Country report: Djibouti

Full text of an article from The Courier ACP-EU
No. 174, March-April 1999: pages 17-21

The waves of the Red Sea which wash Djibouti's northern coast, and the gentle lapping of the nearby Indian Ocean - which merge in the Gulf of Aden separating Africa from Arabia - cool and refresh in a way that those in the country's interior can only dream of. In this barren desert region, where rain and water supplies are rare and a lack of natural resources reduces the scope for sustainable development, the challenges facing the people have always been sizeable. There is a popular view that this part of the world `must have been designed by the Creator when He was in a bad mood'. It is an idea that people express without fatalism, but it sums up the unpleasant and harsh side of nature in Djibouti.

Looking solely at the natural constraints, you might be tempted to think that there is nothing to be discovered, nothing to be done and nothing to be aspired to in this country of just 23,000 km 2 (about the size of an average province in a European country). The reality is very different. For this nation (formerly French Somalia, but renamed The French Territory of the Afars and the Issas in 1967, following a referendum), which gained independence as late as 1977, has an endless and indefinable ability to surprise. It has been the subject of many literary accounts replete with highly descriptive narratives and interesting anecdotes. Authors as diverse as Rimbaud, Loti, Kessel, Theilhard de Chardin, Monfreid and Thesiger have all, at some stage in their writing careers, been seduced by the mysteries of Djibouti. But even those who come without preconceptions, to take a fresh look at the place, have difficulty unravelling its complexities. A newcomer to the ranks of the writers is Djibouti's own Wabéri.

The traditional inhabitants of Djibouti are nomadic herdsmen. The country's biggest asset, however, is its highly strategic geographical position - a fact which deserves to be publicised more. Located at one of the world's major `crossroads', it has good access to important sea routes and a hinterland of landlocked countries with more than 100 million inhabitants. Throughout its history, Djibouti has been eyed greedily by both regional and international powers. Today, in a region where conflict and tensions - often clan-based - persist between and within states, Djibouti wants to recreate an `island of peace'. It is not easy when the regional context is so problematic. This small nation even acts, under the aegis of IGAD (see box) and in other fora, as mediator in the crises that plague the Horn of Africa. It is a highly delicate position, given recent upheavals.

Sadly, the threat of war is always present in the region (and the situation is not helped by the Khasmin, the unbearable, sand-laden wind which sweeps through the country in summer).

If you look more closely at Djibouti's location you can see why people say it is `caught between a rock and a hard place'. To the east lies Somalia which has degenerated into a kind of no man's land ± without a government and subject to clan law. To the south and west are Ethiopia and Eritrea who crossed swords again in May 1998, and whose conflict rumbles on. Djibouti appears anxious toavoid taking sides, butwhenitwas accused of passive complicity by the Asmara government, it decided, for the first time, to break off diplomatic relations with Eritrea. And it is not so long ago that Djibouti had its own armed conflict, pitting the government against Afar rebels. The fighting lasted three years and further exacerbated the country's problems. Since 1995, and the ending of the conflict by agreement in Geneva, there has been something of an economic revival, though tensions still exist.

A political model

Like many African countries that have adopted a multi-party system - whether voluntarily or under duress - Djibouti has found that the road towards democracy is a bumpy one. The uninitiated observer is likely to have a hard time understanding the complexity of the political scene even though the population is estimated at not much more than half a million. The democratic evolution of the country has been influenced by a wide range of factors - historical, cultural, ethnic and regional - which make it particularly difficult to piece together the political jigsaw.

The death sentence for the single-party system, in place since independence, was pronounced in 1990. Thereafter, the way was cleared for the emergence of a new arrangement involving four legally recognised political groupings. At the time, there were some who argued forcibly for even greater political liberalisation and these people still criticise the fact that only four parties are authorised by law. The law in question is itself disputed, because it has not been published in the Official Gazette. Even without an increase in the number of parties, politics in Djibouti are byzantine. A Presidential election is due in May.

