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Development Challenges and Prospects in the Post-2011 Sudan1 Ali Abdel Gadir Ali Arab Planning Institute Kuwait (Preliminary Draft; January, 2012). I. Introduction: The 9th of July 2011 witnessed the birth of the Republic of South Sudan (ROSS) as the 194th member of the United Nations (UN). The day marked the emergence of not only one country; ROSS, but also a brand new Republic of Sudan (ROS) composed of what remained of the old Sudan. Even though the borders between the two Sudan countries, and hence the precise areas of either, are as yet to be determined, it can be argued, based on historical records, that the area of ROS will be approximately equal to about 1.9 million squared kilometers (about 72% of the area of the previously unified Sudan). Based on the recent Sudan’s 5th Population and Housing Census the total population of ROS is approximately equal to 33 million persons2, about 24.3% of whom are living under conflict (Darfur region). Currently, six months after the birth of the post-9th July 2011 ROS the percentage of the population living under conflict increased to 31.4. For administrative purposes the country is divided into 15 states (called wilaiat, from the singular wilaia meaning state). This administrative structure is based on the colonial one where the Northern part of the then unified country was composed of six provinces: Central (with about 24% of the total population; currently split into four states: Algezira, White Nile, Sinnar, and Blue Nile); Darfur in the far west of the country (24.3% of total population; currently split into five states: North, West, East, Central and South Darfurs) ; Eastern (14.7%; currently split into three states: Red Sea, Kassala, and Gedarif); Khartoum (with a population share of 17.1%); Kordofan in the west (14% of total population; currently split into two states: North and South Kordofans); and, Northern (5.9% of total population; currently split into two states Northern and Nile). These old provinces are officially referred to as regions in current official documents. It can be confirmed that over the 53 year period, since Sudan gained its independence in 1956, the population of the old Northern Sudan, currently ROS, increased by an annual rate of about 2.7 percent. There were, of course, regional differences in population growth rates; latest estimates are 2.4 percent for the Central region; about 7 percent for Darfur; 3 percent for the Eastern region; 4.5 percent for Khartoum; 1.7 percent for Kordofan; and 1.4 percent for the Northern region. The exceptionally high 1 This paper is written for a CMI project on Post-cessation Sudan. I am grateful to Miss. Nada Ali, of the University of East Angelia, for comments and suggestions. 2 The 5th Sudan Population census was conducted in 2008. Its results were vehemently contested by the Government of Southern Sudan at the time, as well as by Darfur rebel movements and the Nuba political activists of Southern Kordofan state. See, for example, DRDC (2010). The census estimate was 39.2 million for the (old unified Sudan): 30.9 million in the North. We used this estimate, suspect as it may be, together with a population growth rate of 2.5 percent per annum to arrive at the 2011 population of the ROS. 1 growth rate of the population of Darfur casts great suspicion on the credibility of the Census results! The total area of ROS is about 1.9 million square kilometers (compared to about 2.5 million square kilometers for the unified country). Darfur is the largest region accounting for 28.2% of the total area of ROS, followed by the Northern region (27.1% of the area), Kordofan (21.7%), and the Eastern region (19.4%). Khartoum, the capital of the country, accounts for the smallest area (with 1.2% of the total), followed by the Central region (8.1% of the total)3. This paper seeks to identify the immediate development challenges facing the new Republic of Sudan (ROS). Having set out the initial demographic and geographic conditions of ROS above, the rest of the paper is organized in six sections. Section (II) is on methodology, where we suggest that the development challenges facing ROS could be looked at as comprising of three interrelated dimensions: politicalinstitutional; economic; and, social. Sections (III)-(V) deal respectively with each of the three identified dimensions. In Section (VI), we address the issue of relevant development policies with emphasis on macroeconomic policy which usually affects, and is affected by, the three dimensions identified. Section (VII) offers a few concluding remarks. . II. Preliminary Notes on Methodology: Over the period following September 2000 there developed a world-wide agreement that “development can be seen as a process of expanding the real freedoms that people enjoy” (Sen (1999: 3)). The philosophical foundations of this approach require judging the welfare of individuals not in terms of the utility of goods and services or in terms of primary goods, but in terms of “substantive capabilities to choose a life one has reason to value”. Capability is thus the substantive freedom to achieve various lifestyles. The capability approach, popularly known as the human development approach, is a much broader one to understand what is meant by development compared to other approaches that identify development only with increases in per capita incomes, or with industrialization, or with technological advance, or with social modernization. Over the period since 2000 such a broad approach to development garnered a lot of support around the world, and was embodied in the UN Millennium Development Goals (MDGs). Five instrumental freedoms that have immediate policy relevance are identified. These include: (i) political freedoms: political freedoms, broadly conceived, refer to the opportunities that people have to determine who should govern and on what principles, and also include the possibility to scrutinize and criticize authorities, to have freedom of political expression of an uncensored press, to enjoy the freedom to choose 3 See El-Battahani (1995: 245, table 2). 