HomeReportsBureau of Economic and Business Affairs2022 Investment Climate Statements...Djibouti

# 					2022 Investment Climate Statements: Djibouti			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment                    -  Policies Towards Foreign Direct Investment 
                  -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment and Taxation Treaties   
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Antitrust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                  -  Performance and Data Localization Requirements 
                -  5. Protection of Property Rights                    -  Real Property 
                  -  Intellectual Property Rights 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances 
                  -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises (SOEs)                    -  Privatization Program 
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Djibouti, a country with few resources, recognizes the crucial need for foreign direct investment (FDI) to stimulate economic development. The country’s assets include a strategic geographic location, free zones, an open trade regime, and a stable currency. Djibouti has identified a number of priority sectors for investment, including transport and logistics, real estate, energy, agriculture, and tourism. Djibouti’s investment climate has improved in recent years, which has led to interest by U.S. and other foreign firms. There are, however, a number of reforms still needed to promote investment.

In 2020, according to the UN Conference of Trade and Development, FDI stock represented 58.53% of GDP, up from 52.5% in 2018. Real GDP growth has remained between 5% and a little over 8% per year for the last five years. Inflation decreased to 0.1 % in 2018 then peaked at an estimated 3.3% in 2019 and decreased to 2.9% in 2020. In recent years, Djibouti undertook a surge of foreign-backed infrastructure loans to posture themselves as the “Singapore of Africa.” Major projects have included a new gas terminal and pipeline to Ethiopia, a new port, free zones, improved road systems, a railroad connecting Djibouti and Addis Ababa, and a water pipeline from Ethiopia. Djibouti launched the first phase of an ambitious port and free zone project, Djibouti Damerjog Industrial Development (DDID) free-trade zone, scheduled to be built in three phases of five years each. The project includes a multipurpose port, a liquefied natural gas terminal, a livestock terminal, dry docks and a ship repair area, a power plant and a factory that will produce construction materials. DDID, which is expected to attract foreign investors, will offer all the preferential policies guaranteed by the free zone authority, such as tax exemption, minimized restrictions on foreign labor and competitive water and electricity rates. In April 2018, the Government of Djibouti enacted tax, labor, and financial reforms to improve its investment climate.

Various business climate reforms were introduced in 2020 with the objectives of improving competitiveness both regionally and internationally. These reforms included starting online registration for companies and the creation of the Djibouti Port Community System platform which is a portal that provides a comprehensive set of online services to the business community.

Economic development and foreign investment are hindered by high electricity costs, high unemployment, an unskilled workforce, a large informal sector, regional instability, opaque business practices, compliance risks, corruption, and a weak financial sector. The World Bank estimated the government’s public debt-to-GDP ratio was 66.7% in 2019 with a projection of 69.9% in 2020 which will gradually decrease over the years. The majority of the debt is owed to Chinese entities.

 

							1. Openness To, and Restrictions Upon, Foreign Investment					

### Policies Towards Foreign Direct Investment

Djibouti’s laws encourage FDI, with the government as a driving force behind Djibouti’s economic growth. Faced with an unemployment rate of over 47%, FDI is expected to generate jobs. There are no laws, practices, or mechanisms that discriminate against foreign investors. Navigating the bureaucracy, however, can be complicated. FDI is encouraged by policy and foreign companies are often able to negotiate favorable tax terms on a case-by-case basis.

The government is gradually opening public sector entities, including state owned utilities, to private investment. In 2021 the government invited proposals for a strategic investor in the state-owned telecommunications monopoly. The energy sector remains open to competition through power purchase agreements; however, the state-owned electric utility retains all rights to the transmission and distribution of electricity. This liberalization of production has resulted in the private development of wind, solar, and waste to energy resources.

Djibouti’s National Investment Promotion Agency (NIPA), created in 2001, promotes private-sector investment, facilitates investment operations, and works to modernize the country’s regulatory framework. NIPA assists foreign and domestic investors by disseminating information and streamlining administrative procedures. Since 2017, NIPA’s one-stop-shop, which houses several agencies under one roof, has simplified business registration. NIPA has identified several priority sectors for investment, including infrastructure and renewable energy.

