Eritrean Investment Conference Drama

What have Mr. Yonas Manna, Dr. Asghede Hagos, Dr. Yacob Fisseha, Dr. Berhe Habte-Giorgis, Dr. Ghidewon Asmerom and Prof. Senai Andemariam conveniently forgotten to tell you about the investment climate in Eritrea?  None of these will debate the issues raised in this article.

 

From the outset, it should be understood that Eritrea is a rich country.  It is rich in mineral and marine resources, sufficient fertile land and, above all, possesses industrious population.  Eritrea’s difficulties arise due to PIA’s outdated and failed MAOIST philosophy.  ‘Warsai Yikealo’ and its ever changing names has the same purpose and end results as Mao’s ‘Great Leap Forward’, ‘Cultural Revolution’ and other endless ‘campaigns’.  Ultimately it is about absolute power!  Another Maoist dirty politics practiced in Eritrea is to allow army officers and army units to own and operate businesses.  Gen. Okba Abraha’s concerns about army business fell on deaf ears.  Following Mao, in PIA’s Eritrea, guns and profits are deliberately mixed together to create mafia culture. 

 

As readers will note, what is holding back Eritrea from realizing its richness is PIA’s deliberate policy of impoverishment, designed to maintain tight grip on power, experiment with outdated political ideologies, and other unknown reasons.

 

The 2^nd Eritrean Investment Conference, scheduled for December 17 & 18, 2012, is yet another drama designed to feed its dwindling supporters talking points at a time when every news coming out of the country is about a country hitting rock bottom by every measuring yard stick.  The floodgates of exodus have opened so wide that Eritreans at all levels and including those issued exit visa are buying one-way tickets.  Only the naïve would believe that investment would flood into Eritrea at a time when the Eritrean people are flooding out.

 

This article underscores and builds on astute observations and comments made by Drar Degol in his three part articles titled “If this is not a farce what else is?” posted on assenna.com.  Surely, Mr. Kuflom Dafla’s interview on assenna.com will be eye-opener.

 

The burning question is why would a regime determined to destroy, and has destroyed, the Eritrean private sector and fully engaged in implementing outdated and failed communist policies pay lip service to “private investment”?  

 

Some of the broader questions are,

1. What types of investments would be desirable?
2. What are the prerequisites to attract investments?
3. Any drama has a specific target audience.  The question is, who would be interested in investing in Eritrea.  One can rest assured the regime’s spin-masters and fan club members won’t be lined up to invest in Eritrea.

 

The most important factor in attracting investment is “investor confidence”, which means that investors feel confident that government abides by the rule of law, pursues transparent socio-economic policies including providing accurate and timely data, pursues prudent fiscal and monetary policies, and generally works in cooperation and not in antagonism towards private sector.

 

Why the need to hold back-to-back Investment Conference?

1. Is it to give Dr. Woldai Fitur, who has been demoted from Minister of Economic Development to Head of the defunct Investment Centre, something to keep him busy before he joins the Exodus?  This writer, despite many criticism of Dr. Woldai, has much respect for Dr. Woldai and other Expatriates who return to their homeland to help out.  Our issues are with the remote control
2. Is it to give the regime’s dwindling supporters talking points? How long can you talk about ‘Hizbawi Mekete’, ‘Warsai Yikealo’, etc… before even the regime’s staunchest supporters get tired of stale messages?
3. Is this an attempt by a regime that is cornered socio-economically and politically, both domestically and internationally, seeking a way out to some kind of reform – either for buying time or having learned bitter lessons?
4. Is holding back-to-back investment conference a futile attempt to feign genuine interest in attracting investment?
5. Is this a futile attempt to swindle, it hopes, the very few remaining gullible investors out of their hard currency, which PIA desperately needs due to tightening international sanctions?

 

 

What are Desirable Investments?

What types of investments are desirable?  Are there such things as desirable investments?  How do we determine these?

1. Are these investments that generate hard currency,
2. Are these investments that save hard currency,
3. Are these investments that bring know-how into Eritrea,
4. Are these investments that create employment, etc…?

 

These may not be mutually exclusive and that an investment may achieve different objectives but one objective might be more predominate than others.

