Future of Foreign Investment in Sudan: A Working Paper

Delivered by Abderaheem Hamdi, a Member of the National Congress Party (NCP) and an ex-Minister for Economy and Finance, Khartoum, 11-12 September 2005.



 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 Sudan attractive - for all or parts of the country.  Drastic increase in economic and service growth will entice many to retain the Peace Agreement and ensure continuation of new gains – after having received sizable political power.


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 Oslo Agreement and other International and Regional Institutions will be characterised by the following;

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, Nuba Mountains Southern Blue Nile.  Moreover, these investment funds will be supervised by certain Commissions which ensure that they go to the specified zones only.  Due to these facts, foreign investment will remain out of our hands and will not benefit the North much.

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 Darfur and south Sudan.  As we in the North have personal and official connections with the investors in this category, we can influence it much more than our chances with Western/European investment (this category of investment refers to funds coming from the Arab Banks, Arab and Islamic Investors and Islamic Bank for Development and related institutions).

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 Sudan in Block 3 and 7.  The Chinese also have sizable shares in these Blocks.  As for most of petrol services i.e. downstream operations, they will go by necessity to the north – with its new Blocks.

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 Blue Nile areas.  Voters in this zone are election oriented, more educated and can be influenced.  Due to their high level of education, they also have higher demand for services and employment opportunities.  We must focus on this zone.  Fortunately, this zone is nearer and well connected with transport networks – tarmac roads, communication facilities, etc.  It is easier and faster to manage election campaigns in this zone.


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 Sudan throughout its Turkish, colonial and Independent eras.  Even if the others have gone separate <South>, this Axis can continue as a viable state.  This is true in case of separation of the South and it is equally so though in a different way in case of separation of Darfur.  The Northern Access can maintain good economic relations with Darfur even if it moved away politically (the South is now lost economically but not politically through withdrawal of substantial resources from the Northern Axis).


Hypothesis Four: This is not a hypothesis but a reality that has happened in the South, and will repeat itself in Darfur and to a lesser degree in the East.  The reality is: withdrawal of substantial resources from the Northern Axis. In today’s calculations, the loss to the Northern Axis is in the region of 65% of public revenue resources and 25% of Gross National Products.  If we are to win the populations of the Northern Axis and bring them into our political project, this reality calls for urgent and dramatic development of the traditional resources of the Northern Axis.


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 Sudan may not be voted for and we, therefore, must start working now for its alternatives.  We must avoid taking attractiveness of the unity of Sudan for granted.  If the unity is realised, we may still face another scenario.  Influential foreign powers may resort to igniting secessionist fires, particularly if they fail to transform they unity of the country into certain desired mechanisms for their purpose.  I mean those mechanisms that divide the Sudan and place it under the rule of the non-Arab-Islamic minority.  This will be a repeat of what they did in all countries of the Protective Belt against Islam, south of the Sahara (From Ethiopia, passing through Nigeria to Senegal).


What is required?

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 Sudan and the Blue Nile – for export and then for local consumption.

-         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 Blue Nile area, Gadhariff and Kordofan.

-         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 (DongolaSinnar + Kordofan).  This however does not mean that all investments end here.  In the White Nile area which is partly included in this Axis, Kosti-Sinnar line is important.

(2)   We can direct some investments to some other geographical areas.  These areas include East of Sudan and Darfur when political stability is guaranteed, and of course the South of Sudan.


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 Sudan as well as our interest <NCP>.


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 Khartoum newspapers –not covered.



Translated by Abdullahi El-Tom. 

Office of Strategic Planning and Training, JEM

Abuja, 10/10/2005.