Ethiopia Eritrea Somalia Djibouti

COUNTRY REPORT

4th 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 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through 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 1998-99 8 Review 8 The political scene 11 The economy 13 Agriculture 13 Foreign trade and payments

Eritrea 15 Political structure 16 Outlook for 1998-99 16 Review 16 The political scene 19 The economy

Somalia 22 Political structure 23 Economic structure 24 Outlook for 1998-99 25 Review 25 The political scene 29 The economy 29 News from the Somaliland Republic

Djibouti 32 Political structure 33 Economic structure 34 Outlook for 1998-99 35 Review 35 The political scene 38 The economy

41 Quarterly indicators and trade data

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List of tables 41 Ethiopia: quarterly indicators of economic activity 41 Djibouti: quarterly indicators of economic activity 42 Ethiopia: foreign trade 42 Djibouti: foreign trade 43 Somalia: trade with major trading partnersa 43 Djibouti: trade with major trading partnersa

List of figures 7 Ethiopia: gross domestic product

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December 1st 1997 Summary

4th quarter 1997

Ethiopia Outlook for 1998-99: Economic growth in 1998 will be slower than forecast owing to the current, poor main-crop harvest which will depress economic growth in 1997/98. The introduction of new birr notes in the wake of Eritrea’s creation of a separate currency will create some problems but is unlikely to have a detrimental impact upon the economy. Divisions within the components of the ruling EPRDF will remain of more significance than the country’s small urban opposition parties.

Review: Clandestine negotiations between the government and the OLF have collapsed. The regional governments in both Region 2 (Afar) and Region 5 (Somali) are still embroiled in internal wrangles. The French foreign minister has visited. The armed forces may be allowed to engage in private trade. New birr currency notes are being issued. Electricity rationing has been introduced. A second foreign company is to invest in a new brewery. Late rains have hit the grain crop. Germany has cancelled 80% of Ethiopia’s bilateral debt

Eritrea Outlook for 1998-99: Relations with Sudan will remain problematic, with a continued threat of military confrontation, while the unresolved issue of drilling rights in the Red Sea will lead to a deterioration of relations with Yemen. The parity of the new currency with the Ethiopian birr may prove hard to sustain. More foreign oil exploration is likely.

Review: The risk of military clashes between Eritrea and Sudan has height- ened with reports of skirmishes inside Eritrea. The dispute with Yemen over the Hanish islands has gone to an international tribunal. The development of regional links has been a focus of foreign policy, including in the Great Lakes Region. A national currency has been introduced. More foreign companies have submitted bids for oil exploration licences. Multilateral and bilateral aid has been agreed for port and fishing development. Nine government companies are up for sale.

Somalia Outlook for 1998-99: The momentum of the peace process is picking up, although small-scale fighting will continue in regions outside Mogadishu, particularly Bay and Bakool. Severe floods will result in a serious food deficit next year and Somalia will remain dependent on international aid. Somaliland will not negotiate on its independence, a stand which will be reinforced if, as is rumoured, it receives diplomatic recognition in 1998.

Review: Intense diplomatic efforts have continued with the aim of getting the three main faction leaders to a reconciliation conference. Despite misgivings about the Sodere peace process, because of Ethiopia’s involvement, Mr Aideed did attend preparatory talks in Cairo. The last quarter has seen relative peace between the main militias in Mogadishu. In other regions fighting has continued and many of the remaining aid workers have left. Widespread floods have hit the south, making some 800 000 people made homeless. The Somaliland Republic has refused to engage in the Sodere peace process.

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The cabinet has been reshuffled. Denmark’s parliament blocks a proposed aid package.

Djibouti Outlook for 1998-99: December’s legislative elections will result in victory for the ruling party, consolidating Ismael Omar Guelleh’s hopes of the presidential succession. Military co-operation with Ethiopia is likely to strengthen. Demobilisation of the army will proceed slowly, suggesting that budgetary targets will not be met.

Review: FRUD militia loyal to the exiled Ahmed Dini have clashed with government troops in the north, prompting closer military co-operation between Djibouti and Ethiopia, with the latter expelling Djiboutian Afar activists. Rifts within the opposition parties will aid the ruling RPP in the legislative elections. Djibouti has introduced visa requirements for French nationals. Demobilisation of some 8,500 military personnel is due by the end of 1998. Air Djibouti has been transferred to a private company.

Editor: Piers Haben 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 Peoples’ 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 by 2000 (federal and regional)

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

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

Main political parties The Ethiopian People’s Revolutionary Democratic Front (EPRDF) has evolved from the coalition of armed groups that seized power in 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 1992 and was subsequently banned. Several urban opposition parties boycotted the elections in 1995. A myriad of exiled political factions exist

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 Worede Woldu Wolde 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 19.9 25.2 26.2 31.4 35.7b Real GDP growtha % 12.0 1.7 4.8 7.7b 6.5b Consumer price inflation % 10.5 3.5 7.6 10.1 –6.9 Populationc m 51.6 53.2 54.9 56.7 n/a Exports fob $ m 170 199 372 423 418c Imports fob $ m 993 706 926 1,148 1,235c Current account $ m –120 –50 125 –9.7b –102.3c Reserves excl gold $ m 232 456 544 772 732 Total external debt $ m 4,343 4,661 5,001 5,221 n/a External debt-service ratio % 14.1 12.5 13.8 13.6 n/a Coffee productiond ’000 tonnes 210 222 228b 230b 230b Exchange rate (av) Birr:$ 2.81 5.00 5.09 6.15 6.35

November 28th 1997 Birr6.67:$1

Origins of gross domestic product 1995b % of total Components of gross domestic product 1995b % of total Agriculture & forestry 55.3 Private consumption 81.1 Other production sectors 11.9 Government consumption 12.3 Manufacturing 7.5 Gross fixed capital formation 15.6 Services 32.8 Exports of goods & services 14.2 GDP at factor cost 100.0 Imports of goods & services –23.2 GDP at market prices 100.0

Principal exports 1995a $ m Principal imports 1994a $ m Coffee 269 Motor vehicles 171 Hides & skins 56 Food & live animals 153 Gold 23 Machinery & aircraft 120 Oil seeds 9 Metals & metal products 95

Main destinations of exports 1996a % of total Main origins of imports 1994a % of total Germany 26.4 Saudi Arabia 4.4 Japan 10.9 US 11.7 Italy 10.3 Italy 12.5 UK 7.7 Germany 7.5 a Fiscal years starting July 8th. Fiscal years are widely used by national statistical sources, while calendar years are favoured by international publications. b Provisional. c Official estimates. d Crop years (October-September) beginning in calendar years.

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Outlook for 1998-99

Poor crops will dampen The 6-7% growth in GDP that is likely to have been recorded in 1996/97 (year economic growth starting July 8th) will not be matched in 1997/98, owing to recent exceptionally heavy rains, which have caused widespread damage to crops awaiting harvest and created poor storage conditions for grains. Ethiopia will conse- quently face severe food deficits during 1998, particularly as food stocks were depleted by the failure of the lesser belg harvests in some parts of the country earlier in 1997. In addition to poor harvests, other factors are likely to ensure that economic growth in 1998 remains subdued. Despite the government’s stated policy of liberalising the economy, it is doubtful whether substantial economic reforms will take place in 1998. The economy will remain in a limited number of hands, many with close links to the government, and the decision to allow the army to participate in private- sector activities is likely to strengthen this trend. As the government concentrates on maintaining domestic stability it will continue to use patronage to ensure support from its allies.

Eritrea’s new currency The formal disentangling of the Ethiopian and Eritrea economies, which began will generate problems with the separation of Eritrea in 1991, should be complete by January 1998 when the new currency, the nakfa, becomes fully operational in neighbouring Ethiopia: gross domestic product Eritrea. Ethiopia has, at the same time, issued new birr notes, giving greater % change, year on year control over the flood of repatriated notes expected from Eritrea. With no 12 indications of any change in the tight monetary policy of the National Bank of Ethiopia (a) 10 Ethiopia (NBE), the effects of the changeover are likely to be limited. The NBE Africa is currently more concerned about the likely inflationary implications of poor 8 harvests and the continuing debate over liberalising interest rates.

6 The main uncertainties in Ethiopia concerning the creation of the Eritrean

4 nakfa continue to be its likely impact on bilateral trade, on payment for access to the Eritrean port of Assab and on personal remittances from Eritrea. The 2 decision to use international currencies for crossborder transactions will dis-

0 rupt trade, while the industry ministry’s introduction of crossborder licensing 1992 93 94 95(b) 96(b) for goods valued at over Birr2000 ($300) will create an incentive for smuggling. (a) Fiscal years starting Jul 8th. (b) Provisional. Sources: EIU; IMF, World Economic Outlook. It is also unclear if parity between the Eritrean nafka and the Ethiopian birr is sustainable.

Key political debates will International attention in 1998 will continue to focus on relations between remain internal to government and the small but vociferous opposition groups in the capital city. government However, the actual policymaking process will remain internal to the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) and its regional administrations. Regional opposition has often been co-opted into these regional administrations, leading to internal power struggles. Where this has not occurred, the opposition has found itself outside the formal political system, which has led to armed conflict. It is, therefore, relations between the central government and the regions, and within the regions themselves, that will remain as the most important dynamic in Ethiopian politics in 1998.

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Review

The political scene

Relations with the Oromo Hopes of a reconciliation between the Ethiopian government and the rebel Liberation Front remain Oromo Liberation Front (OLF) have been dampened, following the OLF’s an- fraught— nouncement in mid-October that peace talks had been suspended, because of the government’s reluctance to make concessions While the government has maintained silence on this issue, rumours that discussions were being held were fuelled by reports that Lencho Letta was seen in Addis Ababa in September. He was a minister in the 1991 transitional government, but left it in 1992 when the OLF withdrew from the government. The OLF leadership subsequently splin- tered, with several leaders going into exile and others reverting to rural armed struggle against the government’s security forces. Lencho has now reportedly been reinstated in the OLF leadership.

While the OLF is trying to present a united, and thus more legitimate, leadership to press its demands on the government, these demands are unlikely to be accorded. In a rare interview published in October, the president, Negaso Gidada, himself an Oromo and a former member of the OLF when he was in exile in Germany, denounced the front as a criminal organisation.

—and the government The government’s hardening attitude to the OLF was displayed when the clamps down on terrorist police announced on October 8th that they had killed three alleged OLF mem- suspects bers in a shoot-out in the Mekanisa area of the capital. While the police claimed that the dead had been implicated in acts of violence, there were doubts over the circumstances of the shooting, and these were compounded by the subsequent arrest of a reporter and editors of an independent Oromo language paper who had reported the incident. Then, in early November, the police announced the arrest of three men believed to be responsible for a series of bomb attacks in the capital in April (2nd quarter 1997, page 8). Those injured in April included foreigners, which greatly enhanced the publicity surrounding the attacks. No organisation publicly claimed responsibility, and while the police implied that two of the three men had links to the OLF, they offered neither evidence nor motives when announcing the arrests.

