15 May 2013 | Vol. 4, № 16.

From the Editor’s Desk

Dear FDI supporters, Welcome to the Strategic Weekly Analysis. This week’s issue starts in Bangledesh with an analysis of the recent unrest, where clashes between Islamist hardliners and security forces have increased with the war crimes tribunal handing down further verdicts. Next, FDI Senior Visiting Fellow Dr Sandy Gordon provides us with a timely look at the prospects for Pakistan under the incoming government of Nawaz Sharif. We then move to an examination of the evolving relationship between China and Nepal, and the consequences for the subcontinent’s stability in light of the recent border stand-off in Ladakh. India faces a similar problem with its Chinese relationship, with the on-going border disputes continuing simmer in the background we examine the possibility of India forming or joining a security alliance

to counter the threat from over the border. Finally, we look at Africa, where continuing ethnic tension in Kenya raises questions over the recent March election, and whether President Kenyatta may be institutionalising ethnic violence. Escalating social tensions in Uganda continue to threaten the countries oil industry; and in Djibouti a pro-Western outlook has been bolstered by recent significant investment from the United Kingdom towards social and economic reform. I trust that you will enjoy this edition of the Strategic Weekly Analysis. Major General John Hartley AO (Retd) Institute Director and CEO Future Directions International

*****

Page 2 of 14

Bloodshed in Bangladesh as Islamist Hardliners Clash with

Security Forces

With the war crimes tribunal handing down further verdicts and hardliners proposing

controversial Islamic laws, further unrest and violence is likely in Bangladesh.

Background

Violence erupted in Bangladesh last week as Islamist hardliners clashed with security forces,

killing at least 37 people. The clash on 6 May was the latest act in the violence that has been

ongoing since late February, when a leader of Bangladesh’s biggest Islamic party,

Bangladesh Jamaat-e-Islami, was sentenced to death for his actions in the 1971 war of

independence from Pakistan. Now, however, many hardliners are demanding a controversial

anti-blasphemy law, calling into question Bangladesh’s secular political tradition and raising

fears of further violence.

Comment

The clash on 6 May followed days of unrest in which tens of thousands of demonstrators

staged marches in Dhaka, the country’s capital. The demonstrations involved both members

of Jamaat and Hefazat-e-Islam, a radical Islamic group, who had been protesting the death

penalty given to Delwar Hossain Sayeedi, the deputy President of Jamaat. In all, almost 40

people were killed across Bangladesh, in the bloodiest day of conflict since Sayeedi’s verdict

was read out on 28 February. So far this year, over 150 people have died in clashes between

hard-line extremists and the police.

The ruling Awami League, perhaps worried about further backlashes, tried to justify its

heavy-handed response. The information minister, Hasanul Haq Inu, claimed that Hefezat

had come to Dhaka to topple the government. Further violence has been averted, thanks

largely to a curfew banning public protests in Dhaka. But new clashes are expected as the

war-crimes tribunal continues to prosecute Islamist hardliners over their roles in the

liberation war of 1971.

Almost all those being prosecuted are leaders of Jamaat, who claim that the charges are

politically motivated. On 9 May, Muhammad Kammaruzzaman, the senior assistant

secretary general of Jamaat, was sentenced to death for his part in the war of

independence. Only three days later, A.K.M. Yusef, the leader of Jamaat, was arrested in

Dhaka for similar offences. In response, Jamaat called for another protest on 14 May;

Bangladesh is now bracing for more fighting between protestors and security forces and the

resultant bloodshed.

Meanwhile, the recent clashes have thrown the Hefezat group into the spotlight. Previously

unknown to many, the newly formed Islamic group is loosely linked to Jamaat, the standard-

bearer for Saudi Arabia’s strand of Islam in Bangladesh, though seemingly it has no political

aspirations. It draws support from private madrassas in Chittagong, in the country’s south.

As well as being involved in the recent clashes, the group has issued a series of demands,

which have called into question Bangladesh’s secular political tradition. In April, the group

Page 3 of 14

listed 13 demands in total, including an anti-blasphemy law that would include a provision

for the death penalty. It has also called for other Taliban-style laws, including: the

cancellation of Bangladesh’s pro-women development policy; a ban on the mixing of men

and women in public; and mandatory dress codes.

