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“Economic Development Means Promoting the Standard Of Living and Improving the Quality Of Life of Citizens” President Isaias Afwerki

It is to be recalled that President Isaias Afwerki conducted an extensive interview on the occasion of New Year with national media outlets on 28th and 29th of December 2012. The interview focused on national development programs, political and diplomatic developments in the Horn and Eritrea’s stance and outlook on different scenarios as well as other local, regional and global issues. Third part of Excerpts of the interview follows:

Your Excellency, in the last few days there were two consecutive investment conferences conducted in Asmara. The focus was on investment opportunities for the Eritrean citizens. What about the endeavors that have to be done to attract foreign investment? Would you please tell us about the interest of foreign investors in Eritrea and the prospects associated with foreign investments?

This issue is somehow complicated. It is often said that direct foreign investment has a role to play in the economic development of developing countries. However, from experiences it has been realized that this is not the right choice for materializing development goals. Foreign direct investment in poor countries results in an uneven distribution of investment opportunities. As foreign investors often tend to exploit the resources and cheap labor available in developing countries, eventually this type of investment is harmful for the development of a country. It also happens that the officials and the employees of the developing world often open book accounts in foreign banks along with the investors. This means direct foreign investment is unlikely to result in a situation where foreign investment plays a role in realizing development goals and in improving the living standard of the people. Since direct foreign investment has led not to sustainable development but to sustainable or perpetuating problems in the case of developing countries, its relevance in such a situation has to be properly assessed. But this does not mean that we are against foreign investments. We also have some foreign investors in certain sectors of our economy. What I am saying is investment opportunities should not only encourage foreign investors but they should be also helpful for promoting domestic capacity. While there are open opportunities for foreign investments, we endeavor and focus on creating an enabling environment (through domestic efforts) both for domestic investors and foreign investors.

Why is more emphasis being placed on investments made by Eritrean citizens? What is the extent of the comprehensiveness of the investment opportunities in the country? In addition to the issues associated with new investment opportunities, there were also issues raised in relation to the possibilities for buying shares in publicly owned enterprises and also for privatizing some. In this case, as it has been learned from experience, there were ineffective and unsatisfactory measures related to such experiences. So how effective will be these new initiatives?

Basically, we realize that no economy can be improved without the investment of citizens. At the formative stages, the government will have a considerable role to play. But eventually, there must be investment opportunities where citizens can participate massively.

The fact that our previous experiences were not that satisfactory and our intentions were not realized to the extent we expected should not dishearten us. These were things done when the economy was below zero. In this case, as the lessons learned may differ from one aspect to the other, the experiences need to be examined case by case. Because of the failures associated with particular experiences, we do not reverse the policy.

The government has to provide incentives in agriculture, tourism, and manufacturing as well as other sectors so to encourage investors. However, the incentives should not be designed in a hurry. Rather they should be applicable in feasible programs. When it comes to agriculture, we can talk about many possibilities. For example, there have been a number of attempts related to dairy products and cattle rearing. What were previously nationalized and later returned back to their owners are not functioning today. And those enterprises that were previously owned by the government and then privatized have been also ineffective. Because such investments have been ineffective, it does not mean that it is not possible to invest in these areas. Now there is better investment opportunities in cattle farming, dairy products, poultry production and other similar activities associated with animal husbandry. In tourism and manufacturing too there are better opportunities. Conducting conferences may be helpful, but what matters more is raising awareness related to the various opportunities for investment. We need to ensure popular participation in investments as investment opportunities in a particular area must not be dominated by few individuals. It should be also noted that the investment opportunities must not be restricted to those citizens who have been able to accumulate hard currency in the Diaspora. The citizens inside the country also can have useful experiences that enable them to have a role in the economic recovery of the country through their investments, regardless of the size of their capital. In this case, awareness is very important about the potential opportunities. For this purpose the opportunities must be examined sector by sector, enterprise by enterprise and project by project. To this degree, all inputs in the form of ideas that are provided by citizens inside and outside the country have to be assessed altogether. All the perspectives from different units of the government and the regions have to be also aligned with the inputs from citizens. Besides, the cumulative experiences and lessons learned from previous experiences should be also evaluated properly. Ultimately, we can have a picture about what can be done in the future and what the prospects and opportunities are in the various sectors of the economy and in different enterprises and areas. While there are some clearly developed projects, the conferences could have not gone beyond raising awareness. All the concerns that were addressed in the conferences have to be further concretized.

