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Country Commercial Guides FY 2000: Eritrea Report prepared by U.S. Embassy Asmara, released July 1999 Note*

CHAPTER I: COMMERCIAL OVERVIEW (EXECUTIVE SUMMARY)

THIS COUNTRY COMMERCIAL GUIDE (CCG) PRESENTS A COMPREHENSIVE LOOK AT ERITREA'S COMMERCIAL ENVIRONMENT, USING ECONOMIC, POLITICAL AND MARKET ANALYSIS. THE CCGS WERE ESTABLISHED BY RECOMMENDATION OF THE TRADE PROMOTION COORDINATING COMMITTEE (TPCC), A MULTI-AGENCY TASK FORCE, TO CONSOLIDATE VARIOUS REPORTING DOCUMENTS PREPARED FOR THE U.S. BUSINESS COMMUNITY. COUNTRY COMMERCIAL GUIDES ARE PREPARED ANNUALLY AT U.S. EMBASSIES THROUGH THE COMBINED EFFORTS OF SEVERAL U.S. GOVERNMENT AGENCIES.

ERITREA, AFRICA'S YOUNGEST NATION, GAINED ITS FREEDOM FROM ETHIOPIA IN 1991 AND ACHIEVED STATEHOOD AFTER A REFERENDUM VOTE IN 1993. IT IS EMERGING FROM THE EFFECTS OF A 30-YEAR WAR OF LIBERATION AND REMAINS ONE OF THE WORLD'S POOREST NATIONS, WITH A YEARLY PER CAPITA INCOME OF ABOUT U.S. $219. THE INDUSTRIAL SECTOR SUFFERS FROM WAR DAMAGE, YEARS OF NEGLECT, AND DETERIORATION, AS WELL AS OUTMODED CAPITAL EQUIPMENT. THE AGRICULTURAL SECTOR IS DEVASTATED FROM A LACK OF MODERN TECHNIQUES AND INPUTS; DEFORESTATION; AND AN OUTDATED LAND TENURE SYSTEM. SINCE INDEPENDENCE THE GSE HAS INVESTED SUBSTANTIAL CAPITAL TO REFURBISH THE INDUSTRIAL AND AGRICULTURAL SECTORS.

SMALL TO MEDIUM MANUFACTURING PLANTS, MOSTLY IN THE ASMARA AREA, ARE BEGINNING TO DEVELOP, PRODUCING BEVERAGES, PROCESSED FOODS, LEATHER GOODS, TEXTILES, CONSTRUCTION MATERIALS, SALT, PAPER, AND MATCHES. THE GOVERNMENT IS SHIFTING ITS EMPHASIS FROM CENTRALIZED CONTROL TO ESTABLISHING RATIONAL DEVELOPMENT PROGRAMS THROUGH PRIVATIZATION OF GOVERNMENT INDUSTRIES, FOREIGN PRIVATE INVESTMENT AND PARTNERSHIP WITH INTERNATIONAL DONORS. IN COORDINATION WITH THE WORLD BANK, THE GOVERNMENT DEVELOPED A LIBERAL ECONOMIC MACRO POLICY TO FOSTER ITS GOAL OF ECONOMIC DEVELOPMENT. THE GOVERNMENT HAS TAKEN GENUINE AND PRACTICAL STEPS TOWARD THE PRIVATIZATION OF STATE-RUN ENTERPRISES AND A MARKET ECONOMY. IT PROMULGATED AN INVESTMENT CODE IN 1994 THAT OFFERS SIGNIFICANT INCENTIVES TO FOREIGN INVESTORS, INCLUDING ELIMINATION OF THE REQUIREMENT FOR JOINT VENTURES, REDUCTION OF THE TAX ON PROFITS, THE RIGHT TO REMIT PROFITS IN HARD CURRENCY, JUDICIAL PROTECTION FROM NATIONALIZATION AND SIGNIFICANT REDUCTIONS OF CUSTOMS DUTIES ON IMPORTED ITEMS. THE INVESTMENT PROCLAMATION CAN BE OBTAINED FROM THE ERITREA INVESTMENT CENTER, THE COMMERCIAL OFFICE OF THE U.S. EMBASSY OR ERITREAN EMBASSIES ABROAD.

