Djibouti: A Tiny Haven with Strategic Importance in a Troubled Neighbourhood

1 December 2016 Stephanie Goche, Research Assistant, Northern Australia and Land Care Download PDF

Key Points

  • Djibouti is characterised by poverty, high unemployment rates and low life expectancy; nevertheless, despite its small physical and economic size, it holds great significance to global trade and military security.
  • Djibouti’s political stability and strategic location have attracted foreign military bases from significantly powerful nations. These currently include the US, several EU countries and Japan, with governments competing to maintain and promote national interests in the region.
  • China announced in 2016 that it will install several thousand military personnel in Djibouti, the first permanent overseas deployment by the Chinese armed forces.
  • Despite predictions that Djibouti can be transformed into the Dubai of Africa, if there is a lack of internal government reform much of its population will continue to live in poverty.


Djibouti is a small nation on the northeast coast of the Horn of Africa. Situated at the intersection of the Red Sea and the Gulf of Aden, it provides a deep-water port on a globally significant trade route. Its economy, one of the smallest in the world, is largely based on providing services as a regional and international shipping port and refuelling centre and a host for military bases. Its small physical size and economy, however, bely the strategic significance of Djibouti, geographically positioned, close to the heart of world trade. Its relative political stability has attracted overseas military bases from the United States, several European countries and Japan. From Camp Lemonnier, the 4 500 strong US military contingent coordinates counter-terrorist operations in Somalia, Yemen and beyond. The recent news that China will establish its first permanent overseas military base in Djibouti has sparked global attention, highlighting the unique strategic nature of this small yet enormously important state.



The Suez Canal, Red Sea and Gulf of Aden shipping route, connecting the Mediterranean Sea and the Indian Ocean, is one of the most important waterways in the world. Annually, 30 per cent of all global shipping passes through this narrow passage. Bordering the waterway are the nation states of Egypt, Saudi Arabia, Sudan, Eritrea, Yemen, Somalia and, at times overlooked, Djibouti. The former French Territory of Djibouti is a small nation located in the Western shore of the Gulf of Aden and the entrance to the Red Sea (the Bab el Mandeb Strait). It is a poor, predominantly urban country, characterized by high rates of illiteracy, unemployment, and childhood malnutrition. More than 75 per cent of the population live in cities and towns (predominantly in the capital, Djibouti). The rural population subsists primarily on nomadic herding. The harsh climate can only support limited agricultural production and it relies on imports to feed its population. It has few natural resources.djibouti-mapThe relative economic insignificance of Djibouti, notwithstanding, its political stability and its strategic location command significant importance to international trade. Recently, it has also become an international security asset because of the general volatility of the region. From 2003 it has been gaining attention from some of the world’s most powerful states. It hosts military personnel from France, the United States, the EU and Japan. It is rumoured that Saudi Arabia, India and Russia are also interested in establishing a military presence there. Earlier this year, China announced the establishment of its first permanent overseas military installation in Djibouti.

Country Profile

Djibouti is a small nation-state approximately one third in size of Tasmania. It has a population of slightly less than one million people with three quarters of its inhabitants living in the capital, while the remainder are mostly nomadic herders. 94 per cent of the population is Muslim with the remainder being predominantly Christian. Djibouti has a secular, presidential government. The Family Code is mainly derived from Islamic or Sharia law and regulates personal status matters such as marriage, divorce, child custody and inheritance. It does not, however, apply to criminal law.

Djibouti’s climate is categorised as tropical desert on the coast and arid or semi-arid in the interior. Temperatures are high and rainfall is limited. Climate conditions can only support limited agricultural production. More than 80 per cent of its food requirements are imported from neighbouring countries or from Europe. The rural population relies heavily on livestock for food and to generate income. In the last five years, Djibouti has experienced serious droughts which have contributed further to the general impoverishment of some of the population.djibouti-003Poverty among the general population of Djibouti has been described as rampant. In the last decade, however, it has experienced significant economic growth and improvement. Djibouti’s economy is based on service activities connected with the country’s strategic location as a deep-water port on the Red Sea.

Djibouti provides services as both a transit port for the region and as an international trans-shipment and refuelling centre. Imports, exports, and re-exports represent 70 per cent of port activity at its container terminal. Re-exports consist primarily of coffee from landlocked neighbour Ethiopia. Djibouti has few natural resources and little industry and is, therefore, heavily dependent on foreign assistance to help support its balance of payments and to finance development projects. An official unemployment rate of nearly 50 per cent – with youth unemployment near 80 per cent – continues to be a major problem. Inflation declined to 3 per cent in 2014 due to low international food prices and a decline in electricity tariffs.

Djibouti’s reliance on diesel-generated electricity and imported food and water leave average consumers vulnerable to global price fluctuations. The government has emphasized infrastructure development for transportation and energy and, with the help of foreign partners, Djibouti has begun to increase and modernise its port capacity.

