Ethiopia vs. Eritrea

geologically active Great Rift Valley susceptible to earthquakes, volcanic eruptions; frequent droughts

volcanism: volcanic activity in the Great Rift Valley; Erta Ale (613 m), which has caused frequent lava flows in recent years, is the country's most active volcano; Dabbahu became active in 2005, forcing evacuations; other historically active volcanoes include Alayta, Dalaffilla, Dallol, Dama Ali, Fentale, Kone, Manda Hararo, and Manda-Inakir

frequent droughts, rare earthquakes and volcanoes; locust swarms

volcanism: Dubbi (1,625 m), which last erupted in 1861, was the country's only historically active volcano until Nabro (2,218 m) came to life on 12 June 2011

Ethiopia is a predominantly agricultural country - more than 80% of the population lives in rural areas - that is in the early stages of demographic transition. Infant, child, and maternal mortality have fallen sharply over the past decade, but the total fertility rate has declined more slowly and the population continues to grow. The rising age of marriage and the increasing proportion of women remaining single have contributed to fertility reduction. While the use of modern contraceptive methods among married women has increased significantly from 6 percent in 2000 to 27 percent in 2012, the overall rate is still quite low.

Ethiopia's rapid population growth is putting increasing pressure on land resources, expanding environmental degradation, and raising vulnerability to food shortages. With more than 40 percent of the population below the age of 15 and a fertility rate of over 5 children per woman (and even higher in rural areas), Ethiopia will have to make further progress in meeting its family planning needs if it is to achieve the age structure necessary for reaping a demographic dividend in the coming decades.

Poverty, drought, political repression, and forced government resettlement have driven Ethiopia's internal and external migration since the 1960s. Before the 1974 revolution, only small numbers of the Ethiopian elite went abroad to study and then returned home, but under the brutal Derg regime thousands fled the country, primarily as refugees. Between 1982 and 1991 there was a new wave of migration to the West for family reunification. Since the defeat of the Derg in 1991, Ethiopians have migrated to escape violence among some of the country's myriad ethnic groups or to pursue economic opportunities. Internal and international trafficking of women and children for domestic work and prostitution is a growing problem.

Eritrea is a persistently poor country that has made progress in some socioeconomic categories but not in others. Education and human capital formation are national priorities for facilitating economic development and eradicating poverty. To this end, Eritrea has made great strides in improving adult literacy - doubling the literacy rate over the last 20 years - in large part because of its successful adult education programs. The overall literacy rate was estimated to be almost 74% in 2015; more work needs to be done to raise female literacy and school attendance among nomadic and rural communities. Subsistence farming fails to meet the needs of Eritrea's growing population because of repeated droughts, dwindling arable land, overgrazing, soil erosion, and a shortage of farmers due to conscription and displacement. The government's emphasis on spending on defense over agriculture and its lack of foreign exchange to import food also contribute to food insecurity.

Eritrea has been a leading refugee source country since at least the 1960s, when its 30-year war for independence from Ethiopia began. Since gaining independence in 1993, Eritreans have continued migrating to Sudan, Ethiopia, Yemen, Egypt, or Israel because of a lack of basic human rights or political freedom, educational and job opportunities, or to seek asylum because of militarization. Eritrea's large diaspora has been a source of vital remittances, funding its war for independence and providing 30% of the country's GDP annually since it became independent.

In the last few years, Eritreans have increasingly been trafficked and held hostage by Bedouins in the Sinai Desert, where they are victims of organ harvesting, rape, extortion, and torture. Some Eritrean trafficking victims are kidnapped after being smuggled to Sudan or Ethiopia, while others are kidnapped from within or around refugee camps or crossing Eritrea's borders. Eritreans composed approximately 90% of the conservatively estimated 25,000-30,000 victims of Sinai trafficking from 2009-2013, according to a 2013 consultancy firm report.

Ethiopia - the second most populous country in Africa - is a one-party state with a planned economy. For more than a decade before 2016, GDP grew at a rate between 8% and 11% annually - one of the fastest growing states among the 188 IMF member countries. This growth was driven by government investment in infrastructure, as well as sustained progress in the agricultural and service sectors. More than 70% of Ethiopia's population is still employed in the agricultural sector, but services have surpassed agriculture as the principal source of GDP.

Ethiopia has the lowest level of income-inequality in Africa and one of the lowest in the world, with a Gini coefficient comparable to that of the Scandinavian countries. Yet despite progress toward eliminating extreme poverty, Ethiopia remains one of the poorest countries in the world, due both to rapid population growth and a low starting base. Changes in rainfall associated with world-wide weather patterns resulted in the worst drought in 30 years in 2015-16, creating food insecurity for millions of Ethiopians.

