ERITREA’S DEVELOPMENT POLICY, ACHIEVEMENTS OF THE LAST 25 YEARS, CHALLENGES AND PROSPECTS

 By Prof. Abraham Kidane Economic Advisor in the Ministry of National

Eritrea’s 25th  Independence Anniversary is an opportune event to undertake a sober reflection of the country’s development policy, progress to date, and prospects. The following is a capsulated review of Eritrea’s socio-economic development policy, progress, and a brief outlook of the near future.</>

At liberation in 1991, the Eritrean economy was in a sorry state.  Indeed, an estimated seventy per cent of the population was poor. Abject poverty and deprivation were even greater in rural communities where the majority of citizens lived. Streets and artery roads were destroyed by war machinery, the once vibrant manufacturing sector was in disrepair, and plant machinery had been cannibalized for scrap metal. Furthermore, basic public services such as transportation, healthcare, education and sanitation were almost non-existent. Utilities such as electricity, telephonic services, clean and safe water were in short supply. Only approximately 15 per cent of the national population had access to clean and safe water, government coffers were empty, and private deposits at banks had been hauled away by the fleeing enemy army. Under these circumstances, all indicators of wellbeing including health status, life expectancy at birth and consumption of goods and services indicated woeful inadequacy and societal distress.

Against this background and deeply rooted socio-cultural and historical values of societal cohesion, harmony, sharing, and a great sense of national dignity, a pragmatic and forward-looking development policy emerged. The government adopted what can be referred to as a pro-poor development policy anchored upon poverty eradication in all its forms, social justice, and sustainable development in an environment of social harmony and peace.  These core elements of the national development policy are not simply popular ideas adopted by government. On the contrary, they are deeply rooted in the socio-cultural values and history of Eritrea as well as the bitter experiences of the long struggle for independence. They reflect the aspirations of Eritrean society, past and present, the sacred wishes of the martyrs who sacrificed their lives so that Eritrea will be free not just from colonization and oppression but also from hunger, disease and ignorance. However long it takes, this freedom cannot be assured without sustainable development. In the words of Nobel Laureate Economist Amartya Sen “The development process is an enlargement of human freedom”.

To achieve this freedom, a widely consultative process resulted in the formulation of a socio-economic development policy that is articulated in both the National Charter and the Macro Policy document (both of 1994). The policy seeks to develop an economy in which opportunities and prosperity are widely and equitably shared. It seeks to foster socio-cultural, economic and political life that is rich, diverse, harmonious and satisfying while maintaining equity and social justice for all. Through well vetted investment, trade, and financial policies, the Government further seeks to develop an economy that is open and actively supportive of regional economic integration and international cooperation.

Sustainable development is mainly the result of internal efforts that are anchored on high self esteem, self-reliance and owner ship of  policies and programs. Eritrea espouses these fundamental principles. However, its emphasis on self-reliance is sometimes misconstrued as rejection of development partnership or even as voluntary isolationism. Self reliance  in the Eritrean context is none other than emphasis on,first and foremost, the effective utilization of national human and material resources before seeking external assistance or cooperation.Examples abound of national systems that have failed to alleviate poverty and deprivation of the majority of their populations due to corruption or the propensity and zeal of leadership at every occasion to plead for external aid. By the same token there exist examples of once poor small nations that have prospered based on policies of self reliance in spite of the fact that their natural resource endowments were negligible. In simple terms,Eritrea’s policy of self-reliance seeks to avoid the pitfalls of the insidious culture of dependency.

Empirical evidence of the sources of growth in most developed nations reveals that the single most important source of growth and development has been human capital. This continues to be the case in all economies regardless of their sizes and known physical resource endowments. Educated and skilled labour is not only productive but also enhances the productivity of all other factor inputs in the production system. To eradicate poverty and to secure sustained development with social justice, Eritrea’s priority development strategies include development of human resources, agriculture,infrastructure, and rural development.

Sustainable national development programs further require inclusion and wide participation of citizens in regard to gender, age or cultural identity and diversity of interest.Eritrea’s development strategies are inclusive and diversity sensitive. Early during the struggle for independence, the Eritrean People’s Liberation Front (EPLF) recognized the importance of women’s emancipation and empowerment in development, and established the National Union of Eritrean Women (NUEW) in 1979. Ever since its establishment, NUEW has advocated women’s equal participation in all aspects of Eritrean life including the honor of bearing arms side by side with men.  Equally significant are the establishment, during the struggle, of the Confederation of Eritrean Workers (NCEW), the National Union of Eritrean Youth and Students (NUEYS), and the Cultural Affairs unit that includes music, arts, theatre and cinema. These and other professional associations promote the interests of their respective groups and play effective roles in educating and training their members for national development. Eritrea’srecent and remarkable advances in social and cultural life through sports and athletics, music and the arts speak not only to the enrichment of Eritrean lives but also to the essence of development. Development is a multidimensional phenomenon that, in addition to economic growth, increments in real incomes and the meeting of basic needs,leads to satisfying lives for all citizens in an environment of peace and social harmony.

