Djibouti 1997 PA | | • | Read the Full Text (14Mb PDF) |
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In Djibouti the problem of poverty reduction remains significant. The country's social indicators show that the gaps in social well-being are enormous and recent economic performance has been poor. Over the medium term, the government must develop new sources of growth in the economy. This report analyzes the nature and extend of poverty in Djibouti, and the distinguishing characteristics of the poor. The final goal is to propose a set of measures to reduce poverty in the medium to long-term and minimize the short-term social effects of structural adjustment.
Djibouti's main assets are its strategic location on the Horn of Africa, its harbor and associated infrastructure, and its access to relatively rich fishing waters. However, Djibouti's strategic location is also the cause of its problems. Djibouti attracts populations from other countries in the region because it offers relative peace and stability, and employment opportunities with salaries paid in hard currency. Immigrants and refugees place a tremendous burden on already-weak social services and economic security.
Djibouti is rated as a lower- middle-income country, with an average per capita income of US$780 in 1993. However, estimated living standards are distorted by the high cost of living and well-paid civil servant community. Most Djiboutians live at the subsistence level, and living standards are more comparable with those in Ethiopia than with those in non-African countries with similar per capita GDP levels. QDP per capita in 1993 prices fell from US$1,505 in 1,978 to US$854 in 1991. The situation further deteriorated in 1991 as the economy experienced a series of exogenous shocks, namely: (i) a sharp inflow of refugees from Somalia and Ethiopia: (ii) the 1992-94 armed conflict between the Issas and the Afars; and (iii) increased competition from Eritrea in providing transport services to the region. Concurrently, the Government of Djibouti began to incur increasing deficits (both internal and external) that led to the signing, in April 1996, of a one year stand-by arrangement with the IMF. This arrangement's objective was to stabilize the fiscal situation.
Poverty Profile
To formulate and implement a comprehensive strategy to combat poverty, it is essential to identify the poor. The analysis for this poverty profile is based on (i) a priority survey-type (EDAM, 1996) complemented by (ii) a participatory poverty assessment (PPA, 1996). EDAM excludes three highly impoverished and vulnerable groups - nomads, the homeless, and those living in temporary structures. Therefore, the household survey results on poverty, inequality, and standards of living are likely to present an over-optimistic picture of the real situation in Djibouti.
Poverty in Djibouti is high. In 1996 about 45 percent of Djiboutians were living in households with adult equivalent expenditures below the level necessary to provide basic needs. Ten percent were estimated to live in extreme poverty, i.e. they could not afford to buy the food basket necessary to maintain a minimum level of caloric consumption. Including the homeless and nomads in the analysis would increase the percentage of households living in poverty and extreme poverty.
Poverty is more widespread and deeper in Djibouti's rural areas and in the urban areas outside Djibouti-ville than in the capital city. The incidence of extreme poverty is more than seven times higher in rural areas (45.1 percent) than in Djibouti-ville (6.2 percept). This is probably because a household living in the capital can take advantage of safety nets derived from the presence of a commodity market and services, and job market opportunities not available in rural areas.
Refugees, nomads, the homeless and those living in temporary structures, and the street children are highly impoverished and vulnerable groups. Although refugees living in camps benefit from food aid, and free health care and education, they face a difficult situation and describe themselves as having lost everything, even their identity. War and poor rainfall have changed the nomad's normal patterns of transhumant behavior. Nomads cope by engaging in small-scale border trade, and receiving help from relatives living in Djibouti-ville. The street children, natives of Somalia or Ethiopia, live in dire poverty. They left their countries because of war or poverty, but have few chances to break the cycle of poverty: unable to attend school, they cope by taking odd jobs, and eating out of trash cans.
What Characterizes the Poor in Djibouti
The poor are characterized by absence of purchasing power, low human capital accumulation, and low standards of living. The poor (and the very-poor) differ from the rest of the population in socioeconomic and demographic characteristics, and employment status.