Such demands go against Bangladesh’s secular tradition and against the moderate version of

Islam practiced by the majority of Bangladeshis. Indeed, secularism is even enshrined in

Bangladesh’s constitution. The group, therefore, has been dismissed by the Awami League,

but it is gaining traction. Worryingly, the Bangladesh Nationalist Party, the country’s main

political opposition, has backed Hefezat’s demonstrations and has threatened to boycott

general elections scheduled for January 2014.

Despite moderation being preferred by most Bangladeshis, religion still plays a large part in

the country’s politics. Even the Awami League, a supposedly secular group, talks up its

religious credentials before elections and the relationship between the judiciary and Islamic

law is often blurred. The Awami League still lets some religious leaders issue fatwas that

supersede judicial law. At the same time, the Pew Forum on Religion and Public Life found

that 82 per cent of Bangladeshi Muslims were in favour of making Islamic law official.

Muslims constitute almost 90 per cent of the country’s 160 million people.

With an election scheduled for January 2014, it appears the government will have to make

some concessions to the Islamic right, whose support it needs to win elections. In the

meantime, as the war-crimes tribunal prepares to release more verdicts and with groups

such as Hefezat gaining prominence, further violence and unrest can be expected. For most,

the election cannot come soon enough.

Andrew Manners Research Analyst Indian Ocean Research Programme amanners@futuredirections.org.au

*****

Pakistan’s New Government: A Harbinger of Hope?

While Pakistan’s economy and its relations with India and the US may improve under

incoming Prime Minister Nawaz Sharif, it remains unclear whether he will able to exert

sufficient control over the military and extremist groups.

Background

Pakistan has just experienced the first democratic change of government in its history. It did

so despite a violent campaign by religious extremists to derail the election. This violence

targeted secular-oriented parties such as the ousted Pakistan People’s Party (PPP). However,

the victory is still a genuine one by Nawaz Sharif’s Pakistan Muslim League-Nawaz Party

Page 4 of 14

(PML-N). The 60 per cent voter turnout is excellent for Pakistan and indicates that Pakistanis

defied the religious extremists.

Comment

Voters were clearly fed up with the PPP’s corruption and poor economic management. The

country has suffered from serious electricity cuts and an anaemic economy. It is burdened

by a rapid population growth rate, fuelled by poor levels of general and, especially, female

literacy. Environmental problems in the heavily irrigation-dependent economy are growing.

At the time of writing, Imran Khan has won about 30 seats, which roughly equals that won

by the PPP. It is likely Sharif will be able to reach the necessary 137 seats to govern in his

own right by attracting independent support. He may nevertheless seek a deal with Khan in

order to provide additional stability.

Although the electoral base of the new Sharif Government is mostly confined to Punjab, it

will have the benefit of being far more stable that the wobbly coalition it replaces. Sharif,

who is a billionaire in the steel industry, will be more market-oriented than Zardari. Pakistan

will have a less regulated economy. Economic growth will likely pick up given a reasonable

international environment. But, judging by Sharif’s previous stint in power, do not expect a

marked diminution in corruption or “money politics”.

Pakistan’s regional and security relationships are also challenging. Sharif campaigned on the

basis of lessening the Pakistani dependence on the United States. Even though Washington

is winding down the US military commitment in Afghanistan, it needs Pakistan to achieve an

ordered withdrawal from Afghanistan. This is a massive logistical exercise. It would be

greatly complicated should the US be forced to use the alternative route through the Central

Asian republics and Russia. Washington also needs Pakistan to ensure that a post-NATO

Afghanistan is not unduly destabilised from across the Pakistani border.

Sharif may well temper his supposed antagonism to the US. He will likely be encouraged to

do so by the Pakistani military. He has no love for the military and was ousted in 1999 by

then-Chief of Staff Pervez Musharraf and sent in to exile. But he will have little choice but to

work with them given their importance.

