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"Economy—overview: With independence from Ethiopia on 24 May 1993, Eritrea faced the bitter economic problem of a small, desperately poor African country. The economy is largely based on subsistence agriculture, with over 70% of the population involved in farming and herding. The small industrial sector consists mainly of light industries with outmoded technologies. Domestic output (GDP) is substantially augmented by worker remittances from abroad. Government revenues come from custom duties and taxes on income and sales. Road construction is a top domestic priority. Eritrea has long-term prospects for revenues 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., overcoming 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 armed conflict with Ethiopia."

(Quotes and data are from CIA Fact Book 1999, but the numbers sometimes reflect 1997 or 1995 figures, see the source).

Exports: $95 million (1996 est.)

Exports—commodities: livestock, sorghum, textiles, food, small manufactures

Exports—partners: Ethiopia 67%, Sudan 10%, US 8%, Italy 4%, Saudi Arabia, Yemen (1996)

Imports: $514 million (1996 est.)

Debt—external: $46 million (1996 est.)

Economic aid—recipient: $149.9 million (1995)

Military expenditures—dollar figure: $196 million (1997)

Military expenditures—percent of GDP: 28.6% (1997)

Two immediate impressions, this is troubled and war economy.

I do not believe that there will free Ethiopia without free Eritrea. This free Ethiopia can come only after liberating itself from nationalism.

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new: Revolutionary Ethiopia: From Empire to People's Republic + Ethiopia : A Post-Cold War African State + Sweeter Than Honey: Ethiopian Women and Revolution : Testimones Oftigrayan Women + Among the Pastoral Afar in Ethiopia: Tradition, Continuity and Socio-Economic Change + What Is Your Name: Book of Eritrean and Ethiopian Names + Pillars in Ethiopian History (Pillars in Ethiopian History) + Revolution & Religion in Ethiopia: The Growth & Persecution of the Mekane Yesus Church 1974-85 (Eastern African Studies) + Impact of Economic Reforms on Rural Households in Ethiopia: A Study from 1989-1995 (Poverty Dynamics in Africa Series) + Remapping Ethiopia: Socialism & After (Eastern African Studies (London, England).) + Ethiopia: A Country Study + Ethiopia: From Bullets to the Ballot Box : The Bumpy Road to Democracy and the Political Economy of Transition + The Emperor's Clothes: A Personal Viewpoint on Politics and Administration in the Imperial Ethiopian Government 1941-1974 (African Series, No 3) + Ethiopia Foreign Policy and Government Guide + Ethiopia Through Russian Eyes
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ERITREAN SYNDROME, Part I -- Postmodern Nationalism

This is not an anti-Eritrean article. In fact, this article about Eritrea is about Ethiopia. Whatever is wrong with Ethiopia could be seen in the political and social structure of Eritrea, which is almost 20 times smaller and the disease of nationalism trusts this small body much severe. If in Ethiopia we see some opposition leaders jailed, in Eritrea not a single opposition party is recognized. In Ethiopia we see the independent journalists in prison, in Eritrea there are no independent media.

In all ex-Soviet nation the first movement which appears after the fall of communism is nationalism. Ethiopia and Eritrea are no exception. What makes the nationalism's phenomena so extreme (war) is that diplomatically we have two country, when in actuality it is one body (see the economic figures at the end, about cultural and historical identity was said enough already).

I wrote before that socialism and nationalism are twins (references to Nazi Germany), both try to organize society idelogically, not culturally and economically. Many references to European socialist governments do not mention that European socialists are the "post-nationalist socialists" (Europe went through two world wars to cure itself from nationalism and "purify" socialism). This is not the case with the ex-communist countries, they are going through this process only now.

So how different the two ideologies -- socialism and nationalism? According to Hitler a socialism can't have only one form -- nationalism (his prosecution of communists and socialists with a least 50 years of pan-European traditions). In short, socialism is the method of expressing new nationalism. I say "new" because this is nationalism of the new global era (Lenin called it "Imperialism").

Look at this process in Russia, which came out of the ideology driven society and doesn't have another ideology to live by. So what does constitute them being together? Ah, we are the Russians! Or Eritreans, in our case.

Well, the problem is that there was Russia before, which was destroyed and so-called New Russians are the result of this destruction. Very much like "Eritreans" are the result of the lost of their historical identity. Where this new nationalism can take them? We know where -- to war. Hitler had no other choice, but war -- he had to feed this "new nationalism" to keep it going. Why? The answer is simple -- this new national identity is a social invention for societies with lost identities. This is a postmodern nationalism.

