Ethiopia Eritrea Somalia Djibouti

COUNTRY REPORT

1st quarter 1997

The Economist Intelligence Unit 15 Regent Street, 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 40 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 subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group.

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Contents

3 Summary

Ethiopia

5 Political structure 6 Economic structure 7 Outlook for 1997-98 9 Review 9 The political scene 15 The economy 17 Agriculture and mining 19 Infrastructure and tourism 21 Foreign trade and payments

Eritrea

23 Political structure 24 Outlook for 1997-98 24 Review 24 The political scene 28 The economy

Somalia

35 Political structure 36 Economic structure 37 Outlook for 1997-98 38 Review 38 The political scene 43 The economy 44 News from the Somaliland Republic

Djibouti

46 Political structure 47 Economic structure 48 Outlook for 1997-98 49 Review 49 The political scene 52 The economy

55 Quarterly indicators and trade data

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List of tables

9 Ethiopia: regions 54 Djibouti: current account 55 Ethiopia: quarterly indicators of economic activity 55 Djibouti: quarterly indicators of economic activity 56 Ethiopia: trade with major trading partners 56 Somalia: trade with major trading partners 56 Djibouti: trade with major trading partners

List of figures 8 Ethiopia: gross domestic product 22 Ethiopia: breakdown of exports, July 1995-March 1996 49 Djibouti: gross domestic product

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February 21, 1997 Summary

1st quarter 1997

Ethiopia Outlook for 1997-98: Continued improvements in agricultural output will fuel growth, although food security remains precarious. The government has pledged to accelerate privatisation and land-allocation policies.

Review: The disgraced defence minister has not been charged. Rivalry has resurfaced within the OPDO leadership. The Sudanese government has accused Ethiopia of participating in military raids by opposition forces across the Blue Nile border. Punitive raids on Somali militia have continued in the south-west. The main, meher harvest produced a record crop, reducing dependence on food aid. Foreign investment has remained weak, but a further gold concession has been awarded to a Canadian company. Donors at December’s Consultative Group meeting have pledged $2.5bn in assistance over the next three years and the Paris Club has awarded “Naples terms”.

Eritrea Outlook for 1997-98: It looks improbable that the constitution will be final- ised by May 1997, and the elections are therefore unlikely to be held under a multiparty system. Eritrea should benefit financially from good relations with the USA.

Review: Tensions between Sudan and Eritrea have been heightened by the defection of a senior Sudanese politician to Asmara and growing crossborder operations. The USA has lent its support to Eritrea and has praised the government’s way of doing business. An anti-corruption drive has led to the downfall of the RSTC management. Regional elections have seen a high turnout, and relations with Yemen have recovered. Reforms in the banking sector have taken shape, and European project support has been promised. South Korea will build an aluminium extraction and processing plant, and other mining concessions have been offered for bids.

Somalia Outlook for 1997-98: The Sodere peace deal and the renewal of the ceasefire may be undermined by Mr Aideed and his overtures to Al-Ittihad and by the CCRS’s rejection of the offer to include Somaliland in the negotiations.

Review: Some 26 faction leaders have signed a new peace agreement, although Mr Aideed has refused to participate. The Nairobi ceasefire has been reinstated, but fighting has continued and claimed many lives. Al-Ittihad initi- ated a crossborder raid into Ethiopia and subsequently declared itself a political party. Piracy has continued to be a problem. A new humanitarian crisis is looming, and an accord for the return of refugees has been signed. Somaliland has set out the requirements for the election of a new president.

Djibouti Outlook for 1997-98: Progress on economic reform will continue, but the fiscal and debt targets set for 1997 are unlikely to be met. Djibouti will fail to capitalise on its position as host to the increasingly active regional association of states, IGAD.

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Review: Dissident RPP members have been released from prison. An opposition leader had died. The president of Yemen has visited. Disbursements of French and IMF assistance have been delayed by the inability of ministers to meet economic conditionality. France has begun to contemplate reducing the size of its garrison. The EU has granted Djibouti Ecu22m ($28m) under its current financing programme.

Editor: Kristina Quattek All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

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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. Representatives were elected to the institutions of the new republic in May 1995, which formally came into operation in August 1995

National legislature The 548-member Council of People’s Representatives is the federal assembly. Nine regional State Councils have limited powers, including that of appointing the supervisory Federal Council

National elections June 1994 (Constituent Assembly); May 1995 (federal and regional); next elections due 2000 (federal and regional)

Head of state President, Negaso Gidada, largely ceremonial and appointed by the Council of People’s Representatives

National government The prime minister and his cabinet (Council of Ministers), appointed in August 1995

Main political parties The Ethiopian People’s Revolutionary Democratic Front (EPRDF) has evolved from the coalition of armed groups which seized power in May 1991. It includes the Tigray People’s Liberation Front (TPLF) and the Amhara National Democratic Movement (ANDM, formerly the Ethiopian People’s Democratic Movement). The Oromo Liberation Front (OLF) withdrew from the transitional government in July 1992 and was subsequently banned. Several urban opposition parties boycotted the last elections. A myriad of exiled political factions exists

Prime minister Meles Zenawi Deputy prime minister & minister of defence Tefera Walwa Deputy prime minister for economic affairs Kassu Illala

Key ministers Agriculture Seifu Ketema Economic development & cooperation Girma Biru Education Guenet Zewde Finance Sufyan Ahmed Foreign affairs Seyoum Mesfin Health Adem Ibrahim Information & tourism Wolde-Mikael Chamo Justice Mehetema Solomon Labour & social affairs Hassan Abdullah Mines & energy Azedin Ali Public works & urban development Haile Aseged Trade & industry Kassahun Ayele Transport & communications Abdul Mejid Hussein Water resources Shiferaw Yarso

Central bank governor Dubale Jale

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Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995 1996 GDP at factor costa Birr bn 24.0 25.9 31.7 n/a n/a Real GDP growtha % 12.0 1.7 4.8 7.7b n/a Consumer price inflation % 10.5 3.5 7.6 10.1 –4.4c Populationd m 50.9 52.4 54.1 55.7 n/a Exports fob $ m 170 199 372 423 n/a Imports fob $ m 993 706 926 1,148 n/a Current account $ m –120 –50 125 –28 n/a Reserves excl gold $ m 232 456 544 772 732 Total external debt $ m 4,363 4,703 5,059 n/a n/a External debt-service ratio % 13.4 11.7 11.7 n/a n/a Coffee productione ’000 tons 210 222 228b 300b n/a Exchange rate (av) Birr:$ 2.81 5.00 5.09 6.15 6.34f

February 17, 1997 Birr6.65:$1

Origins of gross domestic product 1994g % of total Components of gross domestic product 1994a % of total Agriculture & forestry 50.2 Private consumption 83.2 Other commodities 11.1 Government consumption 11.0 Manufacturing 4.5 Gross fixed capital formation 15.7 Distribution services 13.4 Exports of goods & services 14.7 Other services 25.2 Imports of goods & services –24.7 GDP at factor cost 100.0 GDP at market prices 100.0

Principal exports 1994a $ m Principal imports 1994a $ m Coffee 303 Motor vehicles 171 Hides & skins 63 Food & live animals 153 Gold 23 Machine & aircraft 120 Metal & metal products 95

Main destinations of exports 1994a % of total Main origins of imports 1994a % of total Germany 31.7 Saudi Arabia 15.0 Japan 14.5 USA 12.3 Italy 8.1 Italy 11.1 Djibouti 7.4 Germany 8.0 a Fiscal years starting July 8. Fiscal years are widely used by national statistical sources, while calendar years are favoured by international publications. b Official estimate. c January-September actual. d Excluding Eritrea, based on a Ministry of Planning estimate of 54.1 million in 1994. e Crop years (October-September) beginning in calendar years. f January-August actual. g Provisional.

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Outlook for 1997-98

Transparency is needed Until the government brings charges against senior officials accused of corrup- over privatisation and tion and promotes wider publicity of its own holdings in the burgeoning ownership patterns “private” sector, allegations of nepotism and rigged markets will persist. The inevitable short-term embarrassment and loss of face involved in trying the former defence minister, Tamrat Layne, and his associates would be out- weighed by the long-term enhancement of credibility and government transparency that such a trial would bring about. Such legal proceedings would also have positive effects on the ongoing privatisation process. It would establish an implicit, yet highly public, code of conduct both for managers of enterprises which remain in state hands and for the new breed of businessman which has emerged from within the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF). However, such a move currently appears improbable. It would require a sea-change in the mindset and perceptions of both politicians and civil servants, ingrained in government and opposition movements alike over many decades, that criticism and enquiry is a private, internal political matter. The need for an acknowledgement of the population’s right to a transparent and accountable administration is enhanced by the fact that the government is publicly committed to selling its larger, more lucrative state-owned enterprises.

Relations with Sudan will Convoluted relations with rival political forces in Sudan will dominate the for- overshadow foreign policy eign and military policies of the EPRDF in 1997. Official attitudes to the beleaguered Islamist regime in Khartoum will continue to be more low key and nuanced than those of their Eritrean allies. However, this is a difference in style rather than strategy: the government perceives an end to Sudan’s civil war and the formation of a more broadly based government as a prerequisite for political stability and the long-term economic development of a federal Ethiopia. In the longer term, the government will wish to ensure that the government which eventually replaces the National Islamic Front (NIF)-inspired regime in Khartoum will be one with which it can do business. As a result, the timing of the NIF regime’s demise is of less importance to Addis Ababa than the shape of the emerging new authorities and their policies. Apart from its desire to forge better business links, Ethiopia’s main interests in a new set-up are two fold. First, it wants to be certain that the new political regime in Sudan would refrain from sponsoring violence in Ethiopia. At present, this threat of violence stems primarily from the NIF’s fuelling of Somali dissent, which has been manifested in military clashes in the south-west and a spate of hotel bombings. The second strategic concern for the Ethiopian government is Sudan’s role in the regional struggle over the Nile waters and its stance towards Egypt, the dominant player and Ethiopia’s main antagonist on the matter.

Agricultural output Good belg rains will reinforce recent improvements in overall food security and continues to improve— lessen the need for internal grain transfers. Enhanced food security is deserv- edly seen as the government’s principal achievement to date. Further small domestic grain surpluses, coupled with continued donor support and food assistance in 1997, will consolidate the advances made in establishing emergency food security reserves and improving famine early-warning mechanisms over the past five years. While the elimination of the country’s overall food

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deficit is primarily the result of good rainfall in 1995 and 1996, the trend towards higher agricultural output fuelling modest real economic growth is likely to be strengthened in 1997/98. Speaking in December the finance minister, Sufyan Ahmed, projected agricultural growth of 14% in 1996/97, with a target for overall economic growth of 7%.

However, government officials and donors are urging caution. Recent increases in smallholder productivity, which stem primarily from improvements in the quality and distribution of seeds and fertilisers, coupled with better farmgate prices, continue to be offset by rampant population growth and pervasive soil erosion. Speaking after December’s meeting of Ethiopia’s Consultative Group of major donors, the government’s most senior economic adviser, Neway Gebreab, reminded the aid and donor community of the complexity of the issue of food security and reiterated the need for prudence. The then agriculture minister, Teketel Forsido, subsequently presented studies indicating that, despite recent improvements, almost 30 million Ethiopians subsist on a nutritional knife-edge, with half the total population surviving on less than 500 grammes of food per day (the threshold for nutritional security). This is double the sub-Saharan African average of 25%.

—providing foundations Nevertheless, buoyant agricultural activity should provide the foundation for for economic growth more sustained overall economic growth in coming years. Yet the Ethiopian economy’s ability to withstand fluctuations in both climate and international coffee prices, the primary external determinants of growth, depends on successful structural reforms and increased investment. The government’s declared Ethiopia: gross domestic product target is to boost the combined rate of public- and private-sector investment to % change, year on year Ethiopia (a) 21% of GDP by the end of fiscal year 1998/99, a rate which it claims would be Africa consistent with annual average real GDP growth of 7%. In 1994/95 investment 15 stood at 15.7% of GDP, although many state-owned enterprises have severely cut back investment. However, improvements can be expected from the current 10 substantial public investment in infrastructure, most notably Birr1.2bn ($193m) on rural road building in 1996/97. Backed by donor support, this focus on 5 infrastructure is likely to be upheld over the next two years.

0 In its economic projections for 1996/97-1998/99, the government has declared that its immediate priorities are to accelerate privatisation, speed up the auction- -5 ing of urban land leases and implement the financial sector and foreign ex- 1991 92 93 94 95(b)

(a) Fiscal years starting July 8. (b) Official estimate. change reforms announced last July (3rd quarter 1996, page 13). While the Sources: EIU; IMF, World Economic Outlook. government also claims that it will introduce “market-based agricultural land allocation”, access to, and security of tenure for, both urban property and commercial farming land, the existing tenure system will remain a significant im- pediment to domestic investment and will continue to undermine investor confidence.

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Review

The political scene

Rumours thrive in a Debates over the extent and nature of corruption continue to intensify, five climate of corruption— months after the summary sacking of the deputy prime minister and minister of defence, Tamrat Layne, on allegations of corruption in October (4th quarter 1996, pages 9-10). The government’s failure either to charge Tamrat and his associates, or to open a full enquiry into the scale of bribe-taking, is under- mining both the political cohesion of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) and public confidence in the functioning of the federal administration.

Tamrat himself remains under house arrest, and several of his business partners are in detention. It has emerged that illicit deals went unchecked after the audit unit in the prime minister’s office during the 1991-95 transitional period was closed on Tamrat’s orders. On November 29 the prime minister, Meles Zenawi, refused to confirm that Tamrat would be tried. Acknowledging that corruption “really did reach a very high level”, Meles nevertheless claimed that “it is not as widespread as the rumours seem to indicate”. In addition to the arrest of several dozen of Tamrat’s associates in October, numerous senior officials are widely reported to have been detained or suspended. However, in the absence of official statements, rumours of purges have flourished and the exact scale of the arrests is difficult to gauge. Allegations have also surfaced over financial irregularities in both the Constitutional Commission and the National Electoral Board, with some reports accusing Dawit Yohannes, the most prominent member of the Amhara National Democratic Movement (ANDM) in the EPRDF after Tamrat, of nepotism and bribery. Other than statements from the prime minister, the only acknowledgement of official concern is that regional and federal governments, and the EPRDF affiliates which control them, have been urged to redouble their efforts to root out corrupt practices. The Addis Ababa municipal council (Region 14) has already undergone numerous changes: the head of the region’s legal bureau has been sacked. Ali Abdo has been appointed as chairman of Region 14 and Khalid Abdurahman as his deputy. Ali Abdo replaces Tefera Walwa, who was promoted to deputy prime minister and minister of defence following Tamrat’s dismissal.

Ethiopia: regionsa

1. Tigray SNNPRb 2. Afar Gambela 3. Amhara Harar 4. Oromo Addis (metropolitan) 5. Somali 6. Benishangul

a Under the new constitution the nine regions and the metropolitan council of Addis Ababa replace the previous 14 regions. Use of the old numbers persist (eg 13 for Harar and 14 for Addis Ababa). In practice the eastern town of Dire Dawa is administered separately from Region 4. b Southern Nation and Nationalities People’s Region.

Source: EIU.

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—while scores are settled The general preoccupation with official impropriety has had a knock-on effect among OPDO leaders— on the Oromo People’s Democratic Organisation (OPDO), which controls the vast Region 4 (Oromo). The OPDO began its annual round of self-criticism and peer evaluation in October. While the OPDO is numerically the largest grouping within the EPRDF, its leadership lacks the cohesion and experience of the Tigray People’s Liberation Front (TPLF), not least because of the organisation’s hasty creation and the fact that its legitimacy is contested by significant segments of the disparate Oromo populations. This, combined with the fact that Region 4 has both the largest regional state budget and generates considerable revenue from coffee and grain exports, has led to patronage and nepotism. Personal rivalries within the OPDO came to a head shortly after Tamrat’s dismissal with the “accidental” death of the head of the finance bureau of Region 4, Alemayehu Dessalegn, during an OPDO central committee meeting in Addis which was reportedly attended by the president, Negaso Gidada, and the influ- ential governor of the National Bank of Ethiopia (NBE, the central bank), Dubale Jale. (The private press mentioned gunshots and pondered the possibility of suicide.) Further OPDO personnel changes emerged on November 12, with the central committee announcing the dismissal of two members, and on January 11 when an OPDO spokesman declared that 18 senior officials had been dismissed as part of the ongoing evaluation exercise.

