Connect with us

Africa

Djibouti’s “International” Free Trade Zone is really just for one country

Samantha Maloof

Published

on

For the past quarter century, Djibouti has flourished as the Horn of Africa’s most strategic port, serving as a lifeline for landlocked Ethiopia’s $3.13 billion in exports at the mouth of the Red Sea and Gulf of Aden. So on the face of it, the Phase 1 opening last month of the Chinese funded, multi-billion dollar Djibouti International Free Trade Zone (DIFTZ) appears to position the tiny nation as a growing trading hub for the entire East African region. But is that just wishful thinking?

The DIFTZ is a sprawling complex meant to house four industrial clusters specializing in trade and logistics, export processing, business and financial support services, as well as manufacturing and duty-free merchandise retail. It’s touted to provide employment for tens of thousands and solidify Djibouti’s reputation as a business-friendly place.

The geopolitical calculations behind China’s generous financing in Djibouti are part of its Belt and Road Initiative, an aggressive economic plan designed to open up and create new markets for Chinese goods and technology by strengthening the traditional Silk Road trade route. That rationale is rooted in the fact that Ethiopia uses ports in Djibouti for about 95 percent of its external trade and pays around $1.5-2 billion in port fees. With the Ethiopian economy growing fast, obtaining better access to Addis Ababa is a crucial objective for the Chinese leadership.

But Djibouti should hold the champagne for now. Despite the glowing press releases, there are at least three major partners who have serious reasons for doubting the trustworthiness of the country’s leaders and its viability as a new axis for regional trade.

First, many U.S. analysts are expressing concern that the DIFTZ is financed by loans from state-backed financial institutions from China, dulling Djibouti’s triumphant expansion as a critical line between the export-rich Ethiopia and vital shipping lanes. In East Africa, the Export-Import Bank of China is the major investor in at least eight infrastructure projects, including an ongoing $322 million water pipeline project from Ethiopia and the $490 million Addis Ababa-Djibouti railway. Yet critics have described the Belt and Road Initiative as a method of entrapping poor countries to Beijing as “economic vassals.” For instance, a major report from the Washington-based Center for Global Development released in March cautions that the Chinese iniatives raise “serious concerns about sovereign debt sustainability in eight countries it funds,” including Djibouti.

Even more worrisome, Chinese commercial investment in Djibouti has been paralleled by the construction of a major Chinese military base, a mere six miles from the United States’ long-established Camp Lemonnier — the only permanent U.S. military base in Africa. The Chinese base is the first outside its borders and gives Beijing a military foothold on the African continent, an outcome that previously led to American political and military leaders pressuring the Djibouti government to block the construction of the base. U.S. military experts have expressed concern that a Chinese presence would hinder U.S. interests and its counter-terrorism missions, tensions that remain as American allies France, Japan and Italy also have bases of various sizes and capabilities in Djibouti.

The second reason: Ethiopia. Until a few months ago, Djibouti represented the country’s only way to access the sea and, as a stable partner, reaped the benefits of a near-monopoly on thriving Ethiopian trade. While ports exist in Sudan, Somaliland, and Eritrea, Djibouti’s developed facilities, political stability and investment-friendly atmosphere have proven more attractive than anywhere else in the region.

Now, however, a new player is coming to town: according to reports from Bloomberg, Eritrea is now mulling building a port on its coastline to export potash from its own mines as well as from Ethiopia. The port will be based at the Bay of Anfile, close to Eritrea’s potash mine at Colluli, which contains large quantities of potash that can be used as fertilizers for fruits, vegetables, and coffee trees. Most significantly, the development follows a historic rapprochement between Ethiopia and its former province of Eritrea in July, which has left Djibouti scrambling to protect its market share.

The third issue: the United Arab Emirates (UAE). Djibouti illegally seized a leased port container terminal from the UAE-based DP World company over a dispute dating back to at least 2012. Earlier this month, Dubai successfully sued the Djibouti government in a London-based international arbitration court over the seizure. Eyebrows were raised when Djibouti issued a statement dismissing the ruling as inconsequential, and the country is now trying to negotiate damages. But the scandal has already cast a shadow over Djibouti with potential foreign investors, as large shipping clients such as DP World publicly advocate for an additional 10 to 12 ports from Sudan to Somalia and continue to make a number of investments in East Africa, including in Somaliland.

The Emiratis also have close ties to Eritrea, where they established a naval base in 2015 that has been used to support the Saudi-led war against Houthi rebels in Yemen. And it was the UAE that helped broker a peace deal between Eritrea and Ethiopia, a further indicator that UAE businesses may favor Eritrean ports over those in Djibouti.