 

The challenge facing Eritrea is that it is a very small market with even smaller consumer purchasing power.  There will not be any significant investment in Eritrea for years to come aimed at marketing within the domestic market.  Eritrea can encourage cottage industries to develop more as a forum for learning business skills than as a long term s

 

 

Overview of Eritrean Domestic Market

Although Eritrea’s population is estimated at about 5.5 Million, domestic population is about 4.5 Million.

• 75% of the population lives in rural areas engaged in subsistence living.  Their consumption capacity is very limited, and mostly consists of food & clothing.
• Of the 25% of the population (1,250,000) that lives in urban areas, about 750,000 live in Asmara.  Most other towns (Massawa, Keren, Mendefera and others) have an average population of 75,000.  The National Service (also known as Slavery Campaign) creates shift in urban population.

 

The Eritrean middle class, which is largely made up of business people, has disappeared in the last 10 years due to imprisonments and fleeing the country.  The Eritrean civil service which had better purchasing power than most of the population is now the working poor as inflation has destroyed their purchasing power. 

 

NO LARGE INVESTOR WOULD BE INTERESTED IN INVESTING IN ERITREA TO SUPPLY DOMESTIC CONSUMPTION BECAUSE ERITREANS HAVE LITTLE PURCHASING POWER – thanks to PIA’s deliberate impoverishment policy.  Especially in the last 12 years, PIA has decimated whatever little purchasing power people had through reckless socio-economic policies in order to maintain absolute power in Eritrea.

 

In today’s Eritrea,

• Average Civil Servant             Nfa 1,200/mth               75,000 servants
• Includes teachers, doctors, ministries
• National Service                      Nfa    600/mth             250,000 servicemen
• (Nfa 150 for first 18 months)
• Regular army                           Nfa  1,200/mth              50,000 soldiers
• PIA owned (PFDJ) Co.          Nfa  2,000/mth              20,000 employees

 

 

COST OF LIVING

• Rent (one room, no electricity)           Nfa 1,000/month (anywhere in Eritrea)
• Food (family of 4)                              Nfa  1,000/month (no dairy, no meat, no    

fruit diet)

• Etc… (everything else is luxury, including clothing)

 

Their earnings can’t even cover the most basic cost of living.

 

The most important reason for inflated cost of living is due to the regime printing money to meet its budgetary requirements, thus devaluing the currency.

 

Eritreans with more comfortable income but not rich are composed of

• Private business people with minimal incomes          
• Not more than 3,500 businessmen
• These are store owners, restaurants, garages, etc…
• These can comfortably afford living expenses (rent homes, food, clothing but not much more).  Those in areas outside the core Asmara business district fall under this category.

 

• Private business people with slightly higher incomes
• Not more than 500 businessmen
• These are engaged in all forms of trading, seeking most profitable ventures as they arise. Most of these must work with patron army officer.
• These can afford to own their own homes, a couple of cars, food, clothing and basic luxury such as television/satellite, domestic tourism, etc… 

 

• Private business people with significant income
• Compared to other country’s businessmen, their wealth is still insignificant
• Not more than 100 businessmen
• Over half are made of the nouveaux rich  – army officers who are being bribed for their loyalty

 

Domestic consumption in PIA’s Eritrea, other than food and clothing, is made up of no more than 1,000 people.  How much investment is needed to supply these 1,000 people?   

 

Today, ERITREA’S ECONOMY consists of 600 people & their families as consumers who can afford beyond the basic necessities of life.

 

 

Are there any Sectors of Interest?

1. 1.      Agricultural Sector – Eritrea has large arable land.  However, Eritrea has failed to meet even one-third (1/3) of its national need because of the regime’s long discredited Maoist policies.  During the G15 era (1991 – 2001), Eritrea had raised its agricultural production to about 78% of its domestic needs through G15 farmer and commercial agricultural support policies.  After 2001, PIA stripped the countryside of all ‘able –bodies’, stripped land from farmers and implemented a misguided agricultural policy that reduced domestic production to less than 30% for the 2002 to 2011 period.  In 2012, the regime changed its policy allowing subsistence farmers to farm their land increasing agricultural production.  PFDJ projects such as banana plantations, SAWA Agro and many other government projects – as has been proven in many other countries of government projects – have utterly failed.  GERSET project will only meet 2%, or 4% under the most optimistic scenario, of the domestic grain needs.  The whole country’s resources are tied up at GERSET project to produce 2% of the grain needs, while private commercial farming have been either discouraged or banned from investing. 

