Eritrea was awarded to Ethiopia in 1952 as part of a federation. A border war with Ethiopia that erupted in 1998 remains unresolved. The small industrial sector consists mainly of light industries with outmoded technologies.
Government revenues come from custom duties and taxes on income and sales.
Road construction is a top domestic priority. In the long term, Eritrea may benefit from the development of offshore oil, offshore fishing, and tourism. Eritrea's economic future depends on its ability to master fundamental social and economic problems, e.g., by reducing illiteracy, promoting job creation, expanding technical training, attracting foreign investment, and streamlining the bureaucracy. The most immediate threat to the economy, however, is the possible expansion of the border conflict with Ethiopia, which broke out in May 1998. The hostilities have drained away substantial resources vital to Eritrea's economic development.