Region 5 administration The unstable Somali regional government, which administers the large but in disarray, again— sparsely populated Region 5, has encountered renewed problems with a stand- off between the region’s president, Idd Tahir Farah, and his executive committee. An emergency meeting of the regional assembly in early October dismissed the whole executive committee and voted for an investigation into irregularities. Both the executive committee and the parliament are split between members of the Ethiopia Somali Democratic League (ESDL) and the Ogaden National Liberation Front (ONLF), which are themselves made up of narrower clan group- ings. The ESDL chairman and minister of transport, Abdul Mejid Hussein, backed the regional president, claiming that he had been the victim of a “coup” by rival committee members, and supported the regional parliament’s actions. This latest turn of events is a setback to hopes of a merger, discussed last April, between the ONLF and the ESDL (2nd quarter 1997, page 12).

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The ongoing dispute within the local leadership will complicate the distribution of emergency food aid in Region 5. Surveys in October suggest that food production in Hararghe during 1997 was well below average, while extensive flooding in October will have set back food distribution and the recovery of livestock herds, on which much of the region depends for its livelihood.

—and turmoil in Region 12 The administration of the small western region of Gambella (Region 12), has been similarly marked by infighting, prompting frequent intervention from the barely disguised hand of central government. In August the region’s principal administrator was arrested by his own police force after accusing police officers of corruption. Three other senior members were also arrested, apparently for disregarding federal government directives over the awarding of local government contracts.

The EPRDF tries to co-opt In August the government press announced that the Afar Revolutionary Demo- dissident Afars in cratic Unity Front (ARDUF), an Afar grouping in existence before the 1991 Region 2— change of government, had renounced its armed struggle against the representatives of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) in Region 2 and would be incorporated into the administration there. In October the Ethiopian news agency claimed that ARDUF had reorganised itself at a conference held in Assaita, the capital of Region 2, and implied that an alliance or merger with the Afar group allied to the EPRDF was probable. However, any co-opting of ARDUF into the regional government was rejected by a spokesman for the front in Europe, and there have been reports of violent incidents since then, involving members of ARDUF opposed to a merger.

—while helping Djibouti While the EPRDF attempts to co-opt at least part of the dissident ARDUF into in its clampdown the regional government, it has at the same time supported a clampdown on rebel Afar activities in neighbouring Djibouti. Anti-government Afar activists were arrested in Addis Ababa in September and deported, while Ethiopia’s security forces have reportedly aided the crackdown on Afar dissidents inside Djibouti.

Somalia turmoil remains The government has adopted a similar approach to Somalia. Since August 1996 a problem— Ethiopian troops have conducted a series of raids across the border into southern Somalia. The aim was to attack and disable Somali groups hostile to the EPRDF government, particularly the Al-Ittihad group, which is believed to have been responsible for a series of terrorist attacks in Ethiopia. At the same time the government has attempted to bolster the Somali reconciliation process, which it has promoted energetically since it first convened a conference of diverse Somali factions in the Ethiopian spa resort of Sodere in 1996 (1st quarter 1997, page 12) In November unconfirmed reports from Kenya suggested that large amounts of arms and ammunition were being supplied by Ethiopia to the Somali Patriotic Movement of Mohamed Said Hirshi, who is allied to Ali Mahdi Mohamed and those involved in the Sodere process. Ethiopia is thus taking sides against Hussein Mohamed Aideed, who was not initially involved in the Sodere process and had denounced the Ethiopian government for intervening in Somalia. Mr Aideed is thought to have given tacit support to Al-Ittihad forces operating

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in Somalia, who were already suspected by the Ethiopian government of receiving Sudanese assistance.(See Somalia: The political scene).

—and more opposition In September two additional alliances of disaffected Ethiopians emerged, fur- groups appear ther confusing the already perplexing political equation along the Ethio- Somali border. First, the Islamic Front for the Liberation of Oromia (IFLO) was reported to have linked up with estranged elements of the OLF and resumed armed activities in the Ogaden. Second, a new alliance of anti-EPRDF forces was launched in Mogadishu in September. Calling itself the Oromo, Somali and Afar Liberation Alliance (OSALA), the new grouping claims to represent six small factions intent on resisting what they term highland, Christian domin- ation of Ethiopia. In the months since its creation, little has been heard of this improbably heterogeneous alliance, prompting speculation that it was little other than a paper front created by Mr Aideed to resist the imposition of an Ethiopian-inspired settlement on Somalia.

Ties are strengthened Hubert Védrine paid the first visit to Ethiopia by a French foreign minister for with France— 15 years in mid-October. He held talks with his Ethiopian counterpart and addressed the Organisation of African Unity (OAU), stressing France’s commitment to the African peace-keeping initiatives promoted by that body. The choice of Addis Ababa as one of just three capitals visited during the minister’s African tour was seen as indicative of the new French government’s commitment to overhauling France’s African policy, long perceived to have rested on a small group of francophone countries. In particular, the visit was intended to boost French trade and investment outside the core francophone countries, and Ethiopia has already been attracting interest from French investors (2nd quarter 1997, page 17). Less clear is the fate of the Franco-Ethiopian educational accords, on which depend the future of the Lycée, widely regarded as the flagship of France’s presence in Ethiopia and currently jointly administered by the two governments. The Ethiopian Ministry of Education is currently reviewing the status of all foreign and so-called “community-run” schools, notably with a view to insisting on the use of Amharic as the principal language of instruction.

—Italy— In another recent first, the Italian president, Oscar Luigi Scalfaro, visited Addis Ababa in November for four days, the first such visit since end of the war between the two countries in 1941. This was in reciprocation of the Ethiopian prime minister’s visit to Italy in mid-April. As well as bringing a delegation of 100 Italian businessmen and diplomats, Mr Scalfaro returned the Axum obelisk, taken to Rome in 1937 as war booty, and admitted that the 1936 invasion had been a mistake.

—and Kuwait Kuwait and Ethiopia exchanged ambassadors in August, in line with the Ethiopian government’s policy of improving political and economic ties with the Arab Gulf states. The opening of an Ethiopian embassy in Kuwait was followed in October by the beginning of direct flights by Ethiopian Airlines (EAL) between Addis and Kuwait. In September, a year after the prime minister, Meles Zenawi, took a party of businessmen to Kuwait, (4th quarter 1996, page 19), a delegation of Kuwaiti politicians paid an official visit to Ethiopia. It is

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expected that the Kuwait Development Fund may now increase its lending to Ethiopia; it has already participated in the funding of the extension to Addis Ababa’s Bole airport.

The economy

Liberalisation is still a Notwithstanding ongoing liberalisation and pledges of further privatisations, long way off— the government’s commitment to opening up the economy is questionable, as state-owned entities continue to dominate the formal manufacturing and services sectors. In September a leaked memo indicated that state-owned enterprises would be barred from taking out insurance with newly founded private insurance companies. The memo was from the head of the body responsible for supervising the publicly owned enterprises, and criticised those enterprises which have already dealt with private-sector firms. The heads of three private- sector insurance companies all condemned the directive, and cited examples where state-owned companies had favoured the (state-owned) Ethiopian Insurance Corporation (EIC). This episode illustrates how newly formed private companies, particularly those in financial services enterprises such as the remain hampered by their inability to compete with state-owned enterprises such as the Commercial Bank of Ethiopia and EIC. The situation is further complicated by the structure of the private sector, where two interlocking conglomerate groups have emerged: the companies affiliated to the Ethio-Saudi entrepreneur, Mohamed Hussein Alamoudi, and a set of private companies whose sharehold- ers are members of the ruling party or bodies created by regional governments.

—as the armed forces are Any progress in opening out to market forces is likely to be hampered by allowed to engage in a relatively innocuous draft bill presented to the Council of Peoples’ private trade Representatives (the federal assembly). In mid-October the Council reportedly discussed legislation which would allow the armed forces to engage in commercial activities during peacetime. How such activities would be policed, both for potential anti-competitive behaviour and in terms of the potential for corruption and for rivalry between branches of the armed forces, remains unclear. The news immediately drew criticism from long-distance hauliers, who fear that the army, with its extensive fleet of vehicles, could force many private operators out of business. The bill fuels suspicions that all wings of the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF), whose recruits still make up the bulk of the country’s armed forces, are intent on following the example of Tigray, where the party apparatus has been encouraged to engage in commercial activities.

New birr currency notes The Ethiopian monetary authorities are using the end of the de facto currency are introduced union with Eritrea (which is to launch its own currency, the nakfa, in 1998) to introduce new birr banknotes. The president, Negaso Gidada, announced the move in his opening address to a special joint session of the upper and lower chambers of the Council of Peoples’ Representatives on October 6th.

Mr Negaso explicitly linked Ethiopia’s action to the change in the Eritrean currency from the Ethiopian birr. There are two obvious aspects to this linkage. First, the new note issue minimises the risk of birr redeemed in Eritrea being

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illicitly reintroduced into the Ethiopian economy. Second, the new birr notes no longer carry the old map of Ethiopia (which included Eritrea) and the nationalist slogans used in the war against the Eritrean fronts.

The following day the National Bank of Ethiopia (NBE, the central bank), announced the procedures for the changeover from old to new birr, and a substantial public information campaign got under way with the aim of having the bulk of the new currency in circulation by the beginning of December.

By mid-November the currency exchange appeared to be going smoothly, with both banks and the specially opened money exchange posts exceedingly busy. Both the new private and old state-owned banks reported an upsurge in the number of people opening new accounts, suggesting that the move may draw cash into the banking system. Relatively short periods were given for redeeming the old notes, however, which will cause some transitional problems, particularly in remote areas of the countryside. The NBE governor appeared in the media in an attempt to smooth worries created by the transition. He reassured people that it was not necessary to account for all money being changed for new birr notes.

Electricity rationing is In late September the Ethiopian Electric Light and Power Authority (EELPA) introduced announced electricity rationing, to last until the middle of 1998. The works and urban development minister, Haile Aseged, who is also the chairman of EELPA, indicated that the rationing necessitated by the dramatic fall in water level at the reservoirs on which Ethiopia depends for the bulk of its electricity generation; nearly 90% of current electricity output comes from hydroelectric sources.

In the same month the Caisse française de développement (CFD), the official French soft-loans agency, announced a FFr9.9bn ($1.7bn) loan to the Ethiopian government to assist with the construction of an electricity generating station on the Blue Nile.

Tourism is growing but is The Ethiopian Tourist Commission (ETC) released figures in September showing hampered by poor that the number of visitors to Ethiopia has risen steadily since the change of infrastructure government in 1991. In 1996 foreigners visiting the country numbered 107,000, around 20% of them purely for tourism purposes; total receipts from all visitors arriving in 1996 are put at Birr231m. Such “tourist” statistics are somewhat suspect since the largest number of visitors arriving in Ethiopia on foreign passports tend to be Ethiopians. However, the increasing numbers of such visitors is generating demand for tourism services, and dozens of private tourism companies now operate out of Addis Ababa. However, there are significant bottlenecks, particularly in terms of air transport and luxury hotel capacity, and the boom in hotel construction seen in Addis Ababa has not been evident in other potential tourist resorts where severe infrastructure limitations, notably in terms of water supply, remain.

