The Possible Contribution of the African Continental Free Trade Area to the Economy of Eritrea

Home , Economy of Eritrea

International Journal of Research and Innovation in Social Science (IJRISS) |Volume V, Issue I, January 2021|ISSN 2454-6186

Ataklti Tsige Kidane Pan African University of Governance, Humanities, and Social Science (PAUGHSS) University of Yaoundé II, Soa, Cameroon

Abstract: Regional integration has a considerable contribution to long been mostly excluded from the benefits of international achieving sustainable economic and social development through Trade (Matambalya, 1995). effective implementation of intergovernmental treaties and market-led strategies. These ambitions have been in the mind of The unification of African regionalism could therefore prove every African since African countries got their independence. To decisive, on the one hand, to create the right bargaining power reach these African dreams, African countries began with the vis-à-vis pertinent commercial partners (such as China, the establishment of African Economic communities (Abuja Treaty). USA, and the European Union). On the other, to foster Later the continent-wide free trade area that is AfCFTA came up economies of scale and value chains that can enlarge African with the objectives of creating a single continental free market companies' competitiveness in international markets. for goods and services, free movement of factors of production, However, the realization of these benefits is conditioned by and paving the ground for accelerating the creation of a continental customs union. Eritrea is the only country left overcoming numerous political, legal, economic, and behind from this continental free trade treaty. Most of Eritrea's functional challenges. policies are heavily influenced by the government's ideology, Eritrea is a country that has been challenged and survived which values self-reliance, that produced an inward-looking economy. However, these policies have contributed to Eritrea's from various United nation Security council Sanctions, weak economy and financial woes, reduces extreme poverty, and regional and global isolations, and now becoming an promotes national unity; it much limits civil liberties, influential nation politically in the horn of Africa. And also international engagements, and economic growth prospects; play a more significant role in the peace building process of therefore, it needs much reform. The study used one of the the horn of African countries. Generally, various issues various study plans, which is mixed-methods - qualitative driven- hamper the accession process for those countries not ratified: of exploratory research. The results revealed that the AfCFTA a) The concern that the removal of tariffs could survive has significant expected benefits for the Eritrea economy. These national productions at risk; and b) The issue of benefits are not only restricted to the economy only; it goes to compensations for those countries that depend on customs social, cultural, and diplomatic relations. The findings also discovered that the government has a limitation on reforming duties to consolidate their national budgets. In addition to that, investment, trade, and financial policies. Therefore, the study Eritrea has its problem different from those like limited recommends that Eritrea's government to amend and implement infrastructure capacity(soft and hard infrastructure), weak the suspended policy in accordance with AfCFTA and should financial institutions, Trade, and investment policies. sign the treaty. Therefore, the top political priorities are necessary to adopt cohesion policies and ad hoc measures to support different Keywords; Regional Integration, Regional Economic Integration, and AfCFTA countries and national actors' specific needs to make AfCFTA a comprehensive and mutually beneficial treaty for all. I. INTRODUCTION In addition to that, we know that this economic integration has egional integration is related to the discriminatory its advantages like- trade creation, greater consensus, political R removal of all trade impediments between a minimum of cooperation and employment opportunities, and so on. And two participating nations and establishing some aspects of also, it has disadvantages like trade diversions and national cooperation and coordination between them (M.El-Agraa & sovereignty, etc. Eritrea's provisional government passed the Ali, 1999). Regional integration is a strategy where countries country's first law on private investment when we see Eritrea's in the same region agree to enhance economic cooperation private investment law that was suspended during the war. through agreed institutions and rules, focusing on eliminating Eager to speed up economic growth, the government enacted barriers to free Trade in the region, increasing the free an Investment proclamation NO.18/1991 seven months after movement of labor, people, capital, and goods. RI is mainly independence. This proclamation encouraged both nationals trade-driven and is a process that involves expanding and foreigners to invest in Eritrea. So, as a result, in 1997, multilateralism in a regional economy, and later it involves Eritrea's growth rate was more than 7%; it means one of the integrating other economic, political, and social policies. It is fastest economic growth in the continent. a process during which the sovereign power of the member states is progressively diminished. African countries have

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International Journal of Research and Innovation in Social Science (IJRISS) |Volume V, Issue I, January 2021|ISSN 2454-6186

