Economic Trade between Africa and the European Union
(With Special Reference to Sudan)
Inaugural-Dissertation
zur
Erlangung der Doktorwürde
der Wirtschafts- und Verhaltenswissenschaftlichen Fakultät
der Albert-Ludwigs-Universität Freiburg im Breisgau
vorgelegt von
Elsadig Dafaelseed Widaa
aus dem Sudan
Sommersemester 2006/07
II
Fach:
Empirische Wirtschaftsforschung und Ökonometrie
Erstgutachter:
Herr Prof. Dr. S. Hauser
Zweitgutachter:
Herr Prof. Dr. Günther G. Schulze
Tag der mündlichen
Prüfung:
13 Juli 2007
III
With a lot of love
This dissertation is dedicated to my parents (Dafaelseed, Alwia)
who have always sacrifice for their children, my Wife Omayma
Osman and my adorable kid Rami who gave me lessons of life
with smile.
IV
TABLE OF CONTENTS
VIII.
List of tables
IX.
List of figures
XI.
Abbreviations and definitions
1.
Introduction
1
1.1.
1.2.
2.
2.1.
2.2.
2.3.
3.
Objective of the study
Lome convention and COTONOU Agreement
Historical Background for Sudan
Growth and incomes before the Second World War
Colonial Heritage
A brief economic history of Sudan
Theoretical foundation for the gains from trade
4
8
11
11
12
13
15
3.1.
The Ricardo two country model with immobile
production factors
15
3.2.
Trade with intersectorally mobile factors of production
19
3.3.
Theory and practice of comparative advantage
22
4.
Brief Summary of EU-ACP Relation
25
4.1.
4.2.
4.3.
Trade and economic development
Common interest between Europe and Eastern Africa
Regional trade pattern of ACP countries (export and
import)
Exports
Imports
28
34
39
4.3.1.
4.3.2.
V
39
42
5.
Economic structure of Sudan
45
5.1.
5.1.1.
5.1.2.
5.1.3.
5.1.4.
5.2.
5.3.
5.3.1.
5.3.2.
5.4.
5.5.
5.6.
The ten year plan 1961-1962/ 1070-1971
The objective of the ten year plan
Roseires Dam
Kashm Elgirba dam project
Allocation to Sudan Railways highway construction
Project for output diversification and import substitution
Sudan’s foreign trade during 1996-1998
Export
Import
Agriculture sector
Industrial sector
Petroleum products in Sudan
49
50
51
51
51
52
53
56
57
70
79
90
6.
The pattern of EU trade and trade flow between the
EU and Africa
103
6.1.
6.2.
The pattern of EU trade
EU export and import with developing countries with
special Reference to the Sudan
Overview of Sudan’s trade with EU
103
106
6.4.
6.5.
Economic co-operation between EU and Africa
Influence of the EU-African trade on the African
economy
125
138
6.6.
7.
Obstacles facing African trade
The most important Trading Partners of Sudan
144
160
8.
Conclusion and main finding of the study
167
8.1.
8.2.
Scope and limitation of the study
Conclusions
167
168
6.3.
VI
115
A1
Appendix
171
References
173
VII
I. LIST OF TABLES
PAGE
Table 4.1
Percentage of total export and import from East Africa (1996)
35
Table 4.2
Growth in value of world merchandise trade by region
44
Table 5.1
Main export items of Sudan (1996-1998)
54
Table 5.2
Economic structure Annual indicators
66
Table 5.3
Sudan manufacturing production (1994-1997)
82
Table 5.4
LDC delivery quotas of sugar (2001-2005)
86
Table 5.5
Textiles production in the Sudan from 1996-2001
87
Table 5.6
Loading export market Jan/June 2001
100
Table 5.7
Forecast summary of EIU estimates (1999-2002)
101
Table 6.1
Merchandise import of the European Union (15) from
Africa by product, 2003
109
Table 6.2
Distribution of merchandise exports 1999
113
Table 6.3
Developing countries share in the world agriculture exports
113
Table 6.4
Agricultural exports of selected products by developing
Countries 1999
114
Table 6.5
Exports by country and commodity during the year 2000
121
Table 6.6
Sudan’s direction of exports to EU during the period 1998-2000
123
Table 6.7
Sudan’s direction of imports to EU during the period 1998-2000
123
Table 6.8
Extent to which African countries depend on primary
commodities for their export earning
159
Table 7.1
Classification overview
165
Table 7.2
Summary of cases
166
VIII
II. LIST OF FIGURES
PAGE
Figure 3.1
Increase in relative prices
16
Figure 3.2
Two country framework with fixed inputs of production
17
Figure 3.3
Determining the world price by world demand and supply
18
Figure 3.4
Determining the world price by export supply and import demand 19
Figure 3.5
Trade with mobile factors of production
20
Figure 3.6
Countries accommodate to world price signals
21
Figure 4.1
External trade (EU) and import from African countries 1990-2000
29
Figure 4.2
World merchandise exports by region Eastern Africa
(East Africa) 1980-2001
39
Figure 4.3
World merchandise export by region 1990-2000
40
Figure 4.4
Leading merchandise exports in Africa 1995-2000
42
Figure 4.5
World merchandise imports by region 1990-2000
43
Figure 5.1
Summary of exports during (Jan-June) 2000
49
Figure 5.2
Sudan’s exports and imports and trade balance 1998
54
Figure 5.3
Sudan’s import from 1996-1998
55
Figure 5.4
Direction of Sudanese export during 1996-1998
56
Figure 5.5
Source of imports for the period 1996-1998
57
Figure 5.6
Sudanese exports during from 1993-95
58
Figure 5.7
Average imports of Sudan from 1993-1995
59
Figure 5.8
Balance of trade in Sudan during 1994-1996
60
Figure 5.9
Exports of all products of Sudan during 1994-1996
61
Figure 5.10
Imports of all products of Sudan from 1994-1996
62
Figure 5.11
Sudanese exports from 1994-1996
63
Figure 5.12
Examination of Sudanese exports for all products to all
destinations 1993-99
Summary of foreign trade: Export, import and trade
64
balance 1993-1999
68
Figure 5.14
Export comparison of all Sudanese products during 2003-04
69
Figure 5.15
Sudanese cotton export from 1993-1999
73
Figure 5.16
Sudanese groundnut exports from 1993-1999
73
Figure 5.17
Live resources in Sudan 2000-2001
76
Figure 5.18
Percentage worldwide gum arabic exports1991-1998
78
Figure 5.13
IX
Figure 5.19
Average utilisation in the industrial sector 1993-1997
81
Figure 5.20
Sugar production in Sudan from 1989-2001
83
Figure 5.21
Map of pump stations in Sudan
91
Figure 5.22
Map of Sudan showing different oil fields
92
Figure 5.23
Types of energy product consumed in 1997
98
Figure 5.24
Nile Blend attributes
99
Figure 5.25
Sudan-GDP per capita
103
Figure 6.1
Leading exporters and importers in the world merchandise
trade 1999
105
Figure 6.2
LDC’s exports according to destination in € billion 1995-2000
110
Figure 6.3
Export of agricultural products from LDCs 1995-2000
110
Figure 6.4
EU import from LDCs
115
Figure 6.5
EU exports to LDCs
115
Figure 7.1
Dendrogram of imports and distance using Single Linkage
163
Figure 7.2
Dendrogram of imports and distance using Ward Method
164
Figure 7.3
The most important importing countries of Sudan
167
X
III. ABBREVIATIONS AND DEFINITIONS
ACP
African, Caribbean and Pacific
AEC
African Economic Community
ARAKIS
Canadian Energy Corporation
ATC
Agreement on Textiles and Clothing
Bpd
Barrels per day
CBI
Cross-Border initiative
CBS
Central Bank of Sudan
Chevron
American company started exploration of petroleum
Abujabra West of Muglad
CNPC
China National Petroleum Company
COMESA
Common Market for Eastern and Southern Africa.
EAC
East African Community
EACSO
East African Common Services Organisation
EBA
Everything but arms
ECA
Economic Commission for Africa
ECHO
European Community Humanitarian Office
ECSC
European Coal and Steel Community
EDF
European Development Fund
EEC
European Economic Community
EFTA
European Free Trade Association
EIB
European Investment Bank
EIU
Economist Intelligence Unit
EPA
Economic Partnership Agreement
EU
European Union
EURATOM
European Atomic Energy Community
FAO
Food Agriculture Organization
FDI
Foreign Direct Investment
XI
Feddan
Unit of area used in the agriculture sector (measurement is
0.42 Hectare)
FTA
Free Trade Agreement
GATT
General Agreement on Tariffs and Trade
GDP
Gross Domestic Product
GNOP
Greater Nile Oil projects
GNP
Gross National Product
GPC
Gulf Petroleum Corporation
GSP
Generalised Scheme of Preference
Hashab
A type of gum arabic tree.
HIV
Human Immunodeficiency Virus, the virus that causes AIDS
IGAD
Inter-Governmental Authority on Drought and Development
IMF
International Monetary Fund
IPC
International petroleum cooperation
Kantar
44.44 kilograms
KSC
Kenana Sugar Company
LDC
Less Developed Countries
Lome
Capital of Togo, first Lome Convention signed 28 February
1975 between EU and ACP
MFN
Most Favoured Nation
NTB
Non-Trade barrier
OAU
Organisation of African Unity
OECD
Organisation for Economic co-operation and Development
ÖMV
Austrian Firm
OPEC
Organization of Petroleum Exporting Countries
PETRONAS
(Petroleum National Berhad), owned by the Malaysian
Government
QUAD
Countries (EU, USA, Canada and Japan), purpose is
elimination of all tariff barriers against LDC’s in the EU.
SD
Sudanese Dinar (Sudanese current currency)
SPLA
Sudan people’s Liberation Army
XII
STABEX
Stabilisation of Agriculture Export Earning. Established to
compensate ACP countries for the shortfall in export earning
due to fluctuation in the prices or supply of commodities
SUDAPET
Oil Company owned by the government of Sudan
TDCA
Trade Development and Co-Operation Agreement
TWG
Technical Working Groups
UDC
Under Developed Countries
UN
United Nations
UNCTAD
United Nations Conference of Trade and Development
WTO
World Trade Organisation
XIII
1. INTRODUCTION
Africa’s trade relations encompass a network of bilateral, regional and multilateral linkages.
Africa’s main trading partners, including the European Union (EU) and other developed
countries, have taken the initiative through offers of preferential access in terms of duties,
quotas, and free access to a large number of products from Africa. EU preferences have had a
significant impact on the relatively small number of African states that are able to export
preferred products, such as temperate agricultural products and fish. The Cotonou Agreement1
offers market access conditions for African exports to the EU. The utilisation rate of the
Cotonou Agreement was around 90 percent in 2001, which was higher than that of the
Generalised Scheme of Preferences system (GSP). The EU plays singular role with regards to
developing countries exports, both because of its market and because of its numerous
reciprocal and non-reciprocal preferential agreement. This show how effective EU’s
preferential agreements are in granting developing countries improve market access. How far
preferences indeed utilised by exporters, when entering the EU’s market? So the EU
preferences to Sub-Saharan Africa were fairly well utilised. Best example is the value of EU
tariff preferences and their significant proportion of their exports excluding Everything But
Arms (EBA) .While Africa’s economic performance has developed positively over the last
decades, the continent has not kept up with the growth of world trade and its share has
consequently been declining. In 1980, African exports represented six percent of world trade.
In 2002 this rate dropped to only two percent.2 A decline in commodity prices is a crucial
factor responsible for this decrease. This is particularly noteworthy in the case of Africa
because of the continent’s dependency on only a few markets and products.
Intra-Africa trade is also low, representing merely eight percent of the region’s total
exports; Sudan is not an exception. Sudan is a predominantly agrarian society with over 80
percent of its population working in the agriculture sector (FAO 2005). Agriculture is the core
economic activity in Sudan and accounts for more than 38,6 % of the gross domestic product
(GDP), industry 27,8%, Mining 15,6%, construction 4,1% services 33,6%3. The purpose of this
study is to investigate EU-African trade relations with special reference to and concentration on
Sudanese trade with EU countries. Bilateral trade between the EU and Africa is of special
1
Cotonou is the capital of Benin. The Cotonou Agreement between the EU and ACP was signed on June 23 1975.
Signatories were EU and ACP countries.
2
3
See General Secretariat for External Information (1998), p. 81.
EIU (Dec 2006), p.5.
1
interest in this study because of the EU’s highly industrialised status compared to Africa’s
typically agrarian based standing.
Existing studies often concentrate on trade relations in developed countries. I have
selected Sudan (the Sudanese economy is growing fast, after real GDP growth of 5-6% per year
from 2000-2004 growth rose to 8% in the year 2005, real GDP growth is projected to top 10%
in 2007 (World Bank, Brief about Sudan)) as the main concentration of this dissertation
because of the positive attention it has received as an encouraging example for underdeveloped countries (especially in Sub-Saharan Africa). In this dissertation, the growth of
Sudanese trade with European countries and its resulting contribution to economic growth in
Sudan will be examined. The goal is to put forth a model that explains the export and import
relations of both continents. In terms of land area, Sudan is the largest nation in Africa and its
strategic location makes it an interesting trading partner for Europe, since it controls part of the
Red Sea entrance to the Suez Canal.
Sudanese economy had not shown massive growth until the nineteenth century, and even then
it faced several obstacles. It is only recently that Sudan has begun to realise its multiple
advantages as well as its potential role in the world market. One particularly important
resource, which is plentiful in Sudan, is water (Nile River), which is still the key to agricultural
development and livelihood.
Geographically Sudan is the largest country in Africa and the Arab world (see figure
5.22). It covers over 2,500,000 square kilometres and is counted among the 10 largest countries
in the world. It occupies eight percent of the continent and is larger than the United Kingdom,
France, Italy, Spain, Portugal, Belgium, Sweden, and Norway put together. However, the
population of Sudan is comparably low at 33 million4 (the highest concentration of the
population resides in the capital, Khartoum, which has a population of around six million).
There are approximately 115 languages spoken in Sudan, and 80 percent of the population
reside in rural areas. There is a definitive division between Muslims and Christians within the
more than 597 tribes (52 percent African, 39 percent Arab, 9 percent other) residing in Sudan.
The hundreds of ethnic, tribal, and language divisions create major obstacles in terms of
effective collaboration among the different groups. Most of these tribes speak traditional nonArabic languages (i.e., Nubian, Beja, Fur, Nuban, Ingessna, etc.). It is estimated that cultivable
land exceeds 200 million acres, and as mentioned water and animal resources are plentiful.
4
Compare with Sudan in figure 88-2000 Khartoum, (May 2001).
2
However, the cultivable land area currently being exploited consists of only around 15 million
acres. The huge source of potential natural resources offers reason for optimism in terms of
development as does Sudan’s proximity and access to the Middle Eastern markets. Both factors
place Sudan in a favourable position regarding self-sufficiency in food production, as well as
agricultural exports to diverse markets. In this sense, it is virgin country ( a lot of the country
resources have not yet commercially utilized, we needs means, ideas, model of development
and policies that are suitable for quick crisis management and we have to combine science and
technology with economic development) with huge potential and a market waiting to be
tapped. It is positioned in a strategically convenient location near Europe and the Middle East,
which lends it a vast scope of investment potential. However, Sudan is lacking the capital,
know-how, and experience to help it reach that potential. Thus, what it requires are partners
(especially European ones) who can provide this type of support. 5
In the 1970s, the Sudanese government considered the possibility of attempting to
become the breadbasket of the Arab world. In this dissertation, the structure of trade in these
Arab countries will be analysed according to commodity classification and trading partners. In
addition, information and data relating to Sudan’s situation in the twentieth century will be
given.
In 2005, the EU again normalised its relations with Sudan after 11 years of suspension.
Sudan is a signatory of the Cotonou Partnership Agreement, which defines and outlines the
EU’s relationship with 77 countries in Africa, the Caribbean, and Pacific. In 1990 development
assistance to Sudan was suspended due to concerns about human rights, democracy, rule of
law, and the progress of peace. The EU, which was the world’s leading donor to Sudan,
suspended cooperation with Sudan during the war in 1990. In 1999, the EU resumed political
dialogue with Khartoum, but didn’t resume cooperation. Not until 14-years later, after the
peace process with the south began, did the European Commission declare its willingness to
provide Sudan with financial aid over the next three years. Political dialogue with Sudan
continued through 2002 under article eight of the Cotonou Agreement. The dialogue was
focused on addressing the internal weapons situation in the country. The Sudanese government
has been invited to work with the Commission in resolving conflicts and other problems with
the south, and to help push forward a peace agreement after the end of what has been Africa’s
longest civil war to date. The EU would like to work with the Sudanese government in order to
prepare a strategy and to create a structure for development funds and support. Within the
5
See General Secretariat for External Information (1998), p. 27.
3
Cotonou Agreement framework € 135 million have been allocated towards development
operations and € 20 million have been made available as emergency assistance. The second
sum is to be used for debt relief and in countering instability in export earnings.6
1.1. Objective of the study
In popular discourse on international trade, we hear about the need for a “level playing field”7
and other measures needed to protect states and people from foreign competition. International
trade sometimes seems much like a competition where there are winners and losers. However,
trade does not have winners and losers; gains in one country don’t necessarily mean losses in
another. All actors focused upon in this study stand to gain from international trade and this has
powerful implications for the world economy today. It means that countries like Germany,
which benefit from internally high levels of productivity, stand to gain from trade with
countries that have low productivity like Sudan and other African countries.
The main focus of this study is to analyse bilateral trade between Africa, with specific
reference to Sudan and the EU. To put the study into proper perspective, a brief survey of the
size and behaviour of the aggregate agricultural exports and imports between Africa and the
EU is carried out. The EU dimension of trade is, of course, only part of the overall relationship
between Western European and African countries. This is especially true given the significance
of the individual bilateral policies that EU member states such as Germany, France and
England have with African countries. Although these bilateral relations are strong, at the
commodity level of particular interest and importance.
It is therefore clear that the most crucial elements to be proposed in this dissertation,
which concentrates on the trade relation between European Union and Africa, must be focused
on and designed for stronger co-operation between Africa and the EU. The following lists the
objectives of this dissertation:
•
To promote free and fair trade in all sectors of Africa economy and try to convince
government to refrain from protectionism both on import and export.
•
To accelerate regional and global trade integration in Africa.
•
To realize the potential development benefit of the planned EPAs.
6
EU-Sudan relations (EU humanitarian aid to Sudan) 31/01/2002 http://europa-euun.org/articles/de/article_1117_de.htm.
7
Feenstra Robert (1998), pp.32-34.
4
•
To provide trade preferences to Africa under the COTONOU Agreement, tariff free access
to its market to LDC.
•
The necessity for African countries to liberalize their imports from the EU in order to
preserve and improve upon their preferential access to EU market also provides an
opportunity for them to accelerate the overall trade liberalization process and the opening
up of their economies.
•
To find the major determinants of Africa-EU trade and its performance. These determinants
will also be used to forecast trade and performance in the near future.
•
To examine government policies towards the external sectors and try to formulate a policy
package, which would allow Sudan to take full advantage of the newly liberalised world
order.
•
To include transportation and other export. Cost, all of which are incurred by exporter.
Compliance requirement on exporters impose non-trivial cost especially on developing
countries, such as the cost of upgrading production system, processing and storage
equipment and quality control stations (Henson et al, 2000)
•
To strengthen political economic and social cultural EU-Africa relations
•
To promote human rights, democracy and the rule of law in Africa.
•
To study the historical development of Sudan’s foreign trade since independence.
•
To examine trade and capital flows between Sudan and the EU since Sudan’s
independence.
Since colonial time Sudan has always had better access to modern European technology
than to North American technology. Consisting of 25 European countries, the EU is a highly
integrated customs and economic union, and the world’s most important economic and trading
bloc.
The first section of this dissertation deals with the Lome Convention and Cotonou Agreement,
it includes focus on preferential trade and development in Africa, the convention has to deal
with the debt crisis in Africa. The Cotonou Agreement is both development cooperation
agreement outline political cooperation and preferential trade agreements with the ACP group,
to show also the ultimate objective of the Cotonou Agreement in the ACP.
The second section of this dissertation contains an overview of Sudan’s colonial heritage with
EU countries since the nineteenth century. It provides the historical background for
5
transformations that occurred after World War II, which are then examined in greater detail.
The Third section of this dissertation is concerned with the theory of comparative advantage,
which is one of the basic fundamentals in international trade theory. Another fundamental in
international trade theory is determining the resources that nations possess, which could
provide them with a comparative advantage and hence guide trade. As early as the nineteenth
century Ricardo (1817) developed his theory of comparative advantage. He proposed a twocountry two-commodity and one-factor (labour) model. The assumption of the labour theory of
value is that constant returns to scale technology. It gives also an overview of standard trade
theory in order to theoretically justify the claims made by the other chapters. In two-country
models it can be shown that the real income of two countries increases even when world supply
is fixed. World trade benefits both countries instead of resulting in a winner-looser situation.
When production factors are assumed to be mobile between sectors the gains from trade are
even more obvious as countries can now benefit from specializing their production on the
commodity of which they have a comparative advantage.
The fourth section of this dissertation examines EU-African relations and trade between the
two parties over different periods, as well as common interests shared by the EU and east
Africa.
The fifth sections outline the economic structure of the Sudan and patterns of EU trade. It then
covers the sectors that are considered to be Sudan’s main resources and income generators, i.e.,
the agricultural, industrial and petroleum sectors. It also presents the role of agriculture in
Sudan, and Sudan’s capability of becoming the breadbasket for Arab countries. In addition,
section fifth examines the role of the private and public sectors and their contribution to
Sudan’s economic growth of the country. The agricultural sector’s contribution to the GDP
since independence is also examined.
Collectively speaking, the EU is by far the largest external trading partner to Sub-Saharan
Africa, and unquestionably the largest project and programme aid donor. They are major
donors mainly due to historical reasons: the countries which now make up the EU were
colonial masters in much of Africa for nearly a century. Due to this connection, the combined
members of the European Community undoubtedly form the single most important external
economic group that currently has relations with Sub-Saharan Africa.
In the future, sales of agricultural products and equipment are likely to increase and be far more
profitable. This is especially true in markets for complex equipment as opposed to markets for
financial products, since those markets are far less transparent. In many cases, import
6
substitution has actually been shown to increase overall levels of imports. This is due to the fact
that the import of raw semi-processed materials, spare parts, services and repairs actually
outweigh reductions in the import of final products.
The sixth section deals with the International Monetary Fund’s (IMF) actions of
conditionally pressuring for lower tariffs. It will be examined how firms may profit from this,
e.g., from building large and expensive plants intended to operate under protection, despite the
recent trend of concentrating on food crop production for the market. In both cases the
emphasis tends to be on increasing imports of inputs and equipment in an effort to increase
production. Here again, the tendency has been to shift over whole systems of production to fit
state or project structures, which are often associated with processing factories. These
tendencies have often led to sufficient increases in imports.
The sixth sections also concentrate on obstacles facing EU export and import and trade
with African and other developing countries. Since these trade relations are examined from the
import side, I have divided my data and the model into groups:
Group 1:
EU imports from Africa
Group 2:
African imports from the EU
Bilateral trade between the countries being examined is also analysed according to
commodities. Here the constant market share method is applied to bilateral trade.
EU policies reflect the community’s external trading pattern since their underlying
economic aim is to obtain the most advantageous conditions for trade. Excluding trade between
member countries, the EU accounted for about 18 percent of world trade in 1982. It is also the
world’s largest single trading unit, surpassing both the USA (15 percent) and Japan (8 percent).
The EU’s share of world trade has been rather stable - fluctuating between 18 and 21 percent
over the last decade - as the rise in oil prices has boosted the export earnings for members of
the Organization of Petroleum Exporting Countries (OPEC).
Section seven identifies Sudan’s most important trading partners in Africa and Europe. The
countries which have the highest imports from Sudan and share the shortest distance to Sudan’s
capital city Khartoum constitute a group. This group is determined by a cluster analysis which
is a method that allocates variables to a group if the variance in this group is only marginally
increased by the inclusion of the additional variable to the existing group. The cluster analysis
finds Egypt and France to be Sudan’s most important trading partners.
7
1.2. The Lome Convention and Cotonou Agreement
Signed in 1975, the first Lome Convention (Lome I) was the result of long-standing
relationships between the EU and its former colonies as well as relations going back to the
founding of the Community in 1958.8
The main objectives of Lome I were the following:9
•
Non-reciprocal preferences for most exports from African, Caribbean and Pacific
countries (ACP) countries to the EEC.
•
Equality between partners, respect for sovereignty, mutual interest and interdependence.
•
The right of each state to determine its own policies.
•
Security of relations based on the achievements of a cooperation system.
When the Lome Convention first entered into effect it was the only agreement that
brought industrial and developing countries together as equal partners seeking economic
growth and development. ACP exports to the Community, excluding crude and refined
petroleum products, increased by 51 percent between 1976 and 1983, and their share of total
imports from outside the Community during this period fell from 6.3 percent to 4.5 percent.
Aid allocations under the Lome Conventions were based on objective criteria such as
size, population growth, GNP per capita or poverty. Since 1986 aid was given only if structural
adjustment programmes were implemented (i.e., rolling back the state, currency devaluation,
deregulation, liberalization, extremely favourable conditions for foreign investment, production
for the European market and free trade). The Lome Conventions were operative for 25 years
until the Cotonou Agreement replaced it. The Agreement was formally initiated in Cotonou,
Benin and negotiations concluded in February 2000. In June 2000, an agreement was officially
signed there and has since become known as the Cotonou Agreement. It was initially signed as
an interim arrangement and scheduled to run until 2020.10 Preceding talks on the Cotonou
Agreement, the European Commission drafted a landmark Green Paper in an effort to aid
discussion on future relations between ACP and EU11 countries. For the best possible trade and
economic cooperation this agreement was decidedly based on Generalised System of
Preferences (GSP).
8
The Treaty of the Rome signed on 25 March 1957 made provisions for the association of the OCTs (Overseas
countries and Territories) with the Embryonic European Union.
9
http://www.ruc.dk/upload/application/pdf/f51d6748/spaventa percent202_99.pdf.
10
See Raffer (2001).
11
The Green Paper on relations between the European Union and the ACP countries suggests challenges and
offers options for a new partnership.
8
The last Lome Convention came to an end in 2000, and was replaced by Cotonou
Partnership Agreement include the former African colonies of France, Britain, Belgium and
Italy most of Caribbean states and some small pacific territories. It seeks focus on poverty
reduction, as well as on a new trade framework to support the mutually reinforcing effects of
trade co-operation and development aid Article 95 of the Cotonou Agreement provides a
revisions clause enabling amendment of the Agreement every five years12.The principle
objective of this Agreement to eradicate poverty and enhance the sustainable development of
ACP countries and their integration into the world economy, but most ACP countries were not
able to make the desired use of these conditions to achieve this objective goal to improve
economic performance hence, improvement in living conditions for their citizens and the
desired reduction in poverty levels was not achieved either. The Cotonou Agreement mentions
private sector participation, emphasises the combating of corruption and talks about civil
society, democracy and human rights (Stevens, 2000).
The Cotonou Agreement has these main elements include:
1. Non-discrimination among member.
2. Encouragement of the involvement of beneficiaries’ experts.
3.
Accounting for regional dimensions.
4.
Encouragement of short and long term institutions building and staff development for
the public and private sectors (ACP-EU, 2000).
Relations between the European Union (EU) and the African, Caribbean and pacific have come
along way, infact, can be traced back to the treaty of Rome (1957) according to the Article 131
of that treaty, the guiding principle of this community was to promote economic and social
development 79 countries of ACP are signatories to the Cotonou Agreement, 48 are African
states, 16 are Caribbean and 15 are Pacific states. From this total of 79 countries, 41 are
classified as least developed countries (LDCs).
Currently the EU provides non-reciprocal trade benefits to ACP members meaning that the
states enjoy preferential access to European Market, without being required to extend the same
access to EU nations. This situation is not compatible with the World Trade Organisation rules;
however, as a result it is being renegotiated through the creation of WTO compliant Economic
Partnership Agreements (EPAs) that are scheduled to enter into force by the end of 2007.
The 2007 deadline is stipulated by Article 37 of the 2000 Cotonou Agreement named for the
business capital where it was signed- which will govern ACP-EU relations until 2020.
12
See Juma Monica (2006), p.p 482-484.
9
The past system of non-reciprocal trade preferences extended to ACP countries has on the
whole failed to deliver expected results in terms of broader economic and social development.
The trade performances of ACP countries have not been impressive. The share of ACP imports
into the EU fell from 6.7% in 1976 to 2.8% in 199913. Foreign direct investment (FDI) from
EU to ACP has stagnated. Africa accounts for only 1.4% of the EU’s total merchandise exports
and 1.7% of its merchandise import. ACP received currently less than 2% of EU foreign direct
investment; furthermore the exports of other developing to the EU grew faster than that of
ACP. The largest recipients of global (FDI) inflows in 2002 in sub-Saharan Africa include
Angola and Nigeria with $1.3 billion, Chad with $ 901 million, South Africa with $754 million
and Sudan with $ 681 million14.
For the period 2000-2005, 13.5 billion Euros15 are available to assist ACP states. France with
the share of 24.3%, German share is 23.36% and UK with 12.69 of the total.
Under the European Union African Caribbean and Pacific Cotonou Agreement, the EIB is
providing up to EUR 1.7 billion of its won resources and further EUR 2 billion that it manages
under the investment facility between 2003-2008 financing of private and public sector
infrastructure essential for economic growth and development16. Due to the Caribbean’s higher
per capita income in relation to other ACP regions, the Caribbean ACP relationship with the
EU has had as its main pillar the trade provision, rather than aid flows.
As Sudan concerned, the EU still remains Sudan’s important economic partner in 2000 the EU
signed a new partnership agreement with the African, Caribbean and Pacific (ACP) states
including Sudan. The agreement known as the Cotonou Agreement is a 20 year partnership,
which provided the structure for trade and cooperation between ACP states and Europe since
1975. The Agreement focus on development aid and closer economic and trade cooperation the
most important trade partner with the Sudan is UK, it is the largest EU trading partner, the
majority of UK exports to Sudan are manufacture, on the other side is France, Sudan has strong
relation in the areas of trade and industry.
Relations between Sudan and Germany have strengthened considerably in the areas of
economy. The country is Sudan’s most important supplier of import such as capital goods,
technology and transport equipment.
13
See Deadrden S. and Salama C (2002), p.905.
http://www.satradehub.org/CXA_html/docs/reports/US-African%20Trade%20Profile%202004.pdf p.12
15
Holland M. (2003), p.167.
16
See European Investment Bank, Annual press conference 2006
14
10
2. Historical Background for Sudan
2.1. Growth and income before the Second World War
The Turk-Egyptian invasion of 1821 indicated the first attempt to form a centralised
administration. Turkey established military garrisons, built telegraph lines, and collected taxes
in the north. Although the Funj king surrendered without any resistance, other groups fought
off the invasion. Above all, people revolted in various localities against the hefty taxes, but
eventually had to pay Mohammed Ali Pasha in cattle or slaves. Over time the regime
developed administrative structures, security, dammed seasonal rivers and established schools,
all of which encouraged economic growth.
Geography and history have not treated Sudan kindly. Years ago when the Turks, and later the
Egyptians and the British governed the area,
Sudan was not really an entity until the nineteenth century, and even then it faced
multiple obstacles towards development. Thus, it is only recently that its advantages have
begun to be realised. Sudan is the largest country in Africa - just under one million square
miles – and contains many different types of climatic vegetation and physical regions that
include people of different backgrounds, religions and cultures. After the birth of Christ most
of the area was technically Christian. However, Islam began to enter the Nile valley after the
seventh century. Today, Arabic culture, language and religion dominate the entire country
except for in the extreme south17. Sudan is one of the African’s most ethnically diverse
countries, it has 50 ethnic group, it estimated that 70% of the population is Muslim, 25% follow
other indigenous religious, and 5% is Christian18.
Developing countries generally look at industrialisation as the solution to chronic
problems of poverty and economic dependence.19 The British established railways to develop
industry in Sudan as well as railway maintenance and carpentry shops in Atbara, and facilities
for repair and improvement in Gezira. During this colonial period, Sudan was set aside as a
market for industrial products and as a source of raw materials. During World War II some
impetus was given to manufacturing activities, and in the post-war decade several processing
industries were established to produce oil, soap, cement, shoes and canned meats.
17
See General Secretariat for External Information (1998), p. 17.
Gisselquits Rachel (2000), p.3.
19
See Collins (1976).
18
11
20
Despite the general opinion that the swamps of the sudd (barrier) blocked contact
between north and south, considerable trade, cultural exchange, as well as military clashes
occurred between the people living in those territories. In the south, sources of livelihood
consisted of cattle herding, fishing, subsistence farming, and trade in ivory and gold.
2.2. Colonial heritage
The European presence in Sudan has survived despite a series of very different political
regimes, each fundamentally different from the other. The first of these regimes is often called
Turk-Egyptian regime because the governors of the Ottoman province of Egypt ruled Sudan
from 1820 to 1885. The first and greatest governor was Mohammed Ali Pasha who governed
Egypt and its dependencies from 1805 to 1848. An independent Sudanese Muslim founded the
second regime, which forcefully ousted the Turk-Egyptian regime, and which lasted from 1885
to 1898. The Mahadist State, as the regime was called, was in turn overthrown by an AngloEgyptian army and river fleet in 1896-98. As a result, a joint authority government called the
Anglo-Egyptian Condominium was established in 1899.
The economic relations between Sudan and Europe underwent a total transformation
during the latter half of the Turk-Egyptian occupation. At that time the most valuable exports
were gum arabic and ivory, while the most valuable imports were textiles. Sudan’s chief export
commodity was cotton, and its chief imports were materials for the construction of industrial
and agricultural installations.
During the first half of this century, the British administration regarded Sudan as an
agricultural country. The administration was concerned primarily with asserting its control over
the country and establishing the machinery of a colonial government. Little large-scale
development activity occurred, although the main planning decisions concerning the Gezira
scheme were made. The Gezira scheme developed over a 36-year period, during which time
major investment decisions and initiatives were founded, which laid the groundwork for the
agricultural economy in Sudan. The Gezira scheme rapidly expanded during the 1920s and
1930s.21
20
21
Wai D. (1973), pp.9-32.
See World Bank (2000).
12
One can follow the thread of influence that Egypt has had on Sudan throughout its
history. 22Sudan is a bridge between Arab North Africa and black Southern Africa, but the
dominant influence has been from north to south. It is thought that much of the area went from
grazing to agriculture, but as climatic conditions began to change, much of it reverted back to
grazing cattle, which was introduced from Egypt about ten thousand years ago. This provided a
livelihood for the population and since that time animal husbandry has played a central role in
many parts of the country.
Although the UK and Egypt continued joint rule over Anglo-Egyptian Sudan after World
War II, the two countries nevertheless began to diverge in policy. The prevailing pattern during
this phase was one of Britain’s growing influence matched by Egypt’s weakening influence.
The Egyptians wanted Sudan to unify with Egypt, partially because of the importance of
the Nile waters to Egypt.23 In 1951, Farouk proclaimed himself king of Egypt and Sudan. The
Sudanese people were not in favour of this merger and wanted self-government. By 1952,
Britain agreed that Sudan should become independent, and in 1956 its independence was
proclaimed, thus ending the period of Sudan’s unique experience of being the only country in
Africa that was simultaneously a colony of two countries - English and Arabic speaking.
2.3. A brief economic History of Sudan
Europeans began trickling into Egypt24 in 1815 when the end of the Napoleonic wars brought
on widespread unemployment as armies dissolved and arsenals closed down. Egypt, under the
rule of viceroy Mohammed Ali Pasha, offered a future for the unemployed of Europe. A great
admirer of Napoleon, the viceroy showed consistent preference for French navel and military
organisation, which ensured the presence of French drill instructors in Sudan together with the
black regiments from the early years of Turk-Egyptian occupation. Further, French immigrants
came as did various people from the Austrian Empire who were well represented in the
Catholic Mission. The Austrian government posted able consular agents to Khartoum. Italians
were medical officers and pharmacists in the Egyptian army, others traders and missionaries
both from Austrian, Italy and from the independent Italian states. All of these groups came to
Sudan early on. More numerous were the Greeks, almost all of whom engaged in low-level
trade. Few British subjects except tourists ever reached Sudan. Many Maltese were employed
as foremen in government shipyards on the Nile and as captains of riverboats. In 1830 eight
22
See Daly M.W. (1991), pp.3-11.
See Wallach (1984).
24
See Van Sertima (1989).
23
13
British iron founders were hired by the government to exploit the recently discovered iron ore
deposits of Kordofan.
Before examining the past economic situation in Sudan it’s necessary to understand how
and why the current crisis situation has been reached. The performance of the economy during
the Nimeiri era must therefore be outlined in an objective manner. It would be too easy to use
Nimeiri as scapegoat for all of Sudan’s problems. The reality is that there were, and still are,
numerous factors that have led to the crisis which befell Sudan during the 1980s.25 This review
of the Nimeiri era can be broadly divided into two parts. There is the first decade (1970s),
which is characterised by general optimism for Sudan’s economic fortune, then the second
decade (1980s) when everything rapidly deteriorated. It should be noted, however, that this
distinction between the two periods is somewhat arbitrary since there was no specific date or
event that can be credited with turning the economic tide.
Although the 1970s are generally seen in an optimistic light, by the mid 1970s it becomes
obvious that something went drastically wrong with Sudan’s economic development. When the
political problems - particularly the war in the Southern region - are included, the scale of the
decline becomes evident.
The main economic problem of the Nimeiri period was surely due to the huge amount of
the foreign debt (a lot of investors stop investing due to imposing Islamic law which is new to
them and the outbreak of the war in the south26). The annual balance of payment deficit rose
from about $ 11 million in 1972/73 to $ 470 million in 1974/75, but remained below $ 600
million until 1980/81.The rise in oil prices and decline in Sudanese exports, which was due to
low production levels and world cotton prices, all led to an increase of the current deficit to $
1.2 billion in 1981/82. By the end of 1982 external debt had risen to $ 2.2 billion27 and public
sector expenditure expanded.
The Sudanese Pound underwent a series of devaluations in 1982 and was eventually
reduced to around 31 percent of its value. At this time the largest creditor and donor, after
Saudi Arabia, was the UK. Between 1979 and 1983, the annual trade surplus in Sudan rose to
by 552 per cent to reach $ 140 million. Sudan suffered from large financial imbalances
throughout the early 1980s, and its external payment situation continued to be precarious, with
recurrent foreign exchange shortages and heavy reliance on balance of payment support.
25
See Harir and Tvedt (1994).
Brown Richard P.C (1987), p.89.
27
See Farzin (1988).
26
14
Because of the binding nature of aid from western countries, a large portion of the aid
from the UK went to the purchase of plants and equipment from British firms. Aid contracts
became the method of support for domestic industry during the period of recession. Aid support
was wasted because it was only tied to certain specific sources of supply that were not even
necessary. It is safe to say that the UK had a large trade surplus with Sudan and that its official
aid only compensated for about one third of the total surplus.28
3. Theoretical foundation for the gains from trade
This section presents an overview of current trade theory and provides a theoretical explanation
for the importance of free trade and the integration of Sudan in the global economy. As will be
discussed later on, Sudan is a country that is abundant with land and labor but scarcely
endowed with physical capital like machinery and tools. Sudan may be able to increase the
level of real output by specializing in the production of the commodity which Sudan can
produce relatively cheaply and export the surplus production while importing physical capital
in return. The buildup of the small existing capital stock will lead to an increase in the ratio of
capital to labor and thus to an increase in productivity which in turn leads to an increase in real
incomes and an overall improvement of the economic situation of Sudan.
