COUNTRY REPORT
Ethiopia Eritrea Somalia Djibouti
May 2000
The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising conferences and roundtables. The firm is a member of The Economist Group.
London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.20) 7499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected]
Website: http://www.eiu.com
Electronic delivery This publication can be viewed by subscribing online at http://store.eiu.com/brdes.html Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, on-line databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office London: Jan Frost Tel: (44.20) 7830 1183 Fax: (44.20) 7830 1023 New York: Alexander Bateman Tel: (1.212) 554 0643 Fax: (1.212) 586 1181 Hong Kong: Amy Ha Tel: (852) 2802 7288/2585 3888 Fax: (852) 2802 7720/7638
Copyright © 2000 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the EIU does not accept responsibility for any loss arising from reliance on it.
ISSN 1352-2922
Symbols for tables “n/a” means not available; “–” means not applicable
Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Contents
3 Summary
Ethiopia
5 Political structure 6 Economic structure 8 Outlook for 2000-01 8 Political forecast 9 Economic policy outlook 9 Economic forecast 11 The political scene 14 Economic policy and the economy
Eritrea
18 Political structure 19 Economic structure 20 Outlook for 2000-01 20 Political forecast 20 Economic outlook 21 The political scene 23 Economic policy and the economy
Somalia
25 Political structure 26 Economic structure 27 Outlook for 2000-01 27 Political forecast 27 Economic outlook 28 Somaliland outlook 28 The political scene 31 Economic policy and the economy 33 News from the Somaliland Republic
Djibouti
35 Political structure 36 Economic structure 37 Outlook for 2000-01 37 Political forecast 38 Economic outlook 38 The political scene 40 Economic policy and the economy
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 2
List of tables
12 Ethiopia: Russian imports 16 Ethiopia: main exports 40 Djibouti: macroeconomic targets, 1999-2002
List of figures
15 Ethiopia: gross domestic product 24 Eritrea: gross domestic product 40 Djibouti: gross domestic product
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 3
May 1st 2000 Summary
May 2000
Ethiopia
Outlook for 2000-01 Ethiopia continues to reject implementation details of the OAU peace initiative. Proximity talks between Eritrean and Ethiopian leaderships scheduled for May in Algiers are unlikely to ease tensions. The military situation remains extremely unstable. The war will overshadow federal elections scheduled for May 14th, which will be dominated by affiliates of the ruling EPRDF. Food shortages will be exacerbated if forecasts of poor harvests are confirmed. This will increase the numbers dependent upon emergency food supplies, with an estimated 8-12m people in need of aid. Food insecurity and a deteriorating fiscal position will not undermine the government’s determination nor its ability to prosecute the war.
The political scene The military situation on the Ethiopian-Eritrean border remained deadlocked in the first four months of 2000. The diplomatic stalemate has also remained unchanged. Campaigning for Ethiopia’s May elections has been lacklustre, due to the ongoing war and urgent need for famine relief in many areas. Opposition groups have complained of harassment. Ethiopia’s former prime minister, Tamrat Layne, has been sentenced to prison on corruption charges.
Economic policy and the Following a UN food assessment, Ethiopia’s disaster commission launched an economy appeal for 900,000 tonnes of cereals. Relations with donors have been strained over depletion of food reserves, delays in donor food appeals, war-related expenditure, and port usage. The war has muddied government finances.
On May 12th Ethiopia launched a major offensive against Eritrean positions along the western front; fighting quickly moved to other fronts. After apparent major Ethiopian gains, there is a window of opportunity for renewed diplomatic efforts, but only after the fighting appears to be over.
Eritrea
Outlook for 2000-01 Diplomatic efforts are not expected to lead to any significant breakthroughs, and fighting could resume any time. Rains due in June/July may accelerate military operations. A drawn-out period of uncertainty, with resumption of war an ever-present threat, is likely to hurt Eritrea more than Ethiopia. Eritrea’s economy appears stalled. Most manpower is mobilised at the front.
The political scene The 12th round of national service has begun. President Isaias has offered to allow Ethiopian food aid to come through Assab. Diplomatic ties have been resumed with Djibouti. Refugees in Sudan have been repatriated.
Economic policy and the Food prices have begun to rise. Nearly one-third of the population will require economy food aid. The Massawa power project has received an EU loan.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 4
Somalia
Outlook for 2000-01 Prospects for peace are still very poor. Fresh rounds of fighting between rival clan factions have erupted throughout central and southern Somalia, even in areas that had been relatively peaceful of late. The Djibouti reconciliation initiative appears bound to fail. Based on the 1999 gul harvest assessment in Somalia, an estimated 1.2m people are at risk of serious food insecurity in 2000.
The political scene Djibouti’s reconciliation conference has been put back. The Mogadishu administration has split. There has been more violence in Mogadishu, Puntland and central and southern regions. Ethiopian troops have been active inside Somalia.
Economic policy and the The World Food Programme (WFP) has warned that a major famine looms in parts economy of the south if the main rainy season fails. Insecurity has continued to hamper the aid effort. Health conditions have deteriorated, but some NGOs have returned. Refugees from Kenya have been repatriated. Bossasso’s power plant is planned to be refurbished.
News from the Somaliland Relations with Djibouti have been strained over Somaliland’s rejection of the Republic reconciliation conference. Confrontations with Puntland have continued. A budget for 2000 has been announced.
Djibouti
Outlook for 2000-01 President Guelleh will continue to push for a Somali reconciliation conference, overshadowing Djibouti’s troubled domestic politics, in which Mr Guelleh’s authoritarian rule will continue to be contested. Mr Guelleh is likely to use the return of an exiled FRUD leader to further divide domestic political critics. It is likely that Djibouti will be unable to meet the timetable outlined in the economic reform strategy, resulting in disappointing levels of growth.
The political scene The government has signed an unexpected peace deal with Ahmed Dini in Paris. Several FRUD detainees have been released, and Mr Dini has returned to the country. However, the political details of the agreement have yet to be decided. Relations with Somaliland have deteriorated, but they have warmed with Eritrea.
Economic policy and the A policy framework paper has been published outlining the government’s economy reform timetable, but it appears to be over ambitious. Djibouti’s port is benefiting from an influx of food aid bound for its neighbours, but the situation is creating strains with Ethiopian traders. Djibouti itself has been estimated to have some 100,000 people requiring food assistance.
Editor: Todd Moss Editorial closing date: May 1st 2000 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Ethiopia 5
Ethiopia
Political structure
Official name Federal Democratic Republic of Ethiopia
Form of state Federal republic
Legal system The federal constitution was promulgated by the transitional authorities in December 1994. In May 1995 representatives were elected to the institutions of the new republic, which formally came into being in August 1995
National legislature The 548-member Council of Peoples’ Representatives is the federal assembly. Nine regional state councils have limited powers, including that of appointing the supervisory Federal Council
National elections May 1995 (federal and regional); next elections due in May 2000 (federal and regional)
Head of state President, currently Negaso Gidada, has a largely ceremonial role and is appointed by the Council of Peoples’ Representatives
National government The prime minister and his cabinet (Council of Ministers), appointed in August 1995
Main political parties The Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) evolved from the coalition of armed groups that seized power in May 1991. It includes the Tigray People’s Liberation Front and the Amhara National Democratic Movement, formerly the Ethiopian People’s Democratic Movement. The Oromo Liberation Front withdrew from the transitional government in July 1992 and was subsequently banned. Several urban opposition parties boycotted the 1995 elections. A large number of political factions exist in exile
Prime minister Meles Zenawi Deputy prime minister & minister of defence Tefera Walwa Deputy prime minister for economic affairs Kassu Illala
Key ministers Agriculture Mengistu Huluka (acting) Economic development & co-operation Girma Biru Education Guenet Zewde Finance Sufyan Ahmed Foreign affairs Seyoum Mesfin Health Adem Ibrahim Information & tourism Wolde-Mikael Chamo Justice Worede Woldu Wolde Labour & social affairs Hassan Abdullah Mines & energy Azedin Ali Public works & urban development Haile Aseged Trade & industry Kassahun Ayele Transport & communications Mohammed Drir (acting) Water resources Shiferaw Yarso
Central bank governor Teklewolde Atnafu
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 6 Ethiopia
Economic structure
Annual indicators
1995 1996 1997 1998 1999a GDP at factor costb (Birr bn) 31.4 35.1 38.2 41.4 45.8c Real GDP growthb (%) 6.2 10.6 5.2 –0.5 0.0 Consumer price inflationd (av; %) 10.0 –5.1 –3.7 0.9 4.0c Population (m) 54.7 56.4 58.1 59.9 61.4 Exports fob (US$ m) 423 418 588 568 460 Imports fob (US$ m) 1,137 1,002 1,019 1,042 1,250 Current-account balance (US$ m) –10 89 –23 134 –100 Reserves excl gold (year-end; US$ m) 772 732 501 511 459c Total external debt (US$ bn) 10.3 10.1 10.1 10.3 10.3 External debt-service, paid (%) 19.1 42.2 9.6 11.3 14.0 Coffee productione (‘000 tonnes) 230 228 230 232f 210 Exchange rate Birr:US$ (av) 6.15 6.35 6.71 7.12 7.85 April 27th 2000 Birr8.07:US$1
Origins of gross domestic product 1998/99b % Components of gross domestic product 1998/99b % Agriculture 44.8 Private consumption 81.3 Industry 11.7 Government consumption 16.4 Manufacturing 4.6 Gross fixed capital formation 18.2 Distribution services 14.8 Exports of goods & services 14.4 Other services 28.7 Imports of goods & services –30.3 GDP at factor cost 100.0 GDP at market prices 100.0
Principal exports fob 1998/99b US$ m Principal imports cif 1996/97b US$ m Coffee 259 Machinery 81 Qat 47 Vehicles 75 Oil seeds 44 Metal & metal products 74 Pulses 40 Electrical products 39
Main destinations of exports 1998g % of total Main origins of imports 1998g % of total Germany 25 Russia 11 Japan 12 Italy 9 Djibouti 10 Saudi Arabia 7 Saudi Arabia 10 US 6 a EIU estimates. b Fiscal years ending July 7th. c Actual. d Addis Ababa retail index. e Crop years ending September 30th; only about one-half of production is exported. f Official estimate. g Based on partners’ trade returns; subject to a wide margin of error.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Ethiopia 7
Quarterly indicators
1998 1999 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3Qtr 4 Qtr Prices Consumer prices Addis Ababa (1995=100) 94.8 98.1 n/a n/a n/a n/a n/a n/a % change, year on year 5.1 7.3 n/a n/a n/a n/a n/a n/a Financial indictors Exchange rate Birr:US$ (av) 6.91 7.03 7.15 7.37 7.59 7.93 n/a n/a Birr:US$ (end-period) 6.95 7.06 7.27 7.50 7.90 8.12 8.12 8.07a Interest rates (av; %) Deposit 6.00 6.00 6.00 6.00 6.00 6.13 n/a n/a Lending 10.50 10.50 10.50 10.50 10.50 10.50 n/a n/a Treasury bill 3.65 3.34 3.76 3.17 4.16 4.10 n/a n/a M1 (end-period; Birr m) 9,730 10,818 9,590 9,304 9,387 10,035 n/a n/a % change, year on year 2.9 10.1 –3.8 –7.8 –3.5 –7.2 n/a n/a M2 (end-period; Birr m) 17,796 18,980 18,062 17,792 17,106 18,111 n/a n/a % change, year on year 9.8 12.5 3.6 –2.8 –3.9 –4.6 n/a n/a Sectoral trends (annual totals; ’000 tonnes) Coffee productionb ( 2 3 0 ) ( 2 3 2 ) Foreign trade (Birr m) Exports fob 1,047 1,368 918 632 n/a 1,167 852 684 Imports cif n/a n/a n/a n/a –1,927 –2,447 –3,380 –2,760 Trade balance n/a n/a n/a n/a n/a –1,280 –2,529 –2,077 Foreign payments (US$ m) Merchandise trade balance –114.1 –73.2 –126.1 –160.5 n/a n/a n/a n/a Services balance 19.2 8.1 –15.3 0.7 n/a n/a n/a n/a Income balance –10.8 –0.2 –5.0 4.3 n/a n/a n/a n/a Current-account balance 51.9 90.9 12.5 –21.3 n/a n/a n/a n/a Reserves excl gold (end-period) 463.9 439.4 419.5 511.1 474.3 n/a 509.9 458.5 a Source FT, last Friday of period. b Estimates.
