Climate Resilient Road Transportation Infrastructure
Climate Resilient Road Transportation Infrastructure
Business Model Description
Provide technical assistance to or implement the design, construction work and supervision of climate proofing existing or new road transport infrastructure connecting Djibouti's transportation hubs.
Expected Impact
Enhance regional economic integration and collaborative action against climate risks and towards national economic growth and food security.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Djibouti: Djibouti (City)
- Djibouti: Arta
- Djibouti: Dikhil
- Djibouti: Tadjourah
Sector Classification
Transportation
Development need
Djibouti's growth is driven by maritime transportation and mega projects that envisage creating a major hub with multi-modal infrastructure in East Africa by 2035. Although the country's SDG 9 performance is low with a score slightly above 25 (out of 100) in 2021 (1), its Logistics Performance Index score rose to 2.63 out of 5 in 2018, up by 44 places compared to 2016 (2).
Policy priority
The Horn of Africa Initiative was launched during the World Bank / International Monetary Fund Annual Meeting 2019. Member States (Djibouti, Ethiopia, Kenya, Somalia and Eritrea) structure key programmes around four pillars, including "Interconnected Horn" (3). Djibouti plans to spend USD 15 billion over the next five years to build and improve its infrastructure network (4).
Gender inequalities and marginalization issues
Women's exposure to informal employment in non-agricultural employment is very high (84%) (5). Investment in transportation may lower the risk by providing increased and safer mobility as well as formal employment opportunities for women. Marginalization of youth is characterized by the age divide between population median age and age of people in leadership positions (6), and share of youth not in education, employment or training (31.8% in 2019) (7).
Investment opportunities introduction
Djibouti's Vision 2035 gives policy momentum to maximize the country's strategic position in the transportation sector. The Great Horn Investment Holding targets USD 15 billion investment in transportation (4). Regional Infrastructure Connectivity projects will attract USD 1.6 billion by 2021 to develop Economic Corridors in the region (11).
Key bottlenecks introduction
In order to promote accountable and sustainable development of the transportation sector, Djibouti requires to set clear monitoring processes for port authorities, support policymaking effort at national (and local) level and avoid customer concentration in port services (8). Active (or latent) conflicts in nearby regions pose a threat to continuity of trade services.
Land Transportation
Development need
The transportation sector traditionally accounts for 35% of the GDP in Djibouti (9). Serving Ethiopia gives the Port of Djibouti a vast hinterland and increasing port traffic (30% increase in 2020) (10), both of which require extensive regional road transportation links that will increase trade and diversify economic activity.
Policy priority
The Horn of Africa Initiative prioritizes two economic corridors in Djibouti. The Djibouti-Addis Corridor is under preparation and has a total project value of USD 570 million, of which USD 70 million covers Djibouti's part (11). The Berbera-Djibouti corridor covers 1,003 kms and will require USD 1.6 billion investments for design, works and supervision (12).
Gender inequalities and marginalization issues
Djibouti should sustain equal opportunities for women and men concerning trainings and jobs aimed at developing technical and mechanical skills in transportation sector. Developing transport infrastructure will improve women's access to education, health care, decent employment opportunities and economic resources (13).
Investment opportunities introduction
The Government policy vests on Djibouti's main asset, its port, to sustain economic growth. The Djibouti Ports & Free Zones Authority and the Great Horn Investment Holding seek to attract USD 3.5 billion (14). The Horn of Africa Initiative aims to foster regional connectivity through economic corridors along land routes with Djibouti's neighbours (11).
Key bottlenecks introduction
Climate and adverse weather conditions may have negative impact on landscaping, soil cohesion, dust volume, and road alignments (such as vegetation). Access to water may prove problematic for compaction work (15).
Road Transportation
Pipeline Opportunity
Climate Resilient Road Transportation Infrastructure
Provide technical assistance to or implement the design, construction work and supervision of climate proofing existing or new road transport infrastructure connecting Djibouti's transportation hubs.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
Paved road network extending to only 430 km
Case studies from the African continent and particularly in Somalia, where a 22,5 km climate resilient road project is valued USD 23 million, put a market size for such infrastructure in Djibouti at more than USD 100 million. The country's existing 430 km paved road network and the World Bank's involvement of USD 70 million in the Djibouti-Addis road corridor (11, 20) were taken into account.