—but OLF military Regular reports of clashes between guerrillas linked to the Oromo Liberation activities continue Front (OLF) and the Ethiopian army in various areas of Region 4 appeared in the private press during December and January. In early December the Oromo language paper Urji reported that two days of fighting in Eastern Hararghe had left over 100 people dead and that additional troops had been sent to garrisons in the region. Urji also reported extensive troop movements around Nekempte, in the west of Region 4, although these may have been connected with tension along the Sudanese border, rather than operations against the OLF. In late November there were unconfirmed reports that talks were being held between OLF representatives and the government in London.

Meanwhile, in a separate development, a further Oromo political grouping has emerged in Addis. In December leaders of the new Oromo National Congress denounced the exiled OLF leadership for failing to provide effective opposition to the OPDO.

Sudanese offensives Longstanding friction between Ethiopia and Sudan along the common border heighten regional intensified in mid-January with the seizure of Kurmuk and Qeissan by forces of tensions— the National Democratic Alliance (NDA), a coalition of northern and southern Sudanese forces opposed to the government in Khartoum. The towns captured lie just across Ethiopia’s north-western border with Sudan, 500 km north-west of Addis Ababa. In early February NDA forces were progressing towards the hydroelectric installation at Damazin, which generates much of Khartoum’s electricity, close to Roseires on the Blue Nile.

The current dry-season offensive is an extension of that in March 1996 when the southern rebel Sudan People’s Liberation Army (SPLA) loyal to John Garang seized the border post of Pochala in an offensive launched from Gambela, Ethiopia’s Region 12 (2nd quarter 1996, page 7). However, in contrast to last

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year’s isolated advances by the SPLA, the military and political thrust of the current offensive is enhanced by two factors: first, the support enjoyed by the SPLA from northern Sudanese opposition forces under the NDA umbrella; and, second, the cohesion of the opposition alliance fostered by regional and international backing, and, in particular, Eritrea’s provision of a diplomatic base and logistical support in Asmara.

—as Khartoum denounces In the light of Eritrean support for the NDA, the government in Khartoum has an Ethio-Eritrean plot— portrayed the offensives as being primarily the work of Ethiopia and Eritrea. On January 28 the powerful leader of Sudan’s National Islamic Front (NIF), Hassan al-Turabi, stated that the offensive is “largely an Ethiopian enterprise, but one that is backed of course by the United States, Britain and to a certain extent by Egypt ... because they do not want Islam to follow the course it is taking”. This line was echoed by Sudan’s president, Omar Hassan Ahmed al-Bashir, in an interview published on January 24. He accused the UN of “providing cover for the Ethio-Eritrean aggression”, before going on to praise the ostensible support of Syria, Iraq, Iran and Saudi Arabia for his government in the conflict.

In the month since the initial offensive, Khartoum has shown greater flair for rhetoric than military defence, lending credence to reports of a demoralised army, fighting across too many fronts. On February 1 the Sudanese alleged that Ethiopian and Ugandan troops were preparing to join the fighting in the south, by launching assaults on Torit, Kapoeta and Juba.

—and Addis remains As relations have deteriorated over the past three years between the NIF- cautious inspired government in Sudan and its southern neighbours, the authorities in Ethiopia and Eritrea have taken a markedly different attitude to Sudanese hostility. While the Eritrean government has been openly antagonistic since evidence emerged of NIF support for Eritrean militia forces in December 1994, the EPRDF has been more circumspect. Only when irrefutable proof emerged of Sudanese government complicity in the failed assassination attempt on the Egyptian president in Addis Ababa in June 1995 did they sanction Sudan. However, this more low-key, conciliatory Ethiopian attitude probably reflects a different diplomatic style rather than divergent strategic aims between the EPRDF and its Eritrean allies.

The official Ethiopian reaction to Sudanese accusations of complicity in the January NDA offensive has again been discreet, and no reference has been made to the presence of Sudanese opposition forces on Ethiopian soil. Speak- ing in Addis on January 28, the president blandly said that Ethiopia and Eritrea should work together to seek a lasting solution to Sudan’s problems, while Meles simply said on February 10 that there was no question of war with Sudan. Unconfirmed reports suggest that Meles received a senior Sudanese envoy in Addis Ababa in early February.

Formally, Ethiopia’s only quarrel with the Sudanese government is over the latter’s refusal to hand over those accused of involvement in the assassination attempt. However, the Ethiopian government is also directly benefiting from the advance of the Sudanese opposition. The fact that the border zones are now controlled by Sudanese opposition forces who are dependent on Ethiopia for supplies and logistical support, has lessened the danger that border camps may

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be used as bases for raids by elements of the Ethiopian opposition. While no credible armed opposition to the EPRDF exists within the country, a number of exiled Ethiopians make no secret of their desire to destabilise the government by stirring armed conflict in Gojjam, where significant opposition to the EPRDF’s policies flourishes.

The army repeats attacks Conflict has also escalated between the government and the Al-Ittihad group, on Al-Ittihad militias— an ostensibly Islamist movement based in Somalia and accused of being behind a number of violent acts committed in Ethiopia (3rd quarter 1996, pages 6-7; see also Somalia: The political scene). On November 5, 1996, Ethiopian authorities arrested a dozen alleged Al-Ittihad members in Addis Ababa, claiming that they were responsible for a series of bomb attacks on hotels in Addis Ababa and Dire Dawa and a failed assassination attempt on the communications minister on July 8. In late December Al-Ittihad militiamen attacked the southern Ethiopian border-town of Dolo. The Ethiopian army claims to have launched a crossborder raid in return, and a Ministry of Defence spokesman said that its troops killed and wounded over 100 militiamen and that the casualties included 19 non-Somali Arab members of the “multinational terrorist force”. An Al-Ittihad spokesman in Mogadishu confirmed the details of the raids, but characteristically claimed that his forces lost only five men but had killed 70 Ethiopian troops.

In a thinly veiled attack on Sudan, Ethiopian military sources accused Al-Ittihad of attempting to “destabilise the region and impose Islamic fundamentalism by force with the help of some neighbouring countries”. On December 29 the Sudanese chargé d’affaires in Mogadishu reportedly called on Al-Ittihad to declare holy war on Ethiopia. This prompted an irate Ethiopian Ministry of Foreign Affairs spokesman to press the Sudanese government to “take urgent action to disassociate itself from the provocative statement made by its diplomat in Mogadishu”.

A grenade attack on a hotel in Harar on February 10 killed two people, reportedly a policeman and a security guard. Nine people were injured, including five Europeans. No immediate claim of responsibility was made.

—while the government Since November Ethiopia has been hosting a series of negotiations aimed at hosts talks between reconciling rival Somali factions. Following a meeting on January 3 in the Somali factions— Ethiopian spa resort of Sodere, 100 km south of Addis Ababa, leaders of 26 factions agreed to form a National Salvation Council (NSC). Speaking on behalf of the new grouping, one of the major warlords, Ali Mahdi Mohammed, condemned Al-Ittihad for having declared war on Ethiopia. However, in a thinly veiled attack on Ethiopia Mr Ali Mahdi’s principal rival, Hussein Mohamed Aideed, promptly condemned the creation of the NSC, thus forging a closer link with Al-Ittihad.

Ethiopia’s brokering efforts, which led to the creation of the NSC alliance, drew extensive and largely favourable comment from the Ethiopian press, although both the print media and independent members of the federal Council of People’s Representatives criticised the government for not having informed the federal legislature of the December raids into Somalia.

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—as Ethiopia’s indigenous The threat posed by Al-Ittihad was also cited as a factor in the latest twist to the Somali factions merge complex and longrunning saga over control of Ethiopia’s own Somali- designated Region 5. On January 14 the minister of transport and communications and head of the EPRDF’s Somali surrogate, the Ethiopian Somali Democratic League (ESDL), Abdul Mejid Hussein, announced the imminent fusion of the ESDL and the Ogaden National Liberation Front (ONLF) into a National Somali Council, claiming that “the interests of Ogadeni Somalis is best served by a unified political organisation”. In 1994 the ONLF called for immediate independence for the Ogadeni rump of Region 5 and full implementation of sharia law in the region, incapacitating the regional administration. The group was subsequently split by internal clan rivalry, with the leadership of the new, moderate wing apparently now rallying to the support of the ESDL. The US ambassador to Ethiopia participated in the press conference announcing the imminent formation of the NSC, and was quoted as saying that he hoped the move would contribute to peace and stability in Region 5. In light of the recent volatility of Somali clan leadership in Region 5, this is likely to be wishful thinking.

In a separate development, the ESDL announced in December that the deputy chairman of Region 5, Abdullahi Hassan, and five other ESDL representatives had been dismissed. The decision stemmed in part from disagreements between the regional officials and EPRDF military staff based in Hararghe. Mean- while, in a long overdue attempt to coordinate the policies of the three small and politically fragmented eastern states, Afar (2), Somali (5) and Harar (13), delegates met in Harar in early January. Representatives from Region 4 (Oromo), which has borders with all three regions, and officials from the prime minister’s office also attended the meeting. The delegates agreed on measures to curtail contraband and to share training and broadcasting facilities.

Ethiopia now hosts In December the Ethiopian Security, Immigration and Refugee Authority 375,000 refugees (SIRA) announced that Ethiopia currently hosts 375,000 officially registered refugees. Of these, 72,000 are Sudanese (largely southerners concentrated in Gambela), 8,000 are Kenyans and 18,000 Djiboutians. The Djiboutians are primarily Afars who fled the fighting in the north of Djibouti in 1991-93 and settled around Asseita in Ethiopia’s own Afar region (2). The remaining refugees are largely Somalis. However, in reality the number of Somalis residing in Ethiopia is probably 300,000-400,000, as many are not officially recognised.

Meanwhile, on January 15 the office of the UN High Commissioner for Refugees (UNHCR) and the Ethiopian government signed an agreement on the repatriation of 10,000 Somali refugees from camps in Hararghe to north-western Somalia. If successful, the programme will be extended to more of the 275,000 Somalis currently living in eight vast camps in the Ogaden.

The USA attempts a On January 30 the US State Department issued its annual Country Reports for measured view of human Human Rights Practices, which cover Ethiopia. The significance of the detailed rights— 1996 report on Ethiopia is enhanced by both the ever closer relationship between the US and EPRDF administrations and the fact that many of the most vociferous, albeit ineffectual, critics of the government are Ethiopians resident in the USA.

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Overall, the report claims that “the government took a number of steps to improve its human rights practices, but serious problems remain”, noting many shortcomings while emphasising the ongoing, positive nature of political reform. Three broad areas of weaknesses are highlighted: judicial failings, lack of regional accountability, and abuses stemming from the ongoing rebellion in Oromo areas.

While barely mentioning delays in trying members of the previous government, the report notes that “the judiciary is weak and overburdened, but showed increased signs of independence” and that the military justice system is being overhauled. It acknowledges the appointment of 56 federal judges in May, but states that the federal government cannot yet protect constitutional rights at the regional level, especially when local authorities are unwilling or unable to do so, adding that some local officials and members of the security forces committed human rights abuses. According to the report, such abuses are prevalent in Region 4 (Oromo), with extra-judicial killings and detention without charge or trial used widely in an attempt to quash those suspected of sympathising with the OLF. However, the State Department goes on to claim that citizens of the Oromo region now have a greater say in their own affairs than at any time in the past century. Without any apparent trace of irony, the report also notes Tamrat Layne’s dismissal, suggesting that “governmental transparency remains a problem”. The US authors highlight discrimination against women and those with disabilities. Women are under-represented in the government, with only 18 sitting in Ethiopia’s 548-member federal legislature. Child labour and female genital mutilation is reportedly widespread, and the report estimates the number of disabled Ethiopians at 5 million.

—and focuses on press The State Department also reiterates US concerns over restrictions on the free- freedom dom of the press which were raised during the October visit of the then secretary of state, Warren Christopher. As part of the general lack of government transparency, it highlights the refusal of government officialdom to respond to press enquiries. The editor and deputy editor of one of the most outspoken Amharic private papers, Tobia, were arrested again in November, and several other newspaper editors were detained in raids in mid-December. Beleaguered private editors and journalists can take some retrospective solace from the fact that their investigative reporting of the activities of the disgraced former defence minister, Tamrat Layne (and notably the coverage of illicit mercury trading, for which journalists were tried and imprisoned) was correct.

However, the growing confidence of, and foreign interest in, the private print media was demonstrated again in the reporting and publicity surrounding December’s meeting of the Consultative Group of Ethiopia’s major donors. For the first time, the private media were granted extensive interviews with senior officials from foreign donor organisations (see The economy). This further strengthens the encouraging, albeit fledgling, trend towards more informed public debate and government transparency over economic issues in both Amharic and English. Improved private reporting also vividly highlights the inability of the often sycophantic state media to provide coherent overviews of major policy matters affecting the population.

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More Derg members are On February 14 the special prosecutor, Girma Wakjira, announced that charges charged as trials resume against 5,198 individuals accused of crimes committed under the Mengistu regime (the Derg) have now been filed. Over 2,000 of those charged are currently in detention, and one month earlier the high court had charged 1,218 of them. These include the 46 senior officials who have been on trial, together with 25 who are being tried in absentia, in Addis Ababa since late 1994. Their trial resumed in mid-January and is likely to continue for much of 1997. While welcoming the fact that the majority of detainees have finally been charged, a London-based human rights body, Amnesty International, reiterated its concerns that the trial to date has progressed too slowly and that, if found guilty, the defendants will face the death penalty.

The imperial past is Asfa Wossen, the only surviving son of the former emperor, Haile Selassie, died, partially buried aged 80, in Virginia (USA) on January 17. He had lived in exile, mostly in London, since 1973 when he was partly paralysed by a stroke. His body was returned to Ethiopia and buried in Addis Ababa’s Holy Trinity cathedral on February 2. His son and heir, Zara Yacob, who has lived all his life in the UK, attended the private burial which received no publicity in the state media. Asfa Wossen, who assumed the regal title Amha Selassie in 1989, was buried alongside the remains of his father. However, the former emperor’s remains still await formal burial. Haile Selassie’s body was exhumed from the grounds of his palace in 1991, but disputes between the EPRDF and monarchists abroad meant that its formal burial was postponed indefinitely. The royal family in exile and its entourage has long been split by intrigue and rivalry. Since 1991 a small mon- archical organisation has operated legally, if ineffectually, in Ethiopia. Asfa Wossen and his family maintained close but convoluted relations with segments of the rastafarian movement, which deifies Haile Selassie, in both the UK and the USA.

The economy

The Consultative Group Following the launch in October of a new IMF three-year Enhanced Structural endorses reforms Adjustment Facility (ESAF; 4th quarter 1996, page 14) the Consultative Group with $2.5bn— (CG) of Ethiopia’s principal donors convened in Addis Ababa for three days in mid-December under the auspices of the World Bank. At the end of the meeting one of the World Bank vice-presidents for Africa, Callisto Madavo, announced that donors had pledged a total of $2.5bn to Ethiopia in assistance covering 1996/97-1998/99. Mr Madavo declared that the amount, which exceeded Ethiopia’s initial request of $1.3bn in project assistance and $600m in balance-of-payments support, was a “vote of confidence” in Ethiopia.

At the last CG meeting in Paris in December 1994 Ethiopia received $1.1bn in pledges, most of which were honoured, although implementation rates have been uneven.

—praising economic It was the first CG meeting to be held in Africa itself and therefore a new set-up policies— for donors. The proximity also provided the Ethiopian public with an unprecedented insight into donors’ attitudes to the ongoing reform programme. The resident representatives of both the IMF and the World Bank in Addis Ababa

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gave extensive interviews to the private press, which were covered particularly well in the English-language weekly newspaper, Addis Tribune. Both men highlighted the success of reforms, with the IMF representative claiming that “Ethiopia has been very successful in implementing its stabilisation programme,” turning it into a remarkable example in the regional and international context.

—and stressing local Both the Bank and the Fund were at pains to stress the degree to which the “ownership”— “ownership” of the reforms was in the hands of the Ethiopian government. This, according to the World Bank representative, is one of the main reasons for the success of the reform programme. However, he added that after four years of constant dialogue the government and the Bank had not reached agreement on all policy matters. He noted wryly that in Ethiopia, where the government so emphatically controls the reform process, donors are not al- ways comfortable, despite their professed desire to see African governments “buy into” reform. The IMF stressed that policy differences were largely over the pace of adjustment, and not its objectives. As in 1994, the comprehensive- ness and professionalism of the Ethiopian delegation’s presentation to the CG appears to have impressed delegates.

