Djibouti
Consulate Generals
Czech Republic, Italy, Switzerland
Consulates
Australia, Austria, Canada, Denmark,
Greece, Hungary, India, Monaco,
Netherlands, Norway, Senegal,
Sweden, United Kingdom
Embassies
China, Cuba, Egypt, Eritrea, Ethiopia,
France, Germany, Japan, Libya,
Oman, Palestine, Qatar, Russia, Saudi
Arabia, Somalia, Sudan, Turkey,
United States, Yemen
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Canada
United States
Cuba
Sweden
Finland
Netherlands
Luxembourg
Germany
UK
Belgium Austria
Russia
Italy
Switzerland
Spain
Turkey Iran
France
Monaco Greece
Saudi Kuwait
Egypt Arabia Qatar
Sudan
UAE
Eritrea Yemen
Ethiopia
Somalia
Uganda
Kenya
India
Malaysia
Japan
South
Korea
China
Hong Kong
Singapore
Philippines
DJIBOUTI WORLDWIDE
Djibouti currently has representative
offices in 36 countries.
Australia
www.investingroup.org
8 — Djibouti Review Invest in Group — 9

ECONOMY
INVEST IN GROUP
AN EYE ON THE EMERGING WORLD
The IIG iPad App is free to download and
includes all IIG publications.
SECTOR
AT A GLANCE
$1.5 Billion
GDP (2014 est.)
THE REVIEW
Economy
$1.668
GDP Per Capita
(by 2014)
5.5%
2.4%
GDP Growth
(2014)
Inflation Rate
(2013)
60%
Unemployment
(2014)
www.investingroup.org
300K
$
$
$
Labor Force
(2014)
$286 Million
FDI (2013)
$1.3 Billion
Total FDI
$684 Million
Total Trade Volume
(2013)
Major FDI Partners
UAE, US, China, Ethiopia,
France
YYTarget: Regional Economic Integration
Continued progress in Djibouti has allowed for
an optimistic appraisal of its future, but more is
needed to ensure sustainable growth and to further
integrate its economy with those of its neighbors.
Although East African countries
appear in general to have
a positive future ahead of them,
political conflicts, ethnic tensions and
economic problems still create instability.
Unlike its neighbors in the region,
Djibouti has managed to maintain its
political and economic stability since
1999, helping it progress towards its
goal of becoming an integral part of the
regional economy. As a small country
surrounded by the larger actors of East
Africa, Djibouti acts as a regional hub for
trade infrastructure and logistics services.
Strong relations with Ethiopia and South
Sudan are the basis of the country’s economy
and Djibouti is extremely dependent
on these countries, especially the huge
Ethiopian market. Continued progress
in Djibouti has allowed for an optimistic
appraisal of its future, but more is needed
to ensure sustainable growth and to
further integrate its economy with those
of its neighbors.
Invest in Group — 11

E
The country is well positioned as an international transit port,
having one of the busiest shipping lanes in the world. Thus, the
vast majority of Djibouti’s economy stems from port-related
activities, such as trade infrastructure and logistics services.
Djibouti
City
ECONOMY
Tourism is one of the
fastest growing sectors
in the Djiboutian
economy, but does
not yet hold a significant
position in the
economic structure,
employing only 4,500
people. However, the
country has great
potential and could be
a regional center for
recreational tourism.
Economic Indicators
Djibouti is ranked as a lower middle-income
country according to figures from
the World Bank and ranks 155th in the
Doing Business table of 2015, which was
less than the regional average. However,
GDP has been rising successively thanks
to two main areas: port-related activities
and FDI inflows. The country’s economic
growth is stable and has continued to
recover its position since the two drops it
experienced in 2010 and 2012. Moreover,
Djibouti is ranked 112th in the 2015
Economic Freedom Index and 18th out
of 46 countries in the Sub-Saharan region,
having experienced improvements in its
economic freedom in recent years with a
total score of 57.5.
Statistics from the World Bank estimated
that GDP in current prices for
Djibouti was $1.5 billion in 2014 and
is forecasted to reach $1.6 billion in
2015. According to figures from the
IMF, GDP rose by 5% in 2013 and 5.5%
in 2014, and this trend is predicted to
continue, with 5.5% growth expected in
2015. Data from the African Economic
Outlook show a higher growth rate, 6%
in 2014 and predict 6.5% in 2015. This
would make Djibouti’s GDP growth rate
higher than the average for Africa, which
was 4.8% in 2014 and 5.7% in 2015. In
addition, statistics from Economy Watch
indicate an income per capita of $1.668
(around $2.893 in purchasing power
terms) in 2014, an increase of 4.2% from
2013, and this is expected to reach $1.754
(around $3.028 in purchasing power
terms) in 2015.
According to statistics from the
African Development Bank Group,
inflation is under control at an annual
rate of 2.4% (in 2014) and no change is
expected in 2015. However, this is still
changeable due to variations in the prices
of food and oil products, which are the
main import products.
Major Trade Partners
UAE, France, Ethiopia,
Somalia
%
6
5
4
3
2
1
0
%
6
5
4
3
2
1
0
4.5
GDP Growth
4.8 5
5.5
2011 2012 2013 2014
GDP Per Capita Growth
3
4
4,5
2012 2013 2014 2015
5
The vast majority of Djibouti’s economy
stems from port-related activities, such as
trade infrastructure and logistics services.
It also receives a significant amount of
income from the French, US and Japanese
military bases located in the country. The
country serves as the main logistical hub
for anti-piracy operations in the Red Sea.
Growth in the telecommunications, construction
and transportation sectors have
accelerated in recent years, becoming the
most important drivers of the country’s
economic growth. As a result, the service
industry became the country’s dominant
sector thanks to port activities, making up
Data from the African
Economic Outlook
show a higher growth
rate, 6% in 2014 and
predict 6.5% in 2015.
This would make
Djibouti’s GDP growth
rate higher than the
average for Africa,
which was 4.8% in
2014.
79.7% of total GDP. It is also the biggest
employer by sector, representing 60% of
total employment. The service industry
drives citizens to the capital city due to the
job opportunities it creates, meaning that
urbanization is still very much increasing.
Now, 77.2% of the total population live in
urban areas.
Although at 77.2% urbanization
Djibouti is one of the most urbanized
countries in the region, employment
options are severely limited and unemployment
is the major challenge faced by
the government. The country has a good
supply of labor, with an active population
of 300,960, nearly 60% of whom are
unemployed, a figure which is higher
among young people. The private sector
is insufficient and needs to be stimulated
in order to create more jobs. Major economic
investments are also needed to
reduce the high unemployment rate. In
addition, the country faces widespread
poverty and a significant portion of the
population lives below the poverty line.
Although poverty is proportionally more
common in the rural areas, nonetheless,
about 72% of the country’s poor populace
live in cities. According to the government,
current investment plans and
12 — Djibouti Review Invest in Group — 13

E
ECONOMY
77+23+L
77%
Percentage of population
live in urban areas.
Djibouti government
long-term development
strategy aims
to triple per capita
income by 2035. An
income per capita
of $1.668 in 2014,
an increase of 4.2%
from 2013, and this
is expected to reach
$1.754 in 2015.
FDI projects have done relatively little to
tackle these troubles, and a new vision is
still required in order to move forward.
Other sectors are still underdeveloped
and continue to decline in importance.
The industrial sector accounts for 16.2%
of GDP and agriculture accounts for 4.1%
of total GDP. The low proportional importance
of the agriculture sector is due to the
country’s dry climatic conditions, lack of
water resources and an absence of arable
lands. Fishing is a traditional profession
for Djiboutians and employs around 3,000
people, but is still limited because of the
small coastline, which stretches for 372
km. Although the fishing sector accounts
for only 0.3% of total GDP, it is growing
steadily and plays a key role in Djibouti’s
exports to the Gulf countries.
Tourism is one of the fastest growing
sectors in the Djiboutian economy, but
Imports and Exports
The economy of Djibouti is highly dependent
on the international market, with a
total trade volume of $684 million in 2013.
However, despite the fact that the country
is at a transit point of major shipping lanes,
its trade volumes are limited. As such, the
government wants to increase its trade
profile in the region, with a focus on the
Ethiopian market, and become the trade
center for East Africa. After its independence
in 2011, South Sudan also became
an important market for Djibouti’s transport
facilities, with Djibouti exporting
South Sudan’s oil products. South Sudan,
Ethiopia and Djibouti signed an agreement
in 2012 to build a new corridor for
oil pipelines, an important step towards
greater regional integration.
77+23+L
60%
Unemployment rate of
active population
does not yet hold a significant position
in the economic structure, employing
only 4,500 people. However, the country
has great potential and could be a
regional center for recreational tourism.
It boasts many tourist attractions and
activities, including beautiful natural
landscapes, exotic beaches, and unique
cultural, archeological and geological
sites, receiving more than 60,000 visitors
in 2013. According to the current
numbers from the National Investment
Promotion Agency of Djibouti, tourists
from neighboring countries and from
the Gulf states are the main sources,
accounting for 40% of total arrivals,
while European countries are the second
key contributors to the tourism sector,
led by France.
The total value of Djibouti’s imports
amounted to $593 million in 2013, with
food and oil products being the main
imports. At the same time, the total value
of the country’s exports amounted to only
$91 million in 2013, resulting in a large
deficit in the current account balance.
Thanks to the country being the main
route to accessing the sea for a number
of landlocked countries, re-export represents
around 80% of Djibouti’s total
export volume, of which Ethiopia is the
leading partner. Aside from re-exporting,
Somalia is the main source of Djibouti’s
exports. The United Arab Emirates and
Yemen are also key clients, exporting
4.4% and 4.1%, respectively.
FDI Trends
Djibouti’s economic activity is boosted
by foreign direct investment (FDI) and
this has been a major source of growth
in GDP. The United Nations 2014 World
Investment Report determined that the
country attracted $286 million in FDI
in 2013, while the total amount of FDI
reached $1.3 billion. The FDI came
mostly from the Arabian Peninsula, with
particularly strong investment from the
United Arab Emirates, reflecting around
70% of total investment, concentrated on
port facilities and port-related sectors
(more than 50%)
Djibouti’s recent FDI growth has
been spurred on by the establishment
of the Djibouti Free Zone in 2004
and the National Initiative for Social
Development (INDS), adopted by the
government in 2007. The strategy was to
create an encouraging climate for business
and develop the private sector in the
country. The Doraleh container port was
expanded with the help of Dubai Ports
World (DPW) in 2009, which is worth
$397 million. Today, Doraleh has become
a regional distribution hub due to its strategic
location and its annual handling
capacity of 1.2 million TEU, the largest
in the Horn of Africa. Moreover, old
ports were privatized by the government
and new ones are being built, mainly
Addis Ababa
by Chinese investors. The Hong Kongbased
firm China Merchants Holdings
International (CMHI) bought a 23.5%
share in the Port de Djibouti in 2012 for
$185 million, as part of the privatization
efforts, and the construction is now
underway. Another Chinese group, the
China Exim Bank, operates in Djibouti,
financing several port-related infrastructure
projects in the country. Between
2011 and 2014, the bank secured more
than $3 billion in loans to Ethiopia and
Djibouti for the construction of the 756
km Addis Ababa-Djibouti City Railway
Project. The project has been under construction
since March 2012, led by the
China Civil Engineering Construction
Corporation (CCECC), and is expected
to be completed by October 2015.
Ethiopia is another important investor,
a reliable partner in working towards the
main goal of increasing East-African economic
integration and reached an agreement
with Djibouti to invest $61 million
to build a new port in Tadjoura. The
Kuwait-based Arab Fund for Economic
and Social Development added $36 million
and the Saudi Fund for Development
contributed $25 million. The new port
will be an alternative route to the sea for
Ethiopia’s re-exports and will greatly contribute
to their trade volume. A
Djibouti
Dire Dawa
The FDI came mostly
from the Arabian
Peninsula, with
particularly strong
investment from the
United Arab Emirates,
reflecting around 70%
of total investment,
concentrated on port
facilities and portrelated
sectors (more
than 50%).
Addis Ababa – Djibouti City
Railway Line
A total of 756 km of railway line,
currently under construction, and
will be completed by the first
quarter of 2016. The project will cost
the two countries around $3 billion,
received on loan from the Chinese
banking group Exim Bank.
14 — Djibouti Review Invest in Group — 15

F
THE REVIEW
Finance
SECTOR
AT A GLANCE
$1.5 Billion
Total Assets
10%
Share in GDP
11
Banks
7.7%
Growth in total
customer deposits
$523M
Total Domestic
Credits
$312M
Islamic Banks
Capital
$186M
Islamic Banking
Deposits
4
Islamic Banks
Operating in
Djibouti
YYIslamic Banking On The Rise
Djibouti’s strategic regional position combined with
financial liberalism make the country a favorable
business environment for investors, allowing them
to enjoy financial stability.
