by Yousef Boulisi
Over the past six years, the relations between Eritrea and Ethiopia have been perfect on every scale. When peace was resolved between the two countries that had been in constant war for thirty years, a comprehensive cooperation agreement was signed and we have made a great effort to make it happen. This partnership has enabled people to move, live and work in between them without the need of passports or visas.
The partnership has helped them heal the wounds of war as quickly as possible without worrying about their generosity of hospitality, facing common challenges together, and revitalizing their economies. And its benefits were obvious to their people, friends and enemies alike. While their people took pride in her and expanded to promote her, their friends praised and supported her, their enemies tried to create differences and provoke divisions because they realized it was the major obstacle to their destructive plans.
The basis of the partnership and cooperation between Ethiopia and Eritrea was not hidden to anyone. Sha’ban is linked by links of history, culture, struggle and common sacrifice. They look forward to living in prosperity and human dignity, free from poverty and backwardness, and are the legacy of war and oppression. And as they united and defeated the lightning system, they realize today that they will achieve what they want if they limit their efforts.
The governments of Ethiopia and Eritrea, which emerged from this prospect, common struggle and victory, are no different in their vision and direction regarding strategic issues. However, given the different circumstances of the two, they have uttered their own policies which they see fit. Their political approach to state-building, for example, is unique. Also their collective economic policies are not rigid.
Ethiopian politics:
Ethiopian development strategy is centered around rural development, where majority of the population lives. It focuses on agricultural development and agro-based transformation industries. To provide the necessary foreign money to implement development programs and repay Ethiopian debt and utilize it in the optimal way, the transfer of foreign currencies is allowed only through banks under control. And in the field of trade, the policy of taxes and duties is applied to ensure that local products get a fair opportunity, that is not negatively affected by imported goods. Regarding investment, there are sectors allocated for government and citizens on one hand, and others available to local and foreign investors on the other hand.
The economic policy of Eritrea
Eritrea’s development goal of economic growth accompanied by social justice can be summarized. It is a development path in which the government is embarking on a leading, supportive and facilitating role within the market reality.
Eritrea adopts a financial, monetary and investment policy that encourages productivity, competitiveness and export. Its economy is open, where withdrawals and deposits are allowed in any currency. All areas of investment in Eritrea are open to all investors, both local and foreign, who offer effective investments. Retail and wholesale trade, import trade, and brokerage agencies, supposedly managed efficiently by compatriots, are also open to the citizens of the countries that allow Eritreans to invest in this sector.
Economic relations between Eritrea and Ethiopia
Despite the differences in college policies between Eritrea and Ethiopia, they diminish over time, and do not transform without establishing strong economic relations. Because of their economic linkage and integration, development of Ethiopia benefits Eritrea, development of Eritrea benefits Ethiopia. And one of them weaken the other, not strengthen them.
Even countries like Eritrea and Ethiopia, who are historically, culturally, politically and economically linked, are taking different initiatives in the era of global economy and intense competition. In our region, efforts are being made to remove trade barriers and promote economic integration through the COMESA (East and South African Common Market). The European Union, which has 15 countries, is another example of this. We see the United States linked with Canada and Mexico under the NAFTA Agreement. The three countries joined the agreement believing that convergence would benefit them, despite their inflexible overall economic policies, different levels of population growth and economic strength. At a time when even major countries are seeking to remove various barriers (customs and non-customs) and form trade alliances with their chosen partners to enhance competitiveness, it may not be constructive.
Barriers and increasing restrictions are glorious.
Returning to Eritrea and Ethiopia, we find their links
The economy is deeper than the ties of other neighbors, and the movement of the two peoples to and from one country is vast, making it very difficult to establish a committed relationship even if desired. And with all these problems, in the absence of the necessary institutions and financial facilities, any action taken to achieve this will result in consumption and losses. Undoubtedly many tricks have been put in place to mitigate this situation, and the trade of naqqa and justice will spread widely outside the official channels.
The majority of the people in Eritrea and Ethiopia are seeking good relations and lasting friendship. They realize that documenting economic links, expanding trade, and reducing barriers and restrictions are all in their favor. On the other hand, there is a shortage in both countries, especially in Ethiopia, that distorts bilateral relationships as if they benefit one more than the other. Some of these have accused Eritrea of being based on Ethiopia and living at the expense of Ethiopians. They see Ethiopia as a great and powerful country, with enormous wealth, and produces foreign currencies’ goods, while they see Eritrea as a poor country with only stones, and cannot be self-sufficient.
And the obvious fact is that Eritrea and Ethiopia are currently in the same developmental stage. Ethiopia is indeed a great country, with tremendous natural resources and tremendous potential. It is true that the population is an influential factor in market growth, but the lifestyle of the population and their purchasing power, depending on the size and type of the local market, are all important factors. The government is striving to move towards the export of higher value industrial and manufactured goods, recognizing that foreign currencies derived from exporting raw materials and semi-manufactured goods cannot be developed in this way. However, Ethiopia’s wealth and development benefits not only Eritrea but all its neighbors.
But Eritrea is a small country with a limited local market. Although it lacks natural resources that help it develop, it is not overappreciated. Instead, her conscience lies in developing her human resources and raising the productivity of her enterprises, which are currently suffering from decline, and operating in wider markets.
Eritrea had a solid foundation and tremendous potential in the field for between 30 and 40 years. Until the 1960s, the state had the most powerful industry in the sector. Their products distinguished themselves by their high competitiveness and high demand both in the region and abroad. However, this development in Eritrea went back during Haile Selassie’s reign, and stopped completely during his 17-year reign. His effects have not disappeared, and he had a significant role in supporting inclusive economic development during the years of the revolution. But thanks to his tireless efforts in nurturing this development, it is not impossible, despite the difficulty and much work, to revive it according to the demands of our time. The governments of Eritrea and its people are working hard to achieve this.
Just as the development of Ethiopia benefits Eritrea, the success of Eritrea’s efforts is a gain for Ethiopia, not a loss. The prevailing peace in both countries, balanced economic development, and freedom of movement between them are all factors that contribute to creating wider job opportunities for their citizens. However, the increasing number of citizens of one of the two countries residing and working in the other indicates strengthening ties between the two countries.
New challenges, new opportunities :-
Current changes in the economic relations between Eritrea and Ethiopia will affect both countries. Trade and services will be exchanged in foreign currencies, mainly through banks. A directive was also issued to regulate cross-border trade in terms of type, price and form. In the light of the reality of countries lacking a functional infrastructure, the cost of this approach in terms of money, time and consumption is not humiliating. Perhaps the most worrying thing is its effect on social interaction between two peoples.
This new economic and trade approach has no benefits, although we do not prefer it in Ethiopian Eritrean relations. This approach will help Eritrea identify and address any weaknesses that were hidden as a result of dealing with Ethiopia with the currency itself. It will also help her to test her ability to manage her financial and monetary policy independently, guide the course of her economy, and how efficient her institutions are. This will give Ethiopia a chance to move forward in its chosen path without worrying about the economic consequences of its own dealings with Eritrea.
In short, although this will cause temporary setbacks, it will undoubtedly contribute to building relations between the two countries on more realistic and strong foundations. And in that sense, it’s a blessing that never ends.
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