 

For instance, between 2003 and 2005, PIA dispossessed farmers of their lands in ‘Semenawi Keih Bahri’ and part of ‘Ala’ without any due process of law.  Gen. Wuchu simply told these commercial farmers to vacate the land without any formal process.  This led to uncertainties that discouraged other farmers from further developing their lands.  Similarly, during the 2000 border war between Eritrea and Ethiopia, PIA evacuated his farming equipment before withdrawing from Gash Barka while failing to inform private commercial farmers in Gash Barka.  They lost all their investments.  

 

In contrast, Ethiopia has been aggressively courting international agro-businesses to invest in rice and other products.  

 

 

1. 2.      Construction Sector– PIA has suspended all home construction projects because PIA believes that it was using up its dwindling hard currency reserve.  Although home owners, who are mostly Diaspora Eritreans, are required to pay in hard currency, PIA believes that allowing the construction of housing projects diverts the dwindling hard currency away from “his” more urgent projects – and most likely in his efforts to build a war chest of hard currency to survive the ever-tightening international sanctions.  Ethiopia is allowing private construction companies to build houses, commercial buildings and infrastructure projects.

 

Without clear foreign currency laws to import construction raw materials, clear laws relating to land, labor, etc… , no construction company would be attracted to Eritrea.

 

The other area of interest in construction is infrastructure projects.  For the last 12 years, infrastructure projects have been abandoned.  The few infrastructure works evolve around micro-dams. 

 

Cement Factory:  the manner in which cement production and supply is being managed in Eritrea gives an excellent illustration of economic and political mismanagement in Eritrea.  It goes without saying that cement is one of the most critical inputs of construction industry, and Eritrea is endowed with raw materials for cement.  Despite the importance of cement, PIA turned down the requests of Eritrean investors to establish cement factory in Tio.  Instead, PIA continued to import cement from abroad in hard currency.  Massawa Cement Factory has very limited capacity, and a new one, Ghedem Cement Factory with a capacity of 1 ton per day was inaugurated in 2011.  However, this factory continues to experience all kinds of technical issues resulting in continuous production interruptions.   The only lesson learned, as have many other nations, is that State-owned enterprises ALWAYS FAIL but PIA seems adamant on these types of ventures for the sole reason of political control.

 

It is a SHAME when the MEKELE (TIGRAI) MESSEBO CEMENT FACTORY is producing 900,000 ton/year of cement beginning in 1999, while it took Eritrea with all its abundant raw material for cement production until 2011 to establish a 300,000 ton/year Ghedem Cement Factory which continues to face technical difficulties, and has not nearly reached its full production.  This is shame, and that can only be construed as deliberate policy to destroy Eritrea!

 

 

1. 3.      Manufacturing Sector– Eritrea is too small for creating vibrant manufacturing sector geared towards domestic market.  It may foster cottage industry but with intense competition from cheap labor countries (e.g. China which nearly engages in slave labor), even cottage industry can’t survive for too long.  Under prudent socio-economic policies and with respect for rule-of-law, it may be able to attract certain multi-national ventures to produce for exports.

 

Some investors may be interested in processing food products, such as pasta and other popular processed food.  Unless PIA opens up the Eritrean market and significantly increase Eritrean people’s purchasing, manufacturing for domestic market will remain largely unprofitable.

 

Asseb Refinery:  One glaring failure, and a deliberate one, is that PIA has allowed the Asseb Refinery to rust due to abandonment.  Although this refinery is outdated, the world continues to suffer from lack of refinery capacity.  Multinational oil and other companies had asked PIA between 2002 and 2006 to lease the refinery but requests were turned down.  After 15 years of neglect, the Asseb Refinery is now one big junk yard.   

 

 

1. 4.      Mining Sector – After years of foot dragging about allowing Western mining companies to invest in the mining sector, PIA has opened the door wide open for the following reasons,

• ·         The realization that mining sector can’t be exploited with pennies in one’s pockets.  Prospecting and exploitation requires risking millions of dollars PIA doesn’t have to realize its potential.  Moreover, Eritrea doesn’t nearly have the expertise to exploit it itself.
• ·         PIA had been very reluctant to allow Western companies from investing in the mining sector out of fear that Western powers would use this investment as political leverage to advocate or even arm-twist into political reform.  PIA wants Chinese companies to undertake such projects, as happened with sale of Chalice to Chinese firm. 
• ·         In anticipation of increasingly tightening international sanctions, PIA wanted to gain alternative sources of foreign currency. 