At the outset of these remarks, I noted that at the time of national liberation in 1991, the great majority of the Eritrean people were impoverished and haggard. At that time as at the present moment, the majority of citizens lived in rural areas that were neglected and undeserved, and they suffered from abject poverty. Moreover, even at the low level of incomes that was then national in magnitude, income and wealth distributions were unacceptably inequitable. Extreme inequality does not only make mockery of all other advances but it is outright dangerous, immoral and socially divisive. Currently, several countries including some that are otherwise growing fast are experiencing widening inequality. Few people, usually urbanites, get extremely wealthy often at the expense of the majority. Unless appropriate and timely policies and measures are applied, this can have deleterious effects that should be worrisome to policy makers. In the midst of widespread poverty, therefore, it was pragmatic and far-sighted for the Government of the State of Eritrea to have ranked food security and rural development as top priorities in its national development strategy. This is a brief review of Eritrean cultural, social and political values as well as history that formed the basis of post-liberation development policy It also provides a glimpse into how this socio-economic policy landscape evolved over time.

• 1993-1998: Peacetime Growth with Macroeconomic Stability

Immediately following independence in 1993, the formidable tasks of reconstruction, rehabilitation and the building of foundations for sustainable socio-economic development commenced in earnest. Among the most important were the establishment of public institutions and civil service, the creation of a legal and administrative environment that is conducive to sustainable development, and building capacity in a down-sized and lean public sector.  Consistent with this, approximately 65% of the liberation forces were demobilized and injected into both the private and public sectors. The demobilization program, the first of two phases following independence, is indicative of Eritrea’s sole preoccupation at the time: poverty eradication through sustainable socio economic development. The period 1993-1998 was clearly a period of successful reconstruction and rehabilitation as well as the beginning of growth with macroeconomic stability.

For instance, gross domestic product (GDP) grew at the rate of 10.9 per cent (1993-1997) , inflation averaged approximately 6%, and fiscal deficit including grants averaged approximately 5.5% of GDP, and gross international reserves were equivalent to 3.5 months of imports of goods and services. These and other macroeconomic performance indicators ascertained that, absent distractions and uncertainties requiring diversion of human and financial resources away from development programs, the national development policy was able to trigger sustainable development. The period 1993-1998 was also a period of peace and stability that are essential conditions for accelerated growth and poverty elimination.

• War Damages and Temporary Distraction (1998-2000)

The border war of 1998-2000 caused substantial damage to social and economic infrastructure in the conflict areas and entailed adverse consequences on the gains that were recorded during the preceding seven years. Among those that sustained heavy damage or complete destruction were schools, healthcare centres, manufacturing and industrial plants, agricultural resources, livestock and places of worship in the battle zone. Under these circumstances, the Government needed to divert some of the nation’s human and financial resources to defence while maintaining the development effort. The conflict areas were also sprinkled with land mines that rendered for some time, arable land in the border areas inaccessible and dangerous to human and animal lives.

In spite of the failure of the so-called Guarantors of Peace who pledged to effect implementation of the Eritrea/Ethiopia Border Commission(EEBC) decisions, and in spite of the numerous stumbling blocks that have been imposed against Eritrea – including sanctions – the nation has endured. Resilience and patience, hallmarks of the Eritrean people, have paid off in the past and they do now. The determination of the people and government to survive and thrive against all odds is unwavering, and Eritreans in the Diaspora unfailingly support their country of birth through remittances and political advocacy. Consequently, the pre-war focus on development is in place, and the economy is on an accelerated path of sustainable development and alleviation of poverty.

Economic growth has accelerated starting in 2010. Foreign direct investment (FDI) especially in mining is picking up and stimulating economic activity.

World Bank updates indicate that the Eritrean economy grew at the rate of 10.9% (1993-97) and by 9.0 % in (2011-12). Using a population estimate of 5.1 million (2014) and gross domestic product of USD2.61 billion at market prices, the Bank also estimates GDP per capita of $544.5 (2011) . The Government’s estimate of the resident population is 3.7 million. Using this as a denominator, the GDP per capita will be even higher. The World Bank also reports that other indicators such as fiscal deficit including grants at 12.6% of GDP (2010-2012) and inflation (estimated single digit in recent years) are declining thus improving macroeconomic stability. The World Bank’s estimates of real growth and stability are generally corroborated by the International Monetary Fund’s (IMF)  revised and updated assessment of Eritrean economic performance.