South African Breweries In October South African Breweries (SAB) signed a joint-venture agreement to invest with a consortium of Ethiopian business partners to construct a new $40m brewery close to the capital. SAB is one of Southern Africa’s largest brewing groups, with plants throughout southern and eastern Africa. The Ethiopian

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consortium, International Beverage Corporation, appears to have been formed specifically for this venture.

SAB’s is the second major brewery to be proposed during 1997. Earlier in the year a French brewing group, Castel, announced plans for a new brewing plant close to Kombulcha, strategically placed at the cross-roads between the port of Assab, the northern Highlands and Addis Ababa (3rd quarter 1997, page 14). The SAB brewery will be in a greenfield site close to Addis Ababa. Although Ethiopia’s existing state-owned breweries are earmarked for privatisation, no timetable for their sale has been published.

Agriculture

Rains damage the main Unseasonal heavy rains during late October caused widespread damage to the harvests country’s principal harvests. Rain throughout the main grain-producing regions damaged crops awaiting harvest, with the country’s staple indigenous grain, teff, being particularly badly hit, although wheat and barley crops are also reported to have suffered. This occurred after rainfall in eastern and northern Ethiopia in August was well below average, stunting crops in the marginal food producing areas of Wollo and Tigray. These areas had suffered from poor harvests during the shorter, belg harvest earlier in the year (3rd quarter 1997, page 15), and will now need substantial food aid.

The untimely rains mean that the initial pre-harvest assessment will have been overoptimistic. Concerned by reports of rain disrupting harvesting in many areas, in mid-October the cabinet ordered a further round of assessments. Information from these revised assessments will be compared with the data from the annual World Food Programme-Food and Agriculture Organisation survey; this was scheduled to begin work in early November, with a view to producing in December an accurate picture of actual food aid needs for 1998.

Coffee estimates are In October the Ethiopian Coffee and Tea Authority released new figures for revised downward 1996/97 coffee exports: 118,000 tonnes were shipped, earning the country $365m in foreign exchange. These figures were significantly lower than the forecast issued earlier in 1997, which had suggested that 134,000 tonnes would earn $409m (3rd quarter 1997, page 15). The total amount of coffee supplied to the central market during the year was 166,000 tonnes: allowing for local marketing and consumption, total production will have been significantly higher than this figure. Production in 1997/98 is likely to be slightly lower still, as a result of the El Niño phenomenon.

Foreign trade and payments

Germany accords debt Germany signed a comprehensive debt reduction agreement with the Ethio- relief pian government in late October, cancelling $39.8m, or 80%, of Ethiopia’s outstanding debt of $51.6m. Of the debt forgiven, $16m represented unpaid credits relating to military material supplied to the pre-1991 government by East Germany. The remainder of the cancelled debt was due for repayment during 1998-99. The residual $11.8m of debt still owing has been rescheduled

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over 23 years, with a grace period of 23 years. The move comes in the wake of multilateral debt rescheduling agreed last January by the Paris Club of creditor nations (1st quarter 1997, page 21) and amidst continued uncertainty as to whether Ethiopia is likely to be included in the highly indebted poor countries (HIPC) initiative. The agreement to cancel liabilities to East Germany accumu- lated by the former government has prompted further speculation over the likely outcome of ongoing negotiations over Ethiopia’s debt to the USSR now that Russia is a member of the Paris Club (3rd quarter 1997, page 16).

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Eritrea

Political structure

Official name Eritrea

Form of state Unitary state

Legal system A new national constitution was formally proclaimed on May 24th 1997

National legislature 150-seat transitional National Assembly, composed of members of the ruling People’s Front for Democracy and Justice

National elections Last elections February 1987 (legislative, within Ethiopia); next elections scheduled for May 1997, but are unlikely before mid-1998

Head of state President, elected by the assembly

National government The president and the Council of Ministers, last reshuffled June 7th 1997

Main political parties The People’s Front for Democracy and Justice (PFDJ; formerly the Eritrean People’s Liberation Front) is the ruling and, in effect, the only legal party. Its third congress in 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 Arafaine Berhe Construction Abraha Asfaha Defence Sebhat Ephrem Education Osman Saleh Energy & mines Tesfaye Gebreselassie Finance & development Gebreselassie Yosief Foreign affairs Haile Woldetensae Information Beraki Gebreselassie Internal affairs Ali Said Abdella Justice Foazia Hashim Land, water & environment Tesfai Girmatzion Marine resources Saleh Meki Regional administration Mahmoud Ahmed Sherifo Tourism Ahmed Haji Ali Trade & industry Ali Said Abdella Transport & communications Saleh Kekia

Central bank governor Tekie Beyene

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Outlook for 1998-99

Regional tensions will Military tension with Sudan will remain high as the two governments continue remain high to trade accusations, and relations with Yemen will deteriorate over the issue of oil resources in the Red Sea. These ongoing external difficulties, which can be seen in the context of Eritrea’s evolution as a sovereign state, are a focus for the strong nationalism built up during the years of war, allowing the government to divert attention from the pressing issue of domestic political reform.

Economic autonomy will Eritrea has taken an important step towards securing autonomy in monetary deepen, with a new policy with the issue of its own currency, the nakfa, to replace the Ethiopian currency— birr. The initial issue, in November, is at parity with the birr, although it remains to be seen if the Eritrean economy can sustain this rate. The decision to use international currencies in transactions with Ethiopia will have offset- ting effects: strengthening inflows from the duties paid by Ethiopia for the use of the port at Assab, but adding to the cost of crossborder trade.

—and more licences for oil Despite the government’s emphasis on indigenous development, displayed by exploration its hostility to foreign non-governmental organisations (NGOs), it has pressed ahead with the granting of oil exploration concessions to foreign concerns, including in disputed areas of the Red Sea. At the same time foreign loans have been secured for the upgrading of infrastructure, notably the ports, which bodes well for Eritrea’s economic development prospects.

Review

The political scene

Tensions rise on the The fourth quarter has seen no reduction in the tension between Eritrea and border with Sudan— Sudan. The two governments continue to trade accusations, following the alleged Sudanese masterminding of a plot to assassinate the Eritrean president, Isaias Aferwerki, and reports of violations of Eritrean airspace (3rd quarter 1997, page 19). The national press carries regular denunciations of the Khartoum government, fuelling popular resentment.

The fear that mutual accusations will escalate into armed conflict has increased with reports that young national service recruits have been killed in skirmishes with Islamic extremist forces inside Eritrea. The movement of foreigners west of Keren has been severely restricted; in Tessenei foreigners are told to report to the police on arrival, and almost all foreign non-governmental organisation (NGO) and bilateral aid programmes in the region have shut down. Landmine attacks, including one in July near Guluj, south of Tessenei, which left 15 bus passengers dead, are said to be increasing, although the official policy is one of silence. Major troop movements have been noted near Tessenei and the interior of the country. Meanwhile, reports continue that the Eritrean authorities are making logistical and military support available to the dissident Sudanese National Democratic Alliance.

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—and the president looks Eritrea’s frustration at continued terrorist attacks inside the country was ex- to Washington pressed in talks between President Isaias and US officials in Washington in late September. He met Sandy Burger, President Clinton’s National Security Advisor, and Thomas Pickering, head of Political Affairs at the State Department; after his return to Asmara, the former US ambassador to Eritrea, Robert Houdek, who now works with the US Greater Horn of Africa Initiative, visited the country. This has led to speculation that Eritrea may request training from US instructors currently working with Ugandan forces to set up a multinational African Crisis Response Initiative. In July the US central commander, General Binford Perry, had visited Eritrea for the third time. However, US efforts to monitor the situation between Eritrea and Sudan have been hampered by the resignation in July of the US ambassador to Eritrea, John Hicks, who left following allegations of corruption in a previous US Agency for International Development (USAID) posting. A new US ambassador is not due to present his credentials before the second quarter of 1998.

Ruling is awaited on While attention is focused on military activity in the west of the country, Hanish islands dispute preparations are under way to resolve the dispute between Yemen and Eritrea over the Hanish archipelago. The islands, which lie in the Red Sea, were the source of dispute in 1995 leading to clashes in which 12 people were killed. An international arbitration tribunal met in London in mid-July, and Eritrea submitted its final documents to the tribunal on September 1st. The ruling on the islands will be released in July 1998, followed by the setting of marine demar- cation lines. However, the dispute could have broadened in the meantime: on September 25th the Yemeni foreign affairs ministry submitted an official memorandum of protest to the Eritrean government against Eritrea’s intended oil exploration in the Red Sea. Eritrea has signed oil exploration deals with a US oil firm, Anadarko Petroleum, who plan to begin drilling a total of three wells in the first quarter of 1998 (see The economy).

Diplomatic relations As Eritrea strengthens diplomatic relations, its sense of international isolation widen should diminish. The Danish embassy opened in Asmara in July and a Canadian consulate is being set up. Haile Menkerios has been appointed Eritrea’s permanent representative to the UN and Semere Russom its ambassador to the United States. Ogbai Habtecmichel presented his credentials in August as a roving ambassador to New Zealand and the Australian and Pacific region.

The deepening of regional Eritrea continues to pursue the development of regional relations, both in partnerships— international forums and through bilateral relations. It has proposed an economic grouping of four of the member states of the Inter-Governmental Agency on Development (IGAD), comprising Sudan, Eritrea, Djibouti and Somalia (Ethiopia is specifically excluded). IGAD itself has recently been recognised by the Organisation of African Unity (OAU) as a new subregional economic grouping. Sweden, France, Germany and Japan have joined the Netherlands, the US, Canada, Italy and the EU in the IGAD Partnership Forum, and according to the Eritrean IGAD executive director, Tekeste Gebrai, Middle Eastern countries (which ones was not specified) may be thinking of joining.

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—extend to the Great Links with countries outside the Horn of Africa have also been high on Eritrea’s Lakes region foreign policy agenda. It has found that it has much in common with countries in the Great Lakes, not least the desire to pursue its own path to democracy. President Isaias paid a three-day visit to Rwanda in late June; a joint commu- niqué issued together with his Rwandan counterpart, Pasteur Bizimungu, announced the formation of a permanent joint commission to identify fields of co-operation, including defence and security. The two presidents emphasised the need for regional economic integration and co-operation as the key to solving Africans’ economic and social problems. In an interview with the Eritrean news agency on his return, President Isaias was quoted, referring to talks with the Democratic Republic of Congo (former Zaire), as saying: “It was a mockery that the foreign forces which had been helping the former oppres- sive regime to oppress and exploit the people over the past 32 years were now calling on the new government to institute democracy and hold elections in the country immediately.” This was a clear reference to criticisms of Eritrea’s slow transition to multiparty democracy and its determination to minimise the influence of foreign NGOs (see below) and governments. Then in late July the president of the Congo, Laurent Kabila, paid a two-day visit to Armara.

