Djibouti's Business World
Djibouti is a largely barren country, with a very underdeveloped agricultural and industrial sector. The country's climate is harsh, and because of its lack of industrial and agricultural businesses, its labor force is largely unskilled. The most important business in Djibouti is its location; it is strategically located between the Gulf of Aden and the Red Sea. Djibouti's business world is almost completely dominated by the service sector, as the country is a port for the entire region and it also serves as a refueling and transshipment center.
Djibouti's business world took a hit when the country went through a civil war from the years 1991-1994. However, there has been relative economic and political stability since then. In the recent past, the macroeconomic stability of Djibouti has improved; its GDP has improved by almost three percent per year since 2003. The growth is attributed to measures taken to improve public financing, and various port management improvements.
Despite the country's recent business and economic growth, Djibouti still faces a lot of challenges; the greatest of which are the reduction of poverty and the creation of new jobs. The population grows at an estimated annual rate of 2.5%, and unemployment is thought to be at almost 50%. A greater effort is needed in order to create the conditions needed to build up human capital and to develop the private sector.
Most of Djibouti's business is based on its location. Because of its position on the Red Sea, the country is strategically important. Its refueling and transport facilities are used by several landlocked countries in Africa to allow for the export of goods, allowing Djibouti to earn harbor fees and transit taxes on every shipment. In fact, most of the government's revenue comes from this source. Djibouti's port also houses a small French naval installment, and the US also has a few hundred troops in the country (its only base in Africa).
The economy of the country also stems largely from its status as a free trade zone. Two-thirds of the country's inhabitants live in its capital, and the remainder of the population consists of herders who live a nomadic lifestyle. Because of low rainfall, crop production is limited to mainly fruits and vegetables; most other foodstuffs have to be imported. These factors all contribute to Djibouti's dependence on foreign help.
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