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Of pirates, ports and poverty!

Simon Bell's picture
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A hard-scrabble, drought-prone small African country;  youth unemployment at 70 percent;  poverty rates of 40 percent;  highly dependent on the port which services much of Ethiopia’s imports and exports;  a few foreign military bases which have little connectivity with the local economy.  Pirates roaming the seas off the coast of the region (like a bad Johnny Depp movie);  illegal money suffusing through the region from illicit piracy;  neighboring Somalia in a state of war and chaos;  Yemen just across the Red Sea with its own bloody revolution;  and neighboring Eritrea causing significant problems of their own across the northern frontier.  Can such a nation ever hope to become a more dynamic, diversified, and private-sector oriented state with faster, more fairly distributed, growth and deeper poverty reduction?

We believe it can.

At first, the odds appear enormous.  Add to the above low agricultural potential and a low skill base combined with Dutch Disease; electricity selling at 36 cents a kw hour compared to 6 cents in neighboring Ethiopia; scarce and highly expensive water; poor governance in the public sector; the list goes on.  How could anyone be hopeful for such a country?

Yet, at least, three bright sparks appear on the horizon.

First, TOURISM.  Dramatic natural beauty, miles of unspoilt Red Sea beaches;  magnificent marine life, including large numbers of that gentle giant of the sea, the Whale Shark;  Lac Asaal, a brilliant white salt lake, the lowest point on the African continent;  and so much more.  But poor air linkages to Europe and other locations in Africa, extremely high travel costs, and an almost complete absence of a tourism culture make this dream exceedingly challenging.  That said, experience in countries like the Maldives, some 2,200 miles east in the Indian Ocean, with equally high costs, no fresh water, high electricity generation costs, and an equally weak tourism culture, has shown that a good beach, a warm climate, and unparalleled diving, lures Europeans half a world away to an exotic adventure.  Sharm El-Sheik in Egypt offers another interesting comparator.  Given Djibouti’s reasonable proximity to European markets, its all-year-round warm weather, and its calm and politically stable environment, there is no reason why this could not be replicated.  Russian delegations have already scouted out tourism options there we learned.

Second, FISHING.  With some of the best fishing waters around, there is considerable scope for an industry many multiples its current size.  Again, the challenges of a pirate-infested ocean, a lack of refrigeration capacity, and poor air links with major markets, represent considerable challenges.  Yet interest from Thai fishing groups and others in Asia, indicate that these challenges are not insurmountable.

Third, TRANSPORT.  Ever since Eritrea and Ethiopia have feuded, Djibouti has become the main through-port for land-locked Ethiopia.  The arrival of Dubai Ports and extensive investment in the port at Djibouti have greatly enhanced this capacity.  Nonetheless, inefficiencies remain and through-put could be speeded up to achieve greater effectiveness.  While Ethiopia remains the current market, further expansion to the new nation state of South Sudan and even beyond to Eastern Congo and the Sahel could be achieved.

These are but three possible industries that could provide private-sector led employment, exports, and growth.  The World Bank is currently exploring others within the context of the Djibouti Regional Hub Study.

As in all things, strong visionary leadership by the Government of Djibouti will be essential, including champions to cut across public-sector governance issues and be prepared to take some tough decisions.  Will the current leadership in Djibouti rise to make this small island of peace in the horn of Africa a bustling hub of economic activity for the entire Eastern and Southern African region?  We believe that Djibouti is ready and we will embark with them on this visionary adventure.

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