So, now Federal Ethiopia, where all those symptoms are not that visible, because multinational composition, does not have an identity. The old Imperial identity is gone, the Soviet socialist identity didn't work, to claim the entire Ethiopia as New Tigrey is too much even for the hard-liners. Could the war with Eritrea restore it? I doubt that the invented Eritrean postmodern nationalism could create new "Ethiopian" identity. I don not think that national will work. not now, not in the future. It won't work in Eritrea, Russia or anywhere else in the world. It's time is gone.

The Age of Ideology is over. All successful federate republics are not based on nationalism, but the historical experience. All Germans are not Germans only because they are not French in principle, because they Germans de facto. Even after a generation of Germans raised as East Germans with the separate economy and imposed new ideology, their historical experience is the ground of their identity. This is a new field of anthropology called Cultural Anthropology, when the fact that culture is the core of social identities (culture understood as historical continuity).

The only way out is to go beyond nationalism -- the separation of citizenship from ethnicity, race or nationality. Citizenship not based on nationality or religion is a relatively new phenomena and best historical experience of it -- America. (There are other new countries, which form themselves as nations on their mutual experience American style, Australia, for instance). But could the traditional countries implement it? Could Ethiopia have Eritrean Ethiopians, Tigrean Ethiopian and Oromo Ethiopians, like it could be in Sweden, US or Great Britain? What is to done to get there?

First, the realization of this historical situation. If you look at Eritrean or Ethiopian constitutions, this understand is not there. The words are. There must be a better definition of the Ethiopian citizenship, which supersedes the nationality principle. To be Tigrean Ethiopian doesn't mean to live in Tigrey with Tigreans. The expulsion of Eritreans is an example of not having an idea about citizenship. (Americans did it with American Japanese during WW II). Constitution protects the citizens, regardless of their nationality and if there could be functional Constitutional Court in Ethiopia, the deportation would be ruled un-constitutional.

Maybe, there are some lessons to learn from the American understanding of the citizenship and an interesting institution such as a legal alien. It's not the same as foreigner. "Permanent resident" has all the functions to live in the country, but he is not a citizen. Paradoxically, insisting on a principle of nationality, all Ethiopians are foreigners in Ethiopia, their are "residents" -- because Addis Ababa, for example is not a capital of Tigrey or Amhara. No wonder -- can Addis Ababa could declare itself independent of Ethiopia, following the model of Eritrean referendum and right for self-determination? This is no end to this chain of contradiction, unless Ethiopian citizenship is understood. Or should we invent new nationality -- AddisAbebian?

Speaking of paradoxes, today one can be a "national" -- in order to have a nationality, you have to be a citizen. Why? Simple because there are no "national state" anymore. Even the religious states (Islamic Fundamentalism) are not religious, but civic -- they can't operate otherwise. ...


At the end of the day it will be Ethiopians who have to deal with the meess in Addis Ababa and Asmara....


The figures for both countries are very similar. First -- almost half of the population is under 14 (often it is referred as African or 3rd world's feature). But what does it say? The transition from agricultural society to industrial or simply urban society is obvious for anybody in any African capital, the rural population will migrate to cities even in bigger numbers. It's a fact of world history.

But there is no work for this new labor force, there is no industry developed for them to be employed. The Western assistance which puts so much stress on teaching "new" nations of self-reliance, doesn't have a program to show how to start many small companies (the process any developed country went through and continue to be the main source of employment). What do we have a result -- the army of the unemployed youth, which governments turn into army recruits, the only business which government knows best. Where is an army, there is a war.


This analysis "Eritrean Economy in Dire Straits: IMF statistical appendix released on May 11, 2000, paints a grim picture" posted on EthioForum wasn't signed, but the figures can give a better understanding of the nature of the Eritrea-Ethiopian war and the future of this conflcit.
Gundet Newsletter, June 4, 2000

Reference: Eritrea: Statistical Appendix. IMF Country Report No.00/55. May 11, 2000.

On May 11, 2000, the IMF released a statistical appendix for Eritrea, summarizing economic data for the country through 1999. The data show the Eritrean economy in dire straits, without even taking into account the events of May 12-31 when the Eritrean army was defeated and driven from western and central Eritrea.