Sources: UN Food and Agriculture Organisation; IMF, International Financial Statistics; Financial Times.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 8 Ethiopia
Outlook for 2000-01
Political forecast
Domestic politics With Ethiopia continuing to reject implementation details of the peace initiative by the Organisation of African Unity (OAU), proximity talks between Eritrean and Ethiopian leaderships scheduled for May in Algiers are unlikely to lead to an easing of tensions. The OAU plan—which has been formally endorsed by both sides but remains held up over details, sequencing and semantics—aims at achieving a ceasefire and a disengagement of forces. Ethiopian officials maintain that to accept the current implementation details, formally known as the Technical Arrangements, would amount to capitulation in the face of Eritrean aggression. Ethiopia insists that only a plan that provides for the unambiguous and verifiable withdrawal of all Eritrean forces from positions taken after May 6th 1998 will be acceptable. Despite a series of clarifications by the OAU, this requires a full redrafting of the document, and another round of talks. With respective notions of national pride a major factor preventing the resolution of this conflict, a sustainable settlement still requires the formulation of a face-saving way out for both sides. Irrespective of the short-term political or economic consequences for the ruling parties, Ethiopia’s leadership will not countenance what it perceives as the appeasement of its neighbour at the expense of its sovereignty or dignity. In the light of this, all external attempts to exert leverage via aid conditionality will be counterproductive and a diplomatic breakthrough appears as far away as ever.
Indeed, veiled criticism of the Ethiopian government’s effective rejection of the Technical Arrangements, coupled with concern among foreign donors over the supply of substantial amounts of food aid to a country at war, serves to reinforce the government’s embattled and defensive attitude in the propaganda battle being fought by both sides for international support. This defensiveness will increase the isolation, anger and frustration evident in the mood of Ethiopian diplomats. Relations with the US are at a notable low.
The military situation therefore remains extremely tense and unstable, while fighting could resume at any moment. With such a heavily militarised border—estimated troop strengths vary, but as many as 500,000 troops may be involved—the risk of renewed fighting may increase in May and June, with each side conscious of the coming rainy season due to start in July.
Election watch Outsiders underestimate the degree to which war has brought political benefits to both the Eritrean and the Ethiopian ruling elites, deflecting opinion both at home and abroad away from domestic political issues. The war thus overshadows Ethiopia’s second set of federal elections, scheduled for May 14th. Affiliates of the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF)—which, despite its highly centralised structure, is in theory an alliance of largely ethno-regional political groups—will dominate the election. War with Eritrea has stripped the disparate urban political opposition groups of their principal criticism of the government, namely that it was dominated by Tigrayans who were politically and economically subservient to their Eritrean
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Ethiopia 9
allies. The EPRDF will attempt to portray opposition candidates, notably in the capital, Addis Ababa—where an array of independent candidates are likely to offer real alternatives to the often inexperienced and mediocre EPRDF cadres— as unpatriotic and in league with Eritreans (see The political scene). The election will be further soured by a climate of suspicion of individuals suspected of having registered with the Eritrean authorities prior to May 1998 and ongoing harassment of rural critics of the EPRDF, particularly in Oromo areas. External monitoring of the polls will be minimal Foreign delegations are likely to maintain a low profile during the election, mindful that any comments are likely to be misinterpreted in the context of war.
Economic policy outlook
Policy trends Food insecurity and a deteriorating fiscal position will not undermine either the government’s determination or its ability to prosecute the war. Rather, it will lead to an increasing divergence between its long-term economic reform strategy and the reality of short-term requirements. Signs of economic strain, such as last December’s unexpected increases in fuel prices and import tariffs (1st quarter 2000, page 13), and growing evidence of foreign exchange shortages during the first quarter both point to underlying economic imbalances. The longer this situation persists, the more clearly it will derail the government’s long-term plans for trade liberalisation, agrarian-based growth and macroeconomic stability.
Uncertainty due to war and policy divergencies from the economic policy framework issued in late 1998 will further sour relations with Ethiopia’s principal economic donors. Despite the successful completion of Article IV consultations with the IMF in mid-1999, the unease engendered among multilateral donors by the war will only be increased by growing evidence of changes of direction in economic policy (4th quarter 1999, page 8). Ethiopia is formally eligible for a IMF’s poverty reduction and growth facility (PRGF, the successor to the enhanced structural adjustment facility, or ESAF). Yet both the war and friction with the Fund over Ethiopia’s previous ESAF, where disbursement was temporarily suspended during 1997/98 following a dispute over financial-sector reform, mean that Ethiopia is unlikely to enter into serious negotiations over either a PRGF or a debt-reduction package until the war appears resolved.
Economic forecast
Economic outlook The economic outlook for 2000-01 is overshadowed by the war effort and the impact of poor harvests. Food shortages stemming from last year’s mediocre harvests (1st quarter 2000, page 14) will be exacerbated if current forecasts of poor, shorter belg season harvests are confirmed. This increases the numbers who will be dependent upon emergency food supplies for the rest of 2000. In April the Ethiopian authorities were estimating 8m people would require assistance for much of the year. In addition, misgivings among donors and policy uncertainty stemming from the war further complicate the response of
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 10 Ethiopia
donor countries to Ethiopia’s appeal for large-scale food aid in 2000 (see Economic policy and the economy). Up to 900,000 tonnes of imported grain are required in the coming months.
As forecast, the protracted failure of rains in Ethiopia’s southern pastoral regions has exacerbated the prolonged crises facing the largely Somali peoples who rely on livestock for their livelihood (1st quarter 2000, page 15). The widespread, but short-term, international outcry over this situation in early April is unlikely to have a lasting impact on southern and eastern Ethiopia, as the collapse of the pastoral economies has been aggravated by political uncertainty in the south caused by Ethiopian involvement in Somalia’s internal struggles.
Given weak agricultural output, which accounts for roughly half of GDP, and current levels of military expenditure, which are certain to persist throughout 2000, Ethiopia faces another year of stagnant economic growth, with a contraction possible in real terms. Low international prices for coffee will also push down total exports, despite official forecasts of a reasonable coffee harvest in 2000.
As a result of rising food and fuel prices, inflation rose to 4% year on year in December 1999. However, subsequent upward pressure on grain prices, coupled with the impact of even higher fuel prices and the introduction of new import tariffs, will generate significantly even stronger inflationary pressures in 2000.
Late note
On May 12th Ethiopia launched a major offensive against Eritrean positions along the western front. After Ethiopian forces made what appear to be sizeable gains, fighting moved to the Zallambessa front, where Eritrea’s forces retreated. As this report goes to press, the Ethiopians do not appear to be mounting an attack on the Eritrean capital, Asmara, but could make a move to capture the port city of Assab, through which most Ethiopian trade used to flow prior to the war. The Ethiopian authorities are presenting these developments as a major victory, while the Eritreans are portraying them as a strategic retreat. Strict control over journalists’ access to the fronts, and thus a lack of reliable information, remains a problem. Should Ethiopia continue to take territory it could, however, bring down the Eritrean government and lead to a quick if uneasy peace. Although diplomatic initiatives have failed to prevent this latest round of fighting, recent events might present both sides with an opportunity to present their publics with a “victory” and allow for negotiation and eventual demobilisation. But this could only occur once the fighting appears to have stopped and neither side sees an advantage in continuing. Strong nationalist sentiments on both sides may make that all the more difficult.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Ethiopia 11
The political scene
Military and diplomatic The military situation along the disputed Ethiopian-Eritrean border remained deadlock persists deadlocked during the first four months of 2000. Aside from a minor skirmish reported around the southern front at Bure on February 23rd, the predictions by many external analysts—including the EIU—of a resumption of large-scale offensives did not materialise.
The diplomatic stalemate also remained unchanged. The special envoy of the Organisation of African Unity (OAU), Ahmed Ouyahia, continued consultations with both the parties over the disputed Technical Arrangements document (1st quarter 2000, pages 10-11). However, Ethiopia’s public position has steadfastly remained unmoved: arbitration and negotiation can only follow unconditional Eritrean withdrawal from all territory occupied since May 1998. Reiterating this, on February 19th Ethiopia’s prime minister, Meles Zenawi, stated that unless Eritrea “accepts the tenets of peace and pulls out its occu- pation army from every inch of Ethiopian territory, Ethiopia has the capacity to restore its sovereignty by every means available“. Mr Meles was speaking in Mekelle, the regional capital of Tigray, at a rally to mark the 25th anniversary of the founding of the Tigray People’s Liberation Front (TPLF), the main faction of the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF).
Mediators keep trying Both the Euro-African summit in Cairo in late March, and the G77 meeting in Havana in early April, provided occasions for discussions with the parties by OAU mediators—as well as further opportunities for each side to seek bilateral support and denounce the intransigence and belligerence of the other. But no breakthroughs of any kind were reached. (Indeed, at the Cairo summit, where countries were seated alphabetically, the Ethiopian and Eritrean representatives has reportedly insisted that they be moved.) Yet, by mid-April both governments had agreed in principle to send envoys to Algiers for talks some time in May. Similar talks, with representatives communicating indirectly via OAU officials, were already scheduled for March, and then postponed several times, so this latest attempt may also fail to come to fruition.
While Mr Ouyahia and other third parties involved, including the US envoy, Anthony Lake, remain optimistic that an interim settlement can be reached, there is little public evidence that either side is willing to make concessions. Acute food shortages have not deflected either government from their primary objectives: maintaining an advanced state of military preparedness, while attempting to undermine the other via intense propaganda. Indeed, recent trade data confirm that a major re-arming exercise has been under way. Imports from Russia, which are presumably mostly weaponry and aircraft, rose from virtually nothing to US$178m in 1998. Ethiopia was again forced on the defensive in the western media following Eritrea’s offer to open Assab to emergency food aid supplies—an offer that was roundly rejected (see Economic policy and the economy).
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 12 Ethiopia
Ethiopia: Russian imports (US$ m) 1992 1993 1994 1995 1996 1997 1998 Total Russian imports 0 0 0 0 2 0 178 Source: IMF, Direction of Trade Statistics.
War and famine Campaigning for Ethiopia’s May elections has been lacklustre, due to the overshadow electioneering combined pressures of the ongoing war and increasingly urgent need for famine relief in many areas of the country. This is particularly the case in the south-east. In the Harrarghe and the Ogaden, the largely Somali-populated areas where both human suffering and foreign media attention were most concentrated in April, no polling will take place. These areas fall within the Somali-designated Region 5, one of nine largely linguistically defined regions which, together with the capital, Addis Ababa, make up the federal state according to the constitution of 1995 (see Ethiopia Country Profile for more details on regions and devolution). Since coming to power in 1991, the highland-dominated EPRDF administration has had great difficulty in organising an effective administration in the sparsely populated Somali region. There have also been severe problems in agreeing how the two main urban areas in the east—Harar, which is ostensibly self-administered, and Dire Dawa, the country’s second largest city and the commercial hub of the south-east— should be governed.
