Identifier
Created
Classification
Origin
06ASMARA492
2006-06-07 14:29:00
CONFIDENTIAL
Embassy Asmara
Cable title:  

CHINESE COMMERICIAL ACTIVITIES IN ERITREA: GSE

Tags:  ECON PREL PGOV PINR CH ER 
pdf how-to read a cable
VZCZCXYZ0017
OO RUEHWEB

DE RUEHAE #0492/01 1581429
ZNY CCCCC ZZH
O 071429Z JUN 06
FM AMEMBASSY ASMARA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8213
INFO RUEHDS/AMEMBASSY ADDIS ABABA PRIORITY 5902
RUEHDJ/AMEMBASSY DJIBOUTI 2806
RUEHLO/AMEMBASSY LONDON 1149
RUEHFR/AMEMBASSY PARIS 1322
RUEHBS/USEU BRUSSELS
RUEKJCS/SECDEF WASHDC
RUEAIIA/CIA WASHDC
RUEKDIA/DIA WASHDC
RHEHNSC/NSC WASHDC
RHMFISS/CJTF HOA
C O N F I D E N T I A L ASMARA 000492 

SIPDIS

SIPDIS

LONDON FOR AFRICA WATCHERS
PARIS FOR AFRICA WATCHERS

E.O. 12958: DECL: 06/07/2016
TAGS: ECON PREL PGOV PINR CH ER
SUBJECT: CHINESE COMMERICIAL ACTIVITIES IN ERITREA: GSE
RULES FRUSTRATE EVEN ITS CLOSEST PARTNER

REFTEL: 05 ASMARA 923

CLASSIFIED BY: AMB Scott H. DeLisi, for reasons
1.4 (b) and (d).
C O N F I D E N T I A L ASMARA 000492

SIPDIS

SIPDIS

LONDON FOR AFRICA WATCHERS
PARIS FOR AFRICA WATCHERS

E.O. 12958: DECL: 06/07/2016
TAGS: ECON PREL PGOV PINR CH ER
SUBJECT: CHINESE COMMERICIAL ACTIVITIES IN ERITREA: GSE
RULES FRUSTRATE EVEN ITS CLOSEST PARTNER

REFTEL: 05 ASMARA 923

CLASSIFIED BY: AMB Scott H. DeLisi, for reasons
1.4 (b) and (d).

1.(C) Chinese influence in Eritrea may begin to erode as
Chinese business operations in Eritrea, restricted by GSE
financial policies, vote with their feet and scale back
on large scale investments in Eritrea. On June 6, Sun
Jiliang, Deputy Chief of Mission of the Embassy of the
People's Republic of China, discussed with Poloff the
general state of affairs for Chinese businesses in
Eritrea. Sun shared the frustrations of the Chinese
businesses at the strict GSE limitations on the export of
foreign currency. For the businesses, the foreign
exchange policies are eating away at the profitability of
doing business iQEritrea. Some Chinese businesses have
paid as high as a 20% tax or fee on currency conversion
in order to remove hard currency from Eritrea. The GSE
foreign exchange policies and the lack of infrastructure
and basic inputs, such as electricity, water and gas,
serve as disincentives for Chinese businesses to initiate
operations in Eritrea.


2. (C) Another constraint for Chinese businesses here is
that most of their projects are outside of Asmara where
limited infrastructure and the lack of basic inputs make
it tough to operate effectively and as profitably as they
would like. In addition, the new GSE travel restrictions
for all foreigners may affect efficiency as businesses
must apply for permits one trip at a time. Upon the
GSE's issuance of its new restrictions, Sun stated the
Chinese Embassy notified all of the businesses. As of
Jun 6, none had reported any difficulties, however, he
did not know if any had requested permission to travel.
He did not anticipate that the Chinese businesses would
encounter difficulties in receiving approval. (Note: He
was unconcerned by the GSE's new restrictions and
seemingly dismissive. Rather, he affirmed the GSE's
right to do whatever they wanted in this regard - a point

we accept in regard to restricting foreign nationals
generally but not diplomatic personnel End note.)


3. (C) According to Sun, approximately 10 Chinese owned
businesses operate in Eritrea. The majority are
construction companies, two are telecommunications
companies and there are a handful of physicians working
in Eritrea. (REFTEL) None of these businesses function
solely in the private market, rather they have contracts
with the Government of Eritrea and with the People's
Front for Democracy and Justice(PFDJ) - the government's
political arm and the only political party in Eritrea.
Nearly all of the projects are infrastructure related,
such as upgrading phone service for Eritel and
constructing roads, bridges, dams and wells, including
several projects funded by World Bank.


4. (C) With seemingly better than access to high level
government officials than enjoyed by other diplomatic
missions there exists the widely held perception that
China has special influence in Eritrea. That influence,
however, may be largely restricted to commercial
enterprises rather than political issues. The newly
arrived British Ambassador, Nick Astbury, shared with
Poloff parts of his initial call on the Chinese
Ambassador, Shu Zhan during which Shu maintained that the
Chinese had minimal political influence on the GSE.
While they may have access to the President, Shu
explained, this access is limited primarily to matters
related to commercial and financial projects and little
policy or ideology is discussed.


5. (C) Comment: The GSE sponsored English language
newspaper frequently spotlights the GSE - PRC
relationship, including on military cooperation and, with
that as the backdrop, Post continues to explore the full
extent of the Chinese - Eritrea bilateral relationship.
Given President Isaias' personal ties to China (he
received military training in the late 1960s),he
maintains strongly positive feelings for the Chinese and
an unfortunate attachment to a Maoist ideology that still
seems to guide his views on governance. Substantively,
however, the relationship may be less than it appears on
the surface, at least in regard to military support which
evidence suggests exists only a small scale.


6. (C) Comment con't: China does continue to be
Eritrea's predominant commercial partner but, as noted,
even that "special" relationship has not kept Chinese
businesses, like others, from struggling under the burden
of the GSE's onerous and restrictive financial
requirements. The inability of Chinese businesses to
repatriate their profits from Eritrea may result in fewer
and fewer Chinese businesses entering the Eritrean
market. Given the GSE's reliance on Chinese-managed
infrastructure projects it will be of interest to see if
the GSE readily accepts a gradual exodus of Chinese
companies or will amend its rules or find a way to make
exceptions for the Chinese. End Comment.

DeLisi