—while cautioning The IMF, in particular, was more guarded over the impact of regional devolution regional reform on the administration’s capacity for project implementation, stressing the importance for both foreign and local investors to have minimal barriers to capital and labour mobility and laws that are both transparent and equitably enforced across regions. The World Bank representative said that implementation capacity is expanding, although there is still much room for improvement.

Donors agreed that there is a need to improve financial statistics, with the IMF stating that at present official numbers give an indication of magnitude rather than reliable data. The Central Statistical Authority is in the process of preparing a revised retail price index and calling for more surveys and reviews of existing data.

Investment remains weak Speaking in November to the Council of People’s Representatives (CPR, the federal legislature), the general manager of the Ethiopian Investment Authority, Tadesse Haile, stated that the proportion of foreign capital in new investment since 1992 was minimal, with only 29 of 3,003 proposed new investments involving offshore interest and the value of this participation estimated at just Birr2.3m ($370,000). Evoking Ethiopia’s poor image among potential investors, Tadesse told the CPR that it will take time to change that image and to persuade foreign financiers to invest in the country. He added that only 1,078 of the 3,003 proposed projects have been approved to date and only one-third of these are actually being implemented. Furthermore, only half of these, with a total value of Birr3.5m, were in fact operational, giving an overall implementation rate of just 18% of approved projects. Tadesse claimed that realised projects had created 22,548 jobs and blamed red tape and delays in installing basic services for the implementation problems. Independent commentators were sceptical of the implementation and employment rates quoted by the minister, suggesting that the latter included seasonal agricultural labour. New investments are over- whelmingly concentrated in Addis Ababa, where 43% of all projects are located,

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with Region 4 (Oromo) and Region 1 (Tigray) absorbing 22% and 15% respectively. The World Bank in Addis said that no foreign investor was going to wait around for months before getting access to land, power, and water, which accounted for the low level of foreign investment.

Confusion persists over In December the government announced that it intends to sell 18,000 proper- compensation for ties which were nationalised under the Mengistu regime (the Derg) and issue nationalised properties compensation to the former owners, although the modalities of the sales were not disclosed. The move compounds the bureaucratic confusion surrounding privatisation and compensation for assets seized after the revolution. The properties earmarked for sale include 12,000 private residences, 5,500 business premises, and assorted garages, stores and hostels. Because of the preponderance of residential properties involved (and fears of corruption and mismanagement in light of Addis Ababa’s acute housing shortage), these sales are being processed separately from those of state-owned companies.

However, several aspects of the proposed property sales are puzzling. Some retail premises have apparently already been sold as part of privatisation deals. Furthermore, it is unclear why properties are not simply returned to their former owners. It is also unclear whether the government intends eventually to sell the far larger number of houses currently managed by the neighbourhood authorities; these are estimated at 27,000 in Addis alone, many with multiple occupancy. Finally, the Ethiopian Privatisation Agency (EPA) is charged with overall responsibility for compensating the owners of nationalised properties, which begs the question of why the EPA is not used to deal with these cases.

Privatisations generate In November the EPA announced the sale of a further eight miscellaneous little apparent interest state-owned enterprises. The companies offered for full or partial sale included a flour mill and soap and edible oil factories, as well as several plants involved in the production of building materials. According to reports in the local press, only three of the companies offered for sale attracted bids by local businessmen. In a presentation to the Council of People’s Representatives in November, the head of the EPA declared that around 200 enterprises have been offered for sale since 1993 and of these, 139 are now in private ownership. However, the bulk of the companies which have secured buyers to date have been relatively small retail outlets. Of the 200 enterprises originally prepared for transfer to the private sector, 140 are shops. Among the remaining enterprises, 28 smaller hotels and restaurants and 25 factories are still on offer. The latter include the companies involved in tanning and leather processing which were put up for sale six months ago.

Agriculture and mining

Excellent harvests boost On January 29 the then agriculture minister, Teketel Forsido, put the anticip- growth prospects— ated combined harvest for 1996/97 at 11.7m tons. Of this total, one-quarter will be used as fodder and seeds. A surplus estimated at 600,000 tons will remain. The harvest once again underscores the vast economic disparities between the new regional states, with Region 4 (Oromo) producing 5.6m tons, or around half the total crop, Region 3 (Amhara) 3.8m tons, Southern Nation and

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Nationalities People’s Region (SNNPR) 1.4m tons and Region 1 (Tigray) 700,000 tons. Both the UN Food and Agriculture Organisation (FAO)/World Food Programme (WFP) annual food-supply survey, and the national early- warning evaluation indicated that the 1996 (September/October) main, meher crop exceeded the previous year’s harvest by about 20% in most areas. The increases were attributed to a marginal expansion in land under cultivation, ample rains and improvements in seed supply and quality.

—but regional shortages Clearly the success of the primary, meher harvest lessens the dependence on the persist— shorter, secondary rains and harvest (belg), due in the highlands in the coming months. Although this accounts for only around 6% of total national grain production, in some localities the belg harvest accounts for over half of food needs, notably in parts of the highlands, Hararghe and Omo. Good belg rains are also necessary to maintain the quality of livestock for both pastoralists, particularly in the south-west, and the vast majority of peasants who depend on oxen for ploughing.

The disparate nature of Ethiopia’s highly segmented and localised agricultural production is underlined by the fact that parts of Hararghe are currently suffering food shortages. On January 20 the head of Region 5 (Somali) announced that there were severe shortages of drinking water in parts of the Ogaden, notably around Gode and Warder and that 200,000 people were in need of emergency food relief.

—although food aid needs Widely varying local patterns of rainfall, agricultural production and con- are reduced— sumption explain in part the paradoxical situation that Ethiopia is appealing for food assistance, while simultaneously announcing grain surpluses for export. Above all, this reflects the fact that even in years of good harvests many Ethiopians eke out precarious livelihoods from extremely poor soil. In December the head of the Disaster Prevention and Preparedness Commission (DPPC, the agency with overall responsibility for food security and relief), Simon Mechale, estimated that 1.93 million people will need food assistance in 1997, 15% less than in 1996 and the lowest for five years. However, a further 700,000 vulnerable people may require aid if rains or harvests fail. The overall food needs of the DPPC are estimated at 79.4m kg, much of which is expected to be met from internal purchases from surplus producing regions. Given that food stocks are high, the DPPC requested 103,369 tons of food aid and $15.7m in non-food assistance from donors for 1997, mostly to improve early warning and food-security reserves.

—and grain exports are In early January the Ethiopian Grain Marketing Enterprise said that Ethiopia predicted was preparing to export up to 20,000 tons of maize. Some of this would be purchased by the EU as part of its internal purchase food-aid programmes, set up to assist food deficit areas in both Ethiopia and Somalia.

Fertiliser subsidies may be On January 18 the parastatal fertiliser industry agency (FIA), responsible for scrapped— marketing and distributing agricultural fertilisers, announced that the contro- versial fertiliser subsidy scheme will be modified and only wholesale prices will be regulated. It is hoped that this measure will introduce competition between private fertiliser merchants and allow price reductions for farmers. While in

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practice this is likely to have only limited impact on most farmers, the move is nevertheless of longer-term significance as a step towards deregulation of fertiliser prices. Although donors have long called for this deregulation, the World Bank representative in Addis praised the fertiliser subsidy in December for boosting economic performance while having a “minimal budgetary impact”. In announcing the move, the FIA estimated that the subsidies had cost the federal government Birr338m ($54.1m) over the past two years.

—as the feasibility of In mid-October an agreement was signed between China and the head of fertiliser production is Ethiopia’s coal-phosphate fertiliser project. This provides for long-term evaluated Chinese assistance in evaluating the local availability of minerals required for fertiliser production, and in selecting a suitable site and plant. A study in 1990 by the UN Industrial Development Organisation (UNIDO) noted that pre- feasibility studies then under way did not appear favourable, although potential existed for the use of derivatives of Ogadeni gas. In a related development announced in late November, the government said that it is allocating Birr28.3m towards mining exploration as a whole in 1996/97, of which a significant proportion is to go towards identifying phosphate and related min- eral deposits, which can be used in fertiliser production.

The Moyale gold On December 10 the Toronto-based Rift Resources company announced that it concession is awarded to had been awarded gold-prospecting rights to a 74,225-ha concession along Rift Resources Ethiopia’s border with Kenya around the town of Moyale, and that it hoped to start explorative drilling and exploration work immediately. Earlier studies by the Ethiopian Institute for Geological Surveys suggest that there are four gold deposits within the area covered by the concession. The Moyale concession lies just south of the Adola goldfield, which accommodates Ethiopia’s only commercial gold mine at Lega Dembi. Rift Resources also currently has gold exploration operations in Eritrea and Uganda. Two other Canadian companies are active in Ethiopia: Golden Star is currently prospecting a second field in western Ethiopia, and the newly formed Emerging African Gold (EAG) announced in February that it now has interests in Ethiopia. However, in mid-February Golden Star was reported to have withdrawn its staff from Gambela because of the crossborder tensions with Sudan.

Meanwhile, on December 13 the head of the Ethiopian Gold Development Enterprise (EGDE), Tibebe Tafesse, claimed that 1 ton of gold was produced by artisanal miners and exported illegally from the country. Most of the gold is extracted in the south-west region and smuggled across the Moyale border to Kenya. While accepting that the lucrative nature of such activities made them impossible to halt, Tibebe said that the EGDE was studying ways of encouraging artisanal miners to form share companies and sell gold via state bodies rather than on the black market.

Infrastructure and tourism

Reform of the Djibouti In November the commercial section of the French embassy issued a report on rail link trundles on the 781-km railway between Addis Ababa and Djibouti. Analysts estimated that the dilapidated infrastructure requires investment worth FFr600m ($106m). A

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FFr55m ($9.7m) emergency repair programme, financed by the Caisse française de développement (CFD, the French development bank), is providing for immediate rehabilitation of tracks and rolling stock. In mid-December the general manager of the rail company announced that spare parts and four of the six reconditioned locomotives on order, with a total value of Birr61.5m ($9.9m), would be delivered shortly. He expressed the hope that, once implemented, the initial repairs and new engines could halve the current travel time to Djibouti. Debates over the rail company’s future have been complicated by the fact that it is jointly owned by the Djiboutian and Ethiopian governments. Its joint management council met in Addis Ababa on January 2 with Ethiopia’s minister of transport and communications, Abdul Mejid Hussein, to review the company’s options.

Meanwhile, attempts continue to encourage Ethiopian traders to use Djibouti, rather than the congested Assab, as a port of entry. Speaking to businessmen in Addis on December 27, officials from the Customs Clearing Agents’ Association said that the recent commercial accord between Ethiopia and Djibouti had simp- lified procedures and reduced the costs of clearing and shipping goods from Djibouti. Progress was also reported on the ministerial pledge eventually to allow Ethiopian importers to settle bills in local currency (4th quarter 1996, page 12).

IGAD seeks funding for Ministers from seven member states of the Intergovernmental Authority on regional infrastructure Development (IGAD, previously the Intergovernmental Authority on Drought and Development) met in Djibouti on November 24. IGAD subsequently issued a series of detailed project proposals to potential donors, most of which aim to enhance regional economic cooperation via improved infrastructure links between member countries. If funding is forthcoming, most projects should facilitate Ethiopia’s trade with neighbouring states. They include upgrading the Kenyan highway to the Ethiopian border town of Moyale, improving roads to Eritrea and Sudan from the agricultural hub of Humera and providing a link from the main Addis-Assab road to the Djiboutian border town of Galafi and on to Yokobi.

A hijacking tragedy Ethiopian Airlines (EAL)’s international profile and the prospects for its on- shakes Ethiopian going programme of extending its network of long-haul flights were seriously Airlines— undermined when the hijacking of flight 961 from Addis to Nairobi on November 23 ended in a crash and the deaths of 125 people. A further 50 people survived, largely due to the pilot’s skill in crashlanding the Boeing 767 in shallow waters just off the coast of Grande Comore island. The unarmed hijackers, three Ethiopians from diverse ethnic backgrounds who were devoid of a political motive, were killed on impact. They had insisted that the pilot fly to Australia, despite an insufficient stock of fuel. A police enquiry in Ethiopia revealed that the three had been living in Djibouti until October, when they had returned to Ethiopia and fraudulently obtained travel papers.

Ethiopian Airlines is the only carrier to provide connecting flights from East to West Africa, and passengers from 14 African countries were aboard flight 961, notably large groups of Nigerian, Malian and Kenyan traders. The families of some of the West Africans killed were reportedly unhappy at EAL’s handling

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of the crisis and are seeking compensation. The flight also contained a group of Israeli aviation experts and several foreign diplomats.

—and jeopardises The disaster reportedly involved the highest loss of human life of any aircraft prospects for a revival of hijacking to date. EAL has been justly proud of its excellent record on safety and tourism maintenance. The airline provides an ever-expanding array of maintenance facilities and training for many other African airlines from its base in Bole. Yet EAL and the Civil Aviation Authority, which controls Ethiopia’s dozen domestic and international airports, have had to deal with 17 hijackings since 1991. Most have originated on internal flights, prompting draconian security procedures at all airports. These are as costly as they are time-consuming for airline and passengers alike. The latest hijacking came just a fortnight after a large delegation of both public and private Ethiopian travel and tourist agencies had attended an international trade fair in London. International media coverage of the crash and EAL inevitably reinforces existing stereotypes of Ethiopia as a lawless, dangerous country, precisely the image that the tour promoters need to overcome if Ethiopia’s huge tourism potential is to be realised.

Foreign trade and payments

Ethiopia receives debt With the Consultative Group’s pledging round over (see The economy), the relief from the Paris Paris Club of Ethiopia’s principal bilateral creditors announced on January 24 Club— that it had agreed to grant a debt-restructuring deal on “Naples terms”. These allow for the cancellation or rescheduling of up to 67% of Ethiopia’s eligible bilateral debt or scheduled service payments. In Ethiopia’s case, this should reportedly lead to a rescheduling of around $200m of official debt. This com- pares with an outstanding total external debt of $5.1bn at the end of 1994 (the latest available World Bank figure). At the end of its current agreement with the IMF in 1999, Ethiopia may qualify for actual debt stock reduction by the Paris Club.

—while negotiations drag Representatives from Austria, Belgium, Finland, Germany, Italy Sweden, the on with Russia UK and the USA participated in the meeting, and agreed to reconvene within two years to reconsider further reductions in Ethiopia’s debt stock. The Paris Club deliberations do not formally cover Ethiopia’s outstanding rouble debt to the former Soviet Union. This is estimated at Rb3.2bn, just $560,000 at the mid-February 1997 exchange rate, but over $2bn at the fixed rate at which it was contracted. On January 30 the finance minister, Sufyan Ahmed, said that negotiations were continuing with representatives of the Russian Federation over the debt to the former Soviet Union.

The finance minister also announced that Ethiopia had paid off all outstanding commercial loans to private companies and financial institutions following the negotiation of a 92% reduction in commercial debt, estimated at $400m in late 1996.

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Ethiopia: breakdown of exports, July 1995-March 1996 % of total

Others 4.8%

Petroleum products 3.9% Coffee 70.4% QatQat 6.9%

Oilseeds 14.1%

Total=Birr 1.15bn

Source: National Bank of Ethiopia, Quarterly Bulletin.

Export earnings are on On January 20 the head of the National Bank of Ethiopia (NBE, the central the increase bank)’s foreign trade section announced preliminary figures which indicate that export earnings for the first half of the current fiscal year (July 8, 1996-July 7, 1997) totalled $184m, up 6.6% on the comparable period in 1995/96. The NBE attributes the improvement to increased coffee exports and better access to Middle Eastern markets for Ethiopia’s live animals and meat exports, noting that supplies are now going to Qatar, Dubai and the other Gulf emirates. In mid-December it was reported that negotiations were under way to export live sheep to Saudi Arabia. Also in December Addis Ababa hosted a delegation of Jordanian businessmen who expressed interest in the livestock sector.