3.1. The Ricardo two country model with immobile production factors
Countries are endowed differently with natural resources, climate, skill levels and levels of
technology. Thus, exports and imports are determined by endowments and different costs of
production. International trade gives countries the opportunity to consume commodities and
services in proportions different from those produced locally.
The gains from trade have been formally presented by Ricardo29 in a two country exchange
model with two goods (x1, x2) and input factors which can only be used in one sector of
production so that the initial endowment point is set by the distribution of the production
factors to each sector. The terms of trade or the relative price of good x1 is the amount of x2
that has to be exchanged for one unit of x1. If relative prices differ between two countries both
countries can gain from trading those commodities at any intermediate price. The terms of trade
are shown in figure 3.1 by the budget line AB.
28
29
See General Secretariat for External Information (1998), p. 99.
D. Ricardo (1817).
15
Figure 3.1: Increase in relative prices
The budget line shows all possible endowment points of the home country that can be reached
from the initial endowment point E by trading with the foreign country when allowing for
world trade or by trading to other individuals of the home country when autarky is considered.
In general, “it illustrates the consumption choices available to an individual who possesses
endowment bundle E30”. As the overall level of production is fixed, the only possibility to
deviate from this endowment point in autarky is for individual members of the home country to
trade with each other31. In order to reach a different endowment point E’ which offers a higher
consumption of the good x2 an individual in the home country would have to trade an amount
dx1 of the good x1 to a fellow citizen in exchange for an additional amount of dx2 of the good
x2. The aggregate endowment point of the home country would stay at point E.
An increase of the relative price of x2 rotates the budget line counter-clockwise around the
initial endowment bundle E. Under the new prices it is now possible for an individual of the
home country to reach an endowment point which contains more of the good x1 for the same
amount of good x2 in exchange. However, in autarky, the aggregate country can only consume
those commodity bundles that are produced at home.
If that country faces a situation with trade like in figure 3.2 with a higher world price for x1 and
a lower world price for x2 the budget line rotates clockwise around the initial endowment point
E as shown by the line CD. Given its indifference curve c1, the endowment bundle E yields the
30
Caves, R.E, Frankel, A.F., and Jones, R.W. (2001), p. 15.
The assumption is that different members of the home countries have different preferences so that incentives to
engage in trade exist.
31
16
highest utility if the country does not engage in world trade. If the country, however, decides to
exports an amount EG of its good x1 and import an amount GF of x2 the country could reach a
higher utility level F as shown by the higher indifference curve c2.
Figure 3.2: Two country framework with fixed inputs of production
The lower relative price of x2 as shown by the dashed line indicates that the relative costs of
producing x2 are lower in the foreign country than at home. The relative world price is set by
world demand and world supply of the goods x1 and x2 and lies between the relative price of
the home country and that of the foreign country. This indicates that for the foreign country the
trade in goods as shown in figure 3.2 is similarly advantageous as for the home country. This is
a powerful result of the simple exchange model as the utility of both countries increases even
though the overall production is fixed. Figure 3.3 shows how the relative world price of x1,
p x1
is determined by the intersection of world demand of good x1 D(x1) and world supply
px2
S(x1). As production factors are assumed to be given exogenenously and are immobile between
sectors in the both countries, world supply cannot expand and is determined by the sum of the
production in the home country and in the foreign country.
17
Figure 3.3: determining the world price by world demand and supply
Another way of looking at the determinants of the world price is to consider export demand an
import demand curves. If the good x1 is relatively cheaper in the home country and thus
relatively more expensive in the foreign country the world price for the good x1 is going to be
set between those two relative prices. If the world price for x1 is above the price level of x1 in
the home country, the home country has incentives to export the good x1 while the foreign
country, having a higher price at home than the world price imports the good x1. The higher the
world price for x1 the lower the foreign import demand for this good. On the other hand, an
increasing world price for x1 increases the incentives of the home country to export larger
supplies of that good to the foreign country. Thus the home export demand function and the
foreign import demand function can be shown as in figure 3.4 with the relative world price of
x1 being determined by the intersection of the two curves.
18
Figure 3.4 determining the world price by export supply and import demand
3.2. Trade with intersectorally mobile factors of production
If production factors are assumed to be mobile between sectors production in one sector can
expand by withdrawing production factors from the other sector and subsequently employing
them in the first sector. If countries exhibit different levels of relative endowments of
production factors or if the skill level of workers in one country is more specialized in the
production of one commodity than in the other commodity then countries have a comparative
advantage in the production of the good which can be produced relatively cheaper. Thus,
countries specialize production on the good for which they have a comparative advantage and
export the surplus to other countries. This specialization often means in addition that countries
can benefit from increasing returns to scale i.e. decreasing average costs32. In particular, “[…]
exposing producers in each country to a wider world market may encourage a reorganization of
productive activities, and such reorganization may lead to gains from expanded production runs
32
Increasing returns to scale are a well known fact of many industrially produced goods. Since they are not
incorporated in the following model, their discussion is basically being an empirical matter so that they will not be
discussed in more detail.
19
and larger scales of output than are possible in a smaller national market”33. With mobile
factors of production the production possibilities schedule is now bow shaped. Even though
both factors can be employed in both industries it is assumed that production factors are more
specialized in one industry than the other which explains the increasing negative slope of the
production possibilities schedule. Thus, increasing the production of good x1 leads to
increasing opportunity costs as the amount of x1 increases since the country has to give up
increasingly larger amounts of the good x2 if it wants to increase the production in the good x1
which constitutes the increasing law of costs. Assuming the good x2 to be relatively cheaper in
the foreign country and an initial endowment point E, figure 3.5 shows the effects in real
income when taking trade into account34.
Figure 3.5: Trade with mobile factors of production
In autarky the relative price of x2 is assumed to be more expensive as shown by the slope of the
price ratio going through the endowment E. With trade and under the assumption of a relatively
inexpensive good x2 in the foreign country the price ratio rotates clockwise as indicated by the
blue line. The home country has now the incentive to switch to the production in point A with a
specialization in producing the good x1 which is relatively cheaper to produce in the home
country. Thus, the home country has a comparative advantage in the production of x1.
Furthermore, it now exports an amount DA of x1 and imports an amount DB of x2 reaching a
33
Caves, R.E, Frankel, A.F., and Jones, R.W. (2001), p.31.
In the context of trade theory it is common to interpret the utility levels denoted by the indifference curves as
levels of real income.
34
20
higher real income as indicated by the indifference curve c2 going through point B. The trade
triangle is now indicated by BAD. Thus, a comparative advantage exist whenever one good can
be produced relatively more cheaply in one country than in another. Furthermore, in the case of
the two country model, if one country has a comparative advantage in producing one good the
other country has a comparative advantage in producing the other good and the trade triangle
BAD of the home country can be found as a mirror image in the foreign country. This
accommodation of the production of one good relative to the other good can be seen in figure
3.6. The home country producing the good x1 relatively more cheaply than the foreign country
faces a higher relative world price for x1 than in autarky. It expands its production and
specializes in x1 shifting it’s relative supply curve to the right. At the higher world price the
home country thus supplies relatively more of x1 than the foreign country.
Figure 3.6: countries accommodate to world price signals
At the same time the foreign country has higher relative costs at producing a given amount
as indicated by the blue dotted line. The home country can offer this amount by the price
corresponding to point A while the foreign country would need a price corresponding to A´.
21
x1
x2
3.3. Theory and practice of comparative advantage
The principle of comparative advantage shows the gains from trade and provides an
explanation for commodity specialization. Comparative advantage has been further developed
by Heckscher (1965)35, Ohlin (1953)36 and Samuelson (1975)37 who also consider the level of
technology and human capital. While the Heckscher-Ohlin two-factor model explains
comparative advantage through relative endowments that can be used more intensively in the
production of one good the model developed by Samuelson suggests complete factor price
equalization if the production factors are immobile between countries, the level of technology
the same across countries and if both countries produce both commodities.
In practice, however, it has been difficult to estimate and measure comparative advantages.
Leontief38 could show for the US that in the 1960s the export industry was labor intensive and
the import industry capital intensive which stands in contrast to the intuition of the theory.
Although Leontief did not consider human capital and different skill levels the general problem
of estimating comparative advantages in order to advise policy makers still exists. Abbott and
Thompson (1987)39 show that for the agricultural sector not only the endowment of land but
also the agricultural investment matters. Thus, agricultural capital complements rather than
substitutes agricultural production.
Different models turned to estimate comparative advantage through exports and imports40.
Considering market imperfections like tariffs or export subsidies however one can not conclude
to a comparative advantage from observing trade patterns. If production and prices are
determined by costs one could measure comparative advantage by comparing different
production costs across countries. However, international production cost data is hard to find.
An approximation would be to compare input factors such as labor productivity, energy usage
and capital returns or focus on the prices of final goods. But also here problems like market
power, subsidies and quotas arise distorting the price of final goods as a measure of
comparative advantage.
35
36
37
38
Heckscher,E.(1965).
Ohlin, B (1953).
Samuelson, P (1975).
Leontief, W. (1965), p. 437-460.
39
Abbott, P. and Thompson, R (1987), p. 97-112.
40
Cf. I. Goldin (1990).
22
When measuring comparative advantage in the agricultural sector, which is a major economic
sector in Sudan, the costs of land have to be considered in addition to the costs of labor and
capital in producing agricultural output. Measuring the costs of land by former market
transactions may not be accurate since land prices will rise when agricultural product prices
rise. Instead, nominal and real interest rates are used as an approximation. Furthermore, private
and state investment in the agricultural sector have to be considered. For this, investment in the
infrastructure like water supply, roads and harbors have to be measured. But also investment in
health service and education may have an impact on agricultural production and should be
considered as well. When measuring the costs of labor as provided by the International Labor
Office (ILO) for the manufacturing sector, adjustments like family labor and other kinds of non
registered work have to be made in order to use the data for the agricultural sector.
Furthermore, joint products and fixed costs raise the problem that costs can not be attributed to
only one agricultural product. For the US the Office of Technology Assessment (OTA) and for
the EU the Farm Accountancy Data Network (FADN) are two institutions that have been
engaged with measuring costs of production in the agricultural sector. For developing countries
however, no reliable data exists.
This lack of cost data led Balassa (1977)41 to measure so called Revealed Comparative
Advantage by measuring the trade performance across different countries. For this, the relative
export supply of the home country is compared with that of the world:
 EX ihom e
RCA = 
hom e
 EX m



 EX iworld

world
 EX m



 EX ihom e 
 as the exports of some particular good i of the home country relative to the
with 
hom e 
EX
m


exports of all m goods of the home country. This in turn is set again relative to the relative
export performance of good i in the world. Assuming that the export patterns reflect relative
costs and other price determinants the revealed comparative advantage is high, when the
 EX ihom e 

overall ratio 
hom e 
EX
m


 EX iworld

world
 EX m

 is high. The major drawback of this kind of measurement

however is that it implicitly assumes that countries do not export and import the same kind of
commodities which is clearly not the case considering the large amounts of intra-industry trade
across countries.
41
Balassa, B. (1977):
23
One attempt to measure comparative advantage that also incorporates the dynamics is to
consider the coherence of comparative advantage for economic growth. If comparative
advantage is regarded as a good measure for economic performance it should also be reflected
in the growth rates of a country. If the standard Heckscher-Ohlin model is augmented to
incorporate not only physical but also human capital as well as technological know-how
Balassa and others could show that countries in fact export more capital intensive goods when
their endowment of that capital relative to their endowment of labor is large. The model has
also been extended by Krueger (1984)42 and Anderson (1990)43 to analyze an economy with
two tradeable products (primary products and manufactures) and three input factors: natural
resources which is specific to primary products, capital which is specific to manufactures and
labor which can be used in both sectors. Since the comparative advantage is determined by the
relative endowment of capital and natural resources countries tend to be producers of primary
products when their capital endowment is low but change gradually to being a producer of
manufactures as their level of capital increases steadily. Thus, countries which are only lightly
endowed with capital but well endowed with labor will change to manufactures in an early
stage of development since producing primary products would in addition require sufficient
amounts of capital. This has also been shown empirically by Anderson (1990).
Measuring comparative advantage still is a challenge for further research. Even though it is a
powerful tool for economists in explaining the gains from trade, it has to be measured
accurately in order to advise policy makers concerning state investments, resource allocation
and specialization.
As will be discussed in detail in the next chapters Sudan is well endowed with land and labor. It
can be thus assumed that the country has a comparative advantage in agricultural production
and food processing. It can also be expected that lowering trade barriers and transport costs and
thus getting closer to the assumptions of the models will show the potential of comparative
advantage for Sudan more clearly.
42
Krueger, A. (1984).
43
Anderson, K. (1990).
24
4. Brief Summary of EU-ACP Relations
The 77 countries of the ACP group and 15 member states of the European Union were
represented in the Lome Convention. The clear objective of this vast group of partner countries
was to fight for the eradication of poverty. The Lome Convention has been described as
relationship of contacts between the northern and southern countries and described as a cooperation based on the principles of solidarity.
Development aid was financed primarily by European countries that have accordingly
contributed significantly to the process of development in certain southern countries. This
financial endeavour demonstrated the necessity for ACP countries to take advantage of
European capital by implementing all measures possible. In particular, this financial aid helped
to provide the conditions necessary to promote the establishment of production units. This
meant giving priority to training in the areas of infrastructure and communications, which
automatically carried more weight in the development plans of ACP countries.
EU-ACP co-operation is aimed at paving the way for the smooth and gradual integration
of ACP countries into the world economy. Some goals include improving markets for export,44
liberalising ACP import regulations, improving infrastructure and transferring new production
techniques and know-how. From 1975-2000 almost € 30 billion were committed under the
Lome I-IV Conventions. This huge amount was distributed inequitably amongst different ACP
countries; the poor countries received less aid than richer ones. ACP countries generally not
only have low income per capita, but also lack the kind of economic and social infrastructure
which has developed in much of Asia and Latin America.
For most of Africa, and a number of smaller countries in other regions, the lack of
adequate social and economic infrastructure poses serious impediments to central goals such as
expanding food and agricultural production as well as providing social services to both rural and
urban populations.
Access provisions than to those of other developing countries. Nevertheless, financial and
technical co-operation in the execution of projects and programs contributed immensely to the
economic and social development of the ACP states. Under the Lome Convention, the four
ACP-EU contact groups were focused on vital areas of cooperation that had a decisive impact
on the institutional structure of the 1978-79 negotiations. The political bodies of Lome consisted
of the Council of Ministers, Committee of Ambassadors, and a Joint Assembly. The ACP
44
See Kimunguyi (2005).
25
countries had their own administrative body represented by the Secretariat, which had its
headquarters in Brussels.
The ultimate goal of poverty reduction is still on the agenda in the Cotonau Agreement45.
However, the resources that were available through the Lome Convention were not sufficient for
real poverty reduction; the number of people living in poverty in ACP countries was and is
simply too high. In order to reduce poverty, indirect programs have been established that
provide food, security, and social security through investment in human resources. The year
2007 will be decisive for the future of the special relation between the EU and the African,
Caribbean and Pacific (ACP) countries46.
It is widely acknowledged that ACP countries have been called upon to strengthen
competitiveness in order to attract foreign direct investment (FDI). Review of the global
economic situation in different countries reveals that there is a fair chance for the ACP
economies to enhance FDI if they remove barriers that restrict investment. In the line with the
Lome convention, the European union and its member states ought to intensify support efforts
aimed at promoting and increasing European foreign investment in the ACP states, which as
shown here continues to be relatively low. The image of Africa as allocation for foreign direct
investment (FDI) has not been favourable. Too often Africa has been associated with pictures of
civil unrest, starvation, deadly diseases and economic disorder; this has given many investors a
negative picture of Africa as a whole but its not true picture of the majority of African countries.
ACP-EU trade cooperation has not allowed to overcome the high dependence of the ACP on a
few commodities and a few markets, indeed, only ten products still make up of most ACP
export to the community and the community still, notably for Africa, the major export of the
ACP. Economic growth in Africa has been low and the growth for whole of Africa has lagged
behind that for other developing regions, with economic stagnation. For most of the time, 47FDI
inflow into Africa have increased from $1,509 million in the year 1985-1989 to $4,648 million
in the year 2000, while on other side inflows to developing countries as groups almost
quadrupled, from $23,391 million in the year 1985-1989 to $238565 million in the year 2000.
Exports obstacles still need to be overcome including utility costs, poor infrastructures,
administrative bottlenecks, cost of finance, low technology and shortage of technical skilled.
South Africa was the largest FDI receipt in the region in 2005, Africa’s top recipient countries
are South Africa, Nigeria, Sudan, Equatorial Guinea, the Democratic Republic of Congo and
45
From Lome to Cotonou principles of original partnership West Africa Consulation workshop 2003.
Article 36 and 37 of the EU-ACP Agreement (Cotonou) signed in Benin on 23 June 2000.
47
UNCTAD (2002), p.3.
46
26
Chad, accounted for 66% of the regions inflow. As Sudan in this research is concerned, the
foreign direct investment inflow to Sudan almost triple from $574 million in 2001 to $1.5 billion
in 2004, according to 2005 World Investment Report issued by the United Nations Conference
on Trade & Development. The performance of Sudanese economy in attracting investments is
truly impressive as the country jumped from 62th place in 2000 to the 18th in 2004 on the
UNCTAD’s inward FDI performance index.
Total FDI inflow into Africa reached $31 billion in 2005, representing a historic growth rate of
78% (higher than global FDI growth 29%)48 , but FDI inflows from EU to the ACP is small
comparing with a single EU country such as Greece.
FDI flows to sub-Saharan Africa accounted for, more than one third of the region’s total net
resource flow in 2000 (World Bank, 2002, p.258).
The EU could play a crucial role in the search for ways and means of alleviating African’s debt
burden to create a more enabling environment for development. This could be accomplished by
investing in the transport and communication sectors and other infrastructure projects.
Sudan, like other countries in the ACP group, benefited from a favourable trade regime with the
EU and also benefited from Stabex, especially in the Lome I (1975-1979). Stabex was mainly
concerned with paying the losses incurred in the export of 19 product categories to the European
Community.49
A balance of € 5.9 million was reallocated to the Stabex budget through Lome II making
the final payment € 659.5 million. Proceeds from Lome II were made to 46 countries in 22
product categories.
In Lome I groundnuts together with iron, ore, and cotton accounted for about two thirds of
all transfers. Under Lome II, transfers were highly concentrated on coffee, coca and groundnuts,
which together accounted for over 75 percent of the total transfers between 1980 and 1985.
Although the ACP-EU trade regimes (under which Sudan has benefited) have been products of
voluntary arrangements between sovereign groups of states, their roots lie in the colonial period.
Even the Treaty of Rome, which was signed February 28 1957 and came into effect on January
1 1958, regulated the mode of cooperation between the EEC and overseas countries.
48
49
World Investment Report (2006), p.41.
Similar to Sissoko and Duffy (1993).
27
4.1. Trade and economic development
The merits of trade become clear when one considers the benefits it has provided for individual
economies and the world as a whole. Between 1983 and 1995, global trade grew by 7 percent on
average and this trend has been increasing since (Lafontaine and Müller 1998, Siebert and Klodt
1998, Matambalya 2001).
At the start of the twenty-first century, Africa’s industrial and technological base was
either non-existent or weak at best. Industrial development should play a critical role in Africa’s
integration into the global economy. Industrial development efforts should be more effectively
supported, so as to increase its competitiveness. In order to meet the challenges of globalisation
and attain sustainable levels of development, the strengthening of Africa’s technological
capacity (especially in the areas of information technology and education is crucial.50
Investment flows are of special interest to the ACP countries. The ACP mandate identifies
a number of areas (most significantly infrastructure) where special attention should be paid as
these areas have implications for supply capacity. In addition, special attention should be paid to
assisting the private sector as well as constructing effective models for the dissemination of
information. This is particularly important in African economies and has been recommended by
the United Nations Conference on Trade and Development (UNCTAD), which due to their
macro-economic policies are in a position to benefit from this type of investment.
Economic growth depends on variables like capital formation, technical know-how,
education and infrastructure. Private investment plays an important role in improving these
variables as well as in the education of employees. Therefore private investment, in almost all
circumstances, is seen as a precondition for growth. Over the past decade, African countries
have made a considerable and often successful effort at improving the investment climate, and
by the mid-1990s African economies had substantially improved their positions.51
The discovery of petroleum deposits in various African countries, in particular Sub-Sahara
Africa where most of the continent’s reserves are concentrated52, raised local people’s hope for
improved standards of living on the basis of revenue generated by “black gold”. However,
petroleum has instead sometimes generated or served to maintain a state of war between rival
factions. Today’s most worrying example is Sudan, where hundreds of thousands of people have
been forced to leave regions rich in petroleum deposits. Forced to flee, persons in exile must live
together in refugee camps where they are totally dependent on international food aid.
50
See UNCTAD (2000).
See Export-Import Bank of India (June 2003).
52
See Knight (2003).
51
28
Figure 4.1:
Imports from EU in percentage of total imports 1993-2000
(Agricultural products)
1,2
1993
1
1994
0,8
1995
1996
0,6
1997
1998
0,4
1999
0,2
2000
M
al
i
M
au
rit
iu
s
M
al
aw
Pa
i
pu
a
N.
G
Su
da
n
Ta
nz
an
ia
Za
m
bi
a
Rw
an
da
Ug
an
da
An
go
Bu
la
rk
in
a
Fa
Ca so
m
er
Co
o
ng on
o(
De
m
)
Li
be
ria
G
ha
na
Ke
ni
a
Ni
ge
ria
0
(Source: European Commission (Eurostat and Directorate General for Agriculture). “Evolution 19902000 ACP”)
1993
1994
1995
1996
1997
1998 1999
Angola
3%
3%
4%
4%
6%
6%
4%
Burkina Faso
20%
21%
18%
15%
13%
12%
16%
Cameroon
28%
28%
32%
32%
24%
26%
26%
Congo(Dem)
14%
14%
22%
13%
9%
8%
5%
Liberia
1%
0%
0%
0%
0%
1%
1%
Ghana
33%
35%
35%
46%
46%
42%
40%
Kenia
83%
85%
89%
89%
90%
90%
85%
Nigeria
5%
5%
6%
5%
6%
10%
9%
Mali
5%
5%
6%
5%
6%
5%
6%
Mauritius
37%
38%
33%
34%
34%
35%
29%
Malawi
95%
94%
94%
94%
98%
97%
99%
Papua N.G
67%
73%
68%
70%
80%
86%
82%
Sudan
71%
69%
63%
48%
44%
54%
43%
Tanzania
62%
54%
63%
71%
74%
77%
65%
Zambia
6%
7%
7%
14%
22%
21%
19%
Rwanda
51%
79%
86%
92%
45%
49%
84%
Uganda
83%
94%
92%
92%
89%
91%
86%
This table contains the same data of the figure 4.1 above
Let’s for moment take a glance at the figure 4.1 and see the trade of African countries
with the EU as the world largest trading power. As such, the EU has a major stake in the
multilateral trading system. The EU is the most important trading partner for developing
29
2000
3%
13%
20%
4%
1%
36%
90%
3%
9%
24%
97%
83%
36%
63%
26%
78%
81%
countries. Including imports the EU accounts for an average of 45 percent of African exports,
the EU is the largest importer of African products and raw materials.
The EU accounts for some 35 percent of global merchandise trade. It is not only the
most important market for African exports, but also the Middle East. From 1998-2000 most of
the USA’s imports of primary commodities, such as food and beverages, came from Canada,
whereas in 1999 almost half of all EU imports of semi-processed commodities for the food
and beverages industry came from ACP countries (22 percent from Africa) and a quarter from
less developed countries in Asia.53
This is similar to the Japanese trade structure, where in 2000 the majority of imported
semi-processed commodities for the food and beverage industry came from Asian countries.
According to the figure 4.1, during 1999 and 2000, between 13 and 16 percent of EU’s
commodities imported from the Burkina Faso were primary commodities for the food and
beverage industry. In the 1999-2000 periods, nearly two thirds of all EU commodity imports
from Nigeria consisted of semi- processed industrial raw materials, the rest (3 percent to 9
percent) were imports of primary commodities for the food and beverage industry.
Refer to figure 4.1 above, between1999-2000; EU imports of commodities from
Cameroon were primary commodities for the beverage industry and a quarter agricultural
primary and industrial raw materials. Total agricultural products imported from Cameroon to
the EU during 1999-2000 were 26 percent and 20 percent, respectively. In Zimbabwe,
economic decline continues: available data shows that the economy contracted by 4.2 percent
in 2000 and by a further 8.6 percent in 2001. In view of the collapse in agricultural production
in 2002, the budget deficit for 2002 was initially set at 14.9 percent.
According to the figure 4.1 above, in Uganda, the share of agricultural production during
the period from 1999-2000 was 81 and 86 percent. In Kenya, maize is the main food staple
making up over 80 percent of total cereal (rice, wheat, millet and sorghum) output. Total
maize production in 1999 was estimated at 2.25 million tons compared to 2.44 million tons in
1998/98. Ghana’s primary export products are gold and coca; its main trading partner remains
the EU which accounts for almost half of Ghana’s total exports and imports. Italy, the United
Kingdom and Germany its main trading partners especially in natural resources such as
minerals. Ghana’s exports to the EU in 2001 equalled € 1.079 million. In 2002, exports
equalled € 1.128 million and in 2003 € 1.055 million. Even though primary production of
minerals accounts for half of the GDP, agriculture remains a very important sector.54
53
54
See Park (2003).
See Eurostat (Dec 2005), pp. 46-50.
30
During 2000 agricultural products represented 36 percent of the exports from Ghana to
the EU. In 2000, Papua New Guinea exported 81 percent of its agricultural products to the EU.
Agriculture products make up around 26 percent of EU imports from Zambia, and in 2000
accounted for 24.8 percent of Zambia’s national GDP compared to about 15.5 percent in 1996.
The share of agriculture’s contribution to the national economy increased mainly due to the
decline in the export earnings in the mining sector in 1990. This decline was a result of low
international prices and a decrease in domestic copper production due to under investment in
the sector. Average international copper prices fell from US$ 119 in 1990 to US$ 81 in 2000
and the production of copper fell sharply in Zambia during 2000.
Tanzania’s primary exports are also agricultural commodities such as coffee, cashew
nuts and tobacco. Its main partners of trade are the EU and Japan. Tanzania’s agricultural
sector constitutes over 50 percent of its national GDP and provides the majority of the
country’s export earnings. During the 2000-2001 period, Tanzania invested about US$ 600
million in the minerals sector - mainly gold - as this sector promised to be an increasingly
important contributor to the GDP and export earnings.
Malawi depends heavily on agriculture, especially tobacco. In 1999 agricultural exports
accounted for 38 percent of the GDP and about 85 percent of total employment in the country.
In 2000, Malawi exported around 97 percent of its agricultural output to the EU. Malawi trade
is concentrated mainly on commodities and primary products; tobacco accounts for most of its
exports.
From 1990 to 2000 the agricultural sector provided the main source of income in Sudan
and thus constituted a vital part of the economy. During 1990 agricultural exports to the EU
were at 59 percent, which declined steadily from 1999 (43 percent) to 2000 when those
exports were only at 36 percent. Sudan’s leading export commodities are petroleum (75
percent of total export during the year 2000), cotton, sesame and livestock products.55 Saudi
Arabia remains the main importer of livestock from Sudan. In 2001, Saudi Arabia issued an
import ban on all livestock (due to an outbreak of Rift Valley Fever in Kenya) from all
countries on the horn of Africa including Sudan, but this ban has since been lifted. Sudan’s
livestock export is valued at US$ 66 million or 4 percent of its total exports.
Angola mainly exports petroleum and mineral resources.56 Angola’s agricultural product
exports to the EU during 1990-91 were one percent, four percent in 1999, and three percent
55
56
See Centre for Strategic Studies (2000), pp. 146-148.
See Amjadi and Reincke (1996).
31
during 2000. Angola’s exports to the EU in 2001 totalled € 2.010 million, in 2002 € around
2.265 million, and € 1.137 million in 2003.57
In terms of poverty and underdevelopment in almost all ACP countries, the EU
development fund has played a very important role in supplementing the national measures
taken by the individual EU states. Since 1975, EU development aid has expanded greatly
within the framework of the Lome Agreement. In Lome IV (1990-1995), the total volume of
EU financial help amounted to € 12 billion. Of the € 12 billion, € 10.8 billion was allocated
from the 7th (EDF). Since the 7th EDF, funds have been allocated exclusively as non-repayable
grants. Only the European Investment Bank (EIB) fund requires interest payments, such that
grant shares resulting from the 7th EDF amount to approximately 92 percent.
The EDF is not financed through the EU budget, but through contributions made by EU
member states. Germany and France are traditionally the largest donors. The major
beneficiaries, however, have been EU companies and individuals, the EU provides 52% of all
development aid in the world, the ACP received Euro 3511 million and the Middle East and
Mediterranean received Euro1074 million58. The loans were used for and applied to different
projects and purposes. For example, funding went towards training, education, health and
AIDS control, industrial co-operation, development in trade, tourism and cultural co-operation.
The EU imposed stricter controls on the use of the funds, especially in Lome IV. In 1991
the funds were to be employed particularly for diversification. The most favoured countries
included the Ivory Coast receiving 18 percent of the fund, Cameroon (18 percent), Ethiopia (12
percent), Uganda (9 percent), Sudan (8 percent), Papua New Guinea (4 percent) and
Madagascar (4 percent).
The EU has clearly demonstrated its partiality concerning the importance of democracy
in co-operation with third world countries.59 Human rights are an important issue especially in
Sudan, Liberia and Zaire. Since 1991, the European Council Resolution has aimed at collecting
funds to support democracy and human right in these countries.
As far as human rights issues are concerned, the views and interest of leaders in many
ACP countries have been, and still are, fundamentally opposed to those of the EU. The EU
members demand more democracy and a halt to all human rights violations. In the case of
Sudan, conflicts in Darfur have pitted the government and Arab militias (Janjaweed) against
57
See Eurostat (Dec 2005), p. 46.
Richelle K. (2006), p.9.
59
See Udombana (2002).
58
32
two factions consisting primarily of three African ethnic groups who are also Muslim.60 The
UN has estimated that around 50,000 African Darfurese have been killed and 1.4 million have
been left homeless. The EU has declared widespread violence in the Darfur region of Sudan,
but not that the killings were genocide. This is likely due to the fact that the EU was making all
efforts to gain peace in the region and claims of genocide may have disrupted these attempts.
The EU’s financial support to Sudan was suspended and only recently have relations between
the two parties been resumed. The EU offered €50 million in aid to help encourage a peace
agreement after the end of one of Africa’s longest civil wars. The EU launched an immediate
aid package splitting of half of the money between the northern and southern parts of the
country.61 The warming of relations between the EU and the Sudanese government means that
Sudan will have access to €590 million for development from 2005-2007. However, the EU has
stressed that the accord is conditional. In a statement, the Commission made clear that the
resumption of cooperation would be progressive, taking into account the effective
implementation of the comprehensive peace agreement and development of the situation in
Darfur. On January 25 2005, the European Commission and the government of Sudan signed a
country strategy paper, which focuses essentially on two sectors: food security and education.
The main policy objective of the European Commission in the field of development cooperation is the reduction and ultimate eradication of poverty. This policy objective is crucial
as poverty is the result of many interrelated economic, social and political factors. For this
reason, the European Commission supports integrated poverty reduction strategies. These
strategies should contribute to strengthening democracy, the consolidation of peace, and
prevention of conflict. Furthermore, these strategies should lead to the gradual integration of
developing countries into the world economy; and finally to more awareness of social and
environmental aspects of sustainable development. One of the main humanitarian objectives of
the European Commission has been to provide integrated emergency assistance to Sudanese
refugees in eastern Chad. The priority areas identified as most critical in improving living
conditions for refugee households were primary health care services, water sanitation, shelter
materials and protection.
Individuals that are unable to produce or purchase food in case of scarcity are considered
food insecure. Food insecurity is one of the dire results of widespread poverty in east and south
Sudan. The Community is willing to support the government’s macro-economic reform
programmes, but special attention should also be given to the objective of poverty reduction,
60
61
See http://hrw.org/reports/2004/sudan0504/5.htm#_Toc71531691.
According to Oslo Donor Conference regarding Sudan (April-2005).
33
particularly with a view to ensuring equitable access to social services, which should be
disbursed on an annual basis. Causes of food insecurity have been linked to lack of access to
food production. In cases of scarcity, food insecurity will be dealt with by arranging poverty
reduction measures. For example, the government may improve formulations of sector policies
(mainly in agricultural and other resource and infrastructure related sectors), and continue
concentration on water resources, irrigation potential, and finally preparation of long-term
national water resource development plans.
In Sudan, potential for economic growth and poverty reduction could be strong if the
government made use of its facilities. The country has substantial natural resources and fertile
land, which offer great potential for agriculturally led development, which is key to future
economic growth and poverty reduction in the country. Economic growth could be strong if
social services were improved via investment in human resource development. Investment in
the education sector is also particularly important if broad-based growth and poverty reductions
are to be achieved.
Efforts and programs in this area are focused particularly on implementing new basic
education, training teachers and providing direct support to schools. The objectives of the
programmes are to improve the quality of schools and enable them to purchase basic school
materials that benefit the pupils and teachers.
Government plans to improve access to schools by constructing new ones and by
increasing boarding facilities. Education quality strategies include the recruitment of qualified
teachers, support for vocational learning and the purchase of books.62
4.2. Common interest between Europe and Eastern Africa
The official visit of East African representatives to Brussels was particularly welcomed by the
Netherlands and Germany, who referred to the Council’s declaration of intentions which
enumerated three alternatives for some African states.63 In late September, the East African
Common Services Organization (EACSO), representing East African countries, decided on a
formal joint request (sent to the Commission in early November) for the establishment of a
formal economic relationship between European and East African common markets. The talks
between the EACSO and the Commission took place in mid February 1964. A new initiative
was launched under the auspices of the UN Economic Commission for Africa (ECA) to form a
larger regional common market in all of Eastern Africa. A conference in Lusaka in October
62
Compare with the European Commission( 2005-2007), European Community strategy paper and indicative
programme ( the government of the republic of the Sudan).
63
See Hannington Ochwada (2004), pp.62-73.
34
1965, and in Addis Ababa in May 1966, pushed the project slowly forward. This diverted East
African energies and attentions from the European common market negotiations.
Bargaining at the conferences was focused on two questions: the list of products and
preferences to be granted by East Africa in a double-column tariff, and the size of the duty free
quotas that could be allowed on East African coffee, cloves and pineapple. Considering the
European list of 40 products too large, the East African delegation countered with a list of their
own which covered 26 products. Although the number was taken from the Nigerian agreement,
it covered only one percent of all East African imports. Four percent of their imports were
granted excluding automobiles (France, Germany, and Italy supplied 43 percent to East Africa),
and East Africa was given only a two percent margin of preference on coffee and cloves.
Among the developing areas of the world, European interests have concentrated first and
foremost upon Africa. EU foreign relations with developing countries of the south are still built
on the foundations of the colonial empires. This is due to the strong relations that, in particular,
France and the UK have maintained with their former colonies. These relations remain
important for the EU and countries in the south.
International politics in many parts of the world are heavily influenced by interdependence in trade relations and commerce, and may in turn influence the pattern of the trade.
Table 4.1 suggests a very different situation in East Africa. While 29.4 percent of Uganda’s
imports came from Kenya in 1996, all other imports from, and exports to neighbouring
countries, as a percentage of all exports and imports, were in single figures. This low level of
inter-African trade may be partially attributed to the colonial history of exploitation.
Table 4.1:
Inter-Africa trade in 1996: percentage of total exports going to, and
imports coming from the rest of East Africa during 199664
Country
Export to
Kenya
Export to
Tanzania
Export to
Uganda
Import
from
Kenya
Import
from
Tanzania
Import
from
Uganda
Kenya
Tanzania
Uganda
---1,6
1,6
7,3
---0,4
9,0
1,2
----
---9,9
29,4
1,5
---1,5
0,25
0,11
----
(Source: Kenya Statistical Digest)
64
Table 2.1 compare with Temu (1993), p. 65.
35
Colonial exploitation was aimed at extracting food and raw materials from Africa and
finding markets for manufactured goods. To serve these ends colonial powers ordered the
construction of roads, railways and ports rather than encouraging any division of labour within
Africa. The low level of inter-African trade was also due to the realities of geography, and the
fact that individual African states had little need for the products of their neighbours, since
most countries could produce similar goods themselves. Although it is a major source of
inconvenience if frontiers between African states are closed due to political conflict (especially
for people living near those borders), it will not normally create an economic disaster.
Therefore, economic imperatives play a relatively minor role in inter-African relations. The end
of the Cold War, and the subsequent winding down of European and American strategic
interests in and around East Africa has led to a loss of concern in the region and ensuing
instability. It is not that there was a sudden shift from neo-colonial control over African foreign
policy to isolation, but a combination of events has helped to persuade western powers that the
cost of involvement in conflicts in Africa increasingly outweighs the benefits.
Both EU members and Eastern African leaders recognise the major changes taking place
in the global trading system. These transformations became especially clear after further EU
integration, and implementation of agreements resulting from the Uruguay Rounds (both of
which will continue to radically affect future EU-ACP relations). Nevertheless it is certain that
both sides are eager to maintain some form of modified relationship.
For example, both EU and African leaders have expressed clear interest in continuing
some form of co-operation between two regions. This is largely due to the historical and
existing links between Europe and Africa in terms of economic incentives such as trade and
investment. As pointed out earlier, Eastern African economies are strongly linked to Western
Europe through trade, investment, and overseas development assistance.
While Eastern Africa’s share of total European trade is small, the trade is highly
significant for both regions. For Africa, Europe remains by far the most important destination
for its exports and source of its imports. In the case of the EU, the monetary value of African
exports is small, but the region is an important source of a number of tropical products like
coffee, tea, and minerals, which are important to the European market. But more important for
Europe is the fact that Eastern Africa, with close to 200 million people, is a potentially major
market for the EU’s manufactured products. The future potential for the region as a market for
EU products could be even more significant, especially if it is able to recover from present
economic crises and strife. Alone the proximity of the EU and East Africa would contribute to
the maintenance of strong economic links.
36
In addition, due to the long historical and colonial association, there tends to be a feeling
of some degree of responsibility on the part of some of European member states to play a part
in assisting Africa out of its present crisis. At the same time, there is a feeling among the
Eastern African population that Europe helped to create the region as it is today and must play
a part in rectifying the situation. At a seminar held in Nairobi on May 21 1996 focusing on the
relationship between the EU and Africa, it became clear to both EU and African participants
that the preferential treatment inherent within the Lome Convention must either come to an end
or under-going drastic changes.65
There was some common agreement that new forms of co-operation could be developed
between the two regions. One of the topics that received considerable attention was FDI and
the need for measures to increase its flow from Europe to the region. Of special interest in this
area was investment in infrastructure, especially for projects that would facilitate rapid
integration for the countries in the region.