Is Chinese investment in the DIFTZ and other infrastructure projects enough to make up for all of this disruption? Perhaps not. Beijing had already started to cool on Ethiopia as an investment destination, and if the Ethiopian market finds multiple alternative ports in Eritrea or Somaliland, the promises of a thriving DIFTZ may end up being little more than hype.

Samantha is a freshly minted graduate in International Relations based in Cairo, currently working as a research assistant in a small think tank looking at development and inequality in Africa

Continue Reading
Comments

Africa

Violence in North and West Africa increasingly targeting civilian and border areas

MD Staff

Published

on

Violence in North and West Africa is increasingly targeting civilian and border regions as today’s conflicts involve non-state actors with diverging agendas, according to a new report by the OECD’s Sahel and West Africa Club (SWAC).

The report uses granular data to assess the intensity and geographical distribution of violence in the region since 1997. It finds that the last five years have been the most violent recorded in North and West Africa, with more than 60,000 people killed between January 2015 and the end of 2019. More than 40% of violent events and fatalities occur within 100 km of a land border, and 10% of deaths from political violence occur less than 10 km from a border. Civilians are increasingly specific targets of violence, rather than just being caught in cross fire.

The report uses a “Spatial Conflict Dynamics Indicator” to show which regions of North and West Africa experience the most conflict, how conflicts evolve geographically over time and how military interventions affect the intensity and spread of violence. It notes that attempts to stabilise the region are complicated due to the number of players involved and their shifting alliances.

“Paying close attention to the geography and dynamics of these deadly conflicts and the complex interactions between the large numbers of actors involved may help to find ways to resolve this worsening insecurity,” said OECD Secretary-General Angel Gurría, presenting the report at the Munich Security Conference.

The Sahara-Sahel region is suffering from exceptional levels of political instability involving a combination of rebellions, jihadist insurgencies, coups d’état, protest movements and illegal trafficking of drugs, arms and migrants. Conflicts tend to regionalise across borders as armed groups defeated by counter-insurgency efforts relocate to other countries. The geographic spread and opportunistic relocation of conflicts is exacerbated by a lack of controls on many African borders that facilitates the circulation of fighters, hostages and weapons.

The study calls for states in the region and the international community to promote regional initiatives to restore state legitimacy, increase investment in border regions and improve protection of civilians — creating secure regions where inclusive forms of policies are put in place and a strong dialogue between states, local actors and populations is reinforced.

Continue Reading

Africa

Russia’s interest in South Sudan

Kester Kenn Klomegah

Published

on

On January 27-29, Minister of Foreign Affairs and International Cooperation of the Republic of South Sudan, Awut Deng Acuil, made an official working visit to Moscow where she held diplomatic talks focused on strengthening economic cooperation with Russian Foreign Minister Sergey Lavrov.

She is a South Sudanese politician and the current Minister of Foreign Affairs and International Cooperation since August 2019. For the first time, Awut Deng Acuil was visiting Moscow – this made it more meaningful and significant to discuss ways of moving forward with relations and comprehensive development of cooperation with the Russian Federation. Russia and South Sudan already signed a Memorandum of Consultations between both Foreign Ministries last October 2019 in Sochi, during the first Russia-Africa Summit.

“There is potential for expanding trade and economic cooperation, including in such areas as energy, construction, development of automobile, railway and pipeline infrastructure, and agriculture. One of the promising areas of bilateral cooperation is the development of the fuel and energy complex in South Sudan. A number of projects with Russian participation are already being implemented,” according to the media report released before the official talks held January 28.

“We have discussed the prospects of bilateral cooperation, first of all, with an emphasis on the development of its economic cooperation. We informed our colleagues about the Russian companies working in the oil and gas, infrastructure, railway and transport sectors that are ready to discuss possible mutually beneficial projects with our South Sudanese partners,” Lavrov said at the media briefing after their closed diplomatic talks.

Back in 2016, Russia and South Sudan also signed the Intergovernmental Agreement on Military Technical Cooperation, which is still effective. Both have agreed to use this sphere of cooperation in order to strengthen security and military capability of South Sudan, only after the United Nations Security Council lifts finally its restrictions on weapons trade with that country.

South Sudan, a landlocked country located in the east-central Africa, is making efforts for further recognition and climb onto a global stage. Africa gaining its independence in July 2011, to become the 55th African state, it has suffered ethnic violence and endured civil war since 2013.