It is interesting to note that Ethiopian data is consistently reported in terms of GDP while Eritrea uses GDP or GNP depending on which indicator yields more favorable statistics. For example, Eritrea reports its budget deficit in terms of GNP, but its economic growth is reported in terms of GDP. This is because the GNP takes into account overseas remittances and thus makes the deficit seem smaller. However, the "remittances" have declined since 1997 and Eritrea’s GNP has correspondingly shrunk to the level of 1996. In order to avoid focusing on this drop in the GNP, Eritrea reports its growth in terms of GDP. A consistent use of either GDP or GNP would have made it easier to analyze the data and compare to other countries.

Following are some highlights from the IMF report. It should be noted that the data are largely gathered and reported by the Eritrean government, therefore the reliability of some of the data is in question.

Debt: Eritrea’s external debt has tripled since 1997 to reach 225 million dollars in 1999. This is about 30 percent of GNP. At this rate Eritrea’s debt will be unsustainable by the time the payments come due. What happened was a big increase in loan disbursements in 1998 and 1999. Also Libya kicked in 14.7 million dollars for unspecified purposes in 1999 while other Arab countries disbursed an additional 33.6 million dollars in 1999. It took Eritrea only six years of independence to run its debt load to unsustainable levels.

Growth: The Eritrean government claims the economy grew by three percent in 1999. In reality this growth is almost entirely due to growth in government spending categorized as “general services.” This category is used to cover Eritrean military spending on construction of trenches, bunkers, planting mines, etc. Since the entire Eritrean trench lines and associated fortifications are now under Ethiopian control, the purported economic growth is something of a joke.

Aside from government spending, the additional area of growth was the agricultural sector, where a second good rainfall year allowed Eritrea to maintain a high agricultural output (relative to 1997 and 1996). However, it is clear that the food aid looted at Assab has been a factor in the reported agricultural growth. The looted food aid amounted to roughly 15 percent of Eritrea’s cereal production, and would thus be sufficient by itself to allow Eritrea to report a large increase in agricultural output. That Eritrea is including the looted food aid as part of its production is indicated by the fact that Eritrea is officially reporting to the IMF that it received no food aid in 1998/99.

The fact that tax revenue only increased by 5 million nakfa in 1999 (0.6%) also demonstrates the unreliability of the purported Eritrean growth rate of 3 percent. When adjusted for inflation, the tax revenue has actually declined despite the increase in tax rates. This shows that the Eritrean economy is shrinking, not growing.

Exchange Rate: As of December 1999, the official rate had sunk to 8.9 to the dollar while the rate offered by the licensed foreign-exchange bureaus was 9.9 to the dollar.

Remittances: In 1997 net private transfers to Eritrea were reported as 352 million dollars. This represented a massive increase of 108 million dollars from the previous year. When the IMF asked for an explanation, it was told that the Eritrean government had launched a campaign among the Eritrean diaspora in 1997(before the war) to support the launching of the Nakfa currency. According to the Eritrean government, the Eritrean diaspora responded by transferring an additional 100 million dollars into Eritrean bank accounts in 1997. The IMF, seemed to reserve judgement on this matter by simply noting that there were inadequate records of financial and trade inflows for Eritrea.

Ethiopian observers however, have noted that the 108 million dollar windfall coincided with Eritrea’s borrowing of over one billion Birr from Ethiopia during this same period. Most Ethiopians have suspected that Eritrea used this loan in conjunction with its introduction of a new currency, to engage in massive currency exchange fraud and smuggling. The documents of Horn International Bank, a bank opened by Eritreans in Ethiopia fronting for the EPLF, clearly show Eritrea's intention to engage in illegal currency manipulation in Ethiopia and to divert foreign exchange to Eritrea.

The proof of Eritrea’s criminal activities has come with the remittance data for 1998 and 1999. Net private transfers have actually fallen to 245 and 240 million dollars in 1998 and 1999 respectively. The reason for the decline is that Ethiopia is no longer open for Eritrean currency fraud. Thus, despite the intensive campaigns to raise foreign currency for the war, Eritrea has not been able to make up the shortfall caused by the end of illegal currency transfers from Ethiopia.

For comparison, in Ethiopia the latest remittance data available are for 1997/98 where the net private transfers were listed as 317 million dollars.

Deficit: Huge deficits have been the norm for Eritrea during its entire seven years of existence. In 1998 and 1999 however, the budget deficits became truly breathtaking. Even when foreign grants are included, in 1998 the deficit was 1.6 billion nakfa and in 1999, 2.6 billion nakfa. In percent of GNP, these figures are –27.3 and –37.4 percent respectively. If these figures are reported as percent of GDP they are in the neighborhood –50 percent. As noted above however, Eritrea reports its figures as percent of GNP because of the importance of external transfers (private and official) to the economy. In 1999 these transfers accounted for 37 percent of the GNP.

