Gateway to Africa: Aboubaker Omar Hadi, Chairman, Djibouti Ports and Free Zones Authority, on East Africa’s largest free trade zone, and its relevance for Djibouti and the wider region

What kind of opportunities will the opening of the new Djibouti International Free Trade Zone (DIFTZ) bring to the country?

HADI: Djibouti’s strategic location makes it an important gateway to dynamic African markets, particularly as it lies on two of the world’s busiest maritime routes. Global trade continues to post strong growth, and as 90% of it is transported by sea, Djibouti is already an important regional and global trade hub, and will continue to be so. It is also a key node on China’s Belt and Road Initiative – one of the most ambitious infrastructure networks in history.

The DIFTZ can benefit landlocked countries such as Ethiopia, Africa’s fastest-growing economy in 2018, by improving their connectivity to key international maritime routes. Hence, Djibouti’s multiple ports have a vital and strategic role to play as a gateway to 13 landlocked countries in the continent’s interior.

A $15bn infrastructure expansion programme will ensure that the DIFTZ is fully integrated into a multi-modal network of ports, airports, motorways and the high-speed railway connecting Djibouti to Ethiopia that started operations in January 2018.

The volume of goods travelling through East Africa continues to increase sharply. Every time a product leaves the continent without having been processed or transformed, it is a missed opportunity for Djibouti and for Africa. Therefore, the role of the DIFTZ is crucial as it will provide an important platform to add value to goods passing through the country.

Most importantly, it will create major transnational business opportunities for both Djibouti and other East African nations by expanding the region’s manufacturing and processing capacity in key export sectors such as food, automotive parts, textiles and packaging. Additionally, the DIFTZ is a key component of Djibouti’s domestic development, fully aligned with various aspects of the long-term national development programme, known as Djibouti Vision 2035.

How can free trade zones (FTZs) better integrate regional trade flows?

HADI: The very nature of FTZs means they tend to be outward-looking ecosystems favourable to international investment. They also allow for outsourcing and the creation of large-scale industrial projects that foster export growth. However, this success is dependent on the solidity of flexible and harmonious fiscal and regulatory conditions.

On a regional scale, this involves moving towards a model of greater integration through better connected transport infrastructure, and more liberalised laws on the movement of goods and people. This would allow FTZs to play a useful role as an interface between national, regional and global economies.

What economic and social impact can the DIFTZ have on Djibouti’s population and businesses?

HADI: Economists claim that a job created within an FTZ generates two other jobs outside of it. This correlation bodes extremely well for Djibouti’s economy as the DIFTZ is set to generate around 12,000 jobs during the pilot phase alone, in particular for young jobseekers. It will soon be a flourishing business district, attracting international companies to set up their regional headquarters and logistics operators to plan their shipments to regional markets.

The long-term aim is to boost international and local investment, and thereby foster growth, by capitalising on both Djibouti’s strategic location and its nexus of ports, railway and new airport. This will encourage local businesses to expand by using the FTZ as a platform. Once fully established, we expect the DIFTZ to boost the country’s GDP by 11%, or around $200m, during the project’s pilot phase, which will cover 2.4 sq km. Looking ahead, subsequent expansion phases planned for 2035 and 2040 will increase its operational capacity and will amount to further investments of $2.5bn and $4bn, respectively.