The Secretariat of State in charge of Investment and Private Sector Development, established in May 2021, is in charge of implementing the business climate policy, investment promotion and private sector development. This agency works in coordination with the Ministry of Economy and Finance. It ensures that the business environment is internationally competitive and conducive to private initiatives. It identifies administrative reforms that remove obstacles to the proper functioning of the private sector.

### Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities have equal rights in establishing and owning business enterprises and engaging in all forms of remunerative activity. Furthermore, foreign investors are not required by law to have a local partner except in the insurance industry, and then, only if the company is registered as a local company and not as a branch of an existing foreign company. Nevertheless, some foreign companies choose to have a local partner to help them better navigate the local bureaucracy and cultural sensitivities. There is no established screening process for FDI.

### Other Investment Policy Reviews

The OECD, WTO, and the UNCTAD have not conducted an investment policy review (IPR) for Djibouti in the last five years. The Business and Human Rights Resource Center conducted a review in 2022 of Djibouti’s Doraleh Multipurpose Port (DMP) which focused on the DMP’s financing by China Eximbank.

### Business Facilitation

The government of Djibouti has facilitated the registration of business by reducing the capital needed for investment, simplifying the formalities needed to register and simplifying certain tax procedures. The most important facilitation effort is the one-stop-shop, or Guichet Unique, managed by NIPA. The Guichet Unique (http://www.guichet-unique.dj) brings together all the agencies with which a company must register.

Typically, a company registers with the following Djiboutian offices: Office of Intellectual Property, Tax office, and the Social Security office. Online registration is not possible; the normal registration process takes 14 days, according to the World Bank. In Djibouti, new businesses must have every document notarized to begin operations.

### Outward Investment

The government neither promotes nor restricts outward investment.

							2. Bilateral Investment and Taxation Treaties					

Djibouti does not have a bilateral investment treaty (BIT), nor does it have a bilateral taxation treaty with the United States. Djibouti is eligible to benefit from the African Growth and Opportunity Act (AGOA). The Common Market for Eastern and Southern Africa (COMESA), of which Djibouti is a member, signed a Trade and Investment Framework Agreement (TIFA) with the United States in 2001.

In March 2018, Djibouti signed the trade agreement for the African Continental Free Trade Area (AfCFTA). Djibouti has signed bilateral investment treaties with several countries. There is no publicly available list of these treaties, and the terms are not standardized from one treaty to the next. Other treaties to which Djibouti is a party include ESA (Eastern and South Eastern Africa)-EU Interim Economic Partnership Agreement, Agreement for the Promotion, Protection and Guarantee of Investment among Member States of the Organization of Islamic Conference, Cotonou Agreement, AU Treaty, League of Arab States Investment, Arab League Investment Agreement, and Arab Economic Unity Agreement.

Business tax exoneration is given to all newly registered foreign and Djiboutian companies for the first three years of operations for those operating in Classes V through VIII (110,000 DJF (621 USD) to 513,000 DJF (2,900 USD) worth of annual business taxes). For those above Class VIII (>513,000 DF (2,898 USD) worth of annual business taxes) and for all banks, they are exonerated from the “proportional” business tax which is equivalent to 20% of their business revenues. Business value added tax (VAT) and consumption tax exoneration is provided to foreign and domestic businesses working in the hospitality, heavy- and light-industrial, real estate and land development sectors during the construction and onboarding phases of the project. As soon as the project begins operations, then the tax exoneration ends. For example, a hotel that is undergoing construction may receive VAT and consumption tax exonerations until the hotel opens for business.

Real estate and sales tax reductions from 10% to 3% are provided for all sales and purchases of land, buildings, and homes for all transactions made by any entity including individuals, foreign or domestic businesses, organizations, schools, and others. Previously, only businesses could receive a tax break of paying 5% sales or purchase tax on land and buildings in their first purchase.

Corporate (profit) tax exoneration is provided for all businesses that enter the market with an initial investment of 50 million DJF (282,486 USD) or more, for up to seven years.