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Eritrea

Political structure

Official name Eritrea

Form of state Unitary state

Legal system Based on the decree of May 20, 1993, covering the formation and structure of the government for the transitional period

National legislature National Assembly, composed of the PFDJ Central Council of 75 members plus three representatives from each of Eritrea’s (former) ten regions

National elections Last elections February 1987 (legislative, within Ethiopia); next elections due by May 1997 (presidential and legislative)

Head of state Elected by the National Assembly

National government The president and the sectoral ministers

Main political parties The People’s Front for Democracy and Justice (PFDJ, formerly 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. A law on political parties has yet to be approved

Head of state Isaias Afewerki

Key ministers Agriculture Tesfaye Ghirmazion Construction Abraha Asfaha Defence Sebhat Ephrem Education Osman Saleh Energy, mining & water resources Tesfaye Gebreselassie Finance & development Haile Woldensai Foreign affairs Petros Solomon Information Beraki Gebreselassie Internal affairs Ali Said Abdella Justice Foazia Hashim Labour & social security Ahmed Haji Ali Marine resources Saleh Meki Regional administration Mahmoud Ahmed Sherifo Tourism Worku Tesfamikael Trade & industry Ogbe Abraha Transport Gergis Teklemikael

Central bank governor Tekie Beyene

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Outlook for 1997-98

Eritrea will take its time Despite a proclamation on December 27 to form an assembly to approve the with pluralism— draft constitution, few people believe that the country will have a final document by the May 1997 (extended) deadline. The assembly is to be formed by members of the National Assembly and the six regional assemblies, as well as representatives of the Eritrean diaspora. The president, Isaias Afewerki, said that the constitution would enshrine the rights of minorities, human rights and other basic freedoms. However, he hinted at a refusal to espouse institutions similar to those in Western countries, saying that this would amount to moving the institutions of the formerly colonialist states to different societies. The slow progress on the shaping of political institutions raises questions about the constitutional framework under which the May 1997 legislative and executive elections will be held. It appears highly unlikely that political groupings other than the ruling People’s Front for Democracy and Justice (PFDJ) will be legalised. There is little internal or external pressure on the government to institute a multiparty system. As in the recent regional elections, the level of popular participation in, and endorsement of, the electoral process will be more important than the model of democracy chosen.

—but urges regional The president recently called for Africans to pool resources and urged the cooperation on food international community to recognise its global responsibility for food secu- security rity, an issue which directly affects Eritrea. Rains have been bad this season and the 1996 harvest is not expected to be more than 130,000 tons, leaving more than 700,000 people vulnerable.

Investment will be slow in Meanwhile, little change has occurred on the economic front. There is still no coming sign of a national currency and foreign investment has remained sluggish. However, as the crisis in Sudan escalates, Isaias is gaining in stature and popu- larity as a politician with whom business can be done. The country can thus be expected to benefit from further US support. Eritrea’s comparatively safe and non-corrupt environment as well as the growing international reputation of its president may well boost investor confidence.

Review

The political scene

A senior Sudanese The defection to Eritrea of the leading northern Sudanese opposition figure, opposition figure defects Sadiq al-Mahdi, in December dealt a huge blow to the National Islamic Front to Asmara— (NIF)-inspired government in Khartoum. Until then the NIF had been able to maintain the charade that the presence of the former prime minister and leader of the Umma Party was due more to their democratic impulses than his house arrest. However, having arrived in Asmara on December 9, protected by a con- voy provided by the Sudanese opposition umbrella, the National Democratic Alliance (NDA), and the Eritrean government, the Sudanese politician spoke out against the human rights abuses of the Khartoum regime. Meanwhile, the

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Sudanese government has announced the trials in absentia of those opposition leaders based in Eritrea.

—and border tension Tension on the border between Eritrea and Sudan, as well as on the frontiers mounts— between Sudan and Ethiopia and Sudan and Uganda, is mounting. Reports speak of a heavy troop presence on the Eritrean side where a dusk-to-dawn curfew is still in place. Claims and counter claims of offensives and crossborder skirmishes have been printed in the respective government or partisan propa- ganda organs of the NIF, the Eritrean authorities and the NDA. The Sudanese, for their part, have accused the Eritrean security forces of shooting dead five men who tried to flee from a training camp for Sudanese dissidents in Eritrea. The report appeared in the government daily newspaper, Al-Engaz al-Watani, on October 23 but elicited no comment from the Eritrean side.

—and the USA is said to Nor has any comment been given in response to a report which appeared in give $20m in non-lethal the International Herald Tribune on November 11 alleging that the US govern- military aid ment is to send $20m of surplus military equipment to Ethiopia, Eritrea and Uganda to help prepare for an offensive to overthrow the NIF regime. Of this, $15m has been apportioned: $7.3m for Ethiopia and $3.85m each for Eritrea and Uganda. The report said the aid was non-lethal and defensive (comprising boots, uniforms and radios) but cited US government sources as saying that it could be expanded to include rifles and other weapons.

A major offensive is The report also said that US officials had denied that the equipment was ear- expected before the dry marked for the Sudanese opposition forces but stated that it was to be used by season the receiving governments for their own defence. However, it added that the US government refers to the three countries as “frontline states” and that US officials estimate that more than 3,000 Sudanese rebels are gathering in Eritrea for a joint offensive expected to concentrate on cutting the road from Khartoum to Port Sudan.

Eritrean leaders get a The USA is clearly keen to strengthen Eritrea, as well as Uganda and Ethiopia, warm welcome in in their resistance to aggression from the Khartoum regime, which it views as the USA— supporting international terrorism. Eritrea was the first country in the region to break diplomatic relations with Sudan in December 1994 and has been instru- mental in providing the Sudanese opposition with a base. The country’s favourable relations with the USA were again highlighted in December when the president, Isaias Afewerki, led a high-ranking delegation to the USA where it was welcomed by the Corporate Council on Africa (CCA) as well as senior political figures. During the six-day tour, the group, which included five cabinet ministers and several representatives of private-sector companies, met the president of the USA, Bill Clinton, the director of the US Agency for International Development (USAID), Brian Atwood, the then national security adviser, Anthony Lake, and the vice-president, Al Gore.

—as the country moves up During the visit the assistant secretary of state for African affairs, George in US strategic thinking— Moose, spelt out the growing importance of the Horn of Africa in general, and Eritrea in particular, to US strategic interests in the region. Mr Moose said that, thanks to its president, Eritrea had gained a reputation for being a viable

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partner for the USA in promoting regional peace and stability in key areas. Attempting to address the root causes of the crisis, the USA poured $4bn into the Horn of Africa between 1985 and 1992 in international emergency relief and to aid the democratisation process.

Eritrea, said Mr Moose, will be a regional environmental hub in an initiative to be unveiled later in 1997 at the US embassy in Addis Ababa. Both Isaias and the Ethiopian prime minister, Meles Zenawi, were emerging as key players in the US-supported strategy to promote regional stability and peace, and lessen dependence on emergency aid.

—and Sudan moves down Coincidentally, Sudan is obstructing all the USA’s goals, which were outlined in but not out the Greater Horn of Africa Initiative (GHAI) launched in 1994 with Mr Clinton’s full backing. While under US law the Sudanese people cannot be denied emergency humanitarian relief, the country can be cut off from long-term development aid if it is considered to be supporting international terrorism. The GHAI as a development strategy, which the former US ambassador to Eritrea, Robert Houdek, had a hand in drafting, is therefore a vehicle for moving US interests in the region, and Isaias is gaining stature as an important actor within its structure.

Regional peace is a The growing importance of Isaias’s role in the region can be explained by priority— Eritrea’s determination to pursue a policy of regional peace as a means of securing prosperity. The revitalisation of the Intergovernmental Authority on Development (IGAD, previously the Intergovernmental Authority on Drought and Development, IGADD) has been one of Isaias’s goals and, as was revealed by the November 25-26 summit in Djibouti (a culmination of the renewal process which begun in March 1996), it has proved a success.

In a speech to the summit, which was attended by all IGAD member states except Somalia as well as representatives of UN agencies, several European countries, the USA and Tanzania, the Eritrean head of state warned against letting the new organisation drift into becoming a “ceremonial club”. Isaias said that priorities for the region should be to pool resources to develop infrastructure, to resolve the crises in Somalia, Sudan and the Great Lakes region, and to assert ownership of all development projects. These themes were to be expanded further at another IGAD conference scheduled to take place in Rome on February 25-26.

—and may involve Eritrea’s commitment to securing regional peace was evidenced in November contributing to an when the government agreed to send 1,000 troops to join an international African force force in Zaire. By the end of the month, however, the foreign ministry withdrew this pledge, basing its decision on the fact that the international force had no clear mission. In Washington in December Isaias backed an idea first broached by the then US secretary of state, Warren Christopher, for an African Crisis Response Force manned and controlled by Africans themselves.

Terrorists target tourists Military engagements inside Sudan have been accompanied by low-level ter- in Eritrea rorist activities in Eritrea itself. Rumours of several attacks have been rife, although there has been no official confirmation of these, and the Eritrean

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press has printed nothing. Even when five Belgian tourists and their Eritrean driver were summarily executed in Semenawi Bahri on December 27, the news- papers kept silent and the radio mentioned the incident only once. This appears to be a curious omission, given that the deaths appeared in the Belgian media and that the region where the incident took place is a favourite destination for tourists.

An anti-corruption drive The press showed a similar disinclination to openness when it came to the nets big fish— question of corruption. The most high-profile victim of a recent clampdown by the government has been the management of the Red Sea Trading Corporation (RSTC), the commercial arm of the ruling People’s Front for Democracy and Justice (PFDJ). The general manager, Dessu Tesfazion, and several senior officials were imprisoned for taking bribes and backhanders in late December.

—and does not seem to be The Eritrean purge, which parallels the process in Ethiopia, is not thought to politically motivated have the same political ramifications. While some people may be caught up in personal vendettas, the clean-out is an old-fashioned anti-corruption drive, and sources say that the president himself was shocked by what he said was an act of betrayal by RSTC comrades. The RSTC, or Zero-Nine as it was known, was established in the early 1980s to transmit supplies to the Eritrean People’s Liberation Front (EPLF) and mobilise funds from Eritreans in the Gulf states. It has grown into a multimillion-dollar empire trading in electrical goods, grains, sesame and main street luxuries, which it sells at a low profit margin to arrest the inflationary tendencies in the emerging private sector.

Regional elections see a While authoritarian structures prevail in the ruling and sole legal party, the high turnout PFDJ, Eritrea does have a working democratic structure, as was proved by the high turnout in local elections, which began on January 7 in three of the country’s six regions. The elections to regional assemblies in Gash Barka, Anseba and Debub saw between 80% and 90% of registered voters going to the polls, and quotas for women candidates (30%) were exceeded in many con- stituencies. Elections in other regions are pending. Members of regional assemblies can stand for election for the permanent National Assembly. In the absence of a legal opposition party, all candidates present themselves on an individual platform.

Relations with Yemen are Despite its poverty, Eritrea has gained international respect for the handling of recovering fast— the Hanish islands dispute (4th quarter 1996, pages 22-23), which could, according to analysts, have divided the region and erupted into a serious Arab-African conflict. Relations with Yemen have been improving to the point where senior officials, including the president, attended a reception at the Yemeni embassy in Asmara to commemorate the revolution of October 1963. On November 2 Yemen’s president, Ali Abdullah Saleh, approved the arbitration document signed on October 3 in Paris which outlines procedures for a tribunal to be set up in London to deliberate on the conflict. Five judges have been chosen: Eritrea has nominated Stephen Schwebel (USA) and Rosalyn Higgins (UK), both judges at the International Court of Justice (ICJ) in The Hague. Yemen has named two further lawyers: Keith Highet (USA) and Ahmed Al-Kushieri (Egypt). The

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president of the tribunal, which met for the first time in London on January 14, is Sir Robert Jennings (UK), a former president of the ICJ.

—as the arbitration According to the arbitration agreement signed in Paris, the court has to set the process gets under way dates for its rulings, which will happen in two stages in accordance with international law. At the end of the first stage, it will issue a ruling concerning regional sovereignty, which will define the scope of the dispute between the two countries. At the end of the second stage, the court will decide on the demarcation of maritime borders and will settle the issue in accordance with its ruling on the regional sovereignty issues, the UN Convention on the Law of the Sea and other relevant test cases.

London was chosen as the site of the tribunal for technical reasons. However, the UK, which is one of the most important investors in Yemen, has since become more involved. The UK foreign secretary, Malcolm Rifkind, who visited Sana’a on November 7, announced that Royal Navy ships would join French forces patrolling the Hanish area. The issue was also discussed during a brief stopover in the UK by Isaias on his way back from the USA in December. But the brief flurry of interest in the UK press is not thought likely to lead to increased interest in Eritrea. The country does not seem to feature highly in UK foreign office affairs, and a visit on December 2-3 by the UK minister for overseas development, Lynda Chalker, was over almost before it had begun.

Asmara strengthens links On a visit to the Maghreb in October, the foreign minister, Petros Solomon, in the Maghreb— signed bilateral agreements with Tunisia, Algeria and Morocco, and established joint commissions with the latter two countries to further economic and technical ties. It is the first time an Eritrean foreign minister has visited Algeria, which, like Eritrea, is troubled by minority religious extremism.

—while back home The Sudanese brand of religious extremism which is spreading across the bor- refugees are stranded der into Eritrea has slowed down efforts to bring home thousands of refugees (4th quarter 1996, page 23). The office of the UN High Commissioner for Refugees (UNHCR) has given both Khartoum and Asmara until April 1 to break the deadlock in negotiations or else it will “downsize [its operations] drasti- cally”. These comments are not meant to indicate a UNHCR withdrawal, but sources have indicated that the UN agency and other donors are getting tired with both sides’ refusal to compromise on the issue of trilateral talks to get the refugees across the border. The militarisation of the frontier region has seen the number of returning refugees dwindle to a trickle.

The economy

Eritrea wins the hearts The highlight of this quarter has been a trade mission to the USA, at which more and minds of the USA— than 110 US companies, including IBM and Anadarko Petroleum, attended a Corporate Council on Africa (CCA)/International Finance Corporation (IFC) seminar on investment opportunities in Eritrea. Both the former US ambassador to Eritrea, Robert Houdek, and his successor, John Hicks, attended the seminar and endorsed the words of Anadarko’s president who said that in Eritrea you could “do business on a handshake”.

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According to the CCA, this honesty and commitment has made Eritrea “one of the best business environments in Africa” and has seen more than $300m in US currency either invested in or committed to business in Eritrea.

—which means more Workshops at the seminar, which was held on December 10, covered growth dollars are to be invested sectors ranging from manufacturing to fisheries, finance and tourism. It was a follow-up event to the CCA trade mission to Asmara in May 1996, when 12 Eritrean business managers were invited by the CCA and the US Agency for International Development (USAID) to attend the December seminar and to go on a working visit to the USA.

A spoonful of sugar— Another follow up from the May 1996 mission was a deal worth $495,000 signed at the Washington seminar for the first phase of a project to bring cheaper sugar to Eritrea. As a result of findings from a USAID-sponsored feasibility study, a US marketing group, FC Schaffer and Associates, was selected by the Eritrean Ministry of Agriculture to develop a sugarcane-processing plant in the western lowlands. The deal is part of a financial package that will eventually approach $100m and create more than 4,000 jobs.

—or two— Coca-Cola, whose joint-venture agreement with the National Soft Drinks Factory in May crowned the success of the CCA mission to Eritrea, has recently signed another deal with the Eritrean government. The two parties will under- take a joint venture in the Red Sea Bottle Factory to treble the production of soft drinks and eventually export to neighbouring countries. The Eritrean government will control 55% of shares in this new arrangement, and Coca-Cola the remainder.

—helps the private sector Another initiative to promote the private sector in Eritrea, cited during the grow up Washington visit, was a deal currently being negotiated with the Ministry of Information to bring a fast access internet link to the country. The president, Isaias Afewerki, noted how the attitude of USAID had changed over the past four years from being pushy and aggressive to more cooperative and prod- uctive. “The language and approach of USAID has completely changed,” he said. “I remember three or four years ago they told us: ‘you should privatise companies within six months.’ That kind of thing was a constant source of friction between us and USAID officials.”

Isaias gives a forthright The partnership of equals was stressed again during a speech given by the speech on equality— president on investment opportunities in Eritrea. In his opening statement, he said that the government had laid the foundation for good governance and long-term political stability, although he acknowledged that the country was still on the mend. He suggested that major investment opportunities existed in agriculture, fishing and general manufacturing, while pointing out that Eritrea’s investment rules were among the most liberal in Africa.

—and calls for foreign Economic achievements, although hampered by poor rainfall (an indication of direct investment the country’s continued dependency on rainfed agriculture), had, said the president, been impressive. The negative growth rates of the late 1980s had been reversed, and from 1992-96 real GDP had grown by an annual average of

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5% while inflation remained below 10%. “Our country,” he concluded, “may not be perfect but we are striving to make it a dynamic port of call for the international investor.”