According to Investment Proclamation No. 59/1994, Eritrea sources (https://www.heritage.org) has adopted an open and market-oriented economic policy. Illustrations; They were assigning the private sectors a leading role in the country's economic activities to function with no restrictions 80–100 Free or discrimination. Chapter 4. of proclamation No. 59/1994 deals with investment incentives. The incentives may be 70–79.9 Mostly Free classified into three categories; Fiscal incentives, financial 60–69.9 Moderately Free incentives, and other incentives (The government of the state of Eritrea, November 1994). 50–59.9 Mostly Unfree Fiscal incentives deal with duties and taxes on imports and 0–49.9 Repressed export, as well as on income. Financial incentives involve According to the heritage foundation report of 2020, Eritrea's loans, allocations of foreign exchange, remittance of foreign Economic freedom scores overall are as indicated in the above exchange. Investment guarantees and additional facilities fall table; it is 38.5%. It ranks 177 of 180 countries, and this under other incentives. The tax code itself is designed to means Eritrea has the least economic freedom, followed by promote investment and economic growth through liberal Cuba-26.9, Venezuela-25.2, and North Korea-4.2 globally and Trade. It offers a low rate on import tariffs for manufacturing regionally also, it scores the lowest percentage of all IGAD inputs—nominal custom duty of two percent on imports of members. (Miller, B.Kim, & M.Roler, 2019). capital goods and industrial spare parts. There are no duties or taxes on exports, which indicates the government's export- II. OVERVIEW OF THE REGIONAL ECONOMIC oriented economic policy. These necessary policies showed us COMMUNITY AND AFRICAN CONTINENTAL FREE that Eritrea's transitional government as pro-regional TRADE AREA economic integration and cooperation among the neighboring The Continental Free Trade Area (CFTA) creation is a countries (Eritrean Investment Center, 2003). significant cornerstone in the long run of African integration. Eritrea's socio-economic policies are hugely influenced by the As foreknow in the Treaty Establishing the African Economic government's ideology, which values self-reliance and equal Community (the Abuja Treaty), which entered into action in distribution of wealth among the nation's citizens. As a result, 1994, the integration process culminated in the African it has produced an inward-looking economy. These policies Economic Community(AEC). The CFTA aims to liberalize have contributed to Eritrea's weak economy and financial trade among African countries and to build on the substantial woes. Eritrea has many sectors that are suitable for successes already achieved within Africa's RECs. By doing development, but gross reform is needed. The state can learn so, the CFTA intends to facilitate intra-African exchange, from successful reform processes undertaken by countries like boost value chains that make smooth integration into the China and Rwanda. Like any other system, the Statist model world economy, and energize competitiveness, includes trade-offs. It reduces high poverty and promotes industrialization, and innovation, thereby contributing to national unity, but much limits "civil liberties," "international African economic and social progress and development. engagements," and "economic growth prospects" these are CFTA's developmental approach is solidly grounded in considered as the main problem to the country. Africa's political economy realities and development challenges. Any trade agreement embodies a confluence of Tabel. 1 Economic Freedom Scores broad political economy considerations underpinned by such Ranking Of the IGAD members by economic Freedom principles as flexibility, variable geometry, and special and differential treatment. These are typically seen through such World Regional rank-IGAD Overall Score Country modalities as exceptions and exclusions, the time frame for rank (Africa) /100 implementation of commitments, and trade remedies, etc. 102 1 (10 ) Uganda 59.5 (UNECA; AfDB, 2017). 132 2 (23) Kenya 55.3 They are now determined to change that. So, will eager 146 3(30) Ethiopia 53.6 traders be able to reap the benefits from the African Continental Free Trade Area? The Continental Free Trade 151 4 (33) Djibouti 52.9 Area entered into force for the (36) thirty-six countries that 173 5 (44) Sudan 45.0 have ratified the agreement; for the remaining (18) eighteen signatories countries; it will not apply until they approve 177 6 (47) Eritrea 38.5 (African Union, 2020). In terms of the population and the N/A N/A Somalia N/A number of countries involved and concerned, the African Continental Free Trade Area represents the main free trade South N/A N/A N/A agreement since the foundation of the World Trade Sudan Organization. Equally important the timing of the deal, as it comes in sharp contrast with a global context marked by a