2 between different political parties and so on” (Sen (1999: 38)). Embracing “the political entitlements associated with democracies in the broadest sense”; (ii) economic facilities: “economic facilities refer to the opportunities that individuals respectively enjoy to utilize economic resources for the purpose of consumption, or production, or exchange. The economic entitlements that a person has will depend on the resources owned or available for use as well as on conditions for exchange, such as relative prices and the working of the markets” (Sen (1999: 3839)). Thus, economic facilities should be understood as pertaining to economic growth (increases in the real income of individuals) as well as the distribution of the fruits of such growth; (iii) social opportunities: social opportunities refer to “the arrangements that society makes for education and health and so on, which influence the individual’s substantive freedom to live better. These facilities are important not only for the conduct of private lives, but also for more effective participation in economic and political activities” (Sen (1999:39). in the sense of “the arrangements that society makes for education, health care and so on”; (iv) transparency guarantees : Concern the freedom to deal with one another under guarantees of disclosure and lucidity. Thus, transparency guarantees have a clear instrumental role in preventing corruption, financial irresponsibility, and underhand dealings” (Sen (1999: 40)); and, (v) protective security : It is noted that “no matter how well an economic system operates, some people can be typically on the verge of vulnerability and can actually succumb to great deprivation as a result of material changes that adversely affect their lives… The domain of protective security includes fixed institutional arrangements such as unemployment benefits and statutory income supplements to the indigent as well as ad hoc arrangements such as famine relief or emergency public employment to generate income for destitute”(Sen 1999: 40)). It is noted that these “instrumental freedoms tend to the general capability of a person to live more freely, but they also serve to complement one another”4. Such a broad understanding of the development process encompasses almost all of the narrow concerns of various political players in the different countries in such a way as to facilitate the expression of serious minded political commitment to development. It also facilitates the exploration of the development challenges and prospects facing a country like the ROS. For such an exploration we suggest the re-grouping of the five instrumental freedoms into three interrelated categories of developmental challenges: (a) political-institutional challenges: to include the original content of “political freedoms” in addition to aspects of the other freedoms that have political implications; 4 Sen (1999: 38). 3 (b) economic challenges: to include the original content of economic facilities” and “transparency guarantees” in addition to aspects of the other freedoms that have economic implications; and, (c) challenges of social arrangements: to include the original content of “social opportunities” and “protective security”. Be the above as it may, we hasten to note that the UNDP had in fact started the measurement of the above broad approach to development since 1990 in the context of the Human Development Report (HDR), an annual advocacy document developed under the leadership of the late Mahboub ul Haq. The composite index used to measure development came to be known as the Human Development Index (HDI). According to UNDP (2010: 25) the HDI “as a simple measure of development and as an alternative to gross domestic product (GDP), captures progress in three basic capabilities: to live a long and healthy life, to be educated and knowledgeable and to enjoy a decent standard of living”. In the latest versions of the HDR the development index continued to use life expectancy at birth as a measure of health of societies, but started to measure educational achievements by a composite of sub-measures of mean years of schooling in the population 15 years and older, the expected years of schooling for 5 years old. In addition it started to use per capita gross national income in purchasing power parity as a measure of the decent standard of living. As is well known, HDI measures development achievements in these three basic capabilities by looking at the relative development gaps between the best and the worst performers on each sub-indicator and by aggregating such gaps for each country. Prior to the 2010 HDR a simple average aggregation methodology was used (implying infinite substitutability between each pair of the three component indicators). Since 2010 a geometric mean aggregation methodology is followed, allowing for a unitary elasticity of substitution between each pair of the component indicators. These methodological changes in the measure of development promise future innovations