Djibouti is at the gateway to the world’s most important maritime route.
The shipping route from China and India to Europe runs via the Gulf of Aden, the Red Sea and through the Suez Canal to the Mediterranean.
Much of the oil transshipped around the world uses this route.
Any interruption in this flow of traffic would be devastating for the world economy, and especially damaging to the European economy – which is already under pressure as a result of the budget deficits facing many Eurozone nations.
For this reason Djibouti, which forms the narrow straight into the Red Sea between itself and Yemen, hosts several foreign bases established to protect the shipping lanes – a more difficult task with the advent of Southern Somalia-based piracy.
Threats to this route come from Yemen, the conflict in Southern Somalia, tense relations between Ethiopia and Eritrea, and an unstable Sudan.
Whilst Djibouti, in the midst of this volatile region, has in the past been regarded as a beacon of stability, this reputation has been rapidly fading away. The decline in the quality of governance has been accompanied by economic decline, ethnic tensions alleged to be fomented by the government, and impunity. The judicial system is no longer independent, taxes and regulations have become ‘confiscatory’ and unemployment has exceeded 70%. A population of 600,000 has been expanded by 200,000 refugees from Southern Somalia, Ethiopia and other nations. The refugees live in terrible conditions.
Services for the population are insufficient, and despite the efforts of charitable institutions, the poorest are neglected.
As a result, Djibouti is sitting on a powder keg.
The country is largely barren and food is imported and expensive. Access to food and water is politicised and has been used as a social weapon.
The President’s decision to change the constitution and stand in an unfair election in April 2010 angered the population and dashed hopes of reform.
Tensions with the foreign bases have arisen, and resentment has increased. What’s more the decline in governance and excessive centralisation has meant that the state no longer fully controls its own territory – creating an environment ripe for the gestation of militancy and militant groups.
There are alternatives. In Djibouti the typical dictatorship mantra of ‘there are no alternatives’, does not apply. This programme is testimony to that.
An accelerating downward spiral of decline
With a food blockade and mass confiscations and in the Northern Districts, unemployment at 70%, a fiscal crisis, investment disappearing, and the bulk of the population with no running water, electricity or health services, Djibouti’s long held reputation for stability is fast fading away. The use of increasing brutality to keep the regime secure has led inevitably to resistance – which in turn has led to more brutality, and so the spiral continues.
The regime’s spurious association of commercial success with potential political resistance has led to confiscations of businesses, plundering of foreign investors’ assets, and a near-impossible climate for new projects. Taxes are among the most complex and punitive in the world, and so arbitrarily applied that even small firms face multi-million dollar random tax threats. Recently, new potential investors have walked away after receiving demands for large ‘free’ equity stakes. The result is that opportunities for the mass of the population have disappeared. This is a dangerous development.
Water is in short supply and food production is negligible. Almost all food and other goods are imported. A currency pegged to the falling dollar, a monopolistic and corrupt transport sector, and increased insurance costs, have caused prices to rise, while net average income has fallen. Half the urban population has no reticulated water supply, and those that do receive supply for only a few hours a day. Electricity is the second most expensive in Africa, but only a minority of households receive (often interrupted) supply. Businesses that rely on electricity cannot assume they will have supply during the day, and high cost private generation therefore substitutes, further damaging the economy.
The fiscal position is close to catastrophic, with international institutions describing it as ‘unsustainable’, and lamenting the additional costs that accrue by failing to meet repayment deadlines for no reason other than adminsistrative inefficiency. This is an unnecessary waste of scarce finance, given that up to four out of ten city inhabitants live in informal shacks or on the street, and that infant mortality is unacceptably high. The tragedy of this sitation is deepened by the extraordinary opportunities offered by Djibouti, with its strategic location at the entrance to the Red Sea and as an export outlet for the heavily populated landlocked countries to the West.
As ethnic tensions deepen and the government begins to lose its grip on its own territory, commanders of foreign military bases have started to worry. Security in Djibouti City has declined, and the fear of domestic or foreign militancy is ever-present. In addition, despite heavy pressure from international lenders to Djibouti, chaotic bank licensing and an absence of proper regulation has raised suspicions about the sources of some of the funds arriving in Djibouti. Measures to prevent money laundering or handling terrorist and pirate finances remain curiously unimplemented.
