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World Bank Document September 2014, Number 134 South-South Knowledge Exchange Series Public Disclosure Authorized DJIBOUTI LOOKS TO THE FUTURE: A SOUTH-SOUTH HIGH LEVEL EXCHANGE Homa-Zahra Fotouhi, Arthur Foch, Roya Vakil 1 Introduction: This Quick Note highlights the key discussions and recommendations made during the High-Level Development Exchange2 held in Djibouti on June 20-23, 2014. The event was co-organized by the World Bank Office in Djibouti and the Ministry of Economy and Finance under the high patronage Public Disclosure Authorized of the President of the Republic of Djibouti. The event provided a platform to promote dialogue, share knowledge, and develop policies to eliminate poverty and enable a dynamic private sector. It aimed to strengthen Djibouti’s capacity to define, Opening of the High-Level Development Exchange held in through a concerted open dialogue, a path to Djibouti on June 20-23, 2014 sustainable development and ensure that growth translates into poverty reduction, jobs, and Wide Attendance with a Participatory Format: The economic opportunities for all. event was very well attended, with over 300 local and foreign participants from government, The goal was to (i) launch “Djibouti Vision 2035”; (ii) development partners, the private sector, civil share the development experiences of Mauritius, society, and academia. The level of engagement was Cape Verde, and Dubai; and (iii) enable the public unprecedented in Djibouti for such an event and Public Disclosure Authorized sector, the private sector and civil society to engage reflected the interest of the private sector and civil in a dialogue, through round-tables, and develop society to learn from the experiences of other recommendations for Djibouti to achieve inclusive countries, and to contribute to the conceptualization and sustainable growth. of Djibouti’s development strategy. Responses from feedback questionnaires stressed the satisfaction of Cape Verde, Mauritius and Dubai were selected due participants with the governments’ inclusion of all to similarities with Djibouti, and their success in stakeholders in an open and constructive dialogue, developing sectors that are currently under- and underlined the importance of maintaining exploited in Djibouti but have the potential to create momentum by implementing the recommendations jobs and generate sustainable growth: transport and made during the roundtables, and pursuing south- logistics, telecommunications, tourism, fisheries, and south cooperation and open dialogue more regularly light industry. Another innovation was the live broadcast of the event and the use of a twitter account enabling 1 Homa-Zahra Fotouhi, Representative, World Bank Liaison viewers to participate virtually and pose questions. Public Disclosure Authorized office, Djibouti (MNCDJ); Arthur Foch, Transport and ICT Global Practice (GTIDR), World Bank; Roya Vakil, Finance and Roundtable Recommendations: The central part of Markets Global Practice (GFMDR), World Bank. This Quick the Exchange was devoted to smaller, interactive Note was cleared by Hart Schaefer, Country Director, Djibouti, Egypt, Yemen (MNCA3), World Bank. round-table sessions covering four central themes: 2 The High-Level Round Table benefited from funding from the (i) the private sector as engine of growth, (ii) tourism South-South Experience Exchange Facility Trust Fund. development, (iii) regional integration through the Roundtable Recommendations for Djibouti: service industry, and (iv) economic growth and poverty reduction. Each roundtable discussed Reduce electricity and telecommunications costs existing constraints and produced recommendations Improve governance and the business climate based on the four ‘thematic areas’. Improve intra-private sector, intra-public sector, and public-private dialogues Roundtable 1: Private Sector as Engine of Growth: Establish a roadmap for the High Council of the The private sector in Djibouti remains embryonic: Public-Private Dialogue (PPD) only 3,000 companies have operating licenses, and 2000 private firms report at least one employee to Roundtable 2: Tourism Development: Despite the Caisse Nationale de Sécurité Sociale. Most Djibouti’s tourism potential (marine resources, land companies are in services (29%), trade (27%) and and geological resources; cultural resources), the transit activities (19%). The business climate is sector is severely underdeveloped, despite a difficult and procedurally burdensome for most significant growth in recent years. In 2010, tourism firms. The cost of starting a business is very high revenue amounted to USD15 million (only 1.5 (184.7% of income per capita, versus an average of percent of GDP) and Djibouti recorded only 53,000 28.9% for the MENA region, 13.5% in Cape