The July 2018 peace agreement between Eritrea and Ethiopia opened new prospects for the country's socio-economic development, linked with the advancement of regional economic integration in the Horn of Africa.
Yet, many structural challenges remain. In rural areas, productivity and employment opportunities are low and access to agricultural inputs as well as energy is limited. Eritrea is highly vulnerable to climate change. Absorbing the youth into the labour market needs to be improved, also as an alterative to irregular migration. Active job creation policies, economic diversification, stronger private sector involvement are required. A paradigm shift, dedicating more attention to development priorities is needed.
The main financial instrument for development cooperaton in Eritrea is currently the European Union Emergency Trust Fund for Africa (EUTF). The primary objective of the EU development cooperation in Eritrea is to improve the living conditions of the population, through promoting local development and the creation of job opportunities.
Under this renewed cooperation between the EU and Eritrea, the immediate priority for Eritrea is to develop its trade corridors, particularely with Ethiopia, to enhance regional economic integration. In this framework, the Government of Eritrea has requested support from the EU for procurement of plants, equipment and materials to be used to rehabilitate the main arterial road reconnecting the two countries, thus providing Ethiopia access to Eritrea’s ports. A first EUR 20 million project is ongoing, implemented by UNOPS. Other priorities include job creation in the agricultural sector focusing on youth, economic governance and support to the country's macro-economic statistic system, and the promotion of Eritrean heritage and cultural sector. Detailed proposals for actions in these areas, to be implemented by UNDP in close coordination with various Eritrean stakeholders, are currenty under development.
In addition, following the new dynamics in the Horn of Africa region, the EU has identified supporting regional integration and peace as a priority.
Following the significant changes in the regional and national context after the reconciliation between Eritrea and Ethiopia in 2018, the EU and the Government of Eritrea have agreed on a new set of priorities for development cooperation.The EU has consequently developed a new Development Cooperation Strategy for 2019/20. The new Strategy highlights the will of the EU to reengage with Eritrea and it reflects the need for the EU to adjust its approach and respond to the new political and regional opportunities. Under the new Strategy, 4 closely interrelated priorities have been identified and discussed:
- development of infrastructure and energy (€125 million)
- job creation in the agricultural sector (€30 million)
- economic governance (€5 million)
- and promotion of Eritrean culture and heritage (€15 million)
The ultimate goal of the new Strategy is to support Eritrea in boosting economic growth and create sustainable jobs. The Strategy aims also at supporting regional integration and peace.