Despite hiccups in the relationship between the US and the Pakistani military, such as the

raid that killed Osama bin Laden, the two countries still have an important working

relationship, including in the provision of aid. Sharif will no doubt give the impression of

distancing Pakistan from the US, but will probably allow himself to be convinced on crucial

issues like continuing supply and exit through Karachi. Even though drone attacks now

originate from Afghanistan rather than Pakistan, Sharif may force the US to curb such

attacks on Pakistani soil because it is an especially high-profile issue in Pakistan. If the US

route through Pakistan is cut, it may be a temporary measure as a negotiation tool.

The really interesting effect of the change of government could be on Pakistan-India

relations. The PML-N is far better regarded by the so-called “religious right” than is the PPP.

Should the PML-N emerge as the majority party in its own right, its hand would be further

strengthened. These factors could give Sharif a freer hand to deal with India than his

Page 5 of 14

predecessor. Both Sharif and Indian Prime Minister Singh have been encouraging and have

had a long talk by phone. Any major change in the relationship would need to be achieved at

the political level and this election could prove a circuit breaker.

But there are also some profound impediments to a major breakthrough. The military needs

a continuing level of antagonism against India to maintain its influential role in Pakistani

society. Pakistani groups like Lashkar-e-Toiba (LeT) have been attacking India from across

the border for many years. The attacks on Indian Kashmir are clearly sponsored and

supported by the Pakistani state, especially the military intelligence, the ISI. Those on other

parts of India – such as that on Mumbai in 2008 – are also mounted from Pakistani soil. The

leaders of perpetrating groups like the LeT seem to function in Pakistan with impunity. India

is both threatened and outraged by this situation and it has become, along with the obvious

and major issue of Kashmir, a serious impediment in improved relations.

Can Sharif do better at reining in these groups than his predecessor? Will he be willing to do

so? Can he work with the military to ease relations with India? These remain important and

unanswered questions as we move into the period of the Sharif Government.

Dr Sandy Gordon FDI Senior Visiting Fellow

*****

China’s Renewed Engagement With Nepal

Chinese cultural and political engagement with Nepal has implications for the

subcontinent’s on-going stability, especially in light of the recent border stand-off in

Ladakh.

Background

China’s engagement with Nepal is focused on investment, cultural exchange and heightened

political contact at all levels. As a result, India is faced with the uncomfortable reality of

growing Chinese influence in the Himalayas - once India’s exclusive cultural and political

realm.

Comment

Chinese investment influence in Nepal is growing steadily. While India remains the dominant

influence for now, this may not last, as China steps up its engagement program. In 2012,

China signed a deal to invest US$1.6bn in the 750 megawatt West Seti hydropower project,

one of the largest in Nepal. A Chinese company is also constructing an indigenously-funded

Upper Tamakoshi hydropower project, with an expected output of 456 megawatts. Nepal

has also recently formed a committee to examine the feasibility of launching its first

satellite, with China and India both expected to submit offers of financial and technological

support. Chinese investment and involvement in these large projects could be the first step

Page 6 of 14

in making Nepal a transit point for furthering its business and investment influence across

the Subcontinent.

China is also involved in construction projects to modernise road networks across the

Himalayas. For example, it is modernising the 115km Araniko Highway, which connects

Kathmandu to the Chinese border near Kodari. China is investing US$20m to upgrade a dirt

track between Nepal’s Syabrubesi and Kerung, while on its side of the border it has

constructed Highway 318, which leads to Lhasa and eventually Shanghai. Importantly, aside

from facilitating easier trade, these road networks will ease military movements around the

border. The Himalayas are rapidly eroding as a barrier between China and the subcontinent.

China’s cultural investment should not be discounted either. Private institutions offering

Chinese lessons have appeared within the last few years; many Nepalese young people are

convinced that learning the new language will open up job opportunities and attract Chinese

tourism. The Chinese government is encouraging this by sending instructors to Kathmandu

to give free lessons and has set up a Confucius Centre at Kathmandu University. It is also

trying to attract talented Nepalese students by doubling the number of available

scholarships. While India used to host and educate the Nepalese elite, in the future they

may go to Beijing and Shanghai instead. On the political front, China is inviting prominent

Nepalese political parties for consultations, ahead of Nepal’s Constituent Assembly elections

due in November. Former Prime Minister Pushpa Kamal Dahal, for example, visited Beijing in

April. All of this constitutes an active erosion of India’s cultural and political dominance in

Nepalese affairs, which, in turn, will engender further suspicion between China and India, in

a region already known for its geopolitical tensions.

