第３種郵便物認可

THE JAPAN TIMES MONDAY, MAY 18, 2009(3)

GLOBAL INSIGHT ERITREA

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www.global-insight.net

ERITREAEntering a new phase

Rich pickings for investors
BIUCCI 2007

A young nation, Eritrea is beginning a new chapter in its history; one that is built on creating stability, self-sufficiency
and a wealth of new incentives for businesses. Global Insight investigates the discourse taking place with Japan, thenew free zones and the opportunities that exist in a small African nation with so much untapped potential.
Tucked away on Africa’s east
coast, Eritrea is rebuilding its
infrastructure and image as it
looks to become one of the continent’s top investment destinations for Japanese investors.
With its golden shores lappedby the warm waters of the Red
Sea, Eritrea is a land rich innatural resources, such as gold,
silver, copper and zinc. Led byPresident Isaias Afewerki since
the country’s independence
from Ethiopia in 1993, the nationof 5.5 million people is becoming
increasingly self-sufficient andwelcoming to new foreign direct
investment (FDI), particularly
from East Asia.
As well as mining, the government is eager to fulfill potential in tourism, fishing andfinancial services industries.
“We have developed a close andstrong working relationshipwith Japan,” explains President

Isaias Afewerki
President of Eritrea

Afewerki. “There may not behuge trade and investment partnerships, but we are on the righttrack. We share common values
on trade and investment, and weboth believe in self-sufficiency— Japan believes in homegrownpotential and so do we.”
Afewerki’s government is now
investing heavily in the rebuilding of infrastructure that wasbadly damaged during former
conflicts. Among the many
projects outlined is a new major
development at the former portof Massawa, where the ex-naval
base is being reinvented as a key
trade hub. Called Massawa Free
Zone, the new international

business park is being seen
as a potential engine for theeconomy, with foreign investors
able to benefit from a range ofincentives and favorable trading
conditions.
Eritrea’s strategic location
along the key Red Sea traderoute that links eastern andwestern markets, and provides
easy access to the Suez Canalis seen as another asset for thecountry’s trading prospects.
The government is also keen
to market its ports to the large
international shipping lines andis strongly committed to improving the facilities available tocommercial users of one of themost important maritime traderoutes in the world. The country
is increasing its presence inglobal markets and alreadycounts Italy, China, Sudan,France, Saudi Arabia andAustralia as export partners.

Eritrea at a glance
Location: East Africa, bordering the Red Sea, between
Djibouti and Sudan
Capital: Asmara
Population: 5.5 million
Natural resources: gold, potash, zinc and copper, salt, possibly oil and natural gas, fish
GDP breakdown by sector: agriculture 17.5%; industry
23.2%; services 59.3% (2007 est.)
Agricultural products: sorghum, lentils, vegetables, corn,cotton, tobacco, sisal, livestock, goats, fish
Industries: food processing, beverages, clothing and textiles,
light manufacturing, salt, cement“We are a young, small nation.
We have to heal the wounds of thewar and create an environmentthat is conducive to investment,”
Afewerki notes. “We need tocreate a stable environment andbuild the physical infrastructure. One of the driving forcesof development in any country
is FDI. Today’s modern world is
like a big village, a new era with

Central Bank of Eritrea—Playing a Pivotal Role in Eritrea’s GrowthWith its favorable location on the Horn of Africa, a 1,200-km-longcoastline, vast stocks of precious mineral resources, and opportunities in tourism, agriculture, mining and fisheries, Eritrea is a gem of adestination, looking to take its trading links with Japan to a new level.
The countries share many values, not least a belief in self-reliance anda focus on homegrown potential, but while Japan has a thriving andsustainable economy, young African nations like Eritrea are still getting
up to speed.
Established by proclamation in 1993, just after the country’s
independence from Ethiopia, the Central Bank of Eritrea, which isempowered by proclamation to foster economic growth, employment
and overall development in the country, has played a pivotal role inthe country’s development thus far. Growth has been steady since theborder war with Ethiopia ended in 2002, and unlike many countries in
the region, Eritrea benefits from having excellent road and sea links.
Eritrea has also succeeded in maximizing its comparative advantages
for growth and development, and is now opening up to foreign direct
investment (FDI) on an unprecedented scale. Kibreab Weldermariam,
acting governor of the central bank, is hopeful that mining contracts
with foreign firms to excavate Eritrea’s gold, silver, potash, copper andzinc resources, will be forthcoming in the future. “Despite the fact it
has had relatively few years to develop its infrastructure, Eritrea hasinvested heavily and achieved economic growth against the odds,” hesays. “Nevertheless, achieving macroeconomic stability, without compromising our objectives, is our primary challenge.

