Djibouti developing infrastructure to become key trading hub

In political terms, Djibouti is a young country. It achieved independence less than 40 years ago and has only had two presidents in that time. This comparative stability in what is a volatile region has allowed the country to develop relatively speedily.

Political System

The political structure in Djibouti is presidential, with legislative power shared between the executive and the parliament. The president is elected for a five-year term by absolute majority in a two-round system. As the head of state, the president appoints the prime minister, who appoints the council of ministers. The next presidential elections are scheduled for April 2016. In 2011, President Ismaïl Omar Guelleh was re-elected for a third term with 80.6% of the vote, 12 years after his initial election as the head of the People’s Progress Assembly (RPP), which since independence has been the largest party in the country.

The National Assembly is unicameral. It consists of 65 seats, 52 of which are filled by plurality vote in multi-seat constituencies. The remaining 13 seats are decided using a proportional representation system. All deputies are elected to the assembly for five-year terms. The last elections were held in February 2013, with the Union for the Presidential Majority, a coalition of five parties including the RPP, receiving a solid majority of votes and seats.

At the head of the judicial branch is the Supreme Court, whose magistrates are appointed by the president for life. The legal system is a mix of the French civil code, Islamic law and customary law.

In line with other small city-states, the government has taken a technocratic approach to governing. In late 2014, President Ismaïl Omar Guelleh told the press that individual politicans in the region were less important than maintaining a strong administration with a unified goal. “When you have a coalition of parties everybody will try to be in this coalition and form this coalition to win the election,” Guelleh commented, going on to say that changes within government would not affect Djibouti’s line of development. In 2015 President Guelleh announced that he will run for another term.

Government Strategy

The current government has laid out an ambitious template for the country to follow. While the RPP has held power, alone or in coalition, since independence, and has rarely faced contested elections, it has nonetheless in recent years presented new ambition for the East African state, modelled in part on the success of Dubai. While the direct relationship between the two administrations has not been without its ups and downs in the last five years, the government sees, in its own limited resources and strategic location, similarities with its successful Gulf counterpart

Economic Progress

While Djibouti is small in size with limited natural resources, its headline figures have thus far supported the government’s overall strategy. Between 2011 and 2013, the trade-to-GDP ratio stood at 73.5%, according to the World Trade Organisation (WTO). Trade has also been on the up (see Economy chapter). The volume of goods passing through Djibouti’s ports doubled in the five years to 2009 and subsequently, between 2011 and 2014, container and bulk cargo passing through the port of Djibouti experienced double-digit growth. However, the country has a long way to go to reach its aspiration. In terms of global merchandise trade, Djibouti ranked 179th for exports and 174th for imports in 2014, according to the WTO.

Good Neighbours

Central to the government’s ambition of developing the country as a trading hub is its linkages with neighbouring 95m-person Ethiopia. The country acts as a key transit and shipment route for Ethiopian goods (see Transport chapter). This is likely to continue with Ethiopia looking to pipe gas through Djibouti and complete a rail line to the coast. An important component of this strategy is the development of infrastructure. Although this will require a massive funding programme, the government has not been short of capital for this purpose. Indeed, high levels of foreign direct investment (FDI) are financing roads, ports and the wider construction industry. In 2013 alone, FDI accounted for 18.6% of GDP, according to the “African Economic Outlook” report by the African Development Bank (see Economy chapter).

Much of this is coming from China, which has sought to develop its ties with Djibouti in recent years. According to the government, Chinese capital, including from China Merchant Holdings International, China Exim Bank and Touchroad International Holdings, accounts for as much as 45% of the infrastructure financing needs. Going forward, this will include $6bn worth of funds for projects such as a rail line linking Djibouti and the Ethiopian capital, Addis Ababa, a thermal power plant, a desalination plant, a new container terminal, a minerals terminal at Tadjourah and a port for salt exports at Goubet (see Transport chapter).

Security

As these commitments suggest, Djibouti has cultivated an expansive and deft foreign policy as a means of supporting its own development agenda (see analysis). Given the country’s location, it is perhaps unsurprising that security remains at the top of the political and foreign policy agenda. The Horn of Africa is a volatile neighbourhood, and Djibouti has played an active role in international efforts to monitor and quell extremist forces within it. It has acted as a base for operations to counter piracy in the Gulf of Aden and terrorist activity in Somalia and Yemen. To this end, several countries – from the US and Japan to France and now China – have established a military presence in Djibouti.

Domestic Stability

Djibouti’s strategic location has been central to the country’s ability to play a key role in regional diplomacy, but the nation’s own internal stability – in stark contrast to some of its neighbours – has been equally important.

In 1991, the Front for the Restoration of Unity and Democracy (FRUD) launched an insurgency in northern Djibouti. However, after lengthy negotiations, subsequent peace deals in 1994 and then again in 2001 brought the violence to an end and paved the way for multi-party elections.

In 2014 incidents related to FRUD that occurred over political grievances related to the pending presidential elections prompted some concerns, but were largely resolved in December, when it was announced that the government and the opposition coalition – the Union of National Salvation – had reached an agreement on political reform.

The agreement marked a significant step forward for the country, given the opposition’s refusal to sit in Parliament since the 2013 parliamentary elections, when it won a total of 10 seats in the chamber.