Although the armed conflict which began in 1991 sapped all sectors of the economy, one positive result was that it 'reconfigured' the nation's political scene. The 1994 peace accords, signed between the government and a branch of the mainly Afar Front for the Restoration of Unity and Democracy (FRUD), led to official recognition of the latter as a political party in its own right. This gave it a bigger stake in the political process. There is still, however, an armed section of the FRUD movement led by Ahmed Dini, who is in exile in France. It wants a much more radical change in the status quo, and would like to see those currently at the helm ousted altogether. It intends to continue the struggle, and claims responsibility for periodic attacks on state targets in the north of the country.

The most recent legislative elections, which took place in December 1997, did not radically alter the composition of parliament. Under an agreement - actually reached after the elections - the 65 seats in the National Assembly are shared between just two parties in coalition. These are the Issa-dominated People's Progress Movement (RPP), led by President Aptidon, and the aforementioned faction of the FRUD, which signed up to the 1994 peace accords. Excluded by the electoral system, the other parties argue that the coalition is not legitimate. They see the arrangement as a political stratagem by those in power designed to consolidate their own position. The effect, they claim is to alter the democratic equilibrium and stifle wider debate and discussion.

As for the coming presidential poll, the big question is who will succeed President Aptidon, who recently announced his retirement from politics. (He gave no hint of his impending decision to us when we spoke to him - as readers will see from the interview which follows.)

There are rumours that the President's nephew and current chef de cabinet, Ismael Omar Guelleh, may stand as a candidate. The relationship between the two is such that, for some Djiboutians, he is the obvious heir apparent. Others are less certain that this will be the outcome. There are also rumours that, with the rise of a new generation of `young Turks', hungry for power, the political pack will be reshuffled much more comprehensively.

The position of the opposition is even more difficult to unravel. Various alliances, inevitably set up on the basis of ethnic origin as well as political choices and calculations, attempt to function as best they can, but they are frequently beset by dissenting voices. Major splits, caused by dissident factions laying claim to control of the party, have emerged in both the main opposition groups not represented in the National Assembly - the Party of Democratic Renewal (PRD) and the National Democratic Party (PND). Some opposition leaders seek to play down the scale of the problem but it is difficult to imagine that these internal difficulties will not affect the result of the forthcoming poll. Some observers believe that only a common front, embracing all opposition forces, stands any chance of toppling President Aptidon's 22- year-old regime. Others suggest that the opposition is still 'serving its apprenticeship' and that currently, there is no one in its ranks with the credibility and charisma needed to win. Not surprisingly, the main opposition leaders reject this kind of analysis. They are convinced that most voters already support their ideas and that they can win, if the elections are open and above board.

A difficult adjustment

Having long jibbed at swallowing the bitter medicine concocted in the laboratories of Washington DC, and administered to practically all ailing economies, Djibouti finally decided in 1995, after lengthy talks, to accept the structural adjustment solution. This, according to the experts, was the only way of preventing irreparable damage to the country's economy. Admittedly, the three year-long conflict had damaged Djibouti's image as an oasis of peace in the Horn of Africa, and the immediate post-war situation did not look too bright. Extra spending on military equipment and on maintaining troop levels had led to a big increase in public expenditure and the budget deficit had doubled to around 20% of GDP. It is not easy for a state in such a difficult fiscal situation to focus on vital sectors such as education and health, or to guarantee the continuity of public investment in order to maintain basic infrastructures. As Yacine Elmi Bouh, the Finance and Economics Minister, acknowledged to us: `The country was in catastrophic decline, to the extent that the state's credibility was at stake.' The debt burden was growing and government purchase orders were no longer being accepted. Wage arrears were mounting up to such a degree that social stability was compromised. The government, in these circumstances, was forced to draw on the already depleted funds of public companies to honour its commitments.

