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Djibouti — the commercial and military hub on the Horn
April 19, 2017, 1:17 pm
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Not that long ago Djibouti was known for little more than French legionnaires, atrocious heat and its old railway line to Addis Ababa in Ethiopia. Nowadays, however, this tiny republic of only about 900,000 people on the Horn of Africa coast has big plans, including turning its capital into a thriving commercial hub, and a military center for anyone willing to pay the rent.

Since gaining independence from France in 1977, Djibouti has steadily carved out a regional role through its strategic and commercial relevance at the junction of Africa and the Middle East, and at the confluence of the Red Sea and the Gulf of Aden, overlooking a passage of water used by 30 percent of the world's shipping transiting from and to the Suez Canal.

Djibouti is viewed as offering some of the most prime military real-estate in the world, both to counter piracy threatening that key shipping lane and to shore up regional stability. In 2014, the US military agreed a 10-year extension to its presence in Djibouti, with an option to extend for another 10 years. The US pays 60 million dollars a year to lease Camp Lemonnier, which it has turned into its African headquarters.

In 2016 China finalized plans for a new base in Obock, a small port a couple of hours by ferry from Djibouti City northward across the Gulf of Tadjoura. When complete, about 10,000 Chinese personal will occupy the base, which China has leased for an initial 10-years at 20 million dollars per year in rent.

Other foreign military already stationed in Djibouti, include those from France, Germany, Netherlands, Spain and Japan; together they number around 25,000 personnel according to some estimates.

But it is not just military rents that prop up Djibouti’s economy. Recently-acquired Chinese investment totaling more than 12 billion dollars is funding the building of six new ports, two new airports, a railway, and what is being touted as the biggest and most dynamic free trade zone in Africa, potentially giving the capital, Djibouti City, an edge over its rivals.

In early 2017, the new Chinese-built 4-billion-dollar railway officially opened linking Djibouti to the Ethiopian interior and which could eventually connect to other Chinese-built railways emerging across the African continent.

Djibouti's location has always been its most precious resource — devoid of a single river or the likes of extractable minerals, it produces almost nothing. Nevertheless, for nearly 150 years it has attracted armies, mercenaries, smugglers, gunrunners and traders: anyone and everyone concerned with the movement or control of merchandise. And that trend only seems set to increase.

Many are upbeat about Djibouti’s future potential. "Ethiopia has a population 100 times larger than Djibouti's but it only imports and exports six times as much," says Aboubaker Omar, chairman and CEO of Djibouti Ports and Free Zones Authority. "Imagine the day that demand matches Ethiopia's population size."

"About 2 million African customers travel to Dubai each year," says Dawit Gebre-ab, with the Djibouti Ports and Free Zones Authority overseeing the city's commercial infrastructure development. "We know what is on their shopping lists, and they could be coming here instead."

However, others are not so optimistic about Djibouti's current strategic and economic upswing — a healthy 6 percent a year, and likely to surpass 7 percent amid the construction boom. They complain of a country run by a business-savvy dictatorship that has reaped profits from its superpower tenants while not doing enough to relieve widespread poverty.

Most of Djibouti’s locals have not seen any improvement in their lives or livelihood from the recent construction boom. According to latest estimates, 60 percent of the labor force is unemployed and 42 percent of the population lives in extreme poverty. For these underprivileged and unemployed people, dreams of their country becoming a future Dubai is of little interest; finding work and feeding their families is their immediate concern.

 

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