DJIBOUTI'S INPUT FOR 2008 PRESIDENT'S REPORT ON AGOA

UNCLAS SECTION 01 OF 02 DJIBOUTI 000239 SIPDIS SIPDIS STATE FOR AF, AF/E, AND AF/EPS E.O. 12958: N/A TAGS: ETRD EINV ECON PGOV DJ SUBJECT: DJIBOUTI'S INPUT FOR 2008 PRESIDENT'S REPORT ON AGOA REF: STATE 20082 ¶1. SUMMARY: Djibouti's market-based, open economy continues to move in the right direction, with an estimated 5 percent growth rate for ¶2007. Djibouti offers substantial incentives to private sector investors, and has benefited from increasing foreign direct investment. The government of Djibouti dedicated considerable attention and resources to fighting poverty in 2007, launching a new social development agency and significantly boosting spending on education and health. Amidst a boycott by three opposition parties, a five-party coalition supporting the president won all sixty-five seats in Djibouti's February 2008 legislative elections. While the government has reformed its labor laws to accelerate private investment, labor unions continue to allege government interference in union activities. END SUMMARY. -------------- Market Economy/Economic Reform/ Elimination of Trade Barriers -------------- ¶2. Djibouti has a market-based, liberal economic regime with minimum interference from the government. It offers attractive incentives to foreign investors and does not impose barriers to U.S. trade. The Djibouti Free Zone, managed by Dubai Ports World (DP World),also offers incentives, including tax breaks, simplified administration, and 100 percent foreign ownership. Djibouti's GDP relies heavily on services, which account for more than 80 percent of its GDP. Economic growth was estimated at 5 percent for 2007, spurred by an increase in foreign direct investment and a hike in port activities and construction. ¶3. The Doraleh Oil Terminal, funded by DP World and the Emirates National Oil Company (ENOC),was inaugurated in February 2006. Construction on the second phase of the project, a container terminal funded by DP World and the Government of Djibouti, began in November 2006 and is expected to be completed by the end of 2008. A large commercial free zone will be the last phase of the Doraleh Port project. Three new banks opened in Djibouti within the two last years, and four more banks are planning to open in 2008. A revamped Commercial Code, geared towards trade facilitation and foreign direct investment, is currently being finalized. -------------- -- Political Pluralism/Rule of Law/Anti Corruption -------------- -- ¶4. Following a thirteen-month, nation-wide voter registration campaign, Djibouti held legislative elections in February 2008. Voters returned the "Union for a Presidential Majority," a five-party coalition, to all sixty-five seats in the National Assembly. Three opposition parties boycotted the elections. International election observers from the African Union and the Arab League characterized the elections as free, fair, and transparent. ¶5. While there were some improvements in rule of law, complaints about lack of transparency in the judicial system remained. The Government of Djibouti ratified the United Nations Convention on Corruption in February 2005 and is acting to reduce corruption and promote transparency. The Chamber of Accounts and Fiscal Discipline, a public expenditures audit board established to fight corruption and promote transparency, has released two annual reports on government expenditures indicating qualitative improvements in some government departments. Dubai Customs International has managed Djibouti Customs since 2005, greatly improving efficiency and transparency. In 2007, Djibouti recorded higher customs revenues. -------------- Poverty Reduction -------------- ¶6. Poverty exceeds 40 percent; unemployment is estimated at 60 percent among those under age 30. The government's anti-poverty plan is laid out in its Poverty Reduction Strategy Papers submitted to the World Bank and IMF. The government has substantially increased spending on education and health. In January 2007, President Guelleh initiated a national social development program aimed at accelerating job creation and reducing economic inequalities. The Djiboutian Agency for Social Development (ADDS), created in December 2007 and funded by the government and international donors, will manage this new program. -------------- Labor/Child Labor -------------- ¶7. The law and the constitution provide for the right to join unions; however, in the past the government has chilled independent union activity. Government approval is required for public DJIBOUTI 00000239 002 OF 002 demonstrations, and this has restricted freedom of assembly and interfered with labor activities. In December 2007, the government created an autonomous National Agency of Employment, Training and Professional Integration. Djibouti has ratified all eight core ILO Conventions. The law prohibits forced or compulsory labor, including by children, and there were no reports that such practices occurred. The law prohibits work for children under 16, and there are laws against the worst forms of child labor. Isolated instances of child labor exist in Djibouti, especially in the informal sector and in family enterprises. SYMINGTON