‘Investment’ and the Danger of Oligarchy in Eritrea

By IndepthAfrica
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Dec 20th, 2012
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Bana from Asmara
On December 17 and 18, 2012 a second round of investment conference will take place in the Eritrean capital, Asmara. If this event is going to be anything similar to the first round that was held at the Asmara Palace Hotel in August this year, it will attract hundreds of wealthy Eritreans from the diaspora (particularly from Africa and the Middle East), a few wealthy merchants from Eritrea and of course, on the government side, government officials to listen to the pleas from the investors for the duration of the conference and the Eritrean president to give opening remarks and perform professorially on the first morn of the conference (for full account of the first conference listen to this tape Audio of Investment Conference).

The people at next week’s conference will, behind closed doors, debate, exchange ideas, at times grill government officials (thanks to the kind of temerity money bestows on its masters) and at the conclusion of the conference there will be dining and wining and a toast (most probably paid from the pockets of the investors).

Again if we are to go by the style of the first conference, both sides (the PFDJ/Government and the potential Investors) will dominate the airwaves in the meeting hall and later on the evening television screens, of course with the spoken words muted. Only these two sides will make their voices heard in the conference. It will be an occasion of two titans: the politically powerful and the financially elitist. The only missing voice in the meetings will be that of the Eritrean people including the intellectuals at home and abroad. How will the investment plans (if any concrete plans come to materialize after the two conferences) impact the Eritrean masses?

Many of us are still of the opinion that these conferences are doomed to fail from the start because of the incorrigible nature of the PFDJ and conferences or rhetoric in themselves will lead to nothing. Judging by the disingenuous approach of the PFDJ to reforms or conference proceedings of any sort, we are justified to assume that the conferences will prove to be a farce. Such an opinion is particularly plausible at a time when the energy crisis in Eritrea is biting hard. For instance, as the first Investment Conference in August was in full swing, Asmara was wrapped in blackout, there was no fuel to be pumped at the gas stations and people in the catering industry across Asmara (hotel, tour and café operators, waiters and waitresses) all thronged the Asmara Stadium for a supply of Kalashnikov rifles. What a regime of paradoxes! The lyrists and minstrels in Asmara have in recent months popularized a chorus: ‘What we expected was the gold from Bisha; instead, we have received kalashinkovs from Russia.’

This month’s investment conference also has some specials to complement itself. Blackout has spread from Asmara to other towns, potable water has reached 100 (hundred) Nakfas a barrel in Asmara (In the town of Mendefera this summer a barrel of water had hit 150 Nakfas), there is reportedly a hostility brewing between the police forces and the newly graduated hzbawi serawit (local militias), etc.

Amid such discordant signals from a chaotic regime, we are vindicated to doubt the integrity of holding investment conferences. However, I am compelled to ask what if these conferences pull off to turn from ideas into reality? Will they benefit the Eritrean people or they will prove to be another PFDJ-choreographed disaster in the economic sphere?

Will they bring real and equitable economic prosperity to the impoverished Eritrean people inside the country and later on attract the exiled Eritreans to partake of the dividends or we will have another story of disaster capitalism and shock therapy as has happened in other parts of the world?

Why are the diasporic Eritrean investors convening?

Why do the Eritrean rich from the diaspora come heeding PFDJ’s call for investment conferences and not boycott the call in a show of solidarity with the suffering masses, as some of us would want them to do?

From an informal discussion with many of the participants of the last conference, the motivations for participation vary. There were some who were simply coerced by PFDJ consulates and embassies into coming to the conference. Some have said they came because they wanted to use the occasion to gain permission to enter the country (as they had fled the country in the wake of the 2004 restriction on imports, the 2006 ban on construction practices and the government’s hostile attitude to the ‘greedy merchants’, to use its tired clichés). This group of participants constitutes perhaps the people who do not take the idea of an investment conference seriously but anyways want to use the invitation to visit long-missed families and friends.

Another group of conference participants confessed that they only wanted to explore the possibilities and make up their minds later on. They sounded the conventional type of investors one finds the world all over.

Yet there are others who say that they will stop at nothing to seize the opportunity to grab whatever the government has on offer, be it land on which to build factories and houses or possibly state enterprises to be privatized (by the government). These investors appear to be the breed which wants to exploit the messy situation in the country and risk making business in a PFDJ ruled country in the hope that they will retain their exploits even if another government is installed, as the latter will be bound to honor previous commitments. This motivation comes as no surprise because every investor is primarily driven by profits in return for invested money and not by philanthropic causes.

From the composition of the conference participants, the majority of the attendees in the last convention and those expected to be present at the December event are the rising Eritrean superrich from the African continent and the Middle East. There are of course investors from Europe, the US and Australia. People of means inside the country are not expected to take part, or the government has not encouraged many of them to participate. Only a select handful did take part in the last gathering. This raises more questions than answers. Are people inside the country too uncompetitive to be desirable when compared to the zillionaires from Angola and South Sudan?

