Djibouti Opens Chinese-Backed Free Trade ZoneMohamed Siad Doualeh / Twitter
By MarEx 2018-07-12 16:58:16
https://www.maritime-executive.com/article/djibouti-opens-chinese-backed-free-trade-zone#gs.qht0YzkDjibouti has opened the first phase of an ambitious project to build an 18-square-mile, $3.5 billion free trade zone, the largest development of its kind in Africa. On July 5, its government celebrated the launch of an initial $370 million complex of commercial and industrial facilities, which President Ismail Omar Guelleh described as a "zone of hope" for Djiboutian job-seekers. The free zone offers foreign investors and businesses the opportunity to set up operations without paying property tax, income tax, dividend tax or VAT, according to the Djibouti Ports & Free Zones Authority.
However, the initiative has also raised concerns about Djibouti's legal liability and debt burden: global port operator DP World says that the project violates its exclusive (and recently terminated) contract to develop Djibouti's port, and financial analysts say that the construction costs will make the nation overly dependent upon Chinese financing.
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According to an analysis from the Center for Global Development, Djibouti has already accumulated government debt equal to about 85 percent of its GDP, almost all of it lent by Chinese entities. The debt could give China leverage to demand additional concessions, like rights for port operations or an increased forward-deployed military presence. Djibouti has already signed a lease with China for a naval base near the port of Doraleh, just a few miles away from the American base at Camp Lemmonier.
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