economy is service-based, with the country's seaport and a railroad
linking it to Addis Ababa accounting for the bulk of economic activity.
Almost all food and many other goods are imported from Ethiopia, the
Gulf, or France. The services and commercial sectors account for 85
percent of GNP.
The government of
Djibouti welcomes all foreign direct investment. Djibouti's assets
include a strategic geographic location, an open trade regime, a stable
currency, substantial tax breaks and other incentives. Potential areas
of investment include Djibouti's port and telecom sectors. Privatization, economic reform, and increased foreign investment as top
priorities for the government.
Djibouti has no major
laws that would discourage incoming foreign investment. In principle
there is no screening of investment or other discriminatory mechanisms.
Certain sectors, most notably public utilities, are state
owned and some parts are not currently open to investors. Conditions of
the structural adjustment agreement recently signed by Djibouti and the
IMF stipulate increased privatization of parastatals and
Currency Conversion and Transfer Policies
has no foreign-exchange restrictions. There are no limitations on
converting or transferring funds, or on the inflow and outflow of cash.
The fixed exchange rate is around 179.56 Djibouti francs to the
Djibouti offers significant tax benefits and incentives to
private-sector individuals or corporate investors. The Djiboutian
investment code guarantees investors the right to freely import all
goods, equipment, products, or material necessary for their investments;
freely display products and services; determine and run marketing policy
and production; choose customers and suppliers; and set prices. Foreign
investors are also free to determine their own hiring and firing policy
as long as it remains within the structure of the labor code. Items in
the labor code include giving a two-week notice before job termination,
a minimum wage, and so on.
benefits and incentives fall under two schemes, which are detailed in
the investment code. Investments greater than $280,000 and creating a
number of permanent jobs are entitled to exemption from the payment of
license and registration fees, property taxes for built-up real estate,
taxes on industrial and commercial profits of individuals, 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 the starting date of operations. Investment
matters fall under the jurisdiction of the national investment board.
All investments must be approved by this board.
Right to Private Ownership
Foreign and domestic
private entities may establish and own business enterprises and engage
in all forms of remunerative activity. Although restrictions on private
enterprises are minimal, competitive equality in regard to public
enterprises, namely public utilities, remains limited.
Capital Markets and Portfolio Investment
The banking system is dominated by two large
commercial banks, which account for 85 percent of total deposits. During
the financial problems of 1997, these banks remained relatively
unscathed largely because their exposure to the economy is limited to
mostly short-term (trade) financing and lending.
several bilateral investment agreements, most notably with Ethiopia and