The investor and his thoughtful mother

When the August event was announced in the middle of this year, many Eritreans rubbed their eyes in disbelief considering that the Eritrean government and the so-called investors have traditionally been the unlikeliest of bedfellows. Many people had not believed that the conferences would seriously take place. But in actuality the conferences took place. Whether they will move ahead to produce the desired results is another matter. There is this story that was making the rounds in Asmara in the run-up to the conference. An Eritrean investor outside the country called his old mother in Asmara and broke to her what he thought was good tidings that he was coming home for investment after an absence of some years. His mother was at a loss by her son’s words in view of the daily shortages such as power outage she was running up against. She asked him, ‘My son, do you really take the government at its word? Here let alone for investment, we do not trust the government even when preparing our injera dough (lafa).’ The story encapsulates the deep distrust of the public towards the state and that people have long ago stopped anticipating anything positive from the Eritrean government.

What is the unequivocal message of these conferences?

(a) that the PFDJ has capitulated to the power of market economy

The last two decades the PFDJ, its macroeconomic policy on paper notwithstanding, has proven to be bent on antagonizing the private sector. It all started in the 1990s with the feud between the PFDJ’s parastatal Red Sea Trading Corporation and the private businesses in Asmara. In those days Red Sea Trading was accused of enjoying tax exemption from the government. Although this privilege was at the time categorically denied by Red Sea, the true extent of the exemption was revealed later on by General Ogbe Abraha, formerly in charge of Red Sea, as a row erupted between the general and the Eritrean President. Over the ensuing years the full drama of PFDJ monopolization of all economic sectors (agriculture, manufacturing, construction, distribution, general trading, hotel operations, and so on) unfolded before our eyes. Today private sector in Eritrea is reduced to grocery shops and contraband trade, all because of PFDJ’s sinister workings.

But now the PFDJ has come to double as a savior of the country and a staunch promoter of private businesses. We are daily being deluged with private sector success stories on the pages of Hadas Ertra. This is in stark contrast to the regular denunciations of market economy that we were used to be treated in the same paper. In yester years the PFDJ pulled down the house with its own hands and today standing on the ruins it tries to appear the very builder of the demolished house. A culprit is asking us to allow him the further raping of our resources.

In a way, the PFDJ after years of falling foul of economic principles is showing that it has not come up with something novel, unheard of. It caused the country all the economic maladies that come from a centralized, mismanaged economy and it now turns to the investor community for bail-out. It seems to go the path of other nations, except that it is doing so after having squandered all the country’s resources and golden opportunities in a futile attempt to reinvent the wheel. Why fail so abysmally while it is possible to learn from the mistakes of other countries?

(b) that money has the last word

Many of us, having grown accustomed to the PFDJ’s demonization of the market forces and rich people, have been under the impression that the loner PFDJ with its extensive economic tentacles will one day work economic miracles and out of its abundance dole out dividends to all its docile slave labor, the families of martyrs and the veteran fighters. The truth is far, far from it. Most of the population has been brought to its knees by the skyrocketing cost of living and has come to live below poverty or extreme poverty line. The ban on lawful trade and price control imposed by the regime, while it heralded huge boon for the traders, has starved the majority of the population. Suffering has become the lot of the poor while enrichment belongs to the contrabandists; slave labor and martyrdom is mostly the destiny of the children of the lowly while demobilization and travel abroad is for the sons and daughters of the rich. Whether we like it or not, this world is for the well-off and Eritrea has not been an exception. All the words in the slogan ‘Victory to the Masses’ are but hollow words. We were often told that when the Eritrean martyrs sighed their last breath on the battlefields, they muttered the words ‘Victory to the Masses.’ Then they must have meant those words, but what has counted finally in a PFDJ dispensation is the will of the people with money. In the light of the investment mood of the day the slogan may over time read ‘Victory to the Oligarchs.’

Whereas the PFDJ in rhetoric is against the wealthy and the illicit traders, in practice it is their biggest benefactor. With each one of its policies, it has been providing them the breeding ground for their aggrandizement. PFDJ has all along been preaching that its end goal is social justice (economic and social democracy) for the Eritrean people. If we revisit PFDJ’s definition of social justice: “Social Justice (Economic and Social Democracy): Equitable distribution of wealth, services and opportunities, and special attention to be paid to the most disadvantaged sections of society” (PFDJ National Charter, Nakfa, February 1994). But in practice what we have seen in the last twenty plus years of PFDJ’s political and economic dominion is not social justice but ‘widely distributed social deprivation’ and the emergence of a small elite related to the extractive clique at the top in interest, blood or loyalty.

Coming back to the issue of investment conferences, at least at face value the on-going conferences show that the country is ultimately for the rich and by the rich. The poor who have for years been trampled under the PFDJ jackboot are not to factor prominently in the equation. They are just statistics. Let’s only pray, wish and work that the rich will be favorable and fair to the rest of us.