Banking services are being In preparation for the desired influx of investment, the banking system is being upgraded— overhauled. Exhortations to convert to a cashless economy, while hampered by the lack of a nationwide computerised system, are starting to bear fruit. Although it is not easy to cash a Commercial Bank of Eritrea (CBE) cheque at any branch other than that named on the cheque itself, bank charges are to be lowered, and 14 branches are operational within the country.

—and savings are The CBE recorded profits of Birr135m ($21m) for 1996, a 79% increase on 1995 growing— levels. Meanwhile, in mid-November the Housing and Commerce Bank of Eritrea started to issue dollar-denominated certificates of deposit with denomi- nations of $1,000 and above, while the Eritrean Development and Investment Bank is expected to start operations shortly. In an interview in the national press on February 1, the manager, Ahmed Said Ali, listed its main functions as extending medium- and long-term credit to development projects in all sectors, managing project funds, mobilising funds and providing technical assistance, and channelling loans. The bank hopes to establish branches in each of the six regions and to target the rural population.

—as a new financial A financial institutions act is being prepared to permit the licensing of private institutions act is financial institutions, including foreign banks and insurance companies. under way Eritrea is also hoping to establish offshore banking services and facilities to cater to the Middle Eastern market.

Italians praise the The upbeat message of the US mission was echoed closer to home by the Italian national development under-secretary for Africa, aid and the Mediterranean, Rino Serri, who visited drive— Asmara on January 25. Mr Serri, whom analysts credit with driving Italy’s revival of interest in the Horn of Africa since the May 1996 election, spoke of his country’s commitment to Eritrea and to the region as a whole.

—and help to ease the The Italian government is guaranteeing financing for three electricity trans- power shortage— mission lines linking the new power generator at Hirgigo, near Massawa, with Asmara, Decamhare, Mendefera and Keren. Calls for bids for this part of the $160m project, which includes the cost of the power station itself, have been reserved for Italian companies, and the results of the tender process, which closed in mid-December, are due shortly. By the end of 1997 power generation should reach 150 mw, compared with less than 50 mw in 1992.

—which should allow for The contract for a study on the repair and upgrading of Massawa’s electricity infrastructural distribution has recently been won by a Spanish company, Inemsa. The improvements Ecu160,000 ($186,000) bill is being paid by the EU, and in early 1998 the European Development Fund (EDF) is expected to approve a credit line for Ecu10m to carry out the work on repairing the city’s antiquated network.

Other infrastructure projects in the city include a programme to improve port management, which is being sponsored by the German Gesellschaft für Technische Zusammenarbeit (GTZ), a suburban road network constructed by

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the Chinese, impressive housing projects financed by the public and private sectors, a DM2.5m ($1.5m) waterpipe project and an international airport funded by Germany. This latter should be finished in late 1998, by which time the Dahlak Islands tourism village, which has been delayed, will be well into its construction phase.

More Ecu trickle in With the allocation of the EU credit line and of an additional Ecu18m to finance the construction of a main road between Nefasit and Teramni, the whole of the EU’s Ecu35m national economic programme for Eritrea under the seventh EDF programme will have been used up. According to the European commissioner for external relations (Africa, Caribbean and Pacific), João de Deus Pinheiro, who visited Asmara at the end of January, the decision on the Nefasit-Teramni road would also be announced in early 1998.

The EU has come under attack for the slow progress of project implementation in Eritrea, and according to a report in a London-based newsletter, Africa Confidential, Mr Pinheiro cited shortages of qualified personnel and the reluctance of Eritrean authorities to discuss aid conditionalities as reasons. He added that Ecu5.5m (16%) of the seventh EDF quota has already been engaged and an additional Ecu1.7m should be disbursed by early 1997. These cover sectoral studies in the transport, water and energy sectors and in the campaign to eradicate cattle fever.

The road network is Other projects in the transport sector include a $7.9m soft loan from the improving— African Development Bank to finance the repair of the Keren-Tessenei road through the fertile western lowlands. The 250-km highway was built by Italy in the 1930s. In 1995/96 Birr23m was spent on repairing bridges and the road surface between Agordat and Tessenei (and Tessenei and Guluj), but it is still very rough. Now that the Gash Barka area is at the centre of various important agricultural initiatives, including banana, cotton and sesame production as well as sugar, a new asphalt surface will rapidly increase revenue from and access to the region. The Ministry of Construction is currently taking tenders on the project.

—but Eritrea needs to Low skill levels were also among the reasons given by the minister of finance develop its personnel and development, Haile Woldensai, for the “gap between the revenue actually collected and the revenue which is supposed to be collected” by the national tax office. This, together with financial mismanagement, led many ministries to accumulate unspent budget allocations in bank accounts while central government had to borrow money for long-term development.

Another problem which called for remedial measures was the fact that many customs officers are forced to estimate the value of electronic imports, leading to friction with customers and appalling time-wasting. The minister, who was interviewed on national television, acknowledged that tax collection and customs are badly in need of systemic overhaul and computerisation.

Another dose of The situation may improve after another round of streamlining and salary ra- streamlining is on tionalisation, scheduled for the first few months of 1997. According to the the way— president’s New Year speech, government ministries will become regulatory,

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research and policy-making bodies, leaving commercial activities to the private sector. It has not been made clear by how much the civil service is to be downsized, but the salary scale will be based on productivity and governed by a new labour law currently in preparation.

At present, government salary scales, set by the Central Personnel Agency (CPA), are based on a mixture of academic qualifications, experience and fighter/non-fighter status. Lowland postings have an additional (but taxable) 40% heat allowance, by no means enough to attract high-calibre staff away from the capital, and certainly not enough to draw skilled Eritreans away from comfortable homes, schools and hospitals in the diaspora.

—and working hours are In a move towards creating a fighting machine for the economic battle ahead changed again of it, the government has recently established new working hours and holidays for the highlands. Hours in Asmara (the only ones covered by the “national” press) are from 7am-12 noon and 2pm-6pm from Monday-Thursday and from 7am-11.30 am and 2pm-6pm on Friday, with Saturdays and Sundays off. In the lowlands there is an interesting mixture of 6am, 6.30am and 7am starts with some government institutions taking a break from noon until 4pm, some stoically working through a full eight and a half hour day without a break, and some sanctioning a lunchbreak of sorts. The UN has said that its members, even those working side-by-side with civil servants in the field, do not have to work more than a 37.5-hour week, which means that its staff arrive at any time between 7.30am and 8am. National holidays have been limited to 16 days, but individual towns and cities have their own liberation or saint’s days as well.

The Chamber of Institutional change led to the closure of the Asmara Chamber of Commerce on Commerce shuts February 1. Although it had often been stated that the constitutional structure temporarily of the chamber, including its operational mandate, membership and regional jurisdiction, was unspecified, its closure, announced on January 27, was dram- atic and sudden. It will open again in due course, and hopefully branch offices will be re-established in Mendefera, Massawa and Keren.

More public enterprises Meanwhile, the assets and properties of the chamber have been taken over by are slated for the Ministry of Trade and Industry, whose Agency for the Supervision and privatisation— Nationalisation of Public Enterprises has announced that 39 more public enterprises are to be put up for sale in 1997. Exactly which industries these are has not yet been made public, but one of them will probably be the Red Sea Hotel in Massawa, which is nearing completion after more than a year under repair.

—and tourism records Once dubbed the flagship of the young Ethiopian Tourism Organisation, the slow but steady growth— 35-year old Red Sea Hotel was almost completely destroyed in 1990. Its reopening early in 1997 comes at a time when Massawa is on the cusp of dis- covery as a tourist destination. More than 125,000 tourists came to the city last year, over one-third of them foreigners. With a luxury yacht on the waters beside the Nobile owned by the ruling People’s Front for Democracy and Justice (PFDJ), and other small vessels operating routes to the island, the mini- boom has highlighted the need for clear-headed zonal planning for the leisure industry. Massawa must develop a municipal identity and take steps to pre- serve its architectural beauty before it is engulfed by the trappings of tourism.

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—as capital projects get Asmara, the main arrival point for tourists, has less of a problem, although there under way are those with worryingly iconoclastic tendencies within City Hall who would quite easily sweep its fading Italianate splendour beneath plate glass and con- crete. Eritrea’s capital has set itself the goal of becoming a major conference centre. The newest hotel under construction, the Asmara Palace, will be a 200-room, five-star business centre. The contract to build the $17.5m facility has been won by Italy’s Cooperativa Muratori Cementisti (CMC). The PFDJ will own 40%, CMC 10% and the general manager, Tewelde Tesfamariam, who is also manager of the Italian-based Red Sea General Import and Export Company, will own 40%. The remaining 10% will belong to an Irish company, Bergheim International, which will manage the hotel.

The Asmara Palace is situated on the airport road opposite the fast-growing Sembel Housing Project, built by a South Korean company, Keangnam Enterprises. Its portfolio, which also contains a housing and office complex in Massawa and Port Authority headquarters, and a huge dam north of Asmara (at an estimated cost of $45m), is likely to be bolstered by the Hirgigo power plant. The Koreans have astutely entered a low bid for this project, calculating to their advantage the fact that they already have expensive earth-moving and construction equipment in Eritrea, which other bidders will have to import.

The dam will provide badly needed water for the capital and surrounding regions. It is part of a huge programme, partly financed by the Caisse française de développement (CFD, the French development bank) and the Italian government, to upgrade the decades-old water system which is currently suffering a 40% leakage rate. Another improvement is in communications, as a result of a $23m deal signed recently between the Ministry of Information and a French company, Thomson, for radio and television transmitters.

Another South Korean Meanwhile, another South Korean company, Hyongin, signed a contract in joint venture is signed— January with an Eritrean company to build a new aluminium extraction and processing plant at Debarwa, south of Asmara. The factory, which is expected to begin operations in early 1998, will produce 2,400 tons of aluminium and 300 types of aluminium bars and frames and has an initial capital of Birr6m.

—and a round of mining The second round of bidding for mining concessions, which was postponed concessions opens for until the end of 1996 from July, concerns seven areas in the western lowlands bids— and two in the east. Australian United Gold and Kalgoorlie Mine Management have submitted a joint bid for a prospecting concession in the Auguro area in south-western Eritrea. Canada’s Golden Star-Parc has begun drilling for dia- monds on a 650-km zone on the Adi Rassi copper and gold prospect in the Galla Valley concession near Asmara. Seven exploration and six prospecting licences were issued in the first round, to companies from Australia, Ghana, the USA, Canada, South Africa and France.

—and the first phase of In the oil and gas sector, analysts are optimistic that commercially exploitable surveying for oil is reserves will be found. Anadarko, the first company to sign an exploration completed contract in 1995, announced in November that it had completed a 16,000-km high-density aerial gravity and magnetic survey over Zula block in the southern Red Sea. It will soon start a seismic acquisition programme. According to

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the agreement, the company has to invest $28.5m over seven years, and one or two wells are to be dug this year.

Other marine resources Also on the Red Sea, France’s oceanological research institute, Efremer, is con- under scrutiny— ducting a survey to evaluate Eritrea’s fisheries resources. Three Eritrean scien- tists from the marine resources ministry have joined the FFr15.6m ($2.8m) programme, which is being financed by the CFD under an agreement signed in Asmara in April 1996. The programme also includes fitting out a marine research vessel belonging to the ministry.

—and some are proving Red Sea salt is proving a market winner. The commodity, which used to be lucrative exported as far afield as Japan, is finding buyers in Kenya and Tanzania to where 3,000 tons and 5,000 tons respectively were exported last year. The government expects this figure to increase in 1997 as additional markets are found in Rwanda and southern Sudan.

EIU Country Report 1st quarter 1997 © The Economist Intelligence Unit Limited 1997 Somalia 35

Somalia

Political structure

Official name Somali Democratic Republic

Form of state Unitary republic, although in May 1991 the Somali National Movement (SNM) unilaterally declared the creation of an independent state, the Somaliland Republic, in the north (see below)

Legal system Based on the 1960 constitution

National legislature People’s Assembly

National elections Last elections 1967 (presidential); 1969 (legislative); next elections: none feasible in current circumstances

Head of state Theoretically Ali Mahdi Mohamed, nominated in January 1991 by his faction of the United Somali Congress (USC), and sworn in in August 1991 with the support of several southern factions. General Mohamed Farah Aideed had himself elected as “interim president” in June 1995 by his own faction of the USC-SNA. On the general’s death, his son, Hussein Mohamed Aideed, was nominated to the post by the same factions in August 1996

National government Mr Ali Mahdi and his government in Mogadishu; announced in October 1991 but of marginal significance. General Aideed announced his own government in June 1995

Main political factions USC; Democratic Front for the Salvation of Somalia (DFSS); Somali National Alliance (SNA); Somali Patriotic Movement (SPM); Southern Somali National Movement (SSNM)

Somaliland Republic Created in May 1991 but awaiting diplomatic recognition; led by the now interim president, Mohamed Ibrahim Egal, elected in May 1993. A referendum on a new constitution and on independence was scheduled for July 1996

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Economic structure

Latest available figures

Economic indicators 1990 1991 1992 1993 1994 GDP at market prices SoSh bn 1,738.8 n/a n/a n/a n/a Real GDP growth % –1.6 n/a n/a n/a n/a Consumer price inflation % 200.0a n/a n/a n/a n/a Population m 8.7 8.8 8.9 9.0 9.1 Exports fobb $ m 150 85 103 102 130 Imports fobb $ m 394 160 217 263 269 Current account $ m –81 n/a n/a n/a n/a Total external debt $ m 2,370 2,449 2,447 2,501 2,616

December 11, 1996 SoSh7,600ac:$1

Origins of gross domestic product 1990 % of total Components of gross domestic product 1989 % of total Agriculture 65.5 Private consumption 91.1 Industry 8.7 Government consumption 22.9 Manufacturing 4.6 Gross fixed capital formation 21.4 Services 25.8 Exports of goods & services 8.4 GDP at factor cost 100.0 Imports of goods & services –43.8 GDP at current market prices 100.0

Principal exports 1989 $ m Principal imports 1990 $ m Livestock 26 Manufactures 204 Bananas 25 Non-fuel primary products 104 Fuels 52

Main destinations of exports 1995b % of total Main origins of imports 1995b % of total Saudi Arabia 57 Kenya 24 Yemen 14 Djibouti 18 Italy 13 Pakistan 6 a EIU estimate. b Based on partners’ trade returns, subject to a wide margin of error. c Outside Mogadishu. In the self-styled Somaliland Republic the legal tender is the Somaliland shilling (SolSh), which has a fixed rate of SolSh80:$1 and a parallel market value of SolSh400-450:$1.

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Outlook for 1997-98

A new year, a new Charged by the Organisation of African Unity (OAU) and the Intergovernmental peace deal— Authority on Development (IGAD) with the unenviable task of facilitating peace talks among the conflicting Somali parties, Ethiopia appears to have fostered a new peace deal. After eight weeks of negotiations in the Ethiopian resort of Sodere, 26 Somali factions agreed to establish a National Salvation Council (NSC) with a mandate to organise a transitional government. The NSC is headed by a National Executive Committee with five chairmen, carefully balanced according to clan and faction allegiances. Among the five are two of Mogadishu’s three principal faction leaders: Ali Mahdi Mohamed, controller of north Mogadishu, and Ali Hassan Osman “Ato”, whose forces control parts of the south of the capital. In a move that marks the Sodere agreement out from the numerous other peace deals of the past few years, Mr Ali Mahdi has publicly declared that the NSC is the supreme ruling body in Somalia, effectively re- nouncing his own claims to the presidency which date back to the ousting of the former president, Mohamed Siad Barre in 1991.

—but Mr Aideed is Notable by his absence at Sodere was the leader of Mogadishu’s third main otherwise engaged faction, Hussein Mohamed Aideed, the son and heir of the former south Mogadishu warlord, General Mohamed Farah Aideed. Mr Aideed, who is still regarded as Somalia’s president by his own followers, dismissed the Ethiopian- backed deal, and real progress towards peace cannot be made without him. This was amply demonstrated by the intense fighting in the capital during Decem- ber, when more than 130 people, most of them civilians, died as Mr Aideed sought to take advantage of the absence of his main rivals in Sodere to move on Mogadishu’s international airport. The high civilian casualties reflect a worrying trend in the fight for control of the capital: conventional face-to-face clashes using customised battle wagons, so-called technicals, have been supplemented with artillery bombardments of rival militia positions.