May’s polls are intended to elect representatives for both the federal parliament, known as the Council of Peoples’ Representatives, and the regional state assemblies. The election is formally overseen by a National Election Board (NEB). This is in theory independent, but in most areas is dominated by local administrative officials whose livelihood and safety depends on the ruling EPRDF. In mid-March the NEB announced that a total of 3,200 candidates had registered in the 522 constituencies being contested. Only about 10% of the candidates are women, while 85% are affiliated to the four principal components of the EPRDF.
Opposition groups The Tigrayan, Amhara and Oromo EPRDF affiliates will easily retain control of complain of harassment the regional state assemblies in regions 1, 3 and 4, respectively. In practice the multi-ethnic Southern Ethiopia Peoples’ Democratic Front (SEPDF) will also dominate the poll in the sprawling, linguistically mixed southern region centred on Awasa (formerly regions 7-11). However, those opposed to the EPRDF in this region have repeatedly complained of intimidation and harassment by local officials. These include members of Beyene Petros’ Southern Ethiopia Peoples’ Democratic Coalition (SEPDC). SEPDC has been complaining that local officials have been disrupting the opposition, notably arresting businessmen known to be critical of the authorities, on allegations of their non-payment of tax. On February 9th riots were reported in the region. Formally SEPDC is just one of 17 opposition groupings reported to be fielding candidates in the elections. Yet SEPDC, like the All Amhara People’s Organisation (AAPO), is internally weak and, even in the absence of repression is probably incapable of mobilising a serious opposition to the EPRDF. AAPO’s organisational abilities have been particularly limited since the death of its
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Ethiopia 13
founder, Asrat Woldeyes, last year (3rd quarter 1999, page 12). Another opposition grouping, the Ethiopian Democratic Union Party (EDUP), which is fielding candidates in several regions, has also complained of harassment of its candidates and an inability of gain access to the state-run broadcast media. There are also a number of independent candidates running, particularly for Addis Ababa’s city assembly.
Much of the discontent and opposition to the government continues to be channelled via Addis Ababa’s critical, mostly Amharic language, independent press. While editors and journalists on these publications have faced frequent detention and harassment, in mid-March the Ethiopian Free Press Journalists Association was finally granted official recognition.
Forest fires devastate the In early March around 80,000 ha of forest in the hard-pressed southern areas of south-east and trigger riots Bale and Borana were destroyed by fires, putting further pressures on people already suffering from drought and insecurity along the Somali and Kenyan borders. South African and German experts responded to Ethiopia’s call for foreign assistance in combating the blazes, which also damaged coffee crops in Sidamo. The fires also ignited domestic political friction in the predominantly Oromo Region 4. Students in Ambo, a largely Oromo town 130km west of Addis Ababa, asked to be sent to assist in tackling the blaze. The authorities’ refusal sparked protests which were harshly repressed. Unconfirmed reports suggest that at least one student was killed and many dozens were arrested.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 14 Ethiopia
Tamrat Layne is sentenced Ethiopia’s former prime minister, Tamrat Layne, who held the post from 1991 to 1995, was sentenced to 18 years’ imprisonment on corruption charges on February 18th, bringing to an end Ethiopia’s most high-profile and convoluted political corruption cases. Until his arrest in 1996, Mr Tamrat was perceived as one of Mr Meles’s few non-Tigrayan senior aides. He was arrested following allegations from Ethiopia’s leading investor, the Ethiopian-Saudi entrepreneur, Sheik Mohamed Hussein Alamoudi, that he had personally pocketed US$16m destined for government coffers. Mr Tamrat’s co-defendants, his partner Shadia Nadi, her two sons and an accomplice, all received sentences of 14-16 years and large fines. One son has fled the country and an accomplice, Munir Duri, the son of another government aide, was reportedly released. The evidence from Sheik Alamoudi himself was given behind closed doors, while the trial did not reveal why the US$16m payment was made in the first place (2nd quarter 1997, page 11 and 2nd quarter 1998, page 10).
Economic policy and the economy
Controversy and alarm Following a UN food assessment (1st quarter 2000, pages 14-15), Ethiopia’s over food supplies own Disaster Preparedness and Prevention Commission (DPPC) launched an appeal in late January for 900,000 tonnes of cereals to assist feeding an estimated 8m people over the coming year. (These figures included supplies for 385,000 people displaced by the ongoing war with Eritrea.) By late March both the DPPC and donors expressed fears that food pledges and planned deliveries were inadequate and behind schedule. Concerns were heightened by donor reservations about enhanced assistance as a result of the ongoing Ethiopian- Eritrean war. These concerns, coupled with growing signs that the highland’s brief rainy season, due in March/April, would be late and insufficient, led to a co-ordinated campaign to lobby donors to increase and speed up deliveries of food aid. Following large-scale media coverage, the UN secretary general’s special envoy to the Horn of Africa, Catherine Bertini, who is also head of the UN’s World Food Programme (WFP), visited Ethiopia on April 11th. By this time pictures of famine in southern Ethiopia had jolted the conscience of donors, prompting increased pledges, notably from the US and EU.
Relations with donors are The impression given in the foreign media that Ethiopia’s leaders have strained neglected famine victims because of the war has created new friction between the government and donors. This concerns several issues of contention.
• Depletion of food reserves: The DPPC views the food shortfalls and April’s sense of crisis to be in part the result of donor’ failure to honour last year’s promises to replenish the country’s Emergency Food Security Reserve (EFSR). The DPPC drew heavily from the reserve in mid-1999 to provide assistance to 4.6m people hit by the failure of last year’s belg harvest (3rd quarter 1999, page 15). The running down of the EFSR, which was created precisely for such emergencies, was approved by donors who also promised to replenish stocks, but this has not happened.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Ethiopia 15
• Delays in food appeals: The DPPC appears to have been uneasy that their annual food aid appeal was delayed. The postponing to late January of the appeal, normally launched in December immediately after the preliminary main crop assessments become known, was at the behest of donors.
• War-related expenditure: Most contentiously, with the war with Eritrea unresolved, several key donors have linked famine and military expenditure, particularly when talking to their own domestic audiences. Relief agencies working within the country have been cautious not to mention the war. Most point out that the immediate need is in southern pastoral regions, where poor infrastructure and insecurity, rather than the inter-state war with Eritrea, has been the problem. Apart from assistance to the 385,000 mostly Tigrayan people displaced by fighting in 1998, the war did not disrupt last year’s successful aid effort in the north. Logistics aside, many donors remain uncomfortable providing assistance to a government which has diverted resources to a war effort—and one seen externally as futile and unnecessary— while its own people are starving.
• Port usage: Eritrea’s offer to open its port of Assab to emergency food aid supplies was largely a propaganda victory for the Eritreans, as Ethiopia’s rejection created the appearance that Eritrea was more willing to help starving people in Ethiopia than their own government. On the ground, however, it does not appear that bottlenecks have yet occurred in Djibouti, while the most affected areas of eastern Ethiopia are better accessed via Berbera in Somaliland.
However, on April 13th Mr Meles said he was pleased with his discussions with Ms Bertini and that they had reached agreement on “de-linking” the war and food aid. Despite much of the foreign press coverage, the Ethiopian leader confidently announced what he called a new chapter in relations where “humanitarian issues are separated from political issues“.
Yet in practice there never was such a linkage, except at a rhetorical level. As has so often happened in the past, feeble attempts by the international community to force a change in policy have been overridden by immediate humanitarian concerns. In effect, the Ethiopian government and donor agencies know that food aid will continue to arrive regardless of whether the government diverts resources to the war effort.
Last year’s mediocre main (gul) crop harvests, and a second successive poor or failed short (belg) season in the highlands will further dent overall economic growth. Agriculture officially accounts for just under half of all economic activity. However, it also indirectly underpins much of both the service sector, particularly distribution, and industry in terms of agricultural processing. Thus, poor agricultural output, coupled with the restrictive impact of war and the slowdown in infrastructure projects as resources are diverted to the front, is likely to have severely constrained overall growth during 1999/2000 . Based on data available by March, it seems that the 1999/2000 fiscal year (ending July 7th) will see close to zero overall GDP growth, as was the case in the year of poor harvests in 1997/98, when official statistics registered –0.5% growth, after a 10% contraction in agricultural activity. The final GDP figure will, however, depend on how military pay and other spending are included.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 16 Ethiopia
The war muddies With the war having both distorted the fiscal plans and reduced the government finances transparency of government accounting, the precise impact of the conflict on public revenue also remains unclear. The 1999/2000 budget was formally set at Birr13.9bn (US$1.7bn). This reportedly represented a 25% increase on the previous year, with an overall budget deficit of Birr1.6bn anticipated (3rd quarter 1999, page 15). Despite widespread speculation abroad as to the overall level of military expenditure, credible figures are, predictably, not available— not least because of considerable off-budget spending that may never be officially recorded.
Exports perform erratically Consolidated figures on Ethiopia’s foreign trade for 1998/99 indicate that its exports have been subject to volatile changes:
• In normal years hides and skins are Ethiopia’s second largest export earner after coffee, but in 1998/99 the country exported almost none at all. The decimation of herds of cattle and camels, notably due to prolonged drought in the southern pastoral regions, will probably have a long-term impact on export earnings from live animals, hides and leather products.
• Exports of qat, the mild stimulant which Ethiopia exports to its southern neighbours, are on the increase. Total official qat exports (which almost certainly underestimate total sales as a result of high levels of smuggling) earned Ethiopia Birr370m (US$47m) in the year to July 1999. This represented a 36% increase in value terms, while the volume exported soared by 52%, from 6,000 tonnes to over 9,000 tonnes. Qat thus became Ethiopia’s second largest export earner, ahead of oilseeds and pulses.
• In the year to July 1999, coffee exports earned Ethiopia Birr2.03bn (US$259m), 30% down on the previous year. Volumes were also down by some 11%, depressed world coffee prices accounting for the difference. These figures are slightly lower than those released by the Ethiopian Coffee and Tea Authority (ECTA) last year (4th quarter 1999, page 14), but the trends point in the same direction. In mid-March the ECTA announced that between July and December 48,000 tonnes of coffee were exported, and forecast 135,000 tonnes for the entire fiscal year.
Ethiopia: main exports Birr m ‘000 tonnes 1997/98 1998/99 % change 1997/98 1998/99 % change Coffee 2,890 2,034 –29.6 120.0 106.3 –11.4 Qat 272 370 36.0 6.0 9.1 51.7 Oil seeds 315 349 10.8 66.6 64.6 –3.0 Pulses 103 312 202.9 30.9 40.6 31.4 Gold 0 174 – 0.0 3.1a – Hides & skins 348 0a –100.0 7.9 0.0b –100.0 Total incl others 4,142 3,800 –8.3 – – – a Tonnes. b Reported as only Birr97,000 and 2 tonnes of exports.
Source: National Bank of Ethiopia.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Ethiopia 17
Further attempts are made An overview of Ethiopia’s attempts to increase foreign investment, funded and to boost inward investment prepared by the UN Conference on Trade and Development (UNCTAD), has advocated that the Ethiopian Investment Authority (EIA) should be streamlined to provide a more efficient gateway for inward investment. The report suggests that an advisory group, including representatives of foreign firms already operating in the country, should be formed to assist the EIA. In mid-1999 UNCTAD helped finance an on-line guide to investment in Ethiopia (3rd quarter 1999, page 17). The Foreign Investment Advisory Service of the World Bank’s International Finance Corporation (IFC) is also reportedly currently working to help improve Ethiopia’s attempts to boost investment. While uncertainty linked to the war remains a significant deterrent, critics point out that other barriers remain. For example, Ethiopia remains in dispute with the World Bank’s Multilateral Investment Guarantee Agency (MIGA) over the government’s failure to settle with foreign investors claiming compensation for properties nationalised 25 years ago.