Indicative Return
10% - 15%
The economic justification undertaken by the African Development Bank (AfDB) for a climate resilient road infrastructure investment in Rwanda reveals an IRR of 14.9% from the project's implementation over the period under analysis, namely 2018-2037 (19).
Investment Timeframe
Short Term (0–5 years)
Based on case studies from across the African continent, usual project timeframes last from 2-4 years (20).
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - Requires Subsidy
Market - Volatile
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
Countries in the Horn of Africa region share challenges of center-periphery issues within states, competing global strategic interests and chronic poverty and forced displacement, driven by periodic weather and other shocks (33).
Djibouti's vision to become a maritime and multimodal transport hub in the Horn of Africa requires an extensive land transport network with its neighbors.
Djibouti is susceptible to various natural hazards that include multi-annual droughts, flash floods, frequent earthquakes, volcanism and fires fuelled by droughts (22).
Gender & Marginalisation
Djibouti's rural population faces a high poverty rate of 94.2% (21), lacks reliable access to Government centers, and is isolated due to limited road infrastructure.
Rural districts in Djibouti are burdened by high social isolation due to geographical distancing and the high cost of transportation. They have little or no access to infrastructure and basic social services, including water, sanitation and healthcare (34).
Expected Development Outcome
Regional challenges could be addressed by improving trade and investment through economic corridors that contribute to economic recovery and poverty reduction, building resilience to common risks posed by climate change and development of border districts (33).
Climate resilient land infrastructure increases the duration of the roads and contribute to sustainable trade, delivery of goods and humanitarian assistance into rural regions and advance the country's climate change adaptation.
Gender & Marginalisation
Climate related disasters' negative impact on the rural population and women are reduced by improved access to health services and information through improved transportation options.
Primary SDGs addressed
9.1.2 Passenger and freight volumes, by mode of transport
Paved roads constitute only 43% of the national roads (23) despite the crucial role played by land infrastructure in Djibouti-Ethiopia trade. The main road between the two countries (Route Nationale 1 in Djibouti) carries about 1,000 trucks per day (24).
Transport trucks crossing the border between Ethiopia and Djibouti may increase to 8,000 trucks per day (25).
11.b.1 Number of countries that adopt and implement national disaster risk reduction strategies in line with the Sendai Framework for Disaster Risk Reduction 2015–2030
Djibouti remains prone to food insecurity caused by drought, flash floods that may result from rising sea levels and variation in much valuable precipitation due to climate change.
Implementation of Djibouti’s Disaster Risk Management Strategy, drought prevention water management, and building (soft and hard) coastal protection structures (26).
13.1.3 Proportion of local governments that adopt and implement local disaster risk reduction strategies in line with national disaster risk reduction strategies
Djibouti remains prone to food insecurity caused by drought, flash floods that may result from rising sea levels and variation in much valuable precipitation due to climate change.
Implementation of Djibouti’s Disaster Risk Management Strategy, drought prevention water management, and building (soft and hard) coastal protection structures (26).
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Indirectly impacted stakeholders
Public sector
Outcome Risks
Additional traffic along new road transport lines may increase CO2 emissions and traffic congestion.
New road infrastructure may increase migration and unexpectedly result in division among different communities.
Impact Risks
Multiple stakeholders have been interested in transport projects in Djibouti but often without aligning climate resilience into their business models.
New road infrastructure may require nationalization of property, which may not be likely to take place within short timeframe.
Impact Classification
What
Climate resilient road transportation infrastructure enhances regional economic integration and collaborative action against climate risks and towards national economic growth and food security.
Who
People lacking access to health, education and other public services are provided with land infrastructure to benefit from commerce opportunities and receive public assistance.
Risk
While the model of climate resilient road transportation infrastructure, exposure to negative impacts of climate change require consideration.
Impact Thesis
Enhance regional economic integration and collaborative action against climate risks and towards national economic growth and food security.
Enabling Environment
Policy Environment
Vision Djibouti 2035, 2014: As the strategic framework for development planning by the Government of the Republic of Djibouti, the key premises of the country's development trajectory are analyzed with respect to being a regional maritime outlet, which requires onward road transportation (27).
Strategy for Accelerated Growth and Employment Promotion (SCAPE) 2015-2019, 2014: Accentuates the prominent role of transportation in the country's economy and growth strategy (28).
Horn of Africa Initiative Ministerial Roundtable, 2021: Joint Presentation by the African Development Bank, the European Union and the World Bank covers key messages and pillars for the regional development scheme, which includes infrastructure and road transportation (11).