Until recently, the population held out some hope that a change in regime was imminent, since the President was coming to the end of his two-term limit. Whilst most expected the April 2011 elections to be rigged, there was some hope in a potential new face. However, since the increasingly authoritarian President changed the constitution to allow him to stand again and again, hope has withered away.
The fear of a meltdown in social order is now coupled with concern that the President will only leave office upon his demise – and given his poor health, the prospect of a political vacuum looms over the nation and the security of its foreign bases. In a few short years Djibouti has gone from a beacon of stability in a turbulent region to a kleptocracy absent of public legitimacy, and a security threat.
This manifesto shows that there is another vision. A concrete one. A vision of a modernised, compassionate and unified state, where all citizens are treated with respect. This is no pipe dream. The economic opportunities lie undeveloped, and the needs of the poor lie waiting. A peaceful transition, and improved security for foreign bases, form part of this vision. The Red Sea Committee for Peace & Stability hereby sets out its well-researched and comprehensive ‘shovel-ready’ reforms. Please support us.
Our reform priorities
Economic growth requires stability. Stability requires economic growth. In Djibouti both have been allowed to slide backwards. Reforms to achieve both must go hand in hand.
Instability in Djibouti comes from tensions with Eritrea, declining relations with Ethiopia, especially over commercial issues, internal problems related to tribal ‘divide-and-rule’ policies, and a loss of control over its territory arising from a loss of legitimacy. There are more subtle factors too. Arbitrary, punitive tax regimes and ‘permissions’ have encouraged the development of a ‘sub-legal’ economic sector. This sector has three parts – informal businesses trying to avoid a rapacious state, larger ‘organised crime style’ sub-legal businesses, and large scale undertakings that bypass the rule of law due to political connections. Sub-legal organisations either hiding from the state or enjoying impunity create the conditions – and the scope – for domestic and international militancy.
Steps to improve stability must by definition include:
- Improved relations with neighbouring countries – political and economic
- Cooperation with commanders to improve foreign base security and internal/border security
- The equal treatment of all citizens (and refugees) and an end to oppressive divide-and-rule
- Re-establishing an independent judiciary, a rule-of-law based police, and easier access to justice
- A reversal of the extreme centralisation of power, and more autonomy for Districts
- The removal of strong incentives to keep businesses ‘sub-legal’
- Ensuring that Djibouti is no longer a destination for pirate, militant, or laundered money
- Reforms to ensure that the poor population receives services – and benefits from growth
Steps to improve the economy must include:
- A return to investment in core sectors – ports, free zones, transportation, shipping security
- Putting the government’s finances and debts on a sustainable footing
- Removing obstacles to business – regulatory and tax reform, rule of law, and accountability
- Improving schools & technical skills and matching them to the demands from core sectors
- Demonopolisation and investment in electricity, water, rail, telecoms, airport and roads
- Proper bank regulation to ensure competition and retail commercial and personal banking
- Focusing finances more effectively on the poor – housing, health, education, transport
- Implementing new ideas and projects to bring the very poor into the mainstream economy
Such reforms are not only overdue, the quality of governance and the performance of the economy have both declined dramatically as well.
However, the size of the required reform programme is daunting. The current structure of decision-making is not suitable for the management of such a comprehensive set of reforms. Special measures are needed to remove obstacles to improving government effectiveness, and to modernise the ‘machinery of government’. Some changes in the way the Presidency works will be needed. Modern methods of focusing the Presidency on key head-of-state functions, and a greater reliance on the Prime Minister and his ministers in getting reforms implemented, will both be needed. The Djibouti government depends for its fiscal health on concessional finance from the IMF and World Bank, as well as EU and bilateral grant aid and greatly improved relations can be anticipated if these reforms are enacted.
The reforms above are thus intended, in part, to ensure that Djibouti is ahead of loan & grant conditions, not left dragging its feet as a reluctant, resistant reformer. The Suez – Red Sea – Gulf of Aden maritime route must be served and protected. That is to an extent the original raison d’etre of Djibouti.