China opens Africa’s biggest Free Trade in Djibouti
There is no question that the China-US trade war is making waves in international trade today. Trade channels opening elsewhere in the world deserve some attention too. For example, the European Union has made significant headway with Mexico. Secondly, China is now breaking new ground with establishing an East Africa Free Trade Zone.
Djibouti opened the first phase of its Chinese-built International East Africa Free Trade Zone. The project, scheduled for completion in a decade, will be the largest of its kind in Africa.
Costing $3.5 billion and set to span 4,800 hectares, the zone enables users to operate without paying property, income, dividend or value-added taxes. The Djibouti Ports and Free Zones Authority and China’s Merchants Holdings Company will run it jointly.
The opening coincided with Djibouti’s hosting of the Africa-China Economic Forum and was attended by both the Ethiopian Prime Minister and the Rwandan President.
Djibouti is positioning itself as a strategic trade hub in the Horn of Africa area. Its landlocked neighbor Ethiopia, an economic powerhouse in the region, already relies on Djibouti for 95 percent of its imports.
Djibouti’s location offers a commercial shipping presence close to one of the world’s busiest trading routes. The state is also home to Chinese, American and French naval bases.
Zone of Hope
The new free trade area is a “zone of hope for thousands of young jobseekers,” said Djibouti President Ismail Omar Guelleh at the inauguration ceremony. Djibouti’s population is 865,000, according to the Central Intelligence Agency’s 2017 estimate, over half of whom are under 25.
The opening signifies the latest step in China’s Belt and Road Initiative. The Initiative refers to Beijing’s plan to redevelop ancient trading routes centered on itself.
Free trade is a hot topic in Africa. Earlier this month, South Africa, signed on to the African Union’s free trade agreement . This agreement proposes continent-wide borderless trade. 49 of the African Union’s 55 members have committed to the scheme. Although Africa’s largest economy, Nigeria, is yet to do so.
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