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pertinacious and significant rise in trade-restrictive measures, Background of Eritrea and its Commitment toward the as well as by a growing resistance towards the Development AfCFTA of regional integration systems, for example, the US. from Eritrea nestled in the volatile region of the Horn of Africa and NAFTA and Brexit from the EU. with a long coast bordering the Red Sea. Its land borders are This ACFTA its main objective is by removing tariff and non- with Sudan, Djibouti, and Ethiopia. Eritrea is located in a tariff barriers on goods and services; member states intend to: strategic region along with one of the world's busiest trade facilitate Intra African trade; promote regional value chains to routes. It has a unique history of being a country once boost the integration of the continent into the international colonized by its neighbor – Ethiopia. It was colonized by economy; increase industrialization, innovation, and European countries – Italy (1889 – 1941) and Britain (1941 – competitiveness, ultimately contributing to Africa's economic 1952) and was also annexed by Ethiopia in 1962 after the and social progress. Due to the broad scope of the deal, the U.N. declared it an autonomous region of Ethiopia by negotiation has been categorized into two stages. The first one rejecting the voice of more than 71 percent of Eritrean after is that culminated in the March agreement, focused on: the British left Eritrea in 1952. In September 1961 Eritrean phasing out of tariffs on ninety percent (90%) of the Trade Revolution started. In 1991, after a 30 - years long war of exchanged among the African countries; the removal of non- independence, the Eritrean Peoples Liberation Front tariff barriers; the definition and illustration of rules the of triumphed in the war of independence; the EPLF deposed origin; an agreement on customs integrations and Trade Ethiopia's last emperor, Mengistu Haile Mariam, from Addis rectifies. Ababa last May 1991. Based on the 1981 proclamation of a referendum by the EPLF during the fighting with the Derg The AfCFTA treaty is also supported by the African Union regime, in 1993, Eritreans voted 99.98% for independence Protocol on Free Movement. The signatory states grant visa from colonization-Ethiopia in an UN-backed referendum. The waiver, the right of residence, and the right to establish country subsequently got international recognition, and It is professional or work reasons to their citizens. The agreement's currently a full member of the Intergovernmental Authority implementation could increase intra- African Trade in 2022 for Development (IGAD), the African Union (A.U.), and of by 52% compared to 2010 levels. Under the African the United Nations (U.N.) and other regional and international continental free trade area, intra-African Trade could rise from organizations. 10.2 % in 2010 to 15.5 % in 2022. But, if matched by improved trade facilitation and tariff reduction, such Trade The first five years of independence were known for could more than double in the same period to 21.9%. This rise impressive progress in rehabilitating necessary social and will reduce the gap with other continent trade quotas currently economic infrastructure, macroeconomic stability, improving characterizing Asia ( 51%), North America (54%), and social indicators, and economic growth. From 1993 to 1997, Europe ( 67%) (Karingi and Mevel, 2012). the country's economy grew at an average annual rate of 10.9% (World Bank, 2018). Though, in the long term, the benefits will expand to all citizens of the continent, who will gain welfare estimated at In May 1998, when the border conflict erupted, these 16.1 billion dollars, specifically in favoring of women and development gains were interrupted. After three bloody wars young populations, who would benefit from new job between these countries, their economy was negatively opportunities created by the treaty (Cofelice, 2018). The intra- affected, especially Eritrea its national hard currency reserve African economic growth would mainly affect the was fully used in the purchasing military weapons, and its manufacturing and industrial sectors, thus demonstrating economy was totally devastated. Later these countries came to AfCFTA's potential contributions in guiding African the Algeria agreement, which was final and binding, and then countries' structural transformation. Such internal signs of the Eritrea- Ethiopian Boundary Commission (EEBC) progress could, in turn, contribute to strengthening Africa's established and made an absolute "virtual" demarcation of the position in global trade. boundary in 2007 (Caprile, 2008). The final and binding decision made by EEBC has been accepted by Eritrea but was According to Karingi and Mevel (2012), African economies rejected by Ethiopia. Within the situation that was described face unique trade barriers today. Both tariff and non-tariff as "no war, no peace," Eritrea's government was remaining in related barriers to exchanges of goods hinder economic and a state of grown mobilization, and border security and its social development. Indeed, Africa's relatively low trade protection was its priority until 2018 when PM Abey Ahmed performances, mostly it's very low intra-trade compared to came to power he fully accepted the EEBC decision without that of other continents, may partly be explained by obstacles any conditions and signed peace and friendship agreement. limiting spillover associated with exchanges within the African countries. In this context, opening African economies U.N. rights rapporteur continues to accuse Eritrea of gross within themselves is expected to generate significant benefits human rights infractions like incommunicado detention, to Africa. Therefore, creating a CFTA could be seen as a step arbitrary arrests, mandatory national service system, and towards helping African economies overcome at least some enforced disappearances (Security council report, 2012). part of their limitations. Eritrea was also punished by a U.N. Security Council arms