1) Unemployment and Poverty Unemployment is extremely high and increases the risk of the household being in poverty. The average unemployment rate is close to 45 percent, with the most disadvantaged economic groups having unemployment rates higher than 60 percent. The anticipated demobilization of up to 9,000 soldiers will add to the ranks of the unemployed. Most households in Djibouti are able to escape poverty because of their earnings from employment. Fifty-five percent of the very-poor live in households where no member is employed. These results underscore the importance of job creation in Djibouti.
2) Lack of Human Capital Social indicators in Djibouti are below regional standards. The poor's welfare is negatively affected by low levels of education, poor health status, and malnutrition.
Education: Poverty, illiteracy, and low educational attainment are strongly correlated. The literacy rate is estimated to be approximately 57 percent; but the poor, women, and old people are at a significant disadvantage in literacy skills. The poor have an illiteracy rate of 64 percent, but even in the most affluent 20 percent of Djiboutian households, 37 percent of individuals are illiterate. The gender gap is wide: while 73 percent of the men older than 10 are literate, only 45 percent of the women in the same group are literate.
Households with lower levels of education are at a higher risk of being poor: a one-year increase in the average education of the household reduces the probability of the household being poor by six percentage points.
Enrollment ratios show that educational attainment is not likely to improve substantially in the near future. Children begin school relatively late. Approximately one out of four children starts school after the age of nine and they begin leaving school when they are 14. Less than 50 percent of those aged 14-20 are in school. Enrollment rates are low and children from poor households are the least likely to be in school. At the primary level in 1996, the net enrollment rate among the poorest quintile was 53.1 percent, 25.3 percentage points lower than the rate in the top quintile. At the secondary school level, the gap widens to a five-fold difference between the poorest and richest quintiles.
Health: Health indicators are below regional standards. Life expectancy at birth is low at 49 years. The infant mortality rate, at l 14 deaths per 1,000 live births, is one of the highest among Middle-Eastern and Sub-Saharan countries. Diarrhea and malnutrition together constitute the leading cause of death among children under 5. Respiratory infections (associated with chronic malnutrition) is the second leading cause of mortality. High maternal mortality, estimated at 740 deaths per 100,000 live births, can be attributed to high fertility rates, anemia caused by malnutrition, and the widespread practice of Female Genital Mutilation. In addition, endemic problems - Tuberculosis, malaria, cholera, and AIDS- affect the population in general.
Malnutrition: Child malnutrition is widespread. Among children under 5 years of age, 26 percent are chronically malnourished (stunted), and 13 percent suffer from acute malnutrition (wasted). Considering that the first 4-5 years of life are critical to the future development of the child, malnourished children will be more likely to have low educational attainment and achievement.
Water and Sanitation: Appropriate sanitation facilities and clean water are necessary to reduce the incidence of diarrheal disease and preserve the environment. Lack of access to water is clearly correlated with poverty. Households belonging to the richest quintile are seven times more likely to be connected to the ONED (the network that supplies tap water directly to houses) than households belonging to the poorest quintile. A large percentage of poor households need to purchase water from a water truck. This water costs four times the price paid by richer households connected to the ONED network.
Sanitation indicators are sub-standard. In Djibouti, more than 40 percent of households have no proper drainage system for used water. The situation is particularly dangerous in the densely populated areas of Djibouti-ville where most of the population lacks proper sanitation services.
A Strategy for Poverty Reduction
This report shows a strong correlation between poverty and unemployment and between poverty and low investment in human capital: policies aimed at creating new jobs can have a substantial impact in reducing poverty. Investment in economic and social infrastructure (transport and telecommunications, water, sanitation, and housing) will have beneficial effects both in the short- and in the long-run. In the short-run these projects will generate employment and allow some households to escape from poverty and improve their living standards. In the long-run, these projects will play a fundamental role in increasing the level of human capital and enhancing productivity. These investments are essential to enhance the competitiveness of Djibouti in the provision of services to the countries in the region, notably Ethiopia. They also could contribute to transforming Djibouti into a regional trade and financial center.