Despite the foregoing, India welcomes the prospect of greater trade with China. Their

agreement to aim for a US$100bn bilateral trade target by 2015 underscores this, as it is a

considerable increase on the US$66bn target set in 2012. For its part, China also desires

trade with India to flourish, and the way to facilitate this is to develop the border

infrastructure and link it to distant commercial hubs. It is also a method of balancing US

influence and preventing any undue deterioration of bilateral relations, which China is keen

to avoid.

In this light, it is no surprise that the incident in Ladakh has not reached the level of open

antagonism exhibited by Japan and China over the Senkaku/Diaoyu Islands. Rumours have

suggested that directives from Beijing led the Chinese media to play down the incident to

prevent tensions from escalating. The timing of this incident is suspicious, considering the

expected visit of Premier Li Keqiang to India on 20 May, with the Chinese government keen

to ensure the success of the visit. Despite this, the incident was handled diplomatically, and

has now been largely resolved by a joint withdrawal of their military forces.

India will have to get used to a greater Chinese presence in the Himalayas. Chinese

incursions into Nepalese affairs, through cultural exchanges and investment, represent an

erosion of Indian dominance; one that may have to be accepted if India desires more

developed economic and political ties with China. While border tensions will remain, the

recent Ladahk incident has shown that China and India are able to resolve minor disputes

without undue aggression. In turn, this bodes well for the future.

Page 7 of 14

Daniel Barnes Research Assistant Indian Ocean Research Programme

*****

Decision Time for India Regarding a Security Alliance

The on-going border spat with China will force India to determine whether it can stand up

to an aggressive China by itself or if it needs to join a security alliance.

Background

The current border issue between China and India (discussed here and here) took on serious

overtones, despite the Indian government’s efforts to downplay the matter. With China

becoming increasingly assertive, India must decide whether to stand up to China or

acknowledge its regional predominance. If it decides on the first option, it must also decide

whether it can do so by itself or if it needs to be part of a security alliance.

Comment

India, Japan and the United States held their fourth trilateral meeting last week. The

meeting was scheduled prior to the latest border dispute between China and India and the

delegates discussed, among other issues, China’s increasingly assertive territorial claims.

India is the odd man out in this grouping. Whereas Japan and the US have a security treaty

and the US has troops stationed in Okinawa, India does not have a similar formal agreement

with either the US or Japan. India does not wish to be seen as a junior partner in any

agreement with the US or, come to that, as a partner in containing China. It effectively holds

to its policy of non-alignment. The current imbroglio with China in the Himalayas, though,

could force India to decide whether to join an alliance.

China’s incursion was probably a reaction to India’s modernisation of its defence forces and

infrastructure in the disputed areas in the Himalayas and in the north-eastern state of

Arunachal Pradesh, which China claims as part of “South Tibet”. What China myopically fails

to recognise, though, is that India is doing exactly what China did previously. India’s effort to

develop roads and airfields in these areas is a delayed reaction to China’s upgraded road, rail

and air infrastructure along the border. Moreover, India has every right as a sovereign state

to carry out these projects, just as China did previously. China’s motives, therefore, can only

be seen as an attempt to keep India off-balance and dictate to it.

China is growing increasingly assertive in its territorial claims in the South China Sea and

along its border with India. India, therefore, has to make a decision: remain non-aligned and

stand up to China by itself, which it cannot do at the present time, or enter into an alliance

Page 8 of 14

with, say Japan and the US, and adhere to that alliance’s objectives. In the latter case, it

would effectively be subject to the policies of the alliance.

It is fairly easy to perceive the reasons for India’s reluctance to enter into such an alliance.

For a start, it does not wish to be seen as part of a coalition to contain China. That would put

it perceptibly into the US camp, at least insofar as the rest of the region is concerned.

