With a new free trade zone, Djibouti seeks to transform from a military hub to a major trade center

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However, whether Djibouti is an ideal investment location for big money from Chinese investors is hard to predict now, Meng Guangwen, a professor specializing in free trade zones at the Tianjin Normal University, told the Global Times.

In the 2018 Doing Business report released by the World Bank, Djibouti ranks 154 out of 183 countries.

According to an investment guide released by China’s commerce ministry in November 2017, Djibouti has a severely adverse natural environment, poor infrastructure and few natural resources.

The biggest challenge to Chinese companies’ investment in Djibouti comes from the uncertainty of political policies, said Meng.

For instance, if more trade friction between China and the US occurs, it is unknown whether China’s business in the country would be affected, said Meng.

As a country that hosts a handful of military bases from countries like the US, France and Japan, it’s hard to say how much autonomy the country has in making policies on issues with intertwined interests, Meng said.

“Djibouti is an independent sovereign state and the foreign military bases cannot have any political or any other impact on the country’s efforts to build a service-based economy. The FTZ is a testimony of the goal,” said Gebre-ab.

The free trade zone is a “touchstone” of whether Djibouti could become Africa’s hub of commerce, trade logistics and transportation, as the FTZ has gathered almost all the support the government could offer, Meng said.

Local businessmen and authorities in the country are very optimistic despite the skeptics.

With a low inflation rate, low crime rate and liberal financial sector, Djibouti has huge potential to be a successful commercial and trade center in Africa, Gebre-ab stressed.

The multi-functional Doraleh Port, which was co-developed by the China Merchants Group (CMG) and the Djibouti government, has proved to be profitable, according to the company.

From 2015 to 2017, the profit of the port surpassed $100 million each year with accumulated profits of $475 million, according to a statement from CMG, adding that the FTZ, which is also co-developed by the company, is also promising.

Risks always exist, and what matters most is to manage the risks and ensure that all the parties involved can profit, Barbara Manzi, UN resident coordinator of Djibouti, told the Global Times.

The free trade zone is a significant place for Djibouti companies, as well as African countries, to show what they can do and how China and Djibouti could actualize win-win cooperation, said Manzi.

(People’s daily/Global Times)

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A warsame

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