China’s Plan to Secure Economic Dominance in Djibouti
In recent years, President Xi Jinping’s initiatives in The People’s Republic of China have propelled its economy to second place globally, surpassed only by the United States. Economist Justin Lin Yifu predicts that China will surpass the US and become the largest economy by 2030. A crucial factor in China’s rapid economic growth has been “large-scale capital investment” funded by domestic savings and foreign investment. The Chinese government’s focus on privatizing state-owned sectors, coupled with its large population, has resulted in the fastest sustained expansion by a major economy in history, as described by the World Bank.
Additionally, China has extended its economic influence to other nations, providing loans to financially strained African countries like Angola, Ethiopia, Zambia, Cameroon, and Djibouti. These loans, amounting to an estimated $153 billion over 19 years, have been granted by Chinese companies associated with the government. By targeting vulnerable economies, China aims to gain influence in countries with desirable attributes. Djibouti, located on the horn of Africa, is one such country.
The focus of our exploration is how China is strengthening its grip on Djibouti’s economy through the implementation of soft power. We will analyze the significant and seemingly unpayable loans provided by China, as well as four noteworthy mega projects: the Doraleh Ports, two airports, a railway system, and a water pipeline. Furthermore, we will consider Djibouti’s power and sovereignty, alongside discussing the imperialist theories surrounding this issue.
The Doraleh Port
The port of Doraleh, situated 5 km from Djibouti City, is a significant multipurpose port that serves as a hub for international trade. Financed and constructed by the Chinese Merchants Group, it boasts a total of 15 berths, offering ample space for cargo ships to unload and load various types of goods. These goods range from essential resources like oil and bulk cargo to the transportation of live animals.
The sheer scale of the port is notable when compared to other major ports around the world. While the Port of Doraleh has 15 berths, the largest port in Shanghai, China, has a staggering 43 berths. This stark difference highlights the substantial investment and development undertaken in Djibouti, especially considering the country’s challenging economic circumstances.
The Chinese Merchants Group, being a state-owned company, had no trouble channeling the necessary funds for the construction of the port. In 2017, the inauguration of the port took place at a cost of $590 million, entirely covered by the Chinese Merchants Group. This investment strategy is not unique to Djibouti, as China has a track record of building ports in economically struggling countries with corrupt governance.
Similar scenarios have unfolded in other nations, such as Sri Lanka and Pakistan, who have also fallen victim to these kinds of seemingly beneficial investments. Notably, Sri Lanka faced a massive debt of $1.4 billion owed to the same Chinese shipping company involved in the funding and construction of the Djibouti port. It becomes evident that China applies similar strategies, targeting countries with weak economies and high corruption rates.
These investments often come with hidden consequences that recipient nations fail to fully consider when agreeing to such agreements. China skillfully presents these deals as mutually beneficial; however, the reality can be quite different. Sri Lanka serves as a prime example, where the inability to repay the debt led to an agreement by which the port was leased to China for a period of 99 years. This strategic move was intentionally orchestrated to secure a valuable port near Saudi oil fields.
These patterns of investment and control reflect a broader strategy employed by China, aiming to expand its global influence and gain strategic advantages. Understanding these dynamics is crucial when examining the larger implications of such investments in susceptible countries like Djibouti.
China has invested a significant amount of money in the construction of a port in Djibouti, which serves the purpose of facilitating transportation between China and other countries. This port also strategically positions the Chinese Navy to quickly respond to threats and protect Chinese cargo ships from piracy attacks in Africa. However, Djibouti’s economic status makes it unlikely that they will be able to repay the huge debt incurred from this project. This situation creates a potential trap where Djibouti may be forced to lease the port to China, giving them control over 70% of the landlocked neighbor Ethiopia’s exports and further exerting economic control over both countries. The media predicts a similar outcome to what happened in Sri Lanka, where the loan repayment demands caused a collapse of the economy.
A Railway and Two Airports
China is employing an infrastructure funding strategy to bolster its influence over Djibouti. This approach, known as soft power, involves investing in the development of another nation’s infrastructure. One prime example of this is the ADDIS ABABA railway system, which spans 759 kilometers, reaching 666 kilometers into Ethiopia and 93 kilometers into Djibouti. This significant infrastructure project, completed in 2016 at a cost of 3.4 billion dollars, has been financed by China.
The primary purpose of the ADDIS ABABA railway is to connect Djibouti’s renowned Doraleh Port to neighboring Ethiopia. It’s noteworthy that Ethiopia ranks 7th among African nations in terms of Gross Domestic Product (GDP). The railway’s operation is overseen by two Chinese companies, partly funded by a state-owned bank. Furthermore, the Congressional Research Service (CRS) reports that Ethiopia relies on Djibouti for nearly 90% of its trade. This railway effectively enables China to significantly enhance its export capabilities to Ethiopia, while concurrently optimizing cargo transportation efficiency and reducing costs by utilizing connected ports in Pakistan and Djibouti.
While this infrastructure project seems to present various benefits for China, it is essential to acknowledge Djibouti’s role in this collaboration. Djibouti, however, finds itself in an economically precarious position, continuing to accept potentially unfavorable deals from China. The absence of a robust and credible governmental body, coupled with corruption issues, contributes to Djibouti’s decision-making process. Despite the potential negative consequences, Djibouti remains entangled in a situation that could potentially result in further economic distress.
A Water Pipeline with No Good Intentions
China has heavily invested in the Ethiopia-Djibouti Water Pipeline, a 374-kilometer-long project designed to transport water from deep wells in Ethiopia to 700,000 residents in Djibouti. Completed by the Chinese construction engineering company CGCOC Group, this project addresses water supply challenges but adds to Djibouti’s existing financial struggles. Djibouti currently owes at least $1.2 billion to China, and future debt repayment seems unrealistic given the country’s struggling economy. If Djibouti fails to repay the debt, the ownership of the pipeline may be transferred to CGCOC, granting China control over the vital water supply.
This scenario demonstrates how China utilizes its state-owned companies to invest in financially vulnerable and corrupt countries. While the water pipeline brings benefits to Djibouti, it also raises concerns about Chinese influence. Based on previous cases, such as the Port of Doraleh, ownership of infrastructure may be transferred to Chinese companies if debt repayment proves impossible. As a result, China could gain control over the water supply that sustains over 700,000 people, leaving future generations to deal with the consequences of this problematic debt.
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