Moreover, China is India’s largest trading partner; India cannot risk that volume of trade.

Also, any aspirations India has to being a global power would be jeopardised. Instead it

would, more than likely, be seen as a junior partner in an unequal alliance. Again, now that

the current dispute has blown over, India still has to live with its more powerful neighbour

and the good work on their relationship over the years could be undone.

But this does not necessarily have to be the case. The negotiated terms of an alliance could

work to India’s benefit. Also, it would be possible to enter into a security alliance with the US

and Japan yet retain the trade and economic benefits from its relationship with China. China

does not exactly see eye to eye with the US and Japan, but still trades with those countries.

India can enter into any alliance it chooses, just as China does. While India could lose part of

its trade with China (or all, given China’s history of doling out “punishments”), it could

replace that, to some extent, with trade with the US, Japan and regional states that also

have territorial disputes with China; several ASEAN countries come to mind. Moreover,

China stands to lose more than India given the skewed trade balance.

India needs to make a decision soon. It cannot afford to have China provoke and dictate to

it, as is currently the case. A security alliance with Japan and the US could entail more

positive than negative outcomes for India.

Lindsay Hughes Research Analyst Indian Ocean Research Programme lhughes@futuredirections.org.au

*****

Kenya’s Continuing Ethnic Tension

In recent years, Kenya’s history of ethnic division and tension has diminished; but President Uhuru Kenyatta may be in the process of institutionalising ethnic violence – even though the election on 4 March proceeded peacefully.

Background

The aftermath of the 2007 Kenyan Presidential Election illustrated that Kenyan society is

highly fragmented, both ethnically and regionally. Many were surprised that the 2013

Page 9 of 14

election did not devolve into ethnic conflict, however, that may soon change. President

Kenyatta is set to once more divide Kenyans along ethnic lines through his nomination of

specific tribal members to cabinet portfolios.

Comment

Kenya, much like other former imperial colonies, has artificial borders that have created or

exacerbated ethnic tension. The country has roughly 42 different tribes divided between

regions, although some cities are highly cosmopolitan. Of those tribes, there are four that

are predominant and compete for power, the Kikuyu, Luhya, Kalenjin and Luo. With no

dominant ethnic group, communities have had to form alliances and ethnic coalitions. This is

the current situation, with President Kenyatta and Vice President William Ruto being from

the Kikuyu and Kalenjin tribes respectively.

These ethnic divisions are currently being exploited by Kenyatta and Ruto, who have made

their choices for the cabinet. Of the 16 members chosen, half are from either the Kikuyu or

Kalenjin tribes, according to John Madi, leading member of the Appointments Committee.

Furthermore, Madi claims that Kenyatta and Ruto’s decision to have a predominately Kikuyu

and Kalenjin cabinet membership is unconstitutional. According to Article 152 of the Kenyan

Constitution, the cabinet is meant to be a microcosm of Kenyan society, with members

representing a regional and ethnic balance.

The marginalisation of the Luhya tribe is an important issue. It is the second largest tribe in

Kenya, but has only received one cabinet nomination, while the Kalenjin, the third largest

and the tribe of Vice President Ruto, has four cabinet positions. It seems that Kenyatta’s

inauguration speech about forming an inclusive government has been, by and large, ignored.

Kenyatta’s ethnic divisiveness is not unique or surprising. His indictment by the International

Criminal Court charged him with ‘adopting and implementing a common plan to commit

widespread attacks in or around Nakuru and Naivasha’ after the 2007 presidential election.1

The people targeted in those attacks were of the Luo tribe and presidential runner-up Raila

Odinga is a member of that tribe. Furthermore, Kenyatta has offered Odinga either a

position as a roving envoy or a pan-African post. This decision may be a political move by

Kenyatta to remove Odinga from public view and limit his ability to further challenge

Kenyatta’s legitimacy. This came shortly after the Kenyan Supreme Court upheld Kenyatta’s

victory over Odinga, 50.5 per cent to 43.7 per cent.