Foreign exchange appears By late February Ethiopian importers and the country’s fledgling banking in short supply sector faced growing evidence of shortages of foreign exchange. Allocation of hard currency via the weekly forex auctions was restricted, with some retail banks unable to obtain currency. Importers also faced new regulations pertaining to the financing of imports, businesses being asked to provide 100% cash coverage for letters of credit. According to the IMF’s International Financial Statistics, Ethiopia’s total reserves fell to US$411m in January, still nearly five months’ import cover, but down some US$126m from five months earlier.
Midroc opens a steel plant Ethiopia’s largest private investor, Sheik Alamoudi’s Midroc Corporation, opened a metal-working plant in Kombolcha on February 5th. The plant, built at a total cost of Birr71m (US$8.9m), is designed to produce sheet metal and corrugated iron. Midroc already has extensive holdings in Ethiopia’s financial, real-estate and service sectors, notably Addis Ababa’s flagship Sheraton hotel opened in early 1998 (2nd quarter 1998, page 15).
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 18 Eritrea
Eritrea
Political structure
Official name Eritrea
Form of state Unitary state
Legal system A new national constitution was formally proclaimed on May 24th 1997
National legislature Transitional National Assembly of 150, composed of members of the ruling People’s Front for Democracy and Justice
National elections Last election February 1987 (legislative, within Ethiopia); next election had been scheduled for May 1997 but is unlikely to be held before the conflict with Ethiopia is resolved
Head of state President, elected by the National Assembly
National government The president and the Council of Ministers, last reshuffled June 7th 1997
Main political parties The People’s Front for Democracy and Justice (PFDJ), which grew out of the Eritrean People’s Liberation Front, is the ruling and, in effect, the only legal party; its third congress in February 1994 confirmed the transition to pluralist elections in 1997, but a law on political parties has yet to be approved
President Isaias Afewerki
Key ministers Agriculture Arefaine Berhe Defence Sebhat Ephrem Education Osman Saleh Energy & mines Tesfi Gebreselassie Finance & development Gebreselassie Yoseph Fisheries Petrus Solomon Foreign affairs Haile Weldensae Health Saleh Meki Information Beraki Gebreselassie Justice Foazia Hashim Labour & welfare Ogbe Abraaha Land, water & environment Tesfai Girmatzion Local government Mahmoud Ahmed Sherifo Public works Abraha Asfaha Tourism Ahmed Haji Ali Trade & industry Ali Said Abdella Transport & communications Saleh Idris Kekia
Central bank governor Tekie Beyene
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Eritrea 19
Economic structure
Annual indicatorsa
1995 1996 1997 1998b 1999b GDP at market prices (Nfa bn) 4.6 5.1 6.0 6.8 7.6 Real GDP growth (%) 2.9 6.8 7.9 4.0 0.0 Consumer price inflationc (end-period; %) 11.0 3.4 10.6 9.0 12.0 Population (m) 3.57 3.67 3.78 3.88 4.01 Exports fob (US$ m) 81 95 53 n/a n/a Imports cif (US$ m) 404 514 490 n/a n/a Current-account balance (US$ m) –53 –131 –37 n/a n/a Total external debt (US$ m; year-end) 37 44 76 149 n/a Exchange rate Nfa:US$d (av) 6.29 6.35 7.05 7.30 8.50 April 2000b bank rate Nfa9.5:US$1; parallel rate Nfa12:US$1
Origins of gross domestic product 1997 % of total Agriculture 9.3 Industry 29.5 Manufacturing 11.2 Distribution services 38.6 Other services 22.5 GDP at factor cost 100.0
Principal exports fob 1997 US$ m Principal imports cif 1997 US$ m Crude materials 18 Machinery & transport equipment 164 Food & live animals 12 Manufactured goods 96 Manufactured goods 9 Food & live animals 85 Chemical & chemical products 26
Main destinations of exports 1997 % of total Main origins of imports 1997 % of total Ethiopia 63.5 Saudi Arabia 15.7 Sudan 16.6 Italy 13.7 Italy 4.9 UAE 13.1 Saudi Arabia 1.9 Ethiopia 9.0 US 0.9 Germany 5.5 a All figures are estimates from official or other sources; all data on Eritrea should be treated with caution. b EIU estimates. c Asmara price index. d The nakfa replaced the Ethiopian birr as Eritrea’s national currency in November 1997 at Nfa1:Birr1.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 20 Eritrea
Outlook for 2000-01
Political forecast
Domestic politics Although both Eritrea and Ethiopia maintain that they support the 11-point Framework Agreement proposed by the Organisation of African Unity (OAU) to end their conflict, Ethiopia still considers the Technical Arrangements to be unacceptable. An attempt by mediators to get Eritrea to agree to amendments has failed, and mediators appear to have lost some of the Eritreans’ trust in the process. This latest setback in implementing the plan is yet another obstacle in the search for a viable peace and, although diplomatic efforts will continue— talks between Eritrean and Ethiopian leaderships are scheduled for May in Algeria—there is little indication that either side is prepared to make meaningful concessions.
Despite continued pleas from the international community to both sides not to resume the fighting, a new offensive by Ethiopia remains a distinct possibility. However, when this may happen, or what event might trigger heavier fighting, is less clear and the onset of rains in June/July will dampen the possibility of a major offensive. Troops on both sides of the militarised 1,000-km frontier have been on high alert since late November, but apart from daily artillery fire, there has been little significant fighting. A push across either the Badme front or the Zala Ambassa front is the most likely scenario, but an Ethiopian attack on Assab from Djibouti is still a possibility, although an advance along the Sudanese border is less likely now that Eritrea and Sudan have resumed diplomatic relations. The Eritrean forces are unlikely to strike first, but most observers consider a decisive military victory for either side to be unlikely because the two armies are too entrenched and relatively evenly matched. However, Eritrean military officials apparently believe that any new Ethiopian offensive would threaten their country’s very existence. Eritrea is therefore unlikely to hold back should the war resume; heavy casualties are a near certainty.
Few believe that this conflict is still about border demarcation—although an eventual solution may be. It is more about pride and national prestige. Each side wants to crush the other militarily, economically and politically. Although a resumption of the shooting war between Ethiopia and Eritrea at any moment remains a strong possibility, another scenario is that Ethiopia has settled on a “no war no peace” strategy, and is prepared to out-wait its smaller and poorer adversary.
Economic outlook
A drawn-out period of uncertainty, with the resumption of war an ever-present threat, is likely to hurt Eritrea more than Ethiopia. Eritrea’s economy appears largely to have ground to a halt, with nearly every able body mobilised at the front. The EIU estimates that, at best, real GDP did not grow at all in 1999 (although the IMF has implausibly estimated 3% growth owing to improved
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Eritrea 21
food production). The need to provide humanitarian assistance to those affected by the war on each side of the border is proving a greater burden to Eritrea than to Ethiopia. Agricultural production has been hit by the war and drought along coastal areas, where the price of cereals has more than doubled in the past nine months. Normally Eritrea’s government buys surplus grain from the highlands and sells it cheaply to people of lowland villages during the dry season, but the displacement of hundreds of thousands of people in the highlands by the war means production has fallen and the surplus has not materialised. Eritrea has not yet recorded any famine deaths, and even soldiers at the front have started farming just behind the front line in a drive for army self-sufficiency, but the government’s national service programme will inevitably cause problems in maintaining production when planting of the 2000 cereal crop starts in June.
Despite efforts to keep projects going, infrastructure development and commercial activities have slowed considerably. Economic activity will be hit further by recruitment for the 12th round of national service which includes those whose business or ministerial work made them previously exempt. There are also reports that some civilians will now be paid a regular military wage of Nfa150 (US$15) per month, with their regular salaries going to the Ministry of Defence. The government’s income will be boosted, but demand for goods and services will inevitably plummet. Prospects for a resumption of productive economic activity are therefore poor—at least until the war with Ethiopia is finally over—and the country will continue to depend on remittances from Eritreans abroad.
The political scene
Ethiopia still considers the Intense shuttle diplomacy between Asmara and Addis Ababa in recent months peace plan unacceptable by the Organisation of African Unity (OAU) mission—led by Ahmed Ouyahia, representing the Algerian president, Abdelaziz Boutefilka, current chairman of the OAU, and supported by the US special envoy, Anthony Lake—has not yielded the desired effect of resolving the war between Eritrea and Ethiopia. In March the two envoys agreed that the Technical Arrangements should be adjusted to address Ethiopian concerns, but they failed to get Eritrean agreement on the changes.
Following a visit to Addis Ababa by the OAU mission in March, the Ethiopian minister of foreign affairs indicated that the mediators had accepted that amendments to the Technical Arrangements had to be made in three areas.
• Specific identification of all the areas occupied, by either side, and from which withdrawal should be made.
• The Technical Arrangements speak of a UN peacekeeping force. The Ethiopians insist on a much smaller OAU observer mission, arguing that bringing in the UN changed the “ownership” of the peace process.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 22 Eritrea
• The restoration of civilian administration in the areas from which withdrawal would be made should be without restriction. This should allow an armed militia to patrol these areas.
Overall these steps would, in Ethiopian eyes, allow a virtual return to the status quo that existed prior to May 1998. However, Eritrea rejected these amendments, having accepted the OAU package in full in August (4th quarter 1999, page 20). The Eritrean president, Isaias Afewerki, arriving in Asmara on April 17th after attending the Euro-African heads of state summit, the G77 meeting in Cuba and a one-week tour of the US, announced that he had told Mr Boutefilka that Eritrea had no problem engaging in talks, provided there was an official announcement that the Technical Arrangements were open to amendment. Mr Isaias also indicated that Eritrea would soon submit a comprehensive document to the OAU regarding the future proceedings of the peace process. Both Eritrea and Ethiopia have agreed to send envoys to Algiers for talks some time in May, although a similar meeting scheduled for late March was cancelled at the last minute.
The armies remain on Few observers, and fewer Eritrean commanders at the front, believe the ongoing high alert peace process will succeed, fully expecting Ethiopia to launch a new attack. A day of fresh fighting erupted early on February 23rd along the eastern Bure front while the OAU mission was finishing up two days of discussions in Asmara with Mr Isaias before flying to Addis Ababa the following day. Both countries traded blame for provoking the skirmishes. Asmara claimed 120 Ethiopian troops were killed, 80 others wounded and four captured in the combat, which it said involved 2,500-3,500 troops from both sides. Otherwise, the heavily militarised border is characterised by regular sniper fire and artillery exchanges—not reported by either government—although casualties occur daily.
The 12th recruitment Media reports suggest that Eritrean women soldiers have been taken off the round gets under way frontlines for training programmes, but there has been no formal announcement of the change. Meanwhile, recruitment for the 12th round of national service was about to begin at the end of April, this time with no exemptions for those considered vital to business or ministries. Although this reflects the government’s desperation for manpower and an attempt at egalitarianism, it is also likely to lead to increased draft-dodging (1st quarter 2000, page 21).
Ethiopia rejects a The international community has called on Eritrea and Ethiopia to put aside humanitarian corridor their border war and facilitate the speedy distribution of food aid to the estimated 8-12m people threatened by famine in the Horn of Africa. The call was reiterated by Hugh Parmer, an official of the US Agency for International Development (USAID) on his return to Washington in early April after a two- week visit to the region (see Economic policy and the economy). While in Asmara Mr Parmer asked Mr Isaias to allow emergency food aid shipments to be unloaded at Assab and transported through Eritrea to Ethiopia. Mr Isaias agreed in principle to the proposed humanitarian corridor, but a statement from the Ethiopian Ministry of Foreign Affairs on March 31st rejected the US proposal as “absurd” (see Ethiopia: The political scene).