to incorporate all the five instrumental freedoms identified above. To apply the above method we hasten to note that strictly speaking the economy of ROS does not have a past: it is about two years old. Its aggregate indicators can only be guessed. Two recent statistical sources could have been helpful in estimating ROS initial development indicators: the Population Census of 2008 (noted in the introduction) and the National Baseline Household Survey of 2009. Unfortunately both sources are suspect. Nonetheless we will use some of their results whenever we feel that they do not contradict our intuitive understanding of the relevant initial conditions. III. Political-Institutional Change: The Major Challenge: The major development challenge that faces the country is, in our view, that of effecting a democratic transition to guarantee political freedoms. At this initial juncture in the history of ROS such a transition will hold the key for a cumulative development process by enhancing the other instrumental freedoms. To appreciate the challenge posed by the initial political and institutional conditions of ROS it is perhaps important to visit the most recent history of the old unified 4 Sudan. The most important signpost in this recent history is the signature of the Comprehensive Peace Agreement (CPA) in 2005. The CPA was signed by the National Congress Party (NCP), the ruling political organization in the North of Sudan at the time, and the Sudan Peoples’ Liberation Movement (SPLM) which represented the Southern part of the then unified country5. Even though the CPA served as the constitutional platform for the later independence of the Republic of South Sudan (ROSS), it is important to recall that the Agreement was reached on the fundamental understanding that the resolution of the longest civil war in Africa was to be found in a political arrangement of “one country, two systems”. Following its signature, the CPA was hailed as a major political achievement due to its success in ending the civil war and bringing about peace between the two parts of the then unified country. Indeed, the date of the signature of the CPA (9th January 2005) was considered, by some, as the true independence date of the country: the Sudan created in 1956 being looked at as the Old Sudan, while that hoped for following the CPA as the New Sudan. As it happened, the CPA eventually created two countries: the old South Sudan became the Republic of South Sudan (ROSS; the 194th member of the UN), and the remainder of old Sudan retaining the name of the Republic of Sudan (ROS) as noted above. The CPA was incorporated in the Interim National Constitution of 2005 (INC). The INC was to be followed during the interim period 9th July 2005 up to 9th July 2011; when a referendum was scheduled to take place to determine the future of the Southern part of the then unified country. According to INC the (old) Republic of Sudan: (i) “ïs an independent, sovereign State. It is a democratic, decentralized, multicultural, multi-lingual, multi-racial, multi-ethnic, and multi-religious country where such diversities co-exist”; and that (ii) “the state is committed to the respect and promotion of human dignity; and is founded on justice, equality and the advancement of human rights and fundamental freedoms” with a multi-party political system. In addition to the above the INC included a “Bill of Rights”, the nature of which is explained as “a covenant among the Sudanese people and between them and their governments at every level and a commitment to respect and promote human rights and fundamental freedoms enshrined in the constitution; it is the cornerstone of social justice, equality and democracy in the Sudan”. In addition to the rights and freedoms enumerated in the constitution it is stated that all “rights and freedoms enshrined in international human rights treaties, covenants and instruments ratified by the Republic of the Sudan shall be an integral part of this Bill”. Properly understood these constitutional provisions should have catered for a democratic transition in the old Sudan. As it happened the period since the signature of the CPA, and its incorporation in the INC, and up to 9th July 2011 did not witness such a transformation. On the contrary the period witnessed the consolidation of NCP political power, this time around with the help of the SPLM6. As a demonstration of the consolidation of NCP’s political power mention can be made of the conduct of the 5 It is known that the regime that signed the CPA was the residual of the Islamic Movement, which engineered the coup of 1989. For crisp details see Ahmed (2008) and references cited there. 6 Such colossal failure in the implantation of the CPA, however, did not draw the attention of any of the parties charged with guaranteeing the agreement, and the monitoring of its implementation. 5 national multi-party elections (presidential and parliamentary) agreed upon in the CPA. The traditional political parties boycotted the elections. Out of 466 seats for the whole unified Sudan, the NCP secured 323 seats, leaving 99 seats for the SPLM and the remainder for 9 parties with an average of 2.3 seats per party! After the withdrawal of SPLM members of parliament after 9th-July 2011 this means that the NCP will have about 88% of the vote in parliament7. Thus, the post-9th July 2011 new ROS was born as an autocracy dominated by the National Congress Party (NCP) which signed the CPA in 2005. The post-July 2011 autocracy in the country was born with an inherited wide-ranging civil conