Djibouti’s biggest business and economic strength comes from its strategic geographical location as it boasts 314 km of Red Sea coastline. The major portion of the country’s revenues (almost 75%) is generated from international and transit port activities through various transit and harbor taxes. Djibouti also supports various landlocked African countries, such as Ethiopia, by providing a route for exporting and trading goods and supplies.

Further, its close strategic ties with France and the United States and its status as a free trade zone in North East Africa have seen Djibouti emerge as a strategically important economy in the African region. Djibouti serves as a single military base in Africa for France and the United States. This contributes to Djibouti’s national revenues, as well as strengthening its relations with its strategic partners.

In common with other poor African countries, Djibouti faces issues such as high unemployment rates (about 60%), a scarcity of natural resources, and reliance on oil imports for electricity generation. These factors, coupled with a civil war which only ended in 2006, have weakened key pillars of the nation’s economy and made it highly reliant on foreign assistance to fund its high external debt and support development projects.

Efforts have been made by a number of non-profit organizations, together with government, to develop industry and improve infrastructure for self-sustained growth and the generation of employment opportunities. These organizations have managed to cultivate the interest of funding bodies – and thus encourage direct foreign investment – by making them understand the potential of Djibouti. Here are some of the projects currently underway, as well as some key opportunities for further development:

1. Private Sector Development-Policies: Electricity shortages, high interest rates and high inflation booming at around 4%, have formed significant barriers to investment. Local authorities have taken steps in order to ease processes and encourage investment in the private sector. They have brought in policies to ease tax implications for businesses, and are beginning to grant exemptions on consumption tax.

2. Addressing electricity shortages: Djibouti lacks food security and is a completely dependent on imports for food because of a dearth of energy and recurring droughts in the region. To address the problem of electricity shortages, the Global Environmental Facility, World Bank and Organization of Petroleum Exporting Countries have collaborated to set up a 56 megawatt geothermal power plant to be completed by 2018. This will reduce the country’s dependence on Ethiopia for power. Oil imports currently account for 20% of Djibouti’s total imports; in this context, the construction of the new power plant is expected to reduce debt and support GDP.

3. Optimization of mineral resources: Salt Investment (SIS) has taken advantage of the country’s natural salt resources and low freight costs. It has started salt mining from Lake Assal, and is operating at a capacity of 4 million tonne per annum. This has generated

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