The need for such projects resulted in the formation of numerous regional integration
bodies such as the Common Market for Eastern and Southern Africa (COMESA), and the Inter
Governmental Authority on Development (IGAD), a seven-country regional development
organization made up of Eastern African countries. Transport and communication between the
member states of these organisations has been seriously hampered by the poor quality of
infrastructure (particularly in the area of transportation), which has in turn limited movement of
people, goods, and services from one country to another.66 There is also an obvious common
interest between the two regions to strengthen economic and eventually political integration
with each other. Both EU members and African leadership regard economic integration in the
region as a critical step in the development process for Eastern Africa. It would seem that the
region could improve investment prospects, especially for regional projects, if the economies
were more integrated.
Another common interest between EU and Eastern African leaders is economic reform.
After initial reluctance to wholly embrace economic reforms being introduced as part of the
World Bank and IMF structural adjustment programs, attitudes have shifted more in support for
reform. Both African and EU leaders have placed considerable expectations on the positive
impact of reforms, particularly concerning an improved environment for foreign investment. It
has become clear that in the increasingly liberalised global trade environment Africa’s future
does not lie with a preferential scheme as featured in the Lome Convention, but with deliberate
65
66
Similar to Livingstone and Ord (1969), pp. 381-383.
See Meier (1989), pp. 79-85.
37
measures aimed at increasing the competitiveness of African countries. The EU and ACP
member states could co-operate in the short- and medium-term to formulate a strategy to
accomplish this goal. However, the problem of debt burden must be addressed before East
African countries can focus more on economic recovery measures.
The EU could play a crucial role in the search for ways and means of alleviating Africa’s
debt burden to create a more enabling environment for development. East Africa consists of ten
regions with highly differentiated economic structures and potential. In total, they cover an area
of more than 1,000 sq km and the region includes some of the largest countries on the
continent. The region also has some of the smallest countries such as Djibouti, Burundi and
Rwanda with less than 30,000 sq km each. In terms of population, Ethiopia is the largest
followed by Tanzania, Kenya and Sudan.
The region’s annual output for the period 1991-1994 averaged US$ 44 billion with
Tanzania, Ethiopia, Kenya and Sudan accounting for about 81 percent of the total. East African
countries registered an overall low GDP growth rate of 1.3 percent during that period.
Indeed, about a third of the countries had negative growth rates. Impressive growth rates were
only recorded in Sudan (5.4 percent) and Uganda (5.0 percent) during the 1991-94 period.
Eastern Africa has market huge potential due to its population. However, the low level of GDP
per-capita in virtually all the countries seriously reduces the effective purchasing power of the
people in the region. Thus, the market potential of East African nations for regional goods and
goods from the EU or other parts of the world can only be tapped if an effective strategy is
found to raise the productivity of labour and other factors of production in the area, thereby
increasing the per-capita GDP and hence the purchasing power of the population. The region’s
per-capita GDP during the period 1991-94 was about US$ 240, with the highest national percapita income being US$ 500 in Djibouti, followed by Tanzania with US$ 354, and Sudan with
US$ 343.67
67
See Livingstone and Ord (1969), pp. 366-367.
38
Figure 4.2:
East African merchandise exports by region 1980-2000 (billion dollars)
2
1.8
1.6
Annual export
1.4
1980
1985
1.2
1990
1
1995
1999
0.8
2000
2001
0.6
0.4
0.2
0
Djibouti
Ethiopia
Kenya
Rwanda
Somalia
Sudan
Tanzania
Uganda
African countries
(Source: International trade statistics 2002, p. 173)
Figure 4.2 shows the annual exports of East African countries from 1980-2001. During 1980,
Kenya topped the regions with US$ 1.25 billion in exports, whereas Sudan and Kenya took the
lead in 2000.
4.3. Regional trade pattern of ACP countries (export and
import)
4.3.1. Exports
According to figure 4.3, the EU was still the most important market for ACP exports even in
2000 when trade between ACP countries accounted for only about 34 percent of total African
ACP exports and 30 percent of total ACP imports. Despite their share in world exports there
was a decline from 3.4 percent in 1976 to 1.1 in 1999.
Diamonds were in second place with 11 percent, then coca (6 percent), coffee (5 percent),
wood (5 percent), sugar (4 percent) and bananas (2 percent). The EU’s main export items
39
consist of vehicles, aircraft and other transport equipment (24 percent), and machinery
appliances (24 percent). As ACP’s share in world exports fell, the ACP-EU joined together on
June 23 2000 forming the Cotonou Agreement. The aim of the agreement is to enhance
economic co-operation and promote sustainable development and dedication to poverty
eradication in ACP countries. The Economic Partnership Agreement (EPA) is designed to
progressively remove all barriers to trade between two parties and to enhance co-operation in
all areas of trade. The EU members support agricultural production, rural infrastructure
development, food security policies and other welfare oriented programmes.
Total EU exports to Angola in 2000 totalled US$ 985,852 million and imports totalled
US$ 1,503,668 million. Real GDP growth between 1996 and 1999 declined from 11.7 percent
to 2.7 percent, but recovered during 2001 to 4.1 percent. Due to oil production, GDP growth
increased to 10.5 percent. It is estimated that petroleum production in Angola averages 920,000
barrels per day.
Figure 4.3
Merchandise exports by region and selected economy, 1990-2000 (millions dollars)
9000
7000
1995
1996
1997
1998
1999
2000
6000
5000
4000
3000
2000
1000
Ke
ny
a
G
ui
ne
a
Se
ne
ga
l
Sw
az
ila
nd
Ta
nz
an
ia
U
ga
nd
a
Za
m
bi
a
Zi
m
ba
bw
e
An
go
la
Et
hi
op
ia
G
ha
na
0
Su
da
n
Value of export million dollars
8000
African countries
(Source: WTO International Trade Statistics, 2002, p. 173)
Zimbabwe’s economy has continually declined and contracted. In 2000 it contracted by
4.2 percent and by a further 8.6 percent in 2001. The collapse of agricultural production in
2002 caused the budget deficit to soar and inflation shot up by around 113 percent.
40
In 2000 agricultural accounted for 24.8 percent of Zambia’s national GDP compared to
about 15.5 percent in 1996. The increase was due to a decline in copper exports, but today the
economy is still dependent on copper which brings foreign exchange to the country. During
2000 the income from copper was around US$ 800 million.
Ghana’s main commodity exports are gold, coca, diamonds, timber and coffee. In 2000
exports totalled US$ 861 million, imports totalled US$ 833 million dollars. The main item of
export (coca) accounted for about 30-40 percent of total exports in 2000.68
In Sudan agriculture remains the most important sector in the economy due its
contribution to the GDP (42 percent in the year 2000), and the fact that it employs more than
two thirds of the population. However, the share of agriculture’s contribution to the economy
has steadily declined as petroleum exports have increased. In 2000 the country’s leading export
commodity was petroleum valued at more than US$ 1.3 billion (75 percent of total exports)
followed by sesame and livestock products, valued at US$ 147 million (8 percent), and US$ 66
million (4 percent), respectively. Other exports included cotton and gold, valued at US$ 52
million and US$ 46 million, respectively. Sudan’s exports were much higher compared to
other countries, which usually have higher export income like Zimbabwe, Zambia, Swaziland,
Senegal, Namibia, Ghana and Tanzania. During 1999 the country’s leading export commodities
were petroleum products valued at US$ 276 million (35.4 percent of total export) followed by
livestock products and sesame, valued at US$ 142 million (18.2 percent) and US$ 126.9
million, respectively. Exports of petroleum products took the lead over other resource exports
with a value of US$ 596.2 million (69 percent of total exports), followed by sesame (US$ 90.8
million or 6.1 percent) and cotton (US$ 27.8 or 3.2 percent). Other items of exports were
sorghum, gum arabic, sugar, molasses, watermelon, seeds and groundnuts.69 In the past, Sudan
depended on cotton, sesame and groundnuts for its foreign exchange which are sensitive to
price fluctuations on the international market.
68
69
See also Sudan in Figures (May 2000), pp. 11-16.
See Bank of Sudan (Oct-Dec 1999), p. 17.
41
Figure 4.4
Leading merchandise exporters in Africa 1995-2000
(Billion dollars)
Leading merchandise net exporters in Africa 2000 (billion dollars)
160
140
2000
120
1980
100
1990
billion dollars
80
1995
60
2000
40
90-00
20
1998
0
-60
en
ya
K
on
go
am
er
oo
n
S
ud
an
C
2000
C
S
ou
th
A
-40
A
fr
ic
a
Li
N
by
ig
er
an
ia
A
ra
A
lg
b
er
Ja
ia
m
ah
ir
iy
a
A
ng
ol
a
M
or
oc
co
T
un
is
ia
E
C
gy
ôt
pt
e
d’
Iv
oi
re
G
ab
on
B
ot
sw
an
a
fr
ic
a
1999
-20
African countries
(Source: WTO International trade statistics 2000, page 75, also WTO 2004, page 78)
According to the WTO report “International trade statistics 2002”, trade in four oil exporting
countries (Angola, Yemen, Sudan and Equatorial Guinea) positively influenced 49 leastdeveloped countries (Sudan included). They benefited from higher oil prices and an increase in
their export resources from 60 to 120 percent during 2000. These four countries accounted for
more than 40 percent of the LDCs total exports in 2000 and their merchandise exports rose by
one quarter last year.
Figure 4.4 show that Sudan doubled its exports from 1999 to 2000. During 1999 exports
totalled US$ 780 million and in the second year over US$ 1.8 billion. The income is expected
to steadily increase in the future if the country succeeds in peace negotiations with the Sudan
People’s Liberation Army (SPLA) to stop the war. That has been raging for the last 19 years
destroying the country’s main material and human resources.
4.3.2 Imports
Figure 4.5 below shows that the EU still provides the bulk of imports to ACP countries. The
EU is, as mentioned, the most important trading partner for developing countries. In 1998 it
42
absorbed 21 percent of their exports and was the source of 23 percent of their imports. In this
way, the EU accounted for 45 percent of Africa’s exports in 1998. The EU accounts for some
35 percent of world merchandise trade and it is the largest market for exports for Africa and the
Middle East.
Figure 4.5
World merchandise imports by region and selected economy, 1990-2000
(million dollars)
35000
30000
1995
25000
1996
20000
1997
15000
1998
10000
1999
5000
2000
ge
r
A n ia
go
la
Be
B o ni
Bu tsw n
rk
a
i n na
a
Fa
Bu so
C run
am di
er
Eq
oo
ua
n
to Co
ria n
l G go
ui
n
E t ea
hi
op
i
G a
ab
G on
am
bi
G a
ha
N na
am
ib
ia
N
ig
e
So Nig r
ut eri
a
h
Af
ric
Su a
da
n
0
Al
Value of import in million dollars
(Source: WTO, International Trade Statistics 2002, page 176-177)
Countries
Caribbean and Pacific ACP countries report generally lower import shares than the other ACP
countries. The Caribbean countries have increased their relative share of imports from the USA
but not from the EU. The top imported items to African countries from the EU include
manufactured goods, machinery, transport equipment, power generating equipment, office and
telecommunication equipment and transport products. The most frequently exported items to
the EU are mining products, fuels, mineral ores, unprocessed foodstuffs, clothing and semi
manufactured goods.70
In 1999, the EU accounted for some 49 percent of developing Africa’s merchandise
import in which manufactured goods, machinery, and transport equipment topped the list of
imports; second on the list was agricultural products. The share of manufactured goods was 79
70
See WTO (2004), p. 79.
43
percent during 1990, but declined in 1999 to 77.8 percent. The share of agricultural products
was 15.2 percent during 1999. During 2001, EU trade imports with ACP countries (including
South Africa) totalled € 47.204 million and exports totalled € 39.559 million, which left a trade
balance of – € 7,646.71 During the 2002 period, total EU imports from Sub-Saharan Africa
totalled nearly € 36 million. During the same period, ACP country imports from the EU totalled
€ 27,392,304 million. The African countries that engage in the highest levels of trade with EU
include South Africa, Congo, Ghana, Ivory Coast, Cameroon and Sudan.
Table 4.2
Growth in the value of world merchandise trade by region, 1999-2000
(billion dollars and percentage)
Exports
Imports
Value Annual percentage
Value
change
2000
1990
Annual percentage
change
1999
2000
2000
-2000
1990
1999
2000
-2000
6186
6
9
12
World
6490
6
4
13
1058
7
5
12
N. America
1504
9
11
17
359
9
7
20
Latin America
388
12
-3
16
2441
4
0
3
W-Europe
2567
4
2
5
2251
4
0
2
EU (15)
2362
4
2
5
271
7
0
26
Europe Baltic
242
5
- 12
13
146
10
-1
13
State/CIS
116
8
1
14
Central Eastern
Europe
105
--
1
39
Russian Fed.
46
--
- 32
12
145
3
10
27
Africa
137
4
-3
7
263
7
28
46
Middle East
171
6
1
14
1649
8
7
18
Asia
1481
8
10
23
479
5
8
14
Japan
380
5
11
22
249
15
6
28
China
225
15
18
36
649
9
8
19
Six East Asian traders
615
8
11
27
(Source: WTO 2001, page 20)
71
See WTO (2000), p. 76.
44
Africa’s major fuel exporters increased their shipments by more than 60 percent, lifting
the region’s export earnings by more than 25 percent.
EU’s import from Africa which grew a bout 21% in 2000 fell by 0.01 percent in 2002,
about one half of Africa’s merchandise exports are destined to Western Europe72, a share which
is somewhat less than at the beginning of the decade. In 1999 imports from Africa recovered by
6 percent largely due to the double-digit growth of fuel imports. Despite this recovery, EU fuel
imports from Africa were still well below their 1990 levels. Imports of manufactured goods and
agricultural products, however, rose by an average of six and two percent over the 1990-99
period. Among manufactured goods, clothing imports rose by eight percent annually,
amounting to US$ 6.8 billion or 11 percent of total imports from Africa in 1999.
The merchandise trade development for 40 African countries in 1999 compared to the
1990-1999 period shows that merchandise trade value in 1999 ranged from more than US$ 26
billion (South Africa) to less than US$ 70 million (Rwanda).73 During 2003, South Africa’s
export level was at US$ 36 billion compared to Rwanda’s at US$ 60 million. The top five
African traders account for more than one half of Africa’s total merchandise trade. Africa’s
trade per-capita in 2003 was about US$ 300. The reported per-capita trade for Botswana,
Gabon and Mauritius was around US$ 3000, but for more than 20 countries the reported percapita trade was below the regional average.
5. Sudan’s Economic Structure
The Sudanese economy’s greatest resource was and remains arable land, of which only onethird had been exploited by 1982. Barring discovery of huge quantities of petroleum or other
exploitable minerals, agricultural will continue to be the economy’s mainstay in the foreseeable
future. Economic activities are characterised by a strong division of the modern sectors in the
central region of the country, and the traditional sectors mostly found in the greater area outside
the central region.
The modern sector, which is made up of mostly agriculture, large-scale industry,
transport, electric power, banking, and insurance, was dominated by public enterprise. In the
production, agriculture, and industry sectors this was partially due to the fact that the private
sector was unable to finance major development. However, since military coup in 1969 public
dominance of those sectors has also been the result of government policy that includes
nationalisation of the financial sector as well as part of the existing industry sector.
72
73
African export-import Bank (2004), pp.88-89.
See WTO (2000), p. 166.
45
Private economic activities were important in modern small and medium scale industry.
They were predominant in road transport, domestic commerce, traditional agriculture and
handicrafts. In the modern industrial sector the predominant state enterprises performed far
below expectations, and were unable to make the anticipated contribution to economic
development. Throughout the decade progress within the economy was generally impeded by
the inefficiency of the rail transport system and its river transport component, which new road
construction only partially offset. Another determent to continual and expanded development
was the great shortage of competent managerial experts and professionally trained and skilled
workers. The latter shortage was exacerbated by the migration of many such workers to oil
producing Arab states which offered higher paying jobs.
The agricultural sector in the Sudan consists of two distinct methods in different areas of the
country. The first is the irrigated area concentrated mostly in the publicly administered projects
along the banks of the Nile and its tributaries. For example, the Gezira Scheme and the Managil
Extension where about two million feddans (840,000 hectares) of irrigated land are available.
There are only one million feddans (420,000 hectares) available for the Rahad Scheme where
cotton, the country’s chief cash crop, is cultivated. The second method is found in the rain-fed
areas, which are mostly farmed using traditional methods. These also include the mechanised
rain-fed farming methods that have become increasingly important.74
Public and private investment has been heavily concentrated in the modern agricultural
sector which is found mainly in the irrigated areas and in rain-fed mechanised farms located in
the east-central region. In this region, the production of groundnuts, wheat and sugarcane have
been added to cotton and Sorghum. No public investment has been contributed to the
production of livestock, groundnuts, sesame and gum arabic. Future agricultural development
is severely constrained by a weak economy, poor infrastructure and a largely subsistence based
agricultural sector, which discourages all attempts at modernising traditional methods of
farming and animal husbandry. In addition to these obstructions there are the high costs and the
technical problems of expanding the existing irrigation network as well as the severe
limitations imposed by inadequate infrastructure. For example, the limited capacity of the
transport system leaves large areas of the country virtually isolated, with only limited seasonal
access to markets.
Sudan has a large amount of forest land (61,627 hectare, about 25.9 percent) and fisheries
which have not yet been developed and appropriately exploited75. The largest sections of these
74
75
See Sudan in Figures (2000), pp. 11-18.
See FAO (20000), Chapter 16 East Africa.
46
forests are found in the southern region, and in the western and central part of the country.
Forests in the southern and central regions of the country provide lumber needed for furniture,
construction purposes, and wood for energy, e.g., firewood.
Fisheries in Sudan are primarily found along the river Nile, the Red Sea Coast and Lake
Nuba. The construction of dams along the Nile, e.g., Gabel Aulia, Sennar, Roseires and Kashm
Elgerba dams, is believed to have helped promote the growth of this resource. Again, recent
improvements in methods of production and storage facilities on the Red Sea Coast and Lake
Nuba are expected to substantially increase the amount of fish caught and processed in these
locations.
A number of mineral deposits, among them natural gas, oil, iron, copper, chromium,
manganese, mica and gypsum are known to exist in Sudan. Iron ore can be found in the Red
Sea area and southern Kordfan while copper is found in the west of Sudan. Chromium has been
discovered in the three areas of the Ingassana Hills in the Blue Nile province, Gala Elnahl (in
Kassala province) and the coastal Red Sea area. Manganese is found in the Upper Nile and Nile
province and mica has been discovered in the Northern Province. Lack of funds, together with
a widespread belief that the exploitation of these minerals is not economically feasible, has
rendered this sector of the economy dormant for quite some time.
Recently, big foreign companies exploration convoys (mainly American, Japanese,
French and British) have turned up results which prove that many of the minerals do indeed
exist there. In addition, the amounts are of commercial quantities and their extraction is
economically feasible. Chevron Corporation has discovered large oil reserves in the southern
and western Sudan. Oil exports earning in the year 2006 was $ 8,252.8 million and in the year
2007 was estimated to reach $11,532.9 million76. Exportation of chromium, manganese,
gypsum and mica has also already begun.
At the moment, the industrial sector in Sudan makes up a comparatively small part of the
economy. It produces primarily import substitutions for consumer goods and uses imported
machinery, equipment, and both local and imported raw materials. The industrial sector is
dominated by private ventures. The most important industries in this sector are textiles, leather,
cement and food processing.77 Public participation in the leather industry is very prominent as
the three big tanneries in the country were built and are owned by the public sector. The largest
shoe factory, which was privately owned, became public property after the 1970
Nationalisation Act, but in 1979 it was converted into a joint public/foreign venture.
76
77
EIU ( August 2006), p.12.
See Centre for Strategic Studies (2000), pp. 178-179.
47
The width and sprawl of Sudan means that river transport could play a potentially vital role
in economic progress. The Nile links the north of the country with south, plays a key role in the
transportation of consumer goods, and encourages the development necessary to the southern
region as well as transporting products to the north. Most importantly, river transport is less
expensive than other types of transport, especially long distance transportation of bulky goods
such as farm produce, wood and oil.78 The transport sector is regarded as a pillar for economic
and social development as it links populated consumer centres with areas of production. The
most important group of actors are:
•
The railway corporations
•
The river transport corporations
•
Air transport
•
Shipping companies
•
Sea port corporations
The transport sector and power facilities in Sudan are underdeveloped and constitute major
bottlenecks in terms of effective development of the country. River transport is crucial in
connecting the southern and central parts of the country. Today road transport is also very
important; especially after extensive road construction was carried out, which now connects the
main parts of the country.79 Sudan’s exports are mainly agricultural primary goods such as
sesame, cotton, gum arabic, oil seeds, livestock, and recently petroleum. Sudan’s imports
consist primarily of foodstuffs, consumer manufactured goods, machinery and equipment.
Agricultural imports consist of rice, tea, coffee, lentils, etc. figure 5.1 shows the composition
and value of Sudan’s exports and imports for the first half of 2000.
78
79
See Centre for Strategic Studies (2000), p.141.
See Centre for Strategic Studies (2000), pp. 148-149.
48
Figure 5.1:
Summary of exports during (Jan-June) 2000 (Value in US$ million)
Benzene
Cake & Meal
700
Cotton
Valu e in US$000's
600
Gold
500
Groundnuts
400
Gum Arabic
Sesame
Meat
300
200
Others
100
Se
ns
am
O
th
er
s
(S
or
gh
um
H
)
ide
&
Sk
in
s
liv
es
to
ck
Pe
t ro
leu
m
Du
ra
ea
t
M
Go
ld
G
ro
un
dn
Ar
ut
ab
s
ic
Se
sa
m
e
G
um
Be
nz
en
C
e
ak
e
&
M
ea
l
C
ot
to
n
0
Items of exports
(Source: Bank of Sudan foreign trade statistical Digest annual, 2000, p.2)
Petroleum topped the export list for the first half of 2000 with US$ 577,426 million. Sesame
held the second position as a major agricultural export.80 Cotton used to be the principal crop,
but it has recently been superseded by sesame. World prices for cotton have steadily decreased
since 1995 when cotton was pulling in approximately US$ 120 cents per pound. By June 1995
and during 1999 cotton was only bringing in US$ 52.93 cents per pound, which meant a 32.9
percent reduction in its price. This decline can be explained by poor climatic conditions,
management problems in the sector, and the decrease in international cotton prices - caused by
the huge international stockpile of the cotton. More generally, the structure of Sudan’s export
changed drastically with the introduction of petroleum export in mid-1999, which initially
represented 35 percent of the export value. The trade deficit reduced from US$ 1,329,000
million in 1998 to US$ 623 million in 1999. There was trade surplus in the first half of 2000
(January-June) and a trade balance of US$ 137.858 million.81
5.1. The Ten-Year Plan (1961- 62 and 1970- 71)
80
81
See Centre for Strategic Studies (2000), p.206.
See Centre for Strategic Studies (2000), pp. 206-207.
49
Sudan is the largest country on the African continent; it is 20 million square miles in length,
and has an annual population growth rate of 2.8 percent. The population of Sudan is very
heterogeneous, with a basic division between people claiming Arab decent and the African
tribes of the south. As in all developing countries, agriculture is by far the most important
economic activity. In 1955-56, agriculture and cattle breeding accounted for some 48 percent of
the GDP.
The GDP per capita in 1955-56 was Sudanese Pound82 (SDP) 27.5 and in 1960-61 when
the population was just 12 million, it had risen to around SDP 30. In these five years the GDP
increased at an annual average rate of 4.7 percent.
5.1.1. Objectives of the Ten-Year Plan
There were five main objectives in the Ten-Year Plan. Firstly, to substantially increase real
income per capita. Secondly, to diversify the structure of production. Thirdly, to considerably
increase exports with something other than import substitutions. Fourthly, to improve social
conditions, education and training, and to increase productive employment opportunities. And
lastly, to work towards the maintenance of stable price levels.
The Ten-Year Plan was the first comprehensive long-term plan for economic
development in the history of Sudan. Many projects during the plan period were implemented,
completed, or initiated as a result of earlier decisions. The Economic Planning Secretariat
considered these projects as benchmarks and only proposed some slight amendments. The
estimated cost of these projects was about SDP 140 million or roughly 50 percent of the total
magnitude of the SDP 285 million set aside as public expansion investment.
It was also not surprising that the value of committed projects increased during the
preparation period of the plan. The most important projects were the Roseires Dam and Kashm
el Girba Dam projects, as well as the expansion and modernisation of Sudanese Railways. It
will also be observed that appreciable amounts were committed for purchase of aircraft,
construction of bridges, and for the Guneid Sugar Factory complex. In regard to non-committed
projects, the total estimated cost came to SDP 145 million or 51 percent of the recommended
public expansion investment.
82
The exchange rate of Sudan in the year 1956 was 1 SDP = 0.35 US$ and changed to 1 SDP = 0.40US$ in 1972.
50
5.1.2. Roseires Dam
The biggest single project on the list of committed projects was the construction of Roseires
Dam. The Roseires Dam was built in 1966 and power-generating facilities were installed in
1971 on the Blue Nile.83 The fact that it was the biggest single project had major implications
for the pattern of public investment and for future economic development in Sudan. The funds
allocated in the Ten-Year Plan allowed for the utilisation of 56 percent of the stored reservoir
water behind the dam.
5.1.3. Khashm el Girba Dam project
The Khashm el Girba Dam is 95 km long and 20-35 km in width .The scheme area comprises
44,000 feddans (18,480 hectares) of primarily flat clay or loamy soils. A sum of SDP 34.5
million was allocated for this project, SDP 14.5 million for gravity irrigation, and SDP 20
million for resettlement. In 1959, the United Arab Republic gave the Sudanese government
permission to proceed with the construction of the dam. The main concern about this project
was the necessity of finding new places of settlement for the citizens of Wadi Halfa, but the
development of the area nevertheless had strong economic justification.84
5.1.4. Allocation to Sudan Railways highway construction
The second main item on the list of committed projects was the allocation of SDP 35 million to
the Sudan Railways network, consisting of SDP 8 million for work in progress and SDP 27
million for a new program concentrating on modernisation, improvements and additions.
Nearly all components of the Sudan Railways plan were meant to improve efficiency and to
increase capacity. Furthermore, since an efficient transport system was a prerequisite for
successful implementation of the plan, there was little choice but to consider the program a
committed project and to construct a rail line between Khartoum and Port Sudan. Sudan
Railways would continue to remain the principle carrier of commodities and the Khartoum Port Sudan rail line was one of the few projects that was thoroughly analysed from the
perspective of the macroeconomic framework of the plan.
83
84
See Centre for Strategic Studies (1997), p. 173.
See Centre for Strategic Studies (1997), pp. 173-174.
51
5.2.Project for output diversification and import substitution
The list for committed projects also included some important developments in the industrial
sectors, such as the electrification of the Sennar Dam, the Guneid Sugar Factory and other
government factories. These industrial projects, as well as the expansion of rice cultivation,
were approved by the Council of Ministers before the recommendations of the National
Technical planning committee. This approval was based on the foreign exchange savings
potential through import substitution, and also on expectations of an increase and
diversification of national income and the greater employment opportunities that they might
provide.
During Numeiri’s (former president of Sudan) time in office, he announced his intentions
of building a socialist Sudan and of not tolerating exploitation and western style capitalism
even by Sudanese citizens as long as it was tied to imperialism. In other words, foreign private
enterprise was not welcomed and in May 1970 foreign banks, insurance companies and
wholesale trading houses were nationalised. A number of Sudanese private businesses and
enterprises were either confiscated or sequestered.85 Foreign holdings in petroleum refinement
and distribution were not nationalised. During this period commodity shortages were
commonplace in all the major towns in the country and it was clear that sooner rather than later
there would be a major reappraisal of all the drastic steps taken.
Sure enough, by 1971 foreign policy changed, trade with socialist countries dropped
drastically, and diplomatic relations were resumed first with West Germany and then with the
USA.
In the future the Sudanese economy may require contributions of greater proportion from
the foreign sector. Whether or not these will be forthcoming will depend on a number of
factors. These include the degree of support and encouragement given to foreign investors by
the government, the success of foreign trade and export policy, the availability of foreign
investment funds and the extent of success in domestic economic planning. In connection with
this last point, it will be necessary for future economic plans to be successful in expanding
capacity in the production of exportable goods to levels compatible with the world trade price
structure, and to expand import savings production.
The prospects of increased contributions resulting from foreign trade and investment
appear favourable. A significant increase in foreign investment appears likely considering the
proximity of the Sudan to the Middle East oil-exporting nations. Economic development will
85
See Howell (1994), pp. 421-436.
52
require increased investment from these oil-exporting nations in order to develop sources for
food production, minerals and low cost labour intensive manufactures (processed foods, textiles
and clothing).
It is believed that significant amounts of petrodollar investment will funnel into Sudan,
encouraging its potential as the breadbasket for the oil-exporting nations. Such investment
would enable Sudan to become an important exporter of foodstuffs, and this could lead to a
pattern of export led growth. Finally, a large inflow of foreign investment would permit
agriculture and industrial development of an import-saving nature.
5.3 Sudan’s foreign trade during 1996-1998
There are various sectors in which countries and businessmen can invest in Sudan. For
example, agriculture (livestock and crops), industry, energy, mining, transport, warehousing,
tourism, marine resources, information technology, health, education, electricity, roads, ports,
water, communications, environment, storage housing, contacting, basic infrastructure and
economic services. Sudan’s foreign trade has improved significantly in value terms under the
present economic liberalisation policies implemented in 1992. These policies have positively
stimulated the private sector in the export and import sectors.86 However, this sector is facing
price fluctuations in the international market as the export compositions consist mainly of
primary products.
During 1999 a substantial change was expected in Sudan’s exports due to production of
petroleum and petroleum products. The figure 5.2 below shows the total exports and imports,
the trade balance as well as percentage change from 1996-98. It also compares Sudanese
exports and imports from the 1996-1998 periods.
86
See Centre for Strategic Studies (1997), pp. 156-157.
53
Figure 5.2:
Sudan’s exports and imports and trade balance 1996-1998
2500
1925
Value in million dollars
2000
1504 1580
1500
1000 620
594 596
500
11% -4% 0% 0
0
Export value Annual %
-500
change
-1000
1996
1997
27% 5% 22%
Import value
Annual %
change
1998
Trade
balance
-884 -986
-1500
-1329
Import,export and trade balance
(Source: Bank of Sudan, foreign trade statistical Digest)
The trade balance registered a deficit of US$ 1.328 million in 1998 compared to a deficit of
US$ 985.5 million in 1997. This increase in the trade balance deficit during 1998 is attributed
to the increase in the imports value of US$ 344.9 million; the main reason for this increase is
due to an increase in imports of petroleum inputs.
Table 5.1:
Main exports items of Sudan 1996-1998 (million US$)
Unit
Cotton
Groundnuts
Sesame
Gum arabic
Dura
Livestock
Hide& skin
Oil Cakes
Others
Total
Bales
M.T
M.T
M.T
M.T
Head
Value
M.T
Value
1996
1997
1998
Quantity value Quantity Value Quantity Value
480,941 128,2 433,292 105,7 395,546
95,5
2,176
1,3
14,782
7,1
25,440
14,2
157,405 141,0 171,726 117,3 167,231 104,8
15,551 29,5
22,428
27
23,622
23,7
5,4
17,250
2,6
35,081 120,2
1.270,337 81,4 1.281,298 78,2 1.852,403
20,2
– 28,7
– 22,8
–
11,3
74,664 10,2
90,172 15,4
17,066 200,4
- 197,2
- 220,7
620,2
594,2
595,7
(Source: Bank of Sudan foreign trade statistical Digest comparing three periods from 1996 to 1998)
54
According to the table 5.1 above, the export proceeds of livestock increased to US$120.2
million for the first time in 1998, i.e., 54 percent compared to the previous year. This was due
to an increase in the quantity exported and improvement in its prices on the world market.
Although the export quantity of gum arabic increased, the exports proceeds declined by
12.2 percent compared to the previous year. This was due to the drop in international demand
for gum arabic.87
According to the table 5.1, the year 1998 witnessed reappearance of dura (sorghum) on
the exports list due to its abundant supply. It is also observed that, both the volume and exports
proceeds of cotton decreased by 8.7 percent and 9.6 percent respectively compared to the
previous year. Whereas sesame exports declined from the top of exports list during this year.
Figure 5.3:
700
600
500
1996
400
1997
300
1998
200
100
55
at
er
ia
ile
(Source: Bank of Sudan foreign trade statistical Digest table of 1996-1998)
See also data from Sudan in Figures (2000), p. 18.
m
R
aw
O
th
er
er
ag
Item of import
87
ls
s
oo
Te
xt
e&
To
b
ds
ac
tu
ffs
e
fe
Be
v
O
th
at
&
er
w
he
Fo
o
at
C
of
Te
a
ic
a
m
he
W
sp
o
fl o
ur
ls
t
en
he
C
ui
pm
en
Eq
ip
m
G
&E
qu
Tr
an
ac
hi
ne
ry
re
d
ac
tu
M
rt&
oo
ue
ro
l
Pe
t
uf
an
M
t
ds
0
m
Value in million dollars
Sudan’s Imports 1996-1998 (million US$)
Figure 5.3 above shows that, import values registered an increase of over US$ 1.9 billion in
1998 compared to US$ 1.579 million in 1997, i.e. 22 percent. The import of petroleum and
petroleum products decreased due to a decline in prices internationally and to a gradual shift to
consumption of locally produced petroleum products.88
In 1998, the import of manufactured goods increased by 102 percent compared to 1997,
this was due to the import of petroleum extraction inputs. The import of machinery and
equipment increased by 29 percent compared to 1997 and the import of transport equipment
increased by 11 percent compared to 1997.
5.3.1 Exports
Figure 5.4 shows the relative importance of the main customers of Sudan’s exports for the year
1998 compared to the previous years.
Figure 5.4:
Direction of Export 1996-98
(As percentage of total exports)
1996
1997
di
a
un
Ar
tri
ab
c o es
S a un
ud trie
s
ia
Ar
ab
ia
Li
O
by
th
a
er
Ar
Eg
ab
y
co pt
O
u
th
nt
er
ri
co es
un
tri
es
In
co
an
an
n
na
As
i
C
hi
Ja
p
pe
a
Eu
ro
rn
st
e
Ea
er
ro
p
th
Eu
O
U
SA
1998
ea
n
EU Un
i
co on
un
tri
es
Percentage of exports
45
40
35
30
25
20
15
10
5
0
Countries
(Source: Bank of Sudan foreign trade statistical Digest table of 1996-1998)
88
See Centre for Strategic Studies (1997), p. 413.
56
Sudan’s exports to Arab countries occupied a leading position on the customers list with
purchases amounting to 40.7 percent of the total export in 1998 compared to33.8 percent in
1997.Also the exports value to Saudi Arabia increased by about 25 percent in 1998 compared
to 1997. Exports to EU countries decreased from 38.3 percent in 1997 to 34.6 percent in 1998.
Exports to US declined from 1.5 percent in 1997 to 0.4 percent in 1998. However, the exports
to the People’s Republic of China, Japan and other countries registered a variable decrease.
While the exports to other Asian countries increased during the year compared to the pervious
year.
5.3.2 Imports
Figure 5.5 shows the relative importance of the main supplier on the base of total imports
during the year 1998 compared to previous year.
Figure 5.5:
Percentage of import
Source of imports for the period 1996-1998
30
25
20
15
10
5
0
1996
1997
an
In
co dia
un
Ar
tri
ab
es
co
u
Sa
n
ud trie
s
ia
Ar
ab
ia
Li
O
by
th
a
er
Ar
Eg
ab
y
c o pt
O
un
th
tri
er
es
co
un
tri
es
na
C
hi
n
an
Ja
p
pe
a
U
SA
rn
As
i
st
e
th
er
Ea
O
O
th
er
W
es
te
r
n
Eu
ro
co
un
...
EU
1998
Countries
(Source: Sudan’s customs, Bank of Sudan Annual report, 1998)
57
The Arab countries occupied the leading position on the suppliers list. Imports from such
countries increased from 25.4 percent in 1998 compared to 18 percent of the total imports in
1997.
Also Saudi Arabia occupied the top of the list for both imports and exports in 1998. The
import volume of EU countries followed Arab countries import volume, although their total
imports decreased from 25 percent in 1997 to 23.5 percent in 1998. Sudan’s imports from the
Peoples’ Republic of China doubled due to increased investment by Chinese companies in
Sudan, particularly in the petroleum project.89
The size of imports slightly increased by only 2 percent compared to the previous year.
In the year 1994 import was US$1.161 million compared with US$1.1845 million during 1995.
Figure 5.6:
Sudanese exports during 1993-95
1993
1994
U
Ea
SA
st
Eu
ro
pe
Ja
pa
n
O
C
th
hi
na
er
As
ia
In
n
di
c
a
o
Ar
ab unt
ri
ic
c o es
u
Sa ntr
ud i es
iA
ra
bi
a
O
L
th
ib
er
ya
Ar
ab
Eg
ic
y
c o pt
O
u
nt
th
ri
er
co es
un
tri
es
O
th
er
s
W
es
te
r
n
co
un
tri
es
1995
EU
Percentage of export
45
40
35
30
25
20
15
10
5
0
Countries
(Source: Sudan’s Customs)
Figure 5.6
above shows the main recipients of Sudan’s exports from 1995 compared with the
previous two years. The EU as we can see tops the countries which imported from Sudan
during these periods. In 1995, they had an average of 33.1 percent of the total exports from
Sudan compared with export in the previous two years. Saudi Arabia was in the second
89
See Centre for Strategic Studies (2000), p. 206.
58
position. The share of Sudanese exports to Saudi Arabia decreased from 25.2 percent in 1993 to
18.4 percent in 1995, but still they have the second position as the main importer of Sudanese
commodities, especially sugar.
Figure 5.7:
Average imports of Sudan from 1993-1995 (from certain countries in percentage)
35
30
25
20
15
10
5
0
1993
1994
Other Arabic
countries
Libya
Arabic countries
India
Japan
USA
1995
EU
Percentage of import
(Source: Sudan’s Customs)
Countries
The above figure 5.7 shows that from 1993-95, the EU had the lion’s share of exports to
Sudan, and it had 31.1 percent of Sudan’s imports during 1995 comparing with 29.9 percent in
1994. Sudan’s import from Arabian countries declined due to the reduction in the import of
petroleum from 29 percent in 1994 to 25.8 percent in 1995. The growth of import volumes
from Japan during 1995 was due to the increase in imports of automobiles and other transport
equipment.
59
Figure 5.8:
Balance of trade in Sudan during 1994-1996
Value in million of dollars
2000
1.504
Value in million dollars
1500
1.162 1.185
1000
524
556
620
500
26% 6% 12%
23% 2% 27%
0
-500
-1000
1994
1995
1996
Value of exports Annual average Value of imports Annual average Balance of trade
change
change
-638 -629
-884
-1500
Value of import,export and trade balance
(Sources: Bank of Sudan economic and financial statistical Digest of 1994-1996)
Figure 5.8 shows the export and import values from 1994-1996. There was a deficit in the
balance of trade during 1995 of US$ 884.2 million compared with US$ 628.8 million during
1995. This deficit in the balance of trade was due to the increase in imports by US$ 319.9
million, and the fact that exports were only at US$ 64.5 million in the same year.