The issue of shares is not new. The fact that certain enterprises are selling some of their shares is just a small portion of an investment. Eri-Tel is one example. As it’s publicly owned, if there is a need to expand the operations of such an enterprise, naturally the government has to invest further by directing some capital assets to it. But now the opportunity for doing so (for investing in Eri-Tel) has been open to citizens living inside and outside the county. The intention in this case is to enable citizens enjoy the benefits of such enterprises or simply their profits. That means if doing so is helpful for improving their standard of living and the quality of their life, the citizens have been provided with the opportunity for buying shares. Citizens have been also provided with the opportunity to buy shares from other similar enterprises. And if an individual citizen feels that it is better for her or him to establish her or his own business instead of buying such shares, it is up to her or him as long as the opportunities are open. This is possible not only for those who have been able to accumulate enough capital. Those who intend to invest by using borrowed money should be also provided with an opportunity to do so. Actually, the financial institutions and banks we currently have are less likely to be considered banks or financial institutions. In this case, something has to be done to strengthen them so that they can improve further their service delivery mechanisms as what they do significantly determines what has to be achieved through investments. Therefore, we need to take into account such a situation whenever we think about investment opportunities. As I said earlier, some may dislike buying shares and instead choose to do something else. If any individual prefers to establish his or her own business, let him or her provide us with his or her proposal. In this case, whether the proposal as a whole as well as whether the action plans it contains are feasible or not have to be examined. Therefore, the investment opportunities are not restricted to buying shares only. But it must be noted that currently we are at awareness raising stage. We need to transcend this stage as much as possible and start talking about concrete plans instead of talking about general policy issues. Programs that enable the general public to take part in the economic development of the country have to be developed and specified clearly. What was reflected in the first as well as the second investment conference was that there is a need to further concretize the concerns that have to be addressed in relation to investment opportunities. Many look at what they consider is profitable from their own perspectives only. And those who have to lead and guide the process say, ‘You can invest where you like, but there are such and such opportunities.’ Such a process will be considerably helpful for promoting awareness. It is not uncommon for things to be less clear at this stage. But little by little the interaction between those who want to invest and those who lead or provide the opportunities (the ministries, the regional governments and other organs) will further clarify what has to be done. In this way, the two sides will be able to develop clear programs. The citizens in the Diaspora have accumulated enough capital. Even some have also accumulated enough capital within the country. However, as I said earlier what matters more is not because you have got a wallet or bigger money bags. There are women who happen to provide people with tea services being at the corners of different roads. These citizens must be also considered potential investors. Why not we consider them as investors? Is it not possible for them to further improve the services they happen to provide? When we talk about investment opportunities, we need to think comprehensively to the extent of empowering and strengthening such citizens by providing them with the facilities that enable them to upgrade what they do. There are also citizens who are engaged in cattle farming and other forms of animal husbandry. In this case, we need to think in terms of enabling these citizens to further upgrade (or expand and improve) their businesses. It does not mean that they should initiate a new investment. There are also those citizens who have been employed in different sectors of the economy and yet who have not started any form of investment. These citizens too may aspire to further improve their standard of living and the quality of their life and may decide that they may no longer need to be employed under others. One must also consider what opportunities must be provided to these people. In 2013, we should talk about actual investments taking place in different sectors and associated with different enterprises. When we talk about investment and the opportunities associated with it, it means we are talking about realizing development goals; investments enable us to accumulate capital goods and related services. So investment has to be associated with the overall economic progress that has to be achieved in the long run. As a result, we should not expect immediate and dramatic changes associated with investment opportunities. Their effects have to be assessed in terms of their cumulative contribution in our endeavor to ensure sustainable development and the programs that have been planned as part of the chosen path towards realizing development goals in the county.

Mr. President, in the last meeting of the cabinet of ministers, a professionally studied document containing a comprehensive package of proposals related to short-term, middle-term and long-term infrastructural projects such as road networks, ports, harbors, airports, houses as well as sewer systems was presented. Taking into account the huge budget required for putting into effect this comprehensive plan, do you think this will be practical with the funds we have at our disposal? Would you also please tell us about the schedules and action plans designed for the implementation of what has been proposed?

