A NEW MAJOR GATEWAY TO AFRICAN MARKETS
Sat on two of the world’s busiest maritime routes, Djibouti’s strategic location makes it an important entry point into African markets for global commerce. Djibouti is also a critical node on one of the most ambitious global infrastructure networks - China’s “Belt and Road” initiative.
Djibouti’s International Free Trade Zone therefore presents dynamic new opportunities for businesses from around the world looking to enter the African market. DIFTZ will focus in particular on the development of industries such as the logistics, marine, construction, automotive, and home electrical industries.
The project is being led by a global alliance bringing over a century of expertise in trade and logistics. The DIFTZ Project Preparatory Group, which is running the project, consists of Djibouti Ports and Free Zones Authority (DPFZA) together with three major Chinese partners: China Merchants Group, Dalian Port Authority and IZP.
A PHASED DEVELOPMENT
The launch on 5 July is the initial phase in a 10-year project which will comprise a total investment of $3.5 billion.
Once complete, the free zone will span an area of 4,800 hectares making it Africa’s largest free trade zone.
The initial phase, a 240-hectare zone, is the result of $370 million and consists of three functional blocks located close to all of Djibouti’s major ports. The pilot zone will have four industrial clusters which focus on trade and logistics, export processing and business support:
- Logistics Industry Cluster: transportation, bonded warehousing, logistics and distribution;
- Business Industry Cluster: bulk bonded goods transactions, merchandise display, duty-free merchandise retail;
- Business Support Cluster: financial services, information services, hotel dormitories, office buildings, training, intermediary services;
- Processing Manufacturing Cluster: packaging production, light processing of incoming materials, food processing, marine products, auto parts assembly.
The pilot zone will be comprised of several major constructions. There will be one main office building which will be completed in November 2018. In addition to this and other office buildings, one hotel and the warehouses of China Merchants Bonded and East Africa Holdings were completed earlier this year. The DIFTZ will also be equipped with advanced facilities to support the companies operating there including high-speed telecommunications, power and water supplies, roads and parking lots.
A SUPPORTIVE BUSINESS ENVIRONMENT
DIFTZ will thrive and attract businesses from around the world through an offering of world-class business incentives. These include:
- 0% property tax
- 0% corporate income tax, personal income tax for foreign employees.
- 0% Dividend tax
- 0% VAT
- Employers assume 10.2% social security
- Work permit for foreign workers
In order to further assist investors in setting up a business, the National Investment Promotion Agency (NIPA) of Djibouti has also established a ‘one-stop-shop’. Run through sophisticated online platforms, this tool will allow companies to conduct business more efficiently by handling administrative procedures – such as customs clearance, business registration, training and visas – and thus improving the ease of doing business in the country.
AN OPPORTUNITY FOR DJIBOUTI’S DOMESTIC DEVELOPMENT
DIFTZ will not only be hugely beneficial to international investors, Djibouti itself will also be a major beneficiary. As the majority shareholder, the management of the free trade zone lies solely with the Djibouti Ports and Free Zones Authority. Whilst attracting international businesses, Djibouti will therefore retain full control of the DIFTZ, holding 60% of the assets.
Crucially, DIFTZ will also be a key source of employment for Djiboutians. It is estimated that DIFTZ will create over 350,000 new jobs over the course of the next ten years and the proportion of foreign workers will be capped at 70% for the first five years and at 30% thereafter.
The project will also create major business opportunities for Djibouti and East Africa as the region’s export manufacturing and processing capacity is expanded in key sectors such as food, automotive parts, textiles and packaging.
AN INTERCONNECTED TRADE ZONE OFFERING WORLD-CLASS INFRASTRUCTURE AND TECHNICAL FRAMEWORK
Djibouti is constructing a truly multimodal infrastructure network, and the newly launched DIFTZ will benefit from the country’s connectivity. Djibouti’s $15 billion expansion programme has seen the investment in a new national airline, airports, ports, railways and highways in order to improve transport and logistics.
The new free trade zone has been constructed at the heart of this global network that will provide companies operating there with access to major maritime trade routes as well as some of the world’s most dynamic and transformative economies here in Africa.
DIFTZ is located next to Doraleh Multipurpose Port and Doraleh Container Terminal, both of which boast state-of-the-art logistics facilities. It is also located next to one of the main stations of the Addis Ababa-Djibouti railway. This 752km track which links Ethiopia’s capital with the Port of Djibouti is the first electrified railway in East Africa and will ensure the free trade zone is fully connected to the region.
During his speech at the opening of DIFTZ, the Chairman of DPFZA, Aboubaker Omar Hadi stated: “Having become a global logistics hub, Djibouti is now taking the next steps to consolidate its economic diversification and become an industrial and trade hub in Africa. The openingof DIFTZ today shows that Djibouti is continuing to consolidate the increasingly important role the country plays in global trade.”