60
Figure 5.9:
Exports of all products of Sudan during 1994-1996
Value in million dollars
250
200
1994
150
1995
100
1996
50
e&
M
er
C
ak
O
th
ea
l
r
at
he
Le
um
Li
ve
st
oc
k
ur
a
D
ar
ab
ic
m
e
Se
n
sa
G
G
ro
u
nd
C
ot
nu
to
ts
n
0
exports commodities
(Source: Bank of Sudan economic financial statistic review)
According to the above figure 5.9, sesame toped the list for the first time as an important
commodity to be exported. This was due to the reduction in the international supply and a
correlating increase in international prices. On the other hand, in the same year there was an
increase in the export of gold and sugar, but the export of gum arabic decreased by 42.6 percent
compared to 1995. This was because the production countries decreased their international
prices from US$ 3,500 dollars to US$ 2,200 dollars per ton.
In 1995 there was a huge reduction in the export of dura (94.1 percent), this was due to
reduction in production.
It is clear from the figure 5.10 below that total imports during 1996 increased from US$ 1.1845
million in 1995 to US$ 1.504 4 million in 1996.
61
Figure 5.10:
350
300
250
1994
200
1995
150
1996
100
50
Other current
materials
Woven
Other food
production
Tobacco&
non alcohlic
Coffee
Tea
Manufactured
commodities
Tools
&equipment
Autos
&spare parts
Chemical
materials
Wheat&
Wheat flour
0
Petroleum
Value in million of dollars
Imports of all products of Sudan from 1994-1996
(million of dollars)
Item of import
(Source: Sudan’s customs)
Cotton used to be the main exported crop, but was superseded in 1997 by sesame which
accounted to 20 percent. The structure of Sudan’s exports has changed with the introduction of
new items of export, especially petroleum.
Agricultural products have decreased sharply in export especially gum arabic and
groundnuts which was reduced to zero. There was sharp decline in export of groundnuts from
1993-99 due to some climatic problems particularly reduction in the rainfall and the decline in
international prices.
62
Figure 5.11:
300
250
200
1997
150
1998
100
1999
50
er
s
d
O
th
ol
G
H
ea
ds
an
d
Sk
in
s
t
ea
M
st
oc
k
um
Li
ve
So
rg
h
ea
&m
C
ak
es
ro
u
nd
nu
ls
ts
e
sa
m
G
ic
Se
n
Ar
ab
to
G
um
C
ot
ue
ro
l
Pe
t
n
0
m
Value in million dollars
Sudanese exports all products from 1997-1999
Item of exports
(Sources: Bank of Sudan statistical Digest, 1997-1999)
Agriculture is the most important sector in the Sudanese economy with a 48 percent share
of GDP in 1998, while the industrial sector made up about 8.3 percent of GDP. The agriculture
sector contributes about 62 percent of the export including also livestock. There was an
important link between the agriculture sector and the growth of the economy, i.e. in 1996
growth was a round 4 percent, in 1999 the GDP rose by 61.7 percent, and growth achieved 5
percent in 1998 and 6 percent in 1999.
The main agricultural products have reduced their share in the export: gum arabic from 5
percent in 1997 to 3 percent in 1999, oil cakes decreased from 3 percent in 1997 to 1 percent in
1999, hide and skins declined from 4 percent to 1 percent. Cotton used to be the main exported
crop, but it was superseded in 1997 by sesame which accounted for 20 percent. The structure of
Sudan’s export industry has been transformed through the introduction of new items of export.
Agricultural products have decreased sharply in export especially gum arabic and groundnuts
which was reduced to zero.
63
Figure 5.12:
Examination of Sudanese exports for all products to all destinations
1993-99
(Sources: Bank of Sudan & Sudan Cotton Company)
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
C
ot
to
n
G
ro
un
dn
G
ro
ut
un
s
dn
ut
s
oi
ls
O
il
ca
ke
s
G
um
ar
H
ab
id
es
ic
an
d
sk
O
in
th
s
er
pr
od
uc
To
ts
ta
le
xp
or
ts
1993
1994
1995
1996
1997
1998
1999
products and destination
According to the statistical data above, exports of cottons have been changed during the
last three years as show above. The Bank of Sudan prepared all balances of payment in which
were to be used by credit and exchange rate measures. The Bank of Sudan has a deliberately
short period to examine all balances of payments. The Bank of Sudan issued annually report
containing the economic situation and balance sheet of export and import. The statistical data
provided by the Bank of Sudan are more reliable than others.
Concerning the export to EU, the main data concerning cotton export comes from Stabex and
Eurostat. The main data of concerning export of groundnuts during 1996-99 comes from
Customs, and for 1998 the data comes from Central Bank of Sudan (CBS). The discrepancies
between these sources on groundnuts exports to EU are concentrated in 1995 (1,805 tons or
106 percent), 1997 (1,712 tons or 59 percent) and 1998 (11,503 tons or 67 percent). With
regard to hide and skin export, there are discrepancies of data between Stabex and Customs
which range from 1,400 tons in 1993 to more than 8,000 in 1998, for the export of hide and
skin to EU data from Customs is better: 1997 (7,000 tons), 1998 (5,000 tons) and in 1999
(5,000 tons).
64
Regarding export quantities to the EU, there are discrepancies in the main sources
(Customs, CBS, Bank of Sudan). According to the trade balance in 1999, there was
improvement in the budget because of petroleum exports that year, the deficit in the budget was
only US$ 634.8 million compared to US$ 1.328.9 million in 1998.90
There was reduction of the EU imports from Sudan in the year 1999 compared to 1998.
At the same time there was an increase of the Sudanese export products to other European
countries. In 1999 there was no trade with USA due to the economic embargo against Sudan.91
Regarding Sudanese exports, Arabic countries have the lion share of the import and the
EU came in the second place during 1999. In 1999 Japan had a good situation in trade with
Sudan on both import and export sides. In 1998 Saudi Arabia remained the most important
trading partner for Sudan, having about 15, 5 percent of total import. China’s share of trade
rose to 14 percent while in 1994 it was only at 3 percent. Within the EU, France topped the list
of imports with Sudan with share of 6.7 percent in 1998.92 Imports during 1994-95 increased
17.5 percent more than export which led to a deficit in the trade from 9.3 percent of the GDP in
1995 to 15 percent in 1998.
Sudan’s import of foodstuffs has declined from 18 percent of total import in 1994-95 to
14 percent in 1998. According to the export of Sudan, Saudi Arabia had 24.4 percent of total
export, Italy and the UK 10 percent, and Germany 5.4 percent. The composition of exports has
changed over the past years; the share of cotton and gum arabic, which accounted for 37
percent of total export in 1994-95, decreased to 20 percent in 1998. Since 1990 GDP has
increased at annual average rate of five percent. This stability is due to favourable weather
conditions and to the economic liberalisation policies that enhance and encourage growth.
90
See Bank of Sudan (Oct-Dec 1999), p. 15.
See Centre for Strategic Studies (2000), p.198.
92
See Bank of Sudan (July-Sept. 1998), p. 32.
91
65
Table 5.2:
Economic structure (Annual indicators)
GDP at
market
prices(SD
billion)
GDP(US$
billion)
Real GDP
growth (
percent)
Consumer
price inflation
(av; percent)
Population
(m)
Exports of
goods
fob(US$ m)
Imports of
goods
fob(US$)
Currentaccounts
balance (US$
m)
Foreignexchange
reserves excl
gold(US$m)
Total external
debt (US$
billion)
Debt service
ratio, paid(
percent)
Exchange rate
(AV) SD:
US$
1999
2000
2001
2002
2003
2,601.9
2,892.3
3,128.8
3,603.2
4,182.3
10.3
11.2
12.1
13.7
16.0
6.5
6.1
5.3
5.0
6.1
16.0
10.0
3.0
8.4
8.8
30.7
31.4
32.1
32.9
33.6
780.1
1,806.7
1,698.7
1,949.7
2,419.3
1,256.0
1,366.3
1,395.1
2,152.8
2,669.5
-464.8
-556.8
-618.3
-960.4
-1,381.9
188.7
278.7
140.7
440.7
625.8
16.1
15.7
15.3
15.8
16.1
4.0
2.6
2.4
2.2
3.1
252.6
257.1
258.7
263.3
261.2
66
Origins of GDP
1999
percent of total
Agriculture
Trade, transport &
communications
Other services
42.6
25.9
Industry and mining
Construction
9.8
6.4
Principal exports
2002
15.3
US $ m
Crude oil
1,510
Sesame
Livestock
Cotton
Gum arabic
Total incl. Others
74.6
117.0
62.2
31.9
1,649
Main destinations
of exports 2002
percent of Total
Components of
GDP 1999
percent of total
Private consumption
Government
consumption
Gross fixed capital
formation
Change in stocks
Exports of goods &
services
Imports of goods &
services
GDP at market prices
Principal imports
cif 2000
Machinery
equipment
Manufactured goods
Transport equipment
Chemicals
Wheat & wheat flour
Main origins of
imports 2000
85.7
4.7
12.6
4.1
8.1
-15.2
100.0
US $ m
620.8
555.0
255.8
206.5
221.3
percent of total
China
54.5
China
20.6
Japan
13.9
UK
5.6
Saudi Arabia
5.4
Saudi Arabia
7.2
South Korea
3.8
Germany
5.6
(Source: EIU country report December 2003, p. 5)
67
Figure 5.13:
Summary of foreign trade: Export, Import and trade balance of Sudan
(1993-2002)
2500
1500
1000
Exports
500
Imports
Trade balance
0
Ja 2
nu
a
Fe ry
br
ua
ry
M
ar
ch
-1000
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
-500
93
0
19
Value in million dollars
2000
-1500
Export,import and trade balance
(Source: Bank of Sudan foreign trade statistical Digest Jan. – March 2002)
New data from the bank of Sudan shows that non-oil exports performed badly in 2001 as
a result of poor weather conditions and cattle disease. However, according to the above Figure
5.13 there are strong indications that this reversed in 2002, therefore non-oil earnings were
expected to pick up the export estimated to increase by US$ 1.7 billion in 2002. This trend will
accelerate in 2003, with an 11.8 percent gain in export volumes. At US$ 1.9 billion, Sudan’s
2003 export earnings will be the highest ever - over 200 percent above that generated in 1998,
which is the year before oil earnings were included on the stream. Development of the oil
sector has also ended Sudan’s reliance on imported petroleum products.
Sudan is an extremely poor country, by both regional and international standards. Despite
having considerable natural resources that could generate wealth, civil war wastes many natural
resources. Sudan still depends on agricultural resources. Cotton has traditionally been the
principal cash crop, but has recently been surpassed by sesame, which accounted for 16 percent
68
of export earnings in 1999, while cotton sales accounted for less than 6 percent.93 By contrast,
in 1995 cotton made up 22 percent of total earnings and was worth 53 percent more than
sesame earnings. The structure of Sudan’s trade account has begun to change, however,
following the inauguration of the oil export industry in August 1999. Export earnings more
than doubled in 2000 to reach US$ 1.8 billion, their highest level ever. Oil earnings are
estimated to have accounted for some US$ 1.25 billion of total revenue.94 This sector is also the
largest source of foreign exchange as far exports value varying over early and mid 1990 from a
low of US$ 213 million in 1992 to high of US$ 620 million in 1996.
Figure 5.14:
Export comparison of all Sudanese products from 2003-04Export of all productions of Sudan during 2003 and 2004
4.000,00
3.500,00
crude oil
Benzene
Kerosene
Naphata
Mixgas
Diesel
Cotton
Gum Arabic
Sensame
Groundnuts
Dura
Livestock
Meat
Hides &Skin
Gold
others
Total
Value in million dollars
3.000,00
2.500,00
2.000,00
1.500,00
1.000,00
500,00
0,00
Export of 2003
Export of 2004
Commodity
(Source: Bank of Sudan Foreign trade data)
According to figure 5.14 the quantity of exported petroleum increased from 72,430
thousand barrels during 2003 to 81,159,260 the following year. The main reason why the
export of petroleum reached US$ 2.957 million is due to the increase in world market prices
(higher than US$ 26.7 in 2003). The non-oil export sectors also made great strides during 2004.
According to the experts in the Ministry of Energy and Mining the individual income in Sudan
93
94
See Centre for Strategic Studies (2000), pp. 171-173.
See Centre for Strategic Studies (2000), p. 163.
69
has increased four times than it was in the year 2000, due to increased in the petroleum
products income in the year 2004.95 Exports to the EU increased during 2003 from US$138
million to US$150.1 million. The United Kingdom led European trading with the Sudan during
2003.
5.4 Agriculture Sector
The agricultural sector in Sudan, as mentioned above, is divided into three parts: mechanised,
irrigated and traditional. In the Sudan, agriculture accounts for about one third of the GDP.
Within this sector livestock accounts for nearly one-third,96 rain-fed traditional and irrigated
agriculture each a count for about half as much, forestry and fisheries, as statistically counted,
contribute less than six percent.
In the mid 1970s, the Sudanese government following recommendations of international
as well as regional Arab organisations, embarked on an ambitious programme to make Sudan
the breadbasket of the Arab countries, more than half the development finance needed was
expected from abroad. Huge increases in agricultural production and the large scale processing
of local raw materials were envisaged. The objective of agro-industrial expansion was import
substitution (in sugar, textile and clothing) and partial export augmentation by additional
processing (cotton to yarn and clothing, hides and skins to leather, live animals to meat).
The agriculture sector includes food crops, livestock, fishing and forestry sub-sectors,
provides employment for over 78 percent of the labour force and livelihood of two-thirds of the
population, and contributes 37 percent to GDP. The Bank of Sudan is the fundamental loaner to
the agricultural sector. Agriculture is an important sector in the Sudanese economy. The
contribution of agriculture to the exports amounted to 80 percent historically, including
livestock. Thus, the majority of the population depend on this sector for food and employment.
As a result the economic growth has been closely linked to the performance of the agricultural
sector which is very vulnerable to climatic conditions and fluctuations in international
commodity prices.97 After growth of 4 percent in 1996, the GDP rose by 6.7 percent in 1997
due to a favourable harvest. Then the growth achieved 5 percent in 1998 and 6 percent in
1999.The share of agriculture in the GDP remained stable from 1992-98, industry and
construction increased in their contribution to GDP from an average of 7.6 percent and 4.9
95
Alrayalaam news paper economic column by Aboelgasim Ibrahim issued on 12.09.05.
See General Secretariat for External Information (1998), p. 117.
97
See Centre for Strategic Studies (2000), p. 163.
96
70
percent respectively in the 1992-96 periods, to an average of 10 percent and 7.5 percent
respectively in 1997-98.
The size of the traditional raining sector increased from 13 million feddan during the
1989/92-1992/93 periods to 23.1 million feddan during the 1997/98 periods and to 42.3 million
feddan during the 1998/99.98
Total production did not increase as much. During 1989-92 it went from only 4.6 million
tons to 5.9 million tons, during 1997-98 there was a 28 percent different increase. Sesame was
cultivated on 5.3 million feddan (2.2 million hectare) during 2000-2001 which was 12 percent
less than what was cultivated during 2002. The reason behind that is fluctuations in
international prices. Sesame being cultivated in the traditional sector which covered 70 percent
of the total production. The production from this sector reached 80 percent of total production
of sesame, during the 2000-2001 period.99 Sudan produced around 282,000 tons of sesame
which was 14 percent less than the prior period (1999-2000). Most of Sudan’s exports and
especially cotton are produced on state owned irrigation schemes. Originally in the Gezira
tenants received about 50 percent of the net income from the sale of cotton, the other half going
to the other two partners. As long as cotton remained the schemes sole cash crop there was
little disincentive for the tenant to concentrate resources and labour on the main or sole source
of cash income. The Gezira Board controlled the allocation of land by being empowered to
decree the cropping patterns and acreage distribution each season, for each tenancy it lost its
control over the distribution of the proceeds from land utilised for non-cotton cash crops.
The irrigated sector, consisting of about 3.5 million feddans of cultivated land with a
supply of water to the irrigated sector, was agreed to in the 1959 Nile Waters Treaty with
Egypt. The Treaty grants 18.5 billion cubic meters of water to the Sudan annually; Sudan
currently uses about 14 billion cubic meters of this. The main crops that benefit from the Treaty
are cotton, sorghum, sugar, wheat, groundnut and oilseeds. The most famous irrigation project
in Sudan is Algezira, but other major programmes are also in operation including the 300,000
feddan (117,000 hectares) and the Rahad scheme, which receives water from the Roseires dam.
There are long standing plans to heighten the market by other producers. Formerly a monopoly
supplier on the world market, Sudan now faces competition from Chad, Mauritania, Senegal,
Mali and Nigeria.100 The imposition of US sanctions also undermined Sudan’s access to what
was previously its most important market.
98
See Centre for Strategic Studies (2000), p. 153.
See Centre for Strategic Studies (2000), p. 153.
100
See Centre for Strategic Studies (1999), p. 289.
99
71
The al-Gezira scheme is the country’s largest irrigation project and the most important
historically and economically. It covers 880,000 hectare between the white and Blue Nile
Rivers and is the world’s largest irrigated agricultural scheme under single management. More
than 100,000 tenant farmers and their families operate the scheme in partnership with the
government and the Sudan Gezira Board, which provides the administration, credit and
marketing services.101 However, the tenant farmer relationships to the board have frequently
been difficult, with farmers attempting to circumvent regulations in order to increase their
individual returns. The breakdown in the relation accounts for many of the problems afflicting
the scheme, including low productivity.
In the Gezira scheme each farmer is allocated 30 feddans and there are a total of farmers
114,000. The net profit thus goes to the tenant after the deduction of all individual costs and
accountability is in accordance with the purchasing system proclaimed by the state. In addition
to the land and water changes, other costs of production for tenant farmer in the Gezira scheme
include land preparation, cultivation operations, harvesting, and material inputs, services and
transport. All other expenses and risks the farmer has to bear alone, including unfavourable
weather. The majority of the farmers face serious finance shortage problems, and most of them
argue that this is basically due to government policies. Farmers also face the following hurdles:
1. High taxes
2. Water changes
3. Government delays of payment
4. Government provides fertiliser prices higher than market prices
The Government has neglected the up keep of the Gezira scheme in the past, leading to
water losses and build -up of silt in irrigation canals.102 The scheme is also heavily indebted,
and there were reports in early 1999 that the government was seeking to force tenants to repay
debts totalling US$ 308 million as a first step towards privatisation. Gezira tenants received
less than half of the net returns on cotton, the larger share going to the state. The export tax was
much higher on cotton than on any other traded goods. Only cotton was marketed by the public
sector, all other crops produced on these schemes were marketed by the private sector under
government licence.
Cotton has been Sudan’s largest export crop and foreign currency earner for the past
101
102
See Centre for Strategic Studies (2000), p. 155.
See Centre for Strategic Studies (2000), p. 156.
72
50 years. The country is one of the world’s largest producers of long staple cotton and a
moderate producer of medium staple cotton. However, as figure 5.15 shows there have been
major fluctuations in production and export. This is due to the accumulative effect of drought,
coupled with poor marketing because of the drop in export prices in the past 15years. 103 This
is partially due to the lack of transport facilities to carry livestock and other agricultural
commodities from the central and western Savannah regions to Port Sudan.
Export of cotton (thousand tons)
Figure 5.15:
Exports of cotton by Sudan –QUANTITY - Comparison of sources
60000
50000
1993
1994
40000
1995
30000
1996
1997
20000
1998
1999
10000
0
Stabex 1999
Customs
CBS
Sudan Cotton
company
Eurostat
Comparison of sources
(Source: Mission 00/11/004-Stabex Sudan)
Figure 5.16 :
Exports of groundnuts by Sudan –Quantity - Comparison of sources
Export of groundnuts in 000 tons
(Source Mission 00/11/04 -Stabex Sudan)
35000
30000
1993
25000
1994
20000
1995
1996
15000
1997
10000
1998
1999
5000
0
Stabex 1999
Customs
CBS
Comparison of sources
103
Sudan’s Comprehensive National Strategic 1999, page 299
73
Eurostat
The market production of cotton fell by 44.514 percent during 1999, compared with the
average of the reference period.104 The consultants estimated that a quarter of this reduction is
attributable to the climatic factors (heavy rains and flooding of irrigated scheme). During 1999
exports to all destinations equalled out to a sum of 36,386 tons with a value of US$ 43,116,000,
export to the EU alone equalled out to a sum of 6,262 tons valued at US$ 7,461,000.
The figure 5.16 shows also the export of groundnuts from 1993-1999 in thousand ton, by
different sources.
The current government declared the following about self sufficiency “we eat what we
grow, wear what we manufacture”, but it’s being realised that food prices shoot up and people
do not have enough financial liquidity to buy. This is all traceable back to political reasons. The
available statistics reveal that the productivity of Sudan’s agricultural export stagnated relative
to world levels from 1970-93, several factors could explain this stagnation, including
differential rates of increase in the level of prices, mainly resulting from increasing domestic
supply rigidities institutional obstacles and tariff -related bias against exports. The explanation
that undoubtedly received the most attention in 1970 and 1980s has been the taxation of
agriculture and exports. Producers of export crops were confronted with a situation in which
their receipts, in domestic currency per unit of sales, failed to keep pace with domestic costs
and prices. This worsening in internal terms of trade of export producers was the result of direct
and indirect bias against exports. The most evident bias against exports stemmed from high
direct taxation of exported commodities, which was designed to finance public investment and
social subsidies, and also from the protection of import -substitutes through tariffs and
quantitative restrictions. While price distortions appear to be crucial in explaining the
deterioration in export performance, technological and structural backwardness is also at the
root of the problem. The continuous deterioration of the rural infrastructure (transport, power,
water, credit and banking institutions marketing facilities, etc.) and the increasing shortage of
consumer goods and imported inputs are among the major constraints to which Sudanese
agriculture has been particularly prone. Another problem that should be of concern is irrigation,
since Sudan has the longest river in the continent (the Nile), but due to many problems that face
this sector only a relatively small quantity of water is used to irrigate a small portion of
cultivated land. Some of the major problems which face this sector are the shortage of funds for
developing it, the shortage in the maintenance of the basic irrigation facilities aggravate the
situation, the increase of the cost of finance credit and its inaccessibility at appropriate times,
104
See Centre for Strategic Studies (1999), pp. 299-300.
74
escalation of the tax burden on the agricultural production and double taxes and the imposition
of the local duties, the lack of resources for the executions of the proposed plans set for the
expansion of irrigation structures and maintenance, the increase in the production cost due to
the lifting of subsidies and inflation.105 Some of the solutions to the agriculture problems could
be the following: A national network of communication and transport, a self-reliance project
for the provision of agricultural inputs especially fertilizer, encourage agricultural workers to
develop investment projects in order to help research move ahead, marketing institutions and
agencies projects through which marketing problems can be resolved.
The exports revenues during the year 2000 for non-oil sector fell by 40 percent. In part
this appears to be a reflection of poor weather conditions in Sudan during the 2000-2001
growing seasons which resulted in a sharp fall in output and consequently a reduced surplus
available for export.106 Exports of the East Africa staple, Dura, for example, fell by more than
90 percent year on year to just 7,000 tons. The fall in cotton and sesame export volumes may
also be due to low rainfall patterns during 2000-2001. Export may be shifted away from this
cash crop to other commodities. The fall in cotton volumes was partly offset by a rise in
average cotton prices during the same period, although other commodity prices performed less
robustly, notably the market for gum arabic for which prices per tonne fell by 23 percent.
The good thing about the agricultural sector in Sudan is that most of the agricultural
products are natural, i.e., no chemicals are used. The soil is good and meat produced (as live
resources) is of a good quality. Until 1998 the agricultural sector dominated export production
in Sudan by more than 90 percent, of which exports made up no more than half a billion
dollars. However, after Sudan started exporting petroleum during the last quarter of 1999 the
agricultural sector began diminishing until 2000 when it made up 20 percent of total exports.107
105
General Secretariat for External Information (1998), p. 122.
See Centre for Strategic Studies (2000), p. 148.
107
See Centre for Strategic Studies (1999), p. 289.
106
75
Figure 5.17:
Live resources in Sudan (million heads)
(Source: Ministry of Animal Resources, 2001)
140
Million heads
120
100
80
2000
60
2001
40
20
0
Cows
Sheep
Goats
Camels
Total
Live resources
Agriculture exports reduced from US$ 290 million during 1999 to US$ 274 million
during 2000. The export of livestock has reduced from US$118.2 million during 1999 to US$
91.2 million in 2000.
According to figure 5.17, Sudan has a huge livestock base and plenty of wildlife, fish and
poultry. Sudanese meats are famous for their excellent quality. As the animals are only fed
grass, the meat is devoid of hormones or antibiotics. However, the packaging of meat should be
improved, the selection widened, on time delivery should be achieved, storage facilities
improved, and it should be assured that the quality meets the demand of importing countries.108
The dramatic fall in livestock export volumes and revenues is easier to account for, and is
a direct result of the Arab Gulf states decision to ban imports from East African states
including Sudan, following an outbreak of Rift valley fever in Saudi Arabia in late 2000. The
Arab states as a whole, and Saudi Arabia in particular, had previously been 109 Sudan’s main
export market and the ban consequently led to a fall of over 90 percent in the sale of camels,
goats and sheep. The linking of Sudanese livestock with the disease also appears to have had an
impact on meat prices, with revenue falling from 85 percent despite a decline of only 12
percent in volumes. While little recovery was likely to have occurred over the fourth quarter of
2001, prospects for 2002 were significantly better. In late December 2002, Saudi Arabia and
108
109
See Centre for Strategic Studies (1999), pp. 302-304.
See Centre for Strategic Studies (2000), p. 151.
76
several other Gulf states announced that they had lifted the ban on Sudanese meat and livestock
exports. The first deliveries of Sudanese livestock arrived in Saudi Arabia in January 2002.110
Sudan has the golden chance to encourage their exports to Arabic countries especially
after the outbreak of diseases in European countries. However, this chance will need the
encouragement of investment in this sector. For example, the Syria based Arab company for
development of animal resources announcement that it was seeking to establish a 92,000
feddan farm in Omdurman to breed sheep and calves for export. The company, which is a
subsidiary of the council of Arab Economic Unity owned by the Arab league, operates some 32
enterprises in 11 Arab countries, and already manages a fodder plant in the Bagheir region and
a poultry complex south of Khartoum.111
Livestock resources increased during the 2000 and 2001 period by 5.7 percent and 21.7
percent respectively. It has been estimated that during 2000 livestock as a whole was 124
million heads and increased to 128 million during 2001.
Gum arabic is widely used in the production of Pharmaceuticals, soft drinks, food
preparation and printing. During the last decade the volume of gum arabic production has
declined due to a reduction in the number of Acacia Senegal trees from which gum is produced,
and the lack of producer incentives. Acacia Senegal trees grow wild in the Savannah belt
extending from central to western Sudan; the gum from these trees is collected during winter or
early summer. Western Sudan is the major area of gum production and Elobeid is the major
centre for gum marketing. The total production of the gum arabic was 48.1 thousand tons
during the 1994-1995 period .The production was reduced till it reached 8,000 tons during
1999-2000 but the production increased to 15.7 thousand tons during 2000-2001. The
percentage increase in production is 96 percent and has been helped along by the development
of industrial substitutes and increasing competition. Figure 5.18 shows that international market
prices for gum arabic fell in Central Africa; production from 1991-1998 was at 7,738 metric
tons. In the same period Sudan produced 19,193 metric tons. Sudan’s production of the gum
arabic is a round 62.4 percent of the total world production.112 Chad has become one of the
most important competitors on the market. Annual production in Chad reached 6,120 metric
tons. This shows Chad as an important market in the trade of gum arabic in the world.
The total production of gum arabic for the 1998-99 season increased by 73.3 percent from 16.1
thousand tons in 97-98 to 29.9 thousand tons in 1998-99.
110
See Centre for Strategic Studies (2000), p. 163.
See Centre for Strategic Studies (2000), p. 151.
112
See Centre for Strategic Studies (1999), pp. 305-306.
111
77
Figure 5.18:
90
80
70
60
50
40
30
20
10
0
1991
1992
1993
1994
1995
rie
s
a
pi
co
un
t
io
Et
h
1997
1998
Ar
ab
Er
i tr
ea
n
C
am
er
oo
ca
r
lA
fri
C
en
tra
N
ig
e
i
al
M
eg
al
a
Se
n
ni
M
au
rit
a
er
ia
ig
N
ha
d
C
an
1996
Su
d
Percentage of gum Arabic exports
Percentage of worldwide gum arabic exports (1991-1998)
and gum arabic production for the 1994-1995 and 1998-1999 periods
Countries
(Source: Gum Arabic Trade Company)
If agricultural technologies can be improved, additional resources mobilised, and appropriate
policies adopted in industrialised and developing countries, then faster agricultural growth will
be achieved. Economic development, particularly of the poor countries like Sudan, will speed
up and poverty will be reduced. The purpose of farmer participation in agricultural technology
development is to involve small farmers as active decision-makers in the development and
transfer of new technology, the result is they get the technology they want and can adopt.
Information is an essential production factor in agriculture. Farmers need information to
improve or adapt their farming practices.
Innovation was thought to be the best single indicator of the multifaceted dimension called
modernisation Sudan has boasted a bout being the largest farm in the world. Sudan’s most
important importers of gum arabic are France, United Kingdom, Germany and indirectly the
USA (through the EU).113
113
See Institute of Strategic Studies, Sudan Annual Strategic Report (1999), p. 351.
78
5.5 Industrial sector
Sudan’s economic resources consist mainly of products from the agricultural sector, forest,
hide and skin sector, and small-scale industries. They represent the main resources of the
national income. The industrial sector also plays an important role in the economic
development of the country. The industrial sector provides tools, equipment, chemicals,
materials, and fertiliser for the agriculture sector.114
Petroleum products have enhanced the other sectors (agriculture sector, industrial sector).
Sudan, like other developing countries, wants to improve its industrial sector in order to
increase the share of industry in the total national product. From 1960-1970 it increased to 4
percent and during 2002 it increased to 20 percent.115
After the Second World War, Sudan was developing its industrial sector almost
completely independently because there were no imports coming in from the EU. This led
many investors to invest in the industrial sector of the country. Existing industrial sectors at the
time of independence in 1956 consisted of the following:116
1.
Wool industry
2. Triko industry
3. Biscuit and sweet industry
4. Mineral water
5. Shoe industry
6. Furniture industry
7. Oil seeds industry
8. Soap industry
9. Perfume industry
10. Printing press industry
The Sudanese economy at that time may be coined as traditional because of its activities of
exporting raw materials such as cotton, oil seeds, hide and skins. However, at the time of other
economic plans (tenth, sixth, fifth ) and the Comprehensive National Strategy plan, industry
was playing an important role in the economy. During these periods the industrial sector
increased its share in the national income by 16 percent and 20 percent.117
114
See General Secretariat for External Information (1998), pp. 99-111.
See Centre for Strategic Studies (1999), p. 42.
116
See Centre for Strategic Studies (1992-2000), p. 238.
117
See Centre for Strategic Studies (1999), p. 209.
115
79
Sudan is one of few countries with a substantial amount of undiscovered natural minerals
deposits such as gold, chromite, iron, copper, manganese, and tungsten – all of which have
been discovered in commercial quantities. There are also large deposits of zinc, silver, uranium,
led and asbestos. Metals have been discovered all over the country ranging in quality and
quantity; among them gypsum, tangastine, talc and copper. Marble and granite are found in the
eastern state. The north state is rich with gold, mica, marble, manganese and kyanite. Oil, gold
and marble were discovered in Upper Nile, Bahrel-Ghazal and Equatoria.
The present structure of industry makes it mainly dependent on the processing of
exported primary products, traditional agriculture products (cotton, sesame, livestock and
groundnuts).118 Sudan has not succeeded in exporting more highly processed industrial
products. Food processing is of major importance and accounts for more than half Sudan’s
industrial activity. The processing of non-food agricultural materials into goods such as textiles
and leather provides for about one-quarter of the employment in the manufacturing sector. The
chemical and non-metallic minerals industries are more capital intensive and contribute about
one-sixth of value added in manufacturing. Industry in Sudan is concentrated mainly in private
sector.
Local raw-materials are quantitatively more important in locally produced intermediate
inputs than in spare parts and packing materials, this again is evidence of the low degree of
inter-sectoral demand. It is also very limited in relation to supplies, most of them being raw
materials exported in their unprocessed form.
Figure 5.19 and table 5.3 show that it is obviously the industrial policy in the Sudan that
has failed to establish an industrial base. Above all, the share of agriculture resources used119 in
industry remains unsatisfactory low, the supply of industrial inputs to agriculture continues to
be marginal. Industrial policy has also failed to create and promote small industries and crafts.
This means that rural industries are being eroded for lack of supply, loss of skills and lack of
markets. As a result development policies have failed to overcome the basic constraint of
industry, that of an inadequate market size. The infant industry argument is distorted, making
industry structurally dependent on protection and financial assistance. Among the major
problems facing this sector were lack of production inputs and spare parts, electrical shortages
(this obstacle might be solved by the Maroe Dam in the north of Sudan which would be
completed by 2008), lack of skilled workers due to either scarcity of technical education or the
migration of skilled workers abroad. The problem of industrial sector in Africa and Sudan are
118
119
See Centre for Strategic Studies (1999), pp. 309-311.
See Centre for Strategic Studies (1999), pp. 313-314.
80
due to debt and lack of financial aid, poor macroeconomic management, poor economic
condition, natural disasters, external market shocks, limited managerial and technological
capabilities and ability to absorb adapt and improve on imported technology,120
Figure 5.19:
100
90
80
70
60
50
40
30
20
10
0
1994
1995
1996
1997
O
th
er
Sh
co
oe
ns
s
um
er
go
od
s
Ci
g
In
a
re
te
rm
tte
s
ed
ia
te
go
od
s
Ce
m
en
t
Su
ga
Ve
r
gt
ab
le
oi
ls
So
Te
ft
dr
xt
in
ile
ks
s
an
d
ap
pa
re
l
Te
xt
ile
s
Fl
ou
r
Percentage utilisation in industrial
sector
Average utilisation in industrial sector, 1993/1994-1997
Item of industries
(Source: Ministry of Sudan Industry)
120
African technology gap case studies on Kenya, Ghana, Tanzania and Uganda by UN.
81
Table 5.3:
Sudan manufacturing production, 1994-97
Years
94/95
1995
1996
1997
300
350
360
324
428
90
450
70
460
118
500
90
29
33
29
23
30
24
19
36
5.2
6.0
9.0
24.0
1,417
133
1,317
186
1,300
198
1,138
60
249
199
380
288
------------
-------------
-----------
1,145
Food and
Beverages
Flour (thousand
tons)
Sugar(000tons)
Vegetables Oils
(thousand tons)
Soft drinks
(million dozen
bottles)
Textiles and
apparel
Textiles (million
Yards)
Shoes (million
pairs)
Other
consumer
goods
Cigarettes(tons)
Tires(thousands)
Intermediate
goods
Cement
(thousands tons)
Petroleum
products
(thousand tons)
(Source: Ministry of Industry)
Sudan is the only net sugar exporter in the Middle East and is the largest sugar producer
in Africa, after South Africa and Egypt. Currently there are five sugar-refining plants in
operation which are processing cane grown in the irrigation projects at al-Gezira and Gadaref.
According to the figure below (5.20), the largest producer, Kenana Sugar Company (KSC),
increased production especially during 2000 and 2001, following an increase in its capacity and
82
at its factory to 26,000 tons of cane a day, from 17,000 during 2000. This set the stage to
produce the equivalent of 500,000 tons of processed sugar a year, lifting Sudan’s total
production to some 870,000 tons a year (T/Y) compared with 630,000 T/Y in 1999-2000.121
KSC has reported that by the time its own expansion project is complete in 2004, total
production would reach 1.6 million T/Y, of which 1 million T/Y would be available for export.
KSC is currently the only majority privately owned producer. It estimated that its own cost
were less than 7 US cent / kg, well below the regional average and leaving Sudan well placed
to compete for a market share abroad. The outlook for sugar prices remains positive. Prices
rebounded to more than 10 US cents /pound by the year end according to the international
sugar organisation.
Figure 5.20:
Sugar productions in Sudan during 1989/1990- 2000/2001
Sugar production ton metric
800000
1989/1990
700000
1990/1991
600000
1991/1992
500000
1992/1993
400000
1993/1994
300000
1994/1995
1995/1996
200000
1996/1997
100000
1997/1998
0
Algenid
Halfa
Sennar
Hagir
Asalaia
Kenana
production of different sugar company
Total
1998/1999
1999/2000
2000/2001
(Source: Kenana Sugar Company and organisation of Sugar trade; and Ministry of Industry )
Food processing, including sugar refining and the vegetable-oil industry, is geared principally
to meet domestic demand. However, there has been sharp growth in sugar refining, which
should allow for an increase in exports especially when KSC - a joint venture between SudanSaudi Arabia, Kuwait and number regional private investors - completes its five years
development programme. The company which operates a 40,000-hectre plantation in central
121
Compare with data of Sudan in Figures (2000), p. 21.
83
Sudan, is the world’s largest integrated sugar manufacturer, and has122 generated rapid year on
year production growth lifting its total output of 107,000123 tons in 1980 to a record 420,000
tons in 2000-2001, an increase of more than 8 percent on the previous year. The company
claims that by 2005 production will reach close to 1 million T/Y. For many developing
countries, the unfair use of subsidies to dump surplus production in export markets symbolises
the injustice of current trade rules, and these policies of sugar subsidies lead to the reduction of
developing countries exports. (The WTO found that the EU is dumping more than three times
the level of subsidised sugar exports than is allowed under WTO rules.) ACP country export
revenues and employment opportunities are negatively affected by EU sugar reform. The LDCs
including Sudan want to attract the investment needed to develop their sugar industries on a
long-term sustainable and competitive basis. In this manner, the EU used cotton and sugar
subsidies unfairly in a way that is damaging to developing countries. Oxfam urges the EU to
respond to the WTO by agreeing to sugar reforms that would end export dumping and increase
access for the poorest countries at remunerative prices.
At present the majority of Sudan’s exports are marketed within the region, notably to
Kenya which buys up to 100,000 T/Y duty free under terms of the common Market for East
and South Africa (COMESA) free trade agreement. KSC has also established a presence in
other African markets, including Madagascar and Tanzania, and now moves sugar by road to
neighbouring Chad and Niger. The key market that KSC wishes to tap, however, is the EU,
which currently has a quota limit of 30,000 T/Y on Sudanese sugar imports. This level will rise
by an agreed 15 percent a year, and will have doubled by 2006. There is some prospect,
however, of Sudan being able to increase supply more quickly than this. Trade with the EU is
particularly attractive as the sugar is purchased at the official EU price of US$600/ tons. KSC
the only majority privately owned firm, remains the most productive, generating half of the
country’s total output and one of the most efficient sugar manufacturers in the world with an
average of 12.5 tons of sugar being generated from each hectare of cane, compared with the 4
tons/hectare in established sugar producing countries such as Cuba. The White Nile sugar
company is due to commence production in 2003, with capacity stand at 300,000 tons year.
