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China International Import Expo

5 November 2018

Dear sir/madams

Thank you very much. It is an honour to be speaking here today at such an important time for the relations between Africa and China, and for the development of African economies in the long term.

 

Section 1: Infrastructure gap

When it comes to economic growth, experts tend to see Africa as the continent of the future. Compared to other markets that have reached their maturity, African economies are full of opportunities. But they are also facing a major challenge, which is the cornerstone of their development: they are in dire need of infrastructure.

Infrastructure has played a key role for the global economy since the industrial revolution.

It is critical to accelerate the movement of goods and people, as well as the interconnection of regional markets and the transformation of raw materials into manufactured goods.

Developing transport or energy infrastructure is the precondition to all other aspects of economic development.

But the infrastructure gap has not reduced enough in Africa. The African Development Bank estimates that Africa needs $130-170 billion to be invested in infrastructure in Africa each year.

This means that there is a gap in financing of about $68-108 billion, which can threaten development prospects for several African countries who need investment in vital infrastructure such as transportation.

This investment is vital as Africa lags behind in almost all areas of infrastructure development: air, rail and road transport.

Despite having 17% of the global population within its borders, African air traffic only counts for 3% of global traffic.

With 51,000 km of operational railways, Africa counts for only 5% of the global rail network. Moreover, 4 of the main 5 rail lines on the African continent are in North Africa, meaning that sub-Saharan Africa only accounts for 15% of the continent’s rail transport.

The lack of strong road networks means that the transport of a container between Uganda and Kenya can take up to two times as long and can be twice as costly as transporting between London and Kenya.

Nonetheless, recent progress in the port industry in Africa demonstrates the immense benefits which can be gained from developing our key transport industries. Following recent constructions around African port infrastructure, the African Development Bank estimates that African ports could be handling 2 billion tonnes by 2040.

Whilst Africa has one of the largest infrastructure gaps in the world, the greatest potential and reward also lies in transforming our transport networks.

 

Section 2: The consequences of the infrastructure gap

Apart from massive missed opportunities for potential investors, the current infrastructure gap has dramatic consequences for the continent.

Closing the infrastructure quantity and quality gap relative to the best performers in the world could increase growth of GDP per capita in sub-Saharan Africa by 2.6% per year.

By contrast, the World Bank estimates that the lack of quality infrastructure, especially transport infrastructure, is slowing down economic growth by 2% for some countries, and limiting business productivity by 40%.

Not only is the infrastructure gap hampering our economic growth, the sub-Saharan Africa lag in industrialisation also means that job creation is behind schedule.

East Africa is the most dynamic region in terms of growth and has seen a steady trend of upward growth: from 4.9% in 2016 to a projected 6.1% in 2019. However, across the continent, job creation did not rise in lockstep with growth, lagging by 1.4%.

With 200 million people aged between 15 and 24 (the youth bracket), Africa has the youngest population in the world. The current trend indicates that this figure will double by 2045. Jobs must be created for this burgeoning young population.

Currently, young people account for 60% of all African unemployed, according to the World Bank.

In order to generate jobs for our young population and ensure job creation keeps pace with economic growth, Africa must take the fast-track to industrialisation.

 

Section 3: OBOR addressing the infrastructure gap in Djibouti  

The One Belt, One Road Initiative is addressing this issue, and is therefore driving forward Africa´s development in a very real way. Let me detail a few examples showing how OBOR is contributing to Djibouti´s development.

Most continents in the world have transcontinental trains linking billions of producers and consumers. Africa does not. And trains are just one example illustrating the lack of infrastructure in Africa.

Thanks to our Chinese partners, Djibouti and Ethiopia are linked by the first electric transnational railway in Africa, optimizing trade by cutting travel time between the two countries. The journey used to be a three to four-day journey by truck and is now just 12 hours via the new rail line.

The benefits of a transcontinental railway would be massive for Africa. Out of 42 landlocked countries in the world, 14 are in Africa. These 14 African countries do not have access to the sea in a world where 90% of world trade is carried by the international shipping industry.

Djibouti benefits from a highly strategic location. With access to the Gulf of Aden and the Indian Ocean beyond, the country is located on two of the busiest international trade routes. It is also a significant gateway to the Horn of Africa and the wider region of East Africa.