Classified as a lower-middle income
economy by current World Bank
records, Djibouti’s financial sector
has grown thanks to the financial
regulations applied in 2000, 2005 and
2011, which were introduced in order to
create a modernized financial market.
According to the current numbers from
the Central Bank of Djibouti, the total
assets of the financial sector amount to
around $1.5 billion, with banking assets
representing 95% of this.
The banking sector has achieved significant
growth in recent years, accounting
for more than 10% of total GDP. The
arrival of new banks, generally owned
by foreigners, have accelerated competition
and brought the total number of
banks to eleven. Before 2006, there were
only two banking groups operating in the
country. Amongst the banks operating in
the country, Banque pour la Commerce et
l’Industrie – Mer Rouge (BCIMR) and the
Bank of Africa (BOA Red Sea, formerly
known as Banque Indosuez) are still the
most dominant banks, making up around
80% of total deposits. Following the
implementation of a new banking law in
2005, the minimum capital requirements
for banking institutions were adjusted to
$1.6 million, which led to an important
growth in the total amount of capital.
Customer deposits recorded an
increase in recent years, as a result of
new regulations related to the public
and private sectors. According to the
latest statistics, total customer deposits
Banks operating in Djibouti
increased from $1.088 billion to $1.1 billion
in 2013, representing a growth of
7.7% in just one year.
The total amount of domestic credits
grew by an annual rate of 2.1% in 2013,
increasing from $510 million to $523 million
in a year. Private companies are the
main contributors, making up 87% of the
total, showing an increase of 15.6% from
2012 to 2013, while credits to the state
took second place with 10%, and credits
to the public sector were lower, at only
3% of the total.
Banks Year of Entry Origin Type
Banque pour le Commerce et l’Industrie - Mer Rouge 1957 France & Djibouti Conventional
Bank of Africa (BOA Red Sea) 2010 Continental Conventional
International Commercial Bank (ICB) 2006 Malaysia Conventional
Saba Islamic Bank (SIB) 2006 Yemen & UAE Islamic
FINANCE
Banque de Depots et de Credits de Djibouti 2008 Switzerland Retail Banking
Salaam African Bank (SAB) 2008 Regional Islamic
Cooperative Agricultural & Credit Bank (CAC) 2009 Yemen Conventional
Dahabshiil Bank International S.A. 2009 Somalia Islamic
Shoura Bank 2010 Egypt Islamic
Warka Bank for Investment & Finance 2010 Lebanon & Iraq Conventional
Exim Bank of Djibouti 2010 Tanzania Conventional
Islamic finance has been a growing force
in the Djiboutian economy, since the government
introduced a new banking law
in 2011, based on Sharia principles. The
Governor of the Central Bank of Djibouti,
Ahmed Osman Ali, stated that as Djibouti
was an Islamic country it is perfectly positioned
to take a leading role in the African
Islamic finance sector. Almost 95% of the
total population is Muslim and many
people do not want to use conventional
banks for religious reasons. Today, there
are already four Islamic banks operating
in the country, representing more than
15% of total banking assets. The sector
is mostly dominated by foreign groups
from Egypt, Yemen and the United Arab
Emirates, as well as domestic shareholders
and Somalian entrepreneurs. East Africa
Bank (formerly known as Dahabshill
Bank International) has the biggest share
of the capital generated from Islamic
finance in the country, with around 70%.
Islamic banks accounted for $312 million
of the market, with an annual growth
rate of 20% in 2013. In the same year, their
deposits reached $186 million, 12% of the
country’s total. In addition, the number
of beneficiaries of Islamic finance loans
doubled between 2012 and 2014. Their
credit portfolio has shown a low rate
of non-performing loans, estimated at
1.56% and this is lower than the average
for domestic credits.
A
Islamic banks
accounted for $312
million of the market,
with an annual growth
rate of 20% in 2013.
According to the
current numbers from
the Central Bank of
Djibouti, the total
assets of the financial
sector amount to
around $1.5 billion,
with banking assets
representing 95% of
this.
16 — Djibouti Review Invest in Group — 17

E
ENERGY
THE REVIEW
Energy
Lake Assal
The objective of the Djibouti -
Geothermal Power Generation
Project is to tap into Djibouti’s
volcanic riches and assess the
commercial viability of the
geothermal resource in the Fiale
Caldera within the Lake Assal
region.
in Djibouti, in order to lay out the current
situation in the sector in Djibouti as well
as to invite foreign investors to consider
the country.
Currently, energy production is based
on thermal power with four diesel power
stations across the country. In addition,
total electricity consumption reached
108 MW in 2014 and is expected to grow
by 4.5% annually over the next decade.
Djibouti already imports two-third of its
electricity from neighboring Ethiopia. The
power trading volumes are currently limited
to a capacity of 70 MW, but Djibouti
and Ethiopia are focusing on new opportunities
to improve electricity access within
the region and reduce energy costs.
A new interconnector project has been
announced which will have the capacity
to import up to 70 MW and construction
is expected to begin in the near future.
The project will represent a significant
part of Djibouti’s energy strategy for the
future based on renewable energy. After
its completion, expected in 2018, the two
interconnections will reduce the country’s
dependency on fossil fuels by meeting
more than half of its power demand.
Total Demand 2014 2020 2025
Interconnection 1 70 MW 70 MW 70 MW
Interconnection 2 - 70 MW 70 MW
Total Supply of Interconnections 70 MW 140 MW 140 MW
Total Demand (Estimated) 108 MW 264 MW 323 MW
*Electricité de Djibouti – EDD
YYAiming at self-suffiency
Djibouti’s strategy for 2020 focuses on developing
the geothermal sector by using its own resources
and reducing the country’s dependency on
imported fossil fuels.
Djibouti is highly dependent on
imported energy and lacks fossil
fuels, but has promising potential
with respect to renewable energy. Several
feasibility studies have demonstrated that
the country is home to a huge amount
of renewable resources, including wind,
solar and geothermal. Djibouti plans
to attain energy independence by 2020
through the use of its renewable resources,
aiming to become the first African
country that uses 100% clean energy.
Djibouti has adopted a National
Strategy and Action Plan for the development
of the renewable energy sector with
the assistance of the Africa-EU Energy
Partnership (AEEP). Given its lack of capital
and experience, the government has
recognized the importance of the private
sector’s role and has encouraged private
sector actors to invest in renewable energy,
among other areas. Several comittees
have been established, including the
2013 Energy Business Dialogue hosted
Geothermal Energy
Djibouti’s strategy for 2020 focuses on
developing the geothermal sector by
using its own resources and reducing the
country’s dependency on imported fossil
fuels. The country’s large geothermal
reserves have a remarkable potential, representing
around 1000 MW of potential
energy. In the coming years, the Djibouti
government hopes to benefit from the
potential available within the country.
