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WTO concludes trade policy review of Djibouti

As it is known, the World Trade Organisation (WTO) responsibilities include the periodic surveillance of the trade policies adopted by its members, as well as the analysis of their impact on the functioning of the multilateral trading system. Between 12 and 14 October 2022, the third review of the trade policies and practices of Djibouti was concluded. The WTO report is now available on the website of the organization.

Located in the Horn of Africa, Djibouti is classified by the World Bank as a lower-middle-income country. The country is a major maritime hub with port activities generating significant revenue for the government, especially from imports (as the country is strongly import-dependent) and transit traffic to/from other neighboring countries, mainly Ethiopia, which is the main user of the Djibouti ports. Djiboutian exports, on the other hand, are very limited, despite its still unexploited mining potential (as there is evidence of the presence of perlite, bauxite, natural gas, copper, zinc, iron, aluminium, gold and oil). The manufacturing sector is very marginal, contributing only 0.3% to GDP,  one of the lowest in the region.

For both geographical and political reasons, Djibouti is the natural and preferred maritime gateway for Ethiopia's imports and exports. Before the opening of the Djibouti-Addis Ababa railway line, this traffic was carried uniquely by road, predominantly channeled through the Djibouti-Addis Ababa corridor, a main conduit for Ethiopian trade that passes through the border post of Galafi. Since the opening and start of operation of the railway line in 2016-18, a part of this traffic has shifted from road to rail, but road transport remains the main modality used for moving goods to the nation’s ports and for distributing goods from the ports to neighboring countries. The WTO report indicates that road traffic in the Djibouti-Addis Ababa corridor reached in 2020 a total of 387,588 commercial vehicles, with Ethiopian trucks that dominate the scene, while Djibouti's truck fleet remains small.

So far Djibouti has attracted foreign investments that have been concentrated almost exclusively in the logistics sector, particularly in port and road infrastructure and services. The recently approved strategy paper, "Vision Djibouti 2035", aims at further strengthening the role of logistics in Djibouti by transforming the country in the "Africa's trade and logistics hub", with the reinforcement of links between Djibouti and Ethiopia that are seen as key for regional integration, as they will contribute to create a single market encompassing Djibouti, Ethiopia, South Sudan, Somalia and Eritrea.

Another objective of Vision Djibouti 2035 is to achieve 100% renewable energy by 2035. To this end, energy legislation has been modernized to open up production to competition. Several foreign companies (independent power producers) have already invested in wind and solar projects, despite the fact that a single state-owned enterprise, Électricité de Djibouti, is still currently responsible for all electricity production, using thermal power stations fuelled by imported refined oil, since Djibouti does not yet have a refinery. Part of the electricity consumed in Djibouti is delivered through a high-voltage line from Ethiopia, with plans to build a second. The percentage of the population connected to the electrical grid remains relatively low. A semi-public company has the monopoly over the importation of refined petroleum products, and the right to distribute such products has been granted to three local companies.

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