Eritrea and Ethiopia’s economic dividend
What economic gains are in the peace deal between longstanding foes?
Image credit Yemane Gebremeskel Twitter via Wikimedia Commons.
In July this year, a historic peace deal was signed between the heads of state of Eritrea and Ethiopia. For two decades, the two countries had been stuck in a “no war, no peace” stalemate with highly militarized borders, no diplomatic cooperation, and no cross-border trade, investments or transport.
By signing the deal, the heads of state most importantly agreed that the two countries will re-establish close political, economic, social, cultural and diplomatic ties, and that both nations will work on regional peace. Embraced by the public on both sides of the border, the peace deal has been hailed as a positive step towards boosting peace and security in the Horn of Africa region. Surprisingly though, no one has yet offered an analysis of what the peace deal means for the economic prospects of Eritrea and Ethiopia. This article makes some predictions, arguing that both countries stand to benefit economically. But the potential upside is much larger for Eritrea. This is, however, a potential that has many obstacles to overcome before it can be realized.