Given Djibouti’s fiscal situation with pandemic recovery and the economic effects of the Ethiopian conflict, the 2022 Finance Act (Article 14) levied an exceptional tax on companies exempted under the Investment Code or located in the free zones, equal to 1% on the turnover or 10% on the profits whichever is highest, but stays at 1% on the turnover in the case of profit loss (article 61 of the Tax General Code)

Djibouti is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting and is also party to the Inclusive Framework’s October 2021 statement on the two-pillar solution to global tax challenges, including a global minimum corporate tax

							3. Legal Regime					

### Transparency of the Regulatory System

Government policies are sometimes not transparent, and do not foster competition on a non-discriminatory basis. Likewise, the legal, regulatory, and accounting systems are not always transparent nor are they consistent with international norms. Rule-making and regulatory authority exists at the state level.

The Djiboutian accounting system is loosely based on the French accounting system as it existed at independence (1977) with subsequent updates.

The regulatory regime is written in a way that promotes open competition, but application of the rules is not always consistent. Draft bills are initiated by the relevant ministry in consultation with stakeholders from relevant ministries or public institutions. Laws are then proposed by the relevant ministry, and then debated and passed by the parliament. The promulgation by the president is the last stage.

Regulatory actions including laws and decrees are available online: https://www.presidence.dj/jord. Ministries and regulatory agencies do not develop forward regulatory plans – that is, a public list of anticipated regulatory changes or proposals intended to be adopted/implemented within a specified time frame

The government has no environmental, social, and governance disclosure requirement.

The State Inspector General (SGI) is tasked with ensuring human and material resources in the public sector are properly utilized. It also acts as an enforcement mechanism to ensure administrative processes are followed.

Public finances and the terms of debt obligations are opaque.

### International Regulatory Considerations

Djibouti is a member of the Intergovernmental Authority on Development (IGAD) and the Common Market for Eastern and Southern Africa (COMESA). The regulatory systems in these countries are not yet harmonized. European norms and standards, especially French, are referenced in Djibouti. Djibouti is a member of the WTO.

### Legal System and Judicial Independence

Djibouti’s legal system is based on Civil law, inherited from the French Napoleonic Code. It consists of three courts: a Court of First Instance presided over by a single judge; a Court of Appeals, with three judges; and the Supreme Court. In addition, Islamic law (shariah) and traditional law is practiced. Djibouti has a written commercial code and specialized courts, including commercial, criminal, administrative, and civilian courts.

The court system is de jure independent from executive power, but may be susceptible to political pressure. Most investors request the right to counsel, including agreements for arbitration, in a recognized international court. International lawyers practicing in Djibouti have reported effective application of maritime and other commercial laws, but in the past, foreign companies operating in Djibouti have reported that court deliberations were biased or delayed.

### Laws and Regulations on Foreign Direct Investment

The country’s legal system has no discriminatory policy against foreign investment, and frequently negotiates extended tax breaks and other incentives to attract larger investments. In conjunction with UNCTAD, NIPA developed an investment guide that provides useful information: https://www.theiguides.org/public-docs/guides/djibouti.

The Djibouti Office of Industrial and Commercial Protection (ODPIC) is the agency in charge of registering businesses. Its website contains information about the registration process:  https://odpic.net/.

### Competition and Antitrust Laws

In 2008, Djibouti adopted a law on competition and consumer protection, which does not cover state-owned enterprises, such as electricity and telecommunications. Under this law, the Government of Djibouti regulates prices in areas where competition remains limited. For example, the government regulates postal services, telecommunications, utilities, and urban transport services. Djibouti does not have an agency that specifically promotes competition and does not have a comprehensive strategy to restrict market monopolies.

### Expropriation and Compensation

Foreign companies enjoy the same benefits as domestic companies under Djibouti’s Investment Code. The Investment Code stipulates that “no partial or total, temporary or permanent expropriation will take place without equitable compensation for the damages suffered.” There are no known recent cases of U.S. companies in Djibouti being subject to expropriation. There have been cases of foreign companies facing de facto expropriation via fines, while other companies have had their concession to run a public service unilaterally revoked (see discussion below about DP World). The government may expropriate land when it is needed for public utility. In that case, the government will compensate the landowner by providing land at a different location or by cash settlement.