To see just how massive these deficits are, it should be noted that the 1999 deficit of 2.6 billion nakfa exceeded total government revenue and external grants combined (2.2 billion nakfa). In other words Eritrea was spending more than twice what it was earning. (Note: The combined revenue consisted of 1.8 billion nakfa from Eritrean government plus 378 million nakfa from external grants).

For Ethiopia, the latest budget deficit available was 1997/98 where the deficit was –3.9% of GDP.

Military Spending: Officially, Eritrea is reporting its defense spending as 62% of the budget in 1998 and 61% of the budget in 1999. These are probably the highest military spending percentages in the world, but they are likely underestimated. The Eritreans have hidden a large portion of this spending under the category “general services.” The military spending is included in both the current budget and capital budget. In the capital budget, this category experienced a 600 percent increase since 1997. This spending would probably be for construction of trenches, bunkers, planting landmines etc. One-third of capital spending is now part of this category.

Government debt (domestic): Government debt has exploded by 250 percent since 1997. The government now accounts for 60 percent of the debt in the Eritrean economy, indicating a credit crunch. If the multi-billion nakfa budget deficits are not stopped, then the Eritrean government will soon use up all the deposits in the banking system and it will be forced to print large amounts of extra money, or find an outside sponsor (eg Libya or Qatar).

The issue of "net claims on the birr area" is also still unresolved, and it may be that the Eritreans are counting this as part of the banks reserve. If so then the two Eritrean banks are not meeting solvency standards because the likelihood of the expired old birr notes being accepted in Ethiopia is zero. Those birr notes are worthless.

Exports: Total exports have crashed to the lowest level since independence. The 197 million nakfa (about 25 million dollars) reported for 1998 still includes Ethiopia as receiving 27%. (The war started in May 1998) The 1999 figures can thus be expected to be even lower. The declining trend in Eritrean exports had actually started in 1996.

Inflation: The inflation rate in 1998 was 16.6 percent, and a similar figure is expected for 1999 although final data were not released. This is a fairly high level relative to the low-inflation environment being enjoyed by economies elsewhere in the world.

Investment: Investment has shown a consistent decline since 1996 when projects worth 851 million nakfa were recorded. In 1999 the recorded investment projects had a total worth of 362 million nakfa; a decline of 57 percent representing a steady trend from 1996.

The Way Forward on the Ethio-Eritrean Conflict

By Dejazmach Zewde Gabre Selassie


The rise of the conflict and the consequent invasion of Eritrea has resulted in the violation of the national sovereignty of Ethiopia. Innocent children while attending school have been massacred. So many lives have been lost. People have been forced to abandon their domicile and properties. Moreover, excessive mine explosives have been planted which are still instrumental in the killing and crippling of children, adults and animals.

It is known that when a conflict arises between two sisterly countries, unless the blood ties between them mitigate the animosity created by the conflict, it would lead to mutual destruction.

Historical Background

It appears to be fashionable with some Eritreans in recent years that Ethiopia and Eritrea have always been separate states without any tie except geographical proximity. I am afraid this is far from the truth. Ethnically, culturally, and historically most of what is now known as Eritrea after it was given that name by the Italian colonizers in 1890, has been an integral part of, and administered by Ethiopia.

During the 6th Century the Ummayad (Syrian Arabs) occupied the Dahlaq Islands in order to extend their dominance over the trade route to the Far East. Subsequently the combined competition of the Arabs and the Persians led to the decline of Axum, which up to the 7th Century was the predominant maritime power in the Red Sea area.

In the 16th Century Ethiopia was preoccupied with the ravage caused by Islamic forces, led by Immam Ahmed Ibrahim el Ghazi, commonly known in Ethiopia as "Gragn", supplied with modern arms and trained men by the Turkish governor in Yemen. The Turks in 1557 occupied Massawa. From there the Turks attempted four times to extend their authority over the highland and reached up to Debaroa, the seat of the Bahr Negash. But they were repulsed. The main interest of the Ottoman’s was to establish their supremacy in the Red Sea against the Portuguese. When the Dutch and the British entered into the scene their interest in the region faded, although they kept Massawa under their flag.

During the 18th Century the Funj Sultanate of Senaar extended their predominant influence over the tribes of Western Eritrea particularly among the Beni Amir.

