COMESA REGION

Victoria Falls (Zimbabwe) - The organization for a common market for Eastern and Southern Africa (COMESA), has launched a single customs union yesterday during the 13th summit of the Head of States 2009.

Eritrea is a member of COMESA and is therefore taking part in the new customs union. The aim of the union is to facilitate trade between member states in a common market.

The COMESA customs union comes along with Eritrea’s recent announcement to introduce Free Trade Zones at the port of Massawa and Assab. As a result, the prospects for trade being stimulated in Eritrea look promising, because Eritrea has lowered trade fences for intra African as well as for overseas goods and products.

The member countries have created one region in respect to their standardized customs system. For example, the abolishment of customs fees for certain goods traded between the member states themselves or the charging of the same rate of customs duty on goods imported from outside their territories.

The President of Zimbabwe Robert Mugabe, who took over the Chairmanship of COMESA for one year, called out to potential investors; ” We have a regional market for you, come to COMESA!”.

The outgoing Chairman and President of Kenya, Mwai Kibaki, encouraged the member states to stay committed to the regional organization, which has developed from a Preferential Trade Area (PTA) to the Free Trade Area (FTA) leading to the launch of the COMESA customs union.

Further, he announced that intra COMESA trade has reached the $15 billion mark in 2008, from $3.2 billion in 2001 when the COMESA FTA was introduced. Out of Eritrea’s total exports in 2007 approximately 8% were made to the COMESA region and 2% of imports came from the COMESA region (see table on the right).

Being in the middle of an economical downturn is definitely not going to be a very easy situation for many people around the world. Nevertheless, it is a periodic occurrence, which is necessary to put things right in a world living too often beyond its means.

Eritrea has been on the track of self-reliance since the independence gained from Ethiopia in the beginning of the Nineties. In many fields, such as humanitarian aid, foreign investment exposure and transport infrastructre, it chose directions apart from the norm of other African countries.

Of course this is the harder way to go for a nation and often difficult to comprehend, because it requires sacrificing in first instance. Moreover, for many years Eritreans have lived far below their means for the sake of their nation and national identity. While others, which now have to come into terms with the bubble burst, used to know no limit.

Thus in times of recession individuals, corporates, national economies and the world tend to lay out their cards newly because it resembles a period of chance, thoughtfulness and self scrutiny.

This is also a chancel for Eritrea to enter into a new relationship in respect to international trade. Especially as a nation, which has a big tourism potential, is soon to enter into the mining industry and is opening its sea ports for free trade.

On the preparations for the upcoming Eritrean National Day on the 24th May 2009, the President of Eritrea has explained to Reuters News Agency, how the country is going to approach these challenges.

“The Norwegians would like to talk about 150 years from now. The Nigerians may want to exploit all their oil resources in 10 days or 10 hours or maybe 10 years, and that’s it, you’re finished. This is a resource of generations.” (President Isaias Afwerki of Eritrea on Reuters News Agency)

The President believes that economical stimulation has to be sustainable in order to fit a nations characteristic of infrastructure. Therefore, he suggests that instead of a tempting short term approach, Eritrea should seek for a more adequate pace to manage the exposure to a free market and a influx of foreign investment. This would be the only way how to best serve Eritrea’s interests for todays and the coming generations ahead.

Massawa

Port of Massawa in Eritrea

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.