Intended Nationally Determined Contribution of the Republic of Djibouti, 2015: An extension of the country’s commitments to fighting the effects of climate change with relevance for road infrastructure (29).
Financial Environment
Financial incentives: The World Bank announced support of USD 2 billion to the Horn of Africa through a lending programme under IDA19, which is the World Bank’s concessional financing window that provides low or no-interest loans and grants to the world’s poorest countries (33).
Fiscal incentives: Djibouti's Investment Code specifies three preferential regimes: Regime A, Regime B and Free Zone Code. The latter favours 100% foreign ownership, free repatriation of capital and profits, exemption from corporate and income tax, and flexibility to employ foreign nationals (31).
Regulatory Environment
Law No. 58, 2016: Governs investments in Djibouti, specifies three preferential regimes including the free zone code that favours 100% foreign ownership, free repatriation of capital and profits, exemption from corporate and income tax, and flexibility to employ foreign nationals (30).
Law No. 186, 2017: Establishes Djibouti's Public-Private Partnership Act, following the Executive Decision No. 045 of 2016 to establish a Committee on the creation of a national legal and regulatory framework of 2016 (8).
Marketplace Participants
Private Sector
Great Horn Investment Holding (GHIH), China Civil Engineering Construction Corporation (CCECC), China Railway Construction Corporation (CRCC), China Railway Engineering Corporation (CREC), China Railway Eryuan Engineering Group (CREEC).
Government
Agence Djiboutienne des Routes (ADR), Djibouti Ports & Free Zones Authority (DPFZA).
Multilaterals
African Development Bank (AfDB), Horn of Africa Initiative, World Bank, European Union, United Nations Conference on Trade and Development (UNCTAD), UN Environment (UNEP), International Fund for Agricultural Development (IFAD).
Non-Profit
Japan International Cooperation Agency (JICA), Kuwait Fund for Arab Economic Development, Abu Dhabi Fund for Development.
Target Locations
Djibouti: Djibouti (City)
Djibouti: Arta
Djibouti: Dikhil
Djibouti: Tadjourah
References
- (1) Djibouti in Sustainable Development Report. 2021. https://dashboards.sdgindex.org/static/profiles/pdfs/SDR-2021-djibouti.pdf.
- (2) World Bank LPI Country Score Card: Djibouti. 2018. https://lpi.worldbank.org/international/scorecard/radar/254/C/DJI/2018#chartarea.
- (3) Horn of Africa Initiative, Key Priority Projects to Deepen Regional Integration. 2020. https://hoainitiative.org/wp-content/uploads/2020/11/HoA-Initiative-KEY-PRIORITY-PILLARS-Brochure_FINAL.pdf.
- (4) Great Horn Investment Holding. Chairman's Speech. 2020. http://www.ghih.dj/about-ghih.
- (5) UN Women Country Profile, SDG 8. 2021. https://data.unwomen.org/country/djibouti.
- (6) Financial Times. June 2021. https://www.ft.com/content/b9198e0f-379c-4c80-9171-58e1c820e655.
- (7) ILOSTAT. ILO Modelled Estimates, 2019. https://www.ilo.org/shinyapps/bulkexplorer55/?lang=en&segment=indicator&id=EAP_2WAP_SEX_AGE_RT_A.
- (8) World Bank Group and UKAid, December, 2018. Port Development in East and Southern Africa: Prospects and challenges. Volume 2: Country and Port Fact Sheets and Projections. 2018. https://documents1.worldbank.org/curated/en/963231561663013431/pdf/Country-and-Port-Fact-Sheets-and-Projections.pdf.
- (9) World Trade Organisation (WTO). Trade Policy Review on Djibouti. 2014. https://www.wto.org/english/tratop_e/tpr_e/s305_e.pdf.
- (10) The Africa Report. 2021. https://www.theafricareport.com/71258/djibouti-is-sailing-along-without-dp-world.
- (11) Horn of Africa Initiative Ministerial Roundtable, March 2021. Joint Presentation by African Development Bank (AfDB), European Union (EU) and World Bank (WB). 2021. https://hoainitiative.org/wp-content/uploads/2021/04/Horn-of-Africa-Deck-FINAL-B.pdf.
- (12) Horn of Africa Initiative Ministerial Roundtable, March 2021. Joint Presentation by African Development Bank (AfDB), European Union (EU) and World Bank (WB). 2021. https://hoainitiative.org/wp-content/uploads/2021/04/Horn-of-Africa-Deck-FINAL-B.pdf.