The United States supported the 2011 referendum on South Sudan’s independence. The New York Times reported that “South Sudan is in many ways an American creation, carved out of war-torn Sudan in a referendum largely orchestrated by the United States, its fragile institutions nurtured with billions of dollars in American aid.”

The U.S. government’s long-standing sanctions against Sudan were officially removed from applicability to newly independent South Sudan in December 2011, and senior South Sudanese officials participated in a high-level international engagement conference in Washington, D.C., to help connect foreign investors with the RSS and South Sudanese private sector representatives

South Sudan has a population of 12 million, and a predominantly rural, subsistence economy. It, however, exports timber to the international market. The region contains many natural resources, but as in many other developing countries, the economy is heavily dependent on agriculture.

It has the third-largest oil reserves in Sub-Saharan Africa. However, after South Sudan became an independent nation in July 2011, southern and northern negotiators were not immediately able to reach an agreement on how to split the revenue from these southern oilfields.

It is estimated that South Sudan has around four times the oil deposits of Sudan. The oil revenues, according to the Comprehensive Peace Agreement (CPA), were split equally for the duration of the agreement period. Since South Sudan relies on pipelines, refineries, and Port Sudan‘s facilities in Red Sea state in Sudan, the agreement stated that the government of Sudan in Khartoum would receive a 50% share of all oil revenues.

South Sudan is attracting many foreign players. But currently, China National Petroleum Corporation (CNPC) is a major investor in South Sudan’s oil sector. It is under pressure to diversify away from oil as oil reserves will likely halve by 2020 if no new finds are made, according to the International Monetary Fund (IMF).

Abraham Telar Kuc, a postgraduate researcher on Diplomacy and International Relations at the Institute of Peace, Development and Security Studies, University of Juba, and currently with South Sudan Broadcasting Corporation, suggests South Sudan officials take advantage of the strategic geo-political location, especially use its membership of different international and regional political cooperation and economic integration blocs, to improve the economy.

More recently, economic partnership, in general, is gaining momentum in direct foreign investments through bilateral and multilateral relations. India is investing limitedly in South Sudan oil sector through India’s Oil and Natural Gas Commission. In addition, Indian companies are investing in the ICT, pharmaceuticals and medical services, finance and banking, housing and construction sectors. India companies such as Reliance Industries, Tata Group, Bajaj Group, Bharti Airtel Communications and others are making forays into the economy, according to Abraham Telar Kuc.

Abraham told Modern Diplomacy: “Soviet Union offered enormous support for liberation and pro-independence movements including those in South Sudan. We are glad that Russians are waking up for investments and existing economic opportunities in Africa, returning to the African arena and moving into new investment opportunities there. As influential government officials and businesspeople have expressed interest, it’s necessary to make sure that they get access to South Sudan.”

Russia and Africa have a long history relationship based on mutual trust, and are lined-up on the principles of equality and mutual respect. In recent years, strategic communications have intensified and are developing in various directions. Moscow has repeatedly indicated that it supports the principle “African solutions to African problems” formulated by the African countries.

Continue Reading

Africa

The children’s Continent: Keeping up with Africa’s growth

MD Staff

Published

on

The world’s population is growing, but it is in Africa where this challenge is particularly acute. We know Africa as the place where human life began – a place with an ancient and noble history, but today it is also a place that is becoming home to more children than any other place on earth. Already, 77% of population is below age of 35.

For many decades the enormous populations of South America, Europe and Asia have grown quickly, but today they have slowed, and the majority of their populations are adults. In India the average age is 29, in China it is even older, at 37. But in Africa, the average age is 19 years old and rapidly getting younger. The continent is growing so quickly that by halfway through this century, it will be home to one billion children. By 2050, two in every five children in the world will be born here.

This is going to present a unique challenge. Graça Machel has warned: “Even though our youth have the potential to transform Africa, if neglected, they could exacerbate poverty and inequality while threatening peace, security and prosperity”. Therefore, we must be proactive in ensuring we meet the needs of this burgeoning population.

But this flourishing of exciting new generations presents acute challenges. Evolving in tandem with this exponential population growth is a rate of urbanisation in Sub-Saharan Africa that is unmatched in the rest of the world.

Africa’s urban population is expected to nearly triple by 2050, to 1.34 billion. Coupled with a high rate of urban primacy in African countries (whereby one city is multiple times bigger than the next nearest) and the high number of mega cities, enormous stress is going to be placed on the physical, political, economic and societal infrastructure in these places.

Young people across the continent are increasingly migrating towards the modern technology, connectivity, and entrepreneurial opportunity of city life. Poverty, lack of resources and financial independence are simultaneously pushing them away from their rural lives.