Kenyan politics place importance on ethnic balance and Uhuru Kenyatta’s cabinet decisions

may be the spark to the fuel that ignites another round of ethnic conflict. This is something

that Nairobi cannot afford economically, as it is a principal transit state for landlocked East

African countries, such as Uganda, Rwanda, Burundi and parts of the Democratic Republic of

the Congo. Additionally, the 2007/2008 riots caused several billion dollars in direct and

indirect damages, killed an estimated 800-1500 people and displaced nearly a quarter of a

million.

1 Kaberia, J., (2013). Prosecutor Amends Kenyatta’s ICC Charges, Capital FM News, retrieved from:

<http://www.capitalfm.co.ke/news/2013/05/prosecutor-amends-kenyattas-icc-charges/>, accessed 9 May 2013.

Page 10 of 14

Uhuru Kenyatta’s policies are likely to lead to ethnic tension between rival groups. Though

the potential for these tensions to spill over into a large scale conflict on the scale of 2007

and 2008 is limited, nevertheless the prospect is greater than before. Ethnic divisions and an

International Criminal Court indictment have marked the beginning of Kenyatta’s legacy.

Gustavo Mendiolaza Research Analyst Indian Ocean Research Programme gmendiolaza@futuredirections.org.au

*****

Uganda’s Oil: Despite Progress in Resolving Disputes, Tensions

Continue to Escalate

A decision to build an oil refinery is a positive step in several disputes between foreign oil

companies and the government of Uganda; however, rising social tensions threaten to

delay timely commercial oil production.

Background

Oil was first discovered in Uganda in 2006; however, commercial production has yet to

begin. Oil companies and the government have been involved in a protracted dispute over

several issues, including taxes for oil companies, petroleum laws and whether a refinery

should be constructed. In the latest move to settle the disputes and begin commercial oil

production, it has been decided that a small refinery will be built in the Hoima District of

north-western Uganda. The refinery will produce 30,000 barrels per day (bpd), as opposed

to the government’s initial request for 200,000 bpd. Despite this positive move forward, the

country faces more delays to oil production due to rising tensions among local residents and

district leaders. Although the situation is unlikely to result in widespread unrest in the short-

term, further delays to the project are likely to frustrate resource companies.

Comment

Several issues remain in Uganda and have the potential to further frustrate investors by

delaying projects and development. These issues stem from the rising tensions in the local

community, namely: those of royalty dividends for local leaders; relocation packages for

residents who need to be evicted due to the refinery’s construction; and managing local

expectations, particularly among the young.

Page 11 of 14

Firstly, local government leaders, represented by the Uganda Local Leaders Government

Association (ULLGA) have asked Parliament to review the conditions in the proposed Public

Finance Bill, which make provision for the distribution of royalties to districts in the ‘oil belt’

areas. Currently, the proposal is that districts located within the petroleum exploration and

production areas will be allocated seven per cent of royalties; however, district leaders want

this increased to at least 15 per cent. Furthermore, local leaders are opposed to potentially

having to share their portion of the royalties with traditional leaders in their districts. In

addition, district leaders from outside the ‘oil belt’ have voiced their dissatisfaction with the

proposal, claiming that all districts in the country should reap the rewards of the royalties

and not just certain districts. The issue has the potential to create anti-government

sentiment and cause

hostility between the local

and central governments.

Another contentious issue

has been the eviction of

some 350 households in

the Hoima District, where

the oil refinery is due to be

constructed. As a positive,

the affected residents have

said that they are not

against development in the

area; however, they claim

to have received little

information about their

relocation and

compensation packages.

This has angered residents

and led to threats of riots,

should the refinery’s

construction commence

without the local

community being supplied

with adequate information

about the arrangements for their relocation.

An issue that has the potential to be of great concern is managing the expectations of the

young people in these areas. Uganda, like much of Africa has an emerging youth sector that

is particularly ambitious, yet also wants to see immediate rewards as a result of investment.

The mayor of Hoima District, Grace Mary Mugusa, has already said that the young want to

‘get rich quick’ from commercial oil production. Uganda’s government and the companies

investing in the country need to be wary of exaggerating the prospects of wealth and

employment to be generated by planned developments. Should they fail to adequately

inform the communities, particularly their young people, they are likely to become angered

if they do not see a sufficient return from the investments and the associated revenue.