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International Journal of Research and Innovation in Social Science (IJRISS) |Volume V, Issue I, January 2021|ISSN 2454-6186

embargo during the war with Ethiopia in 1998, and Resolution -1907 in 2009 and Resolution -2023 in 2011 because of its OVERALL PREFORMANCE(LEVEL OF alleged support for al-Shabaab insurgents in Somalia and also COMMITMENT & alleged to destabilizing the region. Eritrea had repeatedly IMPLEMENTATION READINESS OF called for the U.N. to lift the "unjustified" sanctions that are AFCFTA) drafted by IGAD and A.U. (Afewerki, 2012). The U.N. security council left the injustices and baseless sanctions in 80.00% 67.89% November 2018. 70.00% 62.85%61.41% Because; For the sixth consecutive year, the UN Monitoring 60.00% Group found 1. No evidence of Eritrean support for Al- Shabaab. 2. No proof of large shipment of weapons or 50.00% 45.20% 37.25% ammunition to or from Eritrea. 3. No concrete evidence 40.00% 33.25% throughout the mandate for the large scale cross- border smuggling of arms between Eritrea and Sudan. 4. No evidence 30.00% of the large – scale deployment of foreign troops ( Egypt) in 16.33% 20.00% 11.75% western Eritrea. 5. No concrete evidence of Eritrean Support 10.00% for "FRUD-Arme" (Djiboutian armed group the Front for the Restoration of Unity and Democracy) . And also the USA 0.00% remove Eritrea from the list of countries which does not cooperate against terrorist on May 2019 (Monitoring group on somalia and Eritrea, 2018), (Habtesilassie, 2009). Nowadays, Eritrea's economy is devastated due to the continued isolation, and the government also has a weak role in reforming, Implementing the necessary economic and investment policies. Eritrea's investment, trade, monetary, and other essential policies are still suspended since 2000. And the controlling measures against foreign investors and domestic Fig. 10. Comparing Eritrea with its neighboring countries and IGAD members using overall performance toward AfCFTA private investors are even discouraging. Sources; (AfroChampions, 2020). Furthermore, according to (AfroChampions, 2020) Eritrea as a country is the least committed country. The analysis is based III. POTENTIAL GAINS OF ERITREA FROM THE on the "countries' level of AfCFTA commitment" with a score AFCFTA of 0.85%, countries implementation readiness-Eritrea score According to (Akeyewale, 2018); there are a number of gains th 26.6% and ranked 49 out of 55 states and overall and losses of AfCFTA. Trade between nations has positive rd performance Eritrea score 16.33%, and it ranked 53 . Eritrea economic effects and can also be impeded by structural is a member of the Inter-governmental Authority for imbalances and gaps in the endowment of resources between Development, which comprises eight countries of Horn and countries. Despite the large increase in global trade, the lack Eastern Africa. of a corresponding increase in world economic growth attests Based on the data taken from Afrochampions, Eritrea is found that current trade practices fail to lead to development. For on the seventh level of all IGAD member countries, and South developing countries, the liberalization of trade has not Sudan is the last. This South Sudanese rank probably be yielded the expected return. A new paradigm emerged in affected by the situations of civil war inside the country. This response, suggesting that public investment in leading to analysis produced and combined three main types of ratings economic growth should accompany trade liberalization. In related to countries' level of commitment to AfCFTA, recent years, solid arguments have been put forward to Countries' readiness of implementation, and overall encourage developing countries to emphasize regional performance. This measurement includes the level of integration before seeking to access the worldwide market commitment and readiness of implementation of AfCFTA, (T.Ayuk & T.Kabore, 2012).The study found and understood which is summarized under the term "overall performance." that there are many potential benefits for the economy and other sectors to Eritrea if the government signed and ratified In this case, apart from the significance of a country's the continental free trade area. It increases the free ratification status to its commitment ranking, a country's movement of goods and factors of production, such as commitment to the free movement of persons played a major peoples, labor, and capital across Eritrea's and its neighboring role in the commitment rankings, and the readiness rankings borders, increasing FDI and local private investments and also consisted of the pre-assess trade facilitation capacities of bringing stability. Most of the integrations are trade-driven, these countries regardless of when they became an actual and gradually this relation becomes more vital and could member of AfCFTA. involve integration other than economic to cultural and

