Djibouti: Investing

FDI in Figures

According to UNCTAD’s World Investment Report 2021, FDI flows to Djibouti amounted to USD 240 million in 2020, up from USD 222 million in 2019, despite the global economic crisis triggered by the Covid-19 pandemic. The total stock of FDI was estimated at USD 2 billion in 2020. In 2021, global FDI flows rebounded strongly, but FDI flows to African countries (excluding South Africa) rose only moderately (UNCTAD’ Investment Trends Monitor). Excluding direct investment in port entities, direct investment in Djibouti is concentrated in real estate, industry, and services (IMF). The main investors are the Gulf countries, Ethiopia, Yemen, China, the United States, France, Brazil, India and Turkey. As a member of COMESA willing to attract more FDI, Djibouti aims specifically at building closer ties with the Gulf Cooperation Council and India.

In terms of business climate, Djibouti has lost thirteen places in the 2020 Doing Business report of the World Bank, ranking 112th. Nevertheless, the country has recorded progresses in the recent years in improving its business environment. Djibouti has taken many reforms that include creating a one-stop shop for business start-up ; making property transfer easier and more transparent ; strengthening access to credit ; strengthening minority investor protections ; making enforcing contracts easier by establishing a dedicated division within the court of first instance to resolve commercial cases and by adopting a new Code of Civil Procedure ; and making resolving insolvency easier. Djibouti has also introduced a minimum wage of 35,000 francs (USD 198) per month for workers. The country's main attractive feature for investment is its strategic geographical location, situated at the maritime crossroads between the Far East, the Persian Gulf, Africa and Europe, which makes its deep-water port facilities and railway key assets. Moreover, Djibouti has a stable currency, which is freely convertible and pegged to the U.S. dollar. Furthermore, the government, which is implementing an ambitious infrastructure programme, offers significant tax reductions to foreign investors. In 2022, the redevelopment of the historic port into a business centre and the further development of the Damerjog port industrial free zone, with the construction of a new oil jetty are expected to boost investments (Coface).

Chinese companies are particularly active in the infrastructure programme, of which the biggest initiative is the Chinese-financed Djibouti Free Trade Zone, inaugurated in 2018 and set to become the largest in Africa (Coface). Other major projects include the Addis Abeba-Djibouti railway, the construction of a drinking water pipeline with Ethiopia, as well as airports, a wind farm, a solar power plant (with Germany) and a geothermal power plant (with China). The Port of Doraleh, an extension of the Port of Djibouti and described as potentially the most technologically advanced port in Africa, opened in May 2017. While the port was constructed, owned and operated by two Chinese and Emirati companies, the government of Djibouti seized the facility in February 2018 and placed it under the control of a public company, undermining investment climate. A Court decision ruled in favour of the Emirati group. Other factors impeding FDI flows are mediocre governance, corruption, the lack of a sound judicial framework, an unstable regional geopolitical situation, a poorly diversified economy with little resilience to outside shocks, and a fragile ecosystem prone to environmental crisis.

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Latest Update: February 2023