This is related to the economic progress we plan to achieve. We often talk about food security. But no economic prosperity or progress is achievable without having adequate infrastructure in place. Everything is dependent on infrastructure. In this case, the most important program is associated with roads and bridges because without having first grade, second grade and third grade roads it is not possible to have successful agricultural, tourism, industrial activities and other activities associated with other sectors. We are saying that previously we were below zero, and then we have been able to move forward to a zero level. When it comes to road infrastructure, we may not claim that we have been able to go beyond maintaining the existing ones. We have maintained the existing roads and bridges and we have also built new ones that may not be that significant at least when judged in terms of what we aspire to achieve. But the coming few years, we need to have a clear mind picture of what we intend to do in relation to all types of roads regardless of whether we actually implement or not what we aspire to do. You can do nothing without having such a picture of what you want to do. Without having that picture in your mind, you may not even know whether you have the resources needed for achieving your goal; you cannot also determine your priorities without having the bigger picture in your mind. First and foremost, you need to have a picture of what type of roads you want to build and where you want these roads to have been built and which areas you want to have connected as a result of the road networks. This may not necessarily be a 100% perfect picture or calculation, but it provides one with a sense of direction. The same is also true in the case of agricultural infrastructure such as small scale and medium scale dams and the like. In this case, too, you need to have a clear picture of where you want to build a small dam, a medium scale dam and a large scale dam and why. The point is that regardless of the magnitude or the extent of the resources we are endowed with, we need to make optimal use of our resources such as rainfall and the rivers we have. Making optimal use of any resource such as the aforesaid one is dependent on the relevant infrastructure you have prepared. In simple terms, without having a dam as part of your infrastructure, reserving water as an important resource is not thinkable. Likewise, we need to have also clear pictures or general plans related to ports and harbors. The same is also true when it comes to airports whether they are large or small and whether they are meant for international purposes or domestic purposes. All these are the major infrastructural plans.

In a similar manner, one also needs to have some general picture as regards the costs of materializing the major goals associated with these plans. We are trying to estimate the cost of the said projects without considering the issue of housing, what has to be done in connection to the facilities associated with the delivery of essential services such as education and health as well as water supply system and the like. This way or the other, we need to estimate the corresponding budget requirements. Whether these infrastructural projects are estimated to cost 23, 24, 25 or 30 billion, we need to have a picture about this too. In addition to other services (the ones mentioned above), one also must consider the energy requirements associated with the major infrastructural plans. However, without dealing with basic infrastructural problems and without properly addressing such concerns, it is not thinkable to achieve other goals in the economy. To effectively implement the aforesaid projects and programs, you need to have the budget required for their implementation. Do we have the capacity to do so? Do we have the fund required for addressing these concerns? If one lacks financial resources to fund these important projects, in such a case the need to seek external support may arise. But either way the capacity to fund such plans must be assured. The ability to fund certain capital projects is proportional to the economy you have. You cannot achieve anything that is beyond the capacity of your economy.

Generally, there is a preliminary package of important programs. If we add to it the housing issue, the picture becomes a far bigger one. If you further add to the list what has to be in relation to the energy requirements in the country as part of a major infrastructural package, the picture becomes far, far bigger. However, you have a picture about what you should do. If the priorities and some of the factors that determine their achievement have been identified, then one can arrange project number one, two, three, and so forth in terms of their importance. In this case, the projects are arranged using relevant standards. Accordingly, when arranged in terms of time frame taking into consideration their respective importance, some of the projects are short term projects, others are middle term and some others are said to be long term ones. Bearing this in mind, for the coming years we will do our best to achieve important infrastructural projects taking into account our capacity and the need to evenly distribute our resources across all the concerns we have. This is because all the funds we have cannot be exclusively spent on infrastructure only. It is not thinkable to achieve certain infrastructural projects at the expense of educational and health care services. Therefore, it is compulsory to distribute the resources across core concerns of the country and across time too. But it is important to have a package of proposals regarding the major concerns the society has as it will be an important benchmark for assessing economic performance. Without such a picture as a starting point, it may be impossible, or at least difficult, to measure the progress of your economy as whole or sector level achievements. It is with this perspective in mind that we discussed these issues in the last session of the cabinet of ministers. The fact that these issues were discussed during the said session does not mean that they have been completely finalized; still they need to be further refined. As I said earlier, the ability to materialize the goals associated with the said infrastructural projects is determined by the capacity for funding them. But an equally important factor that determines the successful completion of these projects is also the capacity required for their implementation. For example, we may have machinery and other important technologies imported in 2012. In connection to the capacity for implementing a plan or plans, we need to think in terms of the relative importance of these inputs and the experiences that have been acquired for enhancing the implementation capacity. Overall, the issue of infrastructure as an issue is a fundamentally important issue as everything else in the economy and all projects designed for making a nation economically prosperous are dependent on infrastructure.

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