NGOs are under pressure— World Vision International was asked to cease its activities in Eritrea in August; ACORD, a UK-based international agency working with self-help and credit schemes, was asked to renounce its implementing status and is to pull out in the near future; and Oxfam expects to be told shortly that it cannot work in Eritrea. This is a continuation of an unstated policy to enter the new millen- nium with no NGOs working in Eritrea. Their activities had already been curtailed and those projects not directly involving the health and education ministries shut down. While the determination to follow through the rhetoric of self-reliance is applauded by some, others feel that Eritrea’s policy of implementing its own development has been carried out in a piecemeal and arbitrary manner.

—but national capacity is The abrupt closure of projects has led to frustration among both Eritrean and lacking in crucial areas foreign NGO staff. Many feel that, had they been clearly forewarned, they could have planned for a transition to national implementation and adjusted their projects to fit the available human and technical resources. Meanwhile, in areas outside Asmara and its immediate hinterland, low skills levels and morale mean that Eritrean institutions are unable to cope with the extra workload caused by the withdrawal of expatriate technical support. It is clear that the call to professional Eritreans abroad to return and give their expertise has not been fully answered.

Regions fail to meet The Southern and Northern Red Sea regional assemblies, meeting in early reconstruction targets— September in Assab and Massawa respectively, announced that regional reconstruction plans were not meeting the targets set. Both cited lack of infrastructure and called for an increase in self-help activities. During September the regional administration minister, Mahmoud Ahmed Sherifo, gave briefings to regional representatives and the public on the role of local government. He stressed the determination of the government to decentralise administrative activities and to work towards a leaner, more efficient, civil service.

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—and decentralisation is Decentralisation in Eritrea is still far from a reality. Major decisions are still administered from the top made in Asmara and handed down to provincial administrators with little or down no explanation. One example of this was the decision in August to cut the heat allowance paid to civil servants outside the highlands. This (taxable) bonus was a flat 40%; the government decided to reduce the bonus according to the living standards of the posting so that, for example, civil servants on the Dahlak islands or Dankalia had a 30% bonus, those in Assab received 25%, those in Massawa 20% and those in Tessenei 15%. The logic behind this was that regions would have an incentive to improve their infrastructure so as to lower the bonuses they had to pay their employees. However, civil servants were not informed of this reasoning; instead their bonuses were cut without explanation in August and many are still waiting, on lower take-home pay, for their read- justed salaries. This has caused widespread discontent.

The economy

A national currency is The government has taken another step in securing control of the domestic introduced economy, with the issue of its own currency. The nakfa was introduced in November, at parity with the Ethiopian birr. To prevent a rush on banks and bring cash into the formal financial sector, Eritreans and legal residents were only allowed to convert cash—Birr5,000 ($751) for individuals and Birr100,000 ($15,000) for businesses—once during the conversion period. The weekly newspaper, Eritrea Profile, caused anxiety in business circles by quoting the head of the National Bank, Tekie Beyene, as saying that border currency con- trols were to be introduced. Mr Beyene denied this, but not all were assured, especially in the light of Ethiopia’s announcement that it would issue new birr notes to coincide with the nakfa’s introduction. Eritrea will benefit from the decision to use an international currency for all transactions between Ethiopia and Eritrea, as all port duties will in future be paid in hard currency. However, crossborder trade could become more difficult and expensive, especially in the light of the Ethiopian directive that commodities of a value greater than Birr2,000 crossing the border will need a licence (see Ethiopia: The economy).

More bids for mineral In the second round of bidding for mineral exploration licences, Ophir Ven- exploration licences tures and Pluto Alliance have applied for 18 licences near Agordat, in the western lowlands, and JCI (South Africa) for 45 licences near Auguro in the south-west and Nakfa and Afabet in the north west. Rift Resources has applied for 23 licences in the Agordat/Tekezze area, Odyssey Resources Canada for 32 licences in Auguro and the Eritrean Minerals Corporation for 13 licences in the north near Winna. In addition, in September a US oil company, Anadarko, signed a second agreement with the Ministry of Energy and Mines, granting it exploration rights to an offshore concession on the southern boundary of its first licence. The company now has concessions covering most of the Eritrean coastline and will be spending more than $23m for exploration in this latest concession. Anadarko expects to begin drilling in the first concession early in 1998, despite official protests from the government of Yemen (which disputes sovereignty in this region: see The political scene), and preparations are under way in Massawa to build docking and storage facilities to accommodate the unloading of rigs.

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Foreign funds for port External financing is also important in infrastructure development. A $30m improvement— loan from the International Development Association (the soft-loan arm of the World Bank) and an untied $21m grant from Italy, administered by the World Bank, have been agreed for the development of Massawa and Assab ports. Work scheduled for Massawa includes repairing and extending the wharves, dredg- ing, wastewater drainage and procuring installations for handling containers. In Assab the aim is to install container handling equipment and overhaul existing facilities.

—fishing infrastructure— The fishing sector is also receiving external funding. The $12m fisheries complex at Assab is moving ahead with support from the Japanese International Co-operation Agency (JICA) and the African Development Fund (ADF). The work is due to be completed in 1999. It comprises a fish landing, ice plant and processing complex, designed to equip the outmoded fisheries industry to compete in both domestic and foreign markets. Further north, at Hirgigo near Massawa, the Ministry of Fisheries has invited bids for the construction of a research centre, originally to have been funded by the Japanese, and an inland fisheries centre in the highlands. The expansion of domestic fisheries may lead to increased quota allocations, which is likely to be a further source of tension between Eritrea and Yemen.

—and horticulture Following the success of the Israeli-Eritrean horticultural plantation at Adi Nefas, north of Asmara, in June the African Development Bank (ADB) agreed a $11.6m loan for an irrigated horticultural project. The credit is for 50 years. The aim of the loan is to encourage small-scale agricultural activities and to assist in the development of micro-irrigation. The Adi Nefas plantation, which opened last year, has exported more than a million bunches of carnations to markets in Europe and the Gulf. It also produces strawberries and apples for export and for the domestic market.

Tourism is growing According to the Ministry of Tourism, more than 200,000 people, 60,000 of them Eritreans living abroad, visited Eritrea in the first six months of 1997, 4% up on the same period of 1996. Small-scale tourism activities are a growth area, especially in Asmara where numerous private hotels and restaurants have been opened, many of them by Eritreans returning from abroad. The government still has to sell its large hotels, however, and with the withdrawal of an Italian company, Pianetta Dahlak, from the Dahlak Hotel in Massawa, that hotel will revert to the government and will probably close for restoration prior to being put on the market. A buyer has yet to be found for the 50-room Red Sea Hotel in Massawa, which has just been refurbished to international five-star standards.

Another set of state Bids were invited in June for the purchase of nine government-owned com- industries is put up for panies, including the profitable Asmara Brewery, which made a gross profit of sale— Birr30m ($4.38m) in 1996. Bids for the brewery were to have been submitted by mid-September, but the date was then extended for a month. Other industries in this second round of selling include textiles, bus assembly and shoes.

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—and public transport The State Public Transport Corporation was phased out at the end of July, and management is management functions devolved to the regions, who have the authority to issue decentralised licences and monitor transport companies. The companies will bid for routes, but fares will be regulated to ensure services are provided to remote rural areas.

Saudi interest grows A multibillionaire Saudi investor, Prince Al-Wahid Bin Talal Bin Abd Al-Aziz Al-Saud, visited Eritrea for the first time in July as part of an African tour intended to widen his investments in the continent. The prince met the Eritrean head of state and the ministers of agriculture, tourism and finance and the heads of the National Bank and the Investment Centre. Preliminary agreement has been reached on at least ten projects and a team of consultants is to come to Eritrea over the coming weeks to identify areas for joint investment and to finalise accords.

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Somalia

Political structure

Official name Somali Democratic Republic

Form of state In theory a unitary republic; in May 1991 the Somali National Movement (SNM) unilaterally declared the creation of an independent state, the Somaliland Republic, in the north (see below), while the rest of the country remains divided between rival armed factions

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 and in August 1991 sworn in with the support of several southern factions. Recently joined other factions to form the National Salvation Council which aims to establish a transitional government soon. General Mohamed Farah Aideed had himself elected as “interim president” in June 1995 by his own faction of the United Somali Congress-Somali National Alliance. 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

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

Somaliland Republic Created in May 1991 but awaiting diplomatic recognition; led by the president, Mohamed Ibrahim Egal, re-elected in February 1997. A new constitution came into effect in February 1997 for a three-year period, after which a referendum is to be held on its acceptability

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Economic structure

Latest available figuresa

Economic indicators 1992 1993 1994 1995 1996 GDP at market prices $ m 1,137 1,260 1,404 1,563 n/a Consumer price inflation % 211 263 312 363 n/a Population m 8.9 9.0 9.1 9.3 n/a Exports fob $ m 93 101 111 123 n/a Imports fob $ m 48 52 56 60 n/a Total external debt $ m 2,335 2,334 2,387 2,275 2,616

November 28th 1997 SoSh2,620:$1b

Origins of gross domestic product 1995 % of total Components of gross domestic product 1995 % of total Agriculture 59.0 Private consumption 58.6 Industry 10.0 Government consumption 50.5 Manufacturing 5.3 Gross fixed capital formation 13.1 Services 31.0 Exports of goods & services 8.8 GDP at factor cost 100.0 Imports of goods & services –31.0 GDP at current market prices 100.0

Principal exports 1990 $ m Principal imports 1990 $ m Livestock 43 Manufactures 204 Bananas 28 Non-fuel primary products 104 Hides & skins 3 Fuels 52

Main destinations of exports 1996c % of total Main origins of imports 1996c % of total Saudi Arabia 54.7 Kenya 27.7 Yemen 18.9 Djibouti 20.8 Italy 10.6 Brazil 6.2 a All figures are estimates from official or other sources. b Outside Mogadishu. In the self-styled Somaliland Republic the legal tender is the Somaliland shilling (SolSh), which trades at SolSh3,000:$1. c Based on partners’ trade returns; subject to a wide margin of error.

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Outlook for 1998-99

A negotiated settlement is Talks in Cairo in September 1997 were attended for the first time by all three possible in 1998— main faction leaders and open up the possibility, albeit remote, that a negotiated settlement could be reached in 1998. The Cairo discussions, part of the ongoing national reconciliation process, set out to address the obstacles that stand in the way of the supposedly final national reconciliation conference to be held in Bossasso. However, contentious issues remain: the suspicions entertained by Hussein Mohamed Aideed (son and heir of the former south Mogadishu warlord, General Mohamed Farah Aideed) of Ethiopia’s involvement in the reconciliation process; and the national leadership rivalry between Mr Aideed and Ali Mahdi, controller of north Mogadishu. The relative peace in the last quarter of 1997 between rival Mogadishu factions suggests that a com- promise is possible, although Ethiopia’s involvement may prove to be a complicated problem.

—as fighting will Mr Aideed’s forces will remain more concerned with the clan militia of the continue in the Bay and Rahawayn Resistance Army (RRA) in the Bay and Bakool regions. Despite at- Bakool regions— tempts to bring the opposing factions to the negotiating table, clashes are likely to continue in 1998. The conflict is complicated by Mr Aideed’s claims that Ethiopia is supplying arms to his opponents in Bay and Bakool and their military presence in neighbouring Gedo. This alleged involvement could aggra- vate Mr Aideed’s suspicion of Ethiopia’s involvement in the national peace process and may slow that process down.