A poverty-reduction strategy for Djibouti should: Raise growth and generate employment; Increase investment in human capital Develop targeted interventions for the poorest.
1) Growth and Employment
Given Djibouti's present welfare distribution, the country would have to sustain consistently high growth in GDP per capita to reduce poverty effectively by the year 2015. Assuming a 1.5 percent per capita growth rate, an estimated 38 percent of the population would be living in poverty by the year 2000; and more than twenty years from now, 20 percent of the population would remain in poverty.
Djibouti is characterized by: (i) low labor force participation, (ii) exceptionally high unemployment (particularly long-term unemployment), and (iii) a dual labor market (with the formal sector paying wages well above the informal sector). The high levels of unemployment do not cause a reduction in wages because the high public sector wages, together with other labor market restrictions, limit any downward adjustment in private sector formal wages, giving rise to a dual labor market and high unemployment rates.
Given the country's strategic location, level of infrastructure, and limited natural resources, the service sector (with particular focus on the Ethiopian market) is the main source of potential growth. In this regard, high labor costs (both wages and social security payments) represent a major obstacle to the competitiveness of Djibouti's private sector. Any strategy to cope with this situation will need to concentrate on two elements: Reduction in wages paid by the formal (especially public) sector Policies to facilitate entry into the labor market and creation of new jobs.
2) Investing In Human Capital
Increasing human capital is a key component of a poverty-reducing and growth-promoting strategy. Progressive liberalization of the economy requires higher education levels to support modernization of the productive sectors. Investment in human capital provides direct economic benefits and improves the general welfare of individuals and of society. In addition, it generates important cross-effects between sectors. For example, higher education levels are associated with reduced female genital mutilation (FGM) and fertility. More educated and healthier mothers produce healthier, better nourished and more educated children.
Education: Pro-poor education policies should emphasize two areas of intervention: Expanding all children's access to education, particularly to primary and lower secondary, with special emphasis on the poor and the very-poor Expanding girl's access to secondary education. Given their effect on health and fertility, targeted subsidies for girls' education will have very high social returns.
Improving the quality of and the access to primary and lower secondary school requires additional funding to the sub-sectors. Given the current financial constraints, Djibouti should explore all potential sources for improving the education system, among these: (i) community-based management; and (iii) enlisting the private sector to mobilize additional resources.
Health: Poor health status is both a cause and an effect of poverty. In Djibouti the health of children and mothers is among the most serious issues. Measles, respiratory infections, diarrhea, and FGM cause many deaths that could have been prevented. These health problems are amenable to low-cost and effective interventions. The Djiboutian health system is too centralized and too focused on curative care. Currently, health services are free and available to everybody. This leads to excess demand compared with available resources. Since households are more willing to pay for curative care than for preventive interventions, a reallocation of resources from curative to preventive care could significantly improve the efficiency and equity of the health care system.
Effective strategies to reduce the incidence of FGM include: Incorporating FGM treatment and counseling into health programs for women and children, and organizing information and education programs for community and religious leaders. Enforcing sanctions against individuals performing the practice.
Fertility is high in Djibouti across the population. The total fertility rate is 5.8 children per woman. The high fertility rate, young childbearing, and close birth spacing have detrimental effects on the health of women and children. Programs aimed at increasing female access to education (together with IEC campaigns) are the most likely to succeed in (i) promoting the use of birth control techniques and (ii) increasing the ability of couples to space their children optimally.
Consumption of Khat: Djiboutians are major consumers of khat. Indeed, 55 percent of households have at least one khateur. This practice poses enormous social, economic, and health problems. Two key areas of intervention are: Increasing taxation of khat. Besides contributing to reducing the demand for khat, such policy would generate additional tax revenues that could be earmarked for social programs Organizing IEC campaigns to raise awareness of the negative effects of using khat.
