China has heavily invested in Djibouti, leveraging its strategic location under the Belt and Road Initiative. Despite these investments, Djibouti’s harsh climate limits agricultural output, increasing reliance on imports. Lake Assal’s salt reserves have remained underexploited until recently when a Chinese company took over a salt firm. However, the ongoing Red Sea crisis may pose risks to Chinese businesses operating in the region.
China has significantly invested in Djibouti as part of its Belt and Road Initiative, driven by the nation’s strategic geographical advantages. Djibouti has become a pivotal hub for Chinese enterprises that engage in various sectors, including minerals, railway construction, and port development. Furthermore, Djibouti houses China’s only military base abroad, underscoring the importance of this relationship.
However, Djibouti faces substantial challenges, such as a largely unfavorable climate and a challenging topography, characterized by 90 percent desert and a volcanic plateau. These factors limit agricultural production to only 1 percent of the country’s GDP, heightening its dependence on imports for essential goods.
A key asset for Djibouti is Lake Assal, which contains the largest salt reserve globally and ranks as the second-saltiest water body. Unfortunately, for many years, this natural resource has been underexploited, hindering potential economic growth for local communities and foreign investors alike. In a strategic move in 2015, the China Communications Construction Company acquired a majority stake in an American-controlled salt company, successfully reestablishing it as the Djibouti Salt Investment Company.
Amidst these developments, concerns regarding regional instability, particularly due to the recent Red Sea crisis, raise questions about the sustainability of Chinese investments in the region. The crisis has the potential to disrupt trade routes and investments, presenting a challenging new landscape for Chinese businesses whose success in Djibouti has largely depended on the ongoing stability of the region.
Djibouti’s geographical location at the southern entrance to the Red Sea provides a strategic advantage to Chinese companies as they seek to enhance their connectivity to East Africa and beyond. With China investing heavily under the Belt and Road Initiative, Djibouti has become a focal point for initiatives related to infrastructure and military presence. Knowing that Djibouti lacks manufacturing capabilities and is reliant on imports, Chinese firms have focused on capitalizing on the country’s natural resources, particularly the underutilized salt reserves of Lake Assal.
In conclusion, China’s investments in Djibouti illustrate both opportunity and challenge. While the strategic location and natural resources present significant potential for growth and development, the looming threats posed by the Red Sea crisis could jeopardize these advancements. Companies must navigate these uncertainties carefully to sustain their ventures in this critical East African nation.
Original Source: www.scmp.com
