Just ten months after the historic Oval Office meeting between President Obama and President Guelleh of Djibouti, the two countries last week held the inaugural Strategic Dialogue in Washington, DC.  The announcement of a “strategic partnership” came last May when the two sides agreed to a ten-year lease extension for the Camp Lemonnier military base, which houses the US military’s largest presence on the continent.

Though the focus of last week’s meetings was on regional security issues and counter-terrorism, the Dialogue comprised a full-range of topics, including investment, economic growth and job creation, and social development, such as education and health care.  Foreign Minister Youssef led the Djiboutian delegation, which included Minister of Defense Houffaneh and Finance Minister Dawaleh, among others.  Secretary of Defense Carter hosted the Djiboutian delegation at meetings at the Pentagon (his first delegation as Secretary), while Secretary Kerry kicked off the discussions at the State Department.

Djibouti faces some serious challenges.  The World Bank estimates that 40 percent of the population lives in extreme poverty – one of the highest rates on the continent.  And though the government has emphasized the importance of education – having increased enrollment rates to nearly 80 percent in recent years – the fact is few Djiboutians have the requisite skills to land jobs or start businesses in a services-oriented economy.  It is feared that unemployment might reach as high as 65%, and faced with its own youth bulge, Djibouti needs more help from Western donors and the private sector to  introduce market-driven vocational training schemes.  Add to that the tough neighborhood in which Djibouti is situated, with Eritrea to its north and a still active Al-Shabaab in Somalia to its south, and the picture doesn’t appear very rosy.

Its geography, however, is its greatest strategic advantage.  The economy, growing consistently at 5 percent a year, revolves around the port and port-related services.  The port serves as a lifeline for Ethiopia’s rapidly growing economy, and the number of countries the port services continues to grow.  A $4 billion railway project that connects Djibouti to Ethiopia’s capital, Addis Ababa, which will start service before the end of the year, promises to compress transit times from days to hours.  A new air cargo terminal is being built, and there are plans to triple the throughput of the Doraleh Container Terminal.  Moreover, the government is planning for expansion and future investment: a ship repair facility, an LNG terminal and a crude oil terminal, and widening its railway to connect to more countries.

In describing his vision for Djibouti, President Guelleh said at a dinner last year that he wanted to see his country become the “Singapore of Africa”, with an economy that is Africa’s first “all-green” economy.  With ample solar, wind and geothermal resources, it certainly has the potential to achieve that goal.  The World Bank and other donors are assisting to prove the commercial viability of the geothermal resources at Lake Assal and structure a deal with a private developer.  Finance Minister Dawaleh is one of several ministers actively trying to attract private capital and the private sector into the development of the energy sector to address the power deficit.

By all accounts, the first Dialogue went exceptionally well.  The Djiboutian delegation left Washington feeling very good about the relationship with the US, but there is an important unanswered question that the Djiboutians asked:  How can the two sides work together so that Djibouti will eventually be able to take advantage of AGOA, the Administration’s most important tool for trade with Africa?

This post can also be found on Cov Africa, the firm’s blog on legal, regulatory, political and economic developments in Africa.