The Nairobi ceasefire also Mr Aideed’s south Mogadishu sorties have not been very successful, and as gets a second chance— many observers were suggesting that he was becoming marginalised, he met his arch-rival, Mr Ali Mahdi, in a hotel on the Green Line dividing the city in January. The two faction leaders agreed to try again to implement the ceasefire agreed in Nairobi in October, which collapsed after little more than a week. The meeting was engineered by the Italians, and the fact that Mr Aideed and Mr Ali Mahdi have met twice in four months gives some glimmer of hope in the ever-changing turmoil of Somali clan politics.

—as Mr Aideed courts Apart from Mr Aideed’s non-participation, the problem for the Sodere deal is the Al-Ittihad fact that Ethiopian troops have made several incursions into Somali territory in recent months, most recently at the end of December, to repel attacks from the ostensibly Islamist group Al-Ittihad. These crossborder raids have put Ethiopia’s neutrality as a peacebroker in question and the incursions have been condemned by all Somali factions. Mr Aideed’s ties with Al-Ittihad appear to be strengthening, while the latter announced in January that it has become a political party. Unsurprisingly, given its propensity to attack Ethiopia, Al-Ittihad will not be welcome at meetings of the NSC.

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The north is invited to The NSC does, however, wish to speak with someone from the self-styled participate in the NSC Somaliland Republic. It sees Somaliland as an integral part of its vision of a peaceful Somalia, but most citizens in the north are uninterested. The approach from the NSC was firmly rejected by the Congress of the Communities of the Republic of Somaliland (CCRS) meeting in Hargeisa to find a replace- ment for the outgoing president, Mohamed Ibrahim Egal. In a protracted meeting, the CCRS has come up with a list of necessary qualifications for presidential candidates: they must be Somaliland citizens, Muslims, and at least 40 years old. Some sources suggest that Mr Egal who, despite standing down in October still appears to be at the helm, may stand again. Whoever takes over in Hargeisa, keeping the NSC at bay will be his first major headache.

Review

The political scene

Another peace accord Leaders of 26 Somali factions reached a new peace agreement on January 3 after is agreed— eight weeks of negotiations in the Ethiopian resort of Sodere 100 km east of Addis Ababa. A 41-member National Salvation Council (NSC) was created with DFSS: Democratic Front for the a mandate to organise a transitional government. The NSC is headed by an Salvation of Somalia 11-man National Executive Committee (NEC) with five chairmen, the members RRA: Rahawayn Resistance Army of which are carefully balanced according to clan and faction allegiance. The SDM: Somali Democratic Movement five NEC chairmen are: Ali Mahdi Mohamed, from the Abgal sublineage of the SNA: Somali National Alliance Hawiye clan family which controls north Mogadishu, and Ali Hassan Osman SNF: Somali National Front “Ato” (Abar Gedir/Hawiye), controller of parts of the south of the Somali capital, SPM: Somali Patriotic Movement both representing wings of the USC; Abd Al-Qadir Mohamed Aden (Rahawayn), SSA: Somali Salvation Alliance head of the SDM-RRA; Abdullahi Yusuf Ahmed (Majerteen/Darod) of the DFSS, USC: United Somali Congress and Aden Abdullahi Nur (Ogaden/Darod) of the SPM.

—which is widely The faction leaders gave regular briefings on the progress of their talks to their welcomed— Ethiopian hosts and to delegates of the Intergovernmental Authority on Development (IGAD), and the new agreement was welcomed by these and other interested parties. On the domestic front, street demonstrations in favour of the Sodere plan were reported from Hobyo in the Mudug region on January 5, while in Addis Ababa the Ethiopian prime minister, Meles Zenawi, promised on January 8 to make every effort to ensure that the NSC received international support. According to a report on Radio Mogadishu (pro-Osman “Ato”) on January 13, the Italian ambassador in Addis announced his country’s full diplomatic recognition of the NSC, after a similar pronouncement from Khartoum.

—although not by Conspicuous by his absence at Sodere, however, was Hussein Mohamed Aideed, Mr Aideed— son and heir of a former south Mogadishu warlord, General Mohamed Farah Aideed, who died in early August. Mr Aideed firmly rejected the Ethiopian agreement. In a broadcast on Radio Mogadishu (pro-Aideed) on January 4, the delegates of the 26 factions were denounced as “imperialist lackeys” and accused of sabotage.

—who nevertheless meets Despite his public rejection of the Sodere agreement, Mr Aideed was being Mr Ali Mahdi— encouraged in the first half of January at least to talk to his opponents. Follow- ing a series of meetings in Mogadishu with the Nairobi-based Italian representative to Somalia, Giuseppe Cassini, Mr Aideed met Mr Ali Mahdi, his arch-rival, on January 20 under Italian auspices in a hotel on the Green Line that divides the capital. Despite the singular failure of these two men to stick to the ceasefire agreed in Nairobi on October 15 (4th quarter 1996, page 32; and see below), Mr Aideed and Mr Ali Mahdi issued a statement agreeing to implement the October Nairobi declaration, and to work together to find a solution to Somalia’s problems. High on the agenda was the reopening of Mogadishu’s main airport and port. The Aideed-Ali Mahdi announcement was welcomed the following day by an Arab League spokesman in Cairo. Furthermore, on January 21 Mr Ali Mahdi declared that as far as he was concerned the NSC was now Somalia’s supreme authority, which sounded very much like a renunci- ation of his claims to the presidency. The fact that the rival factions of the USC loyal to Mr Ali Mahdi and Mr Aideed have long claimed to be the country’s sole legitimate government has been a continual sticking point in the hopes for peaceful reconciliation.

—to reinstate the failed The ceasefire agreed in Nairobi quickly broke down. On October 23, eight days October Nairobi ceasefire after it was agreed, Mr Aideed was accused by a spokesman for Mr Ali Mahdi of dishonouring the accord, by not removing roadblocks in south Mogadishu. The shortlived ceasefire was well and truly broken on October 29 when at least 13 civilians were killed and 17 others injured in the south of the capital in a hail of fire from automatic weapons, rocket launchers and grenades. The apparently unprovoked attack was launched by a militia group of indeterminable faction allegiance. Mr Aideed accused Mr Osman “Ato” of being behind the attack. In response, the latter accused Mr Aideed’s forces of killing 43 people since the October 15 ceasefire. Two days later, tension rose in the north of the capital, which is controlled by militia loyal to Mr Ali Mahdi. Two people were killed and several others injured in a dispute sparked by Mr Ali Mahdi’s restructuring of the Islamic judicial system operating there. Mr Ali Mahdi had intro- duced an appeal system and replaced the head of the council of Islamic tribunal. The new head of the tribunal, renamed the supreme judicial council by Mr Ali Mahdi, is a close associate of the faction leader.

On November 1 at least eight people were killed and 13 others injured during artillery exchanges in the south of the city between pro-Aideed and pro-Ali Mahdi factions. Four days later another ten people died and 15 more were wounded when militia loyal to Mr Aideed and Mr Osman “Ato” clashed in the Medina and Hodon quarters of Mogadishu. During the night of November 13/14, five civilians were killed and 12 wounded by mortar fire in a residential area of south Mogadishu near the former military hospital. During the shelling, Mr Osman “Ato”’s sister was kidnapped by Mr Aideed’s militia but she escaped the following day. Clashes on the ground between the two rival factions also continued in south Mogadishu into late November. At least 13 people died and 20 were wounded on November 18. Six primary schools were closed the following day and hundreds of children marched in the streets to protest at the continued fighting. On November 23 a further 15 people were killed and 20 were wounded.

Main Somali clans

Legendary Arabian ancestry

Irrir

Darod Digil Rahawayn Hawiye Dir Issaq

’Iise Gadabursi Marehan Ogaden

Majerteen Dulbahante Warsangeli

Source: Modified after I. M. Lewis, Understanding Somalia: guide to culture, history and social institutions, 2nd edition, Haan, London, 1993.

Mogadishu’s death toll in The capital’s death toll continued to rise in December while Mr Aideed’s main December exceeds 130 rival faction leaders were otherwise engaged in Sodere. Artillery fire left at least 17 civilians dead in south Mogadishu on December 1. Intermittent clashes continued throughout the month, culminating in the worst ten days of violence seen for some time. Estimates of the largely civilian casualties varied, but a Paris-based daily newspaper, Le Monde, quoted officials of the International Committee of the Red Cross (ICRC) on December 23 as saying that more than 130 people had died and that 1,500 injured had been admitted to Mogadishu hospitals. Most of these were casualties of the move by Mr Aideed’s militia on the strategic Medina district next to the international airport, controlled by the Abgal clan leader, Musa Sudi Yalahow. Further artillery fire accompanied attacks on the ground by heavily armed converted four-wheel drive vehicles known as “technicals”. Mr Yalahow is allied to Mr Ali Mahdi and Mr Osman “Ato”, whose militias have also been drawn into the fighting, pitting Aideed against three allied factions. Some observers see Mr Aideed and his supporters

being marginalised. Mr Aideed is bitterly opposed by most other faction leaders, although the continuing violence confirms that no single faction leader is powerful enough to take control of the whole city.

Fighting also continues Sporadic reports from outside the capital suggest that fighting has continued in outside the capital many southern areas in recent months. At least 21 people were killed and 50 wounded on October 30 when militia loyal to Mr Osman “Ato” attacked and occupied a landing strip 50 km south of the capital. More than eight “technicals” were involved in the attack on the airstrip which was under the control of Mr Aideed’s forces. Agence France-presse (AFP) reported clashes on the Mogadishu-Beled Weyne highway north of Mogadishu on November 7, in which “Islamic militia” captured 49 “bandits” who were then subjected to the amputation of a foot or a hand, or both. Fighting also continued in the Bay and Bakool regions. At least 14 people were killed and 22 injured in clashes between rival militias loyal to Mr Aideed and the RRA in Oddur on November 11. Most of the casualties occurred in the south of the regional capital during several hours of fighting, as Mr Aideed’s forces drove RRA militia out of the town. A spokesman for the RRA said on December 18 that forces loyal to Mr Aideed had recently killed 36 people in Oddur, including the district chairman. On Decem- ber 1 Radio Mogadishu (pro-Osman “Ato”) reported that militia loyal to Mr Aideed had kidnapped eight people in the Shabeellaha Hoose region south of Mogadishu. In the Jubbada Hoose region at least six people were killed in clashes between militias loyal to Mr Aideed and Mr Osman “Ato” in an agricultural area near Jamaame, according to reports reaching Mogadishu on Decem- ber 12. Mr Aideed pardonned 30 prisoners being held in Baidoa after a meeting with intellectuals and religious leaders from the Bay, Bakool and Gedo regions in Mogadishu on December 27.

The EU presents its ideas The EU’s contribution towards political reconciliation continued in November on political structure with the second workshop to present ideas to about 30 Somali intellectuals on possible future political structures for the country. Like the first workshop in June (3rd quarter 1996, page 33), the three-day event was held in Kenya. The EU’s ideas on political structure have been developed by a team from the London School of Economics, which has come up with four options: a federation; a confederation linking Somalia with the breakaway Republic of Somaliland; a decentralised state; and a power-sharing agreement. The meeting, which received the blessing of the Kenyan president, Daniel arap Moi, after its completion on November 18, was attended by representatives from numerous Somali clan families and factions, including a delegation from Somaliland, and, according to some reports, by representatives from all the major Mogadishu factions, although Mr Aideed publicly denounced the initiative. If the Sodere agreement holds, the EU’s ideas may soon be discussed across the whole country.

Al-Ittihad becomes a The Mogadishu-based group Al-Ittihad, whose forces have been involved in political party several armed clashes with Ethiopian forces in recent months, is to become an Islamic political party, a member of its executive committee announced in Mogadishu on January 4. The announcement came after another crossborder raid by Al-Ittihad militiamen, on the Ethiopian town of Dolo, at the end of

December. According to a statement from the Ethiopian defence ministry, Ethiopian government troops made an incursion into the Gedo region on December 24 killing and wounding 100 militiamen, among them a number of “multinational fundamentalists” who were involved in the Dolo attack. The Al-Ittihad force suffered 19 casualties before being driven back across the border, the statement added. Ethiopian forces still held Dolo and an area some 10 km into Somalia in mid-January, according to a report in a London-based newsletter, Africa Confidential, on January 17. The Ethiopian presence on Somali soil was denounced on December 26 by Mr Aideed whose links with Al-Ittihad appear to be strengthening. The Sudanese chargé d’affaires (to Mr Aideed’s government) in Mogadishu called for a holy war against Ethiopia at a meeting of Al-Ittihad, according to a report in the Mogadishu Times on December 29. Although the report was denied in Khartoum, the call appeared to confirm the suspicions of many observers that Al-Ittihad is backed by Sudan. Al-Ittihad’s chances of being involved in the reconciliation efforts of the newly formed NSC were firmly scotched by Mr Ali Mahdi on January 18.

Mr Aideed is said to be Supplies of arms and forged banknotes from Hong Kong are being sent to the receiving arms and port of Merca, according to claims from some Somalis attending the Sodere currency talks in January. The newly formed NSC suggested that 28 containers of arms and forged banknotes had been transferred on the seas off Dubai on January 7 to a ship, which is thought to have then sailed to Merca, the port south of Mogadishu controlled by Mr Aideed. Meanwhile, the trade in 1996 at the northern Mogadishu port of El Ma’an was outlined to local journalists by the USC/SSA (pro-Ali Mahdi) secretary of maritime transport on January 2. Some 135 commercial vessels, dhows and ships had called at the port during the year, bringing consumer goods weighing nearly 110,000 tons. Exports included 2,183 tons of consumer goods and 46,000 head of livestock.

Mogadishu gets a A new bank, the Barakat Bank of Somalia, was established in the capital at the new bank end of October by a group of Somalis headed by a local businessman, Ahmed Nour Ali Jumale, according to a report in a speculative Paris-based fortnightly publication, The Indian Ocean Newsletter. Initially capitalised at $2m, the bank will use the dollar as its working currency and will specialise in small loans to Somali traders, foreign currency exchange and currency transactions abroad. The bank aims to establish a further 90 branches across the country. The new bank appears well-timed, as a severe shortage of hard currency was forecast by a London-based newsletter, Africa Analysis, on December 13. As major foreign exchange sources dried up and businessmen began to withdraw their hard currency from Mogadishu markets, the exchange rate in the capital reached an all-time high of SoSh8,040:$1 towards the end of November. By December 11 the rate in Mogadishu had strengthened to SoSh7,900:$1, while in the southern port of Kismayu it has remained stable at SoSh7,600:$1.

Piracy is still a hazard Evidence of the dangers faced by shipping in Somali waters, where piracy has been rife in the past two years, was provided on February 3 when gunmen seized a Kenyan cargo ship off Kismayu. Eight militiamen using speedboats boarded the ship, which was carrying consumer goods from Mombasa in Kenya, before it could enter the southern port to unload. Port officials said the gunmen were

demanding a ransom of $15,000 for its release. The ransom is relatively small compared with the $300,000 paid on November 4 for the release of a fishing trawler hijacked off the coast north of Mogadishu in July. The fishing vessel belonged to the Somali Highseas Fishing Company, a joint Somali-Italian company, and its crew, consisting of Somalis and three Europeans, was set free after intervention by Mr Ali Mahdi, according to a report from AFP. In the same dispatch, another trawler was reported to have been released on September 27 after payment of more than $500,000 to Somali pirates.

A hostage is released Meanwhile, in the capital, Hilal Mohamed Aden, an official at the Mogadishu Institute of Peace and Life who was kidnapped from his home in north Mogadishu on September 19 (4th quarter 1996, page 35), was released on November 2. According to official sources, Mr Aden was released without payment of any ransom, but an AFP report from the capital suggested that $9,000 may have changed hands.

The misconduct of casques The Canadian civil commission of enquiry into an incident in Beled Weyne in bleus continues to make 1993, in which three Somalis died while under the charge of Canadian the news Airborne Regiment members of the UN Operation in Somalia (UNOSOM II), will deliver its final report at the end of June, it was announced on January 12. The commission’s interviews with those involved in the incident will finish on March 31, but the president of the commission, Judge Gilles Letourneau, announced in January that this would not be time enough to interview certain key figures in the Canadian defence administration. Judge Letourneau, who had asked for an extension to his enquiry to October 1998, was given just three extra months to the June deadline. He announced that his commission was “profoundly disappointed” that the full extension had not been granted. Following the court martial of several members of the Airborne Regiment over the Beled Weyne incident, and the resulting disbanding of the regiment, allegations of a cover-up at the highest level of the armed forces were made in February.