—but Somaliland will not The self-declared Republic of Somaliland will not join the negotiations. Its be included— president, Mohamed Ibrahim Egal, did display a certain degree of good faith by agreeing to talk to his predecessor and one of Mr Aideed five vice-presidents, Mr Ali “Tour”, during the latter’s visit to Somaliland in September. However, the non-negotiability of Somaliland’s independence became clear when Mr Ali “Tour” affirmed his belief that Somaliland should be reintegrated into Somalia. The president gave him 24 hours to leave the country. The possibility that Somaliland’s borders will be recognised by at least one country in 1998 will give strength to Somaliland’s independent stand.

—as the economic outlook Serious floods in late 1997 which displaced tens of thousands of people mean looks bleak that Somalia will experience a serious food deficit in 1998. Refugee camps around the country will remain crowded and the country will remain dependent on international aid. A dynamic set of economic policies is unlikely in the absence of a negotiated political settlement, and economic growth in 1998 is likely to be sluggish.

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Review

The political scene

Talks about talks are held The final national reconciliation conference at Bossasso, organised by the in Cairo— National Salvation Council (NSC), which was formed in January by 26 Somali factions which agreed the Sodere peace accord (1st quarter 1997, page 38), has been postponed again. Originally scheduled for June, the conference was rescheduled for November before being further postponed. Nevertheless, all parties likely to take part, plus some others, did meet in Cairo on November 12th for the opening of preliminary talks about the conference. Among the NSC officials attending were two of Mogadishu’s 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; both also hold positions as co-chairmen of the NSC’s National Executive Committee. Also present was Mogadishu’s third main faction leader, Hussein Mohamed Aideed (son and heir of the former south Mogadishu warlord, General Mohamed Farah Aideed), who has, until now, consistently refused to attend the Bossasso conference.

—after intense diplomatic The Cairo meeting is the result of diplomatic efforts from many directions. Talks efforts to get all sides with Mr Ali Mahdi and Mr Aideed have been conducted by the Egyptians in round the same table— both Mogadishu and Cairo in recent months It seems likely that the two rivals met face to face in Cairo under the auspices of Egypt and the Arab League in late October, although nothing was reported from the meeting. The UN has also played a role, through its new special envoy to Somalia, Ismatt Kittani, an Iraqi Kurd appointed in July at the request of the Organisation of African Unity (OAU) and the Arab League. For Mr Kittani it is a return to Somali duties, having held the same post for three months in 1992. On that occasion, he was relieved of his Somalia duties after falling out with General Aideed. The general’s son, Hussein Mohamed Aideed, was willing to talk to Mr Kittani in Nairobi on August 20th and the UN envoy also met Mr Ali Mahdi separately in the Kenyan capital on the same day. Again, there were no reports on the contents of these meetings. Other mediators have been less successful in their attempts to smooth over faction rivalry. The efforts of the Italian envoy to Somalia, Giuseppe Cassini, were dismissed by Mr Osman “Ato” on August 5th, when he accused Mr Cassini of sabotaging the prospects for peace, but Mr Osman “Ato” changed his mind on September 25th and lifted his veto against the Italian envoy. Nonetheless, Italian intentions continued to be interpreted ambiguously. Fol- lowing a meeting with Mr Cassini on September 29th, Mr Ali Mahdi suggested that the Italians were backing the Bossasso conference, but two days later Mr Aideed’s impression of his meeting with the Italian envoy indicated that the Italian government’s position was that the conference had no solution to offer the Somali nation. On October 14th Mohamed Abshir Muse, leader of the Bossasso-based Democratic Front for the Salvation of Somalia (DFSS), wrote to the Italian foreign minister accusing Italy of undermining the Bossasso conference by siding with Mr Aideed.

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—and to paper over the All sides have their own regional interests which must be resolved. Mr Ali differences between Mahdi, quoted in a Cairo-based newspaper on July 21st, accused Sudan of Mogadishu’s main rivals— interfering in Somali affairs by supporting Mr Aideed, as it had previously supported his father. A representative of the Sudanese government was quoted in an interview with a Khartoum-based daily two days later as being “astonished” at the accusation. Mr Osman “Ato” spent several days talking to the Saudis in early October, while in mid-October Mr Aideed spent five days in Tripoli, where he explained his position to the Libyan leader, Colonel Muammar Qadhafi. Mr Ali Mahdi’s belief that, when the Bossasso conference eventually happens, he will emerge as the sole legitimate leader of Somalia was re-emphasised on September 7th when he announced that he would finish forming an interim government by the end of the year, following the Bossasso resolutions. In turn, Mr Aideed appointed an ambassador to French-speaking countries on October 11th to emphasise his legitimacy.

—as Mr Aideed maintains Another difficulty the Cairo meeting will have to address is the role of Ethiopia his war of words against in the reconciliation process. The formation of the NSC at the Ethiopian resort Ethiopia of Sodere has made Mr Aideed suspicious of Ethiopia’s motives, particularly given the incursion of Ethiopian troops on to Somali territory in June (3rd quarter 1997, page 29). In a speech on August 2nd to mark the first anniversary of the death of his father, Mr Aideed maintained that Ethiopian troops still occupied parts of the southern Gedo region after crossing the border in pursuit of forces of the Mogadishu-based Al-Ittihad. On July 13th Mr Aideed accused Ethiopia of supplying arms to the 26 factions that attended the Sodere meeting, and four days later he charged the Ethiopians with arming local militia to destabilise the Bay and Bakool regions (see below). A spokesman for Mr Aideed claimed that three high-ranking Ethiopian officers had recently been in Beled Weyne distributing arms, directly contravening UN Security Council resolu- tion 733 which forbids any state from supplying arms to Somalia. This evidence was presented by Mr Aideed to the UN secretary-general, Kofi Annan, in a letter on September 25th, in which Mr Aideed accused Ethiopia of preparing for a new intervention in Somalia, citing this as a reason why he would not go to Bossasso. A month later Mr Aideed was himself allegedly importing arms, according to Mr Ali Mahdi, who accused his arch-rival of receiving shipments through Ballidogle airstrip. Neither claim was confirmed by any other sources.

Militia clashes continue in Despite the continuing negotiations, Somalia remains extremely volatile. Mogadishu— Although July and August were relatively quiet months in the Somali capital, on July 23rd Agence France-presse (AFP) reported that 200 militiamen previously loyal to Mr Ali Mahdi had shifted their allegiance to Mr Aideed, claiming that Mr Ali Mahdi had not paid them and did not supply them with enough food. Sporadic fighting among militia groups in Mogadishu occurred throughout September. On September 1st a squabble at airstrip K-50 within the ranks of militia loyal to Mr Aideed over the collection of taxes imposed on the mild narcotic qat left three dead, and the following day a dispute over weapons in south Mogadishu resulted in the deaths of another three militiamen. Three men were also killed and two wounded in an exchange of fire by militia in the south of the city on September 4th, the day that the UN and the EU suspended their humanitarian aid flights to the town of Jawhar, 90 km north of

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Mogadishu, because of poor security. Reports from the capital on September 18th said that seven people had been killed and at least eight injured in three separate shooting incidents in the south of the city over the previous 24 hours. On October 10th six men were killed and 11 injured in Jawhar in a militia dispute among Mr Ali Mahdi’s men. A French aid organisation, Action contre la faim, announced on the same day that they were thinking about withdrawal from north Mogadishu because of the permanent insecurity there.

—while fighting escalates Outside the capital, armed clashes in the Bay and Bakool regions between the in the Bay and Bakool forces of Mr Aideed’s United Somali Congress/Somali National Alliance regions— (USC/SNA) and militia from the Digil and Mirifle subclans loyal to the Rahawayn Resistance Army (RRA), have escalated in recent months. Radio Mogadishu (pro-Ali Mahdi) reported that 12 of Mr Aideed’s militia were killed, along with five RRA fighters, in a village near Baidoa on August 4th, while the RRA claimed to have killed 20 of Mr Aideed’s followers in fighting north of Oddur in the Bakool region on August 14th. Fighting intensified around Baidoa towards the end of August. Both sides claimed victory in a clash on August 23rd, in which the RRA liberated 73 prisoners from a USC/SNA jail near the town. A skirmish in a village 8 km south of Baidoa on August 26th left 13 of Mr Aideed’s militia dead, according to an RRA spokesman in Mogadishu, and at least 17 people were killed and 29 wounded in clashes at Baidoa over the following two days. The RRA mined a road near Oddur in mid-September following the alleged massacre of 17 civilians by Mr Aideed’s forces, and the RRA claimed that nine USC/SNA fighters were killed when their vehicle ran over one of these mines on September 15th. At least six militiamen were killed and four wounded in a clash near Baidoa on September 23rd. On September 29th Mr Ali Mahdi accused Mr Aideed’s forces of massacring 260 civilians in the Bay and Bakool regions over the previous three days during attacks on twenty Digil-Mirifle villages which were burnt and looted. There was no independent confirmation of the alleged massacre.

Despite reports towards the end of September that representatives from the two sides were involved in secret peace negotiations in Mogadishu, and an offer on October 2nd from Mr Osman “Ato” to mediate between the warring factions, the clashes continued. After eight hours of heavy fighting on October 1st at a village several kilometres south of Baidoa, the RRA claimed to have killed 15 of Mr Aideed’s militia. RRA forces were reported to have captured Baidoa in early October, but an AFP report on October 13 quoted an RRA leader as saying that his forces had made a tactical withdrawal from the town after two days, to avoid civilian casualties. The RRA commander accused USC/SNA forces of in- discriminate fire with heavy machine-guns and anti-aircraft rockets, killing 74 local residents during the previous week of clashes with the RRA.

—and elsewhere Sporadic clashes between armed militia groups have also been reported in recent months from other parts of the country. The Somali National Front (SNF) said on September 10th that its forces had taken the town of Elwak in the Gedo region from forces of the Mogadishu-based group, Al-Ittihad. Inde- pendent reports indicated that at least eight died in the fighting in which warring factions exchanged heavy machine-gun fire. Al-Ittihad claimed its forces had made a tactical withdrawal from the town because the SNF forces

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were backed by the Ethiopian army, a claim that could not be confirmed independently. Fighting in the Mudug region between rival militias loyal to Mr Aideed and the northern-based DFSS left three dead and six wounded at Gaalka’yo on October 17th, according to one report, although another report put the casualties at five dead and 11 wounded.

