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

CHAPTER IV: MARKETING US PRODUCTS AND SERVICES

DISTRIBUTION AND SALES CHANNELS:

THE IMPORT-EXPORT BUSINESS IS NOT DOMINATED BY ONE CORPORATION, AS WAS HISTORICALLY THE CASE WITH THE RED TRADING CORPORATION. INSTEAD SMALLER TRADING COMPANIES HOLD THIS MARKET NICHE SUCH AS THE GONAFER & NACFA CORPORATION AS WELL AS THOSE LISTED IN APPENDIX G. PRINCIPAL MARKETS ARE CONCENTRATED IN THE CAPITAL AND THE PORT CITIES OF MASSAWA AND ASSAB.

SINCE THE ERITREAN ECONOMY IS IN ITS FLEDGLING STAGE, OPEN ACCOUNT AND COLLECTION SHIPMENTS OF GOODS IS RARE; PRESENTLY ALL INTERNATIONAL PURCHASES ARE CONDUCTED THROUGH IRREVOCABLE LETTERS OF CREDIT. THERE ARE TWO BANKS IN ERITREA THAT ARE AUTHORIZED TO ISSUE A LETTER OF CREDIT FOR IMPORTING GOODS: THE COMMERCIAL BANK OF ERITREA AND THE HOUSING AND COMMERCE BANK (OWNED BY THE PFDJ). THERE HAVE BEEN VISIBLE SHORTAGES OF FOREIGN CURRENCY RESERVES IN THE COUNTRY, DUE TO THE BORDER CONFLICT WITH ETHIOPIA.

THE PRINCIPAL SOURCES FOR MANY IMPORTS ARE: ITALY (BY VIRTUE OF ITS COLONIAL TIES); ETHIOPIA (UNTIL MAY 1998); SUDAN (LIMITED ILLEGAL CROSS-BORDER TRADING SINCE 1995); SAUDI ARABIA AND THE UNITED ARAB EMIRATES (BECAUSE OF THEIR PROXIMITY. FEW FOREIGN FIRMS MAINTAINED FACILITIES IN ERITREA DURING THE PAST TWO DECADES BECAUSE OF THE WAR, BUT A VARIETY OF EUROPEAN, U.S., KOREAN, CHINESE, AND SAUDI COMPANIES ARE NOW REPRESENTED IN ASMARA.

USE OF LOCAL AGENTS & DISTRIBUTORS:

USE OF A LOCAL AGENT WHO CAN HELP WITH LICENSING AND OTHER OFFICIAL TASKS, LOCATING WAREHOUSE SPACE, AND HIRING STAFF IS USEFUL IN ESTABLISHING A LONG-TERM PRESENCE IN ERITREA. U.S. COMPANIES CAN CONTACT THE ERITREAN NATIONAL CHAMBER OF COMMERCE OR THE U.S. EMBASSY COMMERCIAL SECTION TO ASSIST IN LOCATING AN AGENT. WHEN INTERVIEWING POTENTIAL AGENTS, KEY QUESTIONS INCLUDE: CONTACTS WITH THE APPROPRIATE LABOR MARKET, ACCESS TO WAREHOUSE OR OTHER PHYSICAL PLANTS, KNOWLEDGE OF LOCAL COMPETITION, AND FAMILIARITY WITH DEVELOPING MARKETS OUTSIDE THE CAPITAL.

FRANCHISING:

FRANCHISING IS A RELATIVELY NEW CONCEPT IN ERITREA. MOST ERITREANS WOULD HAVE DIFFICULTY RAISING MONEY FOR INITIAL FRANCHISE COSTS. HOWEVER, ERITREANS WHO RETURN FROM LIVING IN THE U.S. OR OTHER DEVELOPED COUNTRIES MIGHT BE GOOD CANDIDATES FOR U.S. FRANCHISES. OF THE MAIN SERVICES THAT COULD BE PROVIDED BY THE EMBASSY COMMERCIAL OFFICE, ERITREANS WERE LEAST INTERESTED IN FRANCHISING, AS INDICATED IN THE SURVEY OF THE BUSINESS COMMUNITY CONDUCTED BY THE ECONOMIC AND COMMERCIAL OFFICE IN APRIL 1998.

DIRECT MARKETING:

THE ERITREAN POSTAL SYSTEM IS NOT YET SUFFICIENTLY DEVELOPED TO SUPPORT DIRECT MARKETING ON ANY LARGE SCALE.

JOINT VENTURES:

THE GOVERNMENT ENCOURAGES JOINT VENTURES WITH FOREIGN FIRMS, PARTICULARLY IN LARGE PROJECTS SUCH AS MINERAL EXPLOITATION AND PRIVATIZING GOVERNMENT OWNED BUSINESSES. THERE ARE SEVERAL JOINT VENTURES AMONG THE AMERICAN BUSINESS COUNCIL SUCH AS COCA-COLA AND ERITREA BUILDING MATERIALS MANUFACTURING.

