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Eritrea and Ethiopia: Towards Economic Cooperation

Signing Ceremony of the Joint Declaration of Peace and Friendship between Eritrea and Ethiopia


Eritrea and Ethiopia: Towards Economic Cooperation

By Natnael Yebio W. | Eritrea Profile

Peace is poised to deliver significant economic gains for both Eritrea and Ethiopia. While it embodies the spirit of both countries, peace also signals progress in the region. In terms of economy it promises great investment and trade opportunities, as well as the possibility to boost physical infrastructure. It is time for sustained peace through economic development.

The Joint Declaration of Peace and Friendship that was signed on July 9th, 2018, states: 1.The state of war between Ethiopia and Eritrea has come to an end. A new era of peace and friendship has been opened. 2. The two governments will endeavor to forge intimate political, economic, social, cultural and security cooperation that serves and advances the vital interests of their peoples; 3. Transport, trade and communications links between the two countries will resume; diplomatic ties and activities will restart; 4. The decision on the boundary between the two countries will be implemented. 5. Both countries will jointly endeavor to ensure regional peace, development and cooperation; will see both governments work towards economic cooperation built on a framework that will be beneficial for both countries in the medium and long term.

Based on this agreement, the rapprochement between the two governments has been established over the last two weeks. Telephone lines are open; President Isaias Afwerki made a historic three day visit to Ethiopia and reopened the Eritrean Embassy in Addis Ababa for the first time since 1998.

As a result, peace between Ethiopia and Eritrea is set to have a calming effect on the Horn. Stability in the region could transform it into a united economic powerhouse. The hard work starts now, as both governments look forward towards economic cooperation and development.

Emphasizing on both countries’ long-standing common history, both governments will work to strengthen economic partnership between the two countries and to contribute to regional peace and prosperity.

Moving forward, the emphasis will be on creating a modern, technologically advanced, and internationally competitive economy by way of improving agricultural productivity and establishing export oriented industries as well as vibrant financial and tourism sectors. Both will work towards facilitating private investment in all sectors of their economy, while pursuing sound financial policies. Operationally, cooperation between the two governments conveys the idea of voluntary collective actions. The concept of cooperation refers to the implementation of intergovernmental institutions. In this sense, economic, political, and institutional cooperation will be vital in order to successfully pool together resources and efforts for the achievement of their goals.

In an interview the former Prime Minister of Ethiopia Mr. Hailemariam Desalegn, stated that both countries are endowed with comparative and competitive advantages. Knowing this, they must work together in identifying these advantages by pooling experts from both countries. In doing so, both governments will first work towards tackling inflation, reducing cost of goods, and working to augment the needs of the population and sustain market price volatility of goods and services.

Given that the transportation sector is a strong factor in terms of economic and regional balanced development, the former Prime Minister also noted the development of well linked transportation system between the two countries will be pivotal in achieving economic development; this will in return help the facilitation of free movement of people between the two countries.

As a result, Ethiopian Airlines resumed flights to Eritrea on the 18th of July, its flight to Asmara being the first in over 20 years. “It is a joy to see Eritreans and Ethiopians come together once again”, said Mr. Tewolde Gebremariam General Manager of Ethiopian Airlines. It is time to move on and work as one towards the realization of economic, trade, investment and tourism development between the two countries with an outlook towards reaching the international market, he added, while hoping the airline to play a broader role in helping the two countries connect not just on social levels but also economic.

Speaking at the official ceremony held in connection with the flight resumption of the Ethiopian Airlines Mr. Osman Saleh, Eritrean Minister of Foreign, Affairs stated the resumption of the airlines will usher a new era of friendship and cooperation between the countries.

Free movement of people between the two countries will be beneficial. For example, it will enhance business and investment. Cross border trade will increase as free movement of labor and capital boosts economic activity. In terms of investment, understanding the importance of foreign direct investment to sustainable development and economic growth, both sides have to cooperate in enhancing investment flows and in developing an investor-supportive environment through joint efforts such as: industrial linkages promotion, networking, information sharing and human capacity building development.

The Joint Declaration of Friendship and Cooperation signed between the two governments will also see the two countries engage in trade. As a result, of duty-free and low-tariff imports, consumers in each country will have more choices of goods and services at lower prices. Imports may also encourage domestic producers in innovation and technological advancements, especially those who face competition from these imports, resulting in economy-wide benefits.

As cooperation between the two nations strengthens, the use of ports in the region will result in higher output of goods and passengers in the region, paving the way to the development of more infrastructure and associated services. These in turn will bring varying degrees of benefits to the economy and to the region. Ports are also important for the support of economic activities in the hinterland since they act as a crucial connection between sea and land transport. As a supplier of jobs, ports do not only serve an economic but also a social function. In terms of load carried, seaway transportation is the cheapest and most effective transportation system compared to other systems. Industries require a safe and cheap means of exporting finished goods and importing raw materials. Hence, the majority of industries in the world are located in the coastal belts, in the vicinity of major ports. These industries, in turn, influence the lives of the employees and other indirect benefactors.

In the long run cooperation between the countries of the horn will aim at sharing a commitment to regional cooperation as a means of fostering regional stability, building prosperity, and addressing regional challenges. The recent state visits by President Isaias Afwerki to Saudi Arabia and UAE are a further indication that regional cooperation will not be confined to the horn but will also include countries on the other side of the Red Sea. Subsequent visit by Somalia’s President Mohamed Abdullahi Mohamed to Eritrea, and the signing of the Joint Declaration of Brotherly Relations and Comprehensive Cooperation between the two governments this week and Dr. Abiy Ahmed’s prior visits to Egypt and Somalia are also signs that point towards an all-inclusive, holistic approach taken by Eritrea and Ethiopia that peace and stability in the region can only be achieved if all countries in the region spearhead the agenda together.

Thus a stronger Eritrea, Ethiopia, Somalia, Egypt, Djibouti, Sudan and South Sudan will pay dividends in achieving sustained economic growth, trade and prosperity needed throughout the region.

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