Undoing Business in Eritrea

Radio Erena: 16 December 2019

One really finds it quizzical and mind-boggling to comprehend the hypocritical conduct of Eritrean officials. From the President at the top all the way down, they conceivably don´t feel any fatigue of distributing gratuitous advice on how to manage the state business to their counterparts in what they consider poorly run neighboring countries. Heading Eritrea´s high-level delegation to the summit of the African, Caribbean and Pacific Group States (ACP) held in Nairobi on 10 December, Ambassador Beyene Russom (no relation with Eritrea´s Ambassador to Ethiopia Semere Russom) didn´t spare the participants his valuable counsel. As Eritrea Profile reported: (83, December, 14), he called on the member states: ‘To work towards stronger African, the Caribbean and Pacific Group States (ACP) through active participation, timely payment of dues and voluntary creation of the lean organizational structure. ´´ Such conduct is nearly typical to his boss´s attitude on giving advice on the basis of the distorted conception that Eritrea is a leading example to be followed.

The ACP Group States is an organization concerned with sustainable development and poverty reduction among member states. But what is Eritrea´s exemplary economic performance, which Eritrean officials hurry to share with world nations? Eritrea ranks at the bottom of the list of the World Bank Annual Doing Business Report. This report virtually says it all. The WB Doing Business Report for 2020 compares business regulation in 190 economies. Whereas the report placed New Zealand in the first place in Ease of Doing Business Ranking with 86.8 points, it placed Eritrea, deservedly, in the 189th place with only 21.6 points for the same category. Somalia ranked 190 with only 20 points for the similar category. Next to New Zealand came Singapore with 86.2 points, and in the third-place came Hong Kong with 85.3 points. Eritrea grouped up with South Sudan, Libya, Yemen, and the politically unstable Venezuela. Political instability and civil strife, to some varying degrees, characterize the poor economic performance of these countries, a matter which can be understood if not justified.

In other related categories such as starting a business, Eritrea scored 185 points; in registering property it obtained the poor points of 178. All in all, and by all standards, Eritrea does not qualify for a higher ranking which can allow its policy maker(s) to go around boasting about any achievement, particularly in the economy. In the absence of a dynamic investment code, Eritrea had invited Canadian, Chinese and other mining companies to invest in gold, copper, and potash extracting. The activities of these companies are marred by grave human rights abuses, the Canadian mining giant Nevsun Resources is facing charges of forced labor in a Vancouver court. The suit was filed by National Service recruits, who were, according to their testimonies in court, forced to work under unlawful work conditions. The on-going mining investments in Eritrea support an extractive type of economy, where the resources are extracted to the last droplet and ounce. The income of these activities is a state secret that even the Ministry of Finance knows nothing about. The poor economic performance of Eritrea in post-independence years is characterized by the lack of capital, inhibition of foreign and local investments and total control and monopoly of PFDJ companies. Leaving Eritrea to neighboring countries, today, the Eritrean businesspersons are in the lead in Uganda, South Sudan, Angola, and Kenya. They were deprived of practicing any economic activity that may threaten PFDJ control. All business people are not allowed to withdraw more than five thousand Nakfa an equivalent of 333 US dollars in one transaction. Those who had started successful businesses were kicked out of the market; or, at best, were forced to have partners from PFDJ companies or wealthy cronies.

In the post-independence Eritrea, the laws and the environment are not appropriate for doing business. Obviously, it is extremely difficult to extricate the economic performance from the political regime´s nature and practices. The regime in the country is one of the cruelest dictatorships in the continent, the type of regime which stifles the economic initiative for fear of political change. The economic prosperity will pave the way for the appearance of a dynamic middle class that is committed to both social and political change, the matter which is not welcomed today or tomorrow. The status of economic stagnation in Eritrea is a thoughtfully planned scheme to preserve the status quo which guarantees the long life of the dictatorship. As power and wealth go hand in hand, the policy in Asmara is to dominate the first and hoard the latter at the expense of the sound social and economic development of the Eritrean society. Understanding the underlying logic behind the poor economic performance of Eritrea will no doubt strip the policy maker(s) of any moral right of distributing superfluous instructions on how states can manage their affairs.

By Fathi Osman