Investors in tiny Djibouti are thinking big

DJIBOUTI: For centuries, nomads have dropped down from the rocky hills around here to carve bricks of salt from an ancient lake and haul them away on the backs of camels.

But a new salt miner is trying his hand, and he may be a harbinger of what is to come.

"As a salt person, my first impression was why was all this salt just sitting here," said Daniel Sutton, an American salt miner who is overseeing a new $70 million operation to industrialize the collection of Djibouti's plentiful salt. "There's 50 square miles of salt. It runs 20 to 30 feet deep. This could be huge."

Djibouti is becoming the little country of big dreams. Hundreds of millions of dollars of overseas investment are pouring in, promising to turn this sleepy, sweltering ministate, which does not even have a stoplight, into something of an African trade center.

There are gold miners from India, geothermal experts from Iceland, Turkish hotel managers, Saudi oil engineers, French bankers and American military contractors. Tycoons from Dubai are pumping in a billion dollars just on their own, largely for the country's all-important port, a gateway to the region. There is even a project on paper to build a multibillion-dollar, 28-kilometer, or 18-mile, bridge across the Red Sea, captained by Tarek bin Laden, the half-brother Osama bin Laden.

Djibouti does not have many people - about 500,000 - and few outsiders have heard of it. Its soil is mostly sand; it is unearthly hot, often more than 35 degrees Celsius (100 Fahrenheit); and just about everything - including bottled water, rice and gasoline - is imported.

But the country's draw is it location. Djibouti sits at the mouth of the Red Sea, where Africa and Asia nearly touch. It overlooks some of the busiest shipping lanes in the world, especially for oil heading from the Gulf to Europe and the United States. And because of its strategic position, both France and the United States have military bases here.

Shipping is already big business in this country - and it is getting even bigger, with investors from Dubai hoping to expand the Port of Djibouti to three million containers a year from its current capacity of 300,000. Dubai World, a large holding company, has also bought a controlling share in a local airline and built an industrial park, new roads and a $200 million, five-star hotel.

"Djibouti is perfectly positioned to become a services and logistics hub," said Jerome Martins Oliveira, chief executive of the port, which is operated by a subsidiary of Dubai World.

He said Djibouti could become a key link between the raw materials of Africa and the oil wealth of Arabia, with Dubai as its main partner.

Dubai is the country's model for development, said the Djiboutian foreign minister, Mahmoud Ali Youssouf. "We're a small country with a big port," he said "And we're even better located than Dubai."

Clearly, Djibouti has a long way to go. Djibouti is ranked 149 of 177 on the United Nations human development index, which measures life span, education and income.

But Djibouti's smallness - it basically has one city, known as Djibouti town - is a virtue, business people say.

"If you need something, the government responds very fast," said Nikhil Bhuta, the chief financial officer for the JB Group, an Indian mining company.

Bhuta said he had set up mines across Africa but had never experienced such generous terms of business as the deal he struck to split gold profits 80 percent for his company, 20 percent for the government. "In Africa, you never even get 50 percent," he said.

Other selling points are a stable currency that is pegged to the U.S. dollar, excellent French food and the fact that Djibouti is an outpost of relative stability in the Horn of Africa, a region plagued by war, famine and drought - sometimes all at the same time.

"If you want to participate in the development of this region, Djibouti is the only place to be," said Ould Amar Yahya, the director of a commercial bank that opened a branch in Djibouti a year ago. "Ethiopia has too many regulations. Sudan has the embargo. Eritrea has serious problems, and Somalia is too violent."

Yahya said that his branch opened 10 to 15 new accounts a day and that profits had shot up 70 percent the first six months of 2008 compared with the same period last year.

But there is a very visible cloud on the horizon: Eritrea. Djibouti's prickly neighbor recently moved more than 1,000 soldiers into a disputed border zone, and Djiboutian officials fear that war might break out at any moment. The troops are heavily armed and very close.

"We've got a lot going on right now," Youssouf said. "Maybe the Eritreans are jealous."

Local customs can also be a bit of a minefield. The population here is predominantly Muslim, divided between Somalis and Afars, a nomadic group that plies the desert and sticks to its traditions.

Sutton said that shortly after he arrived to begin the salt mining operation, an Afar chief threatened to kill him.

The chief was apparently angry that Sutton had not paid his respects. The chief's people live around the salt flats.

Sutton said that he had agreed to hire as many Afars as possible and that he and the chief were now friends.

By Jeffrey Gettleman
Published: May 30, 2008