It has established a Ministry of Energy
for Natural Resources (MERN) and the
Djibouti Office for Geothermal Energy
Development (ODDEG). Currently, the
ODDEG is the sole dedicated authority
dealing with geothermal-related projects.
It is working with other countries and
international organizations with the aim
of developing sustainable geothermal
energy in Djibouti.
Although geothermal explorations
around the Assal field have been carried
out on several occiasions over the last
40 years, the latest pre-feasibility report
produced by Reykjavik Energy Invest
(REI) in 2008 is now the main source of
reference. The Icelandic company began
constructing a geothermal power plant
around Lake Assal with an expected
capacity of about 100 MW which was
to be ready by 2025. However, it was
unable to continue its operations due to
the financial hardships. When the contract
with REI expired, the project was
continued by the Djibouti government.
However, the country lacks both the
know-how and capital to complete the
project.
The feasibility study for the project is
expected to be finished by 2016. After its
completion, the project will be followed
by the construction of a geothermal power
station with an installed capacity of 50
MW. It will be contracted to an independent
power producer, chosen through a
competitive international bidding process.
The second phase of the project,
which aims to increase the capacity to
100 MW, will thus further bolster capacity.
The project will help the country to
meet almost all of its electricity demand.
More than half of the population still does
not have access to electricity. Geothermal
energy will be a major solution to this.
Djibouti has been
blessed with renewable
resources, solar and
wind in addition to
geothermal power.
Given this, the country
could easily meet its
electricity demand
in the long term by
ensuring its energy
independence with
renewables.
18 — Djibouti Review Invest in Group — 19

E
ENERGY
Ongoing Projects
Project Energy Contract
Lake Assal 50 MW (1st Section) Geothermal EDD
Lake Assal 50 MW,(2nd Section) Geothermal EDD
Ali Sabieh 50 MW
Lake Assal 60 MW
2nd Interconnection 70 MW
Solar
Wind
Hydropower
(Imported)
Fotowatio Renewable
Ventures
Qatar Petroleum
International
EDD & EEPCO
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includes all IIG publications.
*Electricité de Djibouti – EDD
Djibouti aims to attract more foreign investment in the renewable sector
in 2015 and beyond. In accordance with its strategy, the government has
been implementing a plan in order to liberalize its production of energy by
allowing private sector investment.
Aside from the Assal field project, more
potential geothermal sites have been
investigated by the Japan International
Cooperation Agency (JICA), including
Lake Abbe and Lake Goubet. The
studies have shown that there are 13
sites with high a potential for geothermal
energy and these could be
Geothermal Power Plant 2014 2020 2025
1st Section - 50 MW 50 MW
2nd Section - - 50 MW
Total Supply - 50 MW 100 MW
Total Demand (Estimated) 108 MW 264 MW 323 MW
*Electricité de Djibouti – EDD
brought into production in the future.
Indeed, Djibouti has been blessed with
renewable resources, solar and wind in
addition to geothermal power. Given this,
the country could easily meet its electricity
demand in the long term by ensuring
its energy independence with renewables.
Djibouti aims to attract more foreign
investment in the renewable sector in
2015 and beyond. In accordance with
its strategy, the government has been
implementing a plan in order to to liberalize
its production of energy by allowing
private sector investment. In June
2013, a memorandum of understanding
was signed with Qatar Petroleum
International (QPI), which has included
the construction of a wind power plant
in Goubet. The results of a number of
explorations have shown that the region
has good conditions for a 60 MW wind
power plant, which could supply 20% of
the country’s energy demand. Djibouti
has also signed an agreement with a
Spanish company, Fotowatio Renewable
Ventures (FRV), to build a solar power
plant with an initial capacity of 50 MW
in Ali Sabieh. The contract grants FRV
permission to develop Djibouti’s first
solar project. A
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20 — Djibouti Review Invest in Group — 21

ICT
ICT
THE REVIEW
ICT
SECTOR
AT A GLANCE
27.9%
Mobile
Penetration
Fiber Optic Cable Systems
East African countries benefit from
being connected to fiber optic cable
systems passing by Djibouti from
Europe toward Africa and Asia. At
present, Ethiopia and Somalia are linked
by two sub-regional cables, allowing
them to connect international networks
and one to South Sudan is being
planned.
38.5%
Increase of internet
users (since 2010)
9.5%
Internet
Users
20,686
Fixed Line
Telephones
21.4%
Internet
Penetration
Kenya
Tanzania
Mozambique
South Africa
YYCompetition needed for growth
Djibouti
Somalia
Toliary
SEAMEWE3
EUROPE INDIA GATEWAY
SEACOM
ADEN-DJIBOUTI
EAST AFRICA SUBMARINE SYSTEM
MENA
Djibouti Subscription Rates
Subscription Type 2011 2012 2013 Change
Mobile Phone 22.8% 24.7% 27.9% 14.9%
Fixed Phone 2.1% 2.3% 2.3% 3.6%
Fixed Broadband 1.3% 1.7% 2% 18.7%
3.9%
GDP Share
3G
Data Service
1
Mobile Operators
(Djibouti Telecom)
.dj
Top Level Domain
Djibouti’s progress in the ICT sector is weak.
However, the country has benefitted from
international telecom projects to construct undersea
fiber optic cable systems providing an international
network between Europe, Asia and Africa.
At present, the state-owned Djibouti
Telecom (DT) is the sole operator in the
domestic market and directs the development
of the sector. Djibouti Telecom’s
entire revenue derives from three specific
products, namely, fixed lines, mobile services
and fixed broadband, which grew
by 11% from 2012 to 2013.
The competition is still required to
meet the demands of the market. Due
to the lack of competition, a number of
issues have arisen, including high prices
and low penetration rates in every area of
the sector. Therefore, unaffordability has
become an issue in the country. Based on
an analysis by the World Bank, at least
40% of the total population would have
to spend nearly their entire income in
order to benefit from fixed broadband
services, and even mobile broadband is
still difficult to afford. Djibouti’s progress
in the ICT sector is weak and below the
world average, according to the United
Nations’ 2014 e-government survey,
placing the country among the lowest
10 in Africa. Based on EGDI statistics,
Djibouti improved by eight positions in
2014 but still ranked 184th worldwide due
to an absence or insufficiency of e-services.
