Djibouti: Investing

FDI in Figures

After the Djibouti government created a climate favorable to business, the value of its FDI multiplied by six between 2003 and 2008, but they declined with the global economic crisis. However, the inflows of FDI are reviving progressively.

Djibouti's main strong points are: its strategic geographical location, being located at the maritime crossroads between the Far East, the Arab-Persian Gulf, Africa and Europe. In addition, it has a stable currency which is freely convertible and linked to the American dollar by a fixed parity and the government offers significant tax reductions to foreign investors.

As an example, in October 2011, an agreement between Ethiopia and a Chinese company was signed with the purpose of building a last section of a railroad linking the Ethiopian capital to Djibouti which will assure more investments into the country.

Among the factors that discourage foreign investment, some of them are: bureaucratic burdens, corruption, high labor costs, the slowness of the judicial system and the relatively high cost of living.

Most of the FDI is received by the services sector (particularly ports and telecommunications). The main investing countries are Ethiopia, Yemen, the United States and France.

Country Comparison For the Protection of Investors

	Djibouti	Middle East & North Africa	United States	Germany
Index of Transaction Transparency*	5.0	6.3	7.0	5.0
Index of Manager’s Responsibility**	2.0	4.6	9.0	5.0
Index of Investor Protection****	2.3	4.8	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	234	100	27
FDI Stock (million USD)	751.7	851.7	878.5
Number of Greenfield Investments***	3.0	2.0	-
FDI Inwards (in % of GFCF****)	51.1	27.6	-
FDI Stock (in % of GDP)	76.6	81.3	-

Source: UNCTAD - Last Available Data

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

Tax Rates

Value Added Tax (VAT).: The government introduced a Value Added Tax (VAT) system in January 2009 with a flat rate tax of 7 percent imposed on companies with an annual turnover exceeding 80 million Djiboutian Francs (approximately USD 450,000). Whenever VAT is levied at 7 percent, other existing taxes on the same transaction are reduced by 7 percent.
Company Tax: 25%. Non-resident taxation is 10%.
Withholding Taxes: Withholding taxes on royalties are taxed at the corporate tax rate of 25% in Djibouti. The tax rate is 10% for non-residents.
Withholding taxes on management fees are taxed at the corporate tax rate of 25% in Djibouti. The tax rate is 10% for non-residents.
Consult the National Promotion Investment Agency of Djibouti Website (in English)
Bilateral Agreement: Djibouti and Lebanon are not bound by a Double Taxation treaty.
Social Security Contributions Paid By Employers: 15.7%

Country Comparison For Corporate Taxation

	Djibouti	Middle East & North Africa	United States	Germany
Number of Payments of Taxes per Year	35.0	21.6	11.0	16.0
Time Taken For Administrative Formalities (Hours)	90.0	194.1	187.0	215.0
Total Share of Taxes (% of Profit)	38.7	32.8	46.8	48.2

Source: Doing Business - Last Available Data.

Investment Opportunities

Tenders, Projects and Public Procurement: Tradeinvest Africa, Tenders in Africa
African Tenders
DgMarket, Tenders Worldwide
Setting Up a Company: Consult Doing Business Website, to know about procedures to start a Business in Djibouti.
Useful Resources: National Investment Promotion Agency
Economic Developments and Prospects in Djibouti - African Economic Outlook

Business Setup Procedures

Setting Up a Company	Djibouti	Middle East & North Africa
Procedures (number)	11.00	8.10
Time (days)	37.00	20.00

Source: Doing Business.

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