### Dispute Settlement

ICSID Convention and New York Convention

On April 12, 2019, Djibouti signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention, also known as the Washington Convention). Djibouti made its deposit of ratification on June 9, 2020 for an entry into force on July 9, 2020.

Djibouti is a contracting member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

Djibouti’s government has had only a few investment disputes in the past several years, none with U.S. businesses. In some cases, the disputes have been settled in international arbitration courts and the government has abided by those decisions. In other cases, there has been de facto expropriation through large fines. As in any country, a strong, enforceable contract is important.

The government passed a law in November 2017 permitting the government to unilaterally alter or terminate contracts. Using this law, in February 2018, Djibouti’s president issued a decree abrogating the government’s contract with the Emirati company, DP World, concerning the Doraleh Container Terminal, later nationalizing the equipment, physical assets, and land. DP World continued to hold 33.33% of shares until July 2018, when the government terminated the shareholders’ agreement with DP World and later nationalized all shares. Throughout, DP World has continued to claim that the 30-year 2006 Doraleh Container Terminal concession agreement remains in force.

In July 2021, the London Court of International Arbitration decided, in a seventh ruling, that Djibouti should restore DP World’s rights to operate Doraleh Container Terminal in line with the original deal and receive compensation. Djibouti has not yet officially replied, but responded to a similar London Court of International Arbitration ruling in January 2020 with an official communiqué rejecting the court ruling, stating “As the Republic of Djibouti has consistently indicated since the termination of the concession, the only possible outcome is allocation of fair compensation in accordance with international law.”

International Commercial Arbitration and Foreign Courts

There is no domestic arbitration body within the country. In February 2014, the IGAD countries agreed to set up an international Business Arbitration Center in Djibouti. This institution provides a mechanism for resolving business disputes and helps create a more transparent business environment in the region by reinforcing the principles of contract law and increasing the number of lawyers practicing commercial and contract law in Djibouti. Investment dispute cases are not made public.

### Bankruptcy Regulations

Djibouti has bankruptcy laws, and bankruptcy is not criminalized.

							4. Industrial Policies					

### Investment Incentives

Tax benefits and incentives fall under two categories detailed in the investment code. Investments greater than DJF 50 million (USD 282,486) that create several permanent jobs may be exempted from license and registration fees, property taxes, taxes on industrial and commercial profits, and taxes on the profits of corporate entities. Imported raw materials used in manufacturing are exempted from the internal consumption tax. These exemptions apply for up to a maximum of ten years after companies start producing materials in Djibouti. Incentives are often unique to an individual company or investment and are agreed upon with relevant ministries. Projects can be delayed if all relevant ministries are not consulted during negotiations. To promote exports, Djibouti has multiple free zones where companies enjoy full exemption from direct and indirect taxes for a period of up to ten years.

### Foreign Trade Zones/Free Ports/Trade Facilitation

The Djibouti Free Zone (DFZ) is located on 40 hectares and offers office space, warehouses, light industrial units, and hangars. Businesses located in the Free Zone do not pay corporate taxes, have a simplified registration process, and receive other benefits such as assistance obtaining work permits and visas. Currently, 180 companies from more than 30 countries operate out of the Free Zone. In December 2013, the DAM Commercial Free Zone opened in the Damerjog region, south of Djibouti City. In March 2018, the Djibouti Ports and Free Zone Authority and China Merchants Group began construction on a large free zone called Djibouti International Free Trade Zone (DIFTZ). The first phase, a 240-hectare pilot zone is currently operational. It consists of four industrial clusters which will focus on trade and logistics, export processing, business, and financial support services, as well as manufacturing and duty-free merchandise retail. When complete it will cover 4,800 hectares and offer office space, warehouses, industrial units, and will be connected directly with the ports in later phases. It will be the largest free zone in Africa.

Djibouti Damerjog Industrial Development (DDID) free-trade zone is in its first of three five-year phases. The project includes a multipurpose port, a liquefied natural gas terminal, a livestock terminal, dry docks and a ship repair area, a power plant and a factory that will produce construction materials. DDID will offer all the preferential policies guaranteed by the free zone authority, such as tax exemption, minimized restrictions on foreign labor and competitive water and electricity rates.

