China has taken another major step to secure its position as a global trade leader by helping to launch the Djibouti International Free Trade Zone (DIFTZ). The pilot zone, which spans 240 hectares of the envisaged 4 800 hectares, consists of four industrial clusters. These will focus on trade and logistics, export processing, business and financial support services, manufacturing and duty-free merchandise retail.

According to Quartz Africa, Djibouti hopes the international trade zone will boost its position as a trade and logistics hub, create employment for its youth and provide a strategic base for global businesses hoping to access the rapidly growing African market.

The zone will be a joint operation run by Djibouti Ports and Free Zones Authority and China Merchants Holdings company. The country sits on two of the world’s busiest maritime routes, so the zone’s location is strategic as Djibouti, with its population of 876 000, already hosts Chinese, US and French naval bases while handling roughly 95 percent of the goods imported by Ethiopia. It aims to become a gateway to South Sudan, Somalia and the Great Lakes region.

“It is a zone of hope for thousands of young jobseekers,” Ismaïl Omar Guelleh, the president of Djibouti said at the inauguration ceremony, which was also attended by the presidents of Rwanda, Somalia, Ethiopia and Sudan.

“We are building a global, modern and sustainable trade hub for the coming decades. Djibouti’s strategic location makes it an important gateway to dynamic African markets. Our strategic location and world-class facilities have seen Djibouti’s importance as a trade hub recognised globally,” Aboubakar Omar Hadi, chairman of the Djibouti Ports and Free Trade Zone, told Reuters at the ceremony.

Hu Jianhua, the executive vice-president of China Merchants Group (CMG), said he was confident that the trade zone would be successful.

“CMG is open to share its port-park-city model experience, the PPC model, which it gained in the 40 years of development of Shenzhen. Djibouti is our top priority, based on mutual trust. I am confident that the port-park-city model will be successful in Djibouti,” he said.

Read: China to establish first overseas military base in Djibouti

China’s Belt and Road initiative and looming debt traps

The DIFTZ zone is integral to China’s Belt and Road initiative, which is a multi-trillion project that aims to invest in infrastructure projects in central, west and southern Asia, as well as in Africa and Europe. Working towards this, China has built and financed the continent’s first transnational electric railway. The railway cost US$4 billion and runs for 756 kilometers (470 miles) between Djibouti and landlocked Addis Ababa.

However, Chinas history of ‘debt traps’ could mean the partnership may threaten Djibouti’s long-term sovereignty, as was the case in Sri Lanka. Sri Lanka’s Mattala Rajapaksa International Airport, which opened in 2013 near Hambantota, has been dubbed the ‘world’s emptiest airport’.

Sri Lanka had to hand over a strategic port, the Magampura Mahinda Rajapaksa Port in Hambantota, to China in December last year on a 99-year lease after struggling to pay its debts to Chinese firms, leaving it vulnerable. India is still attempting to intervene.

“Though Sri Lanka had assured India that a firm commitment had been obtained from China that the port at Hambantota would not be used to even dock Chinese naval vessels, China’s penchant for subterfuge and for going back on its word is too well known. And if China ever goes back on its word to Sri Lanka, the latter would be powerless to act against China. Given this, India had deep concerns over China’s acquisition of the port,” Swarajya magazine reported, quoting a senior Indian diplomat.

China’s penchant for subterfuge and for going back on its word is well known.

China’s support of infrastructure projects in strategically located developing countries by burdening their governments with huge loans leaves them susceptible to Chinese influence on their economy and sovereignty.

Other countries that are under threat as part of China’s Belt to Road initiative include the Maldives, Mongolia, Pakistan, Lao, Tajikistan, Kyrgyzstan and Montenegro.