DJIBOUTI: DECEMBER-JANUARY ECON-ESTH ROUNDUP

UNCLAS SECTION 01 OF 02 DJIBOUTI 000186 SENSITIVE SIPDIS STATE FOR AF/E E/EEB AND AF/EPS NAIROBI FOR FCS ADDIS ABABA FOR REGIONAL ENVIRONMENT OFFICER E.O. 12958: N/A TAGS: ECON EFIN EWWT ENRG KTDB SENV BEXP DJ SUBJECT: DJIBOUTI: DECEMBER-JANUARY ECON-ESTH ROUNDUP REF: 10 DJIBOUTI 113; 09 DJIBOUTI 439; 08 DJIBOUTI 553 09 DJIBOUTI 655 ¶1. (U) This message contains business-sensitive information. Please handle accordingly. ¶2. (SBU) In this issue: --Djibouti associates with Copenhagen Accord --Strong banking sector growth benefits both newcomers and the long-established --Limited progress on Djibouti-Iceland geothermal deal; no U.S. involvement for now --Camp Lemonnier continues successful outreach to Djiboutian business community --Positive economic trends show inflation down, port and employment statistics up -------------- DJIBOUTI ASSOCIATES WITH COPENHAGEN ACCORD -------------- ¶3. (U) As a low-lying coastal state with already notoriously high temperatures, Djibouti is a strong supporter of climate change mitigation. In a January 26 meeting with EconOff, the Ministry of Environment and Housing's Director of the Environment expressed the GODJ's strong support for the Copenhagen Accord, calling it a good start, if not a perfect solution (ref A). Djibouti formally associated with the Accord on February 2. In his note of association, Minister of Environment and Housing Elmi Obsieh Wais hailed the Accord's "major advances," including the commitment to hold temperature increases to under 2 degrees Celsius, the creation of a framework for mitigation, the principle of major emitting countries submitting emission reduction goals and actions, and the marshalling of significant resources to combat climate change. -------------- STRONG BANKING SECTOR GROWTH -------------- ¶4. (U) All of Djibouti's seven commercial banks enjoyed strong performance in 2009. The five new banks established in Djibouti between 2006 and 2009 (refs B and C) have captured approximately 10 percent of the market, according the Central Bank of Djibouti. The Central Bank reported that loans to the private sector increased by 23 percent in 2007 and by 27 percent in 2008--largely as a result of a boom in household consumption, continued growth in the construction sector, and an increase in public investment. Deposits to the five new banks grew by more than 25 percent since January 2009, while loans grew spectacularly at more than 220 percent during the same period. Only an estimated 8 percent of Djiboutians hold formal banking accounts, and the GODJ has encouraged expansion of banking services--notably by guaranteeing access to a banking account for citizens earning above a set monthly wage, and by paying government salaries via electronic deposit. -------------- LIMITED PROGRESS ON DJIBOUTI-ICELAND GEOTHERMAL DEAL -------------- ¶5. (SBU) Little new progress has been reported on the Djibouti-Iceland geothermal deal signed in 2008 (ref D). A long-awaited feasibility study for the planned 50-100 megawatt project at Djibouti's Lac Assal appears to be delayed due to uncertainty over financing. Iceland and Djibouti have been soliciting additional finance partners; representatives of U.S. firm Contour Global travelled to Djibouti in January to discuss a possible partnership, but decided after talks with the GODJ to withdraw from the project. ¶6. (U) As momentum on renewable projects appeared to stall, the parastatal Electricity of Djibouti (EDD) company signed agreements in late January with the Arab Fund for Economic and Social Development (AFESD) to finance construction of a new traditional thermal generation electricity plant. AFESD will finance 25 percent of the project's cost, up to a ceiling of USD 130 million. The new plant, to be constructed in an outlying district of Djibouti City, will replace an ageing facility located on prime property in a central DJIBOUTI 00000186 002 OF 002 commercial and residential district. Planned capacity will be 75 megawatts, expandable to up to 300 megawatts. Current capacity at the existing facility is closer to 47 megawatts, with short-term surge capacity of up to 60-70 megawatts. -------------- CAMP LEMONNIER: SUCCESSFUL OUTREACH TO DJIBOUTIAN BUSINESS -------------- ¶7. (U) Camp Lemonnier (the only U.S. military base in Africa) and the Djibouti Chamber of Commerce co-hosted a "Vendor Day" December 22. Over 100 Djiboutian businesses attended the event, which included presentations from Camp Lemonnier and USG contractor procurement personnel on business opportunities with Camp Lemonnier. State-run media covered the morning's presentation on television and radio and in the daily newspaper, and President of the Chamber of Commerce Said Omar Moussa praised the Vendor Day during a subsequent February 3 visit of GODJ officials to Camp Lemonnier. -------------- POSITIVE ECONOMIC TRENDS -------------- ¶8. (U) Recently released economic statistics from the Ministry of Finance point to positive gains in 2009, including port growth and lower inflation. Inflation was 2.2 percent in 2009, vice 9.2 percent in 2008. December 2009's 1.7 inflation figure stands in marked contrast to December 2008's 12 percent level. At the port, 2009 third quarter statistics revealed a 139 percent year-over-year third quarter increase in dry imports, mostly linked to growing Ethiopian demand. Transshipment, by contrast, was down 83 percent year over year in the third quarter. In welcome news, the National Agency for Employment, Training, and Professional Placement (ANEFIP) registered an unusually successful third quarter, placing over 52 percent of job seekers enrolled in its database. This represents a marked improvement over the second quarter of 2009, during which a mere 10 percent of registered job seekers found employment through ANEFIP. Djibouti's unemployment rate is estimated at 60 percent, and youth unemployment remains a particular challenge. SWAN