Case - Doing Business in Eritrea
Eritrea is in Eastern Africa. Its size is slightly bigger than the state of Pennsylvania. Eritrea currently hosts a UN peacekeeping operation that is monitoring a 25 km-wide Temporary Security Zone on the border with Ethiopia. An international commission, organized to resolve the border dispute, posted its findings in 2002 but final demarcation is on hold due to Ethiopian objections. Since gaining its independence from Ethiopia on 24 May 1993, Eritrea has faced the economic problems of a small, desperately poor country. Like the economies of many African nations, the economy is largely based on subsistence agriculture, with 80 percent of the population involved in farming and herding. In 2004, it took 13.788 nakfa (the Eritrean currency) to get one U.S. dollar, and its per capita income was equal to 900 U.S. dollars. It has a total of 306 kilometers of railroad, 874 kilometers of paved roads, and four airports with paved runways. Its people speak a variety of languages including Afar, Arabic, Tigre and Kunama, Tigrinya, and other Cushitic languages. The Eritrean society is generous with whatever resources it has and its people place a high value on helping others.
-Refer to the scenario above.Eritrea would be classified as a(n):
A) risk aversive nation due to its security zone
B) cultural oasis given the variety of languages spoken there
C) stable country for operation
D) LDC because of low per capita income
E) LDC because its people are altruistic

Question

Quizplus · Accepted Answer

The scenario mentions that Eritrea is a small, desperately poor country with a per capita income equal to 900 U.S. dollars, making it a least developed country (LDC). While the country does have a security zone and a border dispute with Ethiopia, it does not necessarily make it a risk aversive nation or unstable for business operations. The variety of languages spoken and the society's generosity may be interesting cultural aspects, but they do not define the classification of the country for business purposes.