### Performance and Data Localization Requirements

According to local regulations, companies are required to hire locally as long as the qualifications or expertise is available on the local market. However, these schemes are not equally applied to senior management and board of directors where foreign employment is more readily accepted. The process for visas, work permits, and other requirements in order to operate as a foreign employee is not onerous and is easily accessible through Djibouti’s Guichet Unique. Work permits follow a graduated fee schedule: 200,000 Djibouti francs (USD 1,124), 100,000 Djibouti francs (USD 563) and 50,000 Djibouti francs (USD 281) according to the qualifications required for a position.

The government does not follow “forced localization.” The Djiboutian investment code guarantees investors the right to freely import all goods, equipment, products, or material necessary for their investments; display products and services; determine and run marketing policy and production; choose customers and suppliers; and set prices. Performance requirements are not a pre-condition for establishing, maintaining, or expanding foreign direct investments. Incentives do, however, increase with the size of the investment and the number of jobs created.

There are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory. There are no rules requiring local data storage within Djibouti.

							5. Protection of Property Rights					

### Real Property

Djibouti’s legal system officially protects the acquisition and disposition of all property rights. Mortgages exist and are often guaranteed by the employer, who signs a form indicating the employee’s status and salary. The employer is then obliged to inform the bank if the employee leaves the company. Local workers rely on this mechanism to secure mortgages, and they expect that their employer will perform this role. Typically, the government originally owns and sells the land. There are no specific restrictions on foreign ownership of land. All property owners who have legally obtained their land are registered. Even if unoccupied, the property belongs to the owner who legally purchased it.

### Intellectual Property Rights

Djibouti’s legal structure for protecting and enforcement of IPR is weak but developing. There are few existing protections. However, the government passed a law that protects artists’ copyrights.

Djibouti ratified the World Intellectual Property Organization (WIPO) Convention, the Paris Convention on the Protection of Industrial Rights, and the Berne Convention on the Protection of Literature and Art Works. The Ministry of Communication and the Djibouti Office for Intellectual Property Rights are responsible for safeguarding intellectual property after registering products. Counterfeit products are commonly available in Djibouti’s markets. Infringing products include clothing, watches, electronics, and bags. Because of the nascent nature of IPR protections, counterfeit products are rarely seized, and no statistics on seizures are published. There have been reports of seizures of counterfeit money; however, statistics are unavailable.

Djibouti is not listed in the U.S Trade Representative (USTR) Special 301 report or the Notorious Markets List. Compared to other industries, the sale of counterfeit goods does not appear to be at higher risk of labor rights violations, including child labor, forced labor, and dangerous working conditions.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

The Embassy POC is Political Economic Officer Joseph Chamberlain at DjiboutiCommerce@state.gov.

For a list of local lawyers, see: https://dj.usembassy.gov/u-s-citizen-services/attorneys/

							6. Financial Sector					

### Capital Markets and Portfolio Investment

Djibouti is open to and receptive of foreign investors. Djibouti does not have its own stock market, but some multinational companies with investments in Djibouti are publicly traded. Portfolio investment in Djibouti is primarily done through private equity investments in a given sector, rather than through purchase of securities. Investments in Djibouti are inherently illiquid for that reason, and the purchase or sale of any sizeable investment in Djibouti affects the market accordingly. Existing policies respect IMF Article VIII and allow the free flow of funds for international transactions.

Credit is allocated on market terms, and foreign companies do not face discrimination in obtaining it. Generally, however, only well-established businesses obtain bank credit, as the cost of credit is high. Credit is available to the private sector, whether foreign or domestic. Where credit is not available, it is primarily due to the associated risk and not structural factors.

### Money and Banking System

Three large banks, Bank of Africa, Bank for Commerce and Industry – Mer Rouge, and CAC bank dominate Djibouti’s banking sector. While these three banks account for the majority share of deposits in-country, there are 13 total banks, all established in the last 14 years. The 2011 banking law fixed the minimum capital requirement for financial institutions at DJF 1 billion (USD 5,651,250) and also covers financial auxiliaries, such as money transfer agencies and Islamic financial institutions. In addition to the three names banks above, foreign banks include Silkroad Bank, Bank of China, and the Burkina Faso-based International Business Bank.

