As the Bridge Between African and Arab Countries: Sudan: A Rising Market For Foreign Investors
Due to its strategic location, Sudan is the heart of Africa and the bridge between African and Arab countries. Sudan is the largest country in Africa with significant human capital and vast natural resources, providing enormous development potential. Yet, the Civil War that raged for more than 20 years kept Sudan from taking large strides forward. This report will briefly talk about the economic and political situation in Sudan after the settlement of the CPA (Comprehensive Peace Agreement) on Jan. 9, 2005, with a little background about the CPA. The CPA is a result of decades of conflict which originated with the British policy of "The Divide and Rule." The gap between the North and the South began when Sudan was colonized by England. English and Christianity spread in the South, while in the North, Islamic traditions were kept. In addition, the policy concentrated on further separating the relationships between the South and the North. This policy known as the "Double Standard" which led to different cultures being implemented at the same time, led to much dissatisfaction in both parts of Sudan. South Sudan blamed England for enforcing an isolation policy while the North blamed it for curtailing the spread of Islam. The main reason for conflict was the implementation of Shareaa Law in the whole of Sudan. The NIF (National Islamic Front), is the organization that maintains Shareaa Law in Sudan. It began as a result of the South-North "Civil War." Then followed economic sanctions on Sudan by the United Nations, which considered it to be a state supporting terrorism. The United States of America claimed that Sudan was supporting Al-Qaeda and its leader Osama bin Laden. In 1994, the Peace Principles in Nairobi was the first settlement of peace in Sudan. The second stage was Meshakos Protocols in which the South allowed selection of religion for six years. The final stage was the CPA which was signed between the GOS (Government of Sudan) and the SPLMA (Sudanese People's Liberation Movement Army). The agreement brought hopes of lasting peace within sight. Sudan is at a critical juncture. The success of peace negotiations reflected in the CPA after decades of conflict posed enormous challenges for the parties and their international partners. The Sudan's Civil War, the longest of such wars in Africa, had a devastating toll in terms of loss of human life and displacement, and destruction of infrastructure and social fabric. Now, people's expectations for better lives are very high. There is the opportunity to overcome the devastation of war and neglect of human development in policies and programs. This opportunity comes with substantial domestic oil revenues as well as international support.
The CPA directly addresses the key causes of the conflict, and lays out its vision and commitment to accelerating development. It also brought a successful conclusion to address issues of inclusiveness, identity and access to resources that were among the most significant structural causes of the conflict. The key points of the CPA are wealth, power and authority sharing. According to this agreement, the Interim Period of Six Years was begun. By the end of this period, a referendum will determine the unification of both Governments. The total external financing needs of the Sudan for the Interim Period will be large, and support will be critical to fill the gap between local capacity and resources on the one hand, and the need to invest in social stability and future peaceful development of Sudan on the other hand. At the same time, projections show that the size of the gap will decline steadily from 2005 to 2011 as Sudanese authorities will exert efforts to use resources in a productive and socially acceptable way. It means investment of oil revenues in economic growth and shifting expenditure toward development priorities, as the defense budget declines. According to official estimates, economic growth averaged 7% over the period 1995-2004. There is still much potential keeping in mind the country has huge and largely untapped mineral reserves, including oil. On the other hand, deep-seated structural disparities, localized conflict and weak governance have compounded the huge liabilities of decades of Civil War. Beyond widespread human suffering, the financial cost of the war amounted to many millions of dollars worth of damage and isolation from most of the international community including assistance from developing countries. While overall growth has been high, the pattern of growth has been unbalanced, mainly benefiting relatively few and evidently failing to mitigate conflict. The economy in the North grew at over 6% in 2002 and by an estimated 8.5% in 2003. In 2004, both the GDP share and contribution to overall growth rose for industry and services, driven principally by the oil, construction and manufacturing sectors, with spin-offs for transport, communications and services. There is much rural area in the North and more than 85% of the land in the South is rural. While data available on the poor is limited, evidence clearly suggests strong agricultural output has favored those with capital and land, and therefore a largely agrarian economy has not adequately helped the poor, despite strong overall performance.
The registered record annual average high was just under US$39/barrel in 2004 with an average of 324,200 barrel per day an increase of more than 33% on the previous year's performance, and almost 60% above the average price generated over the previous five years. Sudan's oil earnings remained very strong in 2005, with a production rate of 463,300 bpd averaging around US$47 per barrel over the first seven weeks of the year. This is an almost 50% increase from the same period the previous year. Prices have been supported by strong fundamentals, with robust demand ensuring the market has remained tight. By 2006, a production rate of 650,800 bpd is expected with an increase in oil prices. The signing of the peace deal has shifted economic priorities toward reconstruction, especially in the South, which is one of the worlds least developed regions. The U.N.- World Bank Joint Assessment Mission has estimated that Sudan will require US$708 billion by the end of 2007 to meet the immediate needs of reconstruction and the rehabilitation of displaced persons. Revenue from oil and aid will provide the necessary funds. A donor's conference, the Oslo Agreement, has been organized for April. The donor countries according to the Oslo Agreement for the period (2005~2010) are the United States (US$4.5 million), the European Union (US$765 million), Norway (US$2.50 million), New Zealand (US$220 million), the World Bank (US$200 million) and Japan (US$100 million). They amount to US$4.5 billion in total. Regarding the Sudanese-Korean trade relationship since 2003, Korean imports from Sudan amounted to US$8.8 million (2003), US$18 million (2004) and US$23 million (2005 - prospect). These figures mostly represent trade of crude oil, sesame and Arabian gum. On the other hand, Korean exports to Sudan reached US$86.8 million (2003), US$99.9 million (2004) and US$140 million (2005 - prospect). These figures mostly represent exports of vehicles and heavy industries. According to the mentioned figures, bilateral trade between Sudan and Korea has been steady and has witnessed an increase of visits between both countries businessmen. So, Korean businessmen are invited to join in the opportunities in Sudan to enhance development and prosperity. Especially, the coming Sudan will be the horn of the African Continent. Sudan has become a peaceful and safe country. Therefore it is suitable for any domestic or international field of investment which will lead to more prosperity.