Therefore, Djibouti has been developing its infrastructure to take advantage of its strategic location. The construction of state-of-the-art ports, such as the Doraleh Multipurpose Port, cement Djibouti’s position as a global shipping hub, and guarantee sustainable economic growth. This port will be linked to the railway by the end of the year.

 

Section 4: The industrialisation gap

However, exporting raw materials alone will not allow Africa to reach its potential. Indeed, the recent slump in global commodity prices has served as a harsh reminder that our traditional reliance on raw materials needs to evolve.

It is only by transforming our commodities into value added goods that Africa will reap the full benefits of our natural strengths.

Transforming our resources will create larger profit margins and jobs. This transformation will, however, require a massive industrialisation effort across the continent to foster trade and growth.

The volume of goods traveling to East Africa keeps increasing and every time a product leaves the continent without being transformed it is a missed opportunity for Africa.

 

Section 5: Djibouti International Free Trade Zone

To add value to these goods, we opened last July the Djibouti International Free Trade Zone.

This 240-hectare zone is the result of a $3570 million investment and consists of four industrial clusters. The initial pilot phase is already set to have a huge impact on Djibouti’s economy; it is predicted that this pilot zone alone will boost the country’s GDP by 11% ($200 million).

Over the course of 10 years, the full free zone will create a total of 350,000 jobs.

DIFTZ will also enable significant growth opportunities beyond Djibouti’s borders; East Africa’s export manufacturing and processing capacity will be significantly expanded in key sectors such as food, automotive parts, textiles and packaging.

Within the free trade zone, companies benefit from: 0% property tax, 0% corporate income tax, 0% VAT and 0% dividend tax.

They also have privileged access to all of Djibouti’s major ports and the newly constructed Addis-Djibouti railway.

Finally, in the context of tariff increases on trade, companies investing in Djibouti will benefit from preferential policies to export to the US or the EU thanks to the AGOA & ACP agreements.

They will receive a competitive advantage over exporters in other countries on the continent who may need to pay standard US import duties, which for certain textile commodities might be more than 30% on the value of the product.

 

Section 6: Djibouti as a modern destination for investors

Djibouti hosts some of the most modern ports on the continent and is proud to now host one of the most modern and technologically advanced free zones on the African continent.

Djibouti has established a ‘one-stop-shop’ which will allow businesses to operate more efficiently by handling all administrative procedures.

DPFZA is also implementing innovative technologies which will ease operations for businesses locating to the free trade zone

DIFTZ offers technological solutions to lighten the bureaucracy and offer a more business friendly environment, particularly across multiple transport systems. Therefore, all businesses operating from the free trade zone will benefit from the recently launched Port Community System - or PCS - which provides a single point of entry for import and export.

The unique electronic tool allows for the easy coordination of air, sea, land and rail trade, enabling businesses to take advantage of the multimodal transport connections within Djibouti and with the neighbouring countries.

PCS is in operation 24/7 and has led to the development of a paperless system which can process documentation online at any time which is convenient and necessary for businesses requiring it.

Djibouti also offers a financially stable country with an advanced communications capacity in which to invest. With our currency pegged to the US dollar, our economic eco-system is the most stable in the region. The country also has seven under-water cables which connect our communications to countries and continents around the world.

 

Section 7: a long-term win-win relationship

As you can see, over recent years, China and Djibouti have been working together extremely hard in a long-term win-win partnership.

With the recent launch of DIFTZ, bilateral cooperation is now evolving towards the transformation of Djibouti into a global trade hub, for Africa, in Africa.              

Over the coming months, we will be launching more projects as the demand keeps increasing. The Damerjog Industrial Development, a major future industrial zone in Djibouti, will go hand in hand with the existing free trade zone, creating complementary investment opportunities.

The simultaneous development of these projects is our “3+1” plan, fully in line with “Vision 2030”, our national development programme.

In the coming years, the old port of Djibouti will thus turn into a business and leisure centre that will hopefully host the African headquarters of your companies, ladies and gentlemen.

 

Section 8: call to investors.

I have just run through some of the projects that Djibouti has been developing. But it is clear for everyone in Djibouti, that we are at the very beginning of a long road that will turn Djibouti into first a regional, and then a transcontinental logistics, trade and business hub.

Thanks to the One Belt, One Road initiative, we now have the infrastructure to host ambitious companies ready to contribute to the development of a continent full of opportunities. We also have a thriving environment to position Djibouti as a trusted and advantageous business partner.

Ladies and gentlemen, I am looking forward to seeing you in Djibouti.