Strategic Importance

Djibouti’s location is strategically important to both global trade and regional security. The country is situated next to Bab-el-Mandeb, the strait that links the Indian Ocean to the Mediterranean Sea via the Red Sea, the Suez Canal and the Gulf of Aden. The port connects to the juncture of sea and land routes between the Far East, the Arab-Persian Gulf, Africa, Europe, and the East Coast of the United States, holding vital importance to the world economy. Statistics indicate that an average of 20 000 ships, or 20 per cent of global exports, pass through the port on route to their final destinations.


Djibouti’s location has also become central to significant global security issues. Positioned between Somalia, and Yemen, states harbouring active and hostile international terrorist organisations, Djibouti is an ideal basing location for counter-terrorism operations. Its proximity to these countries provides foreign troops with the ability to take immediate action against threats to global security. Foreign states such as the United States, Japan, France and recently China have capitalised on the advantages of conducting military operations from Djibouti. The United States currently has a permanent base in the state dedicated to fighting the war on terror, particularly the militant Islamist groups Al Shabaab (Somalia) and al-Qaeda (Yemen). In the near future, China will also build a permanent military base as the only other economic superpower nation with a permanent military establishment in Africa.

Given recent economic superpower competition between China and the United States, there is some anxiety as to whether allowing both states to establish permanent military bases is wise. The United States Ambassador to Djibouti has stated that a Chinese base in the country will be a challenge for all involved. Interestingly, to deter speculation about any hidden agenda, China has avoided describing the base as military and has often referred to it as a support and logistic facility. Colonel Wu Qian claims that the purpose of the base is to assist the People’s Liberation Army Navy in executing antipiracy patrols in the region. This would make sense as China’s trade with the European Union equates to approximately $150 billion (2014 figures) and much of that trade is transported by sea through the Gulf of Aden which has been heavily targeted by pirates in the past. Other states, however, are still wary of China’s increased presence in Africa and may initiate measures to counter a Chinese presence in the region. Already, post China’s announcement to establish a permanent base in Djibouti, Japan has released a statement vowing to increase its affiliations with Djibouti and Africa.

Australian involvement with Djibouti has been limited; in fact, Australia’s engagement with Africa is quite small in terms of foreign aid or diplomatic engagement. Scholars and academics have described the relationship between Australia and Africa as one of “neglect rather than engagement”. It seems that Australia has chosen to primarily focus on Asia, bypassing the complexity of Africa in areas such as trade and defence. Considering the implications that Djibouti’s location has on global trade and security, it would be interesting to see if Australia shifts from neglect to engagement, pursuing a stronger relationship with the state and an increased Australian presence in Africa.

The presence of foreign military forces does provide economic benefits. On average the United States pays a total annual fee of approximately $70 million for its presence while China is believed to pay over $100 million a year.

Many are concerned that the military presence of several major powers may become problematic. Well reported political tension exists between the United States and China and between China and Japan. Furthermore, the approval of China’s military base has raised the concern that it may have the potential to increase tensions between the United States and China and, if so, what would that mean for the future of Djibouti? There are already unconfirmed reports that Russia will seek approval for a military presence in the country, increasing apprehensions and concern about the motives and consequences of such a concentrated superpower presence.


Djibouti’s has experienced significant economic growth for a country with a GDP of approximately one billion dollars. To date, very little has changed for many its citizens. The increased wealth has failed to reach the 42 per cent of the population still living in extreme poverty and the 48 per cent who are unemployed. This raises a question as to where the foreign investment is being spent. China reportedly plans to invest approximately $12 billion in the city to improve existing port facilities and to build new ports and airports, a plan to remake Djibouti as the “Dubai of Africa”. Technically such projects should create opportunities for employment and improved conditions for citizens; however, this outcome is far from guaranteed. An anonymous Djiboutian journalist provided a statement declaring that the government was unconcerned with human capital and only worried itself with collecting and accumulating wealth to support the lavish lifestyle of a small portion of the population, whilst leaving the rest to suffer. “They do not care about freedom of expression, human rights, justice and equal opportunities of people” the journalist was quoted stating. There has been significant expenditure on infrastructure projects but some overseas investment is not accounted for.


With so little exploitable resources, Djibouti’s strategic location has been its economic life source for foreign aid and investment. Since French colonisation in the mid-19th century, Djibouti has continuously hosted a foreign state presence while maintaining a vulnerable, though profitable, local identity. With the current increase in foreign military presence, many Djiboutians wait in anticipation to see who will next seek access to this strategic hub. As countries continue to realise the strategic importance of Djibouti it is hoped that the nation will continue to attract foreign investment, thus increasing economic growth. Whether the citizens of Djibouti will experience its economic improvements, however, remains to be seen. Largely, the Djiboutian attitude towards global interest is characteristically optimistic, “for many years French, Italian, Germans, Japanese and Americans have coexisted in this very small land … so why should it be different in the future”.

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