Other developments as in the areas of education, healthcare, transportation and communications, water supply, energy and environment indicate that basic needs of households are being met.

During the last twenty five years school enrolment has increased from 213,368 (1993) to 679,038 (2014), increase by 218%; college and university enrolment increased from approximately 1200 full-time students to 14,000 (2015), increase by 1067%; 26 hospitals including five referral, 52 health centres, 180 health stations, 77 clinics and 5 facilities specialized in maternal and child care; Asphalt, gravel and dirt roads constructed increased from 4,930 kilo meters (1991) to 14,500 kilo meters (2015), increase by 195%; buses used for public transportation in rural areas increased from 267 (1991) to 1,769 (2015), increase by 562%; airports in Asmara, Massawa, Assab, Nakfa, Tesseney, Dahlak Island, and Awget have been modernized to be suitable for domestic and international flights; energy generation capacity has increased from 30.1 Mega Watts (1991) to 141.70Mega Watts (2015) increase by 371%; deep water ports and container terminals have been constructed and modernized in Massawa and Assab; and dams and ponds with a capacity of over 300 million cubic meters of water have been built.This investment has already impacted the livelihood of the populationpositively. To ensure access by all citizens, especially low income and rural communities, most of these social and economic services are provided to the public either free of charge or at highly subsidized rates. Further improvements of access to these services, especially water, energy and public transportation will require huge infrastructure investment. However, when implemented, the Government’s infrastructure programs are expected to secure sustainable access to these services by households as well asby social and economic establishments.

Table 1 presents some indicators of progress in development.

In several areas including life expectancy, HIV prevalence, and youth literacy,  Eritrea has performed better than most sub-Saharan countries, all of which were independent states decades before Eritrea. As well, Eritrea shines in the area of healthcare. As of 2013, it was the only African country that achieved all three Health Millennium Development Goals before the target year of 2015. In recognition of this remarkable achievement in healthcare, accolades have been expressed by the United Nations General Assembly (2014) and by the African Union, for success in malaria control (2016).

CHALLENGES

Like most economies – developing and developed – Eritrea faces potential challenges that impede development and affect livelihood. These include exogenous factors such as drought, climate change and seismic movements. If persistent, such hazards can disrupt economic activity including agriculture, and may slow down growth and development. Eritrea is not immune to such challenges. Its location in a fragile region makes it especially susceptible to such hazards and disasters. However, the focus of this review is economic, financial, and political challenges that impede development. The following are among the main challenges:

1. Continued Occupation of Eritrean Sovereign Territory and a Climate of “no-peace, no war” 

The Algiers Agreement (2000) ending the armed conflict between Eritrea and Ethiopia stipulated a final and binding decision to be handed by an Eritrea Ethiopia Boundary Commission (EEBC). Subsequently, the EEBC rendered its ruling and declared Badme – the flash point – Eritrean sovereign territory, thus requiring Ethiopia to withdraw its forces. Ethiopia has reneged on the agreement and continues to occupy sovereign Eritrean territory. The resultant environment of continuous tension and Ethiopia’s belligerence has a negative impact on Eritrea’s development efforts. In short, it has required diversion of some human and fiscal resources to defence and national security, and delayed normalization of relationships among the residents of the region. The tensions and uncertainties created by this state of affairs constitute development and security risk. They are also a detriment to the betterment of the livelihood of residents of the area, as well as an obstacle to the promotion of peace in the region.

2. Embargoes, Sanctions, Harassments and Restriction of Fiscal Space 

In December 2009, the United Nations Security Council Resolution 1907 imposed an arms embargo and sanctions on Eritrea. The justifications were alleged support for Somalia’s Al-Shabaab and Eritrea’s dispute with neighbouring Djibouti. In July 2012, the UN’s Monitoring Group on Somalia and Eritrea (UNSEMG) reported that it had found no evidence of direct Eritrean support for Al-Shebaab. Furthermore, Eritrea and Djibouti had begun the process of mediation under the auspices of the State of Qatar for a peaceful resolution of their differences. Based on these developments, in October 2015 China’s representative at the Security Council, Mr Yong Zhao, stated that “The Council should adjust its sanctions with a view to eventually lifting them”. The Council made no adjustments as proposed. Instead, it voted to extend the mandate of the UNSEMG until 15 December 2016.