Urbanisation is being driven by rural-urban migration, but city planners and management are not always prepared. Growth rates are unplanned, unregulated and beyond their ability to control. The problems manifest quickly from this point. High levels of unemployment lead to high levels of informal employment, which in turn is improperly taxed, denying vital financial capital to the state. Physical infrastructure is unable to keep pace, leading to overcrowding and informal accommodation. Waste management is unable to keep up, bringing its own environmental dangers.

SDG 11 has the stated goal of making cities and human settlements inclusive, safe, resilient and sustainable. While progress has undoubtedly been made on this, there is a great need to act fast to guarantee the last part of this goal: sustainability. The environmental impact at local, national and international scale is at high risk, with rapidly-growing urban populations demanding instant solutions. We have seen innovative ideas spring from the continent already, such as Diamniadio in Senegal, Tatu City in Kenya, or Vision City in Rwanda – but more is needed.

It would be possible to talk at great length on the issues, and how one enables the next, creating a vortex of seemingly never-ending challenges. But we should view these challenges with resolve and see the opportunities that lie ahead.

Yes, Africa is facing some of the toughest challenges in the world right now. But it is also in Africa that we are seeing some of the most innovative, forward thinking ideas when it comes to tackling the issues.

It is in Africa where we can see the beginnings of the development of truly smart cities, with smarter infrastructure. The Fourth Industrial Revolution has given us unparalleled access to data analytics, providing us with real time solutions to real world problems, based on empirical data. We need to ensure we are making the most of this, driving smarter decision making.

The Islamic Development Bank (IsDB) believes that science, technology and innovation have been solving global challenges on how we build and maintain our cities since the very beginning of civilisation. Investing in science, technology and innovation is a key driver for growing urban populations creating sustainable cities and communities, thereby achieving SDG 11.

Cities occupy just 3% of the Earth’s land, but account for 60-80% of energy consumption and 75% of carbon emissions. Affordable housing, safe & sustainable transport, mass migration, climate change and pollution affect us all, but those in the developing world experience these issues much more keenly due to weaker infrastructure.

IsDB has actively launched a science, technology and innovation fund to accelerate progress in cities worldwide. Transform is a $500 million fund for innovation and technology that provides seed money for start-ups and SMEs to facilitate economic and social progress in their respective cities and communities.

We will continue to drive our new development model that maximises our operating assets of $16 billion and subscribed capital of $70 billion to continue providing solutions to international infrastructure challenges.

financing investment Africa children population

The financing gap between what is required to achieve the SDGs versus the current level of investment

The challenges ahead of us require diverse, innovative solutions for the new generations in Africa. Already we can see young entrepreneurs taking the lead in their countries, but we need to be there to support them: helping develop human capital, nurturing the growth of science, technology and innovation in the journey towards the achievement of SDG 11.

Our energy must be focused – the size of the challenge offers little room for error – but we can look forwards with optimism that the solutions to the problems are taking root. We need to nurture and encourage them to flourish.

IsDB

Continue Reading

Publications

Latest

Newsdesk2 hours ago

Justin Trudeau meets African leaders to advance conflict resolution and economic security

Canada’s Prime Minister Justin Trudeau convened a meeting for African heads of state, foreign ministers and representatives of the United...

Reports4 hours ago

“Westlessness”: Munich Security Report 2020

Is the world becoming less Western? Is the West itself becoming less Western, too? What does it mean for the...

Newsdesk6 hours ago

UNIDO to provide emergency assistance to China to help contain the outbreak of coronavirus

The United Nations Industrial Development Organization (UNIDO) will provide emergency response assistance to China to help fight the outbreak of...

Newsdesk8 hours ago

Somalia Eligible for Assistance Under the Enhanced HIPC Initiative

The Executive Boards of the International Monetary Fund (IMF) and World Bank met, on February 12 and 13, respectively, to...

South Asia10 hours ago

Kashmir burns as lockdown continues

The valley is on fire again, and it is engulfing the whole region. It is not just about Pakistan or...

Environment13 hours ago

Why Australia’s 2019-2020 bushfire season was not normal, in three graphs

Data from satellite sources assembled by the United Nations Environment Programme’s (UNEP) World Environment Situation Room confirms that the wildfires...

Eastern Europe16 hours ago

Russia’s Changing Economic Attitude towards Abkhazia & Tskhinvali Regions

Looking at the arc of separatist states on the Russian borders, there have recently been interesting developments which might signal...

Trending