STEPS TO ESTABLISHING AN OFFICE:

THE BUREAUCRATIC PROCEDURES INVOLVED IN ESTABLISHING AN OFFICE IN ERITREA HAVE BEEN STREAMLINED. THE BUSINESS LICENSING OFFICE IS DESIGNED TO PROVIDE "ONE STOP SHOPPING" FOR INVESTORS. SOME FOREIGN FIRMS HAVE RECEIVED LICENSES IN LESS THAN TWO WEEKS, ALTHOUGH THE NORM IS SOMEWHAT LONGER. A BOOKLET (PROCLAMATION #72/1995) PUBLISHED IN 1995 EXPLAINING BUSINESS-LICENSING REGULATIONS IN ENGLISH IS AVAILABLE AT ERITREAN EMBASSIES ABROAD.

SELLING FACTORS/TECHNIQUES:

ENGLISH, ITALIAN AND/OR ARABIC ARE WIDELY SPOKEN BY ERITREAN BUSINESSPERSONS, BUT MANY OF THEIR CUSTOMERS MAY SPEAK ONLY TIGRINYA. PROVIDING PROMOTIONAL MATERIALS IN TIGRINYA MAY ASSIST IN MARKETING CONSUMER GOODS ESPECIALLY WITH NEW OR UNFAMILIAR PRODUCTS. AN ANTIQUATED (BUT IMPROVING) BANKING SYSTEM MAKES FINANCIAL TRANSACTIONS DIFFICULT AND TIME CONSUMING.

ADVERTISING AND PROMOTION:

RADIO AND TELEVISION ADVERTISING IS NOT AN OPTION FOR NOW AS THESE MEDIA ARE GOVERNMENT OWNED. ADVERTISING IS CONCENTRATED ON GOVERNMENT AND PRIVATE NEWSPAPERS, IN ENGLISH, ARABIC AND TIGRINYA WHICH ARE AVIDLY READ, SEE APPENDIX G. BILLBOARDS AND HANDBILLS ARE ALSO WIDELY USED FOR ADVERTISING.

SALES SERVICE/CUSTOMER SUPPORT:

PROVISION FOR CUSTOMER SUPPORT IS CRUCIAL BECAUSE LOCAL TECHNICAL EXPERTISE IN MANY FIELDS IS LIMITED OR NON-EXISTENT. SOME COMPANIES HAVE REGIONAL REPRESENTATIVES IN ADDIS ABABA, CAIRO, OR NAIROBI THAT ARE AVAILABLE TO CONSULT WITH THEIR ERITREAN CLIENTS. SINCE E-MAIL (BUT NOT THE WORLD WIDE WEB) IS AVAILABLE IN ERITREA INTERNATIONAL COMMUNICATION CAN BE DONE INEXPENSIVELY.

SELLING TO THE GOVERNMENT: MANY GOVERNMENT PURCHASES ARE ASSOCIATED WITH DONOR FINANCED PROJECTS AND, THEREFORE, SUBJECT TO BIDDING AND PROCUREMENT RULES OF THE DONORS. THERE IS NO CENTRAL OFFICE OF PROCUREMENT FOR THE GOVERNMENT, RATHER GOODS AND SUPPLIES ARE PUT OUT TO TENDER BY EACH MINISTRY. THE TENDERS ARE OPEN TO PUBLIC BIDDING AND ADVERTISED IN THE LOCAL PAPERS.

NEED FOR A LOCAL ATTORNEY:

HIRING AN AGENT WILL GENERALLY OBVIATE THE NEED FOR A LOCAL ATTORNEY.

PERFORMING DUE DILIGENCE:

ERITREA IS KNOWN FOR THE HONESTY OF ITS PEOPLE AND GOVERNMENT SERVICES. HOWEVER, INVESTORS WOULD BE WISE TO MAKE ALL POSSIBLE INQUIRES BEFORE TAKING ON A LOCAL PARTNER, DISTRIBUTOR OR AGENT. THE AMERICAN EMBASSY COMMERCIAL/OFFICE IS A GOOD PLACE TO START SUCH AN INVESTIGATION. THE BUSINESS LICENSING OFFICE (BLO) HAS INFORMATION ON ALL BUSINESSES IN THE COUNTRY SUCH AS ASSETS AND NET WORTH. HOWEVER, THE BLO DATA IS BASED UPON THE INFORMATION SUBMITTED BY THE APPLICANT AND IS NOT INDEPENDENTLY AUTHENTICATED BY THE BLO. ERITREA IS A SMALL COUNTRY WHERE EVERYONE IN THE BUSINESS COMMUNITY KNOWS EACH OTHER AND CONSIDERABLE VALUE IS PLACED ON CHARACTER AND REPUTATION.