ASMARA (Reuters) - You can hear the ping of metal striking metal and the gentle buzz of wood being cut before you even enter Medebr market in the Eritrean capital.
Inside, a cacophony of hammering and sawing assails the ears while bright blue flashes from welding guns strike the eyes. Down a dirt street inside this old open market, artisan Berhane Seid cuts small slits in a shell casing.
The combs that Berhane carves from these remnants of Eritrea's wars are sold to hairdressers, who use them to straighten hair.
"Self-reliance is very important ... You don't have to expect anything from anybody," says the veteran of Eritrea's 1998-2000 border conflict with neighbor Ethiopia.
Berhane, like many in the Red Sea state, feels a steely pride in the government's self-reliance policy, a legacy of Eritrea's 30-year independence war with Ethiopia, Washington's top regional ally.
During the war -- popularly known as the "Struggle" -- guerrillas had little outside help. Goods like medicines and radios were manufactured in camouflaged tents and bunkers.
After independence in 1991, that enforced policy became an enduring legacy. But it has put Eritrea, home to around 4.7 million people, at loggerheads with many Western donors and could hamper foreign investment, analysts say.
In late 2005, drought-prone Eritrea cut food aid by more than 94 percent, according to aid agencies. Months later, all food aid was stopped except to people displaced by the border war with Ethiopia, according to the World Bank.
In the past three years, the Asmara government has repealed the permits of more than a dozen international aid agencies. It says Western powers have used aid in the past to meddle in countries' internal affairs.
It also says food aid creates a culture of dependency.
"Genuine independent help is not neo-colonialism," said one Western diplomat in Asmara.
Eritrea's tradition of self-reliance comes vividly to life in Medebr market.
Used oil drums are recycled to make traditional ovens for cooking injera -- a spongy bread eaten in Ethiopia and Eritrea.
Artisans construct intricate Orthodox Christian crosses. Others pound away at sizzling scrap metal, morphing it into hoes for the planting season.
President Isaias Afwerki told Reuters in an interview in mid-May that his nation was not trying to cut itself off from the rest of the world.
"We would like integration more than anybody else ... Self-reliance is interpreted as an isolationist trend, which it is not at all ... Self-reliance is preparing yourself for partnership, equal partnership," he said.
Eritrea's government has long been suspicious of the international community and its aid. Fractious ties have worsened in the last few years since Western nations accused it of backing Somali insurgents and expelling U.N. peacekeepers on its border with Ethiopia.
Eritrea, admired by the West in the years after independence as a shining example of post-liberation war African countries, has also fallen out with Western donors over its human rights record.
Asmara denies accusations of abuses and says Western nations have long favored Ethiopia -- both during Eritrea's liberation war and the subsequent border conflict with Addis Ababa.
One of Africa's youngest and smallest nations, Eritrea also has one of the continent's largest armies. At least 320,000 are in service, according to World Bank estimates.
Eritrea's ruling party says it uses Eritreans doing mandatory national service for development and commercial projects. Many more also man the highly militarized border with Ethiopia.
The World Bank says there are few private companies in Eritrea and that its government uses price controls and regulations to manage macroeconomic imbalances.
But Eritrea is not alone.
Its frosty relations with the West have forced it to look elsewhere for allies and it has turned to Gulf States, China and some regional players. Many are old friends from the independence war.
The Red Sea state is believed to be rich in gold and base metals, but analysts say it is likely to be several years before mining companies are ready to start production.
In his May interview with Reuters, Isaias said the first gold mine would begin producing by the end of 2009, starting a metals industry with "huge" reserves and potential to drive development.
He also said his government would take time with its foreign partners to develop mining both to maximize social benefits for Eritreans and avoid the so-called "resource curse" that has bedeviled other African nations.
Eritrea has one of the lowest per capita incomes in the world at $200, but has better social indicators, according to the World Bank. It is also heavily dependent on remittances sent back by tens of thousands of Eritreans who live abroad.
The International Monetary Fund says growth is projected at 1.2 percent this year after 1.3 percent in 2007
With a largely agricultural economy that is being hampered by the ongoing deadlock with Ethiopia, some analysts say the country's self-reliance policy could cost it dear.
"The government simply cannot afford to scare away donors, NGOs, and U.N. agencies (not to mention foreign investors) by adhering to a nationalist narrative based on 'stubbornness'," said Christian Bundegaard, a research fellow at the Programme for Strategic and International Security Studies, in a 2004 article on Eritrea.
(Editing by Clar Ni Chonghaile)
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