Delivered by Abderaheem Hamdi,
a Member of the National Congress Party (NCP) and an ex-Minister for Economy
Future of Foreign Investment in the Transitional Period
(1) Investment objectives during the Transitional Period:
As it is
clear in the Peace Agreement and its related popular political literature, the
aim of investment during the Transitional Period is to make unity of
Our mandate to talk about investment here is a Party matter and not a government or state affair. As such, the debate should address the following:
- Interest of the Party (NCP)
- How the Party could benefit from this investment during the Transitional Government
- Use of investment to ensure continuation of the Party in power.
To address these issues, we should not waste time in futile debate. We must make sure that our work will not go in vain and must distinguish between Party and State work/interests.
This paper addresses the following issues:
1- What type of investment do we – in the Party- need?
2- What are the trends of investment which we require? In which area and location in the country?
3- What are the required policy changes that have to be effected to ensure realization of the two broad objectives which will become clear as I proceed in this submission .
Hypothesis One: Investment is an important economic tool. It will however be useless if it is not backed by appropriate policies.
Hypothesis Two: Financial flows from
1- They will be late
2- Will be far less than promised
3- They will be surrounded by rules and bureaucracy of the donors...
fund will go to areas that are already predetermined in the Peace Agreement;
that is, to the geographical south with its defined borders,
In a sharp
contrast to that, Arab and Islamic investment, both official and private will
go to the Geographical North – as before.
With direction from the North, some of this investment can be channelled
to limited zones in
Huge investment funds in the oil sector are
now going to the North (Blocks 8, 9, 15, and later 10 and 12). Some of the investors in this category do not
shy from going south (Block 5 contracted to French, US and Kuwaiti companies -
currently under dispute with the SPLM).
Petromax Company now has a sizable share in Block A5 and B5... in the
decisive voting block in the coming election resides in the geographical North
– at least 25 million- in the Northern States, down to Sinnar/
Hypothesis Three: The geopolitical body which I referred to earlier as the North,
and which I call henceforth Dongola - Sinnar +Kordofan Axis or the
Northern Axis is very homogeneous <- and + original; it reads Dongola minus Sinnar plus Kordofan?>.
This Axis has carried the Arab Islamic flag for several centuries and
throughout early Islamic kingdoms. For
this, it is possible to incorporate this Axis into an Arab-Islamic political
coalition. It is to be noted that this
Northern Axis financed the
Hypothesis Four: This is not a
hypothesis but a reality that has happened in the South, and will repeat itself
Hypothesis Five: Broad and extensive policies can only bear fruit if their implementation is entrusted to a team that believes in the mission at hand. It is naïve to think that policies realise their objectives by themselves. Hence, and if we are to be honest, we must be prepared to work out all necessary structural, human power, legal and financial changes. We should not take the formation of the present Transitional Government as sufficient to enable us realise our objectives.
Hypothesis Six: The unity of
One: What Type of investment do we need?
- It must be very big and very fast
- For it to be so, investment must be characterised by high and attractive internal and external returns.
- We must not submit to current financial policy visions and we should avoid debating this issue within present policy parameters. Current financial policy vision gives supremacy to revenue size, distribution of local resources, expenditure and salaries. Rather, we must be radical for what is at stake is the preservation of the national entity and its identity and not simple structure of state resources.
Two: Fields/ Directions of Investment:
(I) High return investment fields:
This centres on promotion of agricultural and animal resources that are amenable for quick development. These are:
resources in Kordofan, East of
- Fruits and vegetables in all irrigated sectors, old and new – firstly for export and later for local consumption.
cotton and oil seeds in the south of the
- Wheat and beans in the Northern Region.
These fields are well known and are available. All what is needed is huge investment so that they can return to their golden age and more.
(II) Building and construction specifically in popular/low income as well as high economic margin housing and in an extensive way and in all cities of the Northern Axis. This type of investment forms the cornerstone in gaining popular/low income and middle-income sectors to our political project.
(III) Creation of ample employment by all means as unemployment will become a big and explosive problem, particularly among the educated and among those who have been made jobless.
(IV) Focussing on offering the following services free:
- Health services
- Creation and support of school feeding policy. Offering free breakfast at schools helps in the fight against hunger among poor families. Private/ commercial education and health services can continue but support of public venues is crucial. These services, coupled with public housing are what we need in the Capital cities as well as in all cities of the Northern Axis (Dongola- Sinnar + Kordofan).