Verde, international tourist arrivals and 100,000 overnight and 3.6% in Mauritius). stays in hotels. In 2013 revenues had gone up to $21 million, dwarfed by Cape Verde’s $471 million and With unreliable quality or availability, the cost of Mauritius’ $1.8 billion3. Tourism in Djibouti is electricity in Djibouti is among the highest primarily driven by business travel, and remains worldwide and mobile telephone and broadband highly dependent on the presence of foreign military internet services are expensive and of poor quality, bases and anti-piracy operations in the Horn of with some of the lowest penetration rates in the Africa. world. Djibouti’s SMEs have very limited access to bank financing, and they often face onerous Tourist accommodation capacities are limited, collateral requirements, high interest rates, and short reflecting the low level of investment in the tenors. The judicial system suffers from insufficient sector. resources, lack of training and independence and The lack of a real tourism strategy. impartiality, and the slowness with which The low connectivity of the country is a major judgments are executed. Many companies lack obstacle to tourism development and services international experience and knowledge of methods (i.e. time to obtain visas and quality/availability and standards of modern management which poses of taxis) are ill-suited to support the growth of difficulties in accessing markets in the sub-region. the sector. The visibility of the country as a tourist Key South-South Lessons Learned: Mauritius had a destination is extremely low. clear strategy to develop the private sector and capitalized on its comparative advantages. After Key South-South Lessons Learned: Cape Verde identifying strategic sectors, they developed developed and implemented an action plan focused regional strategies to attract investment and set clear on six priorities: (1) development of transport sector and detailed targets. Mauritius also created a formal to improve access; (2) strengthening of general interaction mechanism between the private sector infrastructure through substantial investment and government which enabled the private sector to programs; (3) development of tourism-specific be effectively and officially represented vis-à-vis the infrastructure; (4) creation of a Ministry of Tourism; public sector. Dubai created an enabling investment (5) development of legal framework to ensure climate, facilitating a strong and dynamic private environmental, social and cultural sustainability of sector. The creation of Free Trade Zones allowed the tourism sector; and (6) implementation of firms to function in a liberal economic environment mechanisms for monitoring and evaluation of where they could fully own businesses and operate impacts. free from currency restrictions. 3 The World Bank, 2014. World Development Indicators, Washington D.C. September 2014 · Number 134· 2 Roundtable Recommendations for Djibouti: different nationalities; and iii) facilitating the attribution of work permits and liberalizing capital Develop a national strategic plan for tourism movements. Mauritius also promoted economic promotion diversification not only by preserving the traditional Implement a comprehensive airport policy to sectors (sugar industry, textile industry and tourism) improve the accessibility of Djibouti but also by promoting the growth of emerging Develop training programs for tourism jobs sectors such as financial services, ICTs and BPOs, Improve the development of the heritage of and port services. Djibouti and services provided to tourists Develop fiscal incentives for sectoral operators. Roundtable Recommendations for Djibouti: Roundtable 3 - Regional Integration through the Improve transport and telecommunications Service Industry: The strategic location of Djibouti, connectivity with other COMESA countries its modern port sector with new projects underway through public-private partnerships. (Tadjourah port, extension of Doraleh, etc.) and Reduce the costs and improve the quality of excellent internet connectivity (six submarine cables factors of production (especially electricity, land in Djibouti; two more are in progress) are assets telephony and internet) by reforming and offering Djibouti the opportunity to strengthen its opening up the sectors. The restructuring of the position as a regional hub for many activities in historical operator and the introduction of finance, ICT, and logistics. However, this potential is competition explains the gap between mobile untapped due to the persistence of structural phone penetration rates in Djibouti (28 per 100 obstacles and the lack of a reform program. persons), Cape Verde (100 per 100 persons) and Mauritius (128 per 100)4. The infrastructure for connectivity
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