office ensures a speedy licensing process. There is freedom
to recruit expatriate staff forcompanies. Foreign investors also
have usufructuary rights to landfor various purposes, althoughownership of land is the exclusive
right of the government. Foreigners may apply for land without citizenship for investment purposes.
Eritrea is a member of the IMF, the World Bank and the Hague
Convention for the Pacific Settlement of International Disputes, and theMultinational Guarantee Agency. In the last five years, much importancehas been given to the development of national laws and the justicesystem in the country. Eritrea has thus proved itself to be a peacefuland stable country. The effort to promote growth has also been part ofthis equation.
KibreabWeldermariam
Acting Governor
Central Bank ofEritrea

Financial market opens up
Formed 16 years ago, the Central Bank of Eritrea has faced many challenges in order to actively and correctly implement sustainable strategies. As Acting Gov. Weldermariam notes: “When we were founded,
our banks were at a rudimentary stage. They had no foreign currency.
However, thanks to the government’s and the people’s efforts, our banks
are now making great progress.”
The financial sector is currently made up of two commercial banks,
one development bank, one insurance corporation and one financial“It is not only an opportunity, but a current strategy of the government to attract FDI to further
develop our economy. Almost all our sectors are virgin and offer untapped potential.”“For a country this size, and given our recent history, it is obvious
and acceptable to face a finance deficit. The government still needs toinvest more in the economy before it can reap the fruit. Good examplesof sectors that are already benefiting from public investment, however,are infrastructure, agriculture, tourism and fisheries. These investments
have caused the current deficit, but we are counting on future returns.
In this respect, FDI will help immensely.”
Offering a wealth of incentives
The Eritrean authorities have done much to improve the investment
climate in recent years. Foreign investors benefit from unrestricted
remittances of net profits and dividends accrued from investment, debtservicing payments, fees and royalties in payment of technology transfer
agreements, proceeds received from liquidation of investment and/orexpansion, and payments received from the sale or transfer of shares.
All buyers of public enterprises have automatic entitlement to theincentives and advantages provided for in the country’s Investment
Code. Total foreign ownership is permitted in all areas of activity. Thereis a nominal duty on all capital goods, semiprocessed materials, industrial parts and raw materials, and exemptions from export duties andsales tax for exports.
The Eritrean Investment Center helps investors acquire the necessary
legal status for their investment activities while the business licensing

service bureau. The banks’ activities are limited to receiving deposits
and lending functions. Taking this into consideration, Weldermariam
points out that there is plenty of room for expansion and plenty of scopefor other banking products, thus foreign investment is welcomed toexecute this within an attractive business environment. “For a short timein the past, Eritrea introduced certain restrictions on foreign entrants,
but now it is not only an opportunity, but a current strategy of thegovernment to attract FDI to further develop our economy. Almost all
our sectors are virgin and offer untapped potential,” he says.
The new reforms will also allow Eritrea to move at full steam aheadand capitalize on its strategic location on the Red Sea trading route:one of the most important maritime trade routes in the world. Increased
activity generated from within its ports will not only increase trade but
open up new possibilities in maritime industries, thus creating a multiplier effect throughout other segments of the sector.
The government has already invested in the development of a freetrade zone that will significantly add to Eritrea’s competitive edge inthe region and increase its attractiveness to important trading partners,including Japan.
“The relationship between Japan and Eritrea has been limited tohumanitarian and development assistance only,” says Weldermariam.
“But Eritrea is now open, and so the possibility for developing a mutually
beneficial relationship is positive and promising.”

interaction among global communities. The potential of thiscountry is huge, in spite of its
size and population.”
Education will be one of themain pillars of economic growth,and officials are concentratingon raising the level of education and training throughout
Eritrea’s schools and colleges.
“We work with the Japanese
in many areas, but our priority
has, and will continue to be,
the development of human resources,” the president says. “Weneed an educated and skilledworkforce so that we can exploit
the promise of our naturalresources.”
Eritrea’s mining sector is seen
as a major growth area and is
expected to become Eritrea’s
largest foreign exchange earnerin the coming years. The country
is also believed to have untapped
oil and gas reserves.
Low duties, taxes and tariffs
are among a large package offinancial incentives offered tomining companies willing toinvest in Eritrea while licensing procedures have also been
simplified. Such measures
have already attracted several
exploration companies and theindustry is now bracing itself fora large increase in the discovery
of major mineral deposits.
Tourism is another sector
poised for growth, thanks to
Eritrea’s hot, sunny climate anda wealth of good beaches scattered along its 1,200 kilometersof coastline. “Tourism infrastructure needs huge investment, however,” the president
reveals. “We have a very attractive coastline and a diverse
climate, but we need skilledclientele and foreign resources
to help develop the sector.”
The government hopes thenew free zones will go a long way
in helping achieve these aims,
particularly those in the capital

