72582 v1 World Trade Indicators 2009/10 Eritrea Trade Brief Trade Policy percent against the euro in 2008, making the country’s exports less expensive in foreign currency terms. Eritrea has made significant progress since independence in 1993 in liberalizing its trade regime. Eritrea belongs to the seven-member In 1994, the country radically reduced the number of Intergovernmental Authority on Development tariffs and simplified its customs procedures. Its MFN (IGAD), which is currently planning to create a free 1 Tariff Trade Restrictiveness Index (TTRI) is 5.8 trade area. The country is also a member of the percent, below the average for both Sub�Saharan Common Market for Eastern and Southern Africa Africa (SSA) (11.3 percent) and low�income countries (COMESA), which established a customs union in (11.6 percent). Tariff protection for agricultural June 2009 and plans to fully implement it in 2012. As products is much less restrictive (4.2 percent) than for negotiations between the Eastern and Southern Africa non-agricultural products (8.5 percent). Based on the (ESA) group and the EU towards a full Economic TTRI, it ranks 66th out of 125 countries (where 1st is Partnership Agreement (EPA) could not be completed least restrictive). The maximum MFN tariff imposed prior to the December 2007 deadline, the preferences by Eritrea was 25 percent as of 2006. under the Cotonou Agreement elapsed. Eritrea, however, maintains a similar level of preferences to As a step towards making its economy more open, the the EU market under the “Everything But Arms� country is planning to launch a free trade zone at its (EBA) initiative for least developed countries. The Massawa harbor later in 2009 to attract foreign country continues to negotiate a comprehensive EPA investment. With this free trade zone, Eritrea would with the EU as part of the ESA group. The country is remove trade barriers such as taxes and quotas and neither a member of the WTO nor an applicant for minimize bureaucracy at the harbor, encouraging membership. further trade. Behind the Border Constraints External Environment Eritrea ranks in the bottom 5 percent of friendly According to Eritrea’s Market Access TTRI 2 business environments according to the Ease of Doing (including preferences) of 0.9 percent, the country’s Business index, on which it ranked 175th out of 183 exports face much lower barriers than an average SSA countries in 2009. Reflecting the extent of trade (3.9 percent) or low-income country (5.6 percent). facilitation in the country, Eritrea’s score on the Similarly, the weighted average overall rest of the Logistics Performance Index (LPI) is 2.19 on a scale world tariff (including preferences) faced by the of 1 to 5, compared to the averages of 2.35 and 2.29 country is a relatively low 1.7 percent, with 3.1 percent for its SSA and low-income comparators, respectively. for agricultural products and 1.4 percent for non- It ranks 124th (out of 150) in the world and 29th (out of agricultural products. The Eritrean currency, the nakfa, 39) in the SSA region (with South Africa leading the which is pegged to the U.S. dollar, depreciated by 7 regional group). Among the LPI subcategories, its strongest performance is in lowering domestic logistics costs while its weakest performance is in ensuring the Unless otherwise indicated, all data are as of August 2009 timeliness of shipments in reaching their destination. and are drawn from the World Trade Indicators 2009/10 Database. The database, Country Trade Briefs and Trade Outcomes Trade-at-a-Glance Tables, are available at http://www.worldbank.org/wti. Real trade growth (in constant 2000 US dollars) is estimated to have been only 3.7 percent in 2008, If using information from this brief, please provide the although this is a significant improvement over the following source citation: World Bank. 2010. “Eritrea contraction of 1.6 percent in 2007. Growth will remain Trade Brief.� World Trade Indicators 2009/10: Country Trade positive in 2009 but at a lower rate of 1.8 percent. Briefs. Washington, DC: World Bank. Available at Imports increased by an estimated 3.9 percent in 2009 http://www.worldbank.org/wti. World Trade Indicators 2009/10 Eritrea Trade Brief after falling by 1.5 percent the year before, while References exports grew by an estimated 2.7 percent following a 2.3 percent fall in 2007. Both imports and exports are Capitaleritrea. 2009. “Eritrea to Attract Investors with expected to continue to register positive growth in Free Trade Zone at Sea Ports.� Capitaleritrea. May 2009, albeit at lower rates of 1.7 percent and 2.1 19, 2009. . In nominal terms, trade growth accelerated to an COMESA. 2009. “COMESA Launches its Customs estimated 12.7 percent in 2008 from 5.2 percent in Union.� COMESA. July 24, 2009. 2007. While import growth rose from 1.2 percent in . from 29.8 percent to an estimated 17.5 percent. Europa. 2009. “Africa, Caribbean, Pacific—Regional Services exports grew at an estimated rate of 8.6 Negotiations of Economic Partnership percent in 2008, compared to 24.2 percent in the Agreements.� Europa. June 2009. . estimated growth of 45.8 percent in 2008, a little lower The Economist Intelligence Unit (EIU). 2009. “Country than the growth rate of 51.5 percent in 2007, but are Report—Eritrea.� EIU. May 2009. . recent discovery of gold is expected to boost exports The Intergovernmental Authority on Development in the near future, with the country’s Bisha gold mine scheduled to begin production in 2010. (IGAD). 2008. “IGAD Member States and Development Partners Discuss Minimum Integration Plan for the Region.� IGAD. November Notes 4, 2008. . 1. TTRI calculates the equivalent uniform tariff that would keep domestic welfare constant. It is weighted by import shares and import demand elasticity. 2. MA-TTRI calculates the equivalent uniform tariff of trading partners that would keep their level of imports constant. It is weighted by import values and import demand elasticities of trading partners.