ports

The interdependence of Eritrea and the northern part of Ethiopia had
its outset already during the times of Italian colonization
and was further deepened when Ethiopia gained control over Eritrea.
By 1997 Ethiopia accounted for 67% of the Eritrean export which demonstrates the degree to which both economies were intertwined.

But since Eritrean independence the two countries’ economic strategies
have grown more and more diverse. Some scholars argue that Eritrea has developed an outward-looking export and free market-oriented strategy buttressing unrestricted movement of capital and economic cooperation
which would promote national interest of both countries and thereby
enhance peace.

These patterns of bilateral trade would, from Eritrea’s point of view, provide
a rudiment for stability in the Horn of Africa.
Ethiopia, on the other hand, is seen to have emphasized development of
its agricultural sector as well as the agriculture-related industry. At the same time, the Ethiopian policy makers did not endorse the idea of open trade.

Quite in contrast, they were in favor of restrictions on certain commodities exported to Eritrea as well as of a control over the flow of currencies. These trade disparities have, ultimately, led to Ethiopian products entering Eritrea with full freedom and Eritrean commodities burdened by indirect or embarkation taxes. In consequence, the value of imports from Ethiopia exceeded Eritrean export by about 60 million Birr in 1997.

Also, the fact that most of Eritrean exports and all of its re-exports to Ethiopia involved payments in foreign currency being exchanged for the Birr, placed
Ethiopia at advantageous side. In addition, both countries seemed to endorse different payment mechanisms. Ethiopia supported irrevocably guaranteed hard currency with an exception of the limited border trade while Eritrea opted for a combination of Birr, dollar and the new Eritrean currency, Nakfa.

Another important point is that Ethiopia believed in Eritrean rivalry against the Ethiopian province of Tigray, industrialized under the leadership of the Prime Minister, Meles Zenawi. Tigray’s rapid development has posed gigantic menace to Eritrean ambitions to become the Singapore or the Taiwan of Africa.
Thus, for Ethiopia, the Eritrean invasion in 1998 was nothing else but
"a way out of the economic quagmire they [the Eritreans]
were wallowing in.” [15]

Yet, it is clear that the concept of a “failed Eritrean economy “ has merely served as a tool for Ethiopian propaganda rather than as an objective assessment of the real situation. Quite contrary to Ethiopian premise,
the International Monetary Fund (IMF) has estimated an output growth in Eritreato be 7 % from 1993 to 1996 and to rise to 8% in 1998.
What is more, due to Eritrean economic development the deficit was brought down from 16.4% in 1996 to 5.5% of GDP in 1997.
Overall, the World Bank assessment of Eritrean economic policies
until 1998 delineated them as “an impressive performance”
that “mainly emanates from its [Eritrean] effective development strategies”

Economic Reform and Development in Ethiopia
Written from Ethiopian perspective assessment of Ethiopia's recent
economic growth and progress. The article also touches on Eritrean economy
delivering its gloomy portrayal; 01/26/2000

Grim Realities of the Eritrean Economy
presented at East African Forum assessment of Eritrean economy
from Ethiopian perspective.

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