Ethiopia-Eritrea Peace Deal: A New Dawn for Sustainability?

Omolola Lipede
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 14-Nov-2018

This year is one full of hopes and happiness for the Ethiopians and Eritreans, what a time of relief and rejoicing for them when the border was open. Many families reunited and their joy knew no bounds, for 20 years some many were trapped by war on the other side. For two decades, the border was closed and no one dare moves across, however, 2018 gave them a new joy. The Ethiopia-Eritrea border is bustling once again, revitalising frontiers.

Eritrea gained its independence from Ethiopia in the early 1990s, and a dispute over the border plunged the twin country into war in 1998, locking the two nations in unyielding hostilities that left more than 80,000 people dead. The conflict continued as a cold war after Ethiopia refused to honour an UN-backed commission verdict demarcating the border. Eritrea is the most diplomatically isolated state in Africa, the UN imposed sanctions including an arms embargo in 2009; accusing the government of aiding Islamist militants in neighbouring Somalia which the government denies.

The country was put on hold for 20 years and everything revolved around the border dispute. Prior to the peace deal, Eritrea’s president, Isaias Afwerki has used Ethiopia’s rejection of the subsequent boundary ruling to justify a host of repressive domestic policies. These include jailing journalists and dissidents, refusing to implement the constitution and running an indefinite military conscription program the UN likens to slavery. According to the United Nations figures, hundreds of thousands of young Eritreans have fled across the Sahara and the Mediterranean Sea to Europe in recent years (before the peace deal) to escape compulsory and indefinite conscription once justified by the state of war with Ethiopia.

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This cold war continued and an end seems impossible not until 2018; a year of breakthrough for the Ethiopians and Eritreans. The turning point came in June when the Ethiopian Prime Minister (PM), Abiy Ahmed announced that his country would fully accept and implement a peace agreement that was signed in 2000 but never honoured. After weeks of meeting and deliberations, the formal deal was signed by both parties.

Weeks after the two nations formally ended 20 years of conflict, President Afwerki and PM Abiy met to open crossings in border towns dotted with debris from a war that killed thousands. Many danced and waved flags while families reunited after two decades. Family reunification is the immediate result of the peace deal. But in the long term, what will it translates for both countries economically? Is this a new dawn for sustainability?

Ethiopia has a population of more than 100 million people; it is the second most populous country in Africa. The country has consistent economic growth, however, it is also one of the poorest countries in the region. Eritrea is home to more than 5 million people, the country has reported consistent growth deficits and poverty. The peace deal could also spur foreign investors to consider Eritrea as a business hub and likewise solidify the country relationship on the international scene.

Analysts stipulated that both countries will benefit from the normalisation. Ethiopia is a land-locked country; negotiating access to Eritrea’s seaports could boost sustainable economic growth and development. Since the conflict, Ethiopia has been forced to use the Djibouti’s seaports; the former sends its 90 per cent foreign trade through the latter. The normalisation opened a new dawn out of isolation for Eritrea, PM Abiy made propositions to the UN secretary to lift the sanctions against Eritrea. Today, the UN lifts the ban, lifting the sanctions could help to unlock new paths for investments and sustainable economic growth in the Eritrea.

Both countries are back to business. After the border was opened, business women and men were glad to be back to economic activities. A merchant in the Eritrean town of Senafe gladly said: we have everything we didn’t have before, from the smallest to the biggest products. The report released by EY attractiveness survey revealed that in 2018, Ethiopia’s investment attractiveness is seven times better than previous years. The EY’s attractiveness program focuses on insights derived from understanding growth from Foreign Direct Investment (FDI) perspective into countries and regions across globe.

Furthermore, the peace agreement will creates space to prioritise economic development over security. More resources were diverted to national security than sustainability. Eritrea has a mandatory national service program which is throat cutting but the government saw the program has a necessity to protect against the continued threat of fighting with Ethiopia. Eritrean migrants have reported that they were fleeing the mandatory program.

Eritrea will be the new sweetheart of investors because it has a lot of untapped resources, including vast potash; an important element in modern fertilizers. The country is a producer of Bisha, gold and copper. Bisha is ‘hot cake’ in the industry, whoever owns this resource will have a head start in future mineral licence; so potential investors will see this as a rat race. According to World Bank, Bisha currently consists of 10 per cent of Eritrea’s GDP.

Although, these indicators are in the favour of both countries, it is however impediments for the governments to set the ball of proper and sound policies rolling for the betterment of the economies. All these may not be enough to drive sustainable economic growth, the future economic and humanitarian conditions will be determined by the direction of their home policies. The governments need to employ policies and sound governance reforms that would restore trust between the citizens and the government for a stable economic growth.

The Eritrean government should adopt trade policies that would strengthen the unregulated and unstable exchange rate. Owing to the fact that the Eritrean nafka has an unstable value compare to the Ethiopian birr, the trade scenario has to be guided by some strategies. The economies have to adopt broader economic and regulatory reforms, work dutifully on the cost of doing business, the ease of doing business and also provide basic social amenities to make the economies more business friendly.

Beyond signing the deal, there are more for both governments to embark upon to benefit the economy. Ethiopia-Eritrea peace deal will remain mere deal if proper reforms are not enacted.

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