allAfrica.com: Djibouti: Using Trade, Foreign Direct Investment, And Workforce Planning to Drive Growth in the Horn of Africa (Page 1 of 2)

Djibouti: Using Trade, Foreign Direct Investment, And Workforce Planning to Drive Growth in the Horn of Africa

Djibouti has long been considered a country with little to offer the global economy. But that was before Dubai Ports World (DPW) saw enough opportunity there to make a major investment in the Djibouti Port, and before the U.S. decided to position a Combined Joint Task Force for the Horn of Africa (CJTF-HOA) in Djibouti.

Djibouti has 'location, location, location' to sell. The DPW and CJTF-HOA investments simply began to prove it. Now other logistical support firms are investing heavily, the country is now a central food aid distribution center, and it boasts a new luxury hotel.

Djibouti has had tremendous investment promotion success over the last five years and is now one of the leading FDI areas in Africa. Its government has decided to use its Red Sea position and proximity to Ethiopia to the West and the Arab Gulf to the East, as the driving theme for major investment promotion. But it also recognized that location alone is not enough, so over the past five years it established a Djibouti Free Zone (DFZ), and a new, more modern, foreign investment regime that would support new direct investment into that Zone.

In addition, there have been significant moves to liberalize and facilitate trade with Ethiopia. There have been agreements to co-locate customs operations at the Djibouti Port. The two countries are also working towards adopting harmonized clearance and inspection documents and procedures. The DPW is building 'joint' facilities at the new port at Durlaleh so goods can transit freely into the Ethiopian market. Such innovations lower overall distribution costs, and the positive impacts will extend across the Horn of Africa.

Djibouti's investment promotion success since 2000 has been phenomenal.

The main catalysts have been the DFZ and leading investments in it by such groups as Dubai Ports World and, more recently, by Bahrain Maritime and Mercantile International (BMMI), and parallel investments such as the Kempenski Hotel. The second driver has been expansion of CJTF-HOA base and supporting investments by firms like Halliburton.

But the government and potential investors have other things to consider. In terms of gross investment and volume of containers transferred, all is well and good. If reforms of investment rules in the DFZ are considered a model that can be used for the rest of the country possibly in agreements with Ethiopia, the outcome is also good. If, however, growth is seen through the lens of development and measured by the degree of local employment generation, the results are not so impressive. Unemployment is excessively high and there has been no real move to address workforce development problems.

WORKFORCE DEVELOPMENT

Djibouti wants to emulate Dubai, and while the gap between the two is wide, the model for solving Djibouti's problems may be found in the Dubai model. That model was and is based on economic analysis of the types of investors they wanted to come to Dubai, mainly in the higher level services, and to focus on educating both public and private sectors on the roles of government and in regional service sector economies. Along these lines, Djibouti should: - Communicate to local businesses and foreign investors what sectors will be developed by the government and what sectors will be developed by the private sector, and focus new investment promotion activities accordingly.

- Invest heavily in developing a base of analysis and data production skills so that the private sector can identify economic opportunities and trading relationships for investment.

- Develop integrated strategic plans wherein ministries, municipal agencies, and the Chamber of Commerce can jointly promote regulatory efficiency and public-private partnerships.

In Dubai, the result has been a steady flow of investment from companies ranging from Cisco to Halliburton, and other major international companies that operate around key distribution hubs; notably, these are also global firms that have been early investors in Djibouti. Needless to say, Djibouti is still far from being on par with Dubai, and its workforce issues are very different. Still, by creating a comprehensive investment promotion strategy that focuses on services and workforce development, its growth can translate into greater local and regional jobs creation.

The biggest concern of potential foreign direct investors is probably the state of the workforce in Djibouti. According to a 2002 report on Djibouti's competitiveness by the United States Agency for International Development (USAID), one of the critical constraints "is a workforce that is largely illiterate, lacking in formal education and bereft of the knowledge and skills required by a modern economy." That assessment remains true today. Therefore, to expand investment and the local benefits of foreign investment, workforce education and training in Djibouti must be upgraded. Djibouti could readily undertake the following activities to enhance workforce development: Assess next generation skill sets with labor demand study: Efforts to upgrade skills must be based on projected investment priorities and labor demands. Djibouti should survey potential investors to gather data on the next-generation skills they will need, compare the results with available training opportunities, and identify gaps and priorities.

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