Aid workers lead a The few aid workers still working in Somalia continue to run the risk of being hazardous existence caught up in militia disputes. A Somali doctor working for a humanitarian organisation, CARE, was kidnapped in north Mogadishu on July 18th. His kidnappers accused him of halting work on development projects, but the doctor was released unhurt three days later and without any ransom payment. In the Hiiraan region, an aid worker was kidnapped in Beled Weyne on July 26th by militia who were reported to be holding him until they were paid an unspecified amount in back-pay by the World Food Programme (WFP). Two Somali employees of another US aid organisation were killed in Kismayu on August 12th, apparently in an act of clan vengeance. General Mohamed Said Hersi Morgan, whose Somali Patriotic Movement (SPM) forces control the southern port, reacted by banning militia in the Jubba valley from carrying light arms and using armed vehicles. The perpetrators of such incidents are rarely brought to justice, but Mr Aideed bucked this particular trend when he announced on October 4th the arrest of two men accused of murdering a Médecins sans frontières (MSF) doctor in Baidoa in June (3rd quarter 1997, page 30). MSF suspended their operations in Baidoa after the murder, and despite the arrests the organisation announced on October 24th that it would not resume work in Baidoa because of the continued insecurity. However, the recent floods and the subsequent promises of aid will mean that more aid workers will return to Somalia.

Italy’s torture allegations New allegations of the torture of Somalis by Italian troops serving in the UN won’t go away— Operation in Somalia (Unosom II) have forced the ministerial commission of inquiry set up in June (2nd quarter 1997, page 33) to reopen its inquiries after reporting to the Italian prime minister, Romano Prodi, in August. The nine- member commission, chaired by Ettore Gallo, gathered evidence from witnesses and victims in Addis Ababa and Nairobi, and found Italian troops guilty of torture and human rights abuses in Somalia in 1993. Although “genuine cases of torture” were confirmed by the commission in its report to Mr Prodi on August 8th, it concluded that the incidents had occurred without the knowledge of the leaders of the Italian mission. The reopening of the inquiry on September 8th is to investigate allegations that suggest otherwise. According to a carabinieri officer who was in Somalia in 1993, the commander of the Italian Unosom II forces had been told of the torture incidents by an Italian journalist who was subsequently assassinated in mysterious circumstances in north Mogadishu in March 1994.

—while another Belgian Legal proceedings against a sergeant in the Belgian third parachute battalion, member of Unosom II is accused of wounding a Somali during his tour of duty for Unosom II in under scrutiny Kismayu in 1993 (2nd quarter 1997, page 33), were initiated and adjourned in Brussels on September 8th. After opening the proceedings, the Belgian military judge called for an adjournment until a list of victims is received from

EIU Country Report 4th quarter 1997 © The Economist Intelligence Unit Limited 1997 Somalia 29

Mogadishu. The case follows the acquittal in June of two other Belgian former paratroopers who had served with the UN in Somalia (3rd quarter 1997, page 30).

The economy

Floods hit the south— Exceptionally heavy rains resulted in widespread flooding, the worst since 1961, on the Jubba and Shabeelle rivers in early November. Initial reports from the region suggested that 1,000 people died and 800,000 people lost their homes in the floods, in addition to a heavy loss of livestock and extensive damage to infrastructure. On November 13th the Organisation of African Unity (OAU) and the UN launched an appeal for international aid to the region, which is threatened by starvation and disease. The EU and the US Agency for International Development (USAID) made an initial pledge of $2.5m each. The UN Children’s Fund (Unicef) was reported to have flown provisions to Baardeere in the Gedo region to feed some 40,000 people shelter- ing in 32 Unicef camps.

—after a successful large At the end of July the World Food Programme (WFP) announced the successful food aid delivery completion of a large-scale food aid delivery in Somalia during the months of June and July, in which 3,240 tonnes of food were delivered to southern and central parts of the country despite grave security problems. Nevertheless, an appeal for more emergency food was made for the Hiiraan region by a United Somali Congress-Somali Patriotic Movement spokesman at a press conference in Mogadishu on September 30th, after the recent floods exacerbated the situation.

10,000 refugees have The UN High Commissioner for Refugees (UNHCR) announced on July 25th returned from Ethiopia that about 10,000 Somali refugees have been repatriated to Somaliland from camps in Ethiopia since February. It is hoped that another 20,000 will be repatriated from Ethiopia by the end of 1997, reducing the number of Somali refugees in eight camps in the Ethiopian Ogaden from 280,000 to 250,000. However, according to a Nairobi-based human rights organisation, several hundred supposed refugees have been sent back to Ethiopia because they were Ethiopians. In Kenya, the refugee camp at Swaleh Nguru near Mombassa has been closed and its 10,500 inhabitants relocated to other camps, the UNHCR announced on August 9th.

News from the Somaliland Republic

A former president makes A former president of the self-styled Somaliland Republic, Abdulrahman Ahmed a brief return visit Ali “Tour”, who presided over the unilateral declaration of independence in May 1991, made a surprise visit to Burao and Hargeisa in September. It was not clear whether Mr Ali “Tour”, who has been part of Hussein Aideed’s faction in Mogadishu since May 1994 and is now opposed to Somaliland’s secession, was travelling in his capacity as one of Mr Aideed’s five vice-presidents or as a private citizen. Mr Ali “Tour”, who was offered an amnesty by Mohamed Ibrahim Egal, the current president, at his swearing-in ceremony in February (3rd quarter 1997, page 31), met with the Somaliland vice-president in Burao and was

EIU Country Report 4th quarter 1997 © The Economist Intelligence Unit Limited 1997 30 Somalia

entertained to lunch by Mr Egal in Hargeisa. However, the discussion revealed that Mr Ali “Tour” had not changed his position on Somaliland’s secession, and Mr Egal issued a deportation order against the former president, who left the country from Berbera on September 23rd.

Government views the Somaliland’s stance on the Bossasso conference continues to be unyielding. In Bossasso conference with mid-August the foreign minister told the UN special envoy to Somalia, Ismatt suspicion— Kittani, in Djibouti that no Somaliland representative would go to Bossasso. An attempt by the Egyptians to encourage Mr Egal to attend also failed in September; Mr Egal declined an invitation from an Egyptian delegation visiting Hargeisa to talks on the matter in Cairo, informing them that Somaliland’s independence was not a subject for negotiation. Recent reports have suggested that Djibouti will officially recognise Somaliland and allow Somaliland diplomatic representation in Djibouti. If this does materialise, it is unlikely that Somaliland would ever agree to rejoin Somalia and it is possible that other countries may follow suit in recognising Somaliland.

—as tension rises in A clash between two subclans in the eastern town of Erigavo in the Sanaag eastern regions region left nine people dead and 13 wounded on August 21st. Government troops arrived in the town two days later with arbitrators, who took 40 days to broker a peace deal between the opposing factions. Meanwhile, an unconfirmed report suggests that the Ethiopian government recruited 500 men in Las Anod to the south in September and took them to a military training camp in Ethiopia’s Region 5. The government dispatched intermediaries to the town to calm the situation, and a military force has been established at the nearby town of Ainabo to monitor the situation at Las Anod. Conflicting rumours abound in the Sool region to explain the recruitment. Some believe the men are destined to bolster a national army for any government that is formed at the Bossasso conference, while others suggest that the force will be deployed in Region 5 to counteract Islamic activities in Ethiopia.

One of the capital’s The Hargeisa-based daily, Jamhuriya, was shut down on September 8th by newspapers is briefly shut armed police who arrested its publisher, Mahmoud Abdi Shide, and held him down in custody for a week. Jamhuriya, which has a daily print-run of about 2,500, reappeared on the streets of the capital two days after Mr Shide’s release. This was the second time in 1997 that Mr Shide was arrested. The first was in April, after Jamhuriya published reports of government corruption. On that occasion Mr Shide was released by a judge on the grounds of arbitrary arrest. Mr Egal denied any knowledge of the September incident, but rumour in Hargeisa has it that the president is unhappy with the newspaper’s independent tone. On September 19th Mr Egal called upon the House of Elders to reinforce control over the courts.

Mr Egal reshuffles his Three new members of cabinet were recently announced by Mr Egal. The head cabinet of the armed forces was accused of incompetence and replaced on September 21st, a week after members of the army had demonstrated for higher salaries on the streets of the capital. Mohamed Ahmed Samatar was appointed as interior minister on October 5th to replace Mohamed Abdi Gabose, after the latter had reportedly fallen from favour. Dr Gabose was quoted as saying that he is

withdrawing from politics to concentrate on his medical practice. A day later the religious affairs minister, Hassan Ibrahim Fartag, resigned because, in his view, sharia law was not being correctly applied.

The government’s budget On October 13th parliament retrospectively approved a government budget is approved totalling $3.7m for the second half of 1997.

A Danish aid package is An aid package of $6.5m pledged by Denmark following a visit to Hargeisa by blocked Danish aid officials in July (3rd quarter 1997, page 32) was blocked by the Danish parliament on September 11th. The aid, destined for humanitarian organisations working in Somaliland in return for clearance to repatriate Somali refugees living in Denmark, was dismissed as an “unacceptable human commerce” by the Danish parliament. Meanwhile, local newspapers in Hargeisa have reported that an EU project to rehabilitate the Dillas-Las Anod road has been financed to the tune of $3m, although work is yet to begin on the highway.

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 Rassemblement populaire pour le progrès (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 Ibrahim Idriss Jibril Commerce & tourism Rifki Abdulkader Bamakrama 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 Borkst Abdillahi 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 83.5 83.7 81.4a 79.0a 78.9a Real GDP growth % –1.0 0.3 –2.9b –3.1b –0.2b Populationc ’000 550 560 570 580 n/a Exports fobd $ m 53 71 56 34 n/a Imports fobd $ m 271 255 237 205 n/a Current account $ m –88 –34 46 –23 n/a Reserves excl gold $ m 83.4 75.1 73.8 72.2 77.0 Total external debt $ m 192 225 247 260 n/a External debt-service ratio % 4.9 3.7 4.0 4.8 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

November 28th 1997 Dfr177.7:$1

Origins of gross domestic product 1993 % of total Components of gross domestic product 1995a % of total Agriculture 2.8 Private consumption 71.1 Industry 21.2 Government consumption 34.2 Services 76.0 Gross domestic investment 12.0 GDP at factor cost 100.0 Net exports of goods & services –17.3 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 1996e % of total Main origins of imports 1995e % of total Somalia 39.5 France 14.7 Ethiopia 33.5 Ethiopia 10.7 Yemen 20.8 Saudi Arabia 7.5 Saudi Arabia 2.9 a Provisional. b IMF estimate. c UN figures, including refugees and expatriates. d Balance-of-payments basis. e Based on partners’ trade returns, subject to a wide margin of error.

Outlook for 1998-99

The ruling party is sure of In mid-November the Djibouti government announced that legislative elec- success in the coming tions would be held on December 19th to elect the 65 deputies to the new elections— Assemblée nationale. The announcement followed months of uncertainty over the timing of elections. Despite over three years of internal party dissent, the presidential heir-apparent, Ismael Omar Guelleh, has consolidated his grip on power so that an electoral machine, abundantly primed by patronage, will ensure victory for the ruling Rassemblement Populaire pour le progrès (RPP). Dissident RPP members, who were expelled from the party and then prose- cuted in 1995, will fail to form an opposition coalition with the two other legal opposition parties, both of which are spilt by leadership struggles. As in 1992, France will turn a blind eye to the partial nature of the electoral register and other procedural irregularities.