- (13) Task Force on Transport and Connectivity. Towards an enhanced Africa-EU. 2020. https://africa-eu-partnership.org/en/stay-informed/publications/report-task-force-transport-and-connectivity.
- (14) Djibouti Ports & Free Zones Authority & Great Horn Investment Holding, Worldwide Connection, Presentation. July 2021.
- (15) Asian Development Bank. Guidelines for Climate Proofing Investment in the Transport Sector. 2011. https://www.adb.org/sites/default/files/institutional-document/32772/files/guidelines-climate-proofing-roads.pdf.
- (16) Railway Technology. Ethiopia-Djibouti Railway Line Modernisation. 2021. https://www.railway-technology.com/projects/ethiopia-djibouti-railway-line-modernisation.
- (17) TradeMark East Africa. Hargeisa Bypass Road Construction. 2021. https://www.trademarkea.com/project/hargeisa-bypass-road.
- (18) UK Government. World News History. UK Ambassador launches construction of the Hargeisa bypass. 2021. https://www.gov.uk/government/news/uk-ambassador-launches-construction-of-the-hargeisa-bypass.
- (19) Nordic Development Fund. Proposal for Final Consideration. 2015. https://www.ndf.int/media/project-files/c79_fin_consid_rwanda_dev_cap_0.pdf.
- (20) Nordic Development Fund. Project Database: Developing Capacity for a Climate Resilient Road Sector [NDF C59]. 2021. https://www.ndf.int/what-we-finance/projects/project-database/developing-capacity-for-a-climate-resilient-road-sector-ndf-c59.html.
- (21) International Fund For Agricultural Development (IFAD). Djibouti. 2021. https://www.ifad.org/en/web/operations/w/country/djibouti.
- (22) UNDP, Djibouti. 2021. https://www.adaptation-undp.org/explore/eastern-africa/djibouti.
- (23) Japan International Cooperation Agency (JICA). Precatory Survey Report. 2018. https://openjicareport.jica.go.jp/pdf/12324695_01.pdf.
- (24) UNCTAD. The Djibouti City – Addis Ababa Transit and Transport Corridor. 2018. https://unctad.org/system/files/official-document/aldc2018d6_en.pdf.
- (25) Oxford Business Group. A surge in Ethiopia-bound trade from Djibouti increases traffic and prompts reforms. 2020. https://oxfordbusinessgroup.com/analysis/good-neighbours-jump-ethiopia-bound-trade-increases-traffic-and-prompts-reforms.
- (26) Global Facility for Disaster Reduction and Recovery (GFDRR). Climate Risk and Adaptation Country Profile: Djibouti. 2011. https://www.gfdrr.org/en/publication/climate-risk-and-adaptation-country-profile-djibouti.
- (27) Republic of Djibouti. Vision Djibouti 2035. 2014. http://ccd.dj/w2017/wp-content/uploads/2016/01/Vision-Nationale.pdf.
- (28) Strategy of Accelerated Growth and Promotion of Employment (SCAPE) 2015-2019. 2014. https://economie.gouv.dj/wp-content/uploads/SCAPE-en-anglais.pdf.
- (29) Republic of Djibouti. Intended Nationally Determined Contribution of the Republic of Djibouti. 2015. https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Djibouti%20First/INDC-Djibouti_ENG.pdf.
- (30) Republic of Djibouti. Le Code des investissements. 2016. http://www.ccd.dj/w2017/wp-content/uploads/2016/01/Code-des-Investissements_4.pdf.
- (31) Djibouti Ports & Free Zones Authority. Free Zone Code Incentives. 2021. https://dpfza.gov.dj/facilities/Free-trade-area/djibouti-free-zone,detailed in https://research.hktdc.com/en/article/MzU3MDc0MTQw.
- (32) NewAfrica. New road link between Ethiopia and Djibouti. 2020. https://newafricanmagazine.com/22974.
- (33) Horn of Africa Initiative. World Bank prioritizes the Horn of Africa in its approach for regional integration in Africa. 2021. https://hoainitiative.org/world-bank-prioritizes-the-horn-of-africa-in-its-approach-for-regional-integration-in-africa.
- (34) International Monetary Fund (IMF). Djibouti: Poverty Reduction Strategy Paper - Annual Progress Report. 2021. https://www.imf.org/external/pubs/ft/scr/2012/cr12131.pdf.