The banking sector suffers from a lack of consistent supervision, but it has been improving. Non-performing loans decreased from 16.26% in 2019 to 13.31% in 2020 and to 9.8% in 2021. The total assets of all the banks were estimated to be USD 3.1 billion in 2020, of which 80% were held by the four largest banks. The country has a Central Bank, which is in charge of delivering licenses to banks and supervising them. Foreign banks or branches are allowed to establish operations in the country. They are subject to the same regulations as local banks. Djibouti has not announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions. Some banks have begun to provide mobile and e-banking services. In June 2020, Djibouti Telecom launched D-Money, a Digital Mobile Money service which allows users to make digital money transfers and payments directly from mobile phones.

### Foreign Exchange and Remittances

Foreign Exchange

Djibouti has no foreign exchange restrictions. Businesses are free to repatriate profits. There are no limitations on converting or transferring funds, or on the inflow and outflow of cash. The Djiboutian franc, which has been pegged to the U.S. dollar since 1949, is stable. The fixed exchange rate is 177.71 Djiboutian francs to the U.S. dollar. Funds can be transferred by using banks or international money transfer companies such as Western Union, all monitored by the Central Bank.

Remittance Policies

There are no recent changes or plans to change investment remittance policies. There are no time limitations on remittances. The government does not issue bonds on the open market, and cash-like instruments are not in common use in Djibouti, so direct currency transfers are the only practical method of remitting profits.

### Sovereign Wealth Funds

In mid-2020 the Djiboutian government announced the creation of a Sovereign Wealth Fund. According to a government statement, the state-owned fund targets investments locally and in neighboring countries in the Horn of Africa. It focuses on industries including telecommunications, technology, energy, and logistics. The fund acts as a long-term investor and is required to reinvest the entire net profits of its activity. The government aims to fund it to $1.5 billion within ten years. Article 12 of Law N° 75/AN/20/8th L, creating the Sovereign Fund of Djibouti, states the fund will adopt and implement best practice in terms of transparency and performance reporting in accordance with the Santiago Principles. As of late 2021, the fund was ramping up operations.

Law No. 75/AN/20/8th L establishing the Sovereign Fund of Djibouti – https://www.presidence.dj/texte/75-an-20-8eme-l-10332

Decree No. 2020-127/PRE approving the statutes and determining certain initial resources of the Sovereign Fund of Djibouti – https://www.presidence.dj/texte/2020-127-pre-10361

Decree No. 2020-111/PRE appointing the members of the Board of Directors and the Director General of the Sovereign Fund of Djibouti –****https://www.presidence.dj/texte/2020-111-pre-10360

							7. State-Owned Enterprises (SOEs)					

Wholly owned SOEs control telecommunications, water, and electricity distribution in Djibouti. Major print, television, and radio outlets are also state-run. Additionally, Djibouti’s ports, airport, and free zones are managed by an SOE. There is a state-owned national airline that is wholly managed by the ports and free zones authority. SOEs are required by law to publish an annual report, but this requirement is not actively enforced. The Court of Auditors is charged with auditing SOEs, but they have not yet released assets, income, employment, or other details about the SOEs. There is no publicly available complete list of SOEs.

State-run services, such as municipal garbage collection and real estate, do not hold legal monopolies, but are afforded material advantages by the government, e.g., government-backed loan guarantees for the real estate sector. Djibouti is not party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO).

In order to exercise ownership in SOEs, the government uses several laws and decrees, most of which were promulgated in the 1990s. The established practices are not consistent with OECD guidelines. No centralized ownership entity exists. SOE senior management reports directly to the relevant line ministry. There is also an independent board of directors whose members are chosen from other ministries

### Privatization Program

A few SOEs have been privatized, such as a milk factory in 2021 and a water bottling plant in 2015. No particular sector has been targeted, although the government has indicated that all sectors may eventually be up for privatization. In 2021, the government announced that it was seeking a strategic investor to purchase a 40% stake in DjiboutiTelecom, the monopoly telecommunications SOE. This process is being managed by an international consultant.