Like KSC, a consortium, which includes the Sudanese government, Egyptian and Arab Gulf
investors, is funding the new facility, which is expected to cover more than 800 sq km. The
government wishes to establish three more large sugar producing factories in the country, and
122
123
See Centre for Strategic Studies (1999), pp. 320-321.
See data of Sudan in Figures (2000), pp. 21-24.
84
made clear that Sudan expected the facilities to be majority privately owned. The projected
facilities are in addition to the new White Nile sugar company.
KSC possesses the largest integrated laboratory for sugar in the world and is located 250
km south of Khartoum. It was incorporated as a private company in 1975. The main objectives
of KSC are to expand investment on sugar in the plentiful untapped cultivatable lands of the
country, to make use of the surplus capital of Arab petroleum countries and to augment import
substitution programmes. The authorised capital of KSC amounts to US$ 590 million while the
paid out capital is US$ 561 million which distributed among various partners. Those partners
are listed here according to percentage of capital distribution:
Government of Sudan
35.70 in %
Kuwait Investment Authority
30.50
Government of Saudi Arabia
10.92
Sudanese development corporation
5.66
The Arab co. for Agricultural Development & Investment
5.56
A trust of Sudanese commercial Banks
4.45
Nishwayowai of Japan
0.16
Gulf Fishing company
-- ----
Lorno Co of UK
------
The total area of the project is about 70,000 hectares, more than half of it is cultivated.
Commercial production started in 1980-1981 with 107,000 tons of white sugar. Yield in 19861987 surpassed the designed capacity reaching 310,000 tons.124 Increase in production went
further to reach 333,000 tons in 1996-1997 amounting to about 60 percent of Sudan total
production of sugar. In 1991-1992 KSC initiated the first step towards the exportation of sugar
with 28,000 tons which increased to 100,000 tons in 1999.
KSC employs 8,000 skilled labourers of high calibre in different production areas in
addition to 8,000 seasonal workers which contributes to the generation of employment
opportunities in the project area. Moreover, KSC provides services in the field of education,
rural development and provision of electricity supply.
124
See Centre for Strategic Studies (1999), p. 149.
85
Table 5.4:
LDC delivery quotas of sugar, 2001/02 to 2005/06
Bangladesh
Congo
Ethiopia
Madagascar
Malawi
Mozambique
Sudan
Tanzania
Zambia
Total
(Source: LMC
2001/02
2002/03
2003/04
2004/05
2005/06
5,836
8,462
11,538
6,101
8,145
5,629
14,652
6,873
6,949
74,185
6,711
9,731
13,269
7,016
9,367
6,473
16,850
7,904
7,991
85,313
7,718
11,191
15,259
8,069
10,772
7,444
19,377
9,090
9,190
98,110
8,876
12,870
17,548
9,279
12,388
8,561
22,284
10,453
10,569
112,826
10,207
14,800
20,180
10,671
14,246
9,845
25,626
12,021
12,154
129,750
125
)
According to the above table (5.4) EU raw sugar imports from developing countries can not
exceed the maximum requirement of the traditional EU refineries of 1,796,351 tons per year,
this is the quota which was imposed by the EU to various LDCs. Imports are pointed according
to the Special Preferential Sugar (SPS). Since 1994 the EU has opened its market for raw sugar
imports from LDCs by increasing the quotas from these countries, during the year 2004 tariff
was zero.
The government estimates that the textiles industry, which survives from domestic cotton
production, could meet 110 percent of Sudanese needs if it operated at full capacity, the
government owned Friendship Textiles Mill, built with Chinese assistance at Hasaheissa near
Medani, has a capacity of 2,100 tons of yarn a day and 16m meters of fabric a year, the most
important private sector factory is the 64 meters a year capacity plant run by Sudan textile
companies. However, output of cloth has shown continuous decline, from 300 million yards in
the 1970s to just 19 million yards in 1996. Output recovered to 28 million yards in 1990. The
main obstacles facing this sector are the shortage in the financial resources to buy local cotton
and the competition coming from abroad, people simply like to buy the product (cloth) coming
from abroad.
125
LMC analysis of the latest development in sugar provides most up to date statistical and market analysis
available for producer, processors, consumers, traders and the organisations.
86
Table 5.5:
Textile production in Sudan during the periods 1996-2001
Factories
1.public
sectors
factories
A.Friendship
factories
Yarn
Unit
1996
1997
1998
1999
2000
2001
(000 kg) 684.0
904.0
448.0
314.0
353.1
33.2
4,479.4
5,672.8
3,847.0
253.0
2,714.3
2,726.0
1,243.6
104.5
715.7
319.0
--------
------
766.0
437.9
346.5
267.0
--------
-------
1,109.1
763.5
569.8
555.0
307.6
-------
870.0
-------
629.6
-------
--------
-------
674.0
--------
--------
--------
---------
-------
-------
--------
--------
--------
---------
--------
892.0
---------
454.3
477.8
---------
--------
--------
--------
--------
--------
--------
--------
---------
---------
--------
--------
--------
58.0
---------
--------
--------
-------
--------
572.0
-------
-------
---------
-------
--------
-------
63.0
171.7
41.0
263.0
-------
------
(000
yards)
Textile
(000
Yards)
B. Kosti
(000
textile
Yards)
C. Shandi
(000
textile
Yards)
D. Eldweem (000
Textile
Yards)
E. Nyala
(000
textile
Yards)
F. Kadogli
(000
textile
Yards)
G. Khartoum (000
Bahri textile KG)
H. Haj
(000
Abdelalla
KG)
textile
2. Private
sectors
factories
A.Sudan
(000
textile factory Yards)
Yarn
(000
Textile
B. Blue Nile
for yarn and
textile
Yarn
Kg)
(000
Yards)
(000
Kg)
87
Textile
C. Medani
textile
company
Yarn
Textile
(000
Yards)
33,723.0 2,339.2
1,704.0
1,943.0
2,105.5
-------
(000
KG)
(000
Yards)
12.0
177.0
65.0
149.0
--------
---------
2,924.0
1,419.0
562.0
808.0
---------
---------
(000
KG)
(000
Yards)
6,658.0
6,672.0
--------
--------
319.2
---------
---------
--------
-------
--------
606.8
---------
135.0
150.0
--------
--------
-------
-------
13,178.0 427.2
---------
--------
--------
--------
1,957.0
982.0
4.2
--------
197.5
--------
--------
2,329.9
---------
--------
--------- -------
-------
-------
--------
(000
KG)
--------
--------
--------
-------
-------
-------
(000
KG)
--------
--------
--------
--------
-------
--------
D. Hada for
Yarn and
textile
company
Yarn
Textile
E. Cotton
textile
company
Yarn
Textile
(000
KG)
(000
Yards)
E. Gazira and
Managil
textile
company
Yarn
(000
Kg)
Textile
(000
Yards)
F.Sennar for (000
Yarn and
Kg)
textile
company
G. Red Sea
Yarn
company
H.
International
company for
yarn and
textile
119.9
34,475.0 127.4
(Source: Bank of Sudan annual report, 2001)
88
Table 5.5 above shows different textile factories in the Sudan, and the production for these
factories in different years from 1996-2001, the major one is Friendship Factories in Hasahesa
in central Sudan.
Oil seed production is one of the main industrial productions in Sudan and it depends mainly
on these crops for the manufacturing of groundnuts, sesame, cotton and sunflower.126 The total
production during 2000 was 120,000 tons and during 1999 was 100,000 tons, total production
increased by 20 percent during 2000.127 The majority of groundnuts were grown in the
traditional sub-sector while the rest were grown in the irrigated sub-sector.128 A substantial
share of the recent increase in groundnuts production has taken place in southern Darfur and
Northern Kordfan. Sesame is grown entirely in the rain fed, traditional and/or mechanised
sectors. Most of the production takes place in Kordfan, Kassala, the Blue Nile, Darfur, and
Bahr Elgazal. The lion share of the textile industry is, however, located in Darfur and Bahr
Elgazal. Here traditional industries produce traditional dress, and was quite prosperous during
the seventies, but during the nineties and 2000 a lot of factories shut down, in both private and
public sectors.
During 2000 total production of spindle cloth reached 8,000 tons, or 50 percent less than
what was projected and planned. During 1999 production was at 8.5 thousand tons, and during
1995 12,000 tons were produced. This figure demonstrates that total production has declined
from year to year. The problems with spindle cloth production are the lack of liquidity during
the purchasing seasons, high production costs, and finally high electricity costs compared to
other countries that compete with the Sudan. But the textile industry has better prospects for
export promotion and import substitution than most other industries due to the high potential
demands for popular fabrics. Yet the design of Sudanese textile mills would meet the demands
of the market in the EU and other industrial countries, if it had been managed in the right way.
The provision of foreign exchange for buying essential industrial inputs is the most important
requirement.
126
See Centre for Strategic Studies (2000), p. 182.
See data of Sudan in Figures (2000), p. 24.
128
See Centre for Strategic Studies (2000), p.153.
127
89
5.6 Petroleum products in Sudan
According to the IMF, Sudan’s real GDP increased by 4.4 percent and 4.5 percent in 1995 and
1996 and also during the year 2003, the GDP per capita is $ 1,878129 (PPP values). Oil is one of
Sudan’s major exports particularly during the last six years, and has provided revenues of more
than US$ 2 million a day and estimated reserve of three billion barrels.
Oil exploration in Sudan started in 1959, when Italy’s Agip oil company was granted
concessions in the Red Sea area, carrying out seismic survey and drilling six wells.130
Following Agip came oceanic oil company, France Total, Texas Eastern, Union Texas and
Chevron. All yielded nothing for the next fifteen years. The only successful results were
achieved by Chevron in 1974, 120 km South East of Port Sudan, where dry gas and gas
condensate were found at Bashair -1 and Suakin -1 wells. Chevron estimated possible
production of 50m cubic feet of dry gas and one thousand barrels of gas condensate per day.
No oil was found, however, and most companies relinquished their concessions in the region.
Since 1991 the main holder of the Red Sea concession has been IPC (International Petroleum
Corporation, part of the Swedish Ludin group).
Exploration for oil in Southern and south-western Sudan began in 1975, when the
government of Sudan granted Chevron a concession area of 516,000 km2 in blocks around
Muglad and Melut.131 Chevron started geological and geophysical survey in 1976, and drilled
its first well in 1977, which was dry in 1979, Chevron made its first discovery in Abujabra
#1,west of Muglad, where an 8 million barrels reserve and 1,000 bpd production rate were
estimated. Heglig field, which lies 70 km north of unity field just inside southern Kordfan, was
discovered in 1982. Six appraisal wells were drilled in Heglig showing an estimated reserve of
265 million barrels, with a production output of 2000 bpd. By 1982 Chevron, had drilled 22
discovery, appraisal and production wells. They estimated total oil reserve of 593 million
barrels and a production rate 3,600 bpd.
Chevron’s most significant discovery was made in 1980 in the unity, Talih oil field, north
of Bentiu in Western Upper Nile. However, when Chevron first started exploring for oil, it was
in areas designated by Nimeiris (president of Sudan at that time). Chevron made moderate
discoveries in Melut (Block 3), east of the river Nile, when the Adar Yale oil field was found in
the Khor Adar valley in 1981. Four exploration wells were drilled in Block 3 and showed good
129
See also CIA World Fact Book regarding latest data about Sudan.
See Centre for Strategic Studies (1997), p. 160.
131
See Centre for Strategic Studies (2000), p. 194.
130
90
flow rate in excess of 1,500 bpd. After Chevron’s departure, the Adar Yale oil field concession
was awarded to Gulf Petroleum Corporation - Sudan (GPC), which is a private consortium of
the Qatari Gulf Petroleum Corporation (60 percent), the previously unknown Sudanese
National Petroleum Company (20 percent), and Concord international owned by the
businessman A Jar Alnabi.132
The agreement with the government was that, foreign oil companies were to receive the
bulk of oil revenue in the first five years of production in order to cover costs, with the
government taking the remaining 40 percent. After the initial cost recovery stage, the division
will move in Sudan’s favour as the government plans to take as much as 80 percent of the oil
earnings.
Figure 5.21:
Map of pump stations in Sudan
(Source: http:// www.rightsmap.com)
132
The Sudanese Government had a deal with the businessman Jar Alnabi regarding the Abujabra oil field, but
later on there was a clash between the two parties and he backed out of the Agreement.
91
Figure 5.22:
Different oil fields, refineries and oil pipelines in the Sudan
(Source: http:// www.rightsmap.com)
Chevron abandoned its concessions in Sudan between 1985 and 1990 due to their
location in an area where fighting was taking place between government and rebel forces. In
92
total Chevron had drilled 28 wells in the relinquished area.133 The Sudanese government subdivided Chevrons concessions into smaller exploration blocks, and Canadian independent
Arakis Energy (Arakis) acquired the portion of Chevron’s concession north of the town of
Bentiu in 1993. Arakis began development of the Heglig and Unity fields located within its
concession, and started production on a small scale in 1996 (2,000 bpd) for local processing
and consumption.
The GPC consortium chaired by Abdelaziz Aldulaimi, reportedly invested $ 12 m in
Adar-Yale and it began producing 5,000 bpd in March 1997 and increased output to 10,000 bpd
in 1998. However, it is still thought to be depending heavily on Chevron’s discoveries and left
over equipment, and is said by critics to lack the expertise to expand the operation.
Jar Alnabi has built a private oil refinery in Khartoum, and the consortium is initially
ferrying crude oil by barge and steamer from the Adar Yale oil fields to Kosti. From Kosti, the
oil is transported to Khartoum by rail.
The reserve of oil in the Falog is estimated to be high at around around 5 billion barrels.
The Melut area to the east of malakal, Upper Nile, is also part of the war zone, and many
people were killed in 1994 when the Adar-Yale fields were134 attacked. In the field of Melut the
production could reach 500,000 barrels in 2006 the oil from this field would be transferred with
the pipeline (1,450 km) to the Bashair in the north. In 1996 Canada’s Arakis Energy Corp,
which was taken over by Talisman (ex-BP Canada), started pumping and trucking 10,000 bpd
from its oil wells in Heglig, South Kordufan, and sending the crude oil to the refinery in
Elobeid.135 The UK listed company, White Nile, is to launch exploration of petroleum in the
state of Jonglei (see the map above 5.22) south of Sudan in the year 2006. The White Nile
would be given 60% stake in 67,000 km block Ba, which may hold as much as six billion
barrels of oil.
The main oil consortium responsible for oil production and exploration in Sudan is the
Greater Nile Oil Projects (GNOP), which is comprised of four companies that control 12.2
million acres of concession land. The China National Petroleum Company (CNPC) has the
largest stake with 40 percent, followed by Malaysia’s Petronas (Petroleum National Berhad),
Carigali with 30 percent, and then Canadian based Talisman Energy with 25 percent. However,
Talisman has already pulled out and announced the sale of the property to an Indian State-
133
See Centre for Strategic Studies (2000), pp. 206-207.
See Centre for Strategic Studies (1997), p. 161.
135
http://www.sudantribune.com/article.php3?id_article=13995.
134
93
owned oil company for US$ 750 million.136 Human rights group and churches said revenue
from the Sudan project helped finance the country’s civil war, which began in 1983 and is said
to have killed two million people through fighting and famine. Talisman chief executive Jim
Buckee said “In the event of signing a peace agreement, we will come back to Sudan”, and
Sudan’s National oil company, Sudapet with 5 percent. The consortium is committed to drilling
30 new development wells and 21 exploration wells, these companies have had to borrow huge
sums of money from international commercial banks to finance the project. Approximately
US$ 1 billion US was invested in building the oil pipeline, and another US$ 600 million in
building the oil refinery 70 km north of Khartoum at Al-jayli.137
Other foreign companies have also been responsible for covering start up costs with the
promise of a share in future oil revenues. The Chinese have been heavily involved in supplying
and laying the pipeline, while the Argentineans have been responsible for telecommunications,
the German have provided the equipment, and British have supplied power generators. Other
companies such as the International Petroleum Company (IPC) of Canada have been operating
in areas congruent to those of the GNOP, primarily undertaking oil exploration activities. IPC
is a subsidiary of the Swedish -based Lundin oil, and has a 40 percent stake in Block 5A which
lies near the Heglig field where Talisman is operating. The other partners in Block 5A are
Petronas of Malaysia with 28 percent, ÖMV of Austria with 27 percent and Sudapet with 5
percent. One of the most recent accomplishments of the Block 5A consortium was the
completion in May 1999 of drilling and logging at the Thar Jath oil well, which is a large and
oil defined prospect. To date the operations in Block 5A have been low key and not subject to
the same kind of attention that the operations and partners of the GNOP have received. This is
primarily due to the fact that Block 5A operations are largely confined to exploration, and
without a mandate to produce oil, the operations have not been highly controversial or targets
of rebel attack.
With the completion of major oil export pipeline in July 1999, Sudanese oil production
and exports have risen rapidly over the past three years.138 Sudan’s estimated reserves of crude
oil have doubled over the past year, and production is expected to reach two million bpd by the
year 2008. With the start of significant oil production and exports beginning in late 1999,
however, Sudan’s economy is changing dramatically, with oil export revenues now accounting
136
See EIU (Dec 2003), p. 24.
See Centre for Strategic Studies (1997), pp. 160-164.
138
See Centre for Strategic Studies (1999), p. 362.
137
94
for a round 70 percent of Sudan’s total export earnings.139 Sudan no longer relies on expensive
imported oil products, which has helped the country’s trade balance, while foreign investment
has started to flow into the country. Sudan’s currency, the dinar has remained relatively stable
since 1999, at around 259 dinars per dollars. Sudan’s economic performance has been strong
over the past few years. In 2001 the country’s real GDP grew by 5.4 percent though growth is
estimated to have slowed to 3.6 percent in 2002. Meanwhile, inflation has slowed dramatically
over the past few years, from an average 110 percent between 1991 and 1996 to 4.9 percent in
2001 and 6.7 percent in 2002.140 Exports have increased sharply since 1999 when the oil export
pipeline was completed, turning the country’s trade balance from negative to positive.
The Sudanese government has been negotiating the payment of its substantial debts to the
International Monetary Fund so that it can improve its standing as a nation with international
institutions. Sudan’s debt to IMF was rescheduled in 2002.141
The IMF referred Sudan’s arrear payments so that it could give priority to repaying loans
from Arab Fund for Socio-Economic Development. Some of those funds will be used to
finance a new hydroelectric dam in Merowe. As part of the rescheduling agreement, Sudan
agreed to reduced its military spending as well and to make the management of its oil revenues
more transparent, despite its economic progress, Sudan still faces development obstacles,
including a limited infrastructure and an external debt estimated at around US$ 15 billion in
2001 and representing a debt to GDP ratio of just over 122 percent.
Furthermore, the government remains embroiled in the long-running conflict with the
rebel movement in the primarily non-Muslim south of the country. This costly and bloody
conflict has, over the past two decades claimed (directly or indirectly through famine) as many
as 2 million Sudanese lives. Sudan’s new reliance on oil export makes the country vulnerable
to world oil price fluctuations, thereby making it necessary for the government to spend its
revenues wisely. The US has been imposing economic sanctions against Sudan since
November 1997, prohibiting trade between the two countries, as well as investment by US
businesses in Sudan. In February 2000, the sanctions were broadened to include a prohibition
against US citizens and companies conducting business with the Greater Nile Petroleum
Operating Company (GNPOC), an international consortium of petroleum companies currently
extracting oil from Sudan.
139
See Centre for Strategic Studies (2000), p. 206.
See Centre for Strategic Studies (1999), p. 27.
141
See General Secretariat for External Information (1998), p. 87-88.
140
95
The sanctions, however, do not apply to the foreign individual parent companies of
GNPOC, which include Calgary -based Talisman Energy, Malaysia’s Petronas, and the
Chinese National Petroleum Corporation (CNPC).Since the September 11, 2001 terrorist attack
on New York and Washington, however, US-Sudanese relations appear to have improved, as
the US is attempting to encourage Sudanese corporations in the war against terrorism.
However, Sudan reacted unfavourably to the passage of the Sudan Peace Act in October 2002,
which outlines stiff sanctions, ranging from a down grading of diplomatic relations to a UN
arms embargo that could be imposed on the Sudanese government if it negotiates in bad faith
with the main southern rebel force, Sudan People Liberation Army (SPLA). Reserves are
estimated at more than two billion barrels, Sudan’s estimated proven reserves of crude oil stood
at an estimated 4 billion barrels in 2001 with recovery rates of at least 30-35 percent or more
than the 262.1 million barrels. Crude oil production averaged 227,500 bpd during 2002, a
figure that has been rising steadily since the completion of the exports pipeline in July 1999.
In August 2001, in recognition of Sudan’s growing significance as an oil exporter, OPEC
granted the country observer status at OPEC meetings. Construction on the pipeline from the
fields to an export terminal near Port Sudan began in May 1998 on an accelerated schedule.
Originally built to move 150,000 bpd,142 the pipeline has a current capacity of 250 bpd and has
recently increased to 500,000 bpd and could expand to 750,000 bpd by late 2006.143 Arakis
involvement in Sudan, even after the formation of the GNPC consortium raised US$ 700
million, remained hindered by a lack of capital. US sanctions against Sudan prevented
investment in the project by US corporations and persons, and the high-risk nature of
investment in Sudan also had an effect. In October 1998, Arakis agreed to be purchased by
another Canadian independent, Talisman Energy, for US$ 277million in Talisman stock. The
Talisman acquisition provided an infusion of capital which allowed the project to be completed
on schedule in 1999. In July 1999, the pipeline began filling with crude.144 and the first cargo
of “Nile Blend” departed the export terminal in early September 1999. The fields in the Muglad
area produce crude oil with 33 to 42 degrees API range, with only 0.5 percent sulphur content.
The crude is highly paraffinic, which requires heating to maintain flow in the pipeline.
Recoverable reserves from the Heglig and Unity fields have been estimated at 660 million to
1.2 billion barrels. The area around these two fields also is suspected to contain oil, but
estimate of reserves vary. The Swedish firm, Ludin oil (partly bought out by Talisman in June
142
See Centre for Strategic Studies (1999), p. 28.
www.eia.doe.gov/emeu/international/sudan.html .
144
See Centre for Strategic Studies (1999), p. 362.
143
96
2001), reported a discovery at the “Thar Jath 2 ” exploration well in the adjacent Block 5A in
March 2001, with oil flows of 2,000 bpd. Petronas, the Austrian firm ÖMV, and Sudapet have
minority stakes in the Block. In July 2000 Petronas was awarded a 40 percent share in Block
5B, and in October 2000, Petronas agreed to raise Sudan oil output by 50,000 bpd by mid 2002.
The increased production will result from Petronas development of two untapped oil field
in Monga and Bambo in the Mujlad Basin of Western Sudan, plus the construction of three
additional oil pumps along the pipeline. In March 2001, ÖMV announced that it had found oil
at its exploratory well Jath 1. Since January 2002 production has been hampered somewhat by
the decision by Petronas, Ludin Oil, and other members of the Greater Nile Oil Project, to
temporarily suspend drilling operations on Block 5A due to safety concerns regarding
personnel and drilling sites. The suspensions seem unlikely to be lifted until a cease-fire
between the government and SPLA can be negotiated and maintained. Once an agreement has
been reached, restarting production is likely to take three months. In October 2002, Talisman
Energy agreed to sell its oil asset in Sudan to ONGC Videsh, which is a subsidiary of the
Indian state oil company and Natural Gas Corporation.145 Talisman holds including 25 percent
interest in GNPOC. Petrel Resources PLC is also considering some projects in Sudan, and
reported that it had a joint venture proposal with Sudapet to explore a block on Red Sea.
Sudan has three refineries, two older refineries are located at Port Sudan (capacity 21,700
bpd) and near Elobeid Capacity 10,000 bpd. The construction of a new 50,000 bpd complex
refinery with a residue fluid catalytic cracker was completed in May 2000146, the new refinery
is located near Elgeili approximately 70 kilometres north of Khartoum. The construction phase
of the project, a joint venture between the Sudanese government and China National Petroleum
Corporation (CNPC), began in 1998. Output from the refinery will include liquefied petroleum
gas oil, fuel oil, and kerosene. Sudan will still need to import jet fuel however. The completion
of the new refinery has made Sudan self sufficient and able to export petroleum products as
well as crude oil. Sudan used to import in the region of 1.5 million tons per year of products
and the new refinery is147 expected to save the Sudanese government over US$ 100 million per
year in the refined product imports. In June 2000, the Sudan shipped off its first export (20,000
tons of petroleum to Malta).
The refinery is able to produce five times the domestic consumption of petroleum
(estimated at 100,000 tons per year). Surplus gas will be exported but it is planned that the later
145
See EIU (Dec. 2002), p. 26.
See Centre for Strategic Studies (1999), p. 362
147
See Centre for Strategic Studies (1999), pp. 338-339.
146
97
will be used to fuel a power station. The price of petrol for local consumers will halve as a
result of this increase in production and petroleum products account for almost all of
commercial energy consumption. The transport and industrial sector are the main consumers of
petroleum, residual fuels and gas oil. According to the US Department of Energy (1997)
consumption amounts to around 1.3 million metric tons. The ordered breakdown of
consumption is provided below in Figure 5.23.
Figure 5.23:
Types of energy products consumed in 1997
consumption 1997 (metric tons)
Value in metric tons
1400
1200
1000
800
consumption 1997 (metric tons)
600
400
200
To
ta
l
Je
tf
ue
l
Ke
ro
se
ne
D
is
til
la
te
R
es
id
ua
l
LP
G
U
’s
ns
pe
ci
fie
d
G
as
ol
in
e
0
sort of energy product
(Source: US department of Energy)
The start of oil exports has begun to have a beneficial impact on Sudan’s trade balance,
and international oil prices are expected to strengthen further with the benchmark dated Brent
Blend averaging US$ 18 a barrel in 1999 and US$ 28 dollars in December 2000, this increase
provided Sudan with a total export revenue of some US$ 1.24 billion. Petroleum was at US$
82.6 million; kerosene and gas were at US$ 25.5 million and the total revenue of petroleum
was US$ 1.7 billion in 2001, compared with US$ 757 million in 1999.148
The development of oil sector will also end the need for energy imports, which in 1998
made up 13 percent of the total import bill. The completion of the oil pipeline will reduce
import spending on raw materials too.149
148
149
See Centre for Strategic Studies (1999), pp. 343-344.
See Centre for Strategic Studies (1999), p. 27.
98
The overwhelming majority of this work is estimated to have cost over US$2.5 billion.
Nevertheless, the pipeline was finished on time in June. The completion of the project and the
development of the oil industry will ease Sudan’s pressing balance of payment problems,
generate additional growth and open the way for further investment in hydrocarbons and other
sectors.150 As such it was rightly hailed by the government as its most important economic
achievement since coming to power in 1989.
According to the figure below (5.24) it is production at the Heglig and Unity fields,
which are providing most of the export oil.
Figure 5.24:
Nile Blend attributes
percentage of the contain of
the Oil
(Nile blend is a mixture of Heglig and Unity crude’s at ratio of 3:7)
70
Cravity (API)
60
Density (20°;g/cubicm)
50
Water (%)
40
Sulphur (%)
30
Pour point (°C)
20
Flash point (°C)
10
Salt content (mg)
0
Heglig
Unity
Nile Blend
Different oil fields
Acidity (mg)
Wax content (%)
(Source: Sudanese Ministry of Oil)
The GNPOC intensive exploration programme has led to a rapid increase in known
reserves, exceeding 800 million barrels. With many involved in GNPOC and a suggested final
figure that is likely to exceed 3 billion barrels, the government expects that planned exploration
in the north near Dongola, in the east around Port Sudan, and the west, will unearth substantial
reserves. The oil discovery to date has shown low sulphur and metal content, and has
commanded a price on the international markets close to the Indonesian blend, Minas - the
medium sweet benchmark in Asia, where much of Sudan’s export have so far been sold.
The new Sudanese crude, which has an API of 34°, is marketed as “Nile Blend”.
150
See Centre for Strategic Studies (1999), p. 351.
99
In the past, poor transport facilities from the Adar fields close to Malakal have constrained
production. However, in August 1999 the government inaugurated the GNPOC by building a
1,610 km oil-export pipeline (the longest in Africa).151
The 28-inch link, which has a first-phase capacity of some 250 bpd, connects the Unity
and Heglig fields to an export terminal close to Port Sudan. According to the Ethiopian
Petroleum Enterprise, Ethiopia is to import oil from Sudan, which could save the country up to
US$7 million per year.152 Some 50 percent of Ethiopia’s export earnings are spent on serving
the nation’s demands from fuel. The Ethiopian Petroleum Enterprise is the only organisation
that supplies oil in Ethiopia. Some 85 percent demand of petroleum will be imported from
Sudan. Ethiopia and Sudan signed a co-operation agreement enabling Addis Ababa to import
fuel.
Royal Dutch Shell (the Netherlands and Britain) owns a refinery in Port Sudan. The newest
refinery at El-Geili is 44 miles north of Khartoum. El-obeid has a smaller and older refinery.
An oilfield exists at Suakin in Sudan but it is located on the Red Sea rather than near the coast.
Amni international petroleum of Nigeria is one company operating there.
In March 2000, the Khartoum government signed a new oil exploration agreement for
upper Nile area around Melut near the Ethiopian border with a consortium of Gulf Oil
Company (Qatar) and alGhanawa (Sudan) with 46 percent stake, three unnamed Canadian and
European companies with 46 percent, and Sudapet with 8 percent. The name of joint venture is
Melut Petroleum.
Table 5.6:
Loading export market Jan/June 2001 (in US $million)
Countries
Total
China
Singapore
South Korea
Japan
UK
355.2
93.51
63.10
57.50
37.20
percent total
exports
44.90
11.80
8.00
7.30
4.70
(Source: Bank of Sudan)
151
152
See Centre for Strategic Studies (1999), p. 363.
According to the Ethiopian Petroluem Enterprise data.
100
Oil
Percent total
355.10
93.40
52.20
54.00
0
99.90
99.90
82.80
94.10
0.0
China (the leader of the foreign consortium developing the oil industry) is now established as
Sudan’s most important export market, and Sudan has emerged as the153 third largest supplier
of oil to China (table 5.6), on the other side Sudan supplies around five percent of the total
import of India’s oil need. The fall in export revenue largely reflects the poor performance of
the non-oil sector, which is dominated by the export of agricultural goods (table 5.7). In part
this likely reflects the poor weather conditions during the 2000-2001 growing season, which
also reduced the surplus of agriculture products for export.
Table 5.7:
Forecast summary of EIU estimates (1999-2000)
Real GDP
growth (in
percent)
Oil
production(000
b/d)
Crude oil
exports (US $
billion)
Export of goods
fob (US $
billion)
Imports of
goods fob (US
$billion)
99
2000
2001
2002
6.0
7.2
5.9
5.5
38,0
185.0
230.0
250.0
276.0
1.247.8
1.424.5
1.545.5
0.8
1.8
2.0
2.1
1.3
1.4
1.5
1.6
(Source: Bank of Sudan)
Sudan’s real GDP growth will remain strong, driven largely by developments in the oil
sector. Higher oil production will generate an increase in export volumes, while growth will
also benefit from the end of petroleum product imports, following the completion of the new
domestic refinery.154 High oil revenue will support capital spending in infrastructure as well as
the oil sector.
153
154
See Centre for Strategic Studies (1999), p. 364.
See Centre for Strategic Studies (2000), p. 137.
101
The government claims that Sudan holds revenue of at least 2 billion- 3 billion barrels
but with only 15 percent of Sudan’s possible oil-bearing areas so far explored, the estimate
proves to be wide of the mark. Swedish company Ludin announced that it had struck oil at it
Thar Jath test well in Wehida province. Ludin operates the field as the lead member of the
consortium which includes Patrons, the Austrian oil firm ÖMV and Sudapet. Oil production is
expected to more than half a million bpd by August 2005. The country’s new, heavy sweet Dar
Blend crude is due to come on stream in July 2005 in the Melut basin on Block 3 and 7, in the
Southeast of the country. Western investors are welcome to come after signing the peace
agreement between the rebels in the south and the government.
The figure below (5.25) shows recent GDP per capita in the Sudan. A recent report by the
IMF stated that the Sudanese economy continued to grow last year with real GDP growth and
is estimated to increase from 5.8 percent in 2003 to 6 percent in 2004. This is due to strong
performances in the oil, manufacturing, construction, power and services sectors. This
economic achievement made Sudan the fifth fastest growing economy in Africa during 2003.155
Improvement in productive capacity led to a 21 percent increase in oil sectors. On the other
hand, the agricultural sector’s share of the economy fell sharply from 42 percent in 1996 to
only 32 percent in 2002.156
155
156
See EIU (June 2003), p. 18.
See EIU (March 2004), p. 19.
102
Figure 5.25:
(Source: CIA World Factbook, 2004)
6. The Pattern of EU trade, and Trade Flow between EU and
Africa
6.1. The pattern of EU trade
According to the WTO figure 6.1 below, the EU accounted for about 18.9 percent of world
trade in 1999, and is the world’s largest single trade unit surpassing both the USA with (16.4
percent) and Japan (9.9 percent). The EU’s share of world trade has been rather stable, and in
2000 the GDP growth in industrial countries expanded by three percent or half a percent faster
than in 1999.
103
There was a slowdown in output growth on the European market in 1999 by about two
percent. It is estimated that exports and imports increased in volume terms by about 3.5
percent157 and thereby comparably less than world trade for the same period. EU exports in
2000 were valued at US$ 798.6 billion and imports at US$ 851.2 billion. Although the smaller
countries have a higher share of trade in relation to their GNP, the EU’s leading trade export
members nevertheless remain Germany (9.6 percent of the world trade), France (5.3 percent),
and the United Kingdom (4.8 percent). The EU exports mainly manufactured goods, especially
machinery and motor vehicles, in exchange for raw materials, tropical foodstuffs and energy.
The impact of oil price increases over the last decade or so is reflected in the evolution of the
commodity structure of imports.
The trade flow has been influenced by many factors including the size of partner
countries population, levels of economic development, patterns of resource endowment,
geographical proximity, differences in political systems, and government restrictions on trade.
Based on the size of its economy, the US is the EU’s largest trading partner followed by Saudi
Arabia, Switzerland, Sweden and Japan.
Countries located within the European Free Trade Area (EFTA) are major export markets
for Europe and key sources of imports in contrast to the strong inter-industry market. The basic
pattern of trade is an exchange of EU manufactured goods for developing countries foodstuffs
and raw materials. EU exports of manufactured goods are exchanged mainly for oil and gas
imports.
The EU’s agreement from the fourth Lome Convention was initiated in the EU and the 77
ACP countries starting in 1998. It covered development co-operation, political dialogue and
economic co-operation. The ACP now needs to foster investment in the region and attempt to
lift isolated and land-locked economies by trading with the EU.
The market in North America and industrial Europe continued to expand through 1998,
but world trade volume slowed sharply to an estimated 4.8 percent the same year. Western
Europe’s exports to North America, Latin and Central America, and Eastern Europe continued
to grow faster than inter-trade in 1998.
157
WTO (2000), Press /175
104
Figure 6.1:
an
y
an
ce
C
an
Be
ad
N
et
lg
a
he
iu
m
r
la
-L
nd
ux
em s
bo
Ko
ur
re
g
a,
R
Ta
ep
ip
.
ei
,C of
do
hi
m
ne
es
se
tic
ex
po
rts
M
al
a
Sw ysi
a
itz
er
la
nd
Ire
la
nd
Th
a
ila
Sa
nd
ud
iA
ra
bi
a
Fr
er
m
G
U
ni
on
(1
5)
900
800
700
600
500
400
300
200
100
0
Eu
ro
pe
an
Value of exports in billion dollars
Leading exporters in world merchandised trade 1999
Countries
(Source: WTO Annual Report, 2000).
The communities’ trade balance with eastern Europe have been negative every year since 1958
except for 1986 when they achieved a surplus of over €7 billion generally attributed to the
decline in oil prices.
Germany is the only EU country that, except for the small trade deficit it incurred in its
external trade flows in 1980, has been earning foreign currencies from trading with both third
world countries and other EU members. The UK had a favourable position in trading with other
communities in 1980, but its external trade balance in the same year was negative and its
overall trading position resulted in a trade balance deficit in 1990. The UK incurred a trade
deficit with both its EU partners and the rest of the world.
Trade policies towards developing countries are a central element in the EU’s attempt to
construct a community approach towards third world development issues, especially over the
last decade. The European Commission has suggested that a common development policy
should be the cornerstone of European integration which should complement rather than
displace national measures to assist third world countries.
The economic condition is most readily observed though the low level of average per
capita incomes in developing countries. Sudan is not a special case, but has the unique problem
that its exports are destined to only a few countries. The destination of Sudan’s exports may be
ranked in a decreasing order of importance as follows: The EU, the Arab countries and other
developing countries. Historically the EU is the main customer. Italy and Germany were the
105
largest buyers purchasing mainly cotton and gum arabic.158 The share going to EU increased
between 1970 and 1980.
An analysis of the direction of exports on the basis of commodity categories reveals a
difference in the pattern of trade between agricultural raw materials and food products. Almost
all raw materials were sent to the industrial countries, while exports of food products were
directed mainly to the Arab countries.
6.2. EU export and import with developing countries with
special reference to Sudan
Through trade the Sudan and the EU have become indispensable partners. Though the trade
turnover is not yet up to expectations, its growth has been considerably high. Besides trade ties,
other forms of economic relation, such as investment, credit, finance, assistance, science and
technology are also developing steadily. This ties relation would really expand after signing for
a peace process with the rebels in the South. The number of Sudanese goods exported to the
EU is on the increase, and in the coming future would increase more due to the high movement
of investment in Sudan. With view to promoting trade relations between the two sides, Sudan
classified as an Under Developed Country (UDC). These measures have been conducive to the
faster growth of Sudan’s export volume to the EU and to giving Sudanese goods an advantage
in the EU market. Various Sudanese products have been accepted which then gained a firm
foothold in the EU market.
Most EU countries are already trading partners of Sudan among which Germany, France,
Italy, Belgium and Netherlands. Though Sudan-EU relations are growing fast and promise
brighter prospects, obstacles still exist and the economic potential from both sides is yet to be
exploited fully. The trade turnover between the two sides is increasing from US$ 150.1 million
during 2003 to US$ 174.3 million during 2004. The UK tops the list with US$ 59.1 million.159
The diversity of Sudanese exports to the EU remains limited with only few products
(gum arabic, groundnuts and sesame).160 Besides, their quality remains low and uneven.
Sudanese enterprises are inexperienced in doing business and are new to the European market.
They find themselves unable to seize opportunities, short of information and knowledge about
rules of EU market and this makes it difficult to gain market access. Their ways of doing
business are at times arbitrary and piecemeal, which are not suitable to the tradition and
practices of Europe.
158
According to the figure data of the export and import of the WTO different years.
See http://www.bankofsudan.org/arabic/period/annual/annual04/chapter_8.pdf.
160
See General Secretariat for External Information (1998), p. 86.
