Eritrea: Investing

FDI in Figures

Eritrea’s Central Bank does not release official data on FDI. According to UNCTAD's World Investment Report 2021, FDI flows to Eritrea amounted to USD 74 million in 2020, up slightly from 2019 (USD 67 million), despite the global economic crisis triggered by the Covid-19 pandemic. The total stock of FDI was estimated at USD 1.2 billion in 2020. However, the country's FDI inflows are the second lowest in the region after Comoros. In 2021, global FDI flows rebounded strongly, but FDI flows to African countries (excluding South Africa) rose only moderately (UNCTAD’ Investment Trends Monitor). Most investments are oriented towards the mining sector. China is the country's main investor, creditor and trading partner.

Eritrea struggles to attract investors for a number of reasons, including corruption, strong state control over currencies, legal uncertainty, an arbitrary judicial system, a low-skilled labour force drained by mass migration, and the generally dilapidated state of the country as a result of years of conflict. The government dominates most aspects of the economy and maintains ownership barriers that reduce or prevent foreign investment. Abuses and attacks against non-Muslim and foreign communities by the Islamist Al-Shabab militant group have impeded development efforts in the region and make it difficult for the country to attract foreign investors. The country is also characterised by recurrent human rights violations, forced labour and indefinite periods of military service. As a result, Eritrea remains one of the world’s most difficult places to do business, ranking second to last (before Somalia) out of 190 countries in the 2020 Doing Business report published by the World Bank (same position as previous edition).

The government created a Free Zone Authority in Massawa in order to attract new investors, mainly in the energy, tourism and fishing sectors. It has also launched a privatisation plan for the national telephone company, the hotel industry and food processing plants, but progress has been slow. Despite an unfavourable business climate, Eritrea’s mineral resources have the potential to attract foreign investors. The country benefits from extensive mineral resources (potash, copper, gold, silver, zinc) and a strategic position on the Red Sea. The peace agreement signed between Eritrea and Ethiopia in July 2018, after 20 years of war, will open new investment opportunities. In 2022, the major potash project in Colluli will be one of the main sources of growth in private investment (Coface).

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Latest Update: February 2023