The sanctions have been and continue to be a detriment to Eritrea’s efforts to eradicate poverty and trigger sustainable development. Furthermore, Eritrea’s adversaries have usurped the letter and spirit of the Council Resolutions by applying additional restrictions and tactics that make it difficult for Eritrea to pursue its agenda of development. They actively pursue prevention of remittances by Diaspora Eritreans; though without much success, they push to apply cumbersome inspections that hinder trade and shipping of goods and services to and from Eritrea; and they make bank transfers and settlements difficult by harassing and jawboning correspondent banks in different countries. In summary, the sanctions and the attendant but illegal restrictions and harassments have restricted Eritrea’s fiscal and financial space, and made development more challenging.

PROSPECTS

In spite of the formidable challenges that have been summarized above, Eritrea’s prospects for sustainable growth and development are bright. The following are among the main sources and drivers of growth: Human capital, modernized agriculture, strategic investments in infrastructure, exploitation of valuable natural resources, and tourism.
In the history of successful economies, human capital input has been the driver of growth and development. Witness the economic, socio-cultural, and technological progress that has been recorded by all the advanced countries in the Americas, Europe and Asia. In those countries, the most growth and development is attributed to human capital and organization. Eritrea is fully cognizant of this historical phenomenon and has banked, as it should, on human resource development. The substantial investments that are being made in basic education, higher education, healthcare, women’s empowerment, and youth training are investments the returns of which will be not only invaluable but will accelerate over time.

Secondly,increased agricultural productivity plays a significant role in eradicating poverty and improving the livelihood of all Eritreans. The government’s strategy to assure food security is two-pronged: reducing dependence on rain-fed agriculture, and modernizing the agricultural sector to increase productivity. As indicated in Part II of this series, numerous dams and ponds with substantial capacity have been constructed in different parts of the country. Once the distribution infrastructure is put in place, water will be available in greater quantities both for irrigation and household consumption. This is the beginning of reducing dependence on erratic rainfall and minimizing the negative effects of recurrent drought. Additionally, the Ministry of Agriculture has on-going programs aimed at assisting farmers to increase productivity and output. They include water harvesting, increasing arable land, introducing better seeds, applying more efficient farming techniques, containing soil erosion, applying environment and health friendly fertilizers and pesticides, and promoting household income supplementing packages. As well, the College of Agriculture at Hamelmalo regularly provides expert consultations to farmers throughout the country.

Parallel to the efforts in human capital formation and modernization of agriculture are critical and strategic investments that are being made continuously in the fields of transportation and communications, energy and water harvesting. The development of critical masses of basic infrastructure in the above areas is a necessary condition for the viability of both public and private investments. A great deal more needs to be accomplished in all of these sectors and the investment requirements are substantial. However, a threshold size necessary to trigger sustainable development is now in place.
Another sector that promises to contribute significantly to growth and development is tourism. Eritrea possesses varied and desirable climatic conditions, marine resources and pristine waters, rich flora and fauna, strategic location and spectacular topography, rich history and culture that promise to make Eritrea a destination of choice for tourists. The harmony among its different nationalities and cultural groups, and the peaceful, hospitable and secure environment that have become synonymous with Eritrea are invaluable assets of tourism.

Last but not least, exploitation of mineral resources will contribute significantly to growth and development. It is common knowledge that Eritrea is endowed with known and substantial deposits of minerals including gold, silver, zinc, copper, magnesium and potash. The country also has varied sources of renewable and clean energy. To facilitate proper exploitation of these resources, the government is investing in training programs, construction of roads, port facilities, and other infrastructure appropriate for mining. Recent exploitation of some of the above mentioned minerals indicates that both Eritrea and its mining partners (foreign direct investors) stand to benefit enormously over a long period of time.

True, Eritrea has joined the ranks of natural resource producers. The exploitation of valuable mineral resources offers tremendous opportunities as well as risks. Revenues from mining have the potential to accelerate development, eradicate poverty, and bring about prosperity to the nation. This is desirable and welcome. The risks, however, are equally significant. Heavy dependence on natural resource exploitation can lead to neglect of other important sectors including agriculture, manufacturing, and tourism; it can lead to environmental destruction and creation of health hazards; it can inhibit creativity and diversification of the sources of national income; and commodity price and revenue fluctuations can result in budgetary difficulties and recessions. Furthermore, natural resources are exhaustible and, therefore, they can be a source of disappointment to those who depend on them heavily. This is why mineral resources should be exploited judiciously while a continuous focus is maintained on human resource development, technological enhancement, and innovation. In conclusion, Eritrea’s future is bright not because of climatic and geopolitical advantages or discovery of substantial mineral deposits but because of its focus on other significant sources of growth including human capital development.