US embassy cable - 05DJIBOUTI559

UNCLAS SECTION 01 OF 02 DJIBOUTI 000559 
 
SIPDIS 
 
STATE FOR AF, AF/E, AF/EPS (ADLER); 
LONDON, PARIS FOR AFRICA WATCHER; 
STATE ALSO PASS DEPARTMENT OF COMMERCE 
 
E.O. 12958: N/A 
TAGS: PREL, EINV, EIND, ETRD, ECIN, ELTN, ECON, DJ 
SUBJECT: INDUSTRIAL PARK TO BE BUILT IN DJIBOUTI 
 
1. (U) SUMMARY: New American investment has come to 
Djibouti. Ali Toubeh, assistant to Saad Ahmed Cheikh - late 
owner of COMAD and a prominent figure in Djiboutian 
business - is carrying on Cheikh's last business venture. 
North Holding Investment Share Company was created as a 
subsidiary of the Virginia-based North Holding Investment, 
Inc and is now under the leadership of Toubeh.  With the 
financial backing of two American institutions, Sovereign 
Bank and Sofitel Capital Corporation USA, Inc, Toubeh is 
continuing Cheikh's vision of a 60-hectare industrial park 
on the outskirts of Djibouti City. The Industrial park will 
start with a factory to create pasta and other foodstuffs 
and a transportation division of 500 MACK trucks. The 
second phase will include factories for textiles, paint, 
and spare parts. Total jobs created for the initial phase 
is projected at a minimum of 1,500 positions. The textile 
factory will add another 1,400 minimum, along with several 
hundred for each of the other two factories. The venture 
has full backing from the Djiboutian Government, which gave 
North Holding the land for free and a tax holiday for the 
first ten years. Market studies for consumers in the COMESA 
(Common Market for Eastern and Southern Africa) and 
worldwide markets have been completed with projections of 
high income for the venture. END SUMMARY. 
 
2. (U) Several months before his death in April, Saad Ahmed 
Cheikh had set-up a subsidiary of the Virginia company, 
North Holding Investment, Inc (NHI) in Djibouti under the 
name North Holding Investment Share Company (NHISC). 
Securing financial backing from its American parent company 
and other financial institutions was started before Cheikh 
died. Saad's inheritors were not interested in pursuing the 
business opportunity after Saad's death and the company was 
dissolved. However, Cheikh's assistant and business 
partner, Ali Toubeh, resurrected the venture. The company 
was recreated in the same name and the deal continued with 
the support of Cheikh's American business partners. NHISC 
now is in the process of finalizing its financial support 
from Sovereign Bank and Sofitel Capital Corporation USA, 
Inc. It is also in the process of securing private 
insurance for its loans. 
 
3. (U) Cheikh's concept for the industrial park was in 
alignment with President Ismail Omar Guelleh's development 
objectives for his next six-year term. Toubeh's pitch to 
the government garnered full support from the Presidency 
and the Ministry of Finance. The Government has given NHISC 
an investment incentive in the form of a temporary land 
grant and a tax holiday for the first ten years of business 
under the current investment code. NHISC is also authorized 
to request an additional five-years of tax holiday should 
it desire. The Government has also agreed to facilitate the 
energy and water needs of the new complex, and all 
guarantees in needs to secure the initial capital layout. 
 
4. (U) NHISC aims to harness the expected success of the 
upcoming oil and container terminals at the Doraleh Port 
Facility. Djibouti's prime location along the Red Sea 
shipping routes, and its potential as a future major trans- 
shipment point, will also play in NHISC's favor. The 
objective of the project is to create a transport system 
that will serve the Ethiopian market and eventually that of 
COMESA. The transport system projects acquiring a target of 
500 MACK trucks over a five-year period to transport dry, 
container, and bulk fluid cargo. Employment for the 
transportation is expected to be a minimum of 1100 persons. 
 
5. (U) The first phase of the industrial complex will also 
include a Food Processing Factory, which will produce items 
such as flour, pasta, macaroni, baby food, biscuits, and 
cereals. The factory's products will be mainly for export, 
but five percent is destined for the local market. Minimum 
employment for this factory is estimated at 1000 persons. 
Production goals are to reach 340 tons per day, according 
to Toubeh. The Food Processing Factory will be complemented 
by a Packaging Plant that will produce PP bags and other 
kinds of packaging for finished products. Toubeh estimated 
that once construction is complete, installation of 
machines and other equipment will take nine months, putting 
the project operational date at about a year and half from 
now. 
 
6. (U) The plan includes creation of three other factories 
two years after the initial phase becomes operational. A 
textile factory will be built for garment transformation 
and blankets at European and American standards. The 
finished garments will be exported to the world markets, 
including Africa. Employment is projected to be 3000 people 
working three-shifts in a 24-hour operation. Toubeh said 
that 70 percent of this workforce is expected to be women. 
An auto-parts factory will supply various parts to COMESA 
and world markets. Ninety-eight percent of production of 
the auto parts will be for export, while two percent will 
supply the local market. Expected employment is around 300 
persons. The third factory is a state-of-the-art paint 
production facility, which will target the world market and 
employ around 600 persons. 
 
7. (U) Due to the labor-intensive nature of the work 
envisioned by Toubeh's projects, significant benefits for 
the labor market are expected. Djibouti's economy is 
currently 100 percent service-based. The addition of 
industry jobs will greatly augment the number of potential 
jobs in Djibouti. Toubeh said that all market studies had 
already been completed and indicated a positive return on 
all phases of the venture. He also specified that the 
suppliers of the raw material for the factories will 
provide the training necessary for the largely unskilled 
labor force that will work in the factories. Toubeh 
expressed hope that financing would be finalized by the end 
of June and construction would begin at the end of 2005. If 
all goes as planned, the initial phase should be 
operational in a year and a half. 
 
8. (U) Comment: While Doraleh remains the Government's 
biggest priority, increasing investment and economic 
opportunities comes a close second. Many are still unsure 
if Doraleh's projected success will come to fruition. The 
industrial park can provide a great benefit to the economy 
in the form of increased employment and expendable income 
that can further drive the need for services, and 
tangentially, increase development opportunities. 
RAGSDALE