Subsequently, the Sultan of Turkey appointed Mohammed Ali Pasha, a Greek from Kavala, as the governor of Egypt, in 1797. He aimed at uniting the whole Nile Valley under his control. He occupied the Sudan in the 1820s including Senaar. Egyptian influence replaced that of the Funj Sultanate over Western Eritrea.

Mohammed Ali’s grandson Khedive Ismail pursued his grandfather’s ambition to bring the whole Nile Valley under his authority. To that end he persuaded his nominal sovereign the Sultan of Turkey to grant him a Firman in 1865, which handed Massawa to him and his heirs by paying additional tribute to the coffer of the Sublime Porte. In 1872 he occupied Bogos through his Swiss born governor of the Red Sea Littoral, Warner Munzinger. His subsequent attempts to extend his authority over the Highlands were defeated twice by the Ethiopian forces, at the battles of Gundet and Gurae, in November 1875 and March 1976 consecutively. About the same time, the Egyptian forces dispatched under the command of Warner Munzinger Pasha to the Afar Region to establish a southern front against Yohannes, was also annihilated by the Sultan of Awsa Mohammed Anfari, in November 1875.

After the bombardment of Alexandria and establishment of British control over Egypt in 1882; and the rise of the revolt in the Sudan led by Mohammed Ahmed Il Mahdi about the same time; the British decided to abandon the over extended Egyptian occupation over such vast areas, which comprised the Sudan, Massaw, Bogos, Somalia and Harar. The thorny problem of extricating the Egyptian garrisons and their families, in five different posts along the Ethiopian-Sudanese border, was conveniently solved by the Tripartite Treaty between Ethiopia, Great Britain and Egypt, commonly known as the Hewett Treaty, concluded at Adwa on June 3, 1884.

This treaty restored Bogos to Ethiopia. Allowed free transit of merchandise including war materiel and ammunitions to and from Ethiopia through the port of Massawa. Emperor Yohannes’ demand for the Port of Massawa was declined on the grounds that the port belonged to Turkey. The Egyptian’s possession of the port was due to a favor granted by the Sultan of Turkey. Therefore, Egypt cannot give what does not belong to her. Admiral Sir William Hewett assured the Emperor, however, that Egypt will abandon the port in the near future, and it would be up to the Emperor to make the arrangement with the rightful owner. Ethiopia on its part was obliged by the Treaty to assist in the relief of the Egyptian garrisons and authorize their passage through Ethiopian territory to the port of Massawa. Ethiopia on her part fulfilled her obligation at great sacrifice.

To Ethiopian’s dismay however, the Italians, who had already established themselves at Assab and Beilul during the previous two decades, occupied Massawa, with British encouragement and assistance, when the Egyptians evacuated in 1885.

The Italian attempt to move up into the Highlands was repulsed by Ras Alula at Dogali in 1887. Subsequently, the Italians tried again to move up to the highlands in the following year. But they did not succeed beyond Sahati, which is only about forty kilometers from Massawa. It was only after the death of Yohannes and the conclusion of the Wuchale Treaty in May 1889 that the Italians acquired Hamassen and Bogos, and established their capital in Asmara, in August of the same year.

In January of 1890, they proclaimed the newly acquired territory as Eritrea. Thereafter, between 1891 and 1902 Italy concluded four Treaties with Ethiopia which resulted in the establishment of Marab, Belesa, Muna line as the border between Ethiopia and the Italian Colony of Eritrea. To which was added the 1908 Treaty, which delineates the border on the Dancalia region, from Bade to Raheita. The border was never demarcated on the ground, although in each agreement it was stated that representatives of the two parties to the agreement would demarcate the borderline on the ground within six month after the signing of the treaty.

Thus until it was colonized by Italy, most of Eritrea’s territory was an integral part of and was administered by Ethiopia.

After the Second World War, the Four Powers and later on the UN attempted to ascertain the wishes of the people in order to determine the future of the former Italian colonies. The majority of the Christian highlanders opted for union with Ethiopia, while the Muslim lowlanders mostly opted for independence. Finally the UN compromised solution resulted in establishing the federation which only lasted for ten years.

Demolishing the federation was a great mistake; irrespective of who instigated it and how it was done. We are all familiar with the havoc caused during the subsequent 30 years, which culminated with the independence of Eritrea.

Enough has already been said regarding the present crisis and the obstacles to implement the OAU sponsored arrangements. I don’t intend to speculate how the present crisis will finally be settled, although I earnestly hope that a settlement will be reached without the necessity of shading more blood on both sides. I wish to emphasize, however, my hope and vision of what ought to be the relation of the two sisterly countries.

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