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Eritrea 23
Diplomatic ties with Relations with Djibouti improved with the issue of a press release on March 11th Djibouti are resumed by Djibouti’s Ministry of Foreign Affairs announcing its intention to resume diplomatic relations with Eritrea. The two had broken official ties in November 1998. The gesture was immediately welcomed by the Eritrean government who praised Libya and other friendly governments for their initiatives.
Sudan and Eritrea reach The improvement in relations between Eritrea and Sudan, marked by the agreement on refugees decision in January to resume diplomatic relations after a break of more than five years (1st quarter 2000, page 22), resulted in the official opening of the Eritrean-Sudan border on January 22nd and the resumption of Sudan Airways Khartoum-Asmara flights on February 7th. It has also yielded an agreement for the repatriation of Eritrean refugees in Sudan. Eritrea, Sudan and the UN High Commissioner for Refugees (UNHCR) concluded the agreement on April 7th in Geneva on the legal framework for the repatriation of some 160,000 Eritrean refugees currently in Sudan, most of whom have expressed a desire to go home.
Eritrean opposition The normalisation in relations between Khartoum and Asmara also prompted factions quit Khartoum the decision by Eritrean opposition factions operating from Sudan—the Eritrean National Forces Alliance (NFA)—to move their headquarters from Khartoum to Addis Ababa, according to an April report in the Khartoum-based daily, As-Sahafi Ad-Dawli. Meanwhile, officials of the Sudanese opposition umbrella group, the Cairo-based National Democratic Alliance (NDA), held a meeting in Asmara in early March. The Eritrean foreign office said then that the resumption of ties with Khartoum would not change Asmara’s relationship with the Sudanese opposition (1st quarter 2000, page 22).
Economic policy and the economy
Food prices rise Despite widespread financial support for the war effort at home and abroad, the conflict and drought in the coastal areas have resulted in unseasonably high prices for cereals. Overseas remittances, officially put at more than US$400m in 1999, continue to supply a vital foreign-currency lifeline. Nonetheless, reports from the lowland areas in the north-west of the country in April indicated that the price of grain needed to fill one rebiet—a bowl that would normally feed a family for two days—has risen steadily from Nfa6.5 (US$0.68) in August to Nfa14 in April. One rebiet is now reportedly stretched to last four or five days.
One-third of Eritreans need A report prepared by the UN Children’s Fund (UNICEF) for the visit of the UN emergency relief special envoy Catherine Bertini to Eritrea in early April claimed that 850,000 Eritreans will need food aid this year as production in the key grain-producing highlands has been disrupted by the conflict, a situation compounded by drought in the northern lowlands. The UN’s Food and Agriculture Organisation (FAO) announced on April 18th that Eritrea’s total cereal import requirement in 2000 is 290,000 tonnes, of which food aid amounts to 100,000 tonnes. In January the UN country team appealed for 62,800 tonnes of food (worth some US$43m) to assist 372,000 war-affected and over 211,000 drought-affected people. Total pledges by end-March amounted to 30,000 tonnes, but this does
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 24 Eritrea
not include a food donation announced by USAID in late March (see below). The World Food Programme (WFP), which is headed by Ms Bertini, has also earmarked US$15m in food aid for Eritrean and Ethiopian refugees living in Sudan, according to an agreement signed between Sudan and the WFP in April.
USAID pledged 40,800 tonnes of food to Eritrea in March along with US$1.8m to the UN and non-governmental organisations (NGOs) for shelter, water and sanitation projects. The US had previously withheld food aid since the war broke out, demanding that Asmara pay US$8.7m for US grain which had been destined for Addis Ababa but held at the Eritrean port of Assab when the conflict started. The grain, which sat in port for six months, was later given to the needy in the Assab region, many of them out-of-work Ethiopians,
according to a report given by Eritrea to USAID. USAID secured a waiver from the State Department to provide assistance while attempting to solve the problem. Mr Parmer said that the US had no role in the Ethiopian lawsuit before an international court demanding Eritrea compensate Ethiopia for the same grain shipment (4th quarter 1999, page 23).
Ethiopian banks continue Some 60% of the almost US$50m outstanding in loans made to Ethiopia-based to recoup Eritrean loans Eritrean businesses before the outbreak of the war had been recovered by the state-owned Commercial Bank of Ethiopia (CBE) by the end of January, according to a report in the London-based Africa Analysis. Efforts by the CBE to recover the money have focused on public auctions of assets abandoned by Eritreans who have left Ethiopia voluntarily or were expelled (which provoked an outcry from Asmara; 1st quarter 2000, page 24) and on negotiations with representatives of departed borrowers. Recent talks with representatives of five major trading companies led to the repayment of US$15.5m, but CBE officials believe it will become increasingly difficult to recover the remainder of the loans and the outstanding interest, levied at roughly 10%.
The Massawa power project Taking advantage of the de facto ceasefire on the ground, the EU announced in gets a boost February that the European Development Fund has endorsed a E20m (US$21m) loan for the power project in the Massawa region, on hold since 1998. The first phase of the scheme involves restoration of the 66-kv line linking Massawa and Ghinda and will be undertaken by the Italia 2000 consortium. The new line will run from the 84 megawatt (mw) Hirgigo power station south of Massawa, construction of which has been slowed by the exodus of workers to the front (4th quarter 1999, page 23). The project’s second phase involves constructing new sub-stations at Ghinda and Forto Vittoria and rehabilitation of the sub-stations at Gherar, Gurgusum and Dogali. A third phase will focus on renovation and modernisation of the country’s distribution system. The programme also provides for training of Eritrean Electricity Authority personnel.
Italy provides cash for a The Italian government pledged E35m (US$37m) in March towards the new science college construction of a college of natural and pharmaceutical sciences in Mendefera. The director of Italian co-operation in Eritrea, Sergio Paladini, said that 80% of the money was in the form of a low-interest loan, and the remaining 20% development aid. Construction work should begin later this year.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Somalia 25
Somalia
Political structure
Official name Somali Democratic Republic
Form of state In theory a unitary republic; in May 1991 the Somali National Movement (SNM) unilaterally declared the creation of an independent state, the Somaliland Republic, in the north, while the rest of the country remains divided between rival armed factions
Legal system In theory, based on the 1960 constitution; in practice, local authorities or elders enforce laws based on custom; in some areas the influence is growing of Islamic courts, which have begun to implement Islamic sharia law
National legislature People’s Assembly, but not active since 1991
National elections Last elections 1967 (presidential); 1969 (legislative); next elections: none feasible in the south given current circumstances; Somaliland is scheduled to hold elections in 2002
Head of state None; Abdullahi Yussuf Ahmed is president of the Puntland administration; Mohamed Ibrahim Egal is president of the Somaliland Republic (see below)
National government None; a new authority comprising the leaders of five major clans is attempting to administer the region around Mogadishu; Puntland is a self-declared autonomous region in the north-east, with Garoe as its administrative capital; the Somaliland Republic in the north was declared independent in 1991, with Hargeisa as its administrative capital (see below); in December 1999 the Rahawayn Resistance Army (RRA) declared the Bay region another autonomous region
Main political factions United Somali Congress-Somali National Alliance (USC-SNA); Somali Salvation Democratic Front (SSDF); Somali Patriotic Movement (SPM); Southern Somali National Movement (SSNM); National Salvation Council (NSC); Somali National Front (SNF); Rahawayn Resistance Army (RRA)
Somaliland Republic Created in May 1991 but awaiting diplomatic recognition; the president, Mohamed Ibrahim Egal, was re-elected in February 1997; a new constitution came into effect in February 1997 for a three-year period, after which a referendum is to be held
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 26 Somalia
Economic structure
Annual indicatorsa
1995 1996 1997 1998 1999 Population (m) 9.3 9.5 9.6 9.8 10.0 Exports fobb (US$ m) 168 187 177 197 n/a Imports fobb (US$ m) 276 295 313 280 n/a Total external debtc (US$ m; year-end) 2,678 2,643 2,561 2,635 n/a
April 2000d SoSh11,500:US$1 SolSh2,900:US$1
Principal exports 1990 US$ m Principal imports 1990 US$ m Livestock 43 Manufactures 204 Bananas 28 Non-fuel primary products 104 Hides & skins 3 Fuels 52
Main destinations of exports 1998b % of total Main origins of imports 1997b % of total Saudi Arabia 56 Djibouti 26 Yemen 16 Kenya 14 United Arab Emirates 15 Saudi Arabia 10 Italy 4 Brazil 9 India 9 a There are few reliable economic data for Somalia; all figures are rough estimates from official or other sources. b Based on partners’ trade returns; subject to a wide margin of error. c There have been no new disbursements of debt since 1991; statistical changes in the debt stock reflect arrears accrued since then and currency fluctuations. d EIU estimate of market rates in Mogadishu and Hargeisa.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Somalia 27
Outlook for 2000-01
Political forecast
Domestic politics The decision in April to postpone the attempt by Djibouti’s president, Ismael Omar Guelleh, to bring Somalia’s factions together for peace talks comes as no surprise. Although backed by the UN, the Inter-Governmental Authority on Development (IGAD), the Organisation of African Unity (OAU) and the Arab League, it has split Somali factions into those willing to participate and those who reject the new initiative. The fact that leading IGAD members, notably Ethiopia, patently lack neutrality in Somalia is just one reason why the Djibouti initiative is likely to founder like so many of its predecessors. Another reason lies in the apparent attempt to sideline clans and political parties in favour of ”civil society” groups as the main constituent of a democratic process for forming a national government. Clan faction militia have certainly been the cause of much suffering in Somalia in the last decade, but they cannot be disregarded. Any Somali government which attempts to skirt the reality of clan allegiances has little hope of durability. The crucial missing factor is trust between clan factions, and it will continue to be elusive. Indeed, the Djibouti initiative has succeeded in sowing further distrust between five of Mogadishu’s most powerful faction leaders who joined forces in establishing a new authority to administer the city in December 1999 (1st quarter 2000, page 29). Like previous attempts to administer Mogadishu, the December initiative is also unlikely to succeed.
Prospects for peace continue to be extremely poor. Fresh rounds of fighting between rival clan factions have erupted throughout central and southern Somalia, even in areas that had been relatively peaceful of late. While the Rahawayn Resistance Army (RRA) has moved out from its bases in the Bay region into Shabeellaha Hoose, capturing territory there for the first time, a new round of factional warfare has been triggered in Bay after months of relative calm. The RRA has had to fight a rearguard action against militia from the Digil Salvation Army (DSA), who support Mogadishu strongman Hussein Mohamed Aideed. The RRA also has a new rival clan militia in the form of the Rahawayn Salvation Army (RSA), a new-found splinter group that had demanded a role in the Bay and Bakool regions. The two are now reportedly fighting. Further rivalries engendered by land issues are leading to escalating violence in Shabeellaha Hoose, where dozens of people have already been killed.
Economic outlook
The new round of violence could not have come at a worse time for the international humanitarian effort. Based on the 1999 gul harvest assessment in Somalia, an estimated 1.2m people are at risk of serious food insecurity, including 450,000 in the Bakool, Gedo, Bay and Hiiraan regions where the situation is particularly acute. Crop failure compounded by clan rivalry and insecurity has virtually exhausted all traditional coping mechanisms, especially in the southern part of the country. Journeys into the heart of Somalia are
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 28 Somalia
often difficult due to poor infrastructure and the threat of attack on food convoys. Truck fleets are operated by private transporters and are heavily guarded, but the risk of attack from armed bandits is unlikely to disappear in the coming months, making delivery of food aid increasingly difficult.
