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PRESS RELEASE

Sudan Launches Country Economic Memorandum (CEM)

June 10, 2010



KHARTOUM, June 10, 2010—While oil-led growth over the past 10 years has greatly improved the Sudanese economy, its sustainability is under threat. The country therefore needs a new, more balanced growth vision that reduces reliance on oil while using remaining oil wealth to create an economic foundation for a diversified, inclusive and sustainable growth path, according to the World Bank’s latest Country Economic Memorandum (CEM) on Sudan released today.

Sudan is now more than a decade into its longest and strongest growth episode since independence, benefitting from the advent of oil exports in 1999. The size of its economy, measured by gross domestic product, has grown fivefold—from $10 billion in 1999 to $53 billion in 2008. Per capita income has increased from $334 to $532 in constant dollar terms over the same time period, in contrast to being range-bound between $200-300 since the 1960s.

Oil wealth has enabled Sudan to roll-out a massive expansion of its physical and social infrastructure including a doubling of the road network and electricity generation, and a sharp increase in primary school enrollment. The Sudanese economy has also become more integrated with the rest of the world—its trade to GDP ratio has increased from 25 percent in 2000 to 44 percent in 2008, and the country has emerged as one of the highest recipients of foreign direct investment in Africa.

Despite this progress, the sustainability of Sudan’s oil-led growth is under threat from a number of economic and political factors. Economic threats come from Sudan’s over-reliance on a single commodity, under-investment in non-oil sectors and dominance of the public sector. These factors are made even more apparent by recent global volatility. The unbalanced development of the country, with a large disparity between the center and periphery remains a potential source for conflict and political instability. The uncertainties created by the end of the interim peace period also negatively affect the economic decisions of domestic economic agents and potential investors.

The report entitled “The Road Toward Sustainable and Broad-Based Growth” takes stock of Sudan’s recent economic growth, analyses the key constraints to sustained future growth, and recommends how the authorities can focus their efforts to progressively transform the economy from one that is oil-dependent and public sector-led to one that is economically diversified and led by the private sector.

“Oil-led growth has enabled tremendous change in Sudan, but going forward we must look for broad-based economic activity across sectors and inclusion of the large part of the country’s labor force in order to achieve high sustainable growth, as well as poverty reduction,” says Bill Battaile, World Bank senior economist for Sudan and task leader for the report. The study proposes a growth strategy for Sudan that encompasses a number of structural reforms that need to be undertaken in order to reduce dependence on oil, while building an economic foundation for a diversified, inclusive and sustainable growth path.

The report recommends the Government’s near term strategy should focus on:

  • developing and maintaining the best supporting environment for sustained growth possible, with specific attention to macroeconomic stability and effective management of public resources;
  • implementing policies aimed at improving the investment climate and broadening private sector-led growth;
  • developing the agriculture sector as the next big alternative source of growth to the oil sector in the medium-term;
  • developing a comprehensive poverty reduction and development plan; and
  • promoting the appropriate role and performance of Government in its interface with the private sector to maximize the benefits the above economic reforms.

“We consider the Government’s call for the formulation of an action plan as a strong indication of its ownership of key recommendations of the CEM. We look forward to our continuous collaboration,” says Alassane Sow, World Bank Country manager for Sudan.

The report also has a specific section focused on the growth challenges in Southern Sudan, which are especially daunting and center on initiating domestic economic activity in a post-conflict environment. Planning for non-oil economic growth in the South is critically important, regardless of the outcome of the 2011 referendum, to further development in the autonomous South under a united Sudan or as a new country. The report finds the highest priority constraints to unleashing growth in the South include: infrastructure shortcomings, particularly those related to transport structures such as inter-state and intra-state road networks; uncertainties around the country’s political future as well as local security, and; shortcomings at various levels of government including multiple taxes. These constraints are binding to almost all sectors and scales of activity, with the effect of restraining productive and marketing activities, and impeding long-term investments.

The CEM is one of the core diagnostic reports of the World Bank, undertaken in every country-member of the Bank every three to four years. It constitutes an analysis of the economic situation of a country and its developmental challenges, aiming to assist government to make policy decisions and focus on priorities that can enhance the impact on growth and poverty reduction. This CEM is the first for Sudan since the Comprehensive Peace Agreement and World Bank re-engagement. It was produced in consultation with the Government of National Unity (GoNU) and the Government of Southern Sudan (GoSS) and in collaboration with development partners of the United Kingdom and African Development Bank.

Media Contacts
In Khartoum
Nada Amin
Tel : (249) 155 155 021 Ext 3016
namin@worldbank.org
In Juba
Albino Okeny Olak
Tel : (249) 122 433 880
aolak@worldbank.org
In Washington
Herbert Boh
Tel : (202) 473-3548
hboh@worldbank.org


PRESS RELEASE NO:
2010/519/AFR

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