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Djibouti
Free Zone: an alternative business hub for Eastern Africa
The Djibouti Free Zone (DFZ)
was established in 2004 with the aim of positioning Djibouti as a marketing
and logistics regional platform for the importation, warehousing, transformation
and re-exportation of goods to and from Eastern African countries. Managed
by the JAFZA International, DFZ aims to provide alternative services for
Eastern African countries that currently are using the Dubai Free Zone. |
“Our mission is to position DFZ as the most attractive and convenient logistics and procurement platform by offering a competitive business environment for investment and trade in the region,” Anand Cyparsade, general manager of DFZ, said. Currently, DFZ is serving companies coming from the Middle East (Bahrain, Qatar, United Arab Emirates), Europe, Ethiopia, USA and also local enterprises, according to the general manager. He added that activities in the DFZ range from trading, logistics, humanitarian aid, services, consultancy and processing, among others. According to experts, the establishment of DFZ will be of paramount importance in facilitating business transactions in Eastern Africa. They added that businesses will avoid unnecessary costs and waste of time that they are incurring while traveling too long distances to other free zones. Ethiopia, the major user of the Port of Djibouti, will be the main beneficiary of DFZ, according to the experts who are engaged in customs clearing services. Since its establishment, DFZ has carried out two development phases. In phase one, it has constructed 12 warehouses with office units and plots of land of 2,000 sq.m. to 15,000 sq.m. While in phase two, finalized in July 2007, it offers 34 Light Industrial Units (LIU) with huge office units and a hangar of 9,000 s.qm. designed to accommodate aid cargo. Anand said that while DFZ has registered an occupancy rate of 100% for the phase one project, over 50% of space was sold out even before the construction of phase two was completed. “With the positive response from international and local business community and aggressive marketing campaign, DFZ is expected to be fully operational at 100% by 2008,” he said. Experts hail free trade zones as a means of boosting business transactions and creating employment opportunities. By eliminating normal trade barriers such as tariffs and quotas and bureaucratic requirements, they attract new business and foreign investments. Free trade zones are often labor intensive manufacturing centers that involve the import of raw materials or components and the export of factory products. In 2007 alone, there were 45 million people working in about 3,500 free trade zones spanning 116 countries producing different products. The basic objectives of these zones are to enhance foreign exchange earnings, develop export-oriented industries and to generate employment opportunities. According to authorities at DFZ, businesses within the area are engaged in trading of food and beverage, construction material, automobiles and spare parts, cigarettes, textile and garments etc., whereas light industrial activities in the free zone include production of medical gasses, LPG bottling and manufacture of food products. Express cargo handlers credit support activities and logistics companies also provide their services. Most free trade zones, like in Djibouti, are located in developing countries. Bureaucracy is typically minimized by outsourcing it to the free trade zone operator and corporations setting up in the zone may be given tax breaks as an additional incentive. Usually, these zones are set up in underdeveloped parts of the host country, the rationale being that the zones will attract employers and thus reduce poverty and unemployment and stimulate the area’s economy. These zones are often used by multinational corporations to set up factories to produce goods such as clothing or shoes. “The potential importers from the region will find Djibouti to be a substitute for Dubai and the Middle East for the imports of goods. They will also benefit shorter delivery times and cheaper costs,” a customs clearing and forwarding agent told The Reporter. According to DFZ authorities, they plan to tap on trade that is going through the Port to Ethiopia which remains a major trade partner. DFZ also aims at extending this commercial tie with larger number of companies within the Horn of Africa and maximizing on the COMESA countries and those of the Arab sub-continent, including the agreements of “everything but arms” with the European Union. In an effort to realize its dream of becoming the region’s business hub, DFZ is planning to implement two projects in the future: the development of an Airport Free Zone which will provide an air-based logistics hub for Eastern Africa and another free trade zone that will lie on some 400 hectares. In DFZ, fiscal incentives range from the exemption of any direct or indirect tax resulting from the national legislation to guarantee of the landed property in the free zone. All these contributing factors are of significant importance especially to the two landlocked countries of Eastern Africa- Ethiopia and Uganda. In addition, in order to facilitate the integration and establishment of the foreign investors in the DFZ, the Djiboutian government has created a “one stop shop” facility that will allow all the foreign investors to deal with one and only organization for all their governmental administrative and legal requirements in the free trade zone. Experts agree that the free trade zone in Djibouti will soon become a regional business hub except for the current development endeavors that it is taking on. And this will allow Ethiopia to tap on its benefits more than any other country in the COMESA region where there are 400 million people. |