This is an ambitious programme. However the processes of ensuring investment and growth in Djibouti, and of addressing key poverty and quality of life problems for the poor and the general population of Djibouti, run hand in hand.
The economic reform programme therefore not only addresses the issue of chaotic government finances and serious macroeconomic risk, but also the factors that have inhibited investment and deterred new projects.
Perhaps the major cause of recent economic stagnation has been the sense of impunity in the Djibouti government, with a widespread belief that confiscatory taxes and arbitrary taxes, together with demands to give up equity without corresponding investment, are ever present. Any investor undertaking their due diligence on Djibouti will quickly observe that recent potential investors have walked away, and existing deals have been abandoned by well known international firms. Word gets around. Such problems affect the banking system and general fears of laundering and pirate or terrorist finance add to a sense of a decent into a failing state dominated by instability and tribal divide-and-rule.
One other area which has seriously hindered growth is the declining condition of infrastructure and the lack of investment to meet demand. Much attention is given to this in the programme.
Several ideas are put forward for rural development, including water sourcing, fishing and some agricultural projects – as part of a general programme of poverty alleviation and decentralisation in government.
However there are some obstacles to the implementation of such a programme that require attention.
First is the quality of governance at the centre of government. An overcentralised ‘dictatorship-style’ system needs to be unwound, and this requires some sophisticated administrative and quasi-constitutional reforms. For efficiency in government, the role of the President needs to be ‘defined and confined’ to the typical head of state functions of foreign policy, the military and borders (including the foreign bases) plus economic developments which are contingent on foreign relations. The rest can be best under the management of the Prime Minister with an improved system of managing the Ministers – reporting to the Prime Minister rather than the President – and using a system of Cabinet Committees to oversee interdependent reforms.
Second, the structures and systems of the civil service have atrophied to an alarming extent. New meritocratic recruitment processes are needed, the distinction between civil servants and politicians need defining, and departments need rightsizing. To assist with this, programmes will need to be put in place to help civil servants who lose their jobs – including support for new businesses and help in finding jobs elsewhere in a newly expanding economy.
A major facilitator of rapid reforms will be a much improved judicial and law enforcement system. At present, foreign investors know that enforcing contracts is very difficult, perhaps impossible if the other party is governmental. The judiciary is not independent, although that is no fault of the senior people in the legal system. Reforms in this area are vital for all other reforms being implemented.
There are other economic reforms planned but not elaborated in detail here. One is employment reforms. Employment taxes will be simplified but reforms need to go beyond that to include the introduction of greater flexibility, together with defined rights – which should not differ between the state and private sectors.
Bringing peace and stability to Djibouti
Planned improvements in relations with states across the region will be complemented with improved inter-working with commanders of military bases and their home governments.
Improved security will come from stepping away from the internal political and economic crises, and a well-publicised policy of treating all citizens equally – and end to tribal and rural divide and rule. Special measures to help the poor and refugees will add to security and take people away from all forms of militancy – including measures to provide better circumstances for the tens of thousands of people living in informal dwelling communities and ‘shanty’ towns.
Direct security will also need to be improved for foreign bases, including improved consultation over new developments – and reforms – that have a security dimension.
As governance quality has declined and economic conditions have worsened (70%+ unemployment is politically unsustainable anywhere in the world), something of a bunker mentality has swept the foreign bases. This can only lead to trouble – even overreaction by base security personnel as well as the local military – which could spiral out of control quickly. Tensions need to be reduced, and the measures set out in this programme go a long way to achieving that.
Alongside this, improvements are needed in the training of the entire Djibouti military – not just specialised units. Further international cooperation will be sought on this, and such steps will help also to improve relations between foreign bases and the Djibouti government and improve security.
To underpin these developments, this programme also sets out some very specific banking reforms, to arrest the decline of bank supervision and stability. The international community and commanders of foreign bases require better confidence that Djibouti is not being used to process pirate proceeds, terrorist funding or engage in money laundering more generally. That level of confidence has dramatically declined in the past two years.