Eritrea sells luxury houses to earn hard currency
It may look like a truck park by Asmara's Halibet Hospital on the edge of town, but the Eritrean Government, keen to tap the hard currency held by the large overseas Eritrean community, has other plans.
The poor Red Sea state plans 766 "new residential-style" two and three-bedroom apartments there, with shopping centres and sports facilities, the project's website halibet.com says.
The prices, between US$97,000 and US$139,000, are low by London and New York standards, but out of reach for most Eritreans whose average income is just US$130 per year.
Glossy brochures are available in Eritrean embassies abroad and payment can be made in US dollars, euros and British pounds but not in nakfa, the national currency.
The government has hard currency reserves equal to only one month of imports, according to the International Monetary Fund (IMF), and must find innovative ways of earning crucial cash.
"This economy lives off two things: diaspora and loans," an Asmara-based analyst said, adding that Eritrea paid 50 times more for imports in 2003 than it earned from exports.
The currency crunch is due partly to a collapse of trade with neighbours Ethiopia and Sudan, a fixed exchange rate and the fact that most foreign exchange transactions take place outside official channels, the IMF says. Reduced donor loans have also contributed.
Meanwhile Eritrea, whose mantra is self-reliance, suffers from tension with its giant neighbour Ethiopia, with which it fought a border war in 1998-2000 and rising world oil prices.
It needs hard cash to pay for food, oil and arms.
Loans have come from financial institutions such as the World Bank and bilateral donors, including the United States, China, Italy and Middle Eastern countries.
A key source of foreign currency is Eritrea's sizeable overseas population, many of whom live in the United States and Europe.
They make donations to the families of those killed in the border war, and pay a two per cent income tax to qualify for privileges back home, like the right to buy housing and land.
But payments are declining as younger Eritreans' interest in their homeland dwindles, analysts say. "Payment is restricted to a minority of diaspora members who want to maintain financial and economic links to the homeland," one analyst said.
Another cash earner is private family transfers.
Economists estimated that in 2003, remittances were worth around 70 per cent of Eritrea's GDP. Diplomats say they fell from US$462 million in 2003 to US$420 million in 2005.
Some Eritreans abroad still want to help their country.
"As a kid, I remember EPLF delegates coming to update us on developments in the field," said Senai Maesho, 39, who lives overseas, referring to the guerrilla group which led a 30-year struggle for independence from Ethiopia, won in 1993.
"We were made aware that if we didn't contribute (to the struggle) then our political independence would be hijacked by surrounding countries," he said, while holidaying in Asmara.
For some Eritreans, the Halibet project is an example not of a cash-strapped economy seeking solutions to a currency crisis, but of a proud young nation proving itself to the world.
The country representative for the project's South Korean contractor, Keangnam, said customers were coming. "They're buying, paying money, registering," Nam-Hun Kang said. "Very promising."
Source: China Daily
It may look like a truck park by Asmara's Halibet Hospital on the edge of town, but the Eritrean Government, keen to tap the hard currency held by the large overseas Eritrean community, has other plans.
The poor Red Sea state plans 766 "new residential-style" two and three-bedroom apartments there, with shopping centres and sports facilities, the project's website halibet.com says.
The prices, between US$97,000 and US$139,000, are low by London and New York standards, but out of reach for most Eritreans whose average income is just US$130 per year.
Glossy brochures are available in Eritrean embassies abroad and payment can be made in US dollars, euros and British pounds but not in nakfa, the national currency.
The government has hard currency reserves equal to only one month of imports, according to the International Monetary Fund (IMF), and must find innovative ways of earning crucial cash.
"This economy lives off two things: diaspora and loans," an Asmara-based analyst said, adding that Eritrea paid 50 times more for imports in 2003 than it earned from exports.
The currency crunch is due partly to a collapse of trade with neighbours Ethiopia and Sudan, a fixed exchange rate and the fact that most foreign exchange transactions take place outside official channels, the IMF says. Reduced donor loans have also contributed.
Meanwhile Eritrea, whose mantra is self-reliance, suffers from tension with its giant neighbour Ethiopia, with which it fought a border war in 1998-2000 and rising world oil prices.
It needs hard cash to pay for food, oil and arms.
Loans have come from financial institutions such as the World Bank and bilateral donors, including the United States, China, Italy and Middle Eastern countries.
A key source of foreign currency is Eritrea's sizeable overseas population, many of whom live in the United States and Europe.
They make donations to the families of those killed in the border war, and pay a two per cent income tax to qualify for privileges back home, like the right to buy housing and land.
But payments are declining as younger Eritreans' interest in their homeland dwindles, analysts say. "Payment is restricted to a minority of diaspora members who want to maintain financial and economic links to the homeland," one analyst said.
Another cash earner is private family transfers.
Economists estimated that in 2003, remittances were worth around 70 per cent of Eritrea's GDP. Diplomats say they fell from US$462 million in 2003 to US$420 million in 2005.
Some Eritreans abroad still want to help their country.
"As a kid, I remember EPLF delegates coming to update us on developments in the field," said Senai Maesho, 39, who lives overseas, referring to the guerrilla group which led a 30-year struggle for independence from Ethiopia, won in 1993.
"We were made aware that if we didn't contribute (to the struggle) then our political independence would be hijacked by surrounding countries," he said, while holidaying in Asmara.
For some Eritreans, the Halibet project is an example not of a cash-strapped economy seeking solutions to a currency crisis, but of a proud young nation proving itself to the world.
The country representative for the project's South Korean contractor, Keangnam, said customers were coming. "They're buying, paying money, registering," Nam-Hun Kang said. "Very promising."
Source: China Daily
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