Published May 21, the new report by Allan & Associates, a consulting firm in policy and risk management provides some clarification.
Djibouti, which wants to become the trans-shipment center of the Horn of Africa, has demonstrated its attractiveness in terms of investments in recent years. Located near some of the busiest sea routes, with access to the Indian Ocean and the Red Sea, this country can boast of the political stability and peace that has been won over for decades, unlike some of its neighbors like Somalia divided, opaque Eritrea or Yemen devastated by war.
“Djibouti offers an attractive environment for investors in the Horn of Africa, but caution is required,” said Olivier Milland, senior analyst and specialist in sub-Saharan Africa, author of the report.
According to Allan & Associates’ evaluation, the indicators show that the investment risks in Djibouti are considerable, notably because of the following factors:
Growing concern over corruption given the decline in international assessments of transparency and governance
Regional competition in the context of markets can result in access by national elites to foreign investors’ incomes
Weak macroeconomic indicators, with public debt reaching 87 percent of GDP in 2018
Excess reliance on neighboring Ethiopia – 95 percent of Ethiopian exports go through the port of Djibouti – and China, its main source of foreign investment
Vulnerability to a global protectionist trend fueled by Donald Trump, US President due to the use of port traffic
Conflicts in Gulf countries threaten investment stability
Concern over renegotiation of markets under a new law and localization
“Changing geopolitical dynamics in the region, coupled with US protectionist policies and conflicts between the Gulf countries, pose additional challenges for investors,” Milland concludes.
