The French first took control of the small coastal settlement of Obock in 1859. The completion of the Franco-Ethiopian railway in 1917 established the town of Djibouti and began a period of economic growth as the port facilities were developed. Djibouti was known as French Somaliland until 1967 when it was renamed the French Territory of the Afars and the Issas; it became Djibouti at independence in 1977.
Ethnic tension between the Afars and Somali has always been high. In 1967 the people of Djibouti voted in a referendum to maintain an association with France, despite claims of expulsions of pro-Somali politicians and vote rigging favoring the Afars in the first election supervised by the French. Growing pressure from the Organization for African Unity (OAU) led to the peaceful progression towards independence in 1977, and Hassan Gouled (an Issa) became the first president. Within one month, Somalia and Ethiopia began the Ogaden war, which had severe economic effects for Djibouti since the fighting, ranging over the rail link between Ethiopia and Djibouti, closed rail links to Addis Ababa, Ethiopia, for a year and cut port traffic.
Despite the resignation of 5 Afar members from the cabinet in 1977, the president managed to contain ethnic strife for most of the 1980s. Political stability was maintained through patronage dispensed through the RPP, the sole political party. Despite winning the elections in 1982 and 1987, the government became extremely unpopular in the late 1980s, and there were calls for a multiparty political system. The government's suppression of Afar civil unrest in Djibouti caused an insurgency in the north.
The Afar rebellion, led by former Prime Minister Ahmed Dini, spread rapidly, and 3 rebel groups came together to form the Front for the Restoration of Unity and Democracy (FRUD). However, the government was able to deflect French pressure for compromise, and with Arab funding regained control of the north, defeating the insurgents. The government signed a cosmetic peace accord with the minority group of the now divided rebels in 1994 and gave 2 of its leaders cabinet posts. The presidential adviser Ismail Omar Guelleh consolidated his position during president Gouled's long illness and became president himself in the 1999 election. The change of president is not expected to lead to a change in policy, as Guelleh headed the cabinet for 20 years and has proved ruthless in dealing with opposition. Guelleh has retained most of the previous cabinet, but power essentially lies with him and his personal advisers.
The constitution is largely French in structure, and provides for universal suffrage. The president is elected for a 6-year term and the members of the 65-member Chamber of Deputies for 5-year terms. At the height of the civil war in 1992, a constitution endorsed by a referendum brought in a multiparty system, though it only recognized 4 political parties. However, formal government institutions have been severely disrupted since 1991. The judicial system has been undermined by political pressure, and most actual power resides in the hands of the security services, which are under the direct control of the president.
The 2 opposition parties are divided and—despite large support—the Party for Democratic Renewal (PRD) and the National Democratic Party (PND) failed to gain any seats in the 1992 or the 1997 elections, mainly due to infighting. In the 1999 presidential election they presented a united candidate, Moussa Ahmed Idriss, who gained a quarter of the votes in a 15 percent voter turnout.
Internationally, Djibouti has remained politically non-aligned, though it has been watchful of its larger neighbors and has been active in promoting the regional developmental organization, the Intergovernmental Authority on Development (IGAD).
The border dispute in 1998 between Ethiopia and Eritrea brought economic benefit to Djibouti, since most international trade with Ethiopia then had to come through Djibouti's ports. This situation strengthened Djibouti's trade ties with Ethiopia, which have remained strong after the cessation of the border dispute. Djibouti broke off diplomatic links with Eritrea and forged solid links with the ruling Ethiopian party in 1998.
Unrest in neighboring Somalia, which began in 1991, could have been destabilizing for Djibouti, but the establishment of the stable, but unrecognized, Somaliland Republic adjacent to the border has limited the impact. French military presence in the form of a naval base has protected Djibouti from international threats both before and after independence, although French presence is currently being scaled down. Despite having an Arab minority, Djibouti declares itself an Arab state and plays an active role in the Arab League.
Djibouti succeeded in raising 31 percent of the GDP as government revenue in 1997. About 19 percent of this money was raised by income taxes on individuals and corporations, 20 percent from other direct taxes (mostly property taxes), 46 percent by indirect taxes (mostly customs duties ), and 15 percent came from license fees and property sales. Grants received from abroad (mostly from France) are about 3 percent of GDP. Administration made up 41 percent of government recurrent expenditure, 28 percent was spent on defense, education accounted for 12 percent, transfers were 10 percent, 5 percent was spent on health care, and subsidies to state-owned enterprises was 4 percent. Government capital expenditure was about 5 percent of the GDP. Defense spending in 1997 was about twice its normal level as a result of demobilization payments made to reduce the size of the defense forces at the conclusion of the civil war.