Ethiopian Airlines flies to Eritrea, buys stake in Eritrean Airlines

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Flag carrier Ethiopian Airlines is to resume flights to the reclusive East African state of Eritrea on Wednesday, marking the end of a 20-year hiatus.

Ethiopian Airlines will also buy a 20 percent stake in Eritrean Airlines, according to a tweet Tuesday by Ahmed Shide, Ethiopia’s communication minister.

The newly-resumed transport links are the latest step in speedy rapprochement between the two former foes in the Horn of Africa region. Earlier this month, Ethiopia and Eritrea declared an end to the state of war that had existed between them since 1998.

The Eritrean embassy in Ethiopia’s capital Addis Ababa was re-opened Monday, following a visit over the weekend by Eritrean President Isaias Afwerki, who was received by Ethiopian Prime Minister Abiy Ahmed. The weekend prior, Abiy was in the Eritrean capital of Asmara.

Abiy, 41, has spearheaded swift reforms since taking power in April, following a political crisis in which his predecessor resigned amid mass anti-government protests. Abiy ended the Ethiopian government’s self-imposed state of emergency two months early and has opened up sectors of the heavily state-controlled economy to private investment.

Ethiopia is positing itself as a regional manufacturing and export hub, achieved through its China-style, state-led development model. The country has seen double-digit economic growth as recently as 2017, although approximately one-third of its inhabitants live below the poverty line.

Eritrea, meanwhile, is known as one of the most secretive — and least developed — countries in the world.

Now that flights have resumed, Ethiopian and Eritrean passport holders will be able to travel between the two countries and “be granted a visa by the respective authorities on arrival,” Fitsum Arega, Abiy’s chief of staff, tweeted last week.

“The perception that Ethiopia offers more substantial economic opportunities could lead to substantial migration (by Eritreans),” Pat Thaker, editorial director for the Middle East and North Africa at analysis firm Economist Intelligence Unit, told CNBC.

But Ethiopia, the second most populous nation in Africa, is not exactly an economic paradise, with an unemployment rate of over 17 percent, according to the Central Intelligence Agency’s (CIA) estimate for 2012. Over 60 percent of Ethiopians are under 24.

“Comparisons with Asia’s manufacturing-led boom are, at least as yet, premature,” said a note by Capital Economics in May.

Ethiopia’s manufacturing sector accounted for just 4 percent of its gross domestic product (GDP) in 2015, comparable to Ghana and less than that of Kenya or Nigeria, the note said. This leaves it well behind emerging Asian tigers such as Thailand and Vietnam.

In addition, “There is a clear risk that an influx of large numbers of relatively poorly-skilled Eritreans could cause tensions by increasing competition for jobs in sectors such as construction or tourism,” Thaker said.

Eritrea borders the Red Sea and presents Ethiopia with the opportunity to diversify its access to ports, which it has been developing across the East Africa region.

The secretive nation is a former province of Ethiopia, seceding in 1993. Border tensions between the two countries flared up between 1998 and 2000 and had remained unresolved until this month.

Providing a new travel option for Eritreans could also impact the European migrant crisis. Eritreans form one of the largest groups of people crossing the Mediterranean Sea.

But it is Isaias’ potential to reform Eritrea that holds the greatest sway over this pattern, said John Ashbourne of consultancy Capital Economics.

“The country has been referred to as the North Korea of Africa, so a lot would have to change before people there saw a brighter future elsewhere,” he told CNBC via email.

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