Page 12 of 14

Although government is most likely to be targeted, resource companies associated with the

projects may also be targeted if they are considered to be at fault. A similar example can be

drawn from Mozambique, where disgruntled community members protested against Vale.

These issues have led to simmering tensions in the area and, although widespread unrest is

not expected in the near future, if they are left unresolved, demonstrations by the

disgruntled community members are likely. Such occurrences can be expected to delay

projects even more, which will undoubtedly frustrate investors.

Kim Moss Research Analyst Minerals and Energy Research Programme kmoss@futuredirections.org.au

*****

Djibouti Looks to UK to Boost Investment

Djibouti and the United Kingdom have begun to explore ways to deepen their relationship.

While it is early days, the choice of the UK highlights the continuing pro-Western outlook

as the strategically located country seeks to address significant social and economic

challenges.

Background

The Republic of Djibouti, strategically located at the Bab el-Mandeb chokepoint linking the

Gulf of Aden and the Red Sea, is seeking to boost its diplomatic and business relations with

the United Kingdom. The inaugural UK-Djibouti Trade and Investment Forum, held in London

on 8 May and attended by high-level Djiboutian officials including President Ismail Omar

Guelleh, was hailed by both countries as the beginning of a deeper relationship.

Comment

With a population of just under 800,000 people, Francophone Djibouti has not traditionally

had close links with the United Kingdom. That may be about to change. Djibouti, which has

high levels of poverty and unemployment and meagre natural resources, is aiming to on its

location and become a regional centre for transport, finance and tourism.

Since the independence of Eritrea in 1993, the port at Djibouti City has been Ethiopia’s sole

outlet to the sea. Now, with the expanding Ethiopian economy and the presence of French,

United States and Japanese military personnel, Djibouti’s location is its greatest asset. A

possible pipeline transporting South Sudanese oil across Ethiopia to the port of Djibouti

would be a significant source of revenue, if constructed.

Page 13 of 14

The challenge for the Djiboutian Government, denounced as authoritarian by opposition

groups both inside and outside the country, is to generate revenue and jobs to boost low

living standards and forestall discontent. The government of President Guelleh has a pro-

Western outlook and, although traditionally close to France, the fact that it is looking further

afield is significant. In seeking to deepen relations with the UK confirms that outlook. If

successful, it should help to bolster Djibouti as an oasis of stability in a largely troubled

region.

It also fits neatly with London’s objective of boosting Britain’s prosperity by improving its

links with emerging economic centres. Despite its many other problems, Djibouti has a

reasonably open investment environment with stable financial institutions and no

restrictions on currency imports or exports. The Djiboutian authorities will need to ensure

that their country does not become a tax haven and thus face the countermeasures that are

taken against such jurisdictions by organisations including the Organisation for Economic Co-

operation and Development and G-20.

Leighton G. Luke Manager Indian Ocean Research Programme lluke@futuredirections.org.au

*****

What’s Next?

15 May: Chief Ministers in India will attend a meeting set up by the home minister

to discuss starting a national counterterrorism centre.

17 May: Bangladeshi Foreign Minister Dipu Moni will meet with US Secretary of

State John Kerry in Washington to discuss bilateral issues.

16-18 May: The Chamber of Mines of Zimbabwe will hold an annual general

meeting ahead of the country's general elections.

The Centre for Muslim States and Societies at the University of Western Australia

is holding a panel discussion titled “Pakistan after the Election: Challenges and

Policies” on 17 May from 7.15 – 8.45am. The venue is the UWA Club Café, Hackett

Entrance № 1, Hackett Drive, Crawley. Tickets cost $20.00 (adults), $10.00

(students and concession). RSVP by 16 May to: cmss-sscs@uwa.edu.au

Page 14 of 14

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International. Published by Future Directions International Pty Ltd. 80 Birdwood Parade, Dalkeith, WA 6009 Tel: +61 8 9389 9831 Fax: +61 8 9389 8803 E-mail: tdavy@futuredirections.org.au Web: www.futuredirections.org.au