The economy

UN agencies warn of a Four UN agencies joined forces to launch an urgent appeal for international aid new humanitarian crisis for Somalia on December 12. Donor assistance totalling over $46m during 1997 is needed to avert a humanitarian crisis on the same scale as that which occurred in 1991/92, when at least 300,000 people died of famine. The UN Development Programme (UNDP), the office of the UN High Commissioner for Refugees (UNHCR), the Wood Food Programme (WFP) and the UN Children’s Fund (Unicef) seek to channel the money into four sectors: emergency food aid and related actions ($16.4m); rehabilitation programmes ($9.4m); reintegra- tion of at least 430,000 refugees living in Ethiopia, Djibouti, Kenya and Yemen, plus 400,000 internally displaced people ($6.7m); and measures to improve security and foster local governance ($13.8m). Thirteen UN agencies still oper- ate in Somalia, despite continuing poor security in many areas and diminish- ing donor interest in the country. Although international staff have not worked in Mogadishu since the withdrawal of UNOSOM II in March 1995, UN programmes have been continued by local staff and non-governmental

organisations (NGOs). Elsewhere, however, particularly in the self-proclaimed Somaliland Republic, many local development projects are under way. Launch- ing the appeal, the UNDP resident representative and current UN and Humani- tarian Coordinator for Somalia, Dominik Langenbacher, said that “the cost of operating in Somalia is high, but the cost of abandoning the emergency areas is even higher”.

Drought hits the Bay and Severe drought was affecting 70% of the population of the southern Bay and Bakool regions— Bakool regions where food, water and medicine were urgently needed, according to a broadcast on Radio Mogadishu (pro-Aideed) in early February. Appeals to international relief agencies for help will be met by the UNDP and the US Agency for International Development (USAID), it was announced on Radio Mogadishu (pro-Ali Mahdi) after a meeting between Mr Ali Mahdi and aid agency officials on February 4.

—and the Shabeelle river 500 families in the central Shabeelle valley lost their homes when the river floods burst its banks after heavy rain at the end of the first week in November. About 2,000 ha of maize, sesame and rice fields were also destroyed in the floods that hit the Jowhar district, 90 km north of Mogadishu.

An accord is signed for An accord for the repatriation of 10,000 Somali refugees from Ethiopia was refugees to return from signed by the Ethiopian government and the UNHCR on January 21. The Ethiopia agreement covers a pilot programme for the eventual full repatriation of 275,000 Somalis in Ethiopian camps announced in August 1996. The pilot repatriation commences with 2,600 Somalis from the Teferi Bir refugee camp who will be transported to Somaliland by truck at the rate of 150 per day.

A Scandinavian The Swedish immigration office announced on January 9 that a delegation from delegation will assess the three Scandinavian countries (Denmark, Finland and Sweden) would visit the security situation south of the country in February to assess the security situation and evaluate the possible dangers facing unsuccessful Somali asylum-seekers who are returned to their country of origin. The Swedish authority considers that most Somalis seeking asylum could safely return to Somalia, with the exception of those from southern parts where armed clashes between rival factions continue.

News from the Somaliland Republic

The search for a new Progress continues towards the election of a new president for the self-styled president continues— Somaliland Republic, following the resignation of Mohamed Ibrahim Egal in October. The third Congress of the Communities of the Republic of Somaliland (CCRS) meeting in the capital Hargeisa, agreed on the necessary qualifications for presidential candidates on December 7 after two days of voting. Among the ten qualifications agreed on was that a candidate must be a Somaliland citizen, although he may be a refugee residing in another country. He must also be a Muslim and at least 40 years old.

—although Mr Egal seems Mr Egal appears to continue to be acting as president, however, despite pub- to be holding the reins licly standing down in October. Radio Hargeisa reported his presidential decree of November 6 to pardon 669 prisoners of war captured during “various civil

wars”. Certainly Mr Egal is the man the National Salvation Council (NSC) formed in Sodere wants to deal with. Mr Egal was invited to take part in NSC business, Ali Mahdi Mohamed said in Mogadishu in mid-January, and the NSC has established a committee to contact him. The NSC is unlikely, however, to get a very positive response from Mr Egal or his successor as members of the NSC have been quoted on numerous occasions as saying that they are convinced that Somalia is an indivisible whole. For most Somalilanders, their secession is non-negotiable. The CCRS responded on January 5 to calls from Sodere to get involved in the NSC, calling them “flagrant interference in the internal affairs of Somaliland”.

The Somaliland army Two battle tanks, 11 “technicals” and 400 militiamen drawn from communi- absorbs some of its former ties west of Burao were officially presented to the government and incorpor- adversaries ated into the national armed forces in a ceremony attended by the minister of defence, Radio Hargeisa reported on December 28. Until January this force had been fighting against Mr Egal’s government troops (2nd quarter 1996, page 34). Two days later, the government called on UN and international aid agencies to resume their work in Somaliland’s three eastern provinces of Togdheer, Sanaag and Sool now that peace had formally been re-established in these areas.

Berbera rehabilitation Four contracts were awarded in October for the EU-funded $1.2m rehabilitation work to finish by August programme of the port at Berbera, with August set as the completion date. The contracts are for repairs to a wharf, port buildings and a workshop damaged during the civil war. A report in a London-based newsletter, Africa Analysis, on November 11 suggested that the northern port was generating 85% of government revenue. The dominant export, livestock, was estimated to number more than 3 million animals in 1995, most of them bound for Saudi Arabia and Yemen. Berbera is also to be included in a $18m project to modernise microwave links between major settlements in the Horn of Africa. The scheme, announced by the Intergovernmental Authority on Development (IGAD) in January, will also upgrade facilities in Hargeisa, Addis Ababa, Assab, Dessi, Djibouti and Nairobi.

Djibouti

Political structure

Official name République de Djibouti

Form of state Unitary republic

Legal system Based on the Code Napoléon. A referendum in September 1992 endorsed a new constitution which provides for a maximum of four political parties

National legislature Assemblée nationale; 65 deputies, elected by universal suffrage, serve a five-year term. The Rassemblement populaire pour le progrès (RPP) holds all seats

National elections Last elections December 1992 (legislative); May 1993 (presidential); next elections due December 1997 (legislative); April 1999 (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 major reshuffle March 1996

Main political parties RPP, the former sole legal party, split in May 1996, with dissident members forming the Groupe pour la démocratie et la république (RPP-GDR); Parti national démocratique (PND); Parti pour le renouveau démocratique (PRD). In November 1991 the Front pour la restauration de l’unité et de la démocratie (FRUD) launched an armed Afar rebellion against the government. In December 1994 the government signed a peace agreement with a faction of FRUD, two members of which joined the government in June 1995. This faction was legalised as a political party in March 1996

Head of state Hassan Gouled Aptidon Prime minister, minister for planning & land development Barkat Gourad Hamadou

Key ministers Agriculture & water resources Ougoureh Kifle Ahmed Civil service & administrative reform Mohamed Dini Farah Commerce & tourism Rifki Abdulkader Finance & economy Mohamed Ali Mohamed Foreign affairs & cooperation Mohamed Moussa Chehem Health & social affairs Ali Mohamed Daoud Industry, energy & mines Ali Abdi Farah Interior & regional administration Idris Harbi Farah Justice, religious affairs & prisons Hassan Farah Miguil Labour & training Osman Robleh Daich National defence Abdullah Chirwa Djibril National education Ahmed Guire Waberi Public works, housing & construction Atayeh Ismail Waiss Transport, communications, port & maritime affairs Salah Omar Hildid Youth, sports & culture Mohamed Balad Abdon

Central bank governor Djama Mohamed Haid

Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995 1996 GDP at market prices Dfr bn 80.7 83.3a n/a n/a n/a Real GDP growth % –1.0 0.3a –2.9b –3.1b n/a Populationc ’000 550 560 570 580 n/a Exports fobd $ m 53 71a 56 34 n/a Imports fobd $ m 271 255a 237 205 n/a Current account $ m –88 –34a 46 –23 n/a Reserves excl gold $ m 83.4 75.1 73.8 72.2 70.6e Total external debt $ m 192 225 247 n/a n/a External debt-service ratio % 3.4 2.1 2.3 n/a n/a Exchange rates (av) Dfr:FFr 33.6 31.4 32.0 35.6 34.7 Dfr:$ 177.7 177.7 177.7 177.1 177.7

February 21, 1997 Dfr177.7:$1

Origins of gross domestic product 1993 % of total Components of gross domestic product 1993a % of total Agriculture 2.8 Private consumption 78.7 Industry 21.2 Government consumption 36.0 Services 76.0 Gross domestic investment 11.9 GDP at factor cost 100.0 Net exports of goods & services –26.5 GDP at market prices 100.0

Principal exports 1988 $ m Principal imports cif 1988 $ m Re-exports 37 Consumer goods 115 Live animals 5 Food 67

Main destinations of exports 1995f % of total Main origins of imports 1995f % of total Somalia 42 Thailand 15 Ethiopia 35 France 13 Yemen 7 Ethiopia 8 Saudi Arabia 6 a Provisional. b IMF estimate. c UN figures, including refugees and expatriates. d Balance-of-payments basis. e September actual. f Based on partners’ trade returns, subject to a wide margin of error.

Outlook for 1997-98

Political parties remain The formal organisational structures of the government and opposition will weak continue to have only tenuous relevance to the real mechanisms of control and power in the Djiboutian state. The importance of the ruling Rassemblement populaire pour le progrès (RPP) and the three constitutionally recognised parties has declined further in the bitter and personalised political climate that has been intensifying over the past 18 months. In Djibouti’s increasingly clan-based polity, it seems unlikely that Parti pour le renouveau démocratique (PRD) will survive the sudden death of its leader, Mohamed Djama Elabe, in November. This leaves only the weaker of the two opposition formations, the Parti national démocratique (PND) of Aden Robleh Awale, which in June 1996 announced the creation of a common front with dissident RPP members led by Moumin Bahdon. Having been released from jail in January, Bahdon and the former presidential confidant, Ismael Omar Guedi, will act as a focus for opposition to Ismael Omar Guelleh, and will consequently attract substantial surveillance and repression.

Domestic divisions Short-term crisis management, together with uncertainty and pessimism over hamper regional longer term developments, seems uppermost in the minds of Djibouti’s mini- planning— scule but deeply divided political class as the twentieth anniversary of independence from France approaches. While the immediate imperative is to achieve short-term fiscal stabilisation, it is obstructed by simmering parochial rivalries over the presidential succession. Such intrigue and power struggles within both the government and the divided opposition factions continue to divert attention from Djibouti’s two key long-term concerns: the economic effects of the progressive reduction in the French military presence, and the corresponding need for more profitable economic integration with neighbouring countries. Officially, France is committed to maintaining its military presence in Djibouti. However, it is increasingly evident that cuts in finance and personnel cannot be postponed indefinitely. In terms of regional integration, the minister of foreign affairs and cooperation, Mohamed Moussa Chehem, has encouraged the recent revival of the Djibouti-based Intergovernmental Authority on Development (IGAD), but domestic strife has deprived Djibouti of an integrated plan for maximising economic gains from regional cooperation within the IGAD framework. Such a plan needs to combine current structural economic reforms, particularly the improvement of the port as well as of road and rail links to Ethiopia.

—and lead to erratic Predictably patchy progress with the economic reform programme, notably in progress on economic reducing both government debt and current expenditure, means that the time- reforms table for the current phase of structural adjustment will almost certainly have to be extended. Achieving the 1997 budgetary target of total government expenditure below 31% of GDP rests on the ability of the government to trim its bill for wages and benefits for civil servants and increase revenue from the port. The largest savings are scheduled to come from reducing housing and transport allowances. This time, the changes must be handled with greater tact than in August 1995, when clumsy attempts to curb expenditure prompted a general strike and widespread social unrest. The cuts will inevitably meet with resistance

Djibouti: gross domestic product from civil servants, worsening already extremely volatile labour relations. On % change, year on year the revenue side, budget proposals to increase excise taxes on luxuries and 3 impose a Dfr500 ($3) stamp duty on all customs declarations have already 2 provoked protests from both Djiboutian and French residents. This highlights

1 the paradox that the French-inspired austerity plan is increasing the financial (a) burden on the cosseted French business and military interests in Djibouti, exac- 0 erbating their growing disenchantment with the former Red Sea colony. -1 The government’s capacity to prepare and implement structural reforms pro- Djibouti (a) -2 Africa posed for 1997 (privatisations, further port tariff reform, army demobilisation

-3 and the introduction of a new labour code) will remain constrained by a lack (b) (b) of both qualified personnel and political cohesion. However, some progress is -4 1991 92 93 94 95 likely, if only to meet donors minimum conditions for additional credits. (a) Provisional. (b) IMF estimate. Sources: EIU; IMF, World Economic Outlook. Funding for the next stage of reform should come from a repeatedly postponed donors’ conference, now tentatively scheduled to be held in Geneva in late March.

Review

The political scene

Moumin Bahdon and Four senior politicians who were jailed in August 1996 for having openly other presidential critics criticised the president, Hassan Gouled Aptidon, were released on January 9. are released— Officially the detainees were granted a presidential pardon to mark the beginning of Ramadan, although in practice they had all just served their six-month prison sentences. A total of 82 inmates were pardoned.

The four released included the former justice minister and prime minister, Moumin Bahdon Farah; Aptidon’s directeur de cabinet until early 1996, Ismael Omar Guedi; and two other senior members of the ruling Rassemblement populaire pour le progrès (RPP). The former industry minister, Ali Mohamed Houmed, had been released a fortnight previously due to illness. Although formally found guilty of slander, in practice the sentences were a way of silenc- ing what was perceived by the president’s nephew and heir apparent, Ismael Omar Guelleh, and the presidential entourage as a challenge to their power base. Following his dismissal from the cabinet in March, Moumin Bahdon along with a dozen deputés had created a dissident wing of the RPP (he had hitherto been RPP secretary-general), named the Groupe pour la démocratie et la république (RPP-GDR).

—but remain barred from Having stripped them of their parliamentary immunity in order to try the five public office deputés (who were elected to the 65-member Assemblée nationale in the December 1992 legislative elections), the court also suspended their civil rights, legally barring them from standing for public office for five years. On his release from prison, Moumin Bahdon called for the civil rights to be restored. He said that “even if we do not run for office, we can then support and elect whoever we like ... we have no faith in the judiciary”. He claimed that they were prosecuted because “the president wanted at all costs to deprive us of our

rights and our parliamentary privileges”, adding that he and his colleagues would continue to campaign peacefully for change in Djibouti.

An opposition leader dies The leader of the opposition Parti pour le renouveau démocratique (PRD), in Paris Mohamed Djama Elabe, died in a Paris hospital on November 26. He had arrived in Paris from Djibouti the previous week, suffering from an unspecified illness. Elabe was dismissed from the last of an illustrious series of ministerial posts in January 1992, after expressing his opposition to the government strategy to quell the mainly Afar insurgency in the north and west of the country. Elabe, who at the time was widely regarded as France’s preferred candidate to succeed Aptidon, then formed his own party. The PRD subsequently participated in the discussions in Paris which spawned the opposition umbrella Front uni de l’opposition djiboutienne (FUOD). However, Elabe and the PRD were only intermittent participants in FUOD. Elabe’s apparent antipathy towards FUOD contributed to the failure of Ahmed Dini’s Front pour la restauration de l’unité et de la démocratie (FRUD) to rally civilian opposition forces in what had been envisaged as a united opposition front. FRUD’s efforts, spearheaded by a primarily Afar guerrilla force, led to an unsuccessful military challenge to the government in 1991-93.

Elabe’s PRD emerged as the primary challenger to Aptidon’s ruling RPP in the legislative elections of December 1992, which were practically forced upon a beleaguered government by France. Despite widespread fraud, the PRD gained 28% of the vote in the polls and Elabe himself then stood against Aptidon in the May 1993 presidential election, gaining 22% of the vote. Extending condo- lences to Elabe’s family, Aptidon glossed over the bitterness of recent years, describing Elabe as an enlightened politician who contributed to the construction of the Djiboutian nation.

Teachers’ union leaders Payments of salaries and pensions continue to be considerably delayed, contrib- are arrested uting to the volatile climate of poor labour relations which underpins tensions in Djibouti-ville. Teachers, who constitute the largest professional group on the state payroll, continue to lobby for the payment of salary arrears and a commitment to maintaining employment levels in the face of current budgetary austerity. A demonstration scheduled for December 18 was broken up by the security forces, and 14 teachers were arrested. Most were later released.