From one Oligarchy to Another?

Now in a country that has long been dominated by one cabalistic system overseeing all economic life, how will the idea of private investors play out? Will the current oligarchy (PFDJ oligarchy run by the likes of the President, Hagos Gebrehiwet, aka Ksha, and Co.) simply relinquish its monopolistic powers? Or it will be the transfer of economic power from a known oligarchy to another yet-to-be-unveiled oligarchy? Perhaps the existing oligarchy (Isaias-Hagos and Co.) may reappear on the stage wearing the garb of private investor and buy out government assets. Or as a minimum the current oligarchy may team up with other private investors in obtaining public assets to carry on with its predatory practices.

In the first place, why is the PFDJ welcoming back the very businesspeople whom it had demonized as ravenous wolves in the cloak of the Merchant of Venice? Is it because there has been a change of heart on the part of those businesspeople or the PFDJ wants to use them for its political and economic intrigues by purging their ‘dirty money’? Is the business community, all too cognizant of PFDJ’s duplicitous nature, content with a marriage of convenience as long as the terms are fulfilled? If these businesspeople, either for their own benefits or for PFDJ’s ulterior motives, gain foothold in the country, are there appropriate policies, institutions and the rule of law in place to avert the harm in the form of economic monopoly and the disaster capitalism that is otherwise likely to visit the Eritrean people? Let’s be under no illusion.

The economic meltdown in Eritrea and the government’s call for private capital investment, whether genuine or sham, are reminiscent of the state of affairs that transpired in Russia beginning in 1991 with  the collapse of the Soviet Union, although the scales and challenges of our economies (Eritrea and Russia) are worlds apart. In 1991 the demise of the Soviet Union had finally been precipitated largely due to the mounting misery in economic conditions. But with the demise arrived a new phenomenon of scramble for state resources and economic monopoly by the old Soviet party loyalists, state enterprise managers, security personnel and other personalities related to them. Although at first there were promising signs of orderly economic restructuring (The Commanding Heights, Daniel Yergin and Joseph Stanislaw, 2002), in the years that followed the situation was to turn exclusively in favor of the powerful and well-connected who resorted to massive bribery, fraud and even murder through gangsterism. Things were to go from gray to black for ordinary Russians.

As President Boris Yeltsin vigorously went ahead with Russia’s economic liberalization, the country slid into a very painful path of messy privatization, hyperinflation and the rise of oligarchs who to this day pull the strings in the country. Some of them have managed to do so from a distance while stationed in Western capitals. The owner of the English Premier League club Chelsea Roman Abramovich is a case in point. This friend of former president Boris Yeltsin and current president Vladimir Putin, who at one time was crowned the title of Russia’s richest man, started his business career at 21 years of age dealing in stolen gasoline and diesel fuels and black market goods while he was serving in the army. At 26 he was arrested on a charge of theft of government property. At the prime age of 30, Abramovich came to join the billionaires’ club. By the time he owned Chelsea (2003), he had already made his way to the governorship of a province in Russia.

While Russia’s economic liberalization brought people like Roman Abramovich the limelight and unimaginable riches, at the same time millions of Russian citizens were left in utter destitution unable to afford a loaf of bread. As a result of that legacy even today the Russian capital Moscow remains to be the most expensive city in the world.

What guarantee do we Eritreans have that Russia’s economic woes and notorious favoritism of the mid 1990s will not visit us given the defunct economic system under the PFDJ, PFDJ’s gross incompetence to oversee a smooth transition and its recent signals to share space with so called private investors, many of whom are braced for scramble of national resources and are already at each other’s throats where they come from outside Eritrea? PFDJ officials on their part have already begun individually wheeling and dealing with their respective favorites among the incoming superrich in a bid to forge a win-win situation. An alliance of vultures!

I am not against rich people or private investment. I welcome the influx of capital investment, technology and management skills into Eritrea. But with one essential caveat. There has to be conscientious guarantee for the welfare of the majority of the citizens in the country by instituting the necessary policy instruments and the attendant institutions. The debate should begin in earnest on how to smoothen the rough ride in any new waters of economic liberalization, regardless of whether the liberalization takes place under the PFDJ or after. Otherwise, private investment and privatization may ensure only the interests of the super rich, foster monopolistic rivalry, send prices spiraling out of control and will then fuel more inequality and poverty instead of alleviating them. What I believe we should demand is a transparent, public and scholarly debate on viable economic models for Eritrea and on judicious transition from the existing ‘shortage economy’ the PFDJ plunged us into. I look forward to hearing enlightening discourses on such subjects and best practices from our most astute Eritrean social scientists. A regime that has for long been wreaking havoc on our economic lives should not again be left to determine the rules of the game in the name of creating enabling environment for investors. Let the virtual war begin!

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