Somaliland outlook
Another curious aspect of the way the Djibouti initiative has been handled lies in its attitude to the self-styled Somaliland Republic. Somaliland is one of the few parts of Somalia that enjoys a functioning central authority, the raison d’être for the proposed Djibouti conference, yet clumsy diplomacy has resulted in Somaliland rejecting the Djibouti initiative as an attempt to reunite the north with warring factions in the south. The UN secretary-general’s special envoy, David Steven, currently resident in Djibouti, is no longer even welcome in Somaliland. President Mohamed Ibrahim Egal made this all too clear on March 8th by declining Mr Steven’s request for a meeting and having him escorted back to the Hargeisa airport. Rejection of the Djibouti initiative is one thing Somaliland can agree on with the neighbouring regional administration of Puntland, despite continuing tension over rival claims over the Sool and Sanaag regions. It is still unlikely that either Somaliland or Puntland will resort to organised violence to solve the issue, since both sides know that hostilities over the disputed regions could be fatal for their administrations—both in terms of resources and in the eyes of the international community. But the importance of Berbera as a conduit for emergency relief aid bound for Ethiopia is an important card in Mr Egal’s hand. The visit in January of an EU mission to conduct a feasibility study into a possible major road link to Addis Ababa augurs well for outside help with infrastructural repairs.
The political scene
Djibouti’s reconciliation Attempts by Djibouti’s president, Ismael Omar Guelleh, to bring Somalia’s conference is postponed factions together for peace talks stalled in late April when the reconciliation conference scheduled to start on April 20th in Djibouti, was postponed. A group of 60 Somali intellectuals, with the tacit backing of the international community, recommended that the starting date of the conference should be delayed pending further consultations and preparation of an agenda, according to sketchy reports.
The peace talks, which aimed to establish a transitional national government, had been welcomed by UN, the Inter-Governmental Authority on Development (IGAD), the Organisation of African Unity (OAU) and the Arab League. But despite support from some Somali factions, including Mogadishu faction leaders Ali Mahdi Mohamed and Hussein Haji Bod, and Somali National Front (SNF) leader General Umar Haji Masaleh, several others had rejected the Djibouti initiative. Those against included several other Mogadishu faction leaders (see below), the self-styled Somaliland Republic, and the self-declared regional administration of neighbouring Puntland.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Somalia 29
The new Mogadishu Few reports have emanated from Mogadishu on the progress of the capital’s administration splits new administration established by five of the city’s faction leaders in December 1999 (1st quarter 2000, page 29). A new radio station, Radio Banaadir, which officially opened on February 21st, is probably linked to the authority. Nonetheless, the Djibouti initiative seems to have led to a split in the newly formed authority. While Mr Ali Mahdi and Mr Bod have come out in favour of the Djibouti peace plan, their three co-signatories—Hussein Mohamed Aideed, Mohamed Qanyare Afrah and Ali Hassan Osman “Ato”—have rejected it.
In another sign of a growing rift, Mr Ali Mahdi—who returned to Mogadishu in February after a six-month absence, partly for medical treatment in Egypt— met an EU delegation visiting the capital in early March, but Mr Aideed and Mr Afrah refused to join him because of its support for the Djibouti conference. Italy’s special envoy to Somalia, Francesco Sciortino, announced on March 2nd that international aid to the new administration would not be forthcoming until the capital’s security improved.
Main political figures in Somalia
Hussein Mohamed Aideed: One of the main faction leaders in Mogadishu and a member of the Mogadishu administration established in December 1999. His forces control much of southern Mogadishu and large tracts of southern Somalia.
Ali Mahdi Mohamed: A Mogadishu faction leader and member of the new Mogadishu administration, whose forces control much of the capital’s northern parts.
Ali Hassan Osman “Ato”: A faction leader based in southern parts of Mogadishu and a member of the new administration.
Mohamed Qanyare Afrah: A south Mogadishu faction leader and member of the new Mogadishu administration.
Hussein Haji Bod: A faction leader in northern Mogadishu and a member of the new administration.
Musa Sude Yalahow: A Mogadishu faction leader, with strongholds in the north and south-west of the city, who is opposed to the new Mogadishu administration.
General Ahmed Warsame: Commander of the Somali National Front (SNF) forces fighting in southern Somalia; an ally of Mr Aideed.
General Umar Haji Masaleh: Commander of SNF forces in Kismayu; allied to Mr Aideed.
Colonel Abdullahi Yussuf Ahmed: President of the Puntland administration based in Garoe.
Colonel Mohamed Nur Shatigudud: Leader of the Rahawayn Resistance Army (RRA), whose forces are fighting Mr Aideed’s militia in central regions; allied to Colonel Abdullahi.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 30 Somalia
Mohamed Ali Aden Qalinleh: A former RRA spokesman; appointed governor of the RRA administration in the Bay region.
General Mohamed Siad Hersi “Morgan”: A faction leader in southern Somalia, whose forces were ousted from Kismayu in June 1999 and who is now operating in central regions.
Mohamed Ibrahim Egal: President of the self-styled Somaliland Republic.
Violence continues in Sporadic violence has continued in the capital in recent months. A local radio Mogadishu journalist was murdered in Bakara market on January 26th and a reporter from the Qaran daily newspaper was arrested at gunpoint and taken to the Hariryale Islamic court jail in southern Mogadishu on March 14th. Unknown gunmen attacked an Islamic court in southern Mogadishu on March 2nd. An Austrian- funded hospital in southern Mogadishu reopened on March 6th after Mr Aideed and Islamic court militias guaranteed its security, following an attack which led to its closure the previous month.
Pro-peace demonstrations The decision by Colonel Abdullahi Yussuf Ahmed, president of the Puntland in Puntland turn violent administration, not to attend in Djibouti has not been welcomed by all in the north-east. Crowds demonstrating in favour of the Djibouti peace accord rallied in the regional capital, Garoe, while another demonstration was sparked in Qardho, Bari region, when Colonel Abdullahi arrived in the town on March 29th. Police fired shots to disperse the crowd, who replied with stones. Two men were later killed in Bossasso when police opened fire on a crowd demonstrating in favour of the Djibouti peace accord in early April.
Fierce fighting continues in Inter-clan fighting has been fierce in the south in recent months as clan faction the south militia jockeyed for position following the Islamic court militia’s success in taking control of the southern port of Merca in November (1st quarter 2000, page 31).
• Five people were killed in fighting at a roadblock just outside Merca between Islamic court forces and rival militiamen on 23rd March, and on 1st April unidentified militia groups issued a warning against aircraft chartered by aid agencies landing at Merca.
• Hundreds of people arrived in Mogadishu and Merca in early February after fleeing from two days of fighting between militia of the Rahawayn Resistance Army (RRA) and militiamen of the Islamic court left more than 20 people dead and 40 wounded in the Kurtunwarey district.
• RRA militia clashed with forces of the Digil Salvation Army (DSA), who support Mr Aideed, in late February near Qoroley, leaving six dead and five wounded.
• Qoroley was again the scene of clashes in the first week of March, this time between Islamic court militia and the DSA. A DSA spokesman said his forces killed 13 rival militiamen and wounded 19, while his side suffered four deaths and seven wounded.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Somalia 31
• DSA militia clashed with Islamic court forces again on 21st March, the day on which militia from the Tuni (Digil subclan) fought Biyomaal (Hawiye subclan) militia in a land dispute in the village of Arrile. At least seven people were killed and 11 wounded in the two separate incidents.
• Tuni and Biyomaal militiamen exchanged heavy machinegun fire again at Arrile five days later, leaving at least 15 people dead and 18 wounded.
The central regions are also The administration established by the RRA in the Bay region in December (1st unstable quarter 2000, page 31) has also come under attack in recent months, primarily from a splinter group known as the Rahawayn Salvation Army (RSA), which is believed to be pro-Aideed. The town of Bur Acaba, controlled since June by the RRA after it drove out militiamen loyal to Mr Aideed, was seized by the RSA on 8th February. Further fighting, between the RRA on the one hand and militia from the RSA and DSA on the other, in which 30 people were killed, was reported from the region in mid-March.
Other outbreaks of clan militia violence have also been reported from central regions, which had largely escaped the factional bloodletting of recent years. An attack on a vehicle in the Galguduud region in late January resulted in six dead and fighting between rival Hawiye subclans in and around Mahaday town in the Shabellaha Dhexe region the last week of February left 20 dead. The violence is thought to have been sparked by a dispute over a contract awarded by an aid agency to members of one of the subclans to repair a bridge in Mahaday district.
Ethiopian troops are still Clan factional violence also flared in the Mudug region of Puntland where at active least 12 people died in clashes in mid-March in the town of Haradhere, in fighting reportedly triggered by the rape and murder of a local woman. Colonel Abdullahi was reported to have asked Ethiopia for military hardware during a visit to Ethiopia in early February to help drive Al-Ittihad militia from Mudug and Ethiopian troops with armoured vehicles apparently crossed the border in search of Al-Ittihad in January (1st quarter 2000, page 32). Although they did not find Al-Ittihad they were able to defuse a tense situation in the Galdogob district where a local militia opposed to the Puntland administration had taken up positions. Reports in the Somali media also claimed that Ethiopia supplied arms to Mogadishu faction leader Musa Sude Yalahow and the RRA in the Bay region, where Ethiopian troop movements were reported by the Mogadishu-based newspaper Ayaamaha on March 8th. Later in March, Mr Aideed accused Ethiopia of effectively annexing parts of the Gedo region, having established permanent camps in the towns of Luuq, Dollow and Bulohawo.
Economic policy and the economy
Famine looms in the south The World Food Programme (WFP) warned at the end of March that a major famine loomed in parts of the south if the rains fail in the main gul wet season (March-June). The situation is particularly acute in the southern regions of
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 32 Somalia
Bakool, Gedo, Bay and Hiiraan, where about 450,000 inhabitants do not have enough to meet their daily food needs. Climate experts predict that there is a 50% chance of failure for the gul rains, which account for three-quarters of annual crop yields and are crucial to livestock pastures. Elsewhere up to 200,000 people are facing food and water shortages in the north, the majority of whom are in the Haud areas of Togdheer and Sool regions (although the number at risk according to Somaliland authorities is much greater; see News from the Somaliland Republic below). The total number of Somalis affected by drought and at risk of serious food insecurity is estimated at 1.2m.
Insecurity continues to The WFP and bilateral donors have been pledging food to help meet the hamper the aid effort estimated 70,000 tonnes needed for drought-affected people in Somalia. Hugh Parmer, the US Agency for International Development (USAID) assistant administrator for humanitarian response, visited the region including Baidoa on 22nd March and reaffirmed the US’s commitment to providing 20,000 tonnes. WFP has so far pledged about 17,000 tonnes. But Mr Parmer, the first senior US official to visit southern Somalia in five years, warned RRA administrators that continued US government assistance to their territory would be dependent upon complete co-operation with the humanitarian community. Food convoys, though heavily guarded, are often at risk from armed bandits. Twenty-seven people were killed at the end of January over two days of attacks on a relief convoy as it passed through the Hiiraan region bound for Bakool.