							8. Responsible Business Conduct					

There is nascent but growing awareness among both companies and consumers in Djibouti of Responsible Business Conduct (RBC). Businesses which might harm the environment are, in general, obligated to conduct studies on the environmental impact before proceeding with their project. The government does not promote RBC in a systematic way, although it does acknowledge good corporate social responsibility and covers it favorably in state media. However, the government does not factor RBC policies or practices into its procurement decisions. There are no corporate governance, accounting, or executive compensation standards to protect stakeholders. The government does not adhere to OECD guidelines in RBC matters. There have been reports that the government does not effectively and fairly enforce domestic laws relating to labor rights, environmental protections, consumer protections, and human rights. There are no independent NGOs, investment funds, worker organizations, or associations that monitor RBC in Djibouti. Djibouti has a salt extraction industry, but it does not participate in the Extractive Industries Transparency Initiative or the Voluntary Principles on Security and Human Rights.

Additional Resources

Department of State

Country Reports on Human Rights Practices;

Trafficking in Persons Report;

Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;

U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;

Xinjiang Supply Chain Business Advisory 

Department of the Treasury

OFAC Recent Actions

Department of Labor

Findings on the Worst Forms of Child Labor Report;

List of Goods Produced by Child Labor or Forced Labor;

Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;

Comply Chain

 

The national climate strategy includes a number of actions to strengthen or build capacity in the field with a view of reducing the vulnerability of the coastal zone to climate change. Priority is on addressing extreme floods, inundations, and marine submersion.

Post is not aware of any government introduction of policies to reach net-zero carbon emissions by 2050.

There are government policies that establish marine protected areas in order to contribute to the conservation of Djibouti’s marine biodiversity and other desirable ecological benefits.

In order to support coastal populations affected by climate change, the government has put in place a program to improve their resilience and mitigate their vulnerability while adopting a co-management approach to protect marine resources.

							9. Corruption					

Djibouti has several laws to combat corruption by public officials. These laws were either passed by the government or contained in the Penal Code. However, there have been no records of cases to combat corruption by public officials. Corruption laws are extended to all family members of officials and across political parties, but they have not been applied in a non-discriminatory manner. Djibouti ranked 128 of 180 countries on the 2021 Transparency International Corruption Perceptions Index. Djibouti does not have laws or regulations to counter conflict-of-interest in awarding contracts or government procurement.

Djibouti is a party to the UN Convention against Corruption. There are two government entities responsible for investigating corruption and enforcing the regulations. The State Inspector General (SGI) is tasked with ensuring human and material resources in the public sector are properly utilized. The Court of Auditors is mandated to verify and audit all public establishments for transparency and accountability, and to implement necessary legal sanctions. Both institutions are mandated to produce annual corruption reports. Despite the legal mandates, both institutions lack the authority to push for meaningful reform. The National Commission for Anti-Corruption is also mandated to enforce the laws on combatting corruption and provide safe haven for whistleblowers. This Commission launched a program in March 2018 to urge high-ranking government officials to publicly declare all of their assets, with little success. The contracting code and other laws passed by Djibouti contain provisions to counter conflict-of-interest contracts or government procurement.

According to a law passed in 2013, the government requires private and public companies to establish internal codes of conduct that prevent and prohibit bribery of public officials. However, these codes have not been implemented. Likewise, the government requirement that private companies use internal controls, ethics, and compliance to detect and prevent bribery of government officials is not enforced. Djibouti is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Djibouti is a signatory country of the UN Convention against Corruption.

U.S. firms have not specifically noted corruption as an obstacle to foreign direct investment in Djibouti, but there were allegations of foreign companies having to meet requirements such as renting houses owned by senior officials or hiring certain employees as a condition of receiving government procurement contracts. In addition, one company reported harassment of employees by local competitors. Prosecution and punishment for corruption is rare.

Resources to Report Corruption

Contact at government agency responsible for combating corruption is listed below:

Fatouma Mahamoud AbdillahiPresidentCommission Nationale Independante pour la Prevention et de Lutte Contre la CorruptionPlateau du Serpent+253 21 35 16 03anticorruption@intnet.dj

No “watchdog” organizations are present in Djibouti.

