Delivered by Abderaheem Hamdi,
a Member of the National Congress Party (NCP) and an ex-Minister for Economy
and Finance,
“TEXT:
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 .
Fundamental Hypotheses:
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...
4-
Investment
fund will go to areas that are already predetermined in the Peace Agreement;
that is, to the geographical south with its defined borders,
5-
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
6-
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
south of
7-
The
decisive voting block in the coming election resides in the geographical North
– at least 25 million- in the Northern States, down to Sinnar/
Gezira and
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
in
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:
-
Animal
resources in Kordofan, East of
-
Fruits and
vegetables in all irrigated sectors, old and new – firstly for export and later
for local consumption.
-
Rain-fed
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:
-
Education
-
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:
(1)
It must go
to the Northern Axis (Dongola – Sinnar
+ Kordofan).
This however does not mean that all investments end here. In the
(2)
We can
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