‘All we ask for is a fair deal’

When we interviewed Ilyas Dawaleh in Washington during the World Bank Spring Meetings, he offered a balanced assessment of his country’s economy.

 “Touch wood,” he said, “our economy has proved pretty resilient to all these shocks,” referring to the series of global crisis from the Covid pandemic to the war in Ukraine. “You will see from the IMF projections, that are in line with our own, that we will achieve strong growth this year, amongst the top 10 or so fastest economies globally.” 

However, he adds a note of caution: “Having said that, I have to admit that these various crises are hurting us in several respects, mainly around the drop in FDI that we’ve seen in recent years, due precisely to the situation of uncertainty, in the region but also globally.” 

The way forward, he says, is to engage the private sector more closely as Djibouti continues its economic transformation campaign. Djibouti has made much of its strategic geographical position, building out its ports and logistics infrastructure and offering a bridge into and out of the region for its less well placed neighbours. 

A lot more needs to be done and Dawaleh says the government will up the ante on partnerships with local and foreign investors in pursuit of its goals. “Our approach from now on will really be to get the private sector involved. This is the high point of our reform agenda – to work with the Djiboutian private sector, including in terms of strengthening their own capabilities and expertise, but also working a lot to bring in foreign partners.” 

That means going beyond Europe, America and the Middle East, where Djibouti has longstanding partnerships, to attract capital from other places such as Asia.  

The key thing, Dawaleh stresses, is to diversify from the country’s overdependence on its main earner, its ports.“Djibouti’s single-sector development model is no longer viable. It has enabled Djibouti to undergo its transformation; it will remain a very important sector, but it must no longer be an exclusive sector in terms of development, because our own ability to create jobs and more wealth is also at stake,” he explains. 

This has been addressed in a diagnostic report issued by the World Bank’s International Finance Corporation as well as in Djibouti’s own assessments. “So diversification is at the centre of what we are now doing, and we call this developing Djibouti ‘Beyond the ports’. This will be the central element of our next strategic action over the next five years.” 

The country’s President, Ismaïl Omar Guelleh, Dawaleh says, is not only behind the plan but is driving the vision that is guiding the strategy. 

In the meanwhile, Djibouti also has to manage its debts. The African Development Bank projects that over 2023-24, public debt will rise to 73% of GDP, owing, in large measure, to the loans it has contracted to finance infrastructure projects. 

Dawaleh says lenders at the Spring Meetings were quite understanding, although he believes there is more that can be done to support the country. “I often say that Djibouti is a global public good because of its geography, because of its geostrategy and because of the services Djibouti provides to the whole world. 

“We really want Djibouti to be well understood in terms of the aspirations of its people and its government. And we are very happy to see that our partners understand and are following us.” 

That, he is quick to add, does not absolve Djibouti of its duty to manage its finances with the same discipline that should be expected of any nation. “We are not exempt from remaining focused in our approach, in our fiscal discipline, on the fundamentals in terms of macroeconomic management, in terms of public finance management, in terms of reforms. We also believe that others will come and support you, if we are capable of supporting ourselves,” he emphasises.

Given its powerful friends, Djibouti’s expectations are justified. Its geostrategic position has brought the United States, France, Japan, Italy and China to set up bases in the country, allowing them to pursue their strategic operations from the country. 

Dawaleh estimates that the alternative to being in Djibouti – to run an aircraft carrier at sea – would cost in the region of a million dollars a day. However, the financial arrangement with Djibouti has been less profitable than it would seem and according to some estimates, actually costs the country a net fiscal loss of $300m annually. 

As the contracts come to an end, Dawaleh says Djibouti will be asking for new terms. In fact, talks with France are already underway. “We want to correct an asymmetry that has been the basis of various commitments by Djibouti. So we want to manage this particular asymmetry better.” 

For Djibouti, Dawaleh says, these relationships should have real and tangible benefits. “What interests us most in this partnership is really to be able to have more support on different levels such as infrastructure development, support in climate resilience and in helping us support our reform agenda.” 

However, he is quick to acknowledge the benefits of hosting the bases. “Having said that, the bases are very important in terms of security and stability. We do not underestimate that and it is what also gives us a competitive advantage and what gives our citizens, investors and visitors peace of mind. The fact that we have special defence agreements with France is also, for us, something that is very much appreciated,” he points out. 

The next few years will be critical for Djibouti and its reform agenda. Dawaleh says the priorities are to develop the country’s human capital and boost infrastructure. Better infrastructure will also benefit another sector that will support the diversification agenda. 

“We’re talking about tourism, for example. We have many sites that are unique in the world and can only be found in Djibouti but they are either very difficult or impossible to access.” Better road infrastructure would then unlock these sites and possibly open up another revenue stream for the country. 

Also on the agenda are public policy reforms and securing more funding for the private sector and especially young entrepreneurs. Some public companies will be opened up for private sector participation to improve quality and delivery. 

The Fonds Souverain de Djibouti, the country’s sovereign wealth fund, is in part a response to these imperatives. The fund is “to help co-invest with international partners and bring in investment, to be the link in the chain to drive the transformation of Djibouti”. 

For Dawaleh, having recently been re-elected to the position of Secretary-General of the ruling party, his priority is summed up in his own words: “to support President Guelleh; remain loyal to him and make sure we win together”.