An Uncertain Future: the Vulnerability of Djibouti's Location as an Economic Asset

Abstract

How did Djibouti, a country the size of New Jersey, go from a sparsely populated desert
to drawing comparisons to 1940s Casablanca, a city filled with intrigue and pivotal powers “rubbing elbows with each other?”. Djibouti can thank its location. The country’s locationon the Horn of Africa allows it to offer a secure location for shipping conglomerates looking to refuel safely and disembark goods destined for the interior of Africa, as well
as governments launching military operations in the Middle East and Africa. As a result,Djibouti has built an economy similar to those of countries that exhibit symptoms of
the so-called “resource curse.” However, the more pressing issue facing Djibouti is not
the symptoms of a “resource curse,” but rather the growing threats to the value of its
land. Djibouti’s neighbors Somalia, specifically the region of Somaliland, and Eritrea arebecoming more attractive destinations for foreign investment. China poses another threat. While China may appear an economic benefactor, the strings attached to its investment ultimately hurt recipients. Benefactors of Chinese investment tend to default on their loans,which Djibouti is in serious risk of doing. In the past, when countries have defaulted ontheir loans, China has gained the lease on the new infrastructure.