Djibouti’s $5bn development plan includes the construction of new ports, LNG and crude oil terminals. It also wants to develop rail links, oil pipelines and other infrastructure to become a middle-income country by 2035.
By Arno Maierbrugger
The wealthy city state of Singapore has become Djibouti’s role model for development over the coming two decades, according to Youssouf Moussa Dawaleh, president of the Djibouti Chamber of Commerce, who commented on the country’s new “Djibouti Vision 2035”, a roadmap that has been drafted with the assistance of the World Bank.
The small country at the Horn of Africa with approximately 873,000 people likens itself to Singapore because it occupies a similar strategic position along one of the world’s busiest shipping lanes and now wants to transform itself into an important maritime port and establish the foundations for a burgeoning commercial hub for the region. A $5bn plan includes the construction of new ports, as well as LNG and crude oil terminals.
Furthermore, Djibouti wants to develop rail links, oil pipelines and other infrastructure as it seeks to become a middle-income country by 2035. The economy is forecast to grow 6% this year and 6.5% in 2015.
But will this really make it the Singapore of Africa? Let’s take a look at where Singapore stood in the past. In 2004, Lee Hsien Loong, the eldest son of Lee Kuan Yew, the as founding father of modern Singapore, became the country’s third Prime Minister and inherited an economy that had 40 years to grow after independence from the British, in a combination of foreign direct investment and a state-led drive for industrialisation. Singapore took advantage of its strategic location and quickly grew to Southeast Asia’s most important seaport and trading hub, but it also diversified its economy quickly into other sectors such as electronics, chemicals, finance and tourism.
It invited foreign skilled workers to relocate to Singapore with generous incentives with the result that roughly 44% of the Singaporean workforce is now made up of non-natives. It also invested heavily in education and healthcare. Nominal GDP per capita grew from around $510 prior to independence to $55,182 in 2013 as per World Bank figures.
The whole system worked only with a tight grip of the government on the economy and its people, with state-controlled media, not really competitive elections, strict regulations and laws for almost everything and harsh penalties for many, even minor offenses.
The result is that Singapore today is among the least corrupt countries worldwide with one of the best ranks in global competitiveness, but the economic upswing and social stability has been bought at a high price by suppressing individuality and certain freedoms.
Compare that to Djibouti: The country became independent 12 years later than Singapore, in 1977, but its economy is still far from being diversified. Some 80% of GDP comes from the service sector - mainly from port operations and trade -, the small rest is industry and agriculture. Tourism development is complicated by exorbitantly high visa fees and hotel prices. Urban unemployment is 60% and poverty is prevalent. Today’s nominal GDP per capita is around $1,600. The adult literacy rate stands at just 70%.
Processes for foreign investors are reportedly opaque: The finance ministry will issue a licence only if an investor possesses an approved investor visa, while the interior ministry will only approve an investor visa to a licensed business, expats complain, a situation that opens all avenues to corruption.
Singapore ranks 2 in the latest Global Competitiveness Index by the World Economic Forum, while Djibouti is not even included in this index. That means there is a lot of work ahead for Djibouti to reach Singapore’s level unless the chamber president’s statement is just a political slogan.
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