President Ismail Omar Guelleh maintains his iron grip on Djibouti's political space by arresting and intimidating the country's opposition forces.

In power since 1999, he insists that he will finally name a successor and step down in 2016 but there are no signs of that yet. The ruling party continues to use Djibouti's geo-strategic location between Africa and the Middle East to its economic and political advantage, with China now the newest country seeking to set up a military presence.

Chinese investors are putting money into several projects to bolster the country's infrastructure and strengthen its role as Ethiopia's main access point for international trade routes.

The year 2015 holds the potential for political reconciliation and the peaceful preparation for polls in 2016. The country has been experiencing an unprecedented political crisis since the contested legislative elections of February 2013, when the opposition finally decided to lift its boycott.

The Union pour le Salut National (USN) coalition of seven opposition parties claimed victory but ended up with just 10 of 65 seats. Attempts at dialogue in early 2014 failed, and the capital city regularly played host to marches that degenerated into confrontations between security forces and protestors.

Peace attempt

The government announced in September 2014 that it was prepared to sign an accord with the USN to end the conflict and allow USN members who refused to take their seats to join the legislature. That was the result of direct negotiations between Guelleh and USN leader Ismail Guedi Hared.

When The Africa Report went to press, the deal was still unsigned. The political scene in Djibouti was transformed in 2014 when the government refused to legalise the Muslim Brotherhood's party, the Mouvement pour le Développement et la Liberté, and it joined the opposition.

Fearing the spread of fundamentalist Islam, the government arrested three religious leaders who were critical of the government and sentenced them to 18 months in prison in 2013. They were finally released in August 2014.

 

Djibouti remains a poor country where 42% of its 900,000 people live below the poverty line. The country's location is its principal strength, as it is the link for landlocked Ethiopia, with Africa's second-largest population and high economic growth rates, to the sea.

Djibouti is also home to military bases that France and the US use for their anti-terrorism missions. Meanwhile, European navies are using the Djibouti port for their Somali anti-piracy programme.

The government is now conducting negotiations with China, its main economic partner, and Russia to allow them to maintain a military presence in the country.

Djibouti has a weakly diversified and largely informal economy. The service sector – including transport, communications, trade, tourism and banks – employs about 60% of the active population and represents about 76% of gross domestic product, according to government statistics.

Withdrawn concession

The Djibouti port and Doraleh container terminal are crucial to the economy, but a conflict with an investor has caused worries about the management of the sector.

The government filed a legal complaint against DP World, the concessionaire at Doraleh, in July 2012. The government revoked the company's contract in July 2014, and an arbitration case is pending. The dispute relates to a falling out between the regime and former ports boss Abdourahman Boreh. 

The government accuses DP World of issuing $150m in illegal payments to Boreh. Both he and the company deny any wrongdoing.

New infrastructure spending will boost Djibouti's economy. The government says that Chinese investors including China Exim Bank, China Merchants Holdings International and Touchroad International Holdings will provide 45% of the finance needed for projects including the second phase of the Doraleh container terminal, a minerals terminal at Tadjourah, a port for salt exports at Ghoubet, the railroad linking Djibouti and Addis Ababa, an aqueduct to transport water from Ethiopia, a desalinisation plant and a thermal power plant.

The projects, which will cost an estimated $6bn, will strengthen the economy over the next few years. The completion of the construction of the rail link is due in October 2015.