POLITICAL STABILITY, A STRATEGIC LOCATION, AN EAGER INEXPENSIVE LABOR POOL, MINIMAL CORRUPTION, AND RECENT STEPS BY THE GOVERNMENT TO STREAMLINE THE CIVIL SERVICE CONTRIBUTE TO ERITREA'S ATTRACTIVENESS TO BOTH PRIVATE INVESTORS AND MULTILATERAL LENDERS. HOWEVER, THE RECENT CONFLICT WITH ETHIOPIA HAS SUBSTANTIALLY SLOWED NEW INVESTMENT. ALTHOUGH CHINESE, SOUTH KOREAN, ITALIAN, AND GERMAN COMPANIES ARE AGGRESSIVELY PURSUING THE MARKET, THERE IS GROWING INTEREST IN U.S. PRODUCTS AND SERVICES WHICH ARE GREATLY VALUED FOR THEIR SUPERIOR QUALITY.

U.S. INVESTMENT IN ERITREA IS STILL SMALL. ENERGY, MINING, AGRIBUSINESS, CONSTRUCTION, TELECOMMUNICATIONS, TRANSPORTATION, TOURISM, HEAVY EQUIPMENT, LIGHT INDUSTRY, AND MARINE RESOURCES OFFER SIGNIFICANT OPPORTUNITIES FOR TRADE AND INVESTMENT. FOREIGN INVESTORS, INCLUDING AMERICAN, ARE CURRENTLY INVOLVED IN OIL EXPLORATION, MINING, FISHERIES, CONSTRUCTION AND LIGHT INDUSTRY.

ERITREA IS SET TO INVEST CLOSE TO U.S. $1 BILLION OVER THE NEXT DECADE TO UPGRADE AND DEVELOP BASIC INFRASTRUCTURE AND UTILITIES. INFRASTRUCTURE UPGRADES AND EXPANSION CONCENTRATE ON POWER PLANTS, ROAD AND DAM CONSTRUCTION, AIR AND SEA PORTS, TELECOMMUNICATIONS NETWORK, AND SOCIAL SERVICES UTILITIES SUCH AS SCHOOLS AND HEALTH FACILITIES. ERITREAN BUSINESSPERSONS HAVE ESTABLISHED U.S. DISTRIBUTORSHIPS, WHILE OTHERS SEEK U.S. SUPPLIERS FOR GENERAL CONSUMER GOODS. IN ADDITION TO SUPPLYING THE ERITREAN MARKET, BUSINESSMEN ARE EXPLORING OPPORTUNITIES FOR EXPORTING FINISHED GOODS TO INTERNATIONAL MARKETS CAPITALIZING ON ERITREA'S LOCATION AND ITS INEXPENSIVE YET INDUSTRIOUS LABOR FORCE.

COUNTRY COMMERCIAL GUIDES ARE AVAILABLE FOR U.S. EXPORTERS ON THE NATIONAL TRADE DATA BANK'S CD-ROM OR VIA THE INTERNET. PLEASE CONTACT STAT-USA AT 1-800-STAT-USA FOR MORE INFORMATION. COUNTRY COMMERCIAL GUIDES CAN BE ACCESSED VIA THE WORLD WIDE WEB AT HTTP://WWW.STAT-USA.GOV; HTTP://WWW.STATE.GOV; AND HTTP://WWW.MAC.DOC.GOV. THEY CAN ALSO BE ORDERED IN HARD COPY OR ON DISKETTE FROM THE NATIONAL TECHNICAL INFORMATION SERVICE (NTIS) AT 1-800-553-NTIS. U.S. EXPORTERS SEEKING GENERAL EXPORT INFORMATION/ASSISTANCE AND COUNTRY-SPECIFIC COMMERCIAL INFORMATION SHOULD CONTACT THE U.S. DEPARTMENT OF COMMERCE, TRADE INFORMATION CENTER BY PHONE AT 1-800-USA-TRAD(E) OR BY FAX AT (202) 482-4473.