http://natna.wordpress.com/2012/12/03/eritrea-towards-new-economic-phase/
by Sam B.
3 December 2012
It is hard to count how many times Eritrea’s economy has been pronounced
dead, dying or soon on its way there. Every ignoramus and his/her aunt had
a say on the matter. Chatham House in the lead declaring: “Eritrea’s
economy is slowly grinding to a halt.”
Yet, begrudgingly, albeit at times while fudging the numbers in order to
take away from the remarkable recovery and progress so far, all now accept
that Eritrea’s economy is one of the fastest growing in the world. This is
even more remarkable as it is taking place despite of the virtual economic
embargo on Eritrea. Eritrea has been shutout from access to hard currency
from IMF, World Bank and other International Financial Institutions and has
been on a no-war-no-peace footing that was meant to disrupt it, weaken it
until it kneels down. Eritrea not only managed to survive this, it is now
on a trajectory to thrive on its own terms.
For all intents and purposes, although they were difficult, the first phase
of adjustments that were required as a result of the economic embargo on it
and the no-war-no-peace situation are now but completed. Eritrea now is
embarking on another phase. This trajectory has officially commenced on the
August 27-28, 2012 Eritrea Investment Conference. It was also evident in
today’s, 3 December 2012, press release regarding Eritrea’s Cabinet of
Ministers meeting in Asmara. It stated:
“Concerning trade and industry, the Ministerial Cabinet meeting conducted
in-depth discussion assessing the available capital resource in the
industrial sector, domestic and foreign trade activities, as well as import
and export. It also discussed ways and means of strengthening the role of
the private sector. Besides, the Cabinet of Ministers outlined the
implementation of projects and investment schemes regarding the setting up
of food processing and construction equipment plants, in addition to
promoting manufacturing capacity at all levels.”
“Noting the need for encouraging domestic and foreign investment in the
trade and industrial sectors, the meeting gave directives to the Ministry
of Trade and Industry to prepare detailed outline of the existing
investment prospects in the country in connection with the forthcoming
Second Investment Conference here in the capital.”
Although there have been obtuse caricature-ization of Eritrea’s economic
policy, few have actually portrayed it as it actually is. Post the first
phase of adjustments Eritrea’s economic policy and goals, as stated by it,
in brief are:
“Eritrea strives to develop an open and dynamic economy anchored on the
self- reliance and full participation of its people. Establishing a
resilient economy based on a well-functioning public and private
partnership where the latter is competitive and socially responsible is the
ultimate goal of its economic development strategy… the participation of
the people, whether at home or in the diaspora, is considered critical.
Accordingly, citizens are mobilized to contribute to, and eventually
benefit from, an expedited achievement of this widely shared national goal.
At the centre of this strategy is the maintenance of a predictable policy
and regulatory framework that promotes regionally and sectorally balanced
economic growth and efficiency. Eritrea’s fiscal, monetary, foreign
exchange, investment, trade, human and infrastructure development policies
and investment programmes are formulated, designed and implemented to
achieve this objective. The strategy also aims to generate rapid
socio-economic transformation with fiscal and monetary stability. Central
to this development strategy and policy setting is Eritrea’s drive to
establish an effective public services delivery system with zero tolerance
of corruption.”
It further states:
“During 2011-2015, to be on a higher growth path and sustain it, Eritrea
shall concentrate on enhancing economic efficiency in the use of existing
assets and investible resources. And to continue restoring macroeconomic
balances, prudent fiscal and monetary measures shall be consistently
pursued. Productivity-generating measures and new strategic investment
where Eritrea has comparative advantages shall also be undertaken on a
continuing basis. In particular, efficiency improvements that expand output
in agriculture, fisheries, construction, mining, manufacturing and the
basic services sector shall be vigorously pursued to generate growth.”
The obvious question that may arise is: As Eritrea is under virtual
economic embargo from IMF, World Bank and other International Financial
Institutions how will Eritrea finance the envisioned economic activities
that were detailed in today’s press release – “the implementation of
projects and investment schemes regarding the setting up of food processing
and construction equipment plants, in addition to promoting manufacturing
capacity at all levels”?
Although Eritrea now has access to hard currency as a result of mineral
extraction activities, one of its valuable asset, along with its resilience
and people, has been its long-term and strategic relationship with certain
regional partners. As a result it has access to financing now, were other
were attempting to deny it. For instance, the Abu Dhabi Fund for
Development (ADFD) in 2012 has made grants and loans all over the world. It
has allocated “worth about AED183 million [US$50 million] to finance a
project in Eritrea to support its economy in tackling the budget deficit
and achieve growth.”
Eritrea is setting out into a new phase. It has been encouraging its
citizens to set up businesses that are not too dependent on imports and
hard currency. It will be safe to assume import substituting or export
oriented investments (as opposed to import oriented trade) naturally will
be preferred and encouraged. Those that can spot the beginning of a new
paradigm and the early movers will be best placed to benefit from it. In
that trend a second Eritrean Investment Conference is scheduled to be held
in Asmara from 17 -18 December 2012. If you are an investor or thinking
about it you would be well advised to attend to see and learn more for
yourself.
Received on Wed Dec 05 2012 - 10:41:59 EST
