The CEO of Eritrea’s Free Zones Authority Araia Tseggai confirmed in a interview with Reuters, that Eritrea is planning to launch a free trade zone for Massawa harbour later this year. Free trade zone means that Eritrea would abolish trade barriers such as taxes, certain charges and quotas as well as minimize bureaucracy on it’s ports, in order to attract foreign investment.

According to Araia dozens of companies have already registered, because Eritrea’s ports are located along the busiest shipping routes of the world. Further, he outlined that approximately 20.000 ships loaded with 700 million tonnes of cargo, which is around 9% of the total global freight market, would pass each year the coast of Eritrea.

The country is said to have invested millions of $US for the infrastructure of the harbour and airport in Massawa. There are already around 12 companies from countries such as China, Italy, Israel, India, Djibouti, Sudan and Dubai, which have registered under the scheme.

Araia points out that the competitive advantage of Massawa or Assab lies in the low labour costs compared to ports such as Dubai, Djibouti or Aden. Although, Eritrea is aware of the fierce competition from neighbouring countries, it believes it can tap into the niche market of small scale freight operations. Because, small companies would shift away from expensive harbours in the region in favour of the less expensive Eritrean ports. Thus, the initial strategy would be to focus on small cargo business first.

Eritrea’s second and strategically better located port Assab, due to it’s closer location to the Indian Ocean, will follow Massawa into the free trade zone in 2010. Eritrea hopes with this measures to stimulate economical activities in the country as well as to lay the foundation for a good soil of future trade with the world.

Along Eritrea’s coastline, in the desert strip between Massawa and Assab, most people live from fishing. This is because the region is not suitable for green agriculture as it belongs to the dry and hot Danakil desert. Since it is difficult to obtain fuel to power boats, local fishermen face problems in going out far to the Red Sea to find rich fishing grounds. Because the heat of the water surface close to the coast reaches high temperatures, fish swarms leave the coastal waters. In addition to this, lack of fuel leads to a shortage of ice, because refrigerators depend on fuel powered electricity from power plants. Ice is required as there is a need to keep the fish fresh while transporting, storing and trading the catch around markets in the region. Fishermen rather sell the fish freshly caught while on sea to Yemen. This shows that the limitation of resources keeps the local fishing industry below its potential.

However, there is a “wind of change” coming in the name of the Wind Energy Application Pilot Project financed by the UNDP and the Global Environment Facility. Under the project it is planned to provide electricity for seven villages in the area in 2009. The prospects that the venture will be successful are promising. According to the local officials and the responsible implementation team of Turkish engineers, wind speeds of over seven knots are required to produce sufficient electricity. Along the Red Sea cost of Eritrea, winds can reach up to 10 knots or more. The planned wind park installations in Assab and the region will reduce fuel dependency and reduce expenditure of fuel imports. Read more: IRIN.

Ethiopia is concerned that the trade volumes of it’s increasing import and exports rely to much on the port of Djibouti. Officials state that 90% of goods out and into Ethiopia flow through the port of Djibouti, which could create a bottleneck in the future. Since Eritrea gained it’s independence, all ports on the Red Sea, such as Massawa and Assab belong to Eritrea. Ethiopia is using the port of Djibouti, which lies 910 kms away from the Ethiopian capital Addis Ababa. Local business men regard the port of Djibouti as expensive and not efficient. Read more: SudanTribune.