Water and Housing Conditions: Djibouti is facing a serious challenge in trying to provide its population with potable water. This will require policies on the supply- and demand-sides. On the supply-side, the introduction of new water harvesting methods is extremely important. Regarding the distribution of water, in the urban areas, the strategy should focus on installation and management of standpipes and minimization of the loss of the water network. For rural areas, the strategy should include a program of digging new boreholes and wells, and rehabilitating and maintaining existing ones. On the demand-side, the government should introduce an appropriate pricing system. Housing conditions are poor in Djibouti. A rehabilitation program would improve basic living standards and generate employment. Squatter-upgrading or slum-improvement programs, that include (i) affordable standards, (ii) cost recovery, (iii) improved institutional capability, and (iv) community participation, could broaden the provision of sustainable, low-cost housing. The housing policy in rural areas must be considered within a wider framework, including the development of economic activities and improvements in social service delivery, transportation, and infrastructure.
Efficiency of Public Spending: The review of government expenditures and subsidies on health, education, housing, and flour suggest that their present levels and patterns are not conducive to effective poverty reduction. Most programs are inefficient, i.e., the share of benefits received by the poor is smaller than their proportion of the population. The government has already taken steps to correct this problem by substantially reducing housing allowances to public employees. A further increase in efficiency could be achieved by: Reallocating resources from university education and hospitals to primary and secondary education, health dispensaries, and preventive health; Promoting policies to increase the participation of women and the poor in secondary and tertiary education (e.g., targeted scholarship programs); Implementing alternative mechanisms to finance tertiary education. To promote a service economy, it is important to have an adequate number of university graduates. However, given the tight budget constraint the government faces and the pro-rich focus of the university scholarship program, the government should means-test scholarships and support alternative financing mechanisms; Reassessing the baguette subsidy. This subvention is inefficient: the poorest 40 percent of population receive only 31 percent of the bread subsidy. The wealthiest 20 percent of individuals gain 28 percent of the subsidy.
Social Security System: There are three main problems with Djibouti's social security system: (its very limited coverage of the population; (ii) a bias toward the middle and upper classes; and (iii) the relative generosity towards those who participate. To solve its financial problems, Djibouti's social security system needs to broaden the tax base. This requires a system of incentives to induce contributors to pay contributions on their actual earnings, and to start a process of gradual "formalization" of the activities that are currently outside the scope of taxation. Some possible actions are: Linking all social security benefits to the level of contribution; Reducing the level of contribution paid by employers and employees; Wage-testing family allowances.
3) Instruments to Reach the Poorest Poverty is so widespread in Djibouti that a long-term policy to address it should be accompanied by short-term income transfer mechanisms to alleviate the poor's most urgent problems. A poverty reduction program should target: Inhabitants of the slums of Djibouti-ville and the homeless, Populations of the districts outside Djibouti-ville and nomads, and Demobilized soldiers.
These groups could be reached if they participated in labor-intensive construction of public infrastructures. These activities not only generate employment opportunity for the most vulnerable groups but also are consistent with long-term development objectives. They could: Directly impact Djiboutian standards of living (e.g., improvement of water and sanitation infrastructures, construction of a water network, rehabilitation and construction of schools and dispensaries; development of a system for the collection of urban waste), Result into higher levels of human capital, and Increase Djibouti's competitiveness as a regional service center for the Horn of Africa (e.g. construction of major roads and other infrastructures).
Income-generating activities would also contribute to provide income support to the poor.
This Report highlights the potential of the fishing sector. Training young fishermen and providing them with financial support can reduce unemployment, improve Djibouti's trade balance, and reduce malnutrition.
Monitoring Poverty
The design and implementation of poverty-oriented social and economic policies in Djibouti are made very difficult by the scarcity of relevant and reliable statistical data. To effectively implement poverty reduction policies, it is essential to develop a permanent and integrated poverty monitoring system. The poverty monitoring unit would be responsible for: Implementing household surveys; Monitoring the impact of social and economic policies on the poor's living standards; Disseminating all poverty-related information.
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