In an ongoing series exploring the effects of China’s Belt and Road Initiative on the cities involved, our next stop is the East African city-state of Djibouti: a strategic choke point at the entrance to the Red Sea whose future remains uncertain… even with the support of China.
China’s Belt and Road Initiative has been described as a modern-day silk road. Encompassing a series of massive infrastructural and investment projects across parts of Europe, Africa and Asia, it follows several routes from mainland and coastal China, across the sea and over land, through the Central Asian republics and several southeast Asian port cities and reaching as far as Djibouti and Mombasa in East Africa, Duisburg in Germany and Venice in Italy. As part of an ongoing series exploring the effects this huge project is having on the cities involved, our first stop was the Chinese city of Xi’an, next up Djibouti City.
The city state of Djibouti is one of the principal East African beneficiaries of the Belt and Road Initiative. Located on the Bab el-Mandeb strait – the strategically vital entrance to the Red Sea, where ships travelling from East Asia can quickly proceed through the Suez Canal, over the Mediterranean and onto the Atlantic Ocean – it also has the advantage of providing the main channel through which neighbouring (landlocked) Ethiopia trades with the world.
Improving the access to Djibouti’s much larger neighbour
As such, China has already funded a major railway link connecting Djibouti City to the Ethiopian capital of Addis Ababa, which opened last year and has cut journey times down from days to hours. Financed and built by China, using Chinese technology and operated according to Chinese standards, this railway is specifically geared towards improving the super power’s access to Djibouti’s much larger neighbour, whose rapidly growing economy offers, among other things: cheap labour, tariff-free trade with the US market (through the African Growth and Opportunity Act) and an important source of soybeans.
Economic “choke point”
China’s current and future plans also involve funding construction of the Djibouti International Free Trade Zone (DIFTZ). Free trade zones are special economic areas, usually based around major ports, which allow for goods to be landed, stored, handled and manufactured under specific customs regulations and generally without customs duty. Representing an essential feature of a global economy that relies heavily on the frictionless movement of goods, free trade zones are absolutely vital in the kind of economic “choke point” that the Bab el-Mandeb Strait represents.
Djibouti as the New Dubai?
The DIFTZ will become Africa’s largest free trade zone when it’s completed, spanning 4,800 hectares and offering dedicated logistics, retail, business support and processing facilities and reportedly bringing an estimated 350,000 new jobs over the next ten years. It will also host the Djibouti Business District, set to be completed in 2021, which a slick rendering shows jutting out towards the sea, with cruise ships docked on the waterfront and buildings grouped around a series of concentric treelined boulevards. It’s all somewhat reminiscent of nearby cities of the Arabian peninsula, indeed, some have gone as far as to call Djibouti the New Dubai.
Unique strategic position
As with every city affected by China’s New Silk Road, things appear to be changing pretty fast. But for Djibouti, this is just the most recent episode in a long history of development brought about by its unique strategic position. While buildings from its long era as a French colony still fill the city, more recently, it has had the dubious honour of being the country with the most foreign military bases (US, China, France, Saudi Arabia and Japan all have bases stationed in the country). Meanwhile, its economic development in the past few decades has been driven by the decades long war between Ethiopia and Eritrea, during which it offered Ethiopia a vital link to international markets.
Eritrea is soon to open two new free trade zones of its own
But here’s the kicker, this war was finally officially concluded last year. Now that its whole stretch of coast is fully accessible to the Ethiopian economy, Eritrea is soon to open two new free trade zones of its own, in the Red Sea ports of Massawa and Assab, a move which could cost Djibouti a 75% loss in Ethiopian trade and port tax revenue according to one report.
Meanwhile, to add insult to injury, according to a recent article in the South China Morning Post, the aforementioned Addis Ababa-Djibouti railway has already had to restructure its debt because of underuse caused by power shortages, leading some Chinese reports to question whether the Belt and Road Initiative has fully accounted for the risk involved in these ambitious infrastructural projects in developing countries.
The volatile and capricious nature of the global market
This says a lot about the exceptionally volatile and capricious nature of the global market in which all this urban development is supposed to be happening. Just as Djibouti could be the New Dubai, so too could it end up lumbered with a couple of massive white elephants in the form of an unused railway and an empty business district. Either way, ordinary East African cities are likely to lose out as their national governments are forced to compete in a race to the bottom to attract global trade.