							10. Political and Security Environment					

Djibouti has seen only very limited episodes of political violence over the last two decades.  In the last ten years, there have been no known incidents of political violence leading to damage to foreign investments.  Both the ruling coalition party and the recognized opposition parties favor foreign direct investment into Djibouti and local attitudes towards foreigners are positive.

Djibouti held presidential elections April 9, 2021, with President Ismael Omar Guelleh winning a fifth consecutive term with 98% of the vote. His 22-year reign has contributed to stability and economic growth, but questions of succession and subsequent instability remain.

Djibouti was recently awarded the International Peace Award by the journal Jeune Afrique for its secure environment, despite being surrounded by countries facing instability.  According to data acquired by the Armed Conflict Location and Event Data Project, Djibouti’s instances of violence and disorder have significantly declined in the past three years.

							11. Labor Policies and Practices					

Djibouti’s official unemployment rate is 47%. Youth unemployment, defined locally as the share of the labor force between age 15 and 24 without work but that is available and actively seeing employment, has remained between 11% and 12% in the past three decades. Estimates of a sizeable informal labor market of up to 75% exist in Djibouti, with a larger informal market outside of the capital city of Djibouti. The informal market consists mostly of individual operating units, is poorly structured, and is concentrated in trade, import-export, construction, various services and handicrafts. In Djibouti, women are largely predominant in the activities of the informal economy. The formal labor market is heavily service- or government-oriented with growing markets in construction, logistics, and transportation. Skilled Djiboutian workers, especially in high-demand trades such as construction, are in short supply.

Djibouti has complicated labor laws that favor the employee, especially in the areas of disputes and termination. Vocational and professional training facilities remain limited. The World Bank, the Ministry of Finance, USAID, and other entities are working on a variety of initiatives to address the shortage of workforce development programs. The government has promoted entrepreneurship as a means of stimulating the economy. The government, in partnership with the World Bank and European Union, opened the entrepreneurship and leadership center (CLE – Centre Leadership Entreprenariat) to assist start-up companies.

Foreign workers are legally allowed to work in Djibouti only if their qualifications or expertise are not available among the nationals, as determined by the Ministry of Labor through the National Agency for Employment, Training, and Professional Integration (ANEFIP). This requirement is not strictly implemented. In January 2017, the cost for a work permit was reviewed and classified in three different categories based on the type of profession with respective annual fees of 50,000 Djibouti francs (USD 281), 100,000 Djibouti francs (USD 563) and Djibouti francs 200,000 (USD 1,125). ANEFIP maintains a database of Djiboutian job-seekers and issues work permits to foreign workers.

Employers have to abide by the Labor Code. Workers who are laid off get more compensation than employees who are fired. No unemployment insurance or other social safety net programs exist for workers laid off for economic reasons. Only those workers who contributed to the social insurance for 25 years and are sixty years of age are entitled to retirement benefits.

Minimum wage is DJF 45,000 (USD 254) per month. By law, all employers are obligated to make social security payments on behalf of their employees, through the National Council for Social Security. Two large labor unions exist in Djibouti, but only the Djiboutian Workers Union is recognized by international organizations.

Labor laws are not waived to attract investment, but the investment code and free zones have separate legal provisions to attract investment. By law, labor unions are independent of the government and employers. In practice they can be influenced by the government and/or employers. In case of labor disputes, the Labor Inspector will bring together the employer and the employee to settle the case acting as a mediator. If the mediation fails, then the case will be sent to the Court. The process is opaque and the results are not publicized.

In November 2020, the National Assembly amended the Labor Code to require companies employing 11 or more employees to report annually on the status of its workforce. This report aims to prevent companies from hiring foreigners illegally, not respecting legally allowed pregnancy leave, and/or illegally firing employees.

							12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs					

Djibouti is eligible for Development Finance Corporation (DFC) programs. Djibouti is a member of the Multilateral Investment Guarantee Agency (MIGA), which guaranteed the loan for the construction of the Doraleh Container Terminal in 2009. Chinese firms have made significant investment financing in Djibouti, which crowds out other investors.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics