Djibouti Economics and Business

In 1979, President Gouled of Djibouti, abbreviated as DJU by, signed a trade and transport agreement with Ethiopia and Somalia. Priority was given to the participation of the Afars in the government and in the newly formed army as part of the attempt to create national unity. The ruling party was reorganized and local administrations created to stimulate interest in active participation in the country’s political life. Foreign aid was concentrated on irrigation projects and on improving conditions for refugees from the war in Ogadén.

According to COUNTRYAAH, Gouled’s government received assistance from Saudi Arabia, Kuwait, Iraq and Libya. Gouled was able to elegantly manage the interests of his country, whose only resource was its strategic location on the Red Sea. After eight years of independence, Djibouti maintained the desire to continue an independent line, thus disappointing expectations that the country would soon be incorporated into either Ethiopia or Somalia.

Despite diplomatic success, Gouled continued to struggle with internal problems, the most serious of which were the problems between the Afars and the Issa. The Afars, who made up 35% of the population, complained of being exposed to political and economic discrimination. The Issa, which represented 60%, held key positions in the government, rejected the accusations of nepotism and welcomed the reprisals Gouled launched against the opposition. Following the dissolution of the Djibouti Popular Liberation Movement in 1979, the Afars in 1981 tried to organize themselves in the Djibouti People’s Party, which was also banned.

In October of that year, President Gouled sought to amend the constitution with a view to introducing a one-party system. The RPP government party thus became the only permitted party, while all others were deprived of the right of election on the grounds that these were racist or religious parties that posed a threat to national unity.

Note: the capital city of Djibouti is Djibouti with a population of 568 800 (UN estimate 2019). Other major cities include Dikhil, Tadjoura.

In 1983, the first steps were taken towards a radical transformation of Djibouti’s economy, which transformed the country into a “Hong Kong of the Middle East”. The vision was to make Djibouti an international financial market with a duty-free port. Six foreign banks set up branches in Djibouti, where the primary attraction was the strong currency supported by the large deposits – in dollars – in North American banks.

Djibouti Economics and Business

Economic conditions. – The country is in very backward economic conditions. Its location in the arid climatic zone and the lack of underground resources have greatly hindered its development: half of the country’s population (the entire rural population) still practices forms of nomadic pastoralism. Only recently have some wells been drilled to draw from the underground aquifers and thus be able to supply a still poor agriculture. Overall, the cultivated area occupies about 1000 ha, while 200,000 ha are intended for meadows and pastures. The country is heavily dependent on food imports, and the presence of a large number of political refugees aggravates its dependence on foreign countries (especially France). The situation of instability that weighs on the Corno d ‘ Africa has also severely penalized the economy of the Republic of Djibouti, causing among other things a collapse in the volume of commercial traffic in transit to and from Ethiopia via the Djibouti-Addis Abeba railway. The industry finds it very difficult to grow and, even today, is based on modest manufacturing plants, despite the existence of a free port. A cement plant (in Djibouti) with an annual capacity of approximately 100,000 tons is at an advanced stage. The services sector is therefore the one that ensures the greatest development prospects: already in the mid-1980s it contributed more than 70% to the formation of the gross domestic product. Among the projects in progress, the strengthening of the port structures deserves a mention (already in 1984 a terminal for containers), the energy sector and the banking sector. International trade and financial intermediation are entrusted with the hopes of the country’s economic take-off (the local currency, the Djibouti franc, is convertible).

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