Far-reaching structural reforms were needed. The first to be implemented by the government, with cautious support from international institutions, was aimed at immediate stabilisation of the public finances. In addition, a programme designed to boost potentially profitable sectors was set up. Its purpose was to give a lift to the economy and ensure social stability. The standby agreement concluded in 1996 with the International Monetary Fund stipulated that the budget deficit had to be reduced through substantial cuts in the (huge) wage bill and stricter controls on spending. Despite some progress, the results have not been spectacular and the country has not fully succeeded in getting back on its feet in financial terms. For various reasons, it was not possible to meet the targets and deadlines set by the donors - proof that the damage of three years of civil war cannot be put right at a stroke. `The funds we expected from international bodies were not released on time,' a government source claimed. And there were further unexpected complications due, among other things, to the organisation of the 1997 legislative election. All in all, Djibouti found it difficult to adapt to the rigours of budget austerity. The standby agreement therefore had to be renegotiated in Geneva in 1997. Although outsiders are convinced that the country's financial crisis cannot be resolved without rapid rationalisation of spending and a boost to revenues, the current rate of reform does not inspire optimism.

Budget stabilisation is a veritable Pandora's box. One of the thorniest issues, which is still a long way from being resolved, is spending on wages (half of which goes on the military and police forces). It is true that the number of public-sector employees is falling and civil servants' wages have been cut by 30%, but the demobilisation programme covering former soldiers (a stipulation of the Geneva agreements), which should have been completed by the end of 1998, is still not firing on all cylinders. This programme, affecting 16,000 veterans, was instigated in 1994 by the government itself, initially using its own funds. The financing was later boosted by France, the European Union and the African Development Bank (ADB). Out of a total of 9000 men, whose demobilisation was to be shared out equally between the three donors, barely half have been dealt with under the programme. Although France has fully honoured its commitment, the EU is still involved in the second stage of its programme. The ADB, meanwhile, dropped out at the last minute, claiming that its agreement was dependent on signature by the Djibouti government of an enhanced structural-adjustment facility with the IMF. This facility was expected to come into operation in early 1999. In the light of these problems, it is fairly clear that demobilisation will take longer than anticipated. It has even been suggested that some political or military leaders would like to push the deadlines back even further in pursuit of their own agendas. As for the demobilised soldiers, most receive bonuses of Yacine Elmi Bouh, Minister of the Economy and Finance. We have been forced to adopt unpopular measures and apply strict management principles in order to control our spending between Euro 1000 and Euro 2500 - depending on their circumstances - before being left to their own devices. Unfortunately, from the outset, the demobilisation programme did not include a reintegration element. Negotia- tions are currently under way with the World Bank with a view to meeting this need.

The government is thus pursuing its stabilisation programme against a background of many constraints, although it is anxious to point to such progress as has already been made. `We have been forced to adopt unpopular measures and demonstrate strict management principles to control our spend- ing more effectively', Elmi Bouh stressed. The country is also trying to extricate itself from a deep-rooted 'everything public' culture and move towards a system of private management. The international consultants, Price Waterhouse, have examined a number of leading public companies that are teetering on the verge of collapse, to see whether they are suitable for conversion into limited companies. The Bretton Woods institutions now have the key sectors of electricity, water supply, telecommunications and transport, in their sights, and are calling for partial privatisation.

Another cloud on Djibouti's economic horizon is the much publicised gradual withdrawal of French troops based in the country. This is the result of budget restrictions in France. Although opinion is divided about the benefits of this kind of cooperation, there is no doubt that the presence of up to 9000 French personnel has undoubtedly been good for Djibouti's revenues. France, for its part, has had 'unquantifiable' advantages from the arrangement which has been in place since independence. Djibouti is finding it difficult, in the post-Cold War era, to come to terms with the idea that cooperation should now be more impartial and perhaps based more on altruism. The authorities are seeking compensation from their erstwhile partners to make up for the losses incurred through personnel withdrawals.