 

As everything else in today’s Eritrea, all socio-economic and legal decisions are made for sole purpose of political survival rather than as concerted and well-thought out long-term development plan.

 

The mining sector is largely the purview of extremely large mining companies with significant capital and expertise.  But there are lessons to be learned.   Much can be learned from the experiences of South African’s Mineral Belt.  Botswana is rich in Diamond and the experience of its trading arm, Diamond Trading Company is something to be emulated.  Botswana has created spin off industries around its diamond industry creating employment and keeping profits at home.  MOPANI MINING CO. (ZAMBIA) is one example what companies in corrupt nations do.  It was accused of leaking diluted acid flowing into neighboring houses, polluting drinking water and creating health problems by sulphur emitted from its operations.  Its late President Frederick Chiluba was accused of corruption for kickbacks earned from MOPANI.  Tanzania had similar corruption issues in exploiting its gold resources but later introduced laws that allows domestic miners to acquire land for gold mining.  As a result, 40% of Tanzania’s gold is now produced by domestic miners.

 

One sad example of the state of Eritrea is marble.  Eritrea is super-rich in marble.  PIA established an advanced marble processing plant in Ghindae.  After a couple of years of production, this venture was neglected resulting in marble being imported into Eritrea.  This is a typical story of state-owned ventures that fail because there are no incentives to become profitable.

 

POTASH:  Eritrea is also rich in Potash.  But the development of this area is deliberately being slowed down.

 

OIL & GAS:  In 1969, Mobil discovered offshore gas.  In the 1990’s Anadarko gave up its efforts to find gas in the Dahlak & Zula Archipelago.  However, Anadarko and PIA had uneasy relationship that was part of the reason for abandoning the project.  The China National Petroleum Corporation is exploring offshore on Sudanese water territories which may have similar geological structure as Eritrea.   No efforts are being made to further exploit this great potential.     

 

1. 5.      Marine Sector– artisan fishermen have been discouraged and coerced into abandoning this activity.  Despite being endowed with over 1,000 km of coastal line and yet one can’t find fish to eat in Massawa!  Domestic investors such as Red Sea Fisheries were run out of business. Foreign investors such as Saudi Fisheries and others were ignored. 

 

In today’s Eritrea, one can’t even find fish to eat in coastal towns such as Massawa.  Nothing else can describe so vividly the dire economic and political situations in Eritrea.

 

This sector encompasses so much wealth that this alone would have lifted Eritrea out of poverty.  However, PIA has deliberately discouraged or refused investment in this sector.

• ·         Marine Tourism – PIA has refused to grant permission to domestic and foreign investors in building tourist facilities such as world class hotels, resorts, chartered boats and others.  No reasons are given other than a vague statement such as ‘we don’t want to be exploited’ or ‘more studies are needed’, etc… In the meantime, Eritrean people remain poor while endowed with natural riches.    

Unrealized Income:  $200 Million / year

 

• ·         Fishing –  As usual, PIA downplays Eritrea’s fishing wealth, saying that, again, that Eritrea won’t allow this industry to be exploited by foreigners as if fishes will live forever.  Eritrea can engage in fishing up to its sustainable yield.  PIA tells us that Eritrea should engage in processing fish in Eritrea.  Saudi Fisheries proposed to invest over $25 Million to establish fish processing plant in Asseb which was turned down. 

Unrealized Income:  $ 500 Million / year

 

• ·         Free Port – Although Eritrea is ideally located for free port service (i.e. as processing zone, container areas, etc…), and having cleared the Eritrean Navy Base in Grar/Massawa, PIA continues with lip service than actually carrying with this project.  In 2008, an arrangement with Norwegian group to invest in Free Port but was turned down by PIA after being encouraged throughout the negotiations by PIA himself saying that this project would be given to the Chinese.   There is no movement 5 years later.

Unrealized income:  $ 100 Million /year

 

• ·         Salt:  the Italians exploited it and yet today’s PIA Eritrea has neglected it.  We import our salt from Saudi Arabia.

