Djibouti – Free Trade Zone Launched

The continent’s largest free trade zone is set to be a new major gateway to African markets and an opportunity for Djibouti’s development. 

African heads of state arrived in Djibouti on July 5th to take part in the inauguration of the Djibouti International Free Trade Zone (DIFTZ), Rwanda’s The New Times reported.

The newly completed industrial area will provide comprehensive solutions to companies operating in services, trade and manufacturing and is set to attract businesses from across Africa and the world.

The free trade zone will benefit the whole continent as 49 African nations – including Djibouti – recently signed the African Continental Free Trade Area (AfCFTA), a trade agreement aimed to create a single market for African countries.

“We are behind you in the realisation of this project and I am sure it will serve us all, even as far south as Rwanda and beyond,” said Rwanda’s President Paul Kagame – also the African Union Chairperson – who attended the launch.

Located on two of the world’s busiest maritime routes, Djibouti is an important entry point into African markets for global commerce. The country is also a critical node on one of the world’s most ambitious global infrastructure networks – China’s “Belt and Road” initiative.

DIFTZ will focus in particular on the development of the logistics, marine, construction, automotive and home electrical industries, according to a press release by the Djibouti Ports and Free Zone Authority (DPFZA).  The project is run by the DPFZA together with three major Chinese partners: China Merchants Group, Dalian Port Authority and IZP.

The launch on July 5th is the initial phase in a 10-year project which will comprise a total investment of $3.5bn. Once complete, the free zone will span an area of 4,800 hectares, making it Africa’s largest free trade zone. The pilot phase, a 240-hectare zone, already hosts the main office building and the first warehouses and facilities, as well as many companies already operating on the site.

DIFTZ will also be equipped with advanced facilities to support companies operating there including high-speed telecommunications, power and water supplies, roads and parking spaces.

diftz
Image: The New Times

The free trade zone will attract businesses from around the world through an offering of world-class business incentives including:

  • 0% property tax
  • 0% corporate income tax, personal income tax for foreign employees
  • 0% dividend tax
  • 0% VAT
  • Employers assume 10.2% social security
  • Work permit for foreign workers

Djibouti itself will also be a major beneficiary. The management of the zone lies solely with the DPFZA with Djibouti retaining full control of DIFTZ, holding 60% of the assets. It is estimated that DIFTZ will create over 350,000 new jobs over the next ten years and the proportion of foreign workers will be capped at 70% for the first five years and at 30% thereafter.

The project will also create major business opportunities for Djibouti and East Africa as the region’s export manufacturing and processing capacity is expanded in key sectors such as food, automotive parts, textiles and packaging.

Djibouti’s £15bn expansion programme has seen investment in a new national airline, ports, railways and highways in order to improve transport and logistics. The new free trade zone has been constructed at the heart of this global network that will provide companies with access to major maritime trade routes and some of the world’s most dynamic and transformative economies in Africa.

DIFTZ is located next to Doraleh Multipurpose Port and Doraleh Container Terminal, both with state-of-the-art logistics facilities, and next to a main stations on the Addis Ababa-Djibouti railway, ensuring the free trade zone is fully connected to the region.

During his speech at the opening ceremony, the chairman of the DPFZA, Aboubaker Omar Hadi, said: “Having become a global logistics hub, Djubouti is now taking the next steps to consolidate its economic diversification and become an industrial and trade hub in Africa.”

economic banner

AFRICAN UNION: AfCFTA Launched
Economic, Financial and Technical Series
Vol. 55, Issue 3

PORTS AND SHIPPING: Horn of Africa
Economic, Financial and Technical Series
Vol. 55, Issue 4

DJIBOUTI – ETHIOPIA: Chinese‐Built Railway Begins Operations
Economic, Financial and Technical Series
Vol. 54, Issue 12

Subscribe to ARB today.