By Barry Malone

SHIMELBA, Ethiopia, Nov 1 (Reuters) - There is a settlement in Ethiopia where houses are in high demand, new restaurants and bars open often and nearly 700 people moved in last month alone.

But Shimelba is a refugee camp, not a boom town, and its residents -- exiles from neighbouring Eritrea whose ranks are swelling at an alarming rate -- are uniformly miserable.

Fears of a new war between the Horn of Africa rivals is raising tensions ahead of a deadline to demarcate their border this month, and many in Shimelba say they were forced to flee.

"People are running because they're afraid they'll be conscripted," says Teases Tsegag, a 23-year-old university graduate from Eritrea who has been at the camp for three years.

"And they're afraid that war will break out again."

Addis Ababa and Asmara fought a 1998-2000 conflict over their disputed frontier that killed an estimated 70,000 people.

As the day nears for them to agree the border while an independent boundary commission shuts up shop in frustration at their lack of progress, the two nations have become engaged in increasingly aggressive sabre-rattling.

In the latest twist on Thursday, Ethiopian media said Eritrean rebels had killed 23 Eritrean troops near the frontier. Asmara rubbished the suggestion.

The tensions have prompted a fresh influx of refugees to Shimelba, which is now home to some 15,600 people. New arrivals in October more than doubled compared with the same period a year ago.


Many of the latest residents have been wrenched from urban backgrounds in Eritrea, and that gives it an entrepreneurial feel absent from many other refugee settlements across Africa.

Ramshackle bars, kiosks, hairdressers and eating places have all mushroomed "downtown" in the centre of the camp.

There are even makeshift "cinemas" where patrons hide in the gloom from the blazing sun outside, watching action films like Rambo or English Premier League football on satellite TV.

Most of the business owners say they set up their enterprises with remittances sent by relatives living abroad.

"But we don't do well," says Kidane Berhe, who sells stereos, gazing forlornly over the camp's patchwork of scorched brick buildings, rickety wooden shacks and canvas tents.

"Nobody else has money."

About a third of Shimelba's refugees are former Eritrean soldiers, many of whom deserted, and some 3,000 are university students or graduates fleeing forced conscription.

The rest are a mix of opposition activists, evangelical Christians escaping religious persecution, and ethnic Kunama accused by Eritrea of siding with Ethiopia during the last war.

The camp, which lies amid rocky mountains about 60 km (37 miles) from the border and can only reached by one rough road, is overwhelmingly young and male.

In the heat of the afternoon, residents half-heartedly play table football or pool, chew narcotic khat leaves, or sleep.

Eyob Awok, a coordinator for the Ethiopian government agency responsible for refugees, says some 90 percent of the population are under 35 years old, and only 24 percent are women.


"Life is harsh for women," one 22-year-old resident, Miraf Gebremikael, tells Reuters. "Most are dependant on men, and because they have nothing they exchange sex for shelter."

Competition for water and firewood is also stoking tensions with local communities.

At one cafe, former soldiers and students sit discussing the dire relations between Ethiopia and their homeland, and their desperate lives in the camp.

Pinned to a wall behind them, a colour photograph displays a full continental breakfast on a table overlooking a beach on the French Riviera. But meals are much simpler in Shimelba.

The men say their food rations are too small, they are given no money for clothes or shoes, there is no doctor, and new arrivals are given no shelter and must hope other refugees offer them somewhere to sleep.

Ilunga Nganda of the U.N. refugee agency UNHCR -- which funds the camp -- blames limited resources.

"I understand their frustration," he says.

Many at the cafe say they hope to travel to Sudan, which lets registered refugees work, unlike Ethiopia which does not.

"In Ethiopia we are just prisoners," says Solomon, 28. "People are committing suicide here. Living under the Eritrean dictatorship was hell. And so is this camp."

One ex-soldier says he has heard that his family back in Eritrea were fined 50,000 nakfa (about $3,300) because he fled.

Others around him say the same fate befell their relatives.

"My mother, father and sister were jailed because they couldn't afford to pay," the man says. "I don't rest from thinking about them day and night."