Unrealized income:  $ 50 Million /year

 

1. 6.      Service Sector–

• ·         Telecommunication – PIA will not allow private companies to enter this market, esp. mobile phone market, because it wants to maintain tight grip on the foreign currency generated from calls abroad.  In contrast, Ethiopia is opening up this market, allowing the giant MTN of South Africa to enter the market.
• ·         Banking – There is no private banking in Eritrea.  The only one registered as ‘private’ is PFDJ/PIA owned bank.  In contrast, Ethiopia has allowed a dozen of private banks to operate.  As a result, banking in Ethiopia is far more advanced than in Eritrea.  Among many other facilities, Ethiopian banks offer Automated Teller Machine (ATM) services that are connected to international banks.  Any foreign traveller can access their home bank account from Ethiopia.   http://www.nbe.gov.et/financial/banks.html
• ·         Tourism – discussed above under Marine Sector.  This is a dead sector in Eritrea.  The Old Grand Train project runs sparingly based on demand.  It operates at significant loss.  There are no plans to allow international tourism businesses to invest in Eritrea.
• ·         Transport –
  • o   Airline – Eritrean Airline is crippled.  It had been mismanaged for years due to continued interference from PIA.  It has been given a mercy blow by European Aviation when it revoked its landing rights (along with Nasair).
  • o   Trucking & Buses – due to lack of fuel, lack of spare parts and tarrifs that are not commensurate with cost of operations, many have chosen to abandon this business, resulting with large number of trucks and buses being eaten away by rust.
  • o   Train – what train?
  • o   Marine – large cargo ship sank off Indian Coast, and a couple are used to bring goods from Dubai.  PIA nearly bought an old passenger ship with technical and health related problems.  Overall, there is no effort on the part of the government to engage in maritime business or allow private Eritrean businesses to operate.  Ethiopia, although having no access to port of its own, owns and operates much larger cargo ships.
  • ·         Health – Private clinics have been banned for the last 3 years.  Although Orotta medical school is graduating doctors, but due to deliberate poor pay, poor working facilities and extreme lack of medicine, most escape the country at the first opportunity.
  • ·         Architectural & Engineering – banned since 2008 under the false pretence of bribery and corruption.   It is more a deliberate political effort to deprive Eritreans from gaining and developing their architectural and engineering skills.  It is about destroying the knowledge base in Eritrea.

 

Two Areas of potential investment in Eritrea, and these do not require investment conference, are

• ·         Asmarawood (i.e. Hollywood or Bolywood of Eritrea) is probably the only business showing some sputtering life.
• ·         Bars and coffee shops – these businesses do not require hard currency, employing mostly girls and geared towards the few thousands Eritreans that visit ‘homeland’. 

 

In brief,  PIA has deliberately put all business opportunities in Eritrea off-limits to Eritrean or international investors using the following stale arguments that (these are PIA’s poor excuses)

• ·         these are negligible resources, implying not worth exploiting.  In reality, although each resource by itself may not make Eritrea rich, exploiting its full potential will guarantee economic prosperity.
• ·         Self-sufficiency – although mainly used for food, it is also implied that Eritrea would develop its own resources to develop its natural resources.  But in the last 12 years, Eritrea’s capacity to develop such resources has plummeted through PIA’s deliberate policy of destroying the private sector.  The ‘government sector’, i.e. PIA/PFDJ, resources have been stripped because PIA is stashing away over $1 billion in Fubon Bank, while international sanctions have crippled its capacity to exploit its resources.
• ·         ‘We don’t want to be exploited’ is an old communist ideology which is a total lie.  It has been shown that the poor is exploited by foreign occupiers or, worse, domestic tyrants and their cohorts.  African kleptomaniacs include Mobutu Seseko (Congo-Zaire $2Billion), Sani Abacha (Nigeria – $2Billion), Mbasogo (Equatorial Guinea – >$1 Billion).  Same can be said about so many other countries, that exploitations are worse under their own rulers. 

 

For instance, we can examine Eritrean National Mining Co. (ENAMCO) 

• Referred to as being owned by the State, but is it? Or, is it owned by PFDJ, i.e. PIA?
• If owned by the State, this is what is happening
• Nevsun and other mining companies pay licence, royalty and taxes to the government of Eritrea in hard currency (US$)
• Profits are paid to ENAMCO in hard currency (US$)
• Hard currency (US$) can not be used by the Ministry of Mines and is deposited into Eritrean Central Bank.  The Central Bank then credits bank accounts of the government and ENAMCO in Nakfa.  Thus neither the government nor ENAMCO can keep their own hard currency accounts with Eritrean Central Bank.
• The Central Bank of Eritrea is then instructed to transfer the hard currency reserves to EriCommerce (PFDJ owned) in London to Singapore accounts of EriCommerce, which is then transferred into Fubon Bank.