Health conditions worsen The Bakool region has suffered seven consecutive poor harvests, and three poor rainy seasons back to back, drastically reducing crops and livestock. Just 113 tonnes of sorghum was produced during Bakool’s most recent harvest, compared with over 1,500 tonnes in the same season during pre-war years. There are no functioning boreholes in the region and shallow wells are being overused. As a result malnutrition in children under five years old has risen alarmingly. Recent surveys by the UN Children’s Fund (UNICEF) recorded malnutrition at 30% in the town of Rabule and 22% in Oddur. The rate at Baardheere in the neighbouring Gedo region was 24%. Cholera has also broken out in the Bay and Bakool regions. Dinsor and Qansahdhereh in the Bay region, where people are contracting the disease in their hundreds, are worst affected, the local health authority said in early April.
MSF-Belgium resumes work The Belgian wing of the medical charity Médecins sans frontières (MSF) officially in Kismayu resumed activities in the southern port of Kismayu on February 1st following the visit of an assessment team to Kismayu general hospital in late January. MSF-Belgium has supported the regional hospital since 1992, but pulled out its expatriate team last June as forces from the Marehan clan’s Somali National Front (SNF) wrested control of the city from militia of the Somali Patriotic Movement (SPM) loyal to General Mohamed Siad Hersi ”Morgan” (3rd quarter 1999, page 30). MSF suspended all its activities in the southern port on December 1st. Hopes that UN humanitarian work might resume in the area were set back on March 30th when unidentified gunmen fired upon a UN aircraft at the Kismayu airport, resulting in an immediate suspension of all UN air and ground operations in the area.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Somalia 33
Refugees return from The voluntary repatriation of nearly 1,000 Somali refugees from Dadaab and Kenya Kakuma camps in northern Kenya began on February 16th when the first of eight flights chartered by the UN High Commissioner for Refugees (UNHCR) left Dadaab with 100 refugees. The returning refugees, having each received a repatriation grant, were destined for Bossasso and Berbera. Nearly 140,000 Somali refugees, mainly from southern Somalia, remain in camps in Kenya. Another 400,000 Somalis, most from the north, remain in refugee camps in Yemen. More than 10,000 Somali refugees have returned to northern Somali regions voluntarily from camps in eastern Ethiopia since March, according to a report from AFP in late April.
Bossasso’s power plant to Puntland officials declared that the Danish government has granted US$3m to be expanded finance the renovation and expansion of the power plant at Bossasso. The money has been donated through the UN Development Programme (UNDP) and a Danish team is expected in the region to assess the northern port’s power needs. The story was carried in the Bossasso-based newspaper Kaaha Bari on March 17th, ten days after a directive banning all other Puntland newspapers.
News from the Somaliland Republic
Relations with Djibouti are Rejection of the Djibouti peace initiative by the president of the self-styled strained Somaliland Republic, Mohamed Ibrahim Egal, has led to a further deterioration in already tense relations (1st quarter 2000, page 33). The Djibouti authorities closed the Somaliland liaison office in mid-April and deported its representative. The strength of feeling in Somaliland against Djibouti’s Somali initiative, which is seen in Hargeisa as an attempt to reunite Somaliland with the south, was reflected in a statement made by Mr Egal in mid-February threatening to ”go to war” if attempts were made by outside parties to unite Somaliland with southern regions.
Violent confrontations The eastern Sool and Sanaag regions, subject to rival claims by Somaliland and with Puntland continue Puntland, resulting in exchanges of gunfire between rival forces (1st quarter 2000, page 34), have continued to be tense in recent months. A build-up of forces from both sides was reported in the Taleex district of Sool in mid-February and later that month an exchange of fire was reported in the Baran district of Sanaag. A further incident, in which a soldier was killed, occurred in the Sool regional capital of Laascaanood in March. In January both sides introduced visas in an attempt to control the movement of people across their borders.
The 2000 budget is This year’s national budget, totalling SolSh74.7bn (US$26m), was announced announced by Mr Egal on March 26th when he swore in the new ministers appointed in a January reshuffle. Four ministers were newly appointed, including Ahmed Shambir Sultan who took over the internal affairs portfolio from Ahmed Adan Umar Gutaleh, who was moved to commerce and industry. This year’s increase in the budget, up from SolSh57.3bn in 1999, is attributed to the widening of revenue collection at Berbera, the government’s main source of income, to include the export of goats.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 34 Djibouti
Total is to run Berbera’s oil Mr Egal gave the go-ahead for Total Red Sea, a local subsidiary of the French oil storage facilities company, to take over the management of oil storage facilities at the northern port of Berbera in January, according to a report in the Hargeisa-based weekly, The Republican, on January 30th. Total Red Sea will manage all fuel-storage depots at Berbera and be allowed to import oil. National oil firms which previously handled the country’s oil imports will now have to rent depots from Total. Berbera’s importance as an entrepot for Ethiopian food aid imports (4th quarter 1999, page 36) prompted a visit in January from an EU mission to conduct a feasibility study into a possible major road link to Addis Ababa.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Djibouti 35
Djibouti
Political structure
Official name République de Djibouti
Form of state Unitary republic
Legal system Based on the Napoleonic Code. A referendum in September 1992 endorsed a new constitution which allows a maximum of four political parties
National legislature Assemblée nationale; 65 deputies, elected by universal suffrage, serve a five-year term. An alliance between the RPP and the FRUD holds all the seats
National elections December 1997 (legislative) and April 1999 (presidential); next elections due in December 2003 (legislative) and April 2005 (presidential)
Head of state President elected by universal suffrage; serves a term of six years
National government The president and his appointed Council of Ministers; last reshuffled in May 1999
Main political parties Rassemblement populaire pour le progrès (RPP), the former sole legal party, split in 1996, with dissidents forming the Groupe pour la démocratie et la république, later banned; Parti national démocratique; Parti pour le renouveau démocratique. In 1991 the Front pour la restauration de l’unité et de la démocratie (FRUD) launched a rebellion by the Afars. In 1994 the government signed a peace agreement with a FRUD faction which was legalised in 1997 and contested the legislative election in alliance with the RPP
President Ismael Omar Guelleh Prime minister & minister for land development Barkat Gourad Hamadou
Key ministers Agriculture & water resources Ali Mohamed Daoub Commerce & industry Elmi Obsieh Waiss Communication & culture Rifki Abdulkader Bamakrama Defence Ougoureh Kifle Ahmed Economy, finance & privatisation Yacin Elmi Bouh Education Abdi Ibrahim Obsieh Employment & solidarity Mohamed Barkat Abdillahi Energy & natural resources Mohamed Ali Mohamed Foreign affairs & co-operation Ali Abdi Farah Health Mohamed Dini Farah Interior Abdallah Abdillahi Miguil Justice, prisons & human rights Ibrahim Idriss Jibril Presidential affairs & investment promotion Osman Ahmed Moussa Public works, housing & construction Saleiban Omar Oudine Transport & equipment Osman Idriss Djama Youth & sports Dini Abdallah Bililis
Non-cabinet advisers Directeur de cabinet Ismael Hussein Tani Chef de cabinet Ali Guelleh Abubaker
Central bank governor Djama Mohamed Haid
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 36 Djibouti
Economic structure Annual indicators 1995 1996 1997 1998a 1999b GDP at market prices (Dfr bn) 87.2 88.2 89.6 91.2 94.3 Real GDP growth (%) –3.6 –1.5 0.0 1.7 0.0 Populationc (‘000) 600 620 630 643b 662 Exports fob (US$ m) 38 40 43 59 260d Imports fob (US$ m) 207 201 204 239 440d Current-account balance (US$ m) –17 –16 –12 –14 –40 Reserves excl gold (US$ m; year-end) 72.2 77.0 66.6 66.5d 66.5 Total external debt (US$ m; year-end) 282 296 274 288d 300 External debt-service ratio, paid (%) 5.5 5.4 3.1 5.3b 5.0 Consumer price inflation (%; av) 4.5 2.6 1.6 0.1 2.0 Exchange rate Dfr:FFr (av) 35.6 34.7 30.4 30.1e 34.4e Exchange rate Dfr:US$ (av) 177.7 177.7 177.7 177.7e 177.7e
April 14th 1999 Dfr177.7:US$1
Origins of gross domestic product 1998a % of total Components of gross domestic product 1998a % of total Agriculture 3.6 Private consumption 79.5 Industry 19.9 Government consumption 23.6 Manufacturing 1.5 Gross domestic investment 15.3 Services 76.5 Exports of goods & services 45.4 Transport & communications 19.6 Imports of goods & services –63.8 GDP at factor cost 100.0 GDP at market prices 100.0
Principal exports 1998a % of total Principal imports fob 1998af US$ m Re-exports 45 Food & beverages 53 Locally produced goods 14 Khat 17 Petroleum products 17 Machinery 15
Main destinations of exports 1998g % of total Main origins of imports 1998g % of total Somalia 53 France 13 Yemen 23 Ethiopia 12 Ethiopia 5 Italy 9 Saudi Arabia 6 UK 6 a Provisional estimates. b EIU estimates. c IMF figures, including refugees and expatriates. d Including Ethiopian trade in transit. e Actual. f Excluding goods for re-export. g Based on partners’ trade returns; subject to a wide margin of error.
Quarterly indicators 1998 1999 2000 2 Qtr 3Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr M1 (end-period; Dfr m) 26,985 26,739 29,245 29,333 29,091 n/a n/a n/a % change, year on year –16.2 –16.0 –10.0 –8.9 7.8 n/a n/a n/a Foreign reserves (US$ m) excl gold (end-period) 63.2 62.6 66.5 66.9 61.9 62.2 70.6 62.2
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Djibouti 37
Outlook for 2000-01
Political forecast
Domestic politics Notwithstanding its disappointing start, the Somali peace initiative of the president, Ismael Omar Guelleh, will continue to be the centrepiece of Djibouti’s regional strategy. This is despite reservations among many Somali factions and overt opposition from neighbouring Somaliland. Like his predecessor, Hassan Gouled Aptidon, Mr Guelleh will use the regional political stage to bolster Djibouti’s status, notably by combining a relatively active Middle East policy—Djibouti, like Somalia, is a member of the Arab League— with East African initiatives within the regional Inter-Governmental Authority on Development (IGAD; see The political scene). Active regional diplomacy has the additional benefit of overshadowing Djibouti’s troubled domestic politics, in which Mr Guelleh’s authoritarian rule will continue to be contested.
Relations with Ethiopia will require careful handling. Mr Guelleh will continue to support Ethiopia, both against Eritrea and in its blatant intervention in Somalia, while also offering the government in Addis Ababa some support in its dealings with Arab states. However, there is a conflict between the political entente between Mr Guelleh and the Ethiopian prime minister, Meles Zenawi, and the requirements of Djibouti’s externally monitored economic reform programme—particularly over fiscal policy. Djibouti is under intense pressure from donors to enhance revenue by increasing tariffs on goods in transit to and from its port. Since Ethiopia has had to use the port of Djibouti since the outbreak of war with Eritrea in May 1998, it will strongly resist such increases, while pushing for greater bilateral co-operation.