Furthermore, the disparity between
rural locations and Djibouti City is a significant
factor in the country receiving
such a low rank. Almost 27% of the total
population still lives in rural areas and
cannot benefit from certain ICT products.
Total mobile phone subscriptions are
still low but have grown rapidly since
2006, seeing an increase of 14.9%. The
mobile penetration rate was at 5.6% in
2006, 19.8% in 2010, and 27.9% in 2013.
Nevertheless, the World Bank’s 2014
report on Broadband Networks in the
MENA region described Djibouti, along
with Yemen, as having one of the lowest
mobile penetration rates compared to
other MENA countries due to coverage
being provided by a monopolistic sector.
The report also indicates that mobile
broadband prices are extremely high in
Djibouti and resulted in a very low penetration
rate of only 2.22% among the
entire population and is used by only
9.29% of mobile phone users. Djibouti
Telecom has been the only provider of
mobile broadband in the market, as with
other telecom and internet services, since
the company officially launched 3G technology
in 2011.
The contribution of
the ICT sector to the
country’s GDP has
increased, amounting
to nearly 3.9% of total
GDP.
22 — Djibouti Review Invest in Group — 23

ICT
HIGHER EDUCATION
Mobile Phone Subscription
The number of internet
users increased by
38.5% on average over
the last five years.
Facebook is popular
among internet
users and 81.8% of
them already have
an account, with an
estimated total of
62,980 users, which
grew by 25.6% in 2013.
2010 2011 2012 2013
Penetration 165,613 193,040 212,468 244,123
Rate (%) 19.8 22.8 24.7 27.9
Change (%) 28.6 16.5 10.0 14.9
*Djibouti Telecom
Fixed Phone Subscription
2010 2011 2012 2013
Penetration 18,474 18,442 19,955 20,686
Rate (%) 2.2 2.1 2.321 2.369
Change (%) 9.6 -0.1 8.2 3.6
*DISED
Internet Subscription (Fixed Wired Broadband – ADSL)
2010 2011 2012 2013
Penetration 8,058 11,302 14,907 17,705
Rate (%) 0.9 1.3 1.7 2.0
Change (%) 52.4 40.2 31.9 3.6
*DISED
The Statistics Office of Djibouti (DISED)
releases an annual statistical report on
telecommunications subscriptions,
showing that fixed line penetration had
grown by a very small amount, 3.6%, at
the end of 2013, reached 2.36% up from
2.30%. DISED also reported a total of
20,686 fixed line telephones in 2013.
Although the fixed broadband market
has not been sufficiently developed compared
to the African average and had a
penetration rate of only 2.1%, it has had
extreme growth rates since 2006. It rose
by 18.7% last year, up from 14,907 subscriptions,
experiencing major advances
both in 2008 and 2009, by 124.4% and
115.6%, respectively. The total number
of internet users in Djibouti reached
9.5% in 2013, overtaking its neighbors
such as Ethiopia by 1.9% and Somalia
by 1.5%. The number of internet users
increased by 38.5% on average over the
last five years. Facebook is popular among
internet users and 81.8% of them already
have an account, with an estimated total
of 62,980 users, which grew by 25.6% in
2013.
Prices are still excessively high which
results in a large portion of the population
not being able afford to pay for the internet
access offered by Djibouti Telecom.
Indeed, with the monthly fee applied by
the operator for ADSL 1MB being about
$84 for domestic users and US$ 236 for
business users, this means fees for broadband
services are equivalent to 45% of
GDP per capita.
The broadband market in Djibouti is
small. However, the country also serves
as a transit hub. Because of its geographical
location in the Horn of Africa, it
has become the meeting point of international
network systems, which offers
the country an opportunity to accelerate
its broadband performance and reduce
internet costs. For instance, East African
countries benefit from being connected
to fiber optic cable systems passing by
Djibouti from Europe toward Africa and
Asia. At present, Ethiopia and Somalia
are linked by two sub-regional cables,
allowing them to connect international
networks and one to South Sudan is
being planned.
However, more is still required despite
the undersea cables. The current monopolistic
system needs to be reformed into a
competitive sector in the short term. The
promotion of a competitive market in
Djibouti would encourage foreign companies
to invest in telecommunications,
reduce the high prices, and increase the
affordability and penetration rates of
every segment of the sector. A
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24 — Djibouti Review
Invest in Group — 25

H
E
HIGHER EDUCATION
THE REVIEW
Higher Education
Focus: Université
de Djibouti
2006
Establish
French
Language of
Instruction
7,481
Number of Students
4 Faculties
Faculty of Humanities &
Languages,
Faculty of Law,
Economics &
Management,
Faculty of Science,
Faculty of Engineering
+2 Technology Institutes
15
Departments
Sector At a
Glance
$13.5 million
Budget
201,017
Population (15-24)
YYNeeds Time
Since his first term, President Guelleh has primarily
focused on driving the growth of the knowledgebased
sector, which it is hoped will lead to a better
future for the country and its society.
Having being largely neglected
for decades, rapid economic
growth in Djibouti has brought
the higher education system back into
the foreground. While the possibility
of receiving an academic education
was once a dream for young people in
Djibouti, it is now a state priority. With
more than half of the population under
the age of 25, the role and potential of
higher education is growing. The sector
has witnessed significant developments
since the foundation in 2006 of the
first and still the only university in the
country. Since his first term, President
Guelleh has primarily focused on driving
the growth of the knowledge-based
sector, which it is hoped will lead to a
better future for the country and its society.
The government has stated that it
sees higher education as the most critical
tool for reducing the high rates of
unemployment in Djibouti. Indeed, the
Djiboutian economy faces no difficulties
in creating job opportunities due
to the dominance of the tertiary sector.
However, filling these jobs is the difficulty,
as the lack of education among
the population results in shortages in
qualified staff in many sectors.
The government
encourages foreign
investors to take part
in the country’s educational
development.
The Kuwait-based Arab
Fund for Economic &
Social Development
(AFESD) was the
first financier to
support the university,
providing $28 million
for the construction
of a new university
complex.
The government has taken a number
of steps towards solving this issue.
The establishment of the University of
Djibouti nine years ago was an important
component in the country’s vision
for development. The aim of establishing
the university was to meet the demands
of the labor market. Thanks to the state’s
support for the education system, the
university grew in a very short time with
7,480 students this year, a 25% increase
on the year before. The university offers a
broad range of undergraduate programs,
including law, science and economics.
