Eritrea

Given to Ethiopia as part of a federation in 1952, Eritrea fought for its sovereignty for 30 years; independence was accepted in a 1993 referendum. In 1998, Eritrea embarked on a border war with Ethiopia that lasted for two and a half years; the conflict ended in 2000 under UN support. A UN peacekeeping force is in Eritrea looking after the Temporary Security Zone bordering Ethiopia. In 2006, an international commission created with the goal to solve the problem gave Eritrea and Ethiopia one year to separate their borders; if they did not do so, the borders would be separated based on coordinates.

Main Airports

Asmara (ASM)

U.S. Embassy

28 Franklin D. Roosevelt Street, P.O. Box 211, Asmara
tel. 291-1-120-004

Statistics

GDP: purchasing power parity:

$4.471 billion (2005 est.)

GDP - real growth rate:

2% (2005 est.)

GDP - per capita: purchasing power parity:

1,000 (2005 est.)

Inflation rate (consumer prices):

15% (2005 est.)

Labor force:

NA

Exports:

$33.58 million f.o.b. (2005 est.)

Exports - partners:

Italy 39.3%, US 14.9%, Belarus 7.3%, Germany 5.8%, UK 4.9% (2005)

Imports:

$676.5 million f.o.b. (2005 est.)

Imports - partners:

Germany 22.2%, Italy 20.3%, France 15.9%, US 12.8%, Ireland 8.2% (2005)

Population:

4,786,994 (July 2006 est.)

Population growth rate:

2.47% (2006 est.)

Population Below Poverty Line:

50% (2004 est.)

Major Industries:

food processing, beverages, clothing and textiles, light manufacturing, salt, cement

Employing Workers: 55*

Registering Property: 153*

Enforcing Contracts: 58*

Closing a Business: 151*

*2006 World Bank rank out of 175 countries

Starting a Business

The table below shows the number of steps and the amount of time needed to start a business, on average

Indicator	Eritrea	Region
Procedures (number)	13	11.1
Time (days)	76	61.8

Eritrea Risk Assessment

Country Rating

Rating: D

A high-risk political and economic situation and an often very difficult business environment can have a very significant impact on corporate payment behaviour. Corporate default probability is very high.

Risk Assessment

Growth remained sluggish in 2007. And an upturn will be unlikely in 2008 due to low productivity in the farm sector, which employs 77 per cent of the population, and a business climate that has hampered private sector development. The substantial military mobilisation has diverted manpower and thus undermined the workforce in productive sectors. The poor state of Eritrea's relations with international financial institutions has been detrimental to development of the aid granted and has limited investment inflows. Far-reaching Chinese projects involving as much infrastructure (Port of Assab) as mining extraction should, however, support economic growth in the medium term.

Stoked by structural fiscal deficit, inflation has remained above 15 per cent. External imbalances also constitute nettlesome problems. Even if the current account deficit should continue to narrow amid new import restrictions, financing needs still remain large and the level of foreign exchange reserves critically low. Covering the financing needs is all the more delicate with the president pursuing a policy of refusal of international aid. With Eritrea thus not included among the beneficiaries of the HIPC and MDRI programmes, the level of foreign debt remains unsustainable.

National elections have been postponed since December 2001 with the single party, the Popular Front for Democracy and Justice, seeming likely to tighten its grip on power under President Isaias Afewerki's leadership. And the border dispute pitting Eritrea against Ethiopia has intensified in the wake of a new failure by the International Arbitration Commission to trace a dividing line acceptable to both parties. Eritrea's support for the Islamic militias in Somalia has moreover been perceived as the opening of a second front by Ethiopia, which has meanwhile been backing the Somali interim transition government. Renewed hostilities between Eritrea and Ethiopia constitute an appreciable risk

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