In addition to these potential frictions, the implications of closer relations with Ethiopia will remain sensitive in Djibouti. Although Mr Guelleh outwardly supports closer economic ties, the political implications of greater integration and reform for Djiboutian sovereignty—and, more practically, the standard of living of Djibouti’s tiny political elite—will generate new political pressures at home, particularly if civil service reforms erode standards of living. In theory the conclusion of a peace deal with Ahmed Dini’s faction of the Front pour la restauration de l’unité et de la démocratie (FRUD) in February considerably bolsters the political stability of the country (see The political scene). Yet, in practice, President Guelleh is likely to try to use Mr Dini’s return to further divide domestic political critics. However, if Mr Dini insists on substantive political reforms, which he claims the government has promised, then an increasingly tense and unpredictable political climate may result. This will particularly be the case if FRUD rallies those seeking to widen political participation to both Somali and Afar elites marginalised by Mr Guelleh during his rise to power.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 38 Djibouti
Economic outlook
The tight conditions attached to Djibouti’s three-year enhanced structural adjustment facility (ESAF) loan from the IMF will make the implementation of reforms and disbursement of funds far from smooth. After delaying fiscal and structural reforms for five years, it is unlikely that the Djiboutian government will be able, even with increased expatriate technical assistance, to meet the timetable set by the IMF and included in the recently released policy framework paper (see Economic policy and the economy). The EIU therefore expects major revisions to the current reform schedule, especially over streamlining the civil service, privatisations and labour market liberalisation. For example, the necessary privatisation legislation is unlikely to be in place by June as stipulated in the reform schedule. The only substantive development may be a possible joint-management agreement with Dubai’s Jebel-Ali port, possibly on a 20-year lease. If agreed, this should bring new investment in port facilities, and a longer- term strategic vision to the port’s generally efficient management. Yet, in the absence of structural reforms, the economy is not expected to show any dynamism or substantial growth. Instead its fortunes will continue to depend on Ethiopian traffic through its port and on muddling through the reform programme to ensure that external financing continues to trickle in.
The political scene
A peace deal is signed The government signed an unexpected peace deal with Ahmed Dini in Paris on with FRUD February 7th. This surprise move followed secret negotiations between Mr Dini and, Ali Guelleh Abubaker, chef de cabinet of the president, Ismael Omar Guelleh. Mr Dini, a veteran Afar politician, leads the principal faction of the Front pour la restauration de l’unité et de la démocratie (FRUD). In 1991-92 FRUD guerrilla offensives incapacitated the national army. However, after widespread mobilisation of ethnic-Somali militia, FRUD forces were partially defeated in 1993-94. In the wake of these defeats, a faction of FRUD signed a peace deal in December 1994, but Mr Dini held out. For the past three years, Mr Dini’s partisans continued sporadic attacks on government troops in the north of the country (2nd quarter 1999, page 43). Although it has placed a financial burden on the government, the primary threat of FRUD has been to undermine the legitimacy of the new president, acting as a focus for a range of opponents to Mr Guelleh’s rule. In reality, FRUD’s military capacity was severely constrained by resource, leadership and communication problems, and it never was a serious threat to the government.
Prisoners are freed and Following the deal, Mr Dini returned to Djibouti on March 29th, after a decade Ahmed Dini returns in exile, primarily in Yemen and France. Accompanied by another leading critic of the government, Chehem Daoud Chehem, he was met by the minister if the interior, Abdallah Abdallahi Miguil, and Mr Abubaker. Although the arrival was a significant moment in Djibouti’s recent history, it was played down by the state-run media and Mr Dini was guarded in his public statements.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Djibouti 39
In practice, the most tangible achievement of the February deal was the release of political prisoners, including several leading members of FRUD held without charge in Gabode prison since 1997. On February 10th an initial group of 28 detainees were released from jail, and three Djiboutian soldiers, held captive by FRUD in the north, were also reportedly released. When signing the deal Mr Dini stated that he anticipated that a total of 47 prisoners would be released from Gabode, 27 of them members of FRUD. The most prominent member of FRUD to be released was Mohamed Kadamy. Until his extradition from Ethiopia in September 1997, Mr Kadamy had been Mr Dini’s chief aide and spokesperson in Europe.
FRUD members are In accordance with the spirit of the agreement, on March 8th Djibouti’s amnestied national assembly voted an amnesty law for all members of FRUD, exempting them from any possible judicial investigation or punishment for acts committed during the decade of civil war. However, confusion was further exacerbated on April 15th when ten former FRUD activists received prison sentences, along with Moumin Bahdon Farah. Mr Bahdon, who reportedly received a six-month suspended sentence along with members of his family, is a former minister who became Mr Guelleh’s principal political rival in the mid-1990s.
Political details are still to The full text of February’s “framework agreement for a cessation of hostilities” be negotiated has not been published. French and Djiboutian officials stressed that the agreement was only the beginning of a longer process of reconciliation. Mr Dini has added that the agreement covered the reciprocal release of prisoners and plans for greater decentralisation of power, as well as the return of all Afar refugees. Around 20,000 Afars fled to Eritrea and Ethiopia at the height of the government’s military campaign against FRUD in 1992-93. The signatories claimed that French officials had not participated directly in the negotiations. The deal and Mr Dini’s subsequent return did, however, prompt extensive speculation over major restructuring of the government. This was heightened by the illness of the prime minister, Barkat Gourad Hamadou, who is, like Mr Dini, an Afar. Mr Barkat, premier for the past 21 years, was admitted to the French military hospital on March 9th having suffered a heart attack.
Formal negotiations on the implementation of the peace agreement began between delegations led by Mr Dini and the minister of the interior, Abdallah Abdillahi Miguil, on April 27th. In the first session four sub-committees were created to deal with demobilisation, the rehabilitation of regions damaged by war, the decentralisation of government and wider political reforms.
Relations with Somaliland Longstanding disputes over trade and the political friction between Somaliland remain fraught and Djibouti, stemming from the former’s resistance to the Somali reconciliation conference, are inextricably interlinked. In mid-February a Hargeisa paper reported that lorries loading goods in Djibouti’s port bound for Somaliland had been the subject of dispute after higher tariffs were imposed on them. The authorities in Somaliland closed the border on April 14th, the second such closure in four months (1st quarter 2000, page 41). Two days later, the Djiboutian government announced that it was closing Somaliland’s diplomatic post in Djibouti, requesting that all officials leave. Somaliland’s
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 40 Djibouti
main representative was reportedly escorted to the border. These latest spats appear to have been sparked by a dispute over protocol surrounding the visit to Hargeisa of a Djibouti delegation to discuss Mr Guelleh’s Somali initiative.
Relations with Eritrea are On March 11th Djibouti and Eritrea restored diplomatic relations. Official ties restored were broken in November 1998 after Eritrea’s president refused to withdraw derogatory remarks made about Djibouti’s then president, Hassan Gouled Aptidon, during OAU mediation attempts between Addis Ababa and Asmara (1st quarter 1999, pages 42-43). Libya, whose envoys were also active in supporting Djibouti’s attempts to convene a Somali reconciliation conference, appears to have been behind this latest cooling in relations.
Economic policy and the economy
A strategy for economic When Djibouti signed an enhanced structural adjustment facility (ESAF) reform is published agreement with the IMF in October 1999, full details of the proposed reforms were not made public (1st quarter 2000, page 42). A medium-term policy framework paper (PFP) has, however, since been published. Yet the public availability of an unprecedented amount of new information on Djibouti’s current economic predicament, and the substantial reforms the government has committed itself to, at least on paper, have failed to prompt public debate over the implications and feasibility of the reforms.
The PFP lays out a strategy for economic reform and performance for the period 1999-2002. Following the effective collapse of Djibouti’s statistical service in the early 1990s, the 1996-98 stand-by agreement with the Fund rested largely on proxy indicators and rough estimates of economic activity. The more plausible figures in the new PFP suggest the following.
• The upsurge in port activity from May 1998 allowed the economy to grow again, for the first time since 1994, at 1.7%, even after taking into account the negative effects of the scaling down of the French military presence.
• Inflation gradually declined over the past four years, to just 0.1% in 1998. • The report also notes progress in reducing the government’s bloated wage bill—largely via the partial implementation of the long-postponed military demobilisation programme—and thus a significant improvement in the government’s fiscal position.
Djibouti: macroeconomic targets, 1999-2002 (% of GDP unless specified otherwise) 1999 2000 2001 2002 Real GDP growth (%) 1.4 2.3 3.2 4.3 Inflation (%) 2.0 2.0 2.0 2.0 Expenditure on health 2.3 2.1 3.9 4.4 Expenditure on education 4.2 4.6 5.1 5.5 Fiscal balance –1.6 –3.8 –3.9 –3.3 Source: Government of Djibouti and IMF, Policy Framework Paper.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 Djibouti 41
The timetable of reform is The PFP provides, for the first time, a comprehensive analysis of what is implausibly tight required to stabilise Djibouti’s ailing formal economy. Few Djiboutians would dispute the need for radical changes, yet there remains an obvious mismatch between the scale and speed with which the externally-supervised framework envisages that change will occur, and the human and political realities on the ground, in particular its small and inefficient bureaucracy. The framework envisages simultaneous reform of virtually every sector of the economy. This includes:
• Strategies and legislation for privatising the six principal state-owned utilities, including the port and airport, to be in place by June 2000.
• The civil service itself to be drastically reformed as part of fiscal restructuring, both to cut wages and to improve efficiency.
• Broader fiscal reforms including a reduction of expenditure via further lay- offs of military and civilian personnel. A doubling of expenditure on health and education is proposed by 2002, up to 12.5% of GDP. New excise taxes are also proposed, including a raft of higher duties on diesel, alcohol, tobacco and qat, all of which will be difficult and controversial to implement.
The port will benefit from Djibouti’s pivotal role as a conduit for the vast majority of the food aid the influx of food aid delivered to Ethiopia was highlighted by the flying visit of the head of the UN’s World Food Programme (WFP), Catherine Bertini, to Djibouti’s port on April 15th. WFP officials estimate that currently the port is able to shift 110,000 tonnes of bulk cargoes a month. However, following the appeals and pledges of additional food aid to Ethiopia in April (see Ethiopia report), in the coming quarter deliveries of up to 170,000 tonnes a month are expected. WFP expects to be able to import around 25,000 tonnes a month through Berbera in Somaliland, and anticipates that improvements in efficiency and shorter turnaround times for loading trucks will extend Djibouti’s monthly bulk cargo handling capacity to about 135,000 tonnes.
The increase of food aid into Djibouti has inevitably accentuated competition between rival shipping and handling agencies. The principal private Djiboutian agency, Compagnie maritime et de manutention de Djibouti (Comad) has boosted its profile in Addis Ababa. Comad, the Ethiopian state-owned Maritime Transit Services Enterprise and a host of smaller agencies have all greatly expanded their activities since mid-1998.
Port officials reassure Djibouti port and government officials continue to strengthen ties with Ethiopian importers Ethiopian businesses. A significant Djiboutian delegation attended the Addis Chamber of Commerce trade fair held in mid-February. The head of Djibouti’s port, Aden Ahmed Douale, used the occasion to reassure Ethiopians over the capacity and efficiency of the port. He discounted reports, carried in the previous week’s Ethiopian press, that the port was about to be sold to Dubai’s Jebel Ali port administration. However, in an interview with the Addis-based weekly, Capital, Mr Douale confirmed that discussions were continuing with the Dubai port authorities over possible joint management, stating that the contours of a possible 20-year co-operation agreement between Jebel Ali and
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000 42 Djibouti
Djibouti should be known within the next few months. The initiative has apparently come from the Jebel Ali authorities, via Mr Guelleh, as Dubai is looking to strengthen its regional position in the face of more intense competition from Aden—now managed by the Singapore port authority—and Salaleh in Oman. Mr Douale also stated that the Djiboutian authorities were still studying rival bids made by two Ethiopian groups to upgrade the port’s bulk-cargo handling capacity.
Djibouti faces its own food Around 100,000 of Djibouti’s own population, nearly one in six people, are shortages currently estimated to require food assistance. On January 19th the WFP agreed a five-month emergency operation to provide around 6,000 tonnes of food. Djibouti, which usually imports most of its foodstuffs, is suffering from prolonged drought, the impact of which falls largely on pastoral populations already dislocated by prolonged civil strife. Despite average incomes well above those of neighbouring countries, the majority of Djiboutians live in extreme poverty, their deprivation heightened by the relatively higher cost of living in Djibouti-ville’s sprawling suburbs.
EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000