DOING BUSINESS IN ERITREA
Since 2003, Healy Consultants has assisted our Clients with business registration in Eritrea. Our services include i) Eritrea company incorporation ii) government license registration iii) business bank account opening iv) employee recruitment v) visa strategies and vi) office rental solutions.
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Advantages and Disadvantages
Advantages of Eritrea company registration
- A limited liability company in Eritrea can be incorporated with a minimum of one shareholder and one director of any nationality. The minimum paid-up capital required is US$1,500 and our Client will not need to travel to complete the engagement;
- Although doing business in Eritrea is challenging, the government has set up attractive incentives for investors willing to invest in tourism such as 100% ownership on equity. The country boasts historical as well as archeological sites and therefore has lots of tourism potential to be explored by investors;
- The Massawa Free Zone opened in 2003 and includes the ports of Massawa and Assab as well as an airport. These free zones are attractive to investors as they are the perfect location for businesses to access global markets, offer tax and duty exemptions on internationally traded products.
- Eritrea’s oil and gas industry is a strategic element in business possibilities for foreign companies. Eritrea boasts considerably large deposits of natural gas and oil along the coast of the Red Sea that could be exploited commercially. Some of the international corporations that have already established in Eritrea and are working in this sector include Mobil, Total and Shell;
- Agriculture is one of the important part of Eritrea’s economy and the county has in abundance arable land suitable for farming and production of agricultural products. Investors interested in this sector will have access to more than 1 million acres of affordable land that be commercially exploited;
- Eritrea was also recently granted access to the African, Caribbean and Pacific Group of States (ACP) that receives preferential access to certain EU markets.
Disadvantages of Eritrea company registration
- Eritrea remains the most censored country in the world according to Committee to Protect Journalist (CPJ). The country also faces economic sanctions and political isolation imposed by the United Nations Security Council over the alleged facilitation of insecurity in the Horn of Africa, which is a major impediment to doing business;
- Given Eritrea’s inability to raise sufficient foreign currency on global capital markets or through exports, the country therefore exerts strict foreign exchange controls. This has severely impacted negatively on freedom of trade and the country’s economic development;
- Prolonged political instability in Eritrea and lack of transparency in the judicial system extremely hamper the country’s regulatory environment. Access to updated and adequate information is burdensome as most of the published regulations are obsolete and thereby ineffective in practice;
- It takes approximately 5 months to register a business in Eritrea involving more than 10 laborious procedures. Another significant hurdle for business operations in Eritrea is government bureaucracy: For example, it is necessary to file 10 documents in order to export a product. Healy Consultants will be happy to help you handle your administrative requirements;
- Corruption is a major constraint to businesses as public officials expect gifts to get things done. Interaction with tax and customs officials often involves demands for facilitation of payments in order to expedite bureaucratic processes and to overcome complicated and time-consuming administrative procedures;
- The financial system in Eritrea is underdeveloped, with only three main commercial banks i) Commercial Bank of Eritrea ii) Eritrean Investment and Development Bank and iii) Housing and Commerce Bank of Eritrea owned by the State. The country is also subject to high inflation, recorded at 12.27% in 2014 and the local currency depreciated against the USD by 12.50% in 2015;
- Eritrea is a generally underdeveloped country with poor infrastructure which includes i) very poor road networks ii) lack of proper drainage systems and iii) inadequate or complete lack of electric power in most parts of the country;
- Eritrean labour force lacks the necessary skilled manpower as majority of the population depends on unskilled labour. Investors therefore should be aware that businesses will operate below full capacity due to shortages in skilled manpower as well as language barrier as English is also not widely spoken.
Best uses for an Eritrean company
- The mining industry is an integral part of the Eritrean economy with copper ore and precious metal ore as the top exports from the country. Although the country has only been operating one commercial mine, Eritrea expects to have in operation four mines by the end of 2017, producing copper, gold, zinc and potash in the country’s bid to revitalize the economy.
- The country is currently on the lookout for international companies interested in investing in this sector in order to boost its economic growth.
- Time to incorporate: Seventeen weeks
- Cost to set up: US$14,650
- Minimum capital: US$1,500
- Physical office required: Yes
- Shareholders: 1
- Directors: 1
- Company secretary: No
- Resident director: No
- Corporate tax rate: 34%
- Corporate tax base: Worldwide
- Shelf companies: Unavailable
- Main company type: LLC