Private Sector-Led Economic Diversification and Development in Sudan
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SUDAN COUNTRY OFFICE PRIVATE SECTOR-LED ECONOMIC DIVERSIFICATION AND DEVELOPMENT IN SUDAN African Development Bank Group East Africa Regional Development & Business Delivery Office 2016 PRIVATE SECTOR-LED ECONOMIC DIVERSIFICATION AND DEVELOPMENT IN SUDAN THE AFRICAN DEVELOPMENT BANK GROUP The production of this report has been coordinated by the African Development Bank (AfDB). Designations employed in this publication do not imply the expression of any opinion on the part of the institution concerning the legal status of any country, or the limitation of its frontier. While efforts have been made to present reliable information, the AfDB accepts no responsibility whatsoever for any consequences of its use. Ag. Vice President: Janvier Litse Regional Director (EARC): Gabriel Negatu Resident Representative (ETFO): Josephine Ngure Chief Regional Economist (EARC): Tilahun Temesgen Senior Macroeconomist (ETFO): Admit Zerihun PLEASE Copyright 2016 — AFRICAN DEVELOPMENT BANK GROUP UPDATE Photo Credits: AfDB photo files THIS PAGE PUBLISHED BY African Development Bank Group - Eastern Africa Regional Resource Centre (EARC) Khushee Tower Longonot Road, Upper Hill Nairobi, Kenya Phone: (254) 20 2712925/26/28 Fax: (254) 20 2712938 Email: [email protected] Website: www.afdb.org TABLE OF CONTENTS FOREWORD .........................................................................................................................................iii PREFACE ............................................................................................................................................ v ACKNOWLEDGMENTS .............................................................................................................................vi EXECUTIVE SUMMARY ........................................................................................................................... vii ACRONYMS AND ABBREVIATIONS..........................................................................................................x 1. ECONOMIC PERFORMANCE IN RECENT DECADES .....................................................................1 1.1 Social and Political Setting .....................................................................................................................1 1.2 Internal Conflict and Economic Sanctions ..............................................................................................3 1.3 Demographic Change and Labour Force Growth ...................................................................................6 1.4 Patterns of Development Since Independence.......................................................................................8 1.5 Implications for Incomes and Poverty...................................................................................................14 1.6 Challenges for Development and Diversification ...................................................................................16 2. STRATEGY FOR BROAD-BASED AND INCLUSIVE GROWTH ......................................................23 2.1 Private Sector-led Growth and Diversification .......................................................................................23 2.2 Resource Base of the Country .............................................................................................................25 2.3 Proposed Programme for Economic Diversification ..............................................................................32 2.4 Growth Prospects for the Decade Ahead .............................................................................................34 2.5 Economic Impact of the Programme and the Benefits .........................................................................37 3. TRANSITION TO A STABLE MACROECONOMIC ENVIRONMENT...............................................43 3.1 Key Challenges for Macroeconomic Management ...............................................................................43 3.2 Re-emergence of High Domestic Inflation ............................................................................................46 3.3 The Need for Fiscal Consolidation ........................................................................................................46 3.4 Monetary Policy and Exchange Rate Management .............................................................................49 3.5 Trade Policy External Imbalances and Debt .........................................................................................53 3.6 Macroeconomic Outlook for the Medium and Longer Term ..................................................................56 4. PROMOTING PRIVATE SECTOR-LED GROWTH ...........................................................................59 4.1 The Setting ........................................................................................................................................59 4.2 Current Profile of the Private Sector .....................................................................................................60 4.3 Private Sector Productivity and Competitiveness .................................................................................61 4.4 Investment Climate and Government Policies ......................................................................................64 4.5 Impediments to Private Sector Growth ................................................................................................65 4.6 Private Investment Requirements and Financing ..................................................................................71 5. PROMOTING AGRICULTURE AND RURAL DEVELOPMENT ........................................................77 5.1 Current Status of the Agricultural Sector ..............................................................................................77 5.2 Performance of Individual Sub-Sectors ................................................................................................80 5.3 Policy and Institutional Arrangements for the Sector ............................................................................88 5.4 Lessons from the Agricultural Revival Programme (ARP) ......................................................................90 5.5 Key Challenges for the Sector ..............................................................................................................91 AFRICAN DEVELOPMENT BANK GROUP | i PRIVATE SECTOR-LED ECONOMIC DIVERSIFICATION AND DEVELOPMENT IN SUDAN 5.6 Action Programme for Agriculture .........................................................................................................98 5.7 Programme Investment Requirements and Financing ........................................................................106 6. ACCELERATING INDUSTRIAL DEVELOPMENT ..........................................................................111 6.1 Current Status of the Industrial Sector ...............................................................................................111 6.2 Status of the Food and Non-Food Agro-Industries .............................................................................112 6.3 Prospects for the Manufacturing Sector .............................................................................................120 6.4 Prospects for Other Industrial Sectors ...............................................................................................126 6.5 Growth Prospects for the Industrial Sector .........................................................................................128 7. CHANGING ROLE OF THE OIL SECTOR ......................................................................................131 7.1 Development of the Industry Since the 1970s ....................................................................................131 7.2 Key Challenges Facing the Industry in Sudan .....................................................................................135 7.3 Prospects for Oil Production and Exports ..........................................................................................137 8. INFRASTRUCTURE SERVICES: AN AGENDA FOR ACTION .......................................................143 8.1 Current Status of Sudan’s Infrastructure.............................................................................................143 8.2 Transport Infrastructure ......................................................................................................................143 8.3 Electric Power and Energy .................................................................................................................159 8.4 Water Supply and Sanitation ..............................................................................................................168 8.5 Information and Communication Technology .....................................................................................171 8.6 Infrastructure Expenditures and Financing..........................................................................................173 9. ROLE OF OTHER KEY SERVICES IN PROMOTING GROWTH ..........................................................177 9.1 Key Challenges for the Decade Ahead ...............................................................................................177 9.2 Expanding the Role of the Financial Sector ........................................................................................178 9.3 Programmes for Skills Development in the Labour Force ...................................................................193