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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).

 

Country Comparison For the Protection of Investors

  Eritrea Sub-Saharan Africa United States Germany
Index of Transaction Transparency* 3.0 5.5 7.0 5.0
Index of Shareholders’ Power*** 5.0 5.5 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

 
Foreign Direct Investment 201820192020
FDI Inward Flow (million USD) 616774
FDI Stock (million USD) 1,055.31,122.41,196.2
Number of Greenfield Investments* 0.00.00.0
Value of Greenfield Investments (million USD) 000

Source: UNCTAD - Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 

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Tax Rates

Sales tax
General service tax, with rates between 5% to 12%.
Company Tax
30% + 4% municipal tax
Withholding Taxes
Dividends: 0%, Interests: 10%, Royalties: 5% (paid to mining companies)/10%
Bilateral Agreement
Eritrea and Spain are not bound by a Double Taxation Agreement.
Social Security Contributions Paid By Employers
Eritrea has not introduced a social security system yet.
Other Domestic Resources
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 
 

Individual Taxes

Personal income tax Progressive rates from 2% to 30% of salary
Recovery and Rehabilitation Tax Eligible Eritreans who live abroad contribute 2% of their net income
 
 

Country Comparison For Corporate Taxation

  Eritrea Sub-Saharan Africa United States Germany
Number of Payments of Taxes per Year 30.0 36.6 10.6 9.0
Time Taken For Administrative Formalities (Hours) 216.0 284.8 175.0 218.0
Total Share of Taxes (% of Profit) 83.7 47.3 36.6 48.8

Source: Doing Business - Latest available data.

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Investment Opportunities

Tenders, Projects and Public Procurement
Fontier Market Network, Tenders in Africa
African Tenders
DgMarket, Tenders Worldwide
Setting Up a Company
Consult Doing Business Website, to know about procedures to start a Business in Eritrea.
Useful Resources
Contact the Spanish Embassy.
Contact the Embassy in Spain.
Business Portal for Africa
 

Business Setup Procedures

Setting Up a Company Eritrea Sub-Saharan Africa
Procedures (number) 13.00 7.51
Time (days) 84.00 21.30

Source: Doing Business.

 
 
 

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Latest Update: April 2022

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