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INTERVIEW: Djibouti Ports and Free Zone Authority

Aboubaker Omar Hadi, chairman of Djibouti Ports and Free Zone Authority (DGZ), on how the hub is a gateway to Africa for the Middle East.
Aboubaker Omar Hadi, chairman of DGZ.
Aboubaker Omar Hadi, chairman of DGZ.

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Aboubaker Omar Hadi, chairman of Djibouti Ports and Free Zone Authority (DGZ), spoke to Logistics Middle East magazine about how the ten-year-old hub is a gateway to Africa for the Middle East, boosting vital trade links for the nations.

How much has Djibouti Free Zone developed since it was established in 2004?
Since its establishment in 2004, the Djibouti Free Zone (DFZ) has witnessed unprecedented levels of demand. The site has been fully occupied since the end of 2011 and occupancy has remained at 100% since. Currently there is a waiting list of 50 companies.

To meet the current and the future anticipated growth the Djibouti government has committed to the development of a second free zone in the country, Khor Abamdo Free Zone. This new facility will cover 3,500 hectares and be developed in three phases.

The first 400 hectares construction phase, which is a $500million project, will start in the fourth quarter of 2014. It is part a $9billion investment planned across the country’s sea and air ports, maritime and free zone sectors over the next three years.

In what ways is DFZ boosting trade links between the Middle East and Africa?
DFZ plays a crucial role in boosting trade links between the Middle East region and Africa. A key platform for the continent’s economic emergence has been its growing relationship with the Middle East, and the GCC countries in particular. Annual trade between the Middle East and Africa has grown fivefold to $49bn over the past decade, up from $10bn in 2002.

As an anchor of stability in the Horn of Africa, and an important partner to the West from a security perspective, Djibouti, through DFZ and the expanded free zone under development, is the natural gateway to Africa, occupying a strategically important position and acting as a regional hub, providing critical sea, air, rail and road linkages for Eastern Africa.

Djibouti is also a member of COMESA, a free trade area covering 19 states and talks are underway to establish the COMESA-EAC-SADC Free Trade Area, comprising 26 countries with a combined population of nearly 600 million people and a total GDP of approximately $1.0trillion. DFZ offers unparalleled access to these markets.

What would you say are DFZ’s key strengths?
Businesses are attracted to Djibouti due to its liberal economy and its location as a regional hub for trade with the emerging Eastern African economies, which creates growth opportunities across a range of different sectors. The country offers a safe and stable environment for investors whilst it is also a key partner to the West in security and the development of Somalia and the Horn of Africa.

The country offers a strong regulatory framework, a US-Dollar linked currency and a commitment to improving transparency with an active anti-corruption programme in place. Djibouti is also a major meeting point for undersea fiber optic cable systems connecting Europe, the Middle East and Asia, to Africa.

The DFZ builds on these attributes and offers further benefits such as zero percent corporate tax, a duty-free environment, 100 percent foreign ownership, no restrictions on employment or foreign personnel, 100 percent repatriation of capital and profits, direct local and regional market access and no currency restrictions, along with minimal red-tape. Additionally, companies can also depend on the help of the Djibouti National Investment Promotion Agency, a one-stop shop that facilitates setting up business in the free zone.

There is talk of Djibouti positioning itself to become the Dubai of Africa. How could this be achieved and what it is about Dubai that DFZ admires?
Dubai, and the UAE as a whole, and Djibouti share a number of similarities, the most significant being their enviable strategic locations in their respective geographies. The UAE is perfectly positioned to channel exports between Asia, Africa and Europe, and Djibouti is ideally located to facilitate trade flows between Europe, Africa and the Middle East.

Both countries, despite their small size also have long-established reputations as trading nations and are gateways to trillion dollar markets: UAE to the Middle East and Djibouti to East Africa. Djibouti is also on the border of one of the largest countries of Africa—Ethiopia—which represents a potential 90 million consumers.

The privileged locations of both countries has allowed them to establish themselves as global hubs for international trade and exports. The next natural stage in this development is evolving from a global port hub to a global business hub; something that Dubai has already achieved.

Today the UAE has established itself as business, transport, tourism and cultural centre for the Middle East. This is a vision shared by the Government of Djibouti and valuable lessons can be learnt from them.

What are the main goals you have for DFZ both for 2014 and longer term?
As well as the expansion that is underway, another vital long-term pillar to DFZ’s story is the upcoming establishment of an English-law Commercial Court in the zone. This will provide international businesses with the additional reassurance of a reliable legal system that will efficiently hear disputes and grant awards guaranteed by the Djiboutian state.

What are the biggest challenges you are facing currently?
Our current challenge is to cope with the fast growing demand for transport and logistic infrastructures. Demand is currently outstripping capacity and with the additional infrastructure projects underway in Djibouti, such as the master plan to upgrade the airport, which would also include the installation of an airport free zone, we anticipate continued demand. Djibouti is on a positive growth trajectory and it will be key to ensure that the upsurge in demand created by the recent economic growth is met by the DFZ.

What are your development plans, looking at the next couple of years?
The new Khor Abamdo Free Zone is being developed to complement the DFZ. It will be more than 200 times the size of the existing one in order to support the anticipated growth in demand, so it is a much larger project. It will have its own electricity, water generation and desalination plants, and deep water ports which can receive the largest vessels; all of which will make light industry more viable.

Already commitments have been received from the big shipping lines. The Horn of Africa is blessed with an abundance of natural resources, including oil, precious metals, minerals and fertile land, but in order to ensure everyone benefits it is essential that platforms like DFZ are created to enable international trade and attract foreign investment. Continued economic growth will also support political stability and economic and social development in the region.

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