ERITREA

COUNTRY OVERVIEW

LOCATION AND SIZE.

Eritrea is an eastern African country occupying an area of 121,320 square kilometers (46,841 square miles), which makes it slightly larger than the state of Pennsylvania. It borders Sudan to the north and west, Ethiopia and Djibouti to the south, and the Red Sea to the east. Its land borders extend for 1,630 kilometers (1,012 miles), while its total coastline is 2,234 kilometers (1,388 miles). Eritrea's capital, Asmara, and its 2 other major cities, Assab and Massawa, are in the southeastern and eastern parts of the country.

POPULATION.

Eritrea's population was estimated to be 4,135,933 in July 2000. The population increased from 2.1 million in 1975 to 3.6 million in 1998, indicating a growth rate of 2.4 percent. The estimated birth rate in 2000 was 42.71 births per 1,000, and the estimated death rate 12.3 deaths per 1,000, contributing to a 3.86 percent growth rate in 2000. The population is expected to increase to about 5.5 million by 2015. Because of drought and a war with Ethiopia, about 1 million Eritreans lived abroad (mostly in Sudan) in 2000, while at least 955,000 were internally displaced.

The major ethnic groups of the predominantly African population of Eritrea are the Tigrinya (50 percent), Tigre and Kunama (40 percent), Afar (4 percent), and Saho (3 percent). There are a variety of religions in the country, with Muslims, Coptic Christians, Roman Catholics, and Protestants dominating. There are also a variety of Cushitic languages spoken in the country. The population is young, with 43 percent under the age of 15 and only 3 percent above the age of 65.

Most Eritreans live in rural areas. In 1998 urban dwellers accounted for only 18 percent of the population, but this figure is expected to reach 26.2 percent by 2015. Asmara is the largest city with 480,000 inhabitants. Other major urban areas include Assab (70,000), Keren (70,000), Mendefera (65,000), and Massawa (35,000).

INDUSTRY

Industry is the second largest sector after the service sector. Its main activities, manufacturing and mining, accounted for 29.5 percent of the GDP in 1998, valued at $855 million.

MANUFACTURING.

The manufacturing industry is unable to meet domestic needs, while its exports are insignificant. Exports earned a paltry $4 million in 1998, while imports of industrial goods ran to $250 million. Manufacturing consists of Asmara-based small and medium size establishments producing consumer products such as glass, leather, processed foods, cotton, textile, liquors, and other beverages. New factories produce marble, recycled plastics, metals, and rubber goods. Low investment and management capacity, outdated machinery, and poor infrastructure have prevented growth, and the Eritrean government has privatized some of its industries while ending subsidies to others to stimulate development. It has also lowered taxes and tariffs on industrial exports and imports and offered other incentives to foreign investors.

MINING.

Eritrea's mining industry is small but has growth potential. Its mineral resources include substantial reserves of barite, feldspar, kaolin, gold, potash, rock salt, gypsum, asbestos, and marble. If mining developed, Eritrea's proximity to the Middle East and Europe would be favorable to the export of minerals to those markets. In the absence of domestic investments, companies from Australia, Canada, France, South Korea, and the United States have operated or now operate limited mining operations there. Mineral exports accounted for $12 million in 1998. Eritrea has sought foreign investment for the exploration and development of offshore oil and gas reserves, but Anadarko, an American company, stopped drilling operations in 1999 after disappointing results.

SERVICES

The most important services in Eritrea are tourism, retail , and financial. Services form the largest economic sector, accounting for 61.2 percent of the GDP and 20 percent of the workforce in 1998. However, like the rest of the country's economic sectors, services suffer from underdevelopment.

FINANCIAL SERVICES.

Eritrea has a small state-run financial system. It consists of a central bank, the National Bank of Eritrea (NBE), 4 other banks, dominated by the Commercial Bank of Eritrea (CBE), and an insurance company, the National Insurance Corporation of Eritrea. The NBE accounted for over 60 percent of Eritrean banking assets in 2000. Except for the Housing and Commerce Bank of Eritrea, owned by the ruling party, all other financial institutions are state-owned, and the government licensed several private exchange offices in 1997 to liberalize the industry. No foreign financial institution operates in Eritrea, but the CBE has arrangements for money transfers with 40 foreign banks.

TOURISM.

With its long warm-water coastline and an abundance of historical, archaeological, and natural sites, Eritrea has much to offer as a tourist destination. However, the development of tourism is constrained by the lack of basic infrastructure. There are only 11 hotels, all in Asmara, all of which require renovation. The government has privatized 3 hotels but has failed to find buyers for the rest. Thanks to some success in attracting foreign investment, in 2000 the first foreign hotel, the Inter-Continental, was opened in Asmara. In that year the government negotiated the construction of a casino and several hotels on the Dahlak archipelago by U.S. and Saudi Arabian companies.

RETAIL.

The retail sector of Eritrea is poorly developed. It consists of small-scale traditional shops that are unable to ensure the accessibility of goods and services to either the rural or the urban populations. The emerging middle class is encouraging the establishment of modern retail outlets in major urban areas, but the economic devastation of the country has delayed the creation of a viable retail sector.

DEPENDENCIES

Eritrea has no territories or colonies.

BIBLIOGRAPHY

Economist Intelligence Unit. Country Profile: Eritrea. London: Economist Intelligence Unit, 2001.

Eritrea: A New Beginning. London: United Nations Industrial Development Organization, 1996.

Government of Eritrea External Affairs Office. Birth of a Nation .Asmara, Eritrea: Government of Eritrea, 1993.

Tesfai, Alemseged, and Martin Doornbos, editors. Post-Conflict Eritrea: Prospects for Reconstruction and Development. Lawrenceville, NJ: Red Sea Press, 1999.

United Nations. Human Development Report 2000 . New York:Oxford University Press, 2000.

U.S. Central Intelligence Agency. World Factbook 2000. <http://www.odci.gov/cia/publications/factbook/index.html> . Accessed August 2001.

U.S. Department of State. FY 2000 Country Commercial Guide: Eritrea. <http://www.state.gov/www/about_state/business/com_guides/2000/africa/index.html> . Accessed September 2001.

Hooman Peimani

CAPITAL:

Asmara.

MONETARY UNIT:

Nakfa (Nkfa). One nakfa equals 100 cents. There are coins of 1, 5, 10, 25, 50 and 100 cents, and notes of 1, 5, 10, 20, 50, and 100 nakfa.

CHIEF EXPORTS:

Livestock, sorghum, textiles, food, small manufactures.

CHIEF IMPORTS:

Processed goods, machinery, petroleum products.

GROSS DOMESTIC PRODUCT:

US$2.9 billion (purchasing power parity, 1999 est.).

BALANCE OF TRADE:

Exports: US$26 million (1999 est.). Imports: US$560 million (1999 est.). [The CIA World Factbook lists exports of US$52.9 million (f.o.b., 1997 est.) and imports of US$489.4 million (c.i.f., 1997 est.).]