China opens Africa’s biggest Free Trade in Djibouti
While the China-US trade war is certainly one of the biggest pieces of news in international trade today – Some attention should be paid to the types of trade channels that are opening elsewhere in the world. First the EU made headway with Mexico, now China is breaking new ground with establishing an East Africa Free Trade Zone.
Djibouti, a tiny state located on the Horn of Africa, on Thursday 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 ultimately set to span 4,800 hectares, the zone enables users to operate without paying property, income, dividend or value-added taxes. It will be jointly run by the Djibouti Ports and Free Zones Authority and China’s Merchants Holdings Company.
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 propositioning 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.
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 also signifies the latest step in China’s Belt and Road Initiative, Beijing’s scheme to redevelop ancient trading routes centered on itself.
Free trade is a hot topic in Africa. Earlier this month, South Africa, the continent’s most developed economy, signed on to the African Union’s free trade agreement that proposes continent-wide borderless trade. 49 out of the African Union’s 55 members have now committed to the scheme although Nigeria, Africa’s largest economy, is yet to do so.