 

The Eritrean Central Bank has no hard currency and no knowledge of what happens to the hard currency funds once transferred abroad.  This is how we are operating a country.  Unlike Ethiopia, there is no legal and structured mechanism to supply foreign currency to the private sector.

 

http://www.nbe.gov.et/

 

 

 

Prerequisites for Investment

 

1. 1.      Rule of Law – a nation that doesn’t respect the rule-of-law can NOT attract investment.  As is, investment faces significant business risks without compounding political and legal risks.  Business, or long term investors, must feel confident that contract, labor, privacy, safety, consumer and other laws are formulated with due process and enforced in transparent and accountable manner.

 

1. a.       Domestic Law – in today’s Eritrea, the judicial system is broken, laws are promulgated and rescinded at the whim of one man, unaccountable army officers with NO legal experience can haul any investor into Special Courts, with no rights to appeal and throw away the key.  Similarly, any army or police officer can throw you behind bars without any due process of law and throw away the key.   There is no such thing as Writ of Habeas Corpus.  You have to buy your way out – i.e. if one’s supposed guilt isn’t political!

 

1. b.      International law – PIA is accused for breaching a long list of international law.  He is accused of triggering war with all the neighbours in direct violation of international laws.  It is accused of violating the Vienna Convention on Diplomatic and Consular Relations in which it is signatory, by engaging in such acts as searching diplomatic bags arriving into Eritrea, refusing consular services to PVI personnel (British & Australians) caught entering illegally into Eritrea, and many other violations.  As a pariah State with total disrespect for international law, no long-term investor would be investing in Eritrea. 

 

One can rest assured that NO ONE, even the regime’s staunchest supporters, such as Dr. Ghideon, the Real Housewives of PFDJ, Mr. Yonas Manna, or any other would risk investing in Eritrea and become potential victims to the total absence of law in Eritrea.  Instead, they would rather enjoy their 15-minutes of fame, or infamy, at safe distance and telling others to invest.

 

1. 2.      Transparent Government – no Eritrean, not even those inner circles, know what PIA is doing or planning for the country.  Unlike Ethiopia which has 10-, 15-, 20- and 25- growth plans, Eritrea doesn’t have any short-term and long term, and any growth strategies.

 

Ethiopian Electric Authority’s 2025 plans are published on its website.  Ethiopian Airlines has similar Year 2020 Vision to nearly double its airline fleet (with airplanes already ordered).  Each ministry and department is required to plan, budget and make public their short and long term plans.  In contrast, no Eritreans can say, including Eritrean ministers, what PIA’s short- and long-term plans are.  Rather, on Dec. 2, 2012 – i.e. 25 days before the beginning of the new year- so called ‘cabinet meeting’ is called to discuss and plan projects for 2013.   This has been the pattern for the last ten years.  It is as if PIA’s budget officer tells PIA how much money is left in the cash box on November 30^th and then the following year’s plans are formulated on the go based on political situation of the day.   This is hand-to-mouth existence!

 

1. 3.      Hard currency
   1. a.       Availability – any significant investment will require hard currency for importation of raw materials.  In today’s Eritrea, unlike in Ethiopia where hard currency is auctioned through Central Bank of Ethiopia, there is no mechanism to purchase hard currency.  As a result, a desperate business that purchases hard currency in black market is bound to find themselves in PFDJ dungeons – sooner or later. 
   2. b.      Official vs. black market rate – the gap between official and black market is a sure sign of the economic health of a nation.  In today’s Eritrea, the official rate is 15 Nfa/USD$ while the black market rate is 43 Nfa/USD$.  The gap would have been worse if the regime hadn’t closed down importation license and only very given access through red-tape and bribery.  This gap is due to PIA printing Nfa to make up for shortfall in revenues. 

 

1. 4.      Labor Force – all Eritreans between 18 to 50 years old are tied up in slavery campaign and can not request to be released for employment.  Where would all these new businesses obtain their labor force?  Even if these new ventures are allowed to hire labor through national service exemptions, what guarantee are there that the regime won’t call these exempt national servicemen from being recalled at any moments notice without any consultation?