Service industry comes to the economy's rescue

You could say that when Djibouti's transport sector sneezes, the whole economy catches cold. You only need to consider the size of the country and the relative importance of other economic sectors, to recognise the accuracy of this metaphor. At present, and for the foreseeable future, transport represents the country's best economic asset. On account of its exceptional geographical location at the crossroads of three continents, Djibouti enjoys a comparative advantage in this respect that other countries of the region must envy. It has long been a place of contact between civilisations, a gateway to East Africa, and a natural stopping off point for goods being traded in this part of the world, whether on the regional or international markets. But one has to ask whether Djibouti has genuinely made the most of its highly strategic position.

Looking at the current circumstances and the various socio-economic indicators, it is not easy to answer clearly in the affirmative. The transport sector has obviously generated revenue in Djibouti, but the conditions for optimising its potential have never been entirely fulfilled. Its success is closely linked to the volume of commercial traffic which, in turn depends on geopolitical issues and regional stability. The conflict between Ethiopia and Eritrea, which broke out in early May 1998, provides a good practical illustration. Ethiopia, the much larger country, previously used the Eritrean port of Assab as one of its main outlets to the sea. After the fighting began, Ethiopian traders switched, whether through choice or because there was no other option, to the port of Djibouti. As far back as 1843, Emperor Menelik identified Djibouti as a natural outlet for Ethiopian trade. As a result of the confict, the volume of goods passing through Djibouti has doubled in the space of just a few months. Indeed, the government was forced to adopt a series of urgent measures to cope with the demand. 'No one could have foreseen what would happen', political leaders told us, while acknowledging that the dispute between their neighbours had obviously been profitable to Djibouti.

Given the importance of transport to the relaunch of the economy, a new policy to boost the sector has just been outlined by the government. It stresses the role and responsibility of the various institutional players, suggesting more active participation by economic operators in the private sector. The Ministry of Transport and Telecommunications has been entirely restructured and programmes aimed at training transport workers are currently being devised. 'Our ambition is to become the driving force behind regional integration', confirmed Abdallah Abdillahi, the new Transport Minister. Yet, without a strengthening of existing infrastructures and investment in modern stock, it is difficult to see how the existing multi-modal transport chain can be improved.

Until about a year ago, the port had the capacity to meet the international demand, and the operation made a vital contribution to the local and regional economy. However, it is now having to deal with a sharp increase in business. According to Mr Abdillahi, Djibouti has coped with the new situation, while continuing its main activity which is transshipment. It wants to consolidate its advantageous position, however, and with this in mind, a number of donors have been approached. The aim is to equip the port with new terminals, gantries, tugs, cranes and rolling stock.

As part of its triennial development plan (1999-2001), the government also envisages setting up an industrial freezone and a free airport/port facility to supplement the existing free trade zone. But the port also needs to operate more efficiently if it is not to be loss-making. There are still considerable distortions when its comes to the price of certain port services (such as those relating to bulk goods) depending on whether they are destined for Djibouti or for transfer to Ethiopia. And efforts to make the whole operation more slick must also focus on modernising the port's management. Competition from the neighbouring ports of Assab and Aden remains keen.

The railway system, historically important to Djibouti and to its relations with Ethiopia, also faces difficulties. Currently, investment is being channelled towards improving rail services with the support of the EU and the French cooperation agency. But the needs are so great that the authorities are looking for further financing from donors. Some track sections desperately need to be repaired and there is a serious shortage of new locomotives to facilitate the transport of goods. This is a region where the railways are perceived as an important complement to road transport.

Aside from a few projects implemented with Japanese aid, the country's road network is in a poor state. The situation along the corridor that links Djibouti with Addis Ababa is a source of increasing concern. Roads are cracking up under the weight of the juggernauts that use the road every day. 70% of the section linking Djibouti with Ethiopia has all but disappeared and accidents are increasingly common. If something is not done in the very near future, there will be nothing left to repair!

Notwithstanding the scale of the problems to be tackled, the country's authorities and their partners in development agree that the tertiary sector offers the best prospects for boosting development and the welfare of the population. A thriving service sector is Djibouti's passport to success in the global economy. That is why they are putting so much effort into this area.

Updated on March 24, 1999

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