—but popular resentment Meanwhile, the alliance, announced in April 1997, between the government will continue high and the faction of the Front pour la restauration de l’unité de la démocratie (FRUD) which signed a 1994 peace accord and was subsequently co-opted into the government, will continue. The ongoing military manoeuvres in the north against those partisans of FRUD who rejected the 1994 peace deal, coupled with the recent arrest and deportation to Djibouti of several exiled FRUD leaders loyal to the rebel FRUD leader, Ahmed Dini, is designed to strengthen the flimsy legitimacy of the pro-government FRUD. However, this view is unlikely to be shared by the majority of Djiboutians: they remain, on the whole, cynical, in view of the failure of politicians to broker a settlement or alleviate the festering resentment which sparked the civil war. This sentiment is particularly acute among poorer sectors of the Afar population in the suburbs of the Djibouti. Against a background of deepening urban hardship, harsh sentences for the FRUD leaders currently detained run the risk of sparking popular protests.

Co-operation with The military co-operation between Ethiopian and Djiboutian government forces Ethiopia will strengthen— seen in the last quarter of 1997 is likely to be consolidated as part of a broader strengthening of bilateral ties. The Ethiopian government’s decision to back Ismael Omar Guelleh, officially chef de cabinet to the president, Hassan Gouled Aptidon, but seen by many as de facto head of the government, stems from two considerations. The immediate catalyst appears to have been worries that Djibouti’s dissident FRUD members were allying with opponents of Ethiopia’s own Afar regional government, a fear shared by Eritrea’s government. However, commerce has also played a part, as trade ties between Djiboutian and new Ethiopian business interests have flourished within the context of the August 1996 bilateral trade protocol. This has prompted a resurgence of trade and greater Ethiopian use of the port of Djibouti.

—which will please France While some French civilian officials in Djibouti have reservations about Ismael Omar’s rise to power, the military appear content to see the consequent rise in Ethiopia’s role. In the long run this may partly shift the burden of Djibouti’s external defence away from France, which is intent on scaling down its military presence in Djibouti. This trend would also leave the way open for closer

ties between France and Ethiopia which were bolstered by the visit of France’s foreign minister to Ethiopia in October and growing French investment in the far larger Ethiopian market (see Ethiopia: The political scene).

Progress on economic Lack of macroeconomic statistics continue to impede analysis of the ongoing reforms will continue economic reforms, while military activity against FRUD militants and specul- fitful ation over the timing and outcome of the elections have deflected domestic attention from their progress. The current economic adjustment plan is now due to be completed in March 1998, having been extended by nine months last April because of Djibouti’s failure to meet the original timetable and disagree- ments between the finance ministry and the IMF. The programme of military demobilisation remains the cornerstone of the government’s attempts to reduce its bloated payroll. Some progress, albeit limited, has been made on this in keeping with the plan elaborated at the donor round table conference held last May. However, progress on measures to reduce state spending (including overhauling civil service benefits) and to boost tax collection is generally disappoint- ing. Thus the target of keeping the 1997 budget deficit within Dfr3.5bn ($19.7m), the equivalent of 11% of total government expenditure, is unlikely to be met.

Review

The political scene

Fighting flares again in Fighting erupted north of Obock on September 1st between the army and guer- the north— rillas loyal to the breakaway faction of the Front pour la restauration de l’unité de la démocratie (FRUD) led by Ahmed Dini. It was the first significant violence between rebels and government forces since the signature in December 1994 of a partial peace deal between the government and the faction of FRUD now co-opted into government. The clash occurred at a waterhole close to the Oue’ima water course, which marks Djibouti’s border with Eritrea. A Djibouti Ministry of Defence spokesman said that a rocket attack had left 12 government troops dead and 15 injured. There was no confirmation either of rebel casualties or of the capture by FRUD of three Djiboutian soldiers. Government sources alleged that the high casualties were a result of their troops being ambushed. This was refuted by Mr Dini, whose FRUD group did not sign the 1994 peace accord. Speaking from Yemen the day after the clash, Mr Dini claimed that a group of fighters loyal to FRUD had been simply defending themselves as government forces advanced on their position. He said that the incident occurred after three days of government military manoeuvres in the north of the country aimed at dislodging those armed members of FRUD still at large. Mr Dini alleged that operations had been timed to deploy the full strength of the army, prior to the next wave of demobilisation

—prompting action While the incident was relatively minor in relation to the scale of fighting which against FRUD dissidents characterised the 1991-93 civil war, it had significant regional and domestic by neighbours— repercussions. Following the attacks, Djibouti’s foreign minister, Mohamed

Moussa Chehem, reportedly called in the ambassadors of Eritrea, Yemen and Ethiopia to discuss the incident. He pressed them to sever links and cease to provide hospitality to dissident FRUD members, suggesting that an Ethiopian Afar group opposed to the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) also had a hand in the attacks. Ahmed Dini’s followers draw support from exiled Djiboutian Afar communities in both Ethiopia and Eritrea

Support for the government from its neighbours was subsequently demonstrated when Mr Dini was obliged in mid-September to leave Yemen, where he has resided since 1995, for France. Mohamed Kadamy, his principal European spokesman then in Eritrea, was also forced to leave hastily for Ethiopia where, on September 28th, he was arrested by the authorities in Addis Ababa. He, his wife and two other senior FRUD members loyal to Mr Dini’s leadership were detained and summarily deported to Djibouti the following day. While Djibouti and Ethiopia do have an extradition agreement, it is not clear whether the transfer of the FRUD militants occurred within this legal framework, and the Ethiopian authorities were reluctant to discuss the issue with the media. In recent years the Djiboutian government has allowed the extradition to Ethiopia of both Ethiopian Afar opponents of the current government and members of the pre-1991 Ethiopian administration, several of whom are now standing trial in Ethiopia.

In the days following the arrest and deportation of Mohamed Kadamy and his colleagues, ten more Djiboutian Afars, detained by the Ethiopian army in the vicinity of the Ethio-Djiboutian border, were handed to the Djiboutian government by the Ethiopians. Mr Dini himself claims that several of his followers were arrested inside Djibouti by the Ethiopian army, before being handed over to the Djiboutians. The latter’s desire to engage the military assistance of Ethiopian and Eritrean forces to mop up the armed remnants of FRUD explains why the foreign minister alleged that dissident Ethiopian Afar groups had links with FRUD and shared facilities in northern Djibouti.

Those arrested were detained in a Djibouti police training centre before being transferred to a central prison, where they were charged with inciting violence. The charges explicitly associated the detainees with the armed clashes between government forces and FRUD. Mohamed Kadamy was arrested with his wife, Aicha Dabale, who was three months pregnant when detained. She had been working as an aid co-ordinator for a Monaco-based children’s charity which has focused international attention on the prisoners whose detention and deportation has been condemned by the London-based human rights organisation, Amnesty International.

—as Afar divisions The arrests have deepened the divisions within Djibouti’s Afar communities. continue While armed struggle failed to topple the government, the war dislocated the Afar population of the north, prompting an exodus of refugees into both Ethiopia and Djibouti-ville, where their arrival worsened already overcrowded conditions. The subsequent splintering of the movement into two rival factions, seen by many to have been manipulated largely by those in government, has added to the grievance and economic marginalisation of many Afars.

The arrests were predictably welcomed by those who defected to join the government in 1994. Ali Mohamed Daoud, now health minister and formerly known as Jean-Marie, denounced Mr Kadamy and his colleagues as agitators trying to present the country as on the brink of civil war, while Ougoureh Kifle, the agriculture minister, called for justice for what he termed assassinations. In mid-November there was still no indication of when those detained would be tried, with trials likely to be postponed until after the December legislative elections.

The government expects that the move against the dissident members of FRUD (those who refused to sign the peace agreement offered in 1994) will enhance the standing of the “internal and legitimate” FRUD. This is the FRUD faction, now registered as a domestic political party, led by Ougoureh Kifle and Jean- Marie, who signed the peace agreement and are pledged to an alliance with the ruling Rassemblement populaire pour le progrès (RPP) in the December elections. In practice many Djiboutians see the two men, who accepted minor cabinet posts in return for endorsing the peace deal, as puppets of Ismael Omar Guelleh.

Co-operation increases The fragmentary evidence available suggests that, in the month following the between Ethiopian and arrests and deportations, the Ethiopian army played a role in attempts to locate Djiboutian armies and defeat the remaining armed members of FRUD. Unconfirmed reports from Djibouti indicate that units of the Ethiopian military established liaison posts in Djibouti-ville and Dikhil during operations against Mr Dini’s FRUD, and that the Djiboutian National Army and Ethiopian units operated jointly around Dorra in late October

If such reports, which suggest the consolidation of security arrangements between the Ethiopian and Djiboutian forces, are authentic, they create a new paradox in Djibouti’s external security. Under the terms of the defence accords signed with France at independence, French forces stationed in Djibouti are bound to intervene to secure Djibouti against external threat. France, having pointedly refused to act against FRUD in 1992 on the basis that the rebellion was a domestic affair, now see a neighbouring army being invited to act against Djiboutian nationals.

Enhanced military co-operation appears to be just one facet of broader security co-operation. In October the Ethio-Djiboutian joint committee for co-operation on border issues met in the northern town of Tadjourah. The committee is designed to provide a forum for the discussion of co-ordinated policy on smuggling, immigration and crossborder security issues. In the past its primary concern has been with contraband and smuggling, primarily of duty-free goods into Ethiopia.

Ruling party is in a strong In mid-November the date for legislative elections was set at December 19th. position for the elections Under the revised 1992 constitution, December is the latest date for elections, five years after the previous ones. The December 1992 elections were held in the midst of the civil war and were widely viewed as having been fraudulent, despite a relatively good turnout by candidates for the opposition parties. The then united FRUD and its allies called for a boycott of the elections, while the war prevented voting in much of the country. Now both of the opposition

parties recognised under the constitution are chronically divided (3rd quarter 1997, page 37), clearing the ground for the ruling RPP. The crisis within the Parti du pour le renouveau démocratique (PRD), which has split the leadership, reached new proportions in October. The leader of one of the two factions fighting for control of the party was arrested on October 12th, following a dispute over control of the PRD’s weekly publication, Le Renouveau.

An RPP dissident is Meanwhile, Moumin Bahdon Farah, a dissident member of the RPP who at- arrested tempted in 1995 to create a splinter RPP group, was charged in mid-October with ivory smuggling. His appearance provoked demonstrations from his fam- ily and supporters, resulting in a series of arrests.