159
106
Sudanese businesses are also unable to effectively take advantage of such instruments as
GSP that the EU granted them. Sudan’s long-term trade policy is to pursue openness and
international integration recently. Sudan has yet to build firm trust among its EU partners, who,
consequently are not comfortable in a long-term partnership with Sudan. For its part the EU,
though interested in the Sudanese market, harbours some doubts and therefore tends to wait.
On the other hand it still applies some criteria inappropriate to the prevalent conditions in
Sudan.
The Sudan and the EU already entertain a long-term relationship, and have in many
areas, developed a sense of mutual understanding, which is important for the two sides to forge
a closer bond. The present international economic situation also calls for the two sides to
further strengthen and expand their economic ties in general and trade ties in particular for
mutual benefit. To that end, each side needs to take specific and practical measures to improve
the situation. Firstly, the two sides should revise their respective policies to create favourable
conditions for enterprise to enter each other’s market, explore new investment and business,
and develop business partnerships.
Some projects and co-operation programs should be put in place to help Sudanese
business understand the market, rules and procedures for import-export activities in the EU.
The recent decisions by the EU to recognise Sudan’s market mechanism is a step forward in
helping Sudanese goods overcome EU’s anti–dumping measures. However, Sudan has not yet
fully enjoyed preferences granted by the EU to UDC’s in accordance with the ACP convention
agreement. The large, diverse EU market is promising to the Sudanese exports, especially
petroleum and on the other hand the EU is a source of technology, high–quality machinery,
materials and intermediate goods which Sudan needs to import for industrialisation and
modernisation.
In order to further promote Sudan’s export to the EU, it is necessary to study and propose
a market policy suitable to the EU region, actively penetrate and gain market access, combine
investment (both direct and indirect) from the EU with Sudan-EU trade relations, and create a
source of exports which meets the EU standards.
It is necessary to strengthen trade promotion and activities related to market information,
provide support and other incentives to enterprises producing and exporting goods to the EU,
especially encourage products which have advantages in the EU market. Sudanese enterprises
should be encouraged to produce goods meeting international standards. The prospects of these
relations depend on policies to attract EU business to Sudan, long-term orientation in Sudan’s
107
market policy and specific measures aimed at helping Sudanese enterprises enter the EU
market.
The EU is the major importer of agricultural products in the world and the second biggest
exporter. The trade balance between the EU with the rest of the world was slightly negative in
2000, the total value of agricultural exports amounted to €58.0 billion, against €58 billion for
imports.
The EU is by far the largest market for agricultural products from developing countries.
On the other hand, the EU exports considerably less to developing countries than the US,
Canada, Australia and New Zealand together.
This is mostly the result of the EU policy with regard to developing countries, based on
the GSP, the EU/ACP (Lome /Cotonou) agreement, and on other bilateral agreements.
The EU imports more and more from developing countries (see table 6.1), including
agricultural products from Africa (15.0 percent).161 Eighty-six percent of total EU imports of
merchandise come from Africa and this share is rising. The yearly growth of the EU imports
from developing countries amounts to 15 percent, which is higher than the growth of the EU
imports in general.42 percent of what the EU imports, comes from developing countries, which
corresponded to a total value of Euro 432 billion in 2000, twice the value of 1990.
161
See WTO (2004), p. 11.
108
Table 6.1:
Merchandise import of the European Union (15) from Africa by product,
2003 (billon dollars and percentage)
Value
Total merchandise
imports
Agricultural
products
food
Raw materials
Mining products
Fuels
Ores and other
minerals
Non-ferrous metals
Manufactures
Clothing
Other semi
manufactures
Share
Annual percentage Change
2003
86.9
1995
100.0
2003
100.0
95-00
4
2001
-1
2002
-2
2003
22
15.0
22.7
17.3
-4
4
8
23
12.2
2.8
41.5
37.4
2.2
17.3
5.4
42.3
36.5
3.5
14.0
3.3
47.8
43.0
2.5
-4
-4
9
9
1
6
-3
-6
-7
2
11
-3
-5
-5
-6
23
13
23
25
3
2.0
27.2
7.1
6.6
2.3
29.1
9.3
6.7
2.3
31.3
8.2
7.6
8
5
1
8
2
8
6
7
-10
-7
2
-23
9
26
13
40
Note: The European Union (15) accounted for 45 percent of Africa’s merchandise exports in
2003(Source: WTO, 2004, page 79)
The EU is also a major importer from LDCs. The EU imports more LDC products than all
other industrial countries together (US, Japan, Australia and New Zealand). The total exports of
the developing countries amounted to Euro 38 billion in 2000 to the QUAD countries (EU, US,
Canada, and Japan), €21 billion was exported of which the EU imported more than half (see
figure 6.2) more than 70 percent of the LDC export of agricultural products goes to the EU (see
figure 6.3). This can be largely explained by the fact that the EU has concluded many bilateral
trade agreements with the developing countries and the least developed countries.
109
Figure 6.2:
LDC’s exports according to destination in € billion 1995-2000
All products
EU
1%
5%
US
52%
42%
Japan
Canada
(Source: DG Trade)
Figure 6.3:
Export of agricultural products from LDCs according to destination in
€ billion 1995-2000
All products
EU
15%
2%
US
10%
Japan
73%
Canada
(Source: DG Trade)
110
For agricultural products, the EU plays an even greater role with regard to the LDC’s. In
September 2000, the EU accepted the EBA proposal, giving free access to all products (except
weapons) from 50 LDC’s. One might think that imports from developing countries to the EU
are subject to high import tariffs, but this is not true. Of all industrialised countries, the EU has
the largest levy free import for developing countries and least developed countries.
Developing countries hold a strong position in the export of fruits, vegetables, vegetables
oils and fats, plant based fibres, sugar and large group of exotic product such as coffee, tea and
spices, but also products like nursery plants and flowers. The EU is the largest single trading
partner for developing countries, and the EU is also the major export market for agricultural
products from the LDCs.
It is emphasised that the analysis provides a stock taking of the trade between the EU and
developing countries, reflecting differences in natural comparative advantages in production as
well as trade policies.
According to the World Bank definition, 157 countries out a total number of 207
countries were classified as developing countries (DCs) in 2000. Developing countries are
defined as countries belonging to low and middle-income economies. Of the 157 DCs, 64 were
low income economies with a total population of 2.4 billion people, 55 countries belonged to
lower-middle economies with 2.1 billion people, 38 to upper middle with 0.6 billion people,
and 50 countries are classified as high –income economies (developed countries) representing
0.9 billion. Hence, of the global population of nearly 6 billion people, 5 billion or 85 percent
live in developing countries.
The UN has designated 50 countries as LDCs for which special consideration is to be
given (Sudan is considered as one of these countries). The definition of LDCs is outlined
giving attention not only to the level of income but also to physical quality of live, economic
diversification and size of population the 50 LDCs are listed indicating that Africa, notably sub
Sahara Africa, is strongly represented in the group. Many of the countries are small economies
with few natural resources; however, some of the countries are very rich in natural resources
but have been ravaged by civil war (Sudan, Democratic Republic of Congo, Rwanda,
Uganda).162
162
See Müller (2002), pp. 90-92.
111
Least Developed Countries
Angola
Afghanistan
Bangladesh
Benin
Bhutan
Burundi
Burkina Faso
Cambodia
Cape verde
Central Africa
Chad
Comoros
Timor-Leste
(Source: UNCTAD, 2004)
Dijbouti
Liberia
Sao Tome& principe
Dem.Rep.Congo
Madagascar
Sierra Leone
Equatorial Guinea Malawi
Solomon Islands
Eritrea
Mali
Somalia
Ethiopia
Maldives
Sudan
Gambia
Mauritania
Tanzania
Guinea
Mozambique
Togo
Guinea Bissau
Myanmar
Tuvalu
Haiti
Nepal
Uganda
Kiribati
Niger
Vanuatu
Laos
Rwanda
Yemen
Lesotho
Samoa
Zambia
The Lao People’s Democratic Republic
163
According to the World Bank, if the Quad (USA, Japan, Canada, and EU) abolished peak
tariffs on exports from those 50 LDCs the latter would earn an extra US$2.5 billion a year
which is 11 percent of their current export earnings.
The United Nation Conference on Trade and development (UNCTAD) designates
countries that meet a set of criteria as LDCs. Determination of a country as LDC is based not
only on income, but also on the “potential” for development of the country. Thus countries with
particular disadvantages are given priority by being included on the LDC list, whereas a
country with similar income may not be included.
Developing countries accounted for 65 percent of total exports and for 43 percent of the exports
of agricultural products in 1999 (see table 6.2). For agricultural trade, this is slightly higher
than in 1990 when developing countries contributed 40 percent to world export. The change is
reflected in the trend of agricultural exports that have increased in value terms by 6.0 percent
per year as compared with 5.2 percent for the world as a whole. Developing countries exports
of manufactures have increased even more (10.3 percent as compared with 7.8 percent for the
world total).
163
See http://www.un.org/special-rep/ohrlls/ldc/list.htm.
112
Table 6.2:
Distribution of merchandise exports, world and developing countries
(DC), 1999
US $ Billion
DC percent
of
Annual change percent
1990-1999
World
DC
World
World
DC
289
125
43
5.2
6.0
Agricultural
products
Mining
Products
Manufactures
486
290
60
3.1
2.3
3313
1115
34
7.8
10.3
Total
4088
2660
65
------
------
(Source: WTO, 2000)
Developing countries in Latin America and the Caribbean, accounted for 17.5 percent of
the world agricultural exports in 1999, and had the largest increase in exports during the 1990s
(table 6.3), whereas agricultural exports of developing Asia have increased by merely 0.3
percent on an annual basis. Developing countries of Africa have increased exports by an annual
rate of 0.8 percent.
Table 6.3:
Developing countries share in world agricultural exports by region, 1999
Region
Africa
Developing Asia
Latin America and Caribbean
Middle East
Other
All Developing countries
World export percent
5.5
16.5
17.5
2.0
1.5
43.0
(Source: WTO 2000)
113
Annual change (
percent)1990-1999
0.8
0.3
2.0
0.0
-3.3
0.3
Table 6.4:
Agricultural exports of selected products by developing countries
Description
Meat
Cereals( incl.
rice)
Fruits &
Vegtables
Sugar
Coffee, tea,
Coca &spice
Feeding
stuffs
Tobacco
Rubber
Natural
fibres
Vegetable
oils and fats
Subtotal
Other
product
Total
African countries
Asian countries
Latin America
US$
mill.1998
US$
mil.1998
US$
mil.1998
n.a
n.a
Annual
growth
percent 941998
n.a
n.a
3,797
6,367
Annual
growth
percent 941998
5.5
5.5
3,192
4,460
Annual
growth
percent 941998
4.5
21.0
2,051
6.0
6,953
-1.0
9,761
9.0
849
1,021
7.5
3.0
n.a
4,472
n.a
3.5
3,463
6,657
17.5
0.5
n.a
n.a
n.a
n.a
4,826
0.0
714
n.a
-1.5
n.a
n.a
4,469
n.a
-2.5
n.a
n.a
n.a
n.a
498
-2.0
3,097
-1.0
n.a
n.a
n.a
n.a
7,170
6.5
n.a
n.a
5,133
3,987
n.a
n.a
36,325
31,656
n.a
n.a
32,360
24,633
n.a
n.a
9,120
n.a
67,981
n.a
56,992
n.a
Note: The data represent 10 African countries, Asian countries and Latin American countries
(Source: WTO, 2000)
The LDCs account for a small and declining share of the total agricultural export. In
1999, LDC’ agricultural exports amounted to US $2.2 billion of which 74 percent went to the
EU.
EU imports of manufactured goods from LDCs have been increasing steadily during the
1990s (figure 6.4), whereas imports of agricultural products have been falling. The EU exports
of agricultural products to LDCs, also measured in current US dollars, have been quite stable
during the same period indicating a fall in quantities. EU exports of manufactured goods to
LDCs have also declined (see figure 6.5).
114
Figure 6.4:
EU imports from LDCs
Agriculture (Ag) Mining products (Mi) Manufactures (Man)
(Source: WTO, 2000)
Figure 6.5:
EU exports to LDCs
Agriculture (Ag) Mining products (Mi) Manufactures (Man)
(Source: WTO, 2000)
6.3. Overview of Sudan’s trade with EU
The European Union is the world’s largest single market with a population of 376 million and
enormous market and production capacity. Africa has not achieved to attract much foreign
direct investment in the past few decades. When countries did attract multinational companies,
it was principally because of their abundant natural resources and the size of their market.
Angola, Ivory Coast, Nigeria and South Africa have been the main countries to gain direct
investment in sub-Saharan Africa, but few sub-Saharan countries have generated interest
among international investors by improving their business policies. In the 1990s and 2000
115
Mali, Mozambique, Namibia, Senegal and Sudan attracted substantial foreign direct investment
and more than countries with better domestic markets such as Cameron, Kenya and huge
natural resources such as Congo, Zimbabwe and Mali which improved their business climate
particularly in 1990s. They did so with a few strategic actions, liberalising trade, launching an
attractive privatization program, modernizing mining and investment, adopting international
agreements on foreign direct investment and developing a few priority projects that had
multiplier effects on other investment projects, Sudan is one of these countries in Africa which
improved the direct investment in the year 2000.
Sudan is the largest trading partner in terms of imports from EU.164 Sudan and the EU
have strong historical links; bilateral trade and investment links between the two countries have
grown rapidly since Sudan’s independence, suggesting the presence of complementary and
unexploited potential.
The complementary strengths of the two economies can be exploited for mutual benefit.
Economic cooperation between EU and Sudan has been deepening in recent years, and will
intensify when Sudan realises a peace agreement with western Sudan (Darfur). The total
exports and imports between EU and Sudan in the year 2000 was US$ 786.6 million.165
Benefit of closer economic cooperation have been reflected in rising bilateral trade
between two partners Sudan-EU bilateral trade in the year 2004 was US$ 697.1 million. The
bilateral trade volume between the EU-Sudan stood at US$ 593.6 million of Sudanese imports
from EU, of which Sudan’s export amounted to 103.5 million dollars.166 The potential for
further enhancing trade is significant.
The abundance and a variety of petroleum product, livestock, groundnuts and gum arabic
in Sudan are remarkable. This cooperation between two parties could help to remove poverty
and paving the way to prosperity. 21th century begins with new challenges on environmental
sustainability, economic productivity and international competitiveness. One of the key
instruments for economic development and poverty reduction in the Sudan is the cooperation
and integration in the trade, investment and infrastructure development.
The economy of Sudan is primarily agrarian but oil, minerals, sugar, meat, fish, sesame,
groundnuts, cotton, gum arabic and other products from different parts of the country are also
produced. According to the minister of agricultural, Sudan cultivated only around 15 percent of
its total land, which is estimated to be around 84 million hectare, whereas its exports of gum
164
According to Bank of Sudan Statistical Data of different years.
See Bank of Sudan (2004), pp. 140-142.
166
See Bank of Sudan (2004), p. 140-142.
165
116
arabic cover around 85 percent of world demand for the product. Sudan has a surplus in the
agricultural products mentioned above, so the EU has should take the opportunity to invest in
these potentially lucrative sectors. Sudan is the world’s largest producer of gum arabic so EU
could also invest in this sector.
The following are circumstances that could encourage EU investment in Sudan:
1. The investment regime does not discriminate between foreigners and nationals giving
foreign investors complete ownership with guarantees.
2. The area is a vibrant source of energy rich in oil, natural gas and gold.167
3. The fertile soil in the Sudan plantation crops, vegetable, fruits.
4. Tourism opportunities exist in the Sudan in lack of some development.
5. The Sudanese economy is a market driven economy, and there is rapid shift toward
privatization in all sectors.
6. The banking system is well established and the banking services are accessible in all
states of the country.
7. The location of Sudan as a gateway to Africa and the Middle East market countries
make advantage of this region to foreign investment.
Therefore this region can emerge as a strategic base for foreign domestic investors to tap the
European investors. Sudan has attracted negligible foreign direct investment (FDI) in the last
three years168 and is counted as the third largest investor in the Arab countries (during the
period between1995-2004), after Saudi Arabia and Egypt, of total investment 11 percent of the
whole Arab countries. This is due to the improvement of the environment of investment in the
country.
Sudan could gain the following if it enhanced trade and cooperate with the EU:
1. Considerable penetration of railway, roadways, waterways, ports and shipping.
2. Untapped and underutilized natural energy.
3. The market would be stronger.
4. Development of hydropower.
5. Enhance commercial investment in the country.
6. Improvement of energy sectors specially electricity in the Sudan.
7.
167
168
Improvement in the field of communication.
Sudan invest.com
See UNCTAD (2005), pp. 7-25.
117
8. Industrial sector is very important to the Sudan especially Petroleum sector and sugar
factories which need spare parts and new machinery.
9. Attracting investment for mega projects in highways and roads development.
10. Information technology, biotechnology or solar wind energy. These substantially
contribute to poverty reductions and growth investment.
11. Improved infrastructure can generate economic activities and increase international
trade.
12. Globalization means increasing access to world resources. This is the right time for
EU-Sudan to intensify cooperation and integration.
The gradual recovery in Sudan’s exports led to a steady relaxation of foreign exchange
constraints and facilitated the liberalisation of import. The relaxation of trade restrictions was
supported by strong macroeconomic stabilization measures, which brought about a substantial
fall in inflation rate that came down from more than 130% in 1996 to one digit in 2000 and
2001 with average of 8.5% and 4.8% respectively and the balance of payment has registered
surplus since the year 2000 and the export estimated to reach 7,889 million dollars in the year
2006 with an increase of 74% from the previous year,169 as well as steps to correct the
exchange rate misalignment reflected in a sharp depreciation of real effective exchange rate
owing to the increasingly favourable incentives to exporters, the average annual rate of growth
of commodity exports also rose steadily in real terms. These increases in turn, contributed to
the steady relaxation of foreign exchange constraint, as evidence by the increase in Sudan’s
gross official reserves. Appreciating the exchange of the national currency to SD 225 per
dollars on average.170
High levels of trade restrictions have been important obstacles to exports in the past, and their
reduction can be expected to result in significant improved trade performance in the region.
The removal of exports restrictions dismantling of marketing boards, relaxation of quantitive
restrictions on imports, and lowering of import tariffs will sharply increase traditional and non
traditional exports. The government policies to launch macroeconomic stabilization and
adjustment programmes, the key components of the programme were the liberalization of the
exchange rate, increases in the prices of traded goods, particularly for groundnuts and
169
http://www.mofsudan.net/PDF%20Files/PERFORMANCE%20OF%20THE%20SUDANESE%20ECONOMY%20DURING%20
1990.pdf.
170
http://www.mof-sudan.com/DNews/011104/budget%202006%20-%206_copy(2).htm.
118
elimination of government subsidies. Tariffs were rationalized and the average duty was
reduced.
In the Sudan more open trade policies can be expected to improve incomes in the rural
sectors, where poverty is concentrated. Investment between EU-Sudan will be enhanced
through information exchange, improved transparency and predictability of measures, and
protection of investors and investment. They should also build institutional linkages between
EU-Sudan to promote cooperation and consultation. Support industry and business groups
working on strengthening bilateral trade, and in the anti –dumping area. EU-Sudan should also
enhance cooperation on research and innovation this programmes would help mainly
developing countries like Sudan.
Major Sudan import sectors from EU include machinery, chemicals, electrical appliances,
transport equipment, machinery spare parts. While export flow are dominated by sesame,
cotton, groundnuts, hide and skin, cake and meal, gold and petroleum recently especially to
Italy (table 6-5). On a regional basis, Sudan shows an interesting case study as its trade
structure is strongly diversified. Trade between EU and Sudan during nineties data indicate
that, Sudan trade focused on the EU than other countries, the level trade links between EUSudan could rapidly increased. Sudan needs to make trade with EU for the high technology,
knowledge know-how and progress in the EU countries. Among the most important production
sector are construction, transport and social services.
On the empirical side, there is an evident lack of empirical literature on the trade effects
of EU integration in the Sudan, both in terms of origin and focus. This may be somehow
surprising when taking into consideration the key role of EU accession for the Sudan economy.
The reasons may be searched for in the shortage of research capacities dealing with this
specific issue. This project should help to improve the econometric focus of research and
contribute to the on going discussion on the effects of EU integration on developing countries
like Sudan. Addressing such an issue empirically requires the availability of sufficient national
accounting data a national input and output table to be used for estimated projections within an
open macro-econometric model or for calibration of computable general equilibrium model. In
the Sudan the quality of trade data is poor as statistical office has not kept pace with the
expansion of the private sector. So predicting the economic responses to stabilization package
in Sudan is a problem. The sustainability of the change in the trade pattern is unsure.
I will try to analyse the foreign trade of Sudan with EU in this equation. The attention is paid to
the export and the import and the impact of the exchange rate on the foreign trade, as the
exchange rate is an important part of the economic policies.
119
Log linear analysis is multivariate extension of Chi square, you use log linear when you have
more than two qualitative variables. It provides a systematic approach to the analysis of
complex multidimensional tables.
Log-linear connect the volume of foreign exchange in constant prices with price competition
and the volume of gross domestic product
Im= (Q)am[
Ex= (Qe)ax[
p m -Em
]
p
ep x -Ex
]
Pe
This formulation comprehends the connections of foreign trade as functions of demand usually
dependent on prices and incomes. The volume of gross domestic product (foreign Qe for
exports, national Q for imports) can be seen from two points of view a: as income which
immediate demand for imported consumer goods b: as the volume of production which creates
demand for imported production (investment and intermediate consumption).
The second determinant is price competition which specifies the substitution between
national products and imported goods. In case of import, its measured as the ratio of import
prices pm in local currency to the prices of local production p. in case of export it is the ratio of
exports prices in foreign currency (e.px ) to foreign prices pe also in foreign currency. Export
prices px in local currency are converted into the foreign currency by multiplying by exchange
rate e. The exchange rate is one unit of local currency in units of foreign currency.
The elasticity of export on the competition ability (Yx) is usually higher than in case of
import (Ym). This elasticity (Yx) show two effects of substitution a: substitution of foreign
market between imported and national products (equivalent to Ym),b: competition among
various exporters on the same export market.
In empirical models, exchange rate (e) and foreign prices (Pe) are considered as weighted
average of exchange rate and prices of main trade partners. Each weight is the ratio of foreign
trade.
In the case of the good relation with EU we expect closer cooperation, which increase our
demand for import, as well as the demand of other EU countries for our exports. If protective
tool abolished in the pre-accession period the economy will become even more open, which
will put additional pressure on the domestic enterprises to cope with competition and also
affect the state budget and certain policies of the state. It will be important to create motivating
120
business environment which will enhance domestic production and raise the competitiveness of
Sudan exports and improve the business environment of the country.
During the past years, trade between the two partners had increased incessantly to reach
1,499.5 million dollars in 2006, which was 1,371.6 million dollars in 2005 and 697.1 million
dollars in 2004, since 1999 Sudan has achieved steady growth in term of economics during
2005 the percentage of development reached 10% (according to ministry of finance quarter
indicators). The number of newly established firms has continuously increased in the year
2005. Small and medium Sudanese enterprises have recorded a more steady growth rate of
exports. The total exports increased from 417.3 million dollars 1993 to 3,395 million dollars in
2004 and 6.989 million dollars in 2005.171 Trade between EU-Sudan has along history.
Table 6.5:
Exports by country and commodity during the year 2000
(Value in US$ 000’S)
Countries
Petroleum
Cotton
&
Gum
Se-
G.
Cake&
arabic
same
nuts
Meal
Gold
Live-
Meat
stock
Hide&
Other
Total
Skin
Petroleum
products
Belgium
------
504
969
----
---
----
----
------
----
----
574
2,047
Germany
----
12,946
1,945
4,595
19
96
-----
----
----
124
8,060
27,785
Spain
-----
508
----
527
---
----
---
----
---
107
176
1,318
Finland
-----
---
72
----
---
---
----
--
--
-
25
97
France
-
-
8,556
406
-
-
-
-
-
-
2,537
11,499
UK
-
27
2,585
1,634
1,790
455
46,155
-
-
90
9,458
62,194
Greece
-
615
-
2,174
81
-
-
-
-
-
104
2,974
Ireland
-
50
-
-
-
-
-
-
-
-
1
51
35,175
4,157
865
1,212
-
-
-
-
-
1,428
10,988
54,142
-
-
-
9,160
2,304
-
-
-
-
-
4,986
16,450
Portugal
-
690
-
-
-
-
-
-
-
46
852
1,588
Sweden
-
-
651
192
-
-
-
-
-
-
2,815
3,658
Italy
Netherlands
Source: Bank of Sudan foreign trade statistical digest Annual 2000, p. 7.
171
http://www.indexmundi.com/sudan/gdp_real_growth_rate.html According to Mundi index.
121
The EU is the first important supplier to Sudan’s import total trade in the year 1998 was US$
761.5 million, and in the year 2000 was US$ 786.6 million. Represented in table 6.5 is an
expansion of trade from year to year. Trade in goods between two regions was fairly steady
over the year 2000, so import from the EU began to rise appreciably. Export to EU accounted
to 141.1 million compare to 190.7 million dollars in the year 2000.
Looking into the structure of Sudan’s export to EU in 2000, the export of cotton, gum
arabic, sesame, petroleum and gold recorded 141.1 million dollars (10.4% of Sudan entire
exports) when examine the structure of Sudan’s import from EU, total import reached $ 595.9
million in the year 2000 with the total percentage of 38.3% as follows (only top imported
items) machinery equipment US$ 97.196 million, Chemicals US$ 125,232 million and
manufacture goods with US$ 53,112 million.
EU has a competitive in completed good such as machinery equipment, electronic
products and transport equipment, while Sudan has a strong edge in raw materials such as
cotton, gum arabic, groundnuts and petroleum.
The relationship between two partners has become friendlier, and that their economic
cooperative projects promoted in diverse ways have contributed to the development of both
economies (such projects could be of Marowe Dam and Sudatel as the biggest communication
company in the Sudan, Siemens as German company have set up the basic structure of this
company).
At this juncture, it is necessary for the relationship of the two partners to leap towards a
higher stage in order to promote more substantial economic cooperation. It is crucial for both
partners pay more attention to cooperative projects and investment, which is regarded as the
driving force for economic growth in the 21st century. EU has the ability to transfer its knowhow and experiences in venture companies, while Sudan can provide petroleum and abundant
agriculture raw materials.
One of the key instruments for economic development and poverty reduction is regional
cooperation and integration of trade, investment and infrastructure development and economic
social benefit.
122
Table 6.6:
Sudan’s direction of exports to EU during the period 1998-2000
Value in million dollars
As percentage of total exports
Country
1998
1999
2000
1998
1999
2000
EU
210.9
192.0
190.7
35.4
24.6
10.7
UK
57.5
71.9
62.2
9.7
9.2
3.5
France
15.9
9.4
11.5
2.7
1.2
0.7
Germany
32.3
16.7
27.8
5.4
2.1
1.6
Italy
59.0
55.0
54.1
9.9
7.1
3.0
Netherlands 21.2
13.5
16.5
3.6
1.7
0.9
Belgium
5.6
2.1
2.0
0.9
0.3
0.1
Sweden
3.4
6.1
3.7
0.5
0.8
0.2
Spain
1.7
2.7
1.3
0.3
0.3
0.1
Others
14.3
14.6
11.6
2.4
1.9
0.6
Source: Bank of Sudan, Economic and financial statistics review (October-December 2000),
p.19.
Table 6.7:
Sudan’s direction of imports to EU during the period 1998-2000
Value in million dollars
Country
1998
1999
As percentage of total import
2000
1998
1999
2000
EU
550.6
520.5
595.9
28.6
36.8
38.4
UK
101.1
71.8
123.0
5.3
5.1
7.9
France
128.2
121.7
62.2
6.7
8.6
4.0
Germany
73.3
76.4
80.4
3.8
5.4
5.2
Italy
58.4
88.5
134.7
3.0
6.3
8.7
Netherlands
34.3
28.3
19.6
1.8
2.0
1.3
Belgium
11.1
8.5
4.9
0.6
0.6
0.3
Sweden
18.4
9.6
8.4
1.0
0.7
0.5
Spain
4.3
8.3
5.3
0.2
0.6
0.3
Others
121.5
107.4
157.4
6.3
7.6
10.1
Source: Bank of Sudan Economic and financial statistics review
(Oct-Dec 2000), p. 20.
123
Sudan needs to diversify exports further in order to emerge from its isolation and to draw the
maximum advantage from the growth potential offered by trade globalisation. Factors that
influence positively, development in the Sudan in the 2000s was influence by a number of
factors that have promoted development include peace with the South and stability, policy
reforms, improve economic planning, external increased cooperation with the external
development partners and participation in regional groupings have influenced Sudan’s
development positively.
The preferential trade agreement with the Europe should facilitate the transition if the
increase in trade results in higher Sudanese productivity through technology transfer and
pressure from competition.
Table 6-6 and 6-7 illustrates the pattern of Sudan trade with individual EU member
states. Cleary Sudan’s trade ties with the EU have been strongest with these countries
Germany, France, Italy, Belgium, the Netherlands, Greece and UK who account of the major
trade with Sudan. The United Kingdom remains our single most important export destination
among the European Union with 9.7% (of Sudan total trade) in the year 1998 and 3.5 % in the
year 2000. Germany in the year 1998 with 5.4% of total Sudan’ export and 1.6% in the year
2000 above table 6-6, the year 1998 with 2.7% of Sudan’s total exports and 0.7% in the year
2000, and Italy account for a further important partner in the EU in the year 1998 with 9.9% of
total Sudan’s export and in the year 2000 with 3.0%.172
On the import side, the united Kingdom is the most important source of Sudanese
imports from the EU, according to the table above 6.7 in the year 1998 the share of the import
was 5.3% and in the year 2000 was 7.9%, trade with UK in the year 1998-1999 is reflecting a
large and growing bilateral trade surplus with the Sudan. France is the second in the importance
of Sudan’s import in the year 1999 with 8.6% of the Sudan’s total imports. Italy is the first
important supplier to Sudan’s import in the year 2000.173 The total trade between SudanTurkey reached 153 million dollars in the year 2005 (it’s apt for Turkey to become an EU
member in 2011). Although UK is considered as Sudan’s most important trade partner, the
sectoral trade structures of both countries are highly dissimilar. The above data and indices give
evidence that, on the one hand Sudan’s major trade partner is clearly the EU in the import side,
but that on the other hand, the level of market integration and competitiveness in a broad range
of products is still very low, EU-Sudan trade is strong, but highly asymmetrical.
172
173
Comparing the (statistical data) Bank of Sudan (1998-2000).
According to the foreign trade minister of Sudan.
124
An important observation regarding this structure is that, a part from cotton, gum arabic,
groundnuts, petroleum product since the year 2000 inter the EU market major import country is
Italy with total import of 35.175 million dollars and Gold the major import country is United
Kingdom in the year 2000 with 46.155 million dollars. According to IMF prediction of
Sudanese economic development and growth rate would reached 13.4% in the year 2006,
compare to 8.5% in the year 2005 due to the increase production of petroleum to 500.000 barrel
per day and the increase of its international prices in the same year, the percentage change of
the production of the petroleum is 22% from the previous year 2005.
There are some agricultural resources which would not produced in Europe because of
winter time (to even out demand variations of economic nature economic cycle of growth and
depression nature and seasonal nature e.g. alternation between winter and summer) so Sudan
has trade advantage and should encourage the export of these agricultural products to Europe.
Sudan’s export promotion strategy to EU should also aim at extending the country’s export
base, by increasing the absolute number of exports products and product groups, and encourage
the investment of EU countries with their capital, technology and experiences. Sudan is virgin
country rich of agriculture raw materials, animal resources, mineral raw materials and
petroleum. So EU countries should use these potential chances in sake of the benefit to the two
partners. Participation of the EU investors in fair and exhibition, to support in this regard the
economic activities in the country and to show the face of Sudan market so to enable
businessmen to participate in such market, information on business standing and capability to
the foreign partners, also information obtained through marketing research can be provided to
EU investors. The reduction of tariff and non-tariff barriers to trade should ensure substantial
efficiency gains and improve welfare through increased market integration. Further indirect
effects, particularly on partner countries, are estimated even larger by linking Sudan to EU
countries partners, to improve investment climate with EU and will provide a more conducive
environment for private sector-led growth. This gain will trigger increased FDI influx, falling
trade and transaction costs, attractive relative labour costs and reduce trade risk.
6.4. Economic co-operation between EU and Africa
We recall that Africa and the EU have traditionally been important trade partners and affirm a
commitment to strengthen this partnership by progressively removing barriers to trade between
125
both sides including non-tariff barriers, and enhancing co-operation in all trade areas, building
on regional integration initiatives existing within Africa. We confirm that the current trend
towards liberalisation and globalisation poses serious challenges to African countries in an era
of continual decline in African share of the world trade. We agree on the need to define policies
that maximise the benefits from further world trade liberalisation for African countries and that
reverse the present trend of marginalization that African countries are experiencing in the world
economy.174
On 23 June 2000, the new partnership agreement between the 77 ACP countries and the
15 member states of EU was signed in Cotonou. The guiding principles of the new Agreement
are the reduction and eventual eradication of poverty, and the gradual integration of the ACP
countries into the global economy.175 Furthermore, the partnership Agreement is also a
framework for new partnerships for trade and investment.
The EU is one of the world’s major assistance donor’s. Reducing poverty in the world,
preventing conflicts, and promoting the integration of developing countries in the world
economy are fundamental goals of the Union’s development policy. Development co-operation
has been part of the EU’s work since the European Community (EC) was funded at the end of
the 1950s. Technological co-operation as well as trade in services are important factors for
closer economic ties between both regions. Building and strengthening the institutional
infrastructure to enhance technological transfer and development in Africa are also necessary.
The EU should help and co-operate with Africa to end dependency on emergency aid and
return to a path of development. The need in post conflict situations for urgent disarmament,
demobilisation and reintegration of ex-combatant, in particulars child soldiers is overwhelming.
The EU is one of the worlds’ major assistance donors today. In addition to the common
development co-operation of the EU countries, every member state also gives its own
assistance to developing countries and various international bodies such as the UN and the
World Bank. If you add the common EU assistance to that provided by the individual member
states, the EU accounts for almost 55 percent of the world’s total development assistance. In
addition, the EU recently announced that it would increase foreign development spending by
US$ 4 billion to US$ 29 billion annually during 2006.176
The European Commission is responsible for the implementation of EU development cooperation. Decisions on which policy should guide the development co-operation are usual
174
See www.europa.eu.int/comm/development/body/cotonou/index_en.htm.
See Article 1 of the Cotonou Partnership Agreement.
176
See http://www.findarticles.com/p/articles/mi_go1690/is_200207/ai_n7159485
175
126
made by the development council, which consist of the Ministers for development co-operation
of the EU member states.
A new partnership agreement was recently concluded between the EU and 77 ACP
countries, the so-called Cotonou Agreement. The Agreement replaces the fourth Lome
convention and regulates both trade and development co-operation between EU and the ACP
countries.
The new agreement extends for 20 years. The overriding goal is poverty alleviation. In
the agreement there is a major emphasis on strengthening human rights, democracy, the rule of
law and good governance.177 The agreement also covers in depth the political dialogue between
the parties in order to contribute to peace, security and stability and to promote democratic
development.
Since attaining independence during the fifties and sixties, African countries have
embraced economic co-operation and regional integration as part of a strategy for the structural
transformation of Africa. This vision and commitment of African leaders to the ideals and
principles of political and economic co-operation, as means of mitigating the development
constraints faced by many small-nation economies led them to, among other initiatives, create
the Organisation of African Unity (OAU) and the African Development Bank in 1963 as
instruments for fostering African development and unity. This commitment was later reiterated
in the Lagos plan of action in 1980 and subsequently, in Abuja Treaty of 1991 which envision
the ultimate creation of an African economic community.
Regarding economic co-operation between EU and Africa the following points are
important to consider:
•
Strengthening support for the process of regional co-operation and integration in Africa.
•
Support of regional integration programmes in Africa that are geared to increasing
efficiency by eliminating constraints to cross border trade, -investment and payment, and
achieving a harmonised economic space.
•
Urge the competent authorities to expedite programmes for capacity building in Africa
regional and national institutions in the area of economic co-operation and integration.
•
Strengthen the capacity of African regional integration institutions, notably the African
Economic Community (AEC), and support them in the formulation and implementation of
their programmes consistent with the objective of the Abuja Treaty on the basis of needs
177
See Article 9 of the Cotonou Partnership Agreement.
127
assessment which will in particular take into account the impact of multilateral trade
liberalisation on regional integration.
•
Promote the implementation of best practices in project formulation and execution, regional
sectors projects, and the harmonisation of macroeconomic and sectors policies that will
help the implementation of Africa’s economic co-operation and integration efforts and the
speedy establishment of the African Union
•
Take into account opportunities and challenges that globalisation offers for all states to cooperate in order to enhance a political, economic and social environment, conducive to
promoting international co-operation, foreign direct investment and other resource flows.
•
Deepen the link between trade and development in the multilateral trading system in order
to ensure that the benefits of further trade liberalisation and the strengthening of multilateral
rules contribute to poverty reduction and sustainable development.
•
Enhance the capacity of African countries to derive maximum benefits from opportunities
offered by the WTO, taking into consideration the activities carried out in this regard by the
AEC. Providing resources for enhancing the capacity of African countries to enter into
EPAs with the EU to formulate appropriate trade policies and to participate actively in trade
negotiations in the framework of the WTO.
•
Support African countries by providing technical assistance in order to enhance their
capacities to respond to the challenges and opportunities offered by their integration into
the global economy.
•
Ensure that trade arrangements between EU and Africa enhance co-operation in all trade
related areas, building on regional integration initiatives existing within Africa and in line
with the goals and objectives of the Abuja Treaty.
•
Support the efforts of African countries in continuing to adopt sound macroeconomic and
other policy reforms, including adjustment policies, as well as the effort of the public sector
in creating the enabling environment for the development of private sector activity.
•
Improve the public –private sector dialogue between and within our regions and encourage
North-South co-operation for private sector development in African countries. This will
imply the strengthening of private sector representative institutions (through capacity and
institutional building), as key actors of a reinforced North –South dialogue.
•
Co-operate with African countries in building capacity in the private sector through the
exchange of experience in business management and the stimulation of joint ventures,
128
investment and trade promotion and the support for the development of micro finance
schemes and the informal sector.
•
Work with governments and the private sector in order to improve regulatory frameworks
for the business community.
•
Support South-South co-operation through triangular mechanisms, with the view to
building capacity in business management, exchange of experience as well as promoting
joint ventures, and mergers and acquisitions.
•
Develop better information on investment in Africa, and strengthen African small and
medium enterprises through schemes and instruments to be determined. Encourage joint
ventures between African and European investors, with the support of EU. The
establishment of African –EU management Centres in Africa, in order to provide avenues
for European technology services could enhance Africa’s entrepreneurship in this respect.
The overall economic performance record of the ACP-EU co-operation has been less than
satisfactory. The incidence and depth of poverty have been increasing ever since the early
1980s, particularly in Africa. More than half the African people live below the poverty line.
On the whole, the preferential relations between ACP and Europe have done relatively
little to stamp out the structural poverty and underdevelopment in these countries.