Since maritime activities have become the
backbone of the country’s economy, the
university has concentrated on engineering
courses, personnel training and related
courses in order to meet the demand
in Djibouti’s labor market for highly educated
workers. The faculty of engineering,
which opened in 2013, intends to educate
a new generation of engineers in the
country. Although the university has seen
consistent growth since its foundation,
only 2.5% of the labor force has tertiary
education at the moment, and the inability
to recruit top quality employees is still
an obstacle for both the public and private
sector in Djibouti. In the long term,
the demand for higher education will be
greater due to the increasing number of
development projects, including new
ports, airports and power plants.
The Ministry of Higher Education
is the sole supervisory authority overseeing
institutional operations. It estimates
the budget required every year to
maintain the university’s progress and
the quality of education. The latest budget
meeting decided that 2.4 billion DJF
($13.5 million) will be reserved for the
year 2015. The university also receives
international support. The government
encourages foreign investors to take
part in the country’s educational development.
The Kuwait-based Arab Fund
for Economic & Social Development
(AFESD) was the first financier to support
the university, providing $28 million
for the construction of a new university
complex. The main aim of this project is
to provide a modern education system
in the country. Indeed, Djibouti aims in
the long term to become a leading education
center, supplying bachelor degrees
and post-graduate education to students
from neighboring countries. As part of
this plan, the University of Djibouti has
introduced the Oracle software system in
order to achieve its ambition of becoming
a regional hub of excellence in education.
The implementation of this software
clearly reflects the country’s development
vision and suggests that Djibouti is on
the right path.
The University of Djibouti is the sole
francophone university in the Horn of
Africa. This unique position is a factor
which distinguishes it from other Frenchspeaking
institutions. At present, it enjoys
ongoing academic partnerships with
more than 30 institutions in other countries,
serving to increase its international
profile and possibilities for collaboration.
The University of Djibouti has not faced
any difficulties acquiring recognition at
the international level, but there is still
plenty of work to be done with respect to
developing higher education in the country.
Despite the positive steps taken, the
country has a long way to go to ensure
quality and competition within the sector.
The Ministry of Higher Education’s only
source of funding is the state. The country
still lacks many types of educational
institutions that would be necessary to
promote growth. A
26 — Djibouti Review Invest in Group — 27

T
TRANSPORT
THE REVIEW
Transport
SECTOR
AT A GLANCE
$6 Billion
Total Investment
$2.7 Billion
Railway Investment
6.5M tons
handled in 2013
794,731 TEU
Container traffic
352,109 TEU
Transshipment (2013)
262,108
Total passengers
56,630
Transit passangers
FOCUS:DOLAREH
5th major container
port in Africa
1.2 Million TEU
Annual handling
capacity
Target: 3 Million TEU
YYSetting Higher Goals
The transport sector is the backbone of the
economy, the main contributor to GDP and an
important source of employment.
Djibouti is strategically located, acting
as a natural port at the meeting
point of the Red Sea and the
Gulf of Aden, serving as a bridge between
East Africa and the Arabian Peninsula.
The country is well positioned as an international
transit port, having one of the
busiest shipping lanes in the world. After
the war between Ethiopia and Eritrea, it
became the main port and route to the
sea for landlocked East African countries,
dramatically increasing its importance.
This was a turning point for Djibouti
and more developments are planned to
upgrade the existing port facilities with
the support of major investments.
The old port of Djibouti (Port
Autonome International de Djibouti -
PAID) has been operating as the center
of the country’s cargo traffic since 1985
and was expanded through several investment
during the 2000s. In 2013, 16,596
vessels, carrying 754,461 million tons of
load, passed through the Suez Canal and
1,644 of these (9.9% of the total) visited
the port of Djibouti. Of the total vessels,
39.1% were containers, 22.3% were navy
vessels, 13.1% general cargo ships, 6%
tankers and other categories accounted
for 19.5%. The port of Djibouti handled
nearly 6.5 million tons in 2013. In that
year, total container traffic grew by 0.40%
with 794,731 TEU, up from 791,463 TEU
in 2012.
Transshipment is a major economic
activity in the transport sector in Djibouti.
Djibouti’s transshipment volumes have
not been stable in recent years due to
heavy competition from other ports in the
Red Sea, such as Aden (Yemen), Salalah
(Oman), Port Sudan (Sudan) and Jeddah
(Saudi Arabia). However, transshipment
still has an important share in the country’s
port-related activities, accounting
for 44% of total traffic. In 2013, Djibouti
handled 352,109 TEU in transshipment
in total, 4% lower than the 368,498 TEU
of the previous year.
In 2006, the government of Djibouti
and Dubai Port World (DP World) established
a joint venture granting the company
a 20 year concession to manage
the international airport of Djibouti at
Ambouli and to build a new oil and cargo
terminal at Doraleh, worth $397 million.
Opened in 2009, Doraleh Container
Terminal (DCT) has become a leading
terminal, processing 93% of the country’s
total traffic, with 743,793 TEU by the end
of 2013. Additionally, it is the center of
transshipment services for many major
global shipping routes, accounting for
98% of Djibouti’s total transshipment volume.
With the most advanced facilities in
the region and an annual handling capacity
of 1.2 million TEU, Doraleh is regarded
as the fifth major container port in all
of Africa after Port Said (Egypt), Durban
(South Africa), Tanger Med (Morocco)
and Damietta (Egypt). As Doraleh has
continued to improve its efficiency,
Djibouti announced the launch of a new
expansion project to upgrade its capacity
to 3 million TEU per annum. The plan is
scheduled to be completed at the end of
this year and costs about $300 million.
Container Port Traffic (TEU per year)
2011 2012 2013 Change
Doraleh Cargo Terminal (DCT) 703,617 743,273 743,793 0.1%
Port of Djibouti (PDSA) 40,361 48,190 50,938 5.7%
Transshipment (Total) 384,065 368,498 352,109 -4.4%
Total 743,978 791,463 794,731 0.4%
The latest economic statistics for Djibouti
demonstrate it is likely to strengthen
its position in East Africa as a regional
logistics hub. As such, new ports,
container facilities, roads and railways
are being planned by the government
to boost the country’s cargo traffic.