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International Journal of Research and Innovation in Social Science (IJRISS) |Volume V, Issue I, January 2021|ISSN 2454-6186

socially. These are the briefed major positive effect of AfCFTA on the Eritrea economy. Top 10 countries Import Trade partner Increased domestic and Foreign Investment.; domestic and foreign investment is one significant aspect of the macroeconomics approach that has attracted the attention of all investors' attention. Becomes a member of the continental 25.00% free trade area means that the member states are ready to 23.57% modify their investment policies according to the regional 23.27% grouping and open their borders to investors. Eritrea's government eager to speed up economic growth and issued an 20.00% investment proclamation (No. 18/1991) immediately after the 18.70% liberation of the country. In 1994 this law was replaced by a new investment proclamation (No. 59/1994) to eliminate the 15.00% previous proclamation's restrictions and deficiencies. Its objectives are; 1)to encourage investment so as to work out and utilize the resources of the nation; 2) to promote exports and encourage competitive import-substituting businesses; 3) 10.00% to create and expand employment opportunities; 4) to encourage equitable regional growth and Development; 5) to 5.59% promote the introduction of new technology, and 6) to 5.52% 5.00% promote small and medium scale businesses (hailemariam, 5.45% 4.54% 2001). These investment proclamations are expected to have a 4.28%3.77% great role in enabling individual-owned businesses to freely 2.94% 2.38% operate and move their capital across the neighboring 0.00% countries' borders. At that time, these policies encouraged both nationals and foreigners to invest their capital in Eritrea. By Practicing these policies and signing and ratifying the continental free trade area, there is a high probability that Eritrea would attract so many foreign investors and increases domestic investment. % Goods Imported from these coutries to Currently, in Eritrea, there are more than twenty foreign Eritrea in 2017 companies have got a license in discovering and mining- related fields like the world-class potash mining operate by Fig.18 Eritrea's trade partners and goods imported from these countries in joint venture 50:50 shares between Australian company 2017 danakali mining Co. and an Eritrean mining company that has Sources; (Ministry of Finance- Department of Custom Eritrea, 2018) expected 200 years of mining life and will start its production Eritrea trade partners, most of them are out of Africa. The in 2022 (UNDP Eritrea, 2019). Generally, an increase in reason could be different, but the main reasons are Eritrea had investment leads to a rise in competition, stimulates domestic no good Trade relation with African Countries due to political product quality improvement, and then reduces production difference, and also Eritrea had a shortage of hard currencies, costs. and it used its hard currency on purchasing basic development International Trade Development;- Trade also one of the equipment like heavy agricultural machinery, Petroleum and main drivers of regional integration. And it is another factor spare parts and other necessity goods(lentils, sugar, and that has a substantial role in economic Development. This cooking oil- for military, colleges and local foods). These economic development motive pulls a country to join a goods were the top imported goods in 2017. These countries regional grouping and expects to expand its trade relations are trade partners from which Eritrea imports Goods; UAE, with the neighboring countries under the free trade area. China, Malaysia, Saudi Arabia, Turkey, and India are from Although Eritrea has a small economy, there would be greater Asia; Italy and Belgium are from Europe; South Africa, negotiating power with other Trade organizations or financial Egypt, and Sudan in small ratios (listed in "others") are from institutions like (WTO, E.U., IMF, W.B…etc). When we see Africa; Brazil from South America. Eritrean trade partners, almost all are far from its bordering Top 10 countries Export Trade Partners countries.