ACP exports grew by less than 4 percent, while other of other non-ACP developing countries
grew by about 75 percent. The ACP countries averaged significantly lower rates of per capita
GDP growth than the developing countries as a whole.178 This drop reflects, in part, the
declining share of the ACP in the world trade, which halved from 3 to 1.5 percent during the
same period. ACP countries exports are heavily concentrated in primary commodities; about 20
commodities account for well over 70 percent of exports by the least developed countries.
Declining commodity prices and slow-growing demand account for their poor export
performance. It also shows that primary commodity exports tend to have low-income
elasticities and low preference margin179.
This increasing liberalisation of the EU’s tariff regime as part of the Uruguay Round
commitments, as well as tariff preferences extended to other developing countries under the
GSP, has eroded the margins of preferences that are accorded to the ACP countries. Above all,
there is mounting evidence to suggest that biotechnology is swiftly eroding the traditional
“comparative advantage” of ACP countries in the emerging international division of labour.
178
179
See WTO (2004).
See Page and Hewitt (2001), p.18.
129
Key agricultural crops like sugar, coca, sisal, cotton and timber are increasingly facing inelastic
demands. Their biologically engineered substitutes in the EU are hitting the market fast.
The obvious lack of stable democratic regimes, political accountability and respect for
human rights as well as the rule of law are factors that remain central to the possible further
marginalization of this group of countries. The continuing political instability and turmoil in
Africa are likely to deter any large –scale inflows of FDI and foreign aid. The other critical
factor is the type of leadership and government required to promote development co-operation
and sustainable development. The governance failure in most ACP countries in last four
decades of independence is due largely to the failure in leadership. Future growth strategies
should explicitly focus on poverty reduction, pay attention to job creating ventures as a means
of enhancing the people’s livelihood, improve the poor access to productive inputs, invest in
the poor people through the provision of basic social services such as healthcare and education.
It is common knowledge that most ACP countries not only require preferential market
access and foreign aid from the EU but, most important, also deliberate policy instruments
aimed at reforming and transforming the structural foundations of their economies.
ACP –EU economic and development co-operation objectives (poverty alleviation,
sustainable development and smooth gradual integration of ACP countries into the global
economy) may not be realised unless all key development partners boldly address the structural
problems.
The EU-ACP negotiations would be used to seek to co-operation and collaboration in the
WTO in order to change the interpretation and application of respective rules and regulation so
as to make them compatible with the development interest and peculiar concerns of the ACP
countries.
The other strategic point of negotiation is the need to address the ACP capacity
problem the lack of capacity to plan, implement, manage, monitor and maintain development
programs and mobilise the entire population in the development effort. The most fundamental
of all causes has been identified as the severe lack of capacity in ACP countries, which is now
well recognised as the missing link in development. Without sufficient capacity, neither
government nor the private sector can adequately perform the tasks that make the economy
function.
There is also the need to negotiate for the resolution of the ACP debt problem. From the
early 1980s to the present,180 ACP’s debt burden has grown more and more unmanageable. If
180
See Birdsall, Claessens and Diwan (2003), pp. 410-411.
130
the poverty alleviation is at the heart of the EU’s future initiatives, the very conditions that lead
to stagnation and marginalization of ACP countries have to be overcome. Economic growth
and investment are not likely to take root unless the question of debt is brought to centre stage.
In fact some recent studies have suggested that investors, local as well as foreign, have
increasingly been unwilling to take the risk of investing in most of ACP countries, which have
been repeatedly tagged as “bad debtors”.
Economic and development co-operation initiatives should seriously reconsider the ACP
debt problem. A full or almost full cancellation of ACP debts by EU could be the key to
sustainable development and poverty reduction.
There is a need for the new economic development co-operation to resolve the ACP’s
competitive problem. The trade and development provisions of the Lome conventions put
emphasis on the development of human resources, the development of products and markets, as
well as the adaptation and strengthening of trade institutions. However, the majority of the
ACP countries have not been able to take advantage of the Lome preferences because of such
constraints as lack of product and market development. Non-availability of trade and market
information, and the absence of human, institutional and physical infrastructure. These
obstacles need to be removed if ACP countries are to achieve sustainable trade and economic
development and to attain competitiveness in the international market. The ongoing negotiation
may wish to address all the major problems that had hindered the full implementation of this
program and then articulate viable suggestions for the post-Lome economic co-operation
arrangement. More specifically EU governments may wish to encourage their home-base
transnational co-operations to invest in the processing, marketing and distribution activities of
the ACP states. Moreover, ACP states, together with the EU, may consider establishing an
ACP –EU investment guarantee mechanism to enable European enterprises to invest in ACP
states without undue fear of bankruptcy.
The Cotonou Agreement gives preferential market access to the ACP countries; changes
were made to bring it into line with WTO rules so that instead of just granting preferential
access, the ACP now supports regional integration between ACP countries or regions and
attempts through this to reduce trade barriers among themselves. As part of this, the EU will be
negotiating EPAs with sub-groups of the ACP countries.
131
The Cotonou Agreement brings into existence political bodies which aim to increase
political dialogue181 between EU and ACP countries with regard to the substantive part of the
partnerships and issues such as human rights and democracy.
The system of trade preferences which the EU granted the ACP states under the previous
Lome conventions will gradually be replaced by a series of new economic partnerships based
on the progressive and reciprocal removal of trade barriers. These agreements will be defined
as part of a broader strategy to improve the ACP states ability to attract private sector
investment.182
Integration of the world economy and the increasing mobility of private investment
provide new opportunities to developing countries. Over the past few decades conditions in
developing countries have improved significantly; average lifespan has risen from 41 to 62
years, child and infant mortality has come down by half, literacy has doubled and despite the
population explosion, the production consumption of food have increased even faster than
population. But there are also signs that the poorest countries are not benefiting from economic
integration, and that their position has continued to deteriorate. Despite advances made, more
than 1.3 billion people now live in poverty, the reason behind this rapid population growth,
which has weakened government efforts to create jobs, education and health services. Even
considerable growth in economy and production would not help if the population is growing
faster. Despite all the achievements things remains very unequal with deep gaps in the standard
of living.
Co-operation between the Sudan and EU was suspended in March 1990 due to several
reasons, but mainly human rights. As Sudan’s second largest donor this was a hefty blow, but a
lot of things changed in November 1999 when the EU and the government of Sudan resumed
political dialogue, with the purpose of discussing development in democratisation, human
rights and rule of law, policies against terrorism and the peace process.183
The dialogue fostered mutual understanding, as well as an atmosphere of trust. Now the
aim is to eventually resume normal co-operation. The EU and Sudan agreed that the dialogue
would now focus on the peace process in southern Sudan.
Sudan’s relation with the EU reached a peak in the 1980s.The deterioration began after
1989, when the EU imposed many restrictions and suspended aid from the Lome convention.
At present some Euro 400 million is frozen. But when a peace agreement between the
181
See Article 8 of the Cotonou Partnership Agreement.
See Article 21 of the Cotonou Partnership Agreement.
183
See http://www.odi.org.uk/pppg/activities/concepts_analysis/poorperformers/BackgroundPaper5-Sudan.pdf ,
pp.11-13.
182
132
government and the rebel SPLA is signed the EU is fully prepared to normalise relations with
the Sudan and resume development co-operation, including resettlement, rehabilitation,
reconstruction and development for the whole of the Sudan.
The EU has started the technical preparations for the programs that are to be financed
once development co-operation is resumed. Sudan said it had received formal notification that
the EU would resume development aid, saying it would receive support totalling € 155 million
under Cotonou Agreement.184
Immediately after independence in 1956 Sudan’s external relation and co-operation with
other countries have been conducted within a dynamic framework of commitment to
documented multilateral conventions as well as bilateral agreements. It has established bilateral
relations with friendly countries in accordance with Vienna and other respective conventions.
Sudan is a member and supporter of the following economic and trade organisations and
conventions:
•
Lome convention
•
The General Preferential System for trade between developing countries and EU.
•
Common Market for East and South Africa (COMESA).
•
Arab Agreement for development and promotion of trade between Arab countries.
•
Permanent Committee for Economical and Commercial Co-operation between Islamic
countries.
•
Economical African Agreement for African “Abuja Agreement”.
•
Sudan has status of an observer in the World Trade Organisation until the completion of
the procedures of being a full member.
The main objectives of Sudan’s co-operation with the EU are to preserve international peace
and security, and to create regional stability; to promote sustainable economic and social
development in Africa; to defend human rights and the principles of equality, strengthen the
institutions of democracy and civil society and improve the situation of national minorities; to
promote social and economic development with special regard to basic needs health and
education; to promote good governance; to protect the environment; to play an active role in
the international development institutions; economic interests should be taken into account in
development co-operation, according to geographical position of Sudan in the heart of Africa
184
According to the European Commission in Khartoum declaring that aid after the peace Agreement between
SPLA and government of the Sudan.
133
(considered to lie in the North and East of Africa) Sudan has the economic and foreign trade
interest to contribute to stability and development of the whole region of Africa.
Sudan’s co-operation should focus on those sectors and areas where EU has “comparative
advantage”.
Germany is one of the EU countries which Sudan has economic co-operation, there has
been an increase in the volume of trade since the Sudan began to pump crude oil. Large-scale
projects such as the expansion of the Sudanese telecommunications sector or the construction
of dams and power stations aroused the interest of the German companies which participate in
such undertakings.185
In 2002 the bilateral volume of trade was just under Euro 150 million. Sudanese exports
to Germany were valued at USD 37.5 million. The main exports were cotton (USD 7.2
million), gum arabic (USD 1 million) and small quantities of sesame and skins.
In 2002 the Sudan imported goods with value of €10 million from Germany alone, mainly
machinery and equipment as well as finished product, chemicals, foodstuffs and textiles.186
German business showed more interest in doing business in Sudan during 2003 when 25
German companies participated in the Khartoum International Trade Fair. There are also a
number of bilateral trading arrangements in the region including:
1. Arab Republic of Egypt –European co-operation Agreement.
2. Republic of South Africa –European Union Trade Development and Co-operation
Agreement.
3. Sudan-Egypt Trade Agreement.
4. Botswana-Zimbabwe Free Trade Agreement.
5. Malawi-Republic of South Africa Bilateral Trade Agreement.
6. Sudan-Ethiopia Trade Agreement (The agreement that Sudan support Ethiopia with
petroleum).
One of the objectives of the Cotonou Agreement is that ACP member states enter into
EPAs with the EU, either individual or collectively. Although EPAs include a free trade
component, they are intended to be more than just free trade arrangements and an attempt to
assist ACP countries to enter global market economy, using the exiting regional integration
organisation already in place.187
185
See El-Sheikh (2003), p. 303.
See Bank of Sudan (2002).
187
See Article 34 of the Cotonou Partnership Agreement.
186
134
The ACP countries have in general, welcomed the EBA initiative. There is, however, a
concern in some quarters that the EBA initiatives will make it more difficult to negotiate
regional EPAs and may well have weakened the African regional integration process. Allowing
better access into EU market for LDCs compared to developing countries may reduce the
incentive of LDCs to join with developing countries in a regional integration organisation to
form an EPA.
The Commission will monitor the import of rice, bananas and sugar carefully and apply
safeguard measures if necessary to prevent damaging surges. There will be monitoring to verify
respect for rules of origin, as well as anti-fraud measures. The Commission will report to the
council in 2005188 on the impact of trade within the EU and for LDCs, as well as on African,
Caribbean and Pacific countries.
The anticipated impact of EPAs on the performance of key sectors will be both positive and
negative. On the negative side, the local manufactures will face competition from EU based
industries, with the local manufactures not being able to compete on price or quality owing to a
lack of economies of scale and restricted access to the latest technologies. This may well lead
to job losses, further de-industrialisation and barriers to entry into new markets for local
producers. On the positive side, regional industries will be exposed to competition that will
force these industries to be more competitive by reducing costs of production and improving
quality. Government also has a role to play in this as, in COMESA countries, government
usually controls utilities, such as electricity and water, which, are in most countries inefficient
sectors, leading to overpriced manufactured commodities.
If this approach to EPA negotiations is to be feasible it would be essential for the eastern
and southern Africa region and those regional organisations with an economic co-operation
mandate, work together in negotiating an EPA. It would probably be practical to assume that
there would be three different subsets of EPAs in the region, these being:
Group1- countries belonging to a custom union.
Group2- countries belonging to a regional FTA.
Group3- countries which are moving towards joining a regional free trade area and customs
union.
The economic and social packages required by the three groups would be different depending
on the progress made in the various areas of economic liberalisation. For example, countries in
188
See Cook (2005), pp. 2-8.
135
a custom union (Group 1) will probably require less time to move to an FTA with the EU than
those which have yet to join a regional free trade area (Group 3).
South Africa has concluded a Trade Development and Co-operation Agreement (TDCA)
which should lead to an FTA between it and the EU in 2012, four years after the establishment
of the SADC FTA.
The present East African Community (EAC), with its Treaty signed in 1999 is a revival
of an economic co-operation agreement which broke up in 1977. The Treaty provides for a
regional integration process that will be progressive, starting from formation of a customs
union within four years of the signing of the Treaty. A common market then a monetary union
and ultimately a political federation will follow this.
Regarding existing trade arrangement, COMESA, has implemented its free trade area,
with nine members making up the FTA, and with seven other COMESA members offering
preferential market access to other COMESA member states. All member states of COMESA
have committed themselves to join the FTA. COMESA is also on track with its plan to
implement its customs union in 2004.189
With regard to a comparative analysis of trade policy by country, we can say that most
COMESA member states are in the process of liberalising their trade policies in that they are
narrowing the dispersion of tariff rates, lowering the level of tariffs (both at a regional and
national level). The target is to narrow tariff bands to maximum of 4 tariff bands (a zero tariff
and 3 non –zero tariff bands) and an overall trade weighted average tariff not exceeding 15
percent. Those countries, which are members of WTO, have bound their tariffs (although in all
cases the bound tariffs are higher than actual tariffs) and have committed (under WTO and
COMESA) to not increase tariffs.
One of the effects of tariff reduction programmes (and globalisation in general) is to
expose manufacturing enterprises to increase regional and international competition. To take
account of this increased competition, in many COMESA countries, governments are
consulting with the private sector to put in place measures to strengthen the specific country’s
international competitiveness. These measures have focused on, among other things, reducing
the high cost of utilities and transportation but could also look at reducing the overall tax
burden on business to allow them to manufacture more cheaply and so increase their
competitiveness.
189
See De La Rocha (June 2003), pp. 7-9.
136
One way to promote investment in the ACP countries is relocation of production
facilities or promotion of joint venture operations between ACP and EU manufacturers. Sectors
in which these joint ventures could take place include coffee, tea, coca processing and metal
fabrication (using copper, aluminium, etc.) as the raw materials for these industries are
produced in the ACP states. Other joint ventures could be in the service sectors such as air
transport and information and communication technology.190
COMESA launched its FTA on 31 October 2000, however, at present only 9 of the 20
member states have joined (Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan,
Zambia, and Zimbabwe). Other countries (Comoros, Ethiopia, Eritrea, Uganda, Dr Congo,
Burundi and Rwanda). COMESA member states have agreed on the need to create and
maintain a full Free Trade Area quarantining the free trade movement of goods produced
within COMESA and the removal of all tariffs and non-tariff barriers191. It has also been agreed
that a customs union under which goods and services imported from non-COMESA countries
will attract an agreed single tariff in all COMESA state. In addition, free movement of capital
and investment supported by the adoption of a common investment area so as to create more
favourable investment climate for the COMESA regions has also been agreed upon. The
establishment of cross-border payments and settlement system and a political risk guarantee
system also falls under the COMESA commitments, as well as the eventual establishment of a
common monetary union with a common currency. And finally, the adoption of common visa
arrangement including the right of establishment and currency is something COMESA has
committed to.
The COMESA region is characterised by low rates of growth and per capita GDP, low
investment and savings, lack of product diversity and high external debt. Among the challenges
faced by regions are low human resource developments, a hostile external trade environment,
and a huge debt burden. In most cases where these reforms have been implemented they have
raised growth and incomes and therein reduced poverty. According to available data, real GDP
in COMESA has improved and in the year 2000 a growth rate of 3.2 percent was recorded,192
which was slightly above the sub-Sahara average. Although improved performance is not
shared across the region, most countries have recorded positive growth (Uganda, Sudan and
Rwanda) with rates growing at more than 8 percent per annum.
190
http://www.ictsd.org/html/weekly/story5.31-10-00.htm.
http://www.comesa.int/comesa%20treaty/comesa%20treaty/Multi-language_content.2005-07-01.3414/en
192
See WTO (September 2002), p. 9.
191
137
The Inter Governmental Authority on Development (IGAD) is constituted as one of the
regional building blocks under the African Economic Community Framework.193 It comprises
seven countries in Eastern Africa and the Horn of Africa (Djibouti, Ethiopia, Eritrea, Kenya,
Somalia, Sudan, and Uganda). The original mandate of IGAD was to combat drought and
desertification in addition to achieving food security. However in 1996, the mandate was
expanded and revitalized to include other areas of co-operation, these being in economic,
political, and humanitarian affairs. The main focus of IGAD since 1996 has been on policy
harmonization, focusing on trade and transport, to assist the elimination of physical and nonphysical barriers to trade development and to promote regional economic integration among
IGAD member states.
The EU, the World Bank, the International Monetary Fund and the African Development
Fund have been supporting a regional integration program called the Cross-Border initiative
(CBI). The initiative started with 14 participating countries: Burundi, Comoros, Kenya,
Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Swaziland, Tanzania, Uganda,
Zambia and Zimbabwe.
Mozambique showed interest in participating in the initiative in 1998 and attended the
regional TWG meeting in Mauritius in November 1998, and has since attended other
subsequent meetings. South Africa has also recently observed meetings of participating
members of the TWGs.194 The TWG has several initiatives and aims such as trade liberalization
in the regional context, opening up the financial sector and liberalizing the payment system,
and enhancement of the investment climate by streamlining investment approval procedures.
Other aims also include facilitation of the movement of persons, and capacity building among
the public and private sector in policy formation and analysis. This could be accomplished by
enhancing public –private sector confidence, as well as trust and collaboration with the
principle objective of ensuring greater private sector participation in economic policy
formulation and overall economic management of the country.
6.5. Influence of EU-African trade on the African economy
Africa has traditionally had strong economic and business ties with Europe which is the
continent’s main trading partner; buying 57 percent of Africa’s exports and supplying 60
193
194
See http://www.cewarn.org/.
See Mutai (July 2003), pp. 7-29.
138
percent of its imports.195 EU states are also the main source of capital inflows, FDI and bilateral
aid. The introduction of the Euro on January 1, 1999 is set to further deepen these relationships.
Strong growth in Europe as a result of a stable Euro will boost Africa’s exports and therefore
growth. Faster growth in Europe will increase the demand for Africa’s products which includes
a variety of primary agricultural and mineral commodities to Europe, such as coca, coffee, oil
and other minerals.196
Europe is the principal source of investment flows to Africa. This is mostly due to
reasons of geographical proximity, and historical ties since most African countries are former
European colonies. Recent trade agreements such as Lome, EU-Morocco and EU-Tunisia
Trade Pacts, and the on-going discussion between South Africa and the EU have also created a
means of investment flow to Africa.
France and UK are principal investors in Africa, accounting for 88 percent of Western
European investment to Africa. The development of a single financial market may push
investment towards emerging markets, including Africa, as European investors try to diversify
beyond European single borders.
The currency area will create a much longer, deeper and more liquid capital market,
which should reduce the costs of borrowing capital for those countries wishing to raise Eurodenominated funds. It will also simplify the international payment mechanism by providing one
foreign exchange rate where previously there were eleven. The advent of the Euro has
particular significance for Franc zone countries, because of their special relationship with
France; they stand to benefit from increased trade investment.
The trade between the members of the African, and the European Community and its
member states, however, also poses a significant challenge. Economic partnership Agreements
aim to eradicate poverty and to integrate the ACP countries into the global economy. The
majority of the ACP countries are poor and vulnerable, forty are LDCs ; and despite persistent
efforts, they are yet to integrate into the world economy.
The share of community imports from the ACP in total community imports decreased,
falling from 6.7 percent in 1976 to 2.8 percent 2000, and shares of imports from ACP in total
imports from developing countries (excluding countries in transition) has fallen from 14.8
percent in 1976 to 6 percent in 2000.
195
196
See Summary African Development Report (1999), p. 6.
See Summary African Development Report (1999), p. 6.
139
Success has been disparate, although EU trade with the ACP countries totalled over Euro
58 billion in 2001.197 There has been a heavy weighting towards the more developed African
economies for example Nigeria (21 percent of ACP exports).198 Ten products accounted for 60
percent of total ACP exports to the EU.
Petroleum oil was the most important ACP export making up 29 percent of total ACP
exports followed by diamonds (10 percent), coca (4 percent), wood (4 percent), sugar (3
percent), aluminium (2 percent), coffee (2 percent), tobacco (2 percent) and bananas (2
percent).
Closer economic relationships between the ACP states and the EU have evolved over a
fifty-year period. They were incorporated into the Treaty of Rome in 1957, Younde1 and 11
(1963 and 1969 respectively) and the Lome convention (1975-1995). The Conventions
enlarged the 79 ACP signatories and created the ACP –EU Partnership Agreement. While the
benefits generated by the multilateral trading system have been global, they have not always
been distributed evenly and equitably within and between nations. The richest nations have
tended to gain the most from increased trade and growth, the poorest have benefited less; for
instance, the 49 LDCs account for less than one percent of world trade. In 1998, the EU was
already by far the leading destination for LDC exports taking in 56 percent of total world trade.
One main objective of the Cotonou Agreement signed between the EU and ACP countries is
the smooth and gradual integration of ACP countries into world trade.199 Trading arrangements
will help consolidate economic and legal reforms and will create more opportunities for local
and foreign investors.
UN Secretary-General Kofi Annan has praised the EU’s “Everything but arms” initiative,
saying it has proven that “Europe really does want a fair international trade system in which
poor countries have a real chance to export their way out of poverty.”200
To encourage this further, the developed countries could help developing countries by
assisting in the following ways:
•
Providing special to meet specific needs of LDCs, including institutional arrangements
to help them participate in all WTO procedures.
•
Help with implementation of WTO agreements for members having genuine
difficulties.
•
Help to improve market access and trading opportunities.
197
EU-Africa Caribbean pacific ACP trade relations key facts and figures Brussels, 02 October 2003.
See WTO (2002), pp. 80-83.
199
See Article 1 of the COTONOU Partnership Agreement.
200
UN Secretary –General, Financial Times, 5 March 2001.
198
140
•
Take account of developing countries constraints in new WTO disciplines, like
competitions, investment or trade facilitation.
•
Enhance assistance to build human and institutional capacity and address supply side
constraints.
The EU is determined to ensure that the expected program of action of the conference for
the sustainable development of the LDCs and their integration into the world economy is
accompanied by concrete and operational measures to support the LDCs developments efforts.
This should include trade measures that complement the EU’s market access initiative so as to
help LDCs make the best of enhanced opportunities for their economic growth and to ensure
poverty reduction.
Influence of the EU trade represented in promotion of diversification and establishment of
linkage between production units in different countries would not only contribute to improved
productivity and greater competitiveness for African products, but would also provide stronger
basis for effective participation of the African region in the evolving global linkages and
interdependence of production units.
The present slow progress due to:
The limited market size of many countries.
Survival of the historical links of African countries with their previous colonial
centers, which have created production structures in supplying the centers with raw
materials in return for manufactured goods.
Concentration on increasing export earnings from a limited range of commodities at
the expense of diversification.
Failure to exploit the potentials of African trade through coordination of
development plan.
Poor and inadequate transport and communication facilities to support expanding
trade.
Lack of harmonization of standards, specifications and trade documentation.
Non-convertibility of African currencies, inappropriate exchange rate policies and
non-availability of trade financing and insurance and credit facilities.
Failure to motivate the private sector, including those engaged in the production and
marketing of export products are some of the key constraints on the ACP side. These structural
and policy weaknesses resulted in the failure of most ACP countries to not only diversify into
141
non-traditional exports, but even to maintain the competitiveness of their traditional export
products. On the EU side too, there were some protectionist obstacles impending market
access, including various non-tariff barriers and the rigid application of “rules of origin” on
import from ACP countries.
The situation of the LDCs and other low income countries should be given special
attention, particular those with a commitment to sound policies and good governance. The EU
allocates a substantially lower proportion of its resources to low income countries than most
donors, and this share has been falling over recent years. The programmes themselves should
be better designed to reduce social disparities and strengthen efforts to give a new impetus to
primary education, professional training, the reduction of gender inequalities, the main
streaming of primary healthcare policies, and support for micro-finance projects and
investment in technologies. The negotiation of the EU Budget New Financial Perspectives for
2000-2006 provide an important opportunity to reaffirm the need for EU development
programmes to focus on equitable development and to shift more resources towards low
income countries.
The Lome Convention negotiations provide an important opportunity to strengthen
Europe’s development co-operation with some of the world’s poorest states. The EU’s
negotiating mandate for a successor to the current convention, which expires in February 2000,
was agreed upon by the European Council in June 1998 201 and includes commitments to
improve political dialogue, human rights, good governance and conflict prevention. It also
includes a proposal on trade that should help enhance the trading interest of the ACP countries.
The EU’s stand towards human rights in Africa is that the right to enjoy freedom requires
an obligation to support rights for others, and good governance is an essential foundation of
successful, pro-poor economic development. Experience in development over recent decades
proves that economic growth is a necessary but not a sufficient condition for poverty reduction.
Where systems of governance are weak, where human rights are violated or denied, where
there is no free press, and where corruption is widespread, it is the poor of a country who are
the principal loser.202 An effective rule of law, a free press and media, and open accountable
and participatory political structures are key to bringing about real improvement in the lives of
the poor.
201
University of Pennsylvania- African Studies Center, Africa New Lome Talks, 13 Oct 1998 distributed: 981013
document, reposted by APIC.
202
See Betz (2003), pp. 90-91.
142
In the large parts of Africa, war and violent conflict are principal causes of poverty and a
major obstacle to progress in development. The risk of war is much greater in poor countries
which lack the political and legal structures necessary to resolve conflicts non-violently. Of the
thirty-four poorest countries in the world, twenty are either in the midst of armed conflict or
have only recently emerged from conflict.203 Thus, European development co-operation has a
crucial role to play in helping to reduce the risks of war and in assisting with post-conflict
reconstruction and peace building. Development co-operation can help reduce the risks of
violent conflict by supporting more inclusive forms of economic development and strengthen
support for democracy, and human rights. The overall aim should be to help create a political
and social environment which allows the equitable representation of different groups and the
resolution of disputes and grievances without resorting to violence.
Building on the new EU code of conduct, the EU should tighten controls over the export
of arms and military equipment; take action to curb illicit trafficking in small arms and light
weapons, and increase support for landmine clearance. A stronger European role in postconflict reconstruction should involve trying to give civilians and former soldiers a stake in
peace processes, and thereby minimize the risks of recurrence of violence. In some cases, this
should include support for the demobilization and reintegration of soldiers, and assistance with
security sector reform to ensure that security forces are appropriately structured and managed,
and subject to proper civilian authority and control. The European Community Humanitarian
Office (ECHO) has an important role in responding to humanitarian emergencies, whether they
result from war and conflict, or from environmental and climate changes. When faced with a
humanitarian disaster there is clearly a moral responsibility to help reduce human suffering and
assist with relief and reconstruction. Europe can help reduce the risk of violent conflict by
preparing conflict prevention204 measures that can be employed in times of war and conflict
when the pressures of a growing population and fragile environments become unbearable, and
when increased trade activity increases migration flows within and between countries.205
Furthermore, there are currently over 30 million refugees and displaced persons uprooted by
violence who count amongst the poorest people in the world. These pressures of poverty and
persecution provoke migration and ensuring respect for the rights of legal migrants, refugees
and asylum seekers within Europe should be of high priority.206
203
Report by the PES development group, Anew Agenda for European development cooperation (March 1999),
p. 4.
204
See Article 11 of the Cotonou Partnership Agreement.
205
See Toole (1990).
206
See Betz (2003), p. 91.
143
EU should reduce its own protectionism in areas such as agriculture. The EU should also
be working with African countries to enhance their trade capacity, as well as strengthening
their ability to exercise their rights, on equal terms, within the WTO.
Private investment has an absolutely vital role to play in improving the development
projects of poor countries, while there has been a huge increase in levels of FDI into
developing countries over recent years; the vast majority of these flows have been concentrated
in a handful of countries. The EU should encourage an increase in the quantity of direct private
investment going into the world’s poorest countries.207 Private investment is more likely to
flow to countries where there is a stable macro-economic framework, a functioning social
market economy, proper systems of business and financial regulation and good governance.
Europe should use its development co-operation policy to promote these objectives. If Europe
is to maximize its contribution to poverty eradication, it is essential that it pursues an integrated
and genuinely coherent approach to development; an approach that brings together EU policies
on development assistance with its policies on trade, investment, debt, agriculture, conflict
prevention, human rights and the environment. Europe has enough influence within the World
Bank and the IMF to win support for a more balanced approach to economic adjustment.
6.6. Obstacles facing African trade
Africa is the region with the largest grouping of least developed countries. It is also the
continent with the highest proportion of the population living in poverty. According to the
World Bank, 300 million people in sub-Saharan Africa survive on less than US$ 1 a day with
the added problems of conflict and disease, life expectancy in decreasing faster in Africa than
anywhere else in the world.
The developing countries export mostly raw materials and basic agricultural
commodities, and import mostly manufactured and semi-manufactured goods. Because of
world price trends for basic commodities relative to manufactures, the developing countries
have found themselves over the years paying as much or more per unit of import each year
while receiving for their exports less per unit of exports. This relationship of units values of
exports to unit values of imports is called terms of trade.
The disadvantage suffered by developing countries is the lack of product diversity in their
exports. The high dependence of many of the countries on only a few products for exports
means that their total foreign exchange earnings are very vulnerable to market fluctuations in
207
See Rogoff and Reinhart (2002).
144
specific products. Nearly half of the developing countries earn over 50 percent of their exports
receipt from a single primary commodity such as coffee or coca.208
Merchandise trade in volume terms rose by 12 percent in 2000, the fastest rate in more
than a decade. The growth of merchandise trade exceeded that of output by 8 percent points,
one of the largest margins in the 1990s. It is estimated that while African trade showed
acceleration in 2000 compared with 1999, it continued to report the lowest export and import
growth of all regions in volume terms. All the net fuel exporting regions showed a stronger
growth rate than the net fuel importing regions.
More than half of all Africans are living in absolute poverty and agree to intensify the
fight against poverty. The primary responsibility for alleviating poverty lies at home with each
country but this doesn’t diminish the importance of the international dimension in the war
against poverty.209
One of the obstacles of African trade is that Africa suffers from external debt. The main reason
Africa as a whole has 350 billion dollars 210 debt is that after these countries had become
independent during the 1950s they needed to develop their countries through taking a lot of
financial resources from the rich world, but without adequate economic planning. Secondly,
external shocks in the mid 1970s because of the high oil prices and a general deterioration in
term of trade led to a world recession. The proportion of external debt to GDP in Africa stood
at 27.4% in 1980 and rose to an average of 92.1% between 1985-1991 (World Bank 1995 data).
African poor performance is due to inappropriate domestic policies and an unproductive public
sector. Many African countries still spend more on paying off debt than they do on health care
or education. A wipe out of a lot of debt owed by 18 countries (14 countries are in Africa) to
hand Africa out of poverty would be one of the biggest write offs of debt ever, and it could
improve in the lives of the world’s poorest people. This step has been taken by the rich nations
finance ministers in London, organised by the UK and the USA it cancelled around $ 40 billion
(according to this agreement conference in England 2005), and these countries will be freed of
their debt to the World Bank and IMF. The debt cancellation will be implemented during the
year 2006. These countries are chosen because they have already completed the harsh heavily
indebted poor countries (HIPC) and received some debt relief (Sudan is not one of these
countries which have been classified).211
208
See WTO (1997), p. 55.
See Temu (1969), pp. 13-14.
210
See Birdsall, Claessens and Diwan (2003), p. 410.
211
http://en.wikipedia.org/wiki/31st_G8_summit.
209
145
Many of the ACP states now face enormous obstacles due to unreliable provision of
public utilities (electricity and water supply) and poor public infrastructure (roads and railways)
and weak institutional and policy frameworks (leading to fluctuating exchange rates and
interest rates as well as to high inflation), and low labour productivity (arising from poor
education, health, in particular HIV/AIDS and housing provisions. There should be negotiation
and a co-ordinated and integrated programme between EU-ACP to deal with these obstacles.
Increasing funding from EU could help enhance investment and economic activity.
Infrastructural problems facing Africa, particularly in the areas of transport,
communication energy, and water supply have been major constraints on the continent’s
growth and development. Therefore there has to be efforts regarding flow of domestic and
foreign resources and with financing and promoting the private sector.
Some obstacles to trade must occur for an export strategy to be successful; there is a need
for a broadly supportive policy environment at home, including macroeconomic stability,
public investment in infrastructure and human capital, access to financing and policies that
provide suitable incentives for investment in the export sector. In Africa, many of these areas
are problematic. Therefore, efforts to improve Africa’s export performance need not only
concentrate on improving market access opportunities, but also further developing the domestic
trade environment to better reap the benefits of the current market access.
Most African countries rely on a few primary commodities for a major part of their
export earning, with a high degree of commodity concentration as, for example, in the case of
Burundi and Zambia. Minerals fuel and related materials continue to dominate the region’s
exports, followed by beverages and tobacco. Manufactured goods account for more than 70
percent of imports; by and large investment goods in the farm machinery and transport
equipment continue to claim a high proportion of imports. While the higher share of capital
goods imports is encouraging, it nevertheless reflects two basic weaknesses, in the structure of
the region’s economies. The first is the continued heavy dependence on the import of capital
goods, signalling the fact that a major technological transformation is yet to take root in
African economies.
The second is the failure of the manufacturing sector to make a significant dent in the
import of consumer goods which absorbs the same proportion of export earnings. African
governments have adopted diversification schemes as essential elements of their development
strategies for several decades. Such diversification schemes have taken two forms: vertical and
horizontal. The horizontal diversification strategy aims at increasing the number of exportable
primary commodities while the vertical option envisages domestic processing of exportable
146
commodities and export of processed and manufactured goods. On the whole, in most countries
the strategy failed to achieve its objectives, the reasons were both internal and external. On the
domestic front, vertical diversification required financial capacity, technical know-how and
managerial skills; all resources with which many African countries are poorly endowed. To the
extent that these domestic constraints were surmounted, there were major obstacles also to
overcome in external markets; the first of these is the marketing problem. In a world dominated
by oligopolistic market structures in which multinational corporations and brand names
dominate, the more pervasive constraint to the export processed and manufactured goods is
implacable protectionism of industrial countries through tariff and in particular non-tariff
barriers. Over the years the tariffs imposed on primary commodities have been substantially
reduced. At the beginning of the Uruguay Round negotiation in 1987, trade weighted tariffs
were 6 percent in the EU, 4.3 percent in the USA and 2.9 percent in Japan. Tariff escalation
based on the degree of processing was a major obstacle for African exporters of processed
goods and manufactured products; the more serious obstacles were of non-tariff nature. These
multifaceted barriers, usually considered as domestic policies, have been excluded from the
various multilateral trade negotiations, despite their considerable impact on trade.
212
Developed countries still supply over 70 percent of Africa’s imports and purchase 80
percent of Africa’s exports. For historical reasons, the EU continues to dominate Africa’s
external trade, accounting for 73 percent of the region’s exports and providing 57 percent of its
imports. African countries have been facing internal and external difficulties, macro economic
instability social turmoil, civil strife, weak and disjointed institutions, heavy debt burden,
unfavourable international economic environment and deteriorating terms of trade. With regard
to private financial flows, there has been a slight recovery in foreign direct financial and
portfolio investment but it has been confined to a few countries.
In order to be able to double average per capita income in Africa and substantially reduce
poverty over a period of 20-25 years, a large increase in external financing would be required,
in addition to an increase in domestic resources, which would require the gross domestic
savings rate to be raised, massive support by Africa’s development partners would have to be
indispensable and willing to support those efforts in the short and medium term.
In many ACP countries serious constraints are faced by ACP enterprise in producing goods
competitively, as a result of the developing nature of their economies. These constraints range
from the unreliable provision of public utilities (electricity and water supply) and poor public
212
See www.sas.upenn.edu/African_studies/ECA/AFEC3.html University of Pennsylvania, African Studies
Center.
147
infrastructure (run down roads and railways) to weak institutional and policy frameworks
(leading to fluctuating exchange rates and high inflation and interest rates) and to low labour
productivity (arising from poor education, health and housing provisions). The EU maintains
that economic partnership agreement will promote more effective action in addressing supply
side constraints by opening up ACP economies to competition.
Two thirds of all poor people, in developing countries live and work in the agricultural
sector213 and are dependant on agriculture for their livelihoods; this is the case for less than five
percent of the population in the EU. Yet the trade policies of the EU combine billions of dollars
of domestic support, export subsidies and extremely high tariffs to protect their large farmers.
This has resulted in a devastating impact on the livelihood of small and poor farmers and
workers in the developing world. It is now well established that this contributes to a vicious
cycle, contributing to the decimation of the productive and export competitiveness of
developing countries. Agriculture occupies a relatively small share of EU output and
employment in this sector is at 4.3 percent. The EU continues to support its farmers by an
amount of US$ 90 billion through a variety of measures including domestic support and export
subsidies. This support amounts to more than two thirds of the gross value added in agricultural
production. Tariff escalation, tariff peaks and quota often support these subsidies.
In the case of coca and coffee for example, the EU even has high tariffs allowing for
preferences under the Generalised Scheme of Preferences system (GSP) on coffee and coca, of
9-12 percent. The tariffs are zero for unprocessed product.
The purpose of this is to protect domestic industries in the EU against foreign
competition. A Swedish study214 (2001) argues that if a tariff escalation were to be dismantled,
this would give developing countries better conditions for processing the raw materials
themselves, and for exporting the processed product instead. Fruit is still subject to high tariffs
in the EU. Tropical fruit like citrus for example, still face exceptionally high tariffs of up to 19
percent. Cut flowers also face high tariffs in the EU, normally 15-17 percent and for a few there
is a GSP rate but still at about 15 percent tariff charge. These tariffs inhibit production and
exports in developing countries.
The clothing and textile industries have been subject to the highest levels of protection by
product and country, through the use of tariffs and quotas Agreement on Textiles and Clothing
(ATC). In addition, the EU has an escalating tariff structure from 0 for cotton seeds and waste,
213
214
See Serageldin (1989), p. 39.
See Chevassus-Lozza and Gallezor (June 2003).
148
to 5 percent for yarn, 9-10 percent for cloth and 12-13 percent for most clothing, with the GSP
rates for yarn and cloth being only slightly below this.
215
The EU remains the second largest user of anti dumping measures. These measures
also tend to be taken in areas of comparative advantage to developing countries, further
exacerbating the ability of developing countries to compete in the global market. A large
number of antidumping cases were lodged in textiles and clothing. There were 15 anti dumping
cases between (1993-1999). Thus this trend makes some commentators conclude that the EU
overall levels of protection remain high, with non-trade barrier and anti dumping measures
raising the overall levels of protection in industrial goods by a third to two thirds from 6.7 to 11
percent in 1995 and from 4.3 to 7.7 percent in 1999.
