Africa Launches Biggest Free Trade Zone With Help From China

Despite the brewing trade war with the U.S., China is still flexing its muscles across the world. Their latest move is to help launch Africa’s largest free trade zone. This move positions China as one of the global market’s trade leaders.

Djibouti formally opened the doors of its free trade zone on July 5. This is just the first phase of the Djibouti International Free Trade Zone (DIFTZ). With a potential investment of $3.8 billion and 4,800 hectares of land, this trade zone soon could be the heart of Africa’s economic development.

As of now, the project is starting out on a small scale. The pilot zone is just 240 hectares and already has $370 million in investment. The location has four industrial sectors, each devoted to one of four economic activities: logistics, business support, export procession, and financial support services.

The zone opened just as the Africa-China Economic Forum started. Hosted by Djibouti, it brings together the private sector and the government to see how they can collaborate with each other to promote economic development in the region. Djibouti is hoping that the DIFTZ will provide a big boost to the local economy. It won’t just provide revenue but also employment for local workers. Officials also hope that the free trade zone becomes the prime hub for foreign investors hoping to enter the African market.

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China Gets Managing Rights In DIFTZ

The DIFTZ will be mainly under the guidance of the Djibouti government. However, three Chinese companies will also have managing rights. This includes the Dalian Port Authority, China Merchants Group and the IZP.

Djibouti lies on the Horn of Africa, where the Red Sea and the Gulf of Aden intersect. This small and barren country is in a very strategic location, which has led to various military bases in the nation. Despite its small population, the country wields a large amount of influence since it has become a sort of entry port into the African continent.

The Chinese push for management rights in DIFTZ is very important to the Belt and Road Initiative that China has been pushing. Building infrastructure in various nations across Africa and Asia is supposed to help China expand its economic influence. Recently, Djibouti and Addis Ababa were connected by a $4 billion railway that could mean more products reaching the land-locked country that is hundreds of kilometers away.

Despite the potential prosperity that the DIFTZ could bring to Djibouti, American officials are worried about China strong-arming weaker countries by taking advantage of the loans they have given them.

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