 

Without resolving the national service on slavery campaign, there can not be any predictable business venture in Eritrea, except of course in the coffee and bar business.

 

1. 5.      Supply of Infrastructural Services – As many have already pointed out, how can one invest in a country where electric and water supply are unpredictable?  Worse is that the regime is so secretive that businesses, and the public, is not informed the causes of these problems are, how they are being addressed and how long before the problems are addressed.  As a result, every business, and the public, is left with guessing game and unable to make any business planning.

 

1. 6.      Land supply – instead of this issue in prudence manner, the regime chose to threaten businesses of taking back land leased to them.  There is no development planning that divides areas as urban, residential, industrial, agricultural, etc… 

 

All these factors feed into “Investor Confidence”.  When the International Finance Corporation, part of the World Bank, rates Eritrea dead last in its ranking of Doing Business in the world, when all the above factors are lacking, no investor would come to Eritrea. 

 

 

 

Who are the Potential Investors?

 

1. 1.      Domestic Investors
   1. a.       PIA – with Nfa 5,000/month salary, PIA has accumulated over $1 Billion USD in Chinese banks.  PIA doesn’t need any other investor except to invest his own, or rather Eritrean people’s, money stashed away in China which instead is helping China to grow at the expense of Eritreans.  If this money was repatriated, it would bring about investment boom in Eritrea.  For instance, over 50% of the wealth and investments of Emirate of Dubai, in its hundreds of billions, is owned by the Emir of Dubai, HH Sheik Al-Makhtoum.  Eritreans wouldn’t complain too much if PIA was to repatriate and invest billions into Eritrea and made the Eritrean population rich, and free to enjoy their God Given Rights, in the process.

 

1. b.      Army officers and PIA’s “princelings” – these corrupt officers have one business philosophy, ‘easy come, easy go’ and are incapable of running any business that doesn’t operate at the barrel of the gun.  Despite their new found riches, they are busy squandering it on Blue Label Whisky and sending their families aboard with their money.  No one expects these officers to invest in Eritrea.

 

1. c.       Private investors
   1.                                                   i.      Entrepreneurs – most of the vibrant businessmen in Eritrea have been forced into exile and busy building their fortunes in Juba, Uganda, Angola and elsewhere.  They have thorough distrust of the regime and would not trust enough the regime to return to Eritrea.

 

1.                                                 ii.      Share/passive investors – Eritrea doesn’t have a developed market for investing shares.  There are only a couple of share companies that are not held within a family. 

 

 

1. 2.      Diaspora Eritreans and Foreign Investors
   1. a.       Foreign investors – when there is a sanction on a country, when all international reports show that the regime is hostile towards rule of law, when World Bank rates it as the worst country to do business in the world, no business would be interested in investing in Eritrea.  Mining investors know that the regime can’t exploit mining resources without its involvement and thus feels confident in the security of its investments.

 

1. b.      Diaspora Eritreans – most Diaspora Eritreans with decent wealth had tried to return to Eritrea after independence but have left the country after bitter experience.   With his loath for traders, PIA would NOT allow any Diaspora Eritreans to return to Eritrea and engage in trading activities.  Thus, Diaspora Eritreans need be engaged in more sophisticated investment activities to be wooed by PIA.  The question is, how many Diaspora Eritreans are engaged in advanced or heavy business activities in the countries they live?  If the interest is in attracting Eritreans to invest in shares of Eritrean businesses, what business opportunities are there? 

 

 

Thus, it is suffice to say that the investment climate in Eritrea is not conducive for attracting investments.  There is no reason to believe that the regime has changed its anti-business attitude.  If it had, we would have noticed major changes in socio-economic policies, including publicly admitting the failures of the regime for the last 12 years – as the Communist Party of China did in 1961 after the failure of ‘Great Leap Forward’.  The regime must address the slavery campaign issue which would release labor back into the economy, foreign exchange policies and restoration of the rule of law, including by rescinding the corrupt and abusive Special Courts. 

 

Anything else is simply a show!  PIA is actively destroying Eritrean socio-economic and legal fabric, and there is no reason to believe that anything has changed.  We only need to see how Ethiopia, which has similar socio-economic make-up (comparing apples with apples), has been progressing for the last 15 years.

 

Volumes can be written on this topic, but shall be left for another day!

 

Berhan Hagos

December 15, 2012

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