The French lawyer A French lawyer arriving in Djibouti to defend a local politician was refused representing a dissident is entry on his arrival at the airport on October 5th. The defendant, Ali Aref, a refused entry— veteran politician who served several years in prison, was suspended from the Djiboutian bar association last February and faces charges of corruption in connection with the sale of flour The French lawyer, Arnaud Montebourg, is also a Socialist MP and heads a committee of Franco-Djiboutian friendship. In this latter capacity he has been outspoken on the treatment of Ali Aref and other defendants as well as on the continued legal and human rights abuses in Djibouti. Mr Montebourg denounced the refusal of entry as contravening the 1988 judicial protocols which allow French lawyers to represent Djiboutian clients. The French foreign ministry said that it “regretted” the incident

—and all visitors are Two weeks later the Council of Ministers announced that henceforth all visitors required to obtain visas to Djibouti must have entry visas. Hitherto, French nationals did not require visas to enter Djibouti. If implemented, the move would have far-reaching implications, French nationals being by far the largest group of non-African foreigners in Djibouti. It is unclear whether the move would be practicable, particularly given the large number of French troops and associated civilian personnel visiting Djibouti. It would also be a blow to the current, fledgling moves to boost tourism in Djibouti.

The economy

Demobilisation is The plan to demobilise around half of those currently serving in the Djiboutian under way armed forces has been at the heart of the attempt for the past two years to stabilise the government’s precarious financial situation. Little progress had been made on demobilisation prior to the donors’ conference, held under the auspices of the UN Development Programme (UNDP) in May 1997 (2nd quarter 1997, page 41). Following the conference, France, the EU and the African Development Bank (ADB) agreed to fund a revamped programme substantially to slim down the military payroll. In September it was announced that details had been agreed and that 3,000 men would leave the army before the end of 1997; a further 5,500 are scheduled to be demobilised in 1998. Those leaving receive an indemnity of $1,000-2,000, according to the terms and length of their service. While the programme is designed primarily to reduce the state’s expenditure, the precise impact of the demobilisation on the economy and un- employment levels is uncertain. In private some donors are confident that large

numbers of those demobilised will not stay in Djibouti, since many are thought to be Ethiopian-Somalis, particularly ethnic Issas hastily recruited from south- eastern Ethiopia in 1992.

Air Djibouti is reformed According to reports in the Parisian press, the debt-ridden state airline, Air Djibouti, has now been transferred to a newly formed private company. The move reportedly follows an agreement reached on the carrier’s debts in the summer under which Djiboutian government agencies agreed to waive repayment of the company’s debts while private creditors accepted a rescheduling package. The new operators, apparently Arab Djiboutians and Saudis, have put up almost $2m to revive the company. While the government has not operated the airline for several years, various planes have flown under the company’s name, using ancient Antonov planes leased from cash-strapped companies of the former Soviet Union. The company has thus made use of its landing rights in Ethiopia. While it has barely been able to compete with Ethiopian Airlines’ bi-weekly passenger flights, it has participated in the rather more lucrative qat trade. Ferrying qat from Dire Dawa used to be the mainstay of Air Djibouti prior to its collapse and it is likely that the new owners will both carry qat from Ethiopia and attempt to compete with the handful of small private companies who fly daily from Djibouti into Somaliland.

Business elections suit Elections for the leadership of the Chambre internationale de commerce et de the government d’industrie de Djibouti (CICID) were finally held in October. The chamber decided to maintain the doyen of Djibouti’s small commercial class, Said Ali Coubeche, as president, despite his advanced age and frailty. More significantly, Abdurahman Boreh was elected as vice-president and is expected to become the real power in the chamber. Mr Boreh is reported to be close to Ismael Omar Guelleh, the likely successor to the president, Hassan Gouled Aptidon. Mr Boreh is the head of a series of companies active in construction and international trade. The chamber continues to exercise a preponderant influence over commercial policy in the tiny Djiboutian business milieu, although its influence has declined since the political and economic upheavals occasioned by civil war in the early 1990s. It is currently trying to upgrade its image and services, which now include an on-line database of members and their commercial activities.

Djibouti promotes The government’s determination to promote the country’s transport and trade economic ties with facilities in Ethiopia were much in evidence at the Addis Ababa international Ethiopia— trade fair in early November. Djibouti sent a large delegation, headed by Rifki Abdulkader and Salah Omar Hildid, respectively ministers of commerce and transport. Representatives of the CICID and port authorities were also present, as were private traders. All were intent on consolidating the growth in the volume of commercial traffic between the two countries since the signing of new bilateral trade accords in August 1996. Djibouti’s substantial presence at the Addis trade fair followed a similar trade mission to Ethiopia in May, when the chamber of commerce and port authorities were well represented at the French trade fair (2nd quarter 1997, page 17). Such trade promotion is correctly seen in Djibouti as being vital to the long-term strategy of increasing the volume of transit goods coming through the port.

—and Somaliland Recognising the importance of the self-styled Somaliland Republic as an economic partner, a group of senior Djiboutian Issaqs visited Hargeisa following a series of discussions on improving links held in Djibouti. The Djiboutian delegation was led by the governor of the central bank, who is of the same Issaq Somali clan lineage as the bulk of the government in Hargeisa. The talks are rumoured to be leading to official recognition of Somaliland. The Arab League, of which both Djibouti and the Somali Republic are members, has always resisted attempts to recognise Somaliland and it is unclear whether the move will undermine Djibouti’s position in the organisation. Economically, diplomatic recognition may allow the regularising of crossborder trade and a tight- ening of attempts, by both the Djbioutian and Hargeisa administrations, to improve taxation of this substantial traffic.

EIU Country Report 4th quarter 1997 © The Economist Intelligence Unit Limited 1997 Quarterly indicators and trade data 41

Quarterly indicators and trade data

Ethiopia: quarterly indicators of economic activity

1995 1996 1997 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 tonnes ( 228a ) ( 230a ) ( n/a ) Prices Monthly av Consumer prices, Addis Ababa: 1990=100 191.4 188.1 177.9 179.0 177.3 177.1 n/a n/a n/a n/a change year on year % 14.5 9.8 1.8 0.5 –7.4 –5.8 n/a n/a n/a n/a Money End-Qtr M1, seasonally adj: Birr m 9,528 9,561 9,402 9,223 9,559 9,760 9,395 9,510 9,623 n/a change year on year % 17.7 12.0 2.7 –0.1 0.3 2.1 –0.1 3.1 0.7 n/a Foreign trade Qtrly totals Exports fob Birr m 988.7 691.8 454.2 548.8 844.2 684.5 705.3 n/a n/a n/a Imports cif “ 1,431.2b n/a n/a n/a n/a n/a n/a n/a n/a n/a Exchange holdings End-Qtr National Bank: goldc $ m 32.9 32.9 32.7 33.9 10.2 0.6 0.6 0.5 0.6 0.5 foreign exchange “ 594.3 724.8 760.8 818.2 890.4 821.0 722.0 566.3 577.3 531.0 Exchange rate Market rate Birr:$ 6.25 6.30 6.32 6.32 6.35 6.39 6.43 6.64 6.80 6.81

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Estimate. b End-1 Qtr. c End-quarter holdings at quarter’s average of London daily price less 25%.

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

Djibouti: quarterly indicators of economic activity

1995 1996 1997 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr Money End-Qtr M1, seasonally adj: Dfr bn 38.03 36.81 36.40 37.18 35.05 36.17 36.10 36.07 40.27a n/a change year on year % 2.2 –0.7 –4.0 –1.9 –7.8 –1.7 –0.8 –3.0 n/a n/a Foreign tradeb Annual totals Exports fob $ m ( 107 ) ( 134 ) ( n/a ) Imports cif “ ( 421 ) ( 374 ) ( n/a ) Exchange holdings End-Qtr Foreign exchange $ m 67.9 75.5 72.7 72.1 70.9 73.5 70.4 76.8 71.9 71.3c 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 End-February. b DOTS estimate. c End-July, 72.4.

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

EIU Country Report 4th quarter 1997 © The Economist Intelligence Unit Limited 1997 42 Quarterly indicators and trade data

Ethiopia: foreign trade ($ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Imports cif 1991 1992 1993 Exports fob 1991 1992 1993 Food, beverages & tobacco 24.8 89.3 97.8 Food 126.3 113.2 138.5 of which: of which: cereals & preparations 14.2 76.3 78.9 coffee 116.2 107.3 129.2 Petroleum & products 50.1 149.5 165.6 Hides & skins 25.1 32.3 32.7 Chemicals 72.7 58.3 106.1 Total incl others 188.6 197.2 201.7 Basic manufactures 76.3 99.4 124.2 of which: iron & steel 15.6 13.9 38.6 metal manufactures 17.2 15.7 26.2 Machinery & transport equipment 210.5 192.8 208.9 of which: road vehicles 77.5 96.7 113.4 Total incl others 471.8 656.6 771.6

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Imports cifa 1993 1994 1995 1996 Exports foba 1993 1994 1995 1996 Italy 190 162 221 174 Germany 46 80 156 126 US 151 157 163 163 Japan 42 61 56 52 Japan 78 80 120 123 Italy 32 32 48 49 Germany 114 117 124 105 UK 18 18 23 37 UK 95 81 93 85 US 21 33 31 33 Saudi Arabia 85 50 57 62 Egypt 2 4 21 25 France 38 62 65 61 Saudi Arabia 6 4 22 24 Kenya 32 38 47 55 France 10 15 21 18 Total incl others 1,148 1,120 1,386 1,390 Total incl others 239 304 472 477 a DOTs estimate.

Sources: UN, International Trade, yearbook; IMF, Direction of Trade Statistics, yearbook.

Djibouti: foreign trade ($ ’000) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Imports cif 1991 1992 Exports fob 1991 1992 Food 45,028 43,789 Food 4,593 3,393 of which: of which: cereals & preparations 17,335 16,307 live animals 2,685 326 Beverages & tobacco 11,603 12,412 Hides & skins 661 124 Crude materials 22,715 23,448 Basic manufactures 457 833 Petroleum & products 19,263 17,427 Machinery & transport equipment 1,978 1,845 Chemicals 12,797 14,855 Total incl others 17,347 15,919 Basic manufactures 36,703 35,208 of which: metals & manufactures 13,179 12,851 Machinery & transport equipment 33,306 42,157 of which: road vehicles 13,989 17,072 Miscellaneous manufactured goods 22,719 18,108 Total incl others 214,403 219,926 Source: UN, International Trade, yearbook.

EIU Country Report 4th quarter 1997 © The Economist Intelligence Unit Limited 1997 Quarterly indicators and trade data 43

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 1993 1994 1995 1996 Exports fob 1993 1994 1995 1996 Kenya 45 53 65 76 Saudi Arabia 60 70 89 98 Djibouti 33 40 49 57 Yemen 40 26 21 34 Saudi Arabia 31 14 16 17 Italy 7 16 20 19 Brazil 3 21 13 17 UAE 7 13 15 16 Yemen 15 24 12 11 Total incl others 121 143 157 179 UK 6 13 6 8 Total incl others 277 309 272 274 a DOTs estimate.

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 1993 1994 1995 1996 Exports fob 1993 1994 1995 1996 Ethiopia 23 28 34 40 Somalia 30 36 45 53 Saudi Arabia 50 22 25 28 Ethiopia 26 31 38 45 Italy 28 24 24 28 Yemen 45 44 8 28 Thailand 41 58 65 14 Total incl others 109 118 107 134 Total incl others 434 373 421 374 a DOTs estimate.

Source: IMF, Direction of Trade Statistics, yearbook.