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International Journal of Research and Innovation in Social Science (IJRISS) |Volume V, Issue I, January 2021|ISSN 2454-6186

30.00% leaked that Eritrea and Sudan have agreed to open a military 26.87% base (Xinhuanews, 2019). This all military cooperation is part 25.35% 25.00% of the agreement, which included the cooperation on Trade, investment, finance, and communication. Military and 20.00% security cooperation has a remarkable role in mitigating foreign military interference in these countries and also has a big role in fighting regional insurgent groups. This defense 15.00% 14.22% and security agreement is expected to strengthen and ensure 10.99% cross-border Trade in a peaceful manner. These exemplify 10.00% 8.65% 6.28% security and defense agreements have a contribution to do Trade smoothly and peacefully. 3.04% 5.00% 0.09% 2.59%1.38% 0.54% Improvement of Soft and Hard infrastructure;- Regional 0.00% integration increases domestic and cross-border infrastructure investment. Because it is the first key to improve connectivity between neighboring countries and thereby promote Trade and investment growth. On the other hand, indifferent soft and hard infrastructure can hinder economies from unleashing % of Goods Exported to these countries … their potential. Therefore, the Eritrean government understands the potential contribution of the hard infrastructure to the economy. Eritrea's economy has been emphasizing domestic road infrastructure that connects the Fig.19 Eritrea's Trade partners and Goods exported to those countries -2017 Sources; (Ministry of Finance- Department of Custom Eritrea, 2018) neighboring countries to secure sustainable and inclusive growth. Closer regional integration is a means of fostering Eritrea produced goods that are exported to India, Singapore, Eritrean demand and economic Development. Considering the UAE, China, Philippines, and Vietnam from the Asia Benefits of communication and transportation infrastructure, continent; Switzerland, Bulgaria, and Italy are from Europe; the government has been investing millions of U.S. dollars in Sierra Leon, Sudan is from Africa. This indicates Eritrea has expanding the existing roadways and building a new one. not strong trade relations with its neighboring countries New roads have also grown relationships with bordering specifically and with its continent in general. The problem countries such as Sudan and Ethiopia. could be the long time of no war and no peace situation and the rough diplomatic relation with African countries. Plans to pave roads, connect cities, build air bases and update Therefore, nowadays, these problems seem to overcome, and ports need huge capital and financial resources. The the relation with neighboring countries is going smoothly. So, government built a modern airbase in Massawa, updated the the AfCFTA has the potential to address such trade relation old port of Massawa, and modernized the 557 KM road high problem of Eritrea by supporting Eritrea's national economic way of the port of Assab to the port of Massawa without a plan to be consistent with the regional plan. single foreign aid. In 2013, Eritrea completed a 100km road connecting the Massawa port of Eritrea to the Sudanese Prevent Wars and Brings Stability; War and conflicts among border town of Qarora, beginning a strategic alliance between neighboring countries would expect to reduce with the the neighboring countries (Gresh, 2017). existence of integration in different ways. Economic, political, military, and social interdependence among member states In addition to that, when Eritrea signed an agreement of peace can make a war costly and substantially decreases the risk of and friendship with Ethiopia in 2018, the European Union internal and external conflict. Additionally, frequent and with its U.N. partner - UNOPS has begun to fund to the cost regular political communication between member nations can of roads that reconnects the port of Assab and Massawa of build trustworthiness and facilitate cooperation, including Eritrea and Ethiopia. Construction of these roads is facilitating military or security. Promoting cooperation in defense and by the local construction companies. So, when the security related issue is important in ensuring the region's government joined the AfCFTA, these sectors would be peace. The environment for sustainable economic boomed dramatically. So as the economy generally will be Development would be conductive. boosted. Connectivity, including both hard and soft infrastructure, can foster closer economic ties between Eritrea Depending on that norm, Eritrea signed an agreement of and the member states. Hard or physical infrastructure (road, comprehensive military cooperation with its neighboring rail, ports, and energy) while associated soft infrastructure countries, initially with Ethiopia, later with Somalia and includes the critical areas of financing infrastructure, trade and Sudan (Ministry of Information- Eritrea, 2018). Therefore, investment reforms, and institutions for coordination. based on the signed agreement, there are pieces of information

