This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 DJIBOUTI 000300 
 
SIPDIS 
 
STATE FOR AF AND AF/E; 
 
E.O. 12958: N/A 
TAGS: ETRD ECON PHUM XA DJ
SUBJECT: DJIBOUTI'S INPUT FOR 2006 
PRESIDENT'S REPORT ON AGOA 
 
REF: STATE 26707 
 
1.Summary.  Djibouti continues to make 
improvements in some problem areas. 
Djibouti's economy took a positive step in 
2005 by recording a surplus budget. 
Djibouti continues to offer incentives to 
investors such as Dubai financing of a 
modern port and a five star hotel.  The 
Government of Djibouti (GoD) is making 
increasing efforts to curb corruption. 
Donors have pledged to fund a major portion 
of Djibouti's long-term program for reducing 
poverty.  However, relations between the GoD 
and the opposition are not improving.  The 
opposition boycotted the presidential 
elections in April 2005 and will adopt the 
same attitude for the upcoming regional 
elections.  The government also continues to 
intimidate legitimate unions.  End Summary. 
 
-------------------------------------------- 
Market Economy/Economic Reform/Elimination 
of barriers to U.S. Trade 
-------------------------------------------- 
¶2. Djibouti relies heavily on services, 
which account for more than 80% of its GDP. 
Djibouti's economy is getting healthier and 
recorded a 3.2% growth rate for 2005. 
Inflation was 3.5% mainly due to the rise in 
oil prices.  The budget in 2005 had a 
surplus for the first time since 1998. 
Djibouti continues to have a market-based, 
liberal economic regime with minimum 
interference from the Government.  Djibouti 
offers attractive incentives to foreign 
investors and does not impose barriers to 
U.S. trade.  Djibouti Free Zone, managed by 
Dubai's Djebel Ali Free Zone, also offers 
interesting incentives including tax breaks, 
simplified administration and 100% foreign 
ownership 
 
¶3. Doraleh Oil Terminal, funded by Dubai 
Port World (DP World) and Emirates National 
Oil Company (ENOC) was inaugurated in 
February 2006.  A Container Terminal and a 
Commercial Free Zone are also planned.  DP 
World, which is currently managing 
Djibouti's port and airport, is also funding 
the construction of a five star hotel, which 
will be managed by the Kempinski Hotel 
Group. 
 
¶4. Oceanic Developpement, a French company 
specializing in fishing, was recently 
selected to manage and develop Djibouti's 
fishing port.  Oceanic Developpement is 
expected to improve the standards of the 
fishing port to make it eligible for 
exporting fish to the United States and 
Europe. 
 
-------------------------------------------- 
Political Pluralism/Rule of Law/Anti- 
corruption 
-------------------------------------------- 
¶5. Since 2002, eight political parties exist 
in Djibouti, grouped in two coalitions: the 
ruling coalition and the opposition 
coalition.  The opposition boycotted the 
presidential elections held in April 2005 
because their conditions for transparency 
were not accepted by the ruling coalition. 
The opposition is intending to also boycott 
upcoming regional elections on March 10, 
¶2006. 
 
¶6. Rule of Law is progressing at a very slow 
pace in Djibouti.  The judiciary system in 
Djibouti, inherited from the French, is 
complex and far from transparent with 
government interference commonplace. 
Enforcement of laws and regulations remains 
difficult. 
 
¶7.    The Government of Djibouti ratified the 
United Nations Convention on Corruption in 
February 2005 and is making attempts to 
reduce corruption and promote transparency. 
The State General Inspection, a government 
agency created to promote transparency, was 
given more support and authority.  Also, the 
Minister of Finance has pledged to fight tax 
evasion, fraud and price speculation, and 
has reactivated the Finance Inspection 
section, an auditing body in his ministry. 
Finally, the GOD signed an agreement with 
Dubai Customs International (DCI) in 2005 to 
manage, develop and promote transparency 
within Djibouti Customs. 
 
----------------- 
Poverty Reduction 
----------------- 
¶8. The increasing poverty rate is a direct 
consequence of the high unemployment rate. 
The poverty rate exceeds forty percent while 
unemployment is at a staggering seventy 
percent among the youth 30 years of age or 
less.  In order to fight against poverty, 
the government has finalized a long-term 
poverty reduction strategy ending in 2015. 
It essentially promotes economic growth, 
human resources development, social safety 
nets, and good governance.  The GoD 
submitted its need for the poverty program 
during an Arab donors' round-table meeting 
held November 2005 in Djibouti. The Arab 
donors, comprising the Islamic Bank of 
Development, the Kuwaiti Fund for 
Development and the Arab Fund for Economic 
and Social Development, approved US$ 341 
Million out of the US$ 455 Million requested 
for the poverty reduction program. 
 
------------------------------ 
Labor/Child Labor/Human Rights 
------------------------------ 
¶9.  The government continues to interfere in 
the internal affairs of labor unions, which 
are perceived as the opposition.  The 
government continues to intimidate union 
leaders. Several union members were jailed 
and fired following a 2005 strike at the 
port.  A new Labor Code was approved by the 
Parliament in December 2005.  This new 
document is meant to attract and provide 
confidence to potential investors but is 
widely contested by Union members.  Unions 
feel that this new Labor Code limits the 
rights of employees at the profit of 
employers.  In addition, the new Labor Code 
reportedly makes it very difficult for 
employees to form unions.   The Embassy will 
report on the details of the new Labor Code 
when it becomes public. 
 
¶10. Child labor exists in Djibouti but not 
in its worst form.  In urban areas, children 
are very active in the informal economic 
activities: they work as shoe cleaners, car 
washers, or domestic servants. In rural 
areas, children help their parents in 
agricultural or livestock areas.  The 
country has laws against the worst forms of 
child labor. These laws are found in 
the Constitution, in the International 
Conventions ratified by Djibouti such as ILO 
Convention 182, the UN Convention on the 
Rights of Children, and in the Penal Code. 
 
¶11. The Human Rights situation in Djibouti 
remains poor despite some timid progress. No 
political detainees were reported in 2005. 
However, police brutalities were noted 
during an operation to remove residents from 
illegal wooden houses, resulting in several 
deaths.  In early February 2005, a seminar 
on Female Genital Mutilation (FGM) was held 
in Djibouti where international guests were 
invited.  After the seminar, Djibouti took a 
positive step by ratifying the Maputo 
Protocol outlawing FGM. 
 
BALL