Note: I did not mention foreign investment in oil operations because there is no difficulty in attracting it. Moreover, foreign investment has already reached and benefited the Northern Axis.
Three: What kind of investment do we need and in which geographical area in the country?
I think the answer is very clear already. However, we have to preach and make efforts to boost foreign and also local investment in the specified areas. We focus here on foreign investment as it is bigger, more important and capable of meeting our objectives - but only if it is channelled into the following areas:
It must go
to the Northern Axis (Dongola – Sinnar
This however does not mean that all investments end here. In the
direct some investments to some other geographical areas. These areas include East of
Investment Laws / Directives:
What are the policies that we must amend in order to take full advantage of investment during the Transitional Period and afterwards? What are the objectives of such investment?
Below are the main features of these policies. Details can be left for discussion afterwards:
One: Investment laws:
(1) In investment Laws and Directives, decision-making for awards of patents and contracts must be simplified and concentrated in limited decision-making space. Patents and tax benefits must be clearly specified. This will prevent investors falling victims to personal whims of decision-makers.
(2) Review of all legal aspects of investment incentives with the view to improving them and with the aim of attracting foreign investment – in a fast and sizable manner.
(3) Commitment to the law, offering free land and abolition of incentive land price. The latter led to states wasting substantial funds to procure fallow land for investment.
Two: Export Encouragement:
(1) Private foreign and local agricultural companies that work in the areas specified earlier should be encouraged through the following: a) Total tax exemption b) Allowing same privilege and tax incentives that are offered to public companies.
(2) Economic financial support for production and export of meat, vegetables, beans and fruits (This is already enshrined in the Second Presidential Programme Policies).
(3) Support/ subsidize production of wheat and its programme of indigenisation – in the Northern Region.
Three: Building and construction:
(1)- Real- 75% reduction of duties on cement, building metals and wood.
(3) Support of production of building bricks and other building materials.
(4) Support of construction of road network; service support for new and cheap housing estates - in replacement of otherwise unused but privately owned residential plots (owners of confiscated plots can be compensated in the new housing schemes; a similar policy was adopted in England during the last Government of the Conservative Party. Same government sold public apartments for 60% of their of cost and gained 13 years of office power)
Four: Financial, economic and institutional sector that allocates resources for programmes specified above:
(1) Substantial increase of government financial bonds, their profit margins and their repayment period in order to finance the specified projects (subsidies to export, public housing, health and education services; the state and its banks are to be entrusted with operation costs).
(2) Liberation of banks and financial sectors to encourage multiplication of financial institutions – with different sizes and different roles. This helps concentrate foreign and internal funds for small farming, handcrafts, cottage industry and financial bonds. Current policies are no good as they restrict growth of financial bonds to the Capital cities, limit returns and thus reduce incentive potentials.
(3) Reorganisation of current War Injury Tax/ Stamp to be used for employment of university graduates and ex-soldiers.
(4) Amendment of some institutional regulations: A) mining licences that are now saddled with prohibitive requirements and lack of incentives; b) Abolition of Capital Tax for newly established public and private companies and cancellation of accumulated arrears.
(5) Reduction of government duties / taxes and limiting their number, especially for small investors.
(6) Continuation of reduction of taxation and especially Profit Tax. State should limit itself to VAT. Tax target for investment and professional sector should stand at 10% only.
(7) Reduction of tax in line with international agreements (COMICIA?, Arab Institutions and later WTO). Tax reform here should be tuned to benefit the public and not the wealthy minority, most of whom do not support our political project.
The aim of the policies specified above is to inject dramatic dynamism in the economy of the Northern Axis, in a short period and in an effective way. These ideas are not the end but the beginning of our project.
Let us remember that what is required is
to ensure that resources move from the state (currently under sword of
separation) towards our target, i.e. the specified societies and entities. This
resource move and in the manner specified will lead to changes that feed into
the interests of the Northern Axis
END of TEXT”.
Translator’s note: Abdel Rahim Hamdi
was the longest serving Minister for National Economy and Finance in Albashir’s government.
He is now an influential member of NCP, the ruling Party and its main
guru for economic affairs. An excellent and vicious critique of this work was
published by the eminent Sudanese Economist Siddq Umbaddi in
Translated by Abdullahi El-Tom.
Office of Strategic Planning and Training, JEM