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IV. THE POTENTIAL LOSS OF ERITREA FROM Eritrea has remained one of the world's most difficult AFCFTA countries to do business. Eritrea's economy is heavily harmed due to the Security council's sanctions, lack of commitment to Losing non- physical sovereignty;- generally, regional and reform economic and investment policies, lack of international organizations (W.B., IMF,WTO, etc.) have a transparency, weak legal and regulatory frameworks and significant contribution in shaping some part of a country's structure that undermine the private sector. Using an open policy. This losing sovereignty could be physical and non- economy could bring new technology and expertise into the physical. Non- Physical Sovereignty represents the country, mainly concerning financial services, manufacturing, government's political, economic, and other related stance or and world markets. Eritrea's lack of interaction with the policies' freedom from external control/influences. However, international economy, whether through investment, or the NGOs and other international organizations have a huge cooperative arrangements with international institutions, role in accelerating economic and social Development; the severely limits the country's ability to learn and develop the government also has the right to secure and put first its economy, especially those of infant and small-medium national interest. The agreements with international enterprises. organizations or regional blocs, Eritrea may understand That's why the Eritrean economy has not the capacity to slightly different from other countries, that it has to hands compete with other countries' economies. Despite its over more of its political and economic rights. Furthermore, advantage, these local producers, infant businesses, and small- one country's political and economic difficulties would affect medium businesses would be damaged and kicked out of the other member nations to determine their own political and market or competition when Eritrea's border open to foreign domestic economic policies. In such a case, Eritrea has a merchandisers without protective tariffs. Therefore, Eritrea's probability of losing its sovereignty when it joined the government should use protective methods to keep these AfCFTA. businesses healthy or subsidize them to compete in

international markets. Security Menace; Eritrea is located at the strategic geographic location of the Horn of Africa. It is near to oil producer V. CONCLUSION countries of the Middle East. The critical international maritime route that connects the West to the East through the AfCFTA, an agreement intended to facilitate Intra African Trade, is expected to promotes regional values chains to foster Suez Canal has given the region great relevance to attract the African continent's integration into the global economy, superpowers' attention. The presence of western power in the boost industrialization, and contribute to Africa's economic region has polarized the political forces of the area. They fully interfere in these countries' political activities and actively development and social progress by removing tariffs and non- participate in dividing the region by demonizing one tariff barriers on goods and services. And this study presents the possible contributions of the AfCFTA to Eritrea's government and appreciating the others. On the other hand, economy, and The objectives of the study were to analyze the the Al-Shabab group's existence in the region is one of the benefits and losses of the AfCFTA. greatest factors that creates instability. It believes in forming a state of Wahhabi sect stronghold in Somalia that would The study discovered the various primary potential benefits of establish an Islamic State of the Somalis in Somalia, Djibouti, AfCFTA to Eritrea's economy, such as Increased domestic Kenya, and Ethiopia. Inspirations the organization aspires to and FDI; International Trade Development, Prevent wars, and take over Somalia and spill-over its ideology throughout the Bringing Stability and Improvement of soft and hard Horn of Africa and go beyond that region to Africa at large. infrastructure. The study also revealed that the potential losses This is a security threat to Eritrea. As a country, Eritrea is the of AfCFTA to Eritrea's economy, such as handing-over the home of both Christian and Islam and adopted the "Zero national sovereignty, Security menace, and losing the market tolerance for religion and ethnic sectarianism movement." of infant industries and small-medium enterprises. Eritrea's macro-policy that was drafted in 1994 is building strong Therefore, opening the border and allowing people to enter national unity, self-sustaining growth, accelerating freely could significantly damage Eritrea security because Al- democratization, prevailing peace and stability in the region, Shabab and other insurgent groups cater to the violent and and opening up to harmonizing and cooperative external often destructive methods of committing violent operations to relation as well as the enhancement and promoting regional implement its general objectives. Opening the border for and international economic cooperation. Based on these Trade means not only for goods. There is the mobility of concepts, Eritrea is ready to cultivate regional economic factors of production- labor, capital, and entrepreneurs. And integration benefits by implementing the economic the free movement of people is proportionally increasing with cooperation agreement made regionally and then going further the movement of goods. And the AfCFTA is not going to to the continental level. stagnate; it will go beyond free Trade. AfCFTA is basically formalized as a trade agreement among Losing Market of Infant industries and Small-Medium nation-states targeting to improve welfare. It begins by enterprises;- this problem is not only happening to Eritrea. reducing or eliminating custom tariff and non-tariff barriers to

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International Journal of Research and Innovation in Social Science (IJRISS) |Volume V, Issue I, January 2021|ISSN 2454-6186

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