Nestled between Eritrea, Ethiopia, and Somalia on the Horn of Africas Gulf of Aden coast, the Massachusetts-sized Republic of Djibouti has one of the hottest climates on earth. The former French colony gained its independence on June 27, 1977, and is predominately a volcanic desert with most of the population concentrated in the capital city of Djibouti (Djibouti-ville, used locally). A crossroads of nomadic migration, Djibouti has a diverse ethnic population composed of Somalis (60 percent), Afars (35 percent), and French, Arabs, Ethiopians, and Italians.



Djiboutis economy is focused on its port, railway and airport, and other services that support the thoroughfare of goods and people to and from nearby African countries. The port at Djibouti-ville has seen a giant increase in container traffic in recent years. This is largely due to political strife in neighboring Ethiopia and Eritrea has led to the rerouting of trade flows through Djibouti-ville. Also, under the management of the Dubai Ports Authority, the port has been modernized and expanded and has thus attracted a good deal of area container traffic, which is helped by Djiboutis positive reputation for safety and security in its port.
The government is also optimistic about the contribution the new US military presence in Djibouti could make to the country. Before France scaled back its military operations in Djibouti in 1997, its base contributed one quarter to the national economy. The other large component of the economy is foreign aid. With limited natural resources, Djibouti is heavily dependent on foreign assistance to support its balance of payments and finance development projects.
The International Development Association (IDA), a division of the World Bank, has planned to increase its involvement in Djiboutis economic development, specifically in alleviating the countrys chronic urban poverty. The World Food Program feeds 100,000 residents, a full one-sixth of the countrys population. USAID is involved in the country, currently focusing on improving transport infrastructure such as the airport. Djibouti is also implementing a demobilization and reintegration program aimed at improving fiscal responsibility and reducing the number of public sector employees.
Exploration is ongoing for minerals and petroleum resources, although production has not yet begun. 



Transshipment services centered around Djiboutis port are crucial to the national economy. Several years ago, the port faced problems regarding over-volumes and congestion, but since then, Djibouti has made successful efforts to fix the problems and expand the ports capacity. The port has been transformed into a large, modern facility that will capably handle the 250,000 containers and will make it the largest transshipment hub on the African continent.
The growing geopolitical importance of the country on the Horn of Africa also makes it relevant to US military interests, as evidenced by the significant US troop presence currently operating in Djibouti. This presence will bring more business to the Djibouti transport industry and more traffic through its port. International organizations and companies are working to update railways and airports to support the logistics and transport services. The Ethio-Djibouti Railway company has refurbished the existing cross-border rail link and provide an alternative route to be finished this year.
The United Nations Development Program (UNDP) has worked with the Ministry of Communications and Culture to design a strategy that would bring Djibouti into the digital age by 2017. The strategy includes provisions for a national information and communications technology (ICT) infrastructure, legal framework, and a national agency to promote ICT use and development. The plan also calls for nationwide Internet access, and implementation of information technology in the government and hospitals. Private sector plans include using ICT to create an international financial services center. To lay the foundation for implementation of the strategy, telecommunications charges have been reduced, a separate governmental telecommunications agency has been created, and a tender has been issued for the construction of a GSM network.
Djibouti already provides quality satellite and submarine cable communications through the state-owned Djibouti Telecom. The Societe de Telecommunications Internationales de Djibouti (STID) is 75 percent government owned and 25 percent owned by France Cable & Radio. The company controls DJIBNET, Djiboutis only Internet services provider.