Total Cargo Throughput
2010 2011 2012 2013
Djiboutian Traffic 0.515 0.871 0.853 0.648
Ethiopian Transits 5.095 5.663 5.843 5.532
Other 413 207 166 464
Total 6.023 6.741 6.872 6.644
The new investment program amounts
to a total of around $6 billion, financed
mostly by Chinese investors. Chinese
interest in Djibouti is relatively new,
beginning with the privatization of
PAID in 2012, of which China Merchant
Holding International (CMHI) now holds
a share of 23.5% worth $185 million. This
partnership led to new Chinese investments
in the country’s transport sector,
such as Exim Bank of China funding
28 — Djibouti Review Invest in Group — 29

T
TRANSPORT
With the most advanced facilities in the region and an
annual handling capacity of 1.2 million TEU, Doraleh
is regarded as the fifth major container port in all of
Africa after Port Said (Egypt), Durban (South Africa),
Tanger Med (Morocco) and Damietta (Egypt).
The new investment
program amounts to
a total of around $6
billion, financed mostly
by Chinese investors.
the expansion of railway transportation
with US$ 2.7 billion in 2013. This
project will both renew existing railway
routes and construct new ones. This will
result in a 756 km transit line which will
operate between Addis Ababa and the
port of Djibouti. A Chinese company,
China Civil Engineering Construction
Cooperation (CCECC), is also involved
in the construction, which has been
underway since 2013.
Djibouti is a transit country and is
highly dependent on regional trade, of
which the Ethiopian market represents
the vast majority of the trade Djibouti
receives. The port of Djibouti play a vital
role for Ethiopia, a landlocked country.
Ethiopian transits represent 83.2%
of Djibouti’s cargo traffic. The highest
amount of total throughput thus far seen
was in 2009, when it reached 8.83 million
tons, compared to 848,000 tons of
local trade. Ethiopia reached an agreement
with Djibouti to invest $61 million
to build a new port in Tadjoura. The new
port will be an alternative route to the sea
for Ethiopia’s re-exports and will greatly
contribute to their trade volume.
Despite its modern facilities and
unchallenged capacity levels, Djibouti
faces tough competition with respect to
transit traffic and transshipment from
other ports in its region. Ethiopia is a geographically
large country, surrounded by
multiple neighbors with sea access. Assab
and Massawa are definitely not options
due to Ethiopia’s political problems with
Eritrea. However, at almost the same distance
to Addis Ababa (705 km), Berbera
is one potential rival for Djibouti and
accounts for a 10% share of all Ethiopian
transit traffic, but this is unlikely to rise
as long as Somalia continues to face
political instability and national security
problems concerning maritime piracy.
Unlike the ports in Eritrea and Somalia,
however, Port Sudan and Mombasa are
real alternatives showing significant performance
with respect to port traffic in
East Africa. In 2013, the port of Mombasa
handled around 22 million tons and Port
Sudan processed more than 10 million
tons. Each of these is at a greater distance
from Addis Ababa (Mombasa 1,450 km;
Port Sudan 1,195 km), whereas the distance
from Djibouti is only 525 km. Thus,
Djibouti remains the dominant port for
Ethiopia, accounting for more than 85%
of all Ethiopian trade.
South Sudan, as a landlocked country,
has also benefited from Djibouti’s
sea access since its independence. It has
become a new oil producer in Africa with
3.5 billion barrels of proven reserves.
South Sudan already has two pipelines
Air Transport
Djibouti has one international airport
with paved runways in Ambouli (AID),
just outside of the capital city. The airport
is used for both civil and military
purposes. It mainly serves the needs of
foreign forces based in the country. The
airport hosts many commercial lines
operated by major air companies coming
from Africa, Europe and Middle East.
Turkish Airlines’ number of passengers
grew by an incredible 352% in 2013. It
became the second largest operator in
Djibouti, spurred on by recent Turkish
investments. Ethiopian Airlines had the
biggest share of total passengers with 22%
but this has decreased. According to the
Airlines & Passengers
Number of Passengers 2012 2013 Total Share Change
Ethiopian Airlines 64,179 57,760 22% -10.0%
Turkish Airlines 7,863 35,617 13% 352%
Fly Dubai 23,726 24,237 9% 2.15%
Kenya Airways 27,306 23,976 9% -12.2%
Yemenia Airlines 24,390 20,344 7% -16.5%
Transit 49,661 56,630 14% 14%
Total Traffic 243,194 262,108 100% 7.7%
*AID; COMESA; DISED
that pass through Sudan but an alternative
corridor would decrease its dependency
on Port Sudan to export its oil. In
2012, Djibouti, Ethiopia and South Sudan
agreed on a deal to build a new oil pipeline
from Juba to Djibouti, which will cost
nearly $3 billion, in parallel to the Juba-
Nairobi-Lamu pipeline plan. Although
the Kenyan coast, 1300 km away, is closer
to South Sudan than the port of Djibouti,
Djibouti is a more secure option owing to
the presence of foreign military facilities
in the country.
records, the total number of passengers
travelling by air increased in 2013 by 7.7%
with 262,108 passengers, compared to
243,194 in 2012. Additionally, transit passengers
represented about one-fifth of the
total number and accounted for 56,630 of
these last year.
Like the maritime sector, the air transport
sector benefits from the country’s
strategic position and serves as a transit
zone between Europe, Asia and Africa,
but has not been able to attain significant
volumes of business. Given the current
situation, more work is still needed for
Djibouti to become an active hub in the
region for this sector. A
In 2006, the government
of Djibouti and
Dubai Port World (DP
World) established a
joint venture granting
the company a 20 year
concession to manage
the international
airport of Djibouti at
Ambouli and to build
a new oil and cargo
terminal at Doraleh,
worth $397 million.
30 — Djibouti Review Invest in Group — 31

P
PROJECTS
Top Transportation
Projects
We keep an eye on the top
projects and companies shaping
the future of transportation
sector in Djibouti.
2
5
Hassan Gouled Aptidon
International Airport 5
The new airport will be constructed by the China
Civil Engineering Construction Corporation
(CCECC) in the city of Ali Sabieh and is expected to
be ready by 2018. Taking its name from Djibouti’s former
president, the Hassan Gouled Aptidon Airport
will be Djibouti’s tourism and cargo center, with a
capacity of 1.5 million passengers and 100,000 tons of
air cargo per year. The project will cost $600 million
to complete and will also include the construction of
a second airport in the north of the country.
1
3
Djibouti City
Addis Ababa – Djibouti City
Railway Line 6
The railway line project will connect Addis Ababa
and Djibouti City passing through other major
cities on the way, and will be the major transport
link between Djibouti and landlocked Ethiopia. It
will mainly handle general cargo. The project will
include a total of 756 km of railway line, currently
under construction, and will be completed by the
first quarter of 2016. The project will cost the two
countries around $3 billion, received on loan from
the Chinese banking group Exim Bank.