In a bizarre twist to November’s Ethiopian hijacking tragedy (see Ethiopia: Infrastructure and tourism), a Djiboutian teachers union leader, Suleiman Ahmed Mohamed, was detained, along with a Kenyan who also survived the crash-landing, for a week in Comoros following the disaster. The men had been mistakenly identified as the hijackers and were released with apologies from the Comorian authorities.

Somaliland protests to On February 10 the government of the self-proclaimed Somaliland Republic Djibouti over the new stated in a letter to the Djiboutian president that it rejected the invitation to join Somali alliance the newly formed Somali National Salvation Council (NSC), created in early January with Ethiopian backing (see Ethiopia: The political scene; Somalia: The political scene). The message, from Somaliland’s putative president, Mohamed Ibrahim Egal, was delivered by his justice minister, who issued similar

statements to the French and US embassies and the Intergovernmental Author- ity on Development (IGAD) in Djibouti. Like the other Somali factions, neither the NSC nor any of its components, acknowledge the de facto independence of Somaliland. There was no official Djiboutian response to the creation of the NSC, although Djibouti continues to be courted by all those involved in the Somali imbroglio, and one of the main faction leaders and head of the NSC, Ali Mahdi Mohamed, visited in September (4th quarter 1996, page 43).

Yemen’s president visits Aptidon received Yemen’s president, Ali Abdullah Saleh, for an unprecedented two day visit in December. Little of substance emerged publicly from the meetings, with predictably woolly statements about strengthening regional peace and stability. Just 30 km separates Djibouti’s northern coastline from the Yemeni island of Pemba, and French forces stationed in Djibouti fly daily over the Bab al-Mandab southern entrance to the Red Sea and Yemen’s western coastline. In addition to trade and maritime links, a small but economically significant minority of Djibouti’s population is of Yemeni origin.

Behind the pious exchange of fraternal greetings between the Red Sea neighbours are three factors which have complicated relations in recent years. The first of these is Djibouti’s awkward geographic and diplomatic position in the dispute between Yemen and Eritrea over the Hanish islands (see Eritrea: The political scene). When hostilities erupted in December 1995 Djibouti was formally neutral. However, with Aptidon ill in Paris at the time, in practice some aides of the presidential heir-apparent, Ismael Omar Guelleh, sided with Yemen. This apparently prompted the somewhat surreal Djiboutian denuncia- tion of an Eritrean incursion over the northern border in April 1996. Djibouti was also drawn into the Eritrean-Yemeni competition over the acquisition of Ethiopia’s defunct navy when it was auctioned last autumn. While formally outside Djiboutian jurisdiction, the navy’s presence in Djibouti complicated relations with its two neighbours. The final details of the sale remain obscure. Four patrol boats have reportedly left for Eritrea. In November Djibouti itself announced that it had taken ownership of one of the speedboats sold.

The third, lingering issue between Djibouti and Yemen, which Mr Saleh’s visit seems to have partly dissipated, is the respective governments’ support for each other’s opponents. Yemen took an ambiguous stance in Djibouti’s 1991-93 civil war. The mainly Afar rebel movement, FRUD, had an office in Aden and its leader Ahmed Dini was a frequent visitor to Yemen. Conversely, during the brief but intense fighting between the forces of the newly unified north and south Yemen two years ago, Djibouti became a somewhat reluctant host to elements loyal to the southern forces who fled the fighting. Speaking to a London-based Arab newspaper, Al-Quds al-Arabi, the Yemeni foreign minister dismissed as “illogical” the claim that the president’s state visit to Djibouti was part of a strategy to move closer to the IGAD states of the Horn in order to compensate for the reluctance of the Gulf Cooperation Council members to accept Yemen as a member.

The economy

Economic reforms limp Entirely predictably, both the pace and content of the ongoing economic reform along— programme continue to be inconsistent. Failures to meet the financial criteria established with the IMF led to a postponement of the disbursal of the second instalment of a SDR4.6m ($6.6m) credit agreed in April 1996. Wrangling over conditionality with France also delayed payment of part of the FFr53m ($9.3m) assistance package finally agreed between the French cooperation minister, Jacques Godfrain, and his Djiboutian counterpart, Mohamed Moussa Chehem, in September. The attitudes of the IMF and France, combined with problems in rescheduling debts to France, which prompted an unanticipated accumula- tion of arrears (reportedly totalling $25.4m), provided a rather sombre backdrop to the negotiation of the 1997 budget.

—as French support is Figures from a World Bank report on Djibouti’s dependence on French spend- declining ing, published in the French press in January, show steadily declining French transfers over the past four years. Direct budgetary support from France has reportedly fallen from an average of $50m per year in the first 15 years of independence to $43m in 1993 and $24m in 1994, and to $27m and $21m respectively in 1995 and 1996. The contribution of the French garrison in Djibouti to the local economy is greater than that of either direct French budgetary support or programme assistance. In 1996 the indirect financial contribution to the local economy of the 3,800 French troops based in Djibouti (and an estimated 5,000 dependants) was estimated at $53m, the lowest figure since 1993. The Bank estimates the value of French diplomatic and other staff in Djibouti, plus the programmes of the Caisse française de développement (CFD, the French development bank) to have been $4.5m in 1996.

France questions the As the direct and indirect expenditure of the French military presence makes the future of its military largest contribution to Djibouti’s national income, it is little wonder that de- commitment bates over the future of France’s garrison feature prominently in projections of economic growth in the city-state. The visits to Djibouti by both the French minister of cooperation in April 1996, and the defence minister, Charles Millon, in January 1996 aimed to reassure Djiboutians and neighbouring states of France’s unwavering commitment to maintaining its garrison in the Horn, regardless of the substantial military reforms announced at home (2nd quarter 1996, page 43). With 3,800 troops, Djibouti remains France’s largest overseas military base, housing over 45% of all its troops in Africa.

Speaking to domestic French media on January 9, a year after his trip to Djibouti, Mr Millon suggested publicly for the first time that France might reconsider its military commitment to Africa. While Djibouti is likely to retain its preeminent position as the only base in Africa housing two regiments for the foreseeable future, it will not be immune to personnel and budgetary cuts. World Bank consultants working on projections of possible future economic developments have reportedly begun calculating the likely effects of a staged reduction of French troop levels in Djibouti.

The current exceptional size of the Djiboutian garrison stems partly from the wide range of operations in which its forces are involved, notably in France’s

Indian Ocean territories as well as the Gulf, Rwanda and Somalia. In February two transport planes and helicopters were dispatched from Djibouti to assist in the recovery operation after a cyclone hit Madagascar.

In a development apparently unrelated to ongoing military reforms, the French press revealed in November that foreign legion troops based in Djibouti have been trained and equipped for urban crowd and riot control. The monthly in-house magazine of the legion reported that its members had taken part in mock crowd-control exercises in Djibouti-ville in September equipped with truncheons and riot shields. While this was presented as part of a strategy “to protect French citizens” in the event of urban unrest, it sits uncomfortably alongside the French forces’ long-established stance of eschewing any publi- cised role in internal Djiboutian affairs.

Djibouti takes a back seat Djibouti is home to the secretariat of the increasingly active regional body, the in IGAD Intergovernmental Authority on Development (IGAD). While it hosted an IGAD heads of state summit meeting in late November 1996, Djibouti’s leaders appear too preoccupied with domestic problems to benefit from the potential diplomatic and economic opportunities the regional grouping offers the host country. November’s meeting was chaired by the Kenyan president, Daniel arap Moi, and was attended by the presidents of Eritrea, Sudan and Djibouti as well as the prime ministers of Ethiopia and Uganda and the head of the Addis Ababa-based Organisation of African Unity (OAU).

In the past two years the diplomatic energies of IGAD have been absorbed by the conflict in Sudan. IGAD’s two-track mission, to act as a forum for discussing regional disputes on the one hand and to promote economic development on the other, continues to exist. At the November summit IGAD’s secretary- general, Tekeste Gebray, announced the creation of a new division aimed at reconciling regional conflicts, particularly in Sudan and Somalia. More significantly, the summit also endorsed a series of project proposals aimed at long- term improvements in regional infrastructure and economic integration. Two of the dozen projects proposed for donor funding concern Djibouti, including a $4.6m proposition for the upgrading of the spur road from region’s busiest highway, linking the Ethiopian capital Addis to the Eritrean port of Assab, to Yoboki in northern Djibouti via the border town of Galafi. At present, traffic across the border is minimal, consisting primarily of contraband and qat.

The second infrastructure project involving Djibouti is a $15m funding applic- ation for a component of the rehabilitation of the dilapidated Djibouti-Addis railway.

EU grants support for Multilateral donors, in particular the EU and the World Bank, are keen to regional integration support regional infrastructure projects proposed under the auspices of IGAD. The EU commissioner for external relations (Africa, Caribbean and Pacific), João de Deus Pinheiro, toured the Horn of Africa in late January, pledging support for IGAD’s initiatives on both conflict management and regional economic development. In late November 1996 the EU granted Ecu22m ($25m) to Djibouti in project aid within the framework of the European Development Fund’s eighth funding programme (EDF VIII). The EDF VIII intends to make available a total of Ecu194m for the Horn of Africa as a whole. Djibouti’s money is earmarked

principally for the road and rail projects proposed by IGAD and for attempts to improve rural and urban health within Djibouti by upgrading water supplies. The previous, seventh EU funding programme currently funds veterinary projects (Ecu212,000), the provision of computer equipment to the Banque nationale de Djibouti (the central bank) (Ecu250,000) and general balance-of-payments support (Ecu4.1m).

An oil contract is queried Concern over the lack of transparency in the commercial dealings of the government were underlined by the announcement in early January that the contract to supply electricity to the state-owned Electricité de Djibouti (EDD) had gone to a previously unknown firm. Fuel had formerly been supplied to EDD by Shell, which has a significant presence in both Djibouti and neighbouring Ethiopia and Eritrea. The company which won the contract, Petrotrade Middle East, was formed only in December 1996 by a group of Djiboutian businessmen who tendered a significantly lower price than the established oil companies in Djibouti. Petrotrade reportedly lacks any storage and processing facilities in Djibouti port, from which fuel is transferred to the ageing Boualos generating plant.

Djibouti’s external Current-account figures recently published by the IMF reveal previously un- performance remains available data for 1994 and 1995. Djibouti’s trade deficit is structural, given the weak country’s small export base and large import requirements. However, export revenue has been shrinking, from $71m in 1993 to under $34m in 1995, probably reflecting a reduction in Ethiopian goods exported through Djibouti. A worsening trade balance was only avoided by cuts in the import bill. Inflows from service provisions (largely through the port) have remained fairly stable, while outflows have declined in line with imports. Following a dip in 1994, transfer payments, mostly grant aid, recovered to $85m in 1995. This, together with a slightly narrowed goods and services deficit, has allowed a reduction in the overall current-account deficit from $88m in 1992 to $23m in 1995.

Djibouti: current account ($ m) 1992 1993 1994 1995 Merchandise exports fob 53.2 71.2 56.4 33.5 Merchandise imports fob –271.0 –255.1 –237.1 –205.0 Trade balance –217.8 –183.9 –180.7 –171.5 Services: credit 145.1 156.9 152.3 151.4 Services: debit –109.3 –110.8 –89.7 –87.2 Income: credit 29.4 30.3 23.7 25.9 Income: debit –9.4 –7.2 –7.0 –8.7 Transfers: credit 90.7 96.6 73.7 85.4 Transfers: debit –16.3 –16.1 –18.3 –18.4 Current-account balance –87.5 –34.3 –46.1 –23.0 Source: IMF, International Financial Statistics.

EIU Country Report 1st quarter 1997 © The Economist Intelligence Unit Limited 1997 Quarterly indicators and trade data 55

Quarterly indicators and trade data

Ethiopia: quarterly indicators of economic activity

1994 1995 1996 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr Production Annual totals Coffee ’000 tons ( 180a ) ( 195a ) ( n/a ) Prices Monthly av Consumer prices, Addis Ababa: 1990=100 167.1 171.3 174.8 178.1 191.4 188.1 177.9 179.0 177.3 177.1 change year on year % 5.2 9.4 14.8 14.7 14.5 9.8 1.8 0.5 –7.4 n/a Money End-Qtr M1, seasonally adj: Birr m 8,100 8,583 9,127 9,194 9,547 9,609 9,374 9,177 9,588 9,608b change year on year % 9.1 16.1 21.0 19.2 17.9 12.0 2.7 –0.2 0.4 n/a Foreign trade Qtrly totals Exports fob Birr m 515.8 549.3 725.4 468.2 988.7 691.8 454.2 548.8 n/a n/a Imports cif “ 1,401.8 1,582.4 1,525.3 1,431.2 n/a n/a n/a n/a n/a n/a Exchange holdings End-Qtr National Bank: goldc $ m 32.5 32.7 33.1 32.1 32.9 32.9 32.7 33.9 10.2 0.6d foreign exchange “ 542.7 464.0 533.6 618.3 594.3 724.8 760.8 818.2 890.4 821.0e Exchange rate Market rate Birr:$ 5.66 5.60 5.95 5.94 6.25 6.30 6.32 6.32 6.35 6.34b

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Estimate. b End-August. c End-quarter holdings at quarter’s average of London daily price less 25%. d End-4 Qtr, 0.6. e End-4 Qtr, 722.0.

Sources: FAO, Quarterly Bulletin of Statistics; IMF, International Financial Statistics.

Djibouti: quarterly indicators of economic activity

1994 1995 1996 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr Money End-Qtr M1, seasonally adj: Dfr bn 36.88 37.92 38.42 37.99 36.77 36.22 37.41 35.01 36.14 n/a change year on year % 1.6 3.0 3.3 1.6 –0.3 –4.5 –2.6 –7.8 –1.7 n/a Foreign tradea Annual totals Exports fob $ m ( 117 ) ( 108 ) ( n/a ) Imports cif “ ( 380 ) ( 430 ) ( n/a ) Exchange holdings End-Qtr Foreign exchange $ m 79.3 84.5 73.6 67.9 75.5 72.7 72.1 70.9 73.5 70.4 Exchange rate Market rate Dfr:$ 177.72 177.72 177.72 177.72 177.72 177.72 177.72 177.72 177.72 177.72

Note. Annual figures of most of the series shown above will be found in the Country Profile. a DOTS estimate.

Source: IMF, International Financial Statistics; IMF, Direction of Trade Statistics, Yearbook.

EIU Country Report 1st quarter 1997 © The Economist Intelligence Unit Limited 1997 56 Quarterly indicators and trade data

Ethiopia: trade with major trading partnersa ($ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Imports cif 1992 1993 1994 1995 Exports fob 1992 1993 1994 1995 Italy 127 190 162 221 Germany 27 46 80 156 USA 274 151 157 163 Japan 40 42 61 56 Germany 101 114 117 124 Italy 18 32 32 48 Japan 51 78 80 120 USA 8 21 33 31 UK 104 95 81 93 UK 21 18 18 23 France 44 38 62 65 Saudi Arabia 16 6 4 22 Saudi Arabia 148 85 50 57 France 14 10 15 21 Belgium-Luxembourg 56 35 40 48 Djibouti 8 10 11 14 Total incl others 1,265 1,146 1,106 1,359 Total incl others 187 243 312 452 a Derived.

Source: IMF, Direction of Trade Statistics, Yearbook.

Somalia: trade with major trading partnersa ($ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Imports cif 1992 1993 1994 1995 Exports fob 1992 1993 1994 1995 Kenya 33 45 53 65 Saudi Arabia 50 60 70 89 Djibouti 28 33 40 49 Yemen 45 40 26 21 Pakistan 1 2 5 17 Italy 12 7 16 20 Saudi Arabia 6 31 14 16 UAE 12 7 13 15 Brazil 4 3 21 13 Pakistan 1 1 2 2 USA 23 34 33 9 China 1 1 1 1 Total incl others 228 277 297 271 Total incl others 130 121 143 155 a Derived.

Source: IMF, Direction of Trade Statistics, Yearbook.

Djibouti: trade with major trading partnersa ($ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Imports cif 1992 1993 1994 1995 Exports fob 1992 1993 1994 1995 Thailand 34 41 58 65 Somalia 26 30 36 45 Ethiopia 20 23 28 34 Ethiopia 22 26 31 38 Saudi Arabia 31 50 22 25 Yemen 19 45 44 8 Italy 29 28 24 24 Total incl others 75 110 117 108 Total incl others 480 442 380 430 a Derived.

Source: IMF, Direction of Trade Statistics, Yearbook.