The EU protects its meat producers (beef, pork, poultry, and lamb) through high tariffs
and restrictions and subsidies that are a result of the Common Agricultural Policy (CAP). The
EU is the second largest sugar producer in the world after Brazil. The EU sugar regime is
responsible for the chronic over supply of sugar on the world market and depressed prices.
Thus reducing protection in this area would stimulate re-location of production to developing
countries with greater comparative advantage.
216
The trade regime of the EU and other industrial countries are open, agriculture is the
major exception. Protection in textiles also remains significant but is being gradually phased
out in accordance with the multilateral trade agreements that resulted from the Uruguay Round.
Tariffs on agricultural raw materials in the EU average 5 percent, and those for processed
agricultural goods average more than 10 percent, while the average EU tariff on other goods is
only about 2 percent. Significant escalation is built into the EU’s tariff structure, which
discourages imports of higher value added processed products from Africa. The industrial
countries have also erected many non-tariff barriers in the form of price supports, subsidies and
special marketing arrangements that keep out agricultural products from Africa. Product
standards and health regulations can also be used for restrictive purposes. Thus, it is clearly in
Africa’s interest to support broad-based multilateral liberalisation of agriculture in the next
round of global trade negotiations. Cost of transport is one of the main problems faced by
developing countries in trade.217 Costs of aggregate transport time and costs arising from loss,
215
Kempton, Holmes and Stevens (1999), pp.6-35
See Page (1999), pp.18-21.
217
See Makings (1967), p. 121.
216
149
damage and delay create additions hurdles for developing countries where trade is
concerned.218
UNACTAD calculations during 2001 indicate that the freight costs for land-locked
developing countries amount to 20.7 percent of the value of their import, compared with 8.7
percent for all developing countries. These high costs impede trade and act as a barrier, just like
tariffs and non-tariff measures. The foreign rate for ocean freight transport for developing
countries is nearly double that of developed countries. Port charges are also high in developing
countries in comparison to their counterparts in developed countries. The direct costs imposed
through high ship dues and cargo handling and storage charges are aggravated by slow ship
turn around times. The cost of delaying vessels in port increases ship-owners’ costs and ocean
freight rates and ultimately raises trader’s transport and distribution costs.
In many African countries the major trade problem is inland transport cost. The road
transport costs can be two and a half to three times more costly as in other parts of the world
and it often costs more to move a container of cargo inland to importer’s premises than to ship
it from the port of export in Europe. The United Nation Conference on Trade and development
(UNCTAD) estimated that if African road transport costs could be reduced by 10 percent, up
to US$ 12 billion could be saved each year.219 Rail and inland waterway charges are likewise
high and don’t always constitute available alternatives to shippers. Shortage of rail, road and
inland waterway capacity, as well as poor maintenance of infrastructure and vehicles, also act
as impediments to trade. The shortage of rail capacity forces traders to use road transport over
long distances (in Sudan for example due to rain and war in the south there is only a seasonal
road which takes a long time to reach). In developing countries the insurance premiums is high
because of the known high risk factors facing goods in transit. Many transport operators don’t
assume liability and carriage is performed at shipper’s risk. The liability regime in many
countries is not developed.
Transit time costs in land transport services are unreliable in many developing countries
and transport operators don’t provide consistent, scheduled services to traders. This causes
additional costs and delays for shippers and prevents them from responding quickly to market
changes and opportunities.
Long transit times inevitably increase traders transport costs. Traders payment is not
made until evidence of shipment has been received often many weeks after the goods have left
the farm or factory this time adds to trader’s costs and puts pressure on their liquidity as does
218
219
http://www.scienceblog.com/community/older/archives/L/2003/C/un032681.html.
See UNCTAD (May 1994), P. 9.
150
slow and unreliable transport services, errors in the preparations of shipping, administrative and
documentary delays. Penalties for late delivery of goods and penalty clauses in contracts are
triggered because goods are not delivered when expected; there is also damage to the supplier’s
reputation, with a loss of future orders. Late delivery causes markets to be missed. There is also
a high incidence of damage to goods when in transit in many African countries. Delays in
transit also contribute to the deterioration of goods during transport. The quality of goods
delivered is also at stake due to poor quality of packaging and packing and lack of protection
against weather damage, poor stowage of goods in containers, lack of care during cargo
handling, long transit times, especially of perishable goods, and the poor quality of storage
areas in ports.
There is high level of lost goods in transit. The reputation of traders and the opportunities
for trade expansion are often damaged by such losses, and customer satisfaction is severely
affected due to lack of security, allowing often highly organised theft, poor packing of cargo
and frequent stops and delays at border points.
African countries have much to gain from trade. The available evidence suggests that
open economies have faster growth rates than closed economies. Thus African countries have
much to gain from further liberalisation. Currently manufacturing exports from developing
countries to developed countries face - on average - an effective tariff four times higher than
that on exports between developed countries. They would also gain from lower tariffs on trade
between themselves, which are currently far higher than those in developed countries. In a
study of European Commission, of the US$ 400 billion gains from liberalisation, developing
countries would gain $140 billion a year, more than the EU (US$ 92 billion) and the (US$ 45
billion). This research shows that trade liberalisation generally helps to alleviate poverty. In
general, trade openness has beneficial effects on productivity, as does the adoption and use of
new technology and investment. It is through these channels that trade stimulates economic
growth and provides the resources necessary for reducing poverty.
Developing countries stand to benefit the most from successful WTO negotiations
launched at Doha. It has been estimated that halving protection in agriculture, industrial goods
and services could boost developing countries income by around US$ 150 billion a year (three
times the value of all aid budgets put together) according to the World Bank substantial trade
liberalisation could reduce the number of people living in poverty by over 300 million by 2015.
That is why the UK government continues to believe that free and fair trade offers one of the
best means of helping the poorest people in the poorest countries. A development-focused trade
round offers the best opportunity for many people in developing countries to escape from
151
poverty. It is widely believe that the Doha development Agenda could mark a major step
forward in the war on poverty. The lowering of trade barriers is of particular significance to
developing country exporters and should help to stimulate their economic growth.
The Doha Ministerial instructed the sub committee220 for LDCs to report on an agreed
work programme. The committee focused on:
•
Market access
•
Trade related technical assistance and capacity building.
•
Providing support to agencies assisting with diversification.
•
Mainstreaming trade.
•
Participation of LDCs in the multilateral trading system.
•
Accession of LDCs to the WTO
•
Follow up to Ministerial decisions.
The UK is also party to a number of other non WTO initiatives aimed at promoting better
integration of developing countries into the world trading system.
The Everything but Arms (EBA) initiative allows all goods, except for arms from the 49
least developed countries (LDCs) to enter into the EU duty and tariff free. Three categories of
goods (rice, bananas, sugar) were given longer implementation periods, but this means that the
LDCs now have duty free access to the EU market for goods they produce.
The GSP aims to encourage developing countries exports by allowing their products
preferential access to the markets of developed countries. GSP allows non-sensitive goods into
the EU duty free. In the “sensitive” category a flat 3.5 percent point reduction in tariff rates is
applied to the most favoured Nation (MFN) rate. The Economic Partnership Agreement (EPA)
will be at the heart of the economic and trade co-operation. The EPA is a pillar of the Cotonou
Agreement (an international agreement, between the EU and the African, Caribbean and
Pacific countries).221
The EPA will come into force by 2008 and will progressively remove barriers to trade
between the EU and 77 ACP countries. The EPA will be fully WTO compatible and will
therefore put trade relations with the ACP countries on a secure and sustainable footing. The
aim of economic and trade co-operation is to foster the smooth and gradual integration of the
220
See WTO (February 2002).
Article 35 of the Cotonou Partnership Agreement states that “economic and trade cooperation shall build on
regional integration initiatives of the ACP states, bearing in mind that regional integration is key instrument for the
integration of ACP countries into the work economy”.
221
152
ACP countries into the world economy thereby promoting sustainable development and
contributing to poverty eradication in ACP countries.
A long series of negotiations within WTO, GATT has helped reduce the tariffs and other
obstacles to trade that confront export products from developing nations to the industrialised
world. Despite this and despite especially favourable rules for the LDC nations, in many cases,
exports are made difficult due to the fact that trade in the export products most important to
developing nations, has often been liberalised.
Trade liberalisation and removal or reduction of barriers to trade is the engine of
economic globalisation. Liberalisation will help economic growth, which in turn will reduce
poverty. Also countries with more open trade enjoy higher growth rates than those with
protectionist policies. It can provide opportunities for increased market access, and these
improve export earning for developing countries.222
EU farmers receive huge handouts in subsidies and are increasing their share of global
market at the expense of the world’s rural poor. At the same time, the EU is moving very
slowly to lower its quotas on imported clothing and textiles from poor countries.
There is now less confidence that the mainstream trading system can help the poor. The
benefits of liberalisation to low income agricultural producers are likely to be very limited.
Developing countries are refusing to contemplate a new trade round at the WTO until
certain issues have been addressed. These include resolving the difficulties they currently face
over implementing their existing commitments under the Uruguay Round. They also want
developed countries to implement the agreements properly and end the continued barriers to
trade in textiles and clothing, as well as provide promised technical assistance and special
treatment for them and to cease harassing developing country exporters with anti-dumping and
anti-subsidy actions.
The WTO agreement on agriculture has permitted the developed countries to increase
their domestic subsidies instead of reducing them. This has helped to substantially continue
their export subsidies and to provide special protection to their farmers in times of increased
imports and diminished domestic prices. Most developing countries, on the other hand, have
previously provided little or no agriculture subsidies, and the agreement constrains them from
having or increasing these subsidies. They now find themselves in a situation in which they
cannot use domestic subsidies beyond a certain level, and cannot use export subsidies or
provide special protection measures for their farmers.
222
See WTO (2003), pp. 79-80.
153
However, the agreement on agriculture is one of the most imbalanced and deficient
agreements emerging out of the Uruguay Round. Countries were asked to reduce their domestic
subsidies over a span of time; the developed countries by 20 percent in six years and
developing countries by 13.3 percent in 10 years. The de minimis level was defined as 5
percent of production for developed countries and 10 percent of production for developing
countries.223
Countries having subsidies below these levels did not have to make any reduction. Since
all but a few of the developing countries had no domestic subsidies beyond the de minmis level
at that time, they did not have to make any reduction. Developed countries with high levels of
domestic subsidies were allowed to continue these up to 80 percent after the six year period,
while developing countries with very few exceptions were prohibited from having subsidies
beyond the de minimis level, except in a limited way. As for export subsidies, developed
countries were to reduce their budget outlays by 36 percent and the quantity of exports covered
by the subsidies by 21 percent over six years. The reductions for developing countries were 24
percent and 14 percent respectively over ten years. This has enabled the developed countries to
retain 64 percent of their budget allocations and 79 percent of their subsidy coverage after six
years. The developing countries, on the other hand had generally not been using export
subsidies, except in a very few cases. They are now prohibited from doing so. The inequity
relating to the special protection of farmers arises from what is called the process of
tariffication. Countries that had been using non-tariff measures for import restrain, that is,
quantitative limits on imports, were obliged to remove them and convert them into equivalent
tariffs. Countries that undertook such tariffication for a product got the benefit of the special
safeguard provision, which enables them to protect their farmers when imports rise above some
specified levels.
Countries that did not undertake tarrification did not get this special facility. This has
been clearly unfair to developing countries, which with few exceptions, did not have any nontariff measures and thus did not have to tariff them. The result is that developed countries,
which were using trade-distorting methods, have been allowed to protect their farmers, whereas
developing countries, which were not engaging in such practices, cannot provide special
protection to their farmers.
Advocates of liberalisation argue that it will help economic growth, which in turn will
reduce poverty. Also those countries with more open trade regimes have enjoyed higher growth
223
See WTO (2000).
154
rates than those with protectionist policies. Another claim is that it can provide opportunities
for increased market access, and thus improve export earning for developing countries.224
Over the last decades, Africa has been marginalized in world trade. Africa’s share of
world exports has dropped by nearly 60 percent from 4 percent in 1970 to 1.5 percent by the
end of 2004225. This dramatic decline in Africa’s export market share represents a staggering
income loss of US$ 70 billion annually, an amount equivalent to 21 percent of the region’s
GDP and to more than five times the US$13 billion in annual aid flows to Africa.
Poor export and trade performance has been closely linked to the low growth of per
capita incomes in the region. Export expansion and diversification are essential if African
economies are to grow and Africans are to have a chance to earn better livings.
The objective of Africa’s regional work program on trade is to support the integration of
African countries into the world and regional economies and improve their trade performance
and its linkages to accelerated growth and poverty reduction, particularly important for Africa
are reducing tariffs and tariff escalation on agricultural products and labour intensive
manufactures, eliminating trade distorting agricultural subsidies, preferential market access for
African exports, reasonable international product standards and restraints on monopolies.
Investment rates in Africa are low and need to be substantially raised in order to
accelerate growth and poverty reduction. An unsupportive investment climate is still a major
problem in most African countries. Policies that restrain private investment and inhibit a supply
response to improve market access and trade policies are serious impediments to growth and
competitiveness.
There are many reasons why African countries share of world trade is shrinking, and
these can vary from country to country. Several so-called external reasons are difficult for the
countries themselves to influence, such as forcing down the price of raw materials, expensive
transport and the trading policies pursued by other countries. Other reasons can be traced to the
countries themselves. Inadequate economic policy and legal frameworks, poorly developed
customs service, poor efficiency in harbours, weak general infrastructure, social instability, a
lack of processing capacity and difficulties in producing competitive products. The African
countries also levy high tariffs against each other which prevent the development of internal
trade within this group of countries.226 Most of these countries have been in a deep debt crisis
224
See Cartney (2004), pp. 3-6.
http://www.thedatareport.org/pdf/trade.pdf
226
See Frankel (1997), pp.105-212.
225
155
for many years. As a consequence of this, the World Bank and IMF have initiated restructuring
programs in these countries.
These programs aim to make the developing nations more compatible with the market
situation in the rest of the world. Measures such as deregulation and lower import tariffs
enhance their export potential. Africa is not just falling behind in the development of the world
trade; the African states are becoming increasingly marginalized in the development process.
Despite the significant progress made in trade liberalisation,227 African countries still
maintain high levels of nominal and effective protection for import competing industries, anti
export bias is strong and liberalisation is incomplete. Recently a few countries have started to
follow more aggressive export growth strategies with encouraging results, but on a continent
wide basis, export expansion and diversification appear to be low country priorities. Although
the unweighted average tariff is about 16 percent, the widespread practice of levying the
highest tariff rates on virtually all domestically produced goods, while exempting the imported
inputs used to produce these leads to much higher protection for import competing industries
and resulting inefficiencies. 228Nominal protection rates for import competing industry ranges
on average from 30 percent to 35 percent, while average effective protection rates reach 70
percent-80 percent very few countries provide exporters with effective access to import duty
and indirect tax free inputs. Inefficient and corrupt customs administrations are a substantial
additional restraint on trade and competitiveness.
Because of the very low average level of income and high incidence of poverty in Africa,
accelerated growth is essential for poverty reduction. Improved trade performance is, in turn,
critical for accelerating growth and is thus a key element of broad based poverty reduction. in
order to both strengthen the linkage between trade expansion and poverty reduction and to
better manage transitional impacts, the distributional effects of trade expansion are a standard
feature of the region’s diagnostic trade integration study.
One of the problems that faces Africa is the extensive corruption and excessive
bureaucracy which acts as a hindrance on trade. The administrative strength to punish officials
for failing to perform their public duties correctly must be strengthened. We have experiences
of cases in which embezzlers are penalized to pay a little portion of the public funds they are
found to have misappropriated, sent to jail for a couple of weeks or months and then set free to
enjoy the rest of it. Many have become millionaires in this way. Misuse of public office in nonfinancial matters doesn’t seem to be a problem at all. Senior officials who publish unfounded
227
228
See Dean, Desai and Riedel (Nov 1994), pp. 1-4.
See Ackah C. and Morrissey O. (Sep 2005), pp.7-20.
156
data for public consumption that leads to devastating results are never held accountable for
their misguided actions. If they have not executed any of their duties at the end of a given term,
they are only transferred to other posts or at the worst retire while the public stands to suffer the
result of such irresponsibility and unaccountability.
Inter trade within Africa considered as one of the main obstacles of the African trade, in
2001, for instance, trade flow within the American region amounted to 56 percent of total
internal external trade flows. The figure for Western Europe was 67.5 percent, and that for Asia
was 48.2 percent, internal trade flows within African region account for only 7.8 percent (WTO
statistics). Africa has demonstrated the lowest progress in developing regional integration and
cooperation arrangement (UNCTAD, 1993b).
The African Economic Community and exiting sub-regional economic cooperation
arrangements should accord high priority to promote trade expansion based on export and
import by removing distortions and reducing transactions costs and increasing trade flow.
African countries dominated by trade with their former colonial rather than with each other,
lower tariff entering EU and US market also make export to industrial countries more lucrative
than to other African countries.
I will point out here some of the obstacles facing African inter trade:
•
The continent has generally inadequate road and rail network.
•
Transport services operate at low level of efficiency, a study in the 1990s indicated
that transport cost in Sub-Saharan Africa countries of Cameroon, Ivory Coast and
Mali were on average five or six times higher than in Pakistan (Rizet and Hine, 1993),
a study by UNCTAD indicate that freight cost as percentage of total import value was
13% for Africa in 2000 compared to 8.8% for developing countries and 5.2% for
industrial countries.
•
Slow and cumbersome border crossing procedures.
•
Transit charges and visa requirement for transport crews.
•
Regional taxes and transit charges or bribes.
More than half of the African countries derive 95 percent of their export earnings from
three commodities (table 6.8), sometimes such dependence could be 100 percent on a single
commodity in countries such as Libya. In the case of Sudan dependence was on one
commodity before exploitation of petroleum, cotton, gum arabic depending on three
commodities by 68 percent and on two commodities by 56 percent according to the table
below. Some countries have a dependency of over 90 percent on one export commodity for
157
example Angola (94.5 percent on minerals), Gabon (99 percent on oil), Nigeria (94.5 percent
on oil) and Zambia (99 percent on minerals). Most of these are minerals whose quotas are fixed
and whose prices are unstable. They are exported crude and unprocessed to specific traditional
importers. Competition within the supply market for these products is very high.
The composition of export products also effect market access, most countries have not
changed the nature, composition or even quality of their products for decades Ghana for
example has always exported coca, coca butter, gold and wood products. Kenya and Uganda
have always relied on tea, cotton and coffee and to that list Tanzania has always added
diamonds and pyrethrum. Botswana consistently exports beef and diamonds and the same
composition of exports can be ascribed to many other African Countries.
158
Table 6.8:
Extent to which African countries depend on primary commodities for
their export earning (in percent)
Country
Algeria
Angola
Botswana
Burkina Faso
Cameroon
Central Africa
Chad
Congo
Egypt
Ethiopia
Ghana
Guinea
Kenya
Liberia
Libya
Malawi
Mauritania
Morocco
Negeria
Rwanda
Senegal
Sierra Leone
Somalia
Sudan
Tanzania
Tunsian
Uganda
Zambia
Zimbabwe
Single commodity
Two commodities
72
83
78
48
38
33
29
91
61
66
59
----30
64
100
55
45
23
96
73
32
32
76
42
40
41
95
98
20
98
87
87
63
61
64
87
96
81
88
83
91
54
81
-----75
87
33
99
85
52
49
86
56
53
45
97
99
27
(Source: Commodity year book UNCTAD, 1995)
159
Three commodities
98
99
95
75
81
87
96
99
85
96
91
99
75
88
-----84
98
42
99
97
62
62
96
68
61
47
98
99
31
7. Sudan’s Most Important Trading Partners
The trade flows between Sudan and Europe have been analysed in detail in this dissertation.
The logical question to ask now is if there are any countries or country groups which have
particularly strong trade links with Sudan. Concentrating on these countries and promoting
exports to these countries could lead to stronger growth and higher income for Sudan. In
particular, the national government could consider subsidizing exports to specific countries or
financing the construction of roads and railways. Bilateral trade agreements and the support of
the most important export sectors through low interest credits could also be advantageous.
The most logical step to start with was to look for countries that have correlating
income and trade patterns with Sudan.229 However, tests for identifying distinct groups using
income and trade correlation have not been successful. A second approach was to measure
Sudan’s imports from every country and the corresponding geographical distance. The aim
being to find those countries that import the most from Sudan and at the same time have the
shortest distance from the capital city, Khartoum. Using this approach, imports from 2000 to
2004 were measured in US dollars and normalized to values between 0 and 1. When the
distance is measured from Khartoum to the capital city of the respective country then values
normalize between 0 and 1. Since 5 years of imports are used, but only one distance value, the
imports have a higher weight in the following computation and thus follow the intuition that the
magnitude of imports matters more than the distance.
In the first step a distance measure (squared Euclidean distance) computes the
differences in the absolute values:230
d k ,l
J
= ∑ x kj − xlj
 j =1
2



1/ 2
with d k ,l as the distance between one country k and another country j. x kj and xlj are the
values of the variable j (e.g., the distance from Khartoum to the capital city of another country)
of the country k,l (j=1,2,…5). The more similar the two countries k and l are with respect to the
distance to Sudan and the imports from Sudan, the smaller is the squared Euclidean distance.
The role of the respective merger algorithm is now to merge the countries with the smallest
distance into one group. A group containing two countries P and Q is now considered a new
object. In the next step, the new object P+Q is compared with all other countries (objects) and
229
A similar approach has been taken by Frankel and Rose (1996).
230
Cf. Backhaus et al. (2003).
160
the objects with the smallest distance are merged. The single linkage algorithm proceeds as
follows:
D(R;P+Q) = 0.5{D(R,P) + D(R,Q) - |D(R,P) – D(R,Q)|}
With D as the squared Euclidean distance between the object P+Q and some other country
(object) R. This formula can be simplified to D(R;P+Q) = min {D(R,P);D(R,Q)}. Thus, the
country with the smallest distance is the crucial object in the group P+Q when comparing with
another country R. The single linkage method is thus also called “nearest-neighbor” method
and because of the property of finding outliers this method is commonly used in a first
approach.
As can be seen from figure 7.1, the countries starting from Morocco and Austria up to
Greece are merged into one group while countries like Germany, Italy, France, and Egypt are
merged much later and with a higher distance which suggests that they are dissimilar to the
other countries.231 Egypt and France are considered outliers and thus excluded from the further
procedure. It is important to notice, however, that Egypt and France are outliers because of
their extremely high imports from Sudan. Even though they have to be excluded from the
ensuing procedure in order to obtain unbiased test results, they are particularly important
trading partners. In the next step, the Ward Method is applied excluding Egypt and France. The
Ward Method uses a different merger algorithm that merges two objects which increase the
sum of squared errors as little as possible:
Sum of squared errors: V g = ∑∑ (x kjg − x jg )
Kg
J
2
k =1 j =1
with x kjg as the value of the variable j (e.g., imports from Sudan) for object k for all objects k =
1,…, K g of group g.
and x jg =
1
Kg
Kg
∑x
k =1
kjg
as the mean of the variable j in group g.
Ward Method algorithm:
D(R;P+Q) =
231
1
{( NR + NP )* D( R , P ) + ( NR + NQ )* D( R ,Q )− NR * D( P ,Q )}
NR + NP + NQ
The statistical software SPSS normalizes the highest distance to 25.
161
NR, NP and NQ are the number of objects in group R,P and Q, respectively. The Ward Method
tends to create groups of similar size, but tests show that the Ward Method is able to merge the
right objects into groups.232
Figure 7.2 looks promising and shows Sudan in a group with mainly African, northern
African and one southern European country. Table 7.1 shows which object is merged to a
cluster at which step. In step 16, Sudan (number 1) is merged with number 2 (Nigeria and
Tunisia) at a distance coefficient of 0.753 and in the 17th step with number 3 which at this stage
already contains Uganda, Cameroon and Kenya. Furthermore, the coefficients show that the 3
Cluster solution probably fits best since the increase of the distance measured in step 19 from
1.365 to 2.088 is large. Table 7.2 shows the group of countries which have the highest imports
from Sudan and the shortest transportation distance and thus turn out to be its most important
trading partners. Sudan is in one group with Nigeria, Ethiopia, Kenya, Cameroon, Uganda,
Tanzania, Tunisia and Greece. Thus, Sudan should concentrate on exports to those African
countries, such as Tunisia and other northern African countries. Figure 7.3 shows that Egypt
and France are of special importance and should be the entrance to the Arabic world and
Europe, respectively. If transportation costs are considered important, e.g., when trading
livestock, Greece is then attractive due to its location. If Sudan wants to expand its exports to
Europe then France and Greece would be the best places to start with.
232
Cf. Bergs (1981).
162
Figure 7.1: Dendrogram of imports and distance using Single Linkage
Rescaled Distance Cluster Combine
C A S E
Label
Num
0
5
10
15
20
25
+---------+---------+---------+---------+---------+
Morocco
20
òø
Austria
24
òú
Ivoire
17
òú
Algeria
19
òú
Angola
14
òú
Burkina
16
òú
Portugal
22
òú
Spain
10
òú
Cameroon
5
òú
Tanzania
15
òú
Uganda
13
òú
2
òú
Nigeria
3
òôòø
Tunisia
18
òú ó
Greece
21
ò÷ ó
Ireland
23
òòòôòø
Ethiopia
Kenya
4
òòòú ó
UK
8
òòòú ùòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòø
12
òòò÷ ó
ùòòòòòòòø
Sudan
1
òòòòò÷
ó
Germany
6
òòòòòòòòòòòòòòòòòòòòòûòòòòòòòòòòòòòòò÷
ùòòòø
Italy
9
òòòòòòòòòòòòòòòòòòòòò÷
ó
ó
egypt
11
òòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòò÷
ó
Netherla
France
7
ó
òòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòò÷
Figure 7.1 shows that Egypt and France are outliers because of their large distance values and
are thus excluded from the further procedure.
163
Figure 7.2: Dendrogram of imports and distance using Ward Method
Rescaled Distance Cluster Combine
C A S E
Label
Num
0
5
10
15
20
25
+---------+---------+---------+---------+---------+
Morocco
18
òø
Austria
22
òú
Portugal
20
òú
9
òú
Spain
Ireland
21
òôòòòòòø
Ivoire
15
òú
ó
Algeria
17
òú
ùòø
Angola
12
òú
ó ó
Burkina
14
ò÷
ó ó
UK
7
òûòòòòò÷ ó
Netherla
10
ò÷
ùòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòø
Cameroon
5
òø
ó
ó
Tanzania
13
òú
ó
ó
3
òôòø
ó
ó
11
òú ó
ó
ó
ò÷ ùòòòòò÷
ó
Ethiopia
Uganda
Kenya
4
Tunisia
16
òø ó
ó
Greece
19
òú ó
ó
Nigeria
2
òôò÷
ó
Sudan
1
ò÷
ó
Germany
6
òòòûòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòòò÷
Italy
8
òòò÷
Figure 7.2 shows that Sudan is in a group with mainly African countries except for Greece as
the only European country.
164
Table 7.1: classification overview:
First Occurrence of the
Cluster
Merged Clusters
Step
1
Cluster 1
18
Cluster 2
22
2
5
3
15
4
Coefficients
Next Step
,000
Cluster 1
0
Cluster 2
0
13
,001
0
0
10
17
,002
0
0
7
12
14
,004
0
0
7
5
18
20
,011
1
0
8
6
3
11
,020
0
0
10
7
12
15
,028
4
3
15
8
9
18
,059
0
5
11
9
16
19
,091
0
0
13
10
3
5
,126
6
2
12
11
9
21
,185
8
0
15
12
3
4
,270
10
0
17
13
2
16
,358
0
9
16
14
7
10
,450
0
0
19
15
9
12
,576
11
7
19
16
1
2
,753
0
13
17
17
1
3
1,050
16
12
20
18
6
8
1,365
0
0
21
19
7
9
2,088
14
15
20
20
1
7
2,997
17
19
21
21
1
6
8,414
20
18
0
5
Countries with small distance coefficients are merged first. A large increase from step 18 to 19
suggests a 3 cluster solution.
165
Table 7.2: Summary of cases:
Countries
Ward
Method
Cluster
number
1
1
Sudan
2
Nigeria
3
Ethiopia
4
Kenya
5
Cameroon
6
Uganda
7
Tanzania
8
Tunisia
9
total
2
Greece
N
1
Germany
2
total
3
Italy
N
2
1
UK
2
Spain
3
Netherla
4
Angola
5
Burkina
6
Ivoire
7
Algeria
8
Morocco
9
Portugal
10
Ireland
11
total
total
9
N
Austria
N
11
22
Sudan is in one group with Nigeria, Ethiopia, Kenya, Cameroon, Uganda, Tanzania, Tunisia
and Greece.
166
Figure 7.3: The most important importing countries of Sudan:
France and Egypt have exceptionally high imports from Sudan. Other European countries like
the UK, Italy and Germany imported goods in worth of approximatelyUS$ 30 million in 2004.
8. Conclusion and Main Findings
8.1 Scope and limitations of the study
The analyses included in this dissertation have certain limitations that need to be understood
before writing the main conclusion. Africa is by far the world’s poorest inhabited continent,
and more important to understand is that it is on average poorer than it was 25 years ago. The
economic challenges facing Africa today are serious, and although there are some signs of
improvement, problems such as HIV/AIDS and debt burden are severely constraining growth
167
and development in Africa. It is for these reasons that the volume of EU-Africa trade is small
compared to EU trade with developed countries such as the USA, Switzerland and Japan.
Africa accounts for only 1.4% of the EU’s total merchandise exports and 1.7% of its
merchandise import, thus the impact on the EU of free trade arrangements with Africa is likely
to be quite limited and easier for the EU to adjust than for Africa. The differences in economic
size and the relative importance of EU-Africa trade to the two sides place the EU in a much
stronger bargains position than Africa.
This study should provide a framework that may impact the future of foreign trade
between Africa and EU. Its primary importance lies in bringing out the structure of Sudanese
trade flows with her major trading partner, the EU.
The process of globalisation, or in other words, the intensification of economic, political,
social and cultural relations across international boundaries has transformed the world into one
large village. This has meant an increasing breakdown of trade barriers and increasing
integration of world markets. African countries should take advantage of globalisation in
positive way by focusing efforts on enhancing trade progress among existing partners as well
as potential partners.
There are 54 independent countries in Africa, however, the data gathered for this research
only concentrated on certain countries, thus making it difficult to claim a general study on the
whole of Africa. Focusing very specifically on particular countries in Africa could have
improved the quality of research and this is thus considered as one of the major limitations of
this dissertation. As this is the first study of its kind concerning Sudan and the EU, the data and
information about EU-Sudan trade relations was consequently very limited. As a result, it was a
complex task to analyse all facets of economic trade between the two sides. This is where indepth interviews offered the opportunity to gather information from individuals and officials on
both sides. Nevertheless, personally collecting data from different countries in Africa would
have been an ideal means of improving the quality of the research. Unfortunately, financial
constraints did not allow for travel to and from African countries, which in turn posed the
second major limitation in terms of research for this dissertation.
8.2 Conclusions
This research concludes with a number of remarks. In terms of a framework for Africa-EU
trade, the research outlines the evolution of the special links between the EU and Africa,
considering first the status of the latter as a colonial entity under various European powers, the
168
later within the framework of special trade relations between the EU and its ACP associates
moving through several stages in different years.
Concerning the importance of trade between the EU and Africa, the research shows that
the EU is comprised of strong economies and Africa of weak developing economies. The
relative poor export performance of the ACP countries can be partly attributed to their export
structure, which does not resemble that of more developed and newly industrialised countries.
The ACP countries exports mainly consist of raw materials (mainly agricultural commodities
such as coffee, coca, cotton, sugar and vegetable oil, the main mineral commodities are copper,
bauxite, iron, manganese and petroleum products) while the share of manufactured goods
remains comparatively low. The ACP countries export performance still depends on these
unprocessed agriculture and mining products. The ACP countries still depend on the EU
market to import its products, and the EU remains the largest purchaser of ACP (African
countries) imports.
This research identified some of the key strategic and policy challenges facing African
trade and the policies that are aimed at improving the productivity in the future of EU-Africa
trade. The EU, which represents 20 percent of the world’s total exports and imports, occupies a
clear first place in world trade. The EU spends around € 30 billion per year on development
cooperation which is more than half the amount of aid granted globally. With a budget of € 7
billion per year, the European Commission is the world’s largest donor and a large proportion
of the aid granted by the EU (€ 2.43 billion) is channelled through the European Development
Fund (EDF). Creating incentives for African farmers to sell their products on the EU market
should reduce poverty in Africa. In addition, reducing or removing agricultural tariffs in the EU
would allow Africa’s farmers to export enough products to reverse growing poverty levels on
the continent. Educational, cultural, health and social services components should also be
included in trade agreements with Africa.
The main objective of the EU development cooperation policy is lasting poverty
reduction and EU economic cooperation, which has accordingly been very beneficial to Africa.
It has contributed enormously to the development in infrastructure, manufacturing, human
resources and healthcare. The region has clearly made advances, but it also continues to
grapple with major difficulties. In this regard, the research offered some methods and means
for achieving fuller integration into the global economy. For example, introducing more
technology and know-how via trade. A crucial diplomatic task facing the EU-ACP partnership
is cooperation in establishing peace in Africa and bringing about conditions for peaceful
unification. The series of bilateral talks have greatly contributed to creating an overall
169
hospitable atmosphere between the two parties. In recent years, EU-Africa bilateral
development cooperation has been remarkable and has progressively expanded by creating
conditions that attract more FDI to Africa. The rate of the total value of trade has increased at
an incredible rate; however, there is still immense potential for further development in terms of
EU-Africa economic and trade relations. Africa is a traditional agriculturally dependent
continent and besides the prioritised areas of cooperation as mentioned above, there are also
some other sectors that have great potential for development in the future. These are also
sectors in which the EU and Africa potentially complement each other. These sectors include
mining, petroleum, forestry-based products and fisheries. The strengthening of networks is still
needed in order to improve economic relations, and especially to increase the trade between the
two continents. The trade relationship between Europe and Africa has historically been
characterized by strong trade surplus in favour of the EU.
Reference has already been made to the Lome Agreement between the EU and ACP
countries. This agreement gave preference to ACP countries in terms of exports of traditional
tropical products to the EU. Since this is the first study of its kind concerning Sudan’s foreign
trade, its primary importance was concerned in bringing out the structure of Sudan’s trade
flows with her trading partners. Sudan’s participation in the Lome Agreement played a large
role in determining its structure of trade in relation to the EU.
On the other hand, research concerned with the Sudanese economy has undergone a
series of changes during the last decades. The literary analysis on this transformation has
focused mainly on the sectoral composition of the GDP at various points in time. It is quite
evident from the strand of literature that the economy is still predominantly agrarian in nature
with the public sector playing an increasingly important role. In this research, historical
developments in Sudan’s foreign trade since independence has been established as a major
determinant of Sudan-EU trade relations and its corresponding performance.
A survey of the general literature concerning the Sudanese economy, especially recently
with economic liberalization, ascertained that Sudan has been able improve its situation in
terms of economic indicators. The research is this dissertation is intended to supplement
existing literature, and to give a birds eye view of information regarding EU policy towards
developing countries as well as EU policy and tariff structures for primary and agricultural
commodities. It has been based on the collection of information regarding Sudanese
government policy, fiscal policy, customs duty structures and exports and imports over
different years. Future predictions of trade in Africa are impossible because of the unusual and
unpredictable transformation of governments and policies.
170
A1 Appendix
Information pertaining to the survey can be found at the following internet
websites:
• http://europa-eu-un.org/articles/de/article_1117_de.htm
EU-Sudan relation (EU humanitarian aid to Sudan) 24/01/2002
• http://www.ruc.dk/upload/application/pdf/f51d6748/spaventa percent202_99.pdf
Alessandro Spaventa, Research report 2/1999 The Lome Convention Objective,
instruments, Results.
•
http://www.satradehub.org/CXA_html/docs/reports/USAfrican%20Trade%20Profile%202004.pdf p.12
US-African trade profile United States Department of Commerce, International
Trade Administration Washington.D.C.20230, 2004
• http://hrw.org/reports/2004/sudan0504/5.htm#_Toc71531691
Human Rights Watch Abused by the government-Janjaweed in West Darfur
2003.
• http://www.sudantribune.com/article.php3?id_article=13995
Philip Ngunjiri Sudan Tribune, UK White Nile to prospect in disputed block Ba
10 February 2006 .
•
http://en.wikipedia.org/wiki/31st_G8_summit
Wikipedia, the free Encyclopaedia, 31st G8 summit July 2005
•
www.sas.upenn.edu/African_studies/ECA/AFEC3.html
University of Pennsylvania, African Studies Center
•
http://www.thedatareport.org/pdf/trade.pdf
•
Make trade work for Africa
http://www.scienceblog.com/community/older/archives/L/2003/C/un032681.html
Science Blog
UNCTAD Review Notes Rebound in World Seaborne trade Nov.2003
•
http://www.bankofsudan.org/arabic/period/annual/annual04/chapter_8.pdf
Bank of Sudan Forty Four Annual report 2004 in Arabic Language.
http://www.un.org/special-rep/ohrlls/ldc/list.htm
171
UN Office of the High Representative for the Least Developing Countries and
Small Island developing States- 2006
•
http://www.mofsudan.net/PDF%20Files/PERFORMANCE%20OF%20THE%20SUDANESE%2
0ECONOMY%20DURING%201990.pdf
Ministry Of Finance and National Economy
Performance of Sudanese Economy during 1990-2001
•
http://www.mof-sudan.com/DNews/011104/budget%202006%20%206_copy(2).htm
Ministry of Finance 2006
Macro Economic Objective for 2006 Budget
•
http://www.indexmundi.com/sudan/gdp_real_growth_rate.html
Mundi Index January 2005
Sudan GDP-real growth rate
•
www.europa.eu.int/comm/development/body/cotonou/index_en.htm
European Commission 2006
The Cotonou Agreement
•
http://www.findarticles.com/p/articles/mi_go1690/is_200207/ai_n7159485
EU, US pledge to increase development assistance. (Environmental Intelligence)
July 2002 by Elizabeth Bath
• http://www.cewarn.org/ The conflict Early Warning and response (EWARN)
Mechanism in the Intergovernmental Authority on Development (IGAD).
•
http://www.ictsd.org/html/weekly/story5.31-10-00.htm ICTSD Bridges Weekly
Trade New Digest Feature Article Volume 4, Number 41, 31 October 2000.
• http://www.comesa.int/comesa%20treaty/comesa%20treaty/Multilanguage_content.2005-07-01.3414/en
The Common Market for Eastern and Southern Africa, establishment and
membership including different Article of the COMESA agreement.
• http://www.odi.org.uk/pppg/activities/concepts_analysis/poorperformers/Backgr
oundPaper5-Sudan.pdf
Harmer, Adele (March 2004): Aid to Poorly Performing Countries Sudan
Case Study ODI Overseas Development Institute, March 2004.
172
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