Doraleh Port 1
The Hong Kong-based China Merchants Group has
been a major contributor to Djibouti’s large-scale
infrastructure projects. The Group acquired a 23.5%
share in the Port of Djibouti and two-thirds of the
rights to Doraleh Container Terminal for $185 million
in 2013.
The Group has already, as a first phase, invested in
building a livestock port at Damerjog, located in the
Arta region, and in expanding the Doraleh Terminal
in order to increase the current handling capacity
by adding seven new births. The total investment
for these projects is estimated to be $470 million.
China Merchants Group’s continued partnership
with the Djibouti government was ensured by a new
agreement signed in March 2015. The result of the
agreement was a massive $7 billion investment, to
be implemented over the next ten years, for the construction
of the Djibouti Free Trade Zone, the second
phase of the expansion of Doraleh Terminal and a
new shipyard in the town of Obock. The new free
trade zone project will be the largest within the country,
and will rapidly increase Djibouti’s secondary and
tertiary sector activities as well as reduce the unemployment
rate by creating more than 200,000 jobs.
4
Tadjourah Port 2-3-4
The new port facility at Tadjourah will be Djibouti’s
third sea port and will serve as the main base for
Ethiopian potash exports. Ethiopian transit volumes
make up the majority of Djibouti’s trade traffic and
the port will increase these by 40%. Expected to be
completed in late 2015, the port is also the main
driving force behind several other projects which will
help in the development of the northern regions of
the country, including the construction of a railway
line between Tadjourah and Mekele. The total investment
in the project is $61 million, with the source
of the funds being the Arab Fund for Economic and
Social Development (AFESD) and the Saudi Fund
for Development, providing $36 million and $25
million, respectively.
Addis Ababa
Dire Dawa
6
Other Related Projects
Project Investment Completion Date
Mekele-Tadjourah Railway Line $1,5B 2015-2016
Awash-Djibouti City Oil Pipeline $1,400M 2016-2018
Ali Sabieh International Airport $500M 2016-2018
Djibouti Shipping Company $200M 2016-2018
Ras Siyan International Airport $100M 2016-2018
7
Goubet Mineral Port 7
Goubet Port is one of the most specialized of
Djibouti’s ports, dedicated to handling more than
5 million tons of salt and gypsum export from Lake
Assal per year. An investment of $64 million has been
secured in order to carry out the construction by the
China Harbour Engineering Company.
32 — Djibouti Review Invest in Group — 33

I
INVESTMENT
Investment Opportunities
Djibouti encourages foreign investment by
ensuring 100% foreign ownership in the
private sector.
Aside from some limited natural
resources, Djibouti’s economy is
largely dependent on trade. The
country is strategically located in East Africa
and serves as the regional transportation
and logistics hub for landlocked countries
in the region. It also enjoys political stability
and security from hosting French and US
military bases. Djibouti encourages foreign
investment by ensuring 100% foreign ownership
in the private sector. In addition, the
national currency is pegged to the US dollar
in order to keep the economy integrated
with international markets. The country
attracted $286 million in FDI in 2013, bringing
its total FDI to $1.3 billion.
Transport & Logistics
The sector is a major contributor to the country’s
GDP owing to its port facilities. Doraleh
Terminal was built by the DP World. The
Tadjourah and Ghoubet ports are still under
construction and will be completed in a short
time. In addition, the government plans to
increase the number of ports by separating
them into specific functions and build new
railway lines to serve them, a network which
will include new oil refineries, livestock terminals,
potash and salt exporting facilities.
Air Transport
Djibouti has only one international airport,
in Ambouli, just outside the capital city. With
more than 11 major international airlines
having regular flights to Djibouti, the country
has the opportunity to become an air transport
hub for connecting flights. Air transport
has been identified as an area for expansion,
with a number of investment opportunities
coming, including extending the current
capacity and constructing a new international
airport with an estimated investment
value of $360 million for the next decade.
Banking Sector
Djibouti’s banking sector is competitive and
hosts 11 banking groups in total. Recently, it
has achieved significant growth by providing
an excellent macroeconomic framework
for investors and now accounts for 10% of
GDP. There are no restrictions except for
the minimum capital requirement of $1.7
million to establish a financial institution.
However, Djibouti lacks other financial services,
including leasing and insurance companies,
investment funds and microcredit
organizations. In addition, Islamic finance
is a growing trend and there are already four
Islamic banks operating in Djibouti.
Telecom Sector
Djibouti’s telecom sector represents an
untouched domestic market with various
products including mobile services, fixed
lines and broadband, where the state-owned
Djibouti Telecom has the monopoly. GDP
contribution is still low, therefore, competition
is required. However, the country has
potential to become the regional hub for
telecommunications by providing an international
network with undersea fiber optic
cable systems.
Tourism Sector
Djibouti offers various tourism opportunities,
most of which have not yet been used
to their full potential due to a lack of tourism
facilities. There are already 23 hotels,
but only two of these are of a high standard.
In addition, these hotels are all located in
the capital city. The National Investment
Promotion Agency (NIPA) works to highlight
to investors and companies other areas
in the country where hotels and resorts could
be built. Its targets include Maskali and
Moucha Islands, Goubet, Lake Abbe and
Lake Assal. Ecotourism is a growing trend
in Djibouti with some small amount of competition,
which is driven by the government.
In addition, the Gulf of Tadjourah and Seven
Brothers Islands are ideal places for scuba
diving and sea safari trips.
Salt Production
Djibouti’s Lake Assal is one of the largest
saline lakes in the world and is ideal for
salt production. In 2008, Emerging Capital
Partners (ECP), in an agreement with two
other interests, began further developing the
facilities for harvesting salt from the lake,
with an initial investment of $30 million in
Salt Investment. The government is open
to new investors, who it is hoped would
improve salt production and thus increase
its export volume.
Renewable Energy
Djibouti does not have any oil or natural gas
reserves and imports what it needs, but it
has considerable potential energy resources,
including wind, solar and geothermal energy.
However, the country, like others in the
region, lacks production capacity. Energy
development is one of the crucial aspects of
Djibouti’s future plans and the government
encourages the private sector to invest in
energy development by promoting a supportive
business climate. In addition, the
country is aiming to have 100% of its energy
come from renewable sources by 2020.
34 — Djibouti Review Invest in Group — 35

DJIBOUTI
in pictures
36 — Djibouti Review Invest in Group — 37