* President cheers failure of 'speculation economy'
* Isaias confident Eritrea will cope
By Andrew Cawthorne
ASMARA, May 21 President Isaias Afwerki believes the financial crisis is a welcome restructuring of the global economic order and vindication of Eritrea's much-vaunted principles of self-reliance and sustainability.
"People learn things the hard way sometimes," he said.
The former Marxist guerrilla leader has ruled one of Africa's smallest economies since its 1993 formal independence from Ethiopia. His government avows resistance to foreign aid.
Isaias said Eritrea, like other nations, had of course felt some pain from higher import costs -- particularly oil and food -- and lower remittances from abroad. But in the grand scheme, "these are very small things," he said.
"The good thing about it is that the global economic situation is in the process of transformation," the 63-year-old told Reuters in an interview on Wednesday.
"It is a wake-up call to many who have been preaching ideals about the functioning of economies in their own ways and trying to substitute real economy for finance and speculation ... what I call the speculative economy or the economy of speculation."
Eritrea's 4 million people are feeling the pinch, especially due to recent drought, but Isaias said there was no starvation and his country was better off than neighbours.
"For us, it's a moral boost, because for the last 18 years, we've been focusing on the real economy -- roads, ports, airports, electricity, water, housing, services, health, education, food security. Not a single penny has been wasted.
"It may not have accumulated the critical mass required for jump-starting the economy, but we have been investing and accumulating all along."
Few African economies were as well-prepared to weather the crisis, he said. "There may be good examples. People talk about Ghana and other economies, but out of 50-something, you can talk about a handful."
Talk of an imminent recovery by some world leaders was false prophesy, he said. "They are preoccupied with micro-managing panic ... (so) you tell people lies.
"You see every day, on TV or the Internet, that 'stock markets are reviving, stock markets are doing this and that' when the real economy is not improving, employment is higher, real estate is going down, the car industry is collapsing."
Isaias acknowledged hardships for Eritreans, but said the government was subsidising food and oil, while some communities were simply moving from arid areas.
"In comparison to the neighbours, I can say we are better off. I don't want to exaggerate this. Yes, we have some areas that are badly hit," he said, acknowledging that a "very little" food aid was coming in, including from Japan and China.
Aid sources say child malnutrition rates are up alarmingly in Eritrea, but the president said that was not the case.
Few hard statistics are known about Eritrea's economy, which is agriculture-based and depends heavily on money sent from Eritreans abroad. It is allowing more than a dozen foreign firms into its nascent mining sector, and wants to develop untapped fisheries potential off its Red Sea coast.
Eritrea is also seeking to create free trade zones to take advantage of busy shipping lanes nearby. [ID:nLJ065902]
Isaias said Eritrea would move slowly to draw foreign investment, without exaggerating the possibilities. He laughingly cited a TV advert for tourism in Egypt which he said showed dolphins offshore where in fact there were none.
"There is nothing there ... (though) at one point in time, I was there, to see the sea full of jelly-fish!
"We will have to create opportunities rather than create distorted images ... And we are on the right track."
Around Asmara, new residential construction projects demonstrate progress underway, while the presence of some beggars and the site of peasant farmers on the hills around underline the enormity of Eritrea's task.
Speaking anonymously, some Eritreans grumbled at worsening poverty, particularly in rural areas, while others said their leader's long-term view was the right one. "He gets a lot of criticism from abroad, but he's not emptying the budget into his pockets, like everywhere else in Africa," one man said.