Eritrea’s unspoiled Red Sea coastline is the perfect tourist attraction.
Asmara and Massawa. Thezones feature new warehouses
and roads, with the Massawa
Free Zone also incorporating anew airport as well as the area’s
former naval base.
Managed by the Eritrea
Free Zones Authority (EFZA),
the slated developments areexpected to act as a magnet formajor overseas investors such as
Japan, with the project likely to
be extended to other parts of thecountry in due course.
Authorities say the activitiesof the free zones and their associated operations will trickle
down through the economy in
the form of more education andemployment opportunties.
Outlining the wide range of“We would like to haveJapanese investment in the freezones,” says Tseggai, “but theJapanese make their decisions
very carefully and are often not
the first to invest in new things.
They need to see examples thatare doing well for a while before
moving in themselves.
“However, once they do makethe decision to invest in a certain
area, they are there to stay andmore will follow. The Japaneseare solid investors and they are
there for the long haul.”
Highlighting the benefitsof Japan’s business presence,Tseggai adds: “Japan has always
been at the forefront of development in new technology — they
are world leaders. We would like

“By the end of 2009, we hope to have aconsultative arrangement with Japan
where we can share technical andprofessional skills.”
Isaias Afewerki, President of Eritrea

incentives available for firms
based at the Massawa Free Zone,
EFZA CEO Araia Tseggai says:“There is no income tax, nosales tax, no stamp duty, no VAT
and no corporate profit tax to bepaid. All the capital invested canbe repatriated after closure ofoperations.
“It is a long-term strategy. We
want to attract quality investments that will allow investors
to stay here for many years. The
regulations are very simple andthe paperwork can be concluded
very quickly.”
Japanese companies arebeing targeted as future investors in the projects, especially as
now that links between the twocountries have been strengthened through high-profile visits
last year by two Japanese tradedelegations.

to see a transfer of technology,
to strengthen our economy andimprove our education system.
“Investors will find it easierthan they thought to start operations. We are in the processof improving our infrastructure,especially our rail transportsystem, but it is good enough tosustain economic growth andwelcome foreign investment.
Eritrea is a new country withdeep roots. Its potential for economic growth is impressive.”
Ripe for investment
Founded in 1993 after independence, the Central Bank ofEritrea is responsible for thedevelopment of and investmentin the financial sector. Although

the country has very few commercial banks and hardly any
financial products or services,the political and economic
stability now offered, will, thegovernment believes, offer excellent opportunities for foreigninvestors.
As acting governor of theCentral Bank of Eritrea,
Kibreab Weldermariam, tells
The Japan Times: “The relationship between Japan and Eritrea
has been good for a long time
now, although it was previouslyprimarily one of aid.
“Eritrea is a young country
that is full of potential. Now is
the time for us to welcome FDI
in the untapped sectors of theeconomy.”
Such positive views areshared by President Afewerki
who expects to see a wave ofinvestment from Japan overthe next few years, as well as anincreased exchange of skills andexperience.
“By the end of 2009, we hopeto have a consultative arrangement with Japan where we canshare technical and professional
skills, and focus on tertiaryeducation. This will ultimately
deliver fruitful relationships
between the two countries,”
he explains. “Japan is a small
country with few natural resources, but it can produce thebest products and has the mostadvanced technology.
“We may not be able toemulate the Japanese experience, but I think we can learn a
lot from them. Any partnershipwe form needs to be sustainable
as we need to have partners whowill be with us for the long term.
“If we can successfully implement these programs within abroader vision, the outlook for
Eritrea is certainly optimistic.”

This report has been produced by Global Insight and did not involve thereporting or editing staff of The Japan Times. This report can also be read
online at www.japantimes.co.jp/international-reports

Massawa Free Zone
The perfect location for your business• Easy access to global markets• Tax and duty exemptions• International trade afﬁliationwww.eritreafza.co

Central Bank of Eritrea
PO Box 849, Asmara, Eritrea. Tel: +291 1 123033 36 Fax: +291 1 123162

Massawa Free Zone PO BOX 491, Massawa, Eritrea. Tel: +291 1 540362/ 540247 +291 1 200812 Fax: +291 1 202778 erifreezone@tse.com.er

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