The state is heavily engaged in the economy. Ongoing infrastructure projects include power production and distribution, roads, rails, airports and industrial parks. Key sectors are state-owned, including telecommunications, banking and insurance, and power distribution. Under Ethiopia's constitution, the state owns all land and provides long-term leases to tenants. Title rights in urban areas, particularly Addis Ababa, are poorly regulated, and subject to corruption.

Ethiopia's foreign exchange earnings are led by the services sector - primarily the state-run Ethiopian Airlines - followed by exports of several commodities. While coffee remains the largest foreign exchange earner, Ethiopia is diversifying exports, and commodities such as gold, sesame, khat, livestock and horticulture products are becoming increasingly important. Manufacturing represented less than 8% of total exports in 2016, but manufacturing exports should increase in future years due to a growing international presence.

The banking, insurance, telecommunications, and micro-credit industries are restricted to domestic investors, but Ethiopia has attracted roughly $8.5 billion in foreign direct investment (FDI), mostly from China, Turkey, India and the EU; US FDI is $567 million. Investment has been primarily in infrastructure, construction, agriculture/horticulture, agricultural processing, textiles, leather and leather products.

To support industrialization in sectors where Ethiopia has a comparative advantage, such as textiles and garments, leather goods, and processed agricultural products, Ethiopia plans to increase installed power generation capacity by 8,320 MW, up from a capacity of 2,000 MW, by building three more major dams and expanding to other sources of renewable energy. In 2017, the government devalued the birr by 15% to increase exports and alleviate a chronic foreign currency shortage in the country.

Since formal independence from Ethiopia in 1993, Eritrea has faced many economic problems, including lack of financial resources and chronic drought. Eritrea has a command economy under the control of the sole political party, the People's Front for Democracy and Justice. Like the economies of many African nations, a large share of the population - nearly 80% in Eritrea - is engaged in subsistence agriculture, but the sector only produces a small share of the country's total output. Mining accounts for the lion's share of output.

The government has strictly controlled the use of foreign currency by limiting access and availability; new regulations in 2013 aimed at relaxing currency controls have had little economic effect. Few large private enterprises exist in Eritrea and most operate in conjunction with government partners, including a number of large international mining ventures, which began production in 2013. In late 2015, the Government of Eritrea introduced a new currency, retaining the name nakfa, and restricted the amount of hard currency individuals could withdraw from banks per month. The changeover has resulted in exchange fluctuations and the scarcity of hard currency available in the market.

While reliable statistics on Eritrea are difficult to obtain, erratic rainfall and the large percentage of the labor force tied up in military service continue to interfere with agricultural production and economic development. Eritrea's harvests generally cannot meet the food needs of the country without supplemental grain purchases. Copper, potash, and gold production are likely to continue to drive limited economic growth and government revenue over the next few years, but military spending will continue to compete with development and investment plans.

telecom market challenged by political factionalism and reorganization of ruling party; despite some gains in access, Ethiopia remains one of the least-connected countries in the world; state-owned telecom held a monopoly over services until 2019 when government approved legislation and opened the market to competition and foreign investment; new expansion of LTE services; government reduced tariffs leading to increases in data and voice traffic; government launched mobile app as part of e-government initiative to build smart city; Huawei provides infrastructure to government operator and built data center in Addis Ababa; government disrupted service during political crises; importer of broadcasting equipment from China (2020)

Eritrea and Ethiopia agreed to abide by the 2002 Eritrea-Ethiopia Boundary Commission's (EEBC) delimitation decision, but neither party responded to the revised line detailed in the November 2006 EEBC Demarcation Statement; the undemarcated former British administrative line has little meaning as a political separation to rival clans within Ethiopia's Ogaden and southern Somalia's Oromo region; Ethiopian forces invaded southern Somalia and routed Islamist courts from Mogadishu in January 2007; "Somaliland" secessionists provide port facilities in Berbera and trade ties to landlocked Ethiopia; civil unrest in eastern Sudan has hampered efforts to demarcate the porous boundary with Ethiopia; Ethiopia's construction of a large dam (the Grand Ethiopian Renaissance Dam) on the Blue Nile since 2011 has become a focal point of relations with Egypt and Sudan; as of 2020, four years of three-way talks between the three capitals over operating the dam and filling its reservoir had made little progress; Ethiopia began filling the dam in July 2020

Eritrea and Ethiopia agreed to abide by 2002 Ethiopia-Eritrea Boundary Commission's (EEBC) delimitation decision, but neither party responded to the revised line detailed in the November 2006 EEBC Demarcation Statement; Sudan accuses Eritrea of supporting eastern Sudanese rebel groups; in 2008, Eritrean troops moved across the border on Ras Doumera peninsula and occupied Doumera Island with undefined sovereignty in the Red Sea