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Economy and Investment

Economy

The main economic advantage of Djibouti is its strategic location and its active port, which is also the main outlet at present for Ethiopia.
The economy of Djibouti depends mainly on the services sector alongside with the following resources:

  • Revenues from the services of Djibouti international port
  • lease income from foreign military bases.
  • Direct and indirect taxes.
  • Foreign aid.


The main economic indicators


  • General Budget (2017): 120 billion Djiboutian francs (676 million US dollars) .

  • Gross Domestic Product (GDP):1.89 billion US dollars.

  • Agricultural sector share in the GDP: 3%.

  • Industrial sector share in the GDP: 23%.

  • Services sector share in the GDP: 74%.

  • Internal investment share in the GDP: 24.5%.

  • Direct foreign investments: 124 million US dollars.

  • Growth rate:6.5% .

  • Annual per-capita income:1908 US dollars.

  • Indebtedness rate: 35.98%.

  • Inflation rate: 3% .

  • Trade balance deficit:-17.15%.

  • Foreign exchange rate: 1 US dollars = 177.72 Djiboutian francs

  • Gasoline price:1.77 US dollars = 315 Djiboutian francs per liter.

  • Diesel price:1.21 US dollars = 215 Djiboutian francs per liter.



Investment

The Djiboutian laws allow everybody to invest and practice economic activities on the Djiboutian soil in accordance with the relevant controls and regulations. The state recognizes the freedom of investment for all Djiboutian or foreign natural or legal personalities provided they observe the provisions of the current laws and regulations. All the establishments which practice productive activities in Djibouti are equal in front of the law.
To encourage entrepreneurship the Djiboutian government is providing a favorable legislative and regulatory atmosphere through the incentives offered by the investment law and the numerous services and privileges provided by the free zone to export companies.



Investment Law

The investment law which was issued on 16th October 1994 for both Djiboutian and foreign investors provides the following taxation and other incentives:

  • Investment in Djibouti doesn't require having a partnership with a Djiboutian national or entity.
  • Both local and foreign investors are treated on equal terms.
  • All investors can remit their profits outside the country freely.


Tax Incentives

  • Investments of the minimum value of 5 million Djiboutian francs (about 28 thousand US dollars) enjoy the privileges of system A, including the following tax exemptions:
    • Local consumption tax on the project's machinery, materials and imported raw materials for the first three years of actual operation of the project.

  • Investments of the minimum value of 50 million Djiboutian francs (about 281 US dollars) enjoy the privileges of system B, including the following tax exemptions:
    • Exemption for 7 years from property ownership and construction tax.
    • Exemption for 7 years from professional profits tax.
    • Exemption from local consumption of imported raw materials used in the first stages of operation of the project.
    • Investments subject to the provisions of system B can enjoy exemption from building licenses tax.


Other sectors

The following are the investment activities that enjoy the privileges of both systems A and B:

  • Utilization and manufacture of agricultural and animal products regardless of their sources.
  • Costal and deep sea fishing; and storage, freezing or manufacturing of sea products.
  • Utilization, formation and manufacture of local or imported metals and mining products.
  • Exploration, utilization and storage of all energy sources and refining of petroleum.
  • The establishment and operation of the institutions concerned with the development of tourism, traditional trades, electricity services, electronics, chemistry and shipbuilding; and land, marine and air transport sectors.
  • Ports and airports activities.
  • Building, repair and maintenance of transport and fishing boats.
  • Manufacture or packaging of intensely consumed commodities.
  • New investments to develop the activities of banks or credit facilities.
  • Engineering and processing of information data consultancy services and central distributors of databases.


Free zone system



Free zone companies

Since the establishment of Djibouti's free zone the Djiboutian law differentiates between the following two types of legal personalities:

  • The individual body with a limited liability for the free zone named Free Zone Establishment (FZE).
  • The limited liability company of the free zone known by the name Free Zone Company (FZCO).
    These companies are subject to the free zones law, the commercial companies' law and the free zone law.


Tax system in the free zone

  • Persons and establishments operating in three zone are not subject to any direct or indirect tax including income tax except for the added value tax which is levied only on the free zone's establishments that are subject to the provisions of the general tax law. This tax exemption is offered for up to fifty years starting from the date of licensing of the business in question.
  • Imported materials or those manufactured in the free zone are exempt from all customs and tax duties except when imported from the customs zone of the republic of Djibouti. The promotion of the materials originating from the free zone in the local market is subject to the duties and taxes levied on imports.


Investment laws observed in the republic of Djibouti

  • The general public tax law.
  • Investment Law.
  • Law No 53 issued on 17 May 2014 on free zones.
  • Law No 134 for 2011 on trade.
  • Law No 179 for 2002 on Djibouti Chamber of Commerce.
  • Law No 49 for 2008 on industrial and commercial ownership system of Djibouti.
  • Decree No 271 for 2009 on the organization of industrial and commercial ownership system of Djibouti.
  • Law No 159 for 2012 on the royalty of industrial and commercial ownership system of Djibouti.


The banking sector

There are 12 banks in Djibouti, including:

  • Banque centrale de Djibouti.
  • Banque de Dépôt et Crédit de Djibouti (BDCD).
  • Banque of Africa (BOA).
  • Banque pour le Commerce et l'Industrie - Mer Rouge (BCI-MR).
  • Cooperative Agricultural and Credit Bank (CACB).
  • Exim Bank of Djibouti (EBD).
  • International Commercial Bank (ICB).
  • Warka Bank (WB).
  • Dahabshiil Bank International (DBI).
  • Saba Islamic Bank (SIB).
  • Salaam African Bank (SAB).
  • Shoura Bank (SB).


Insurance Sector

There are two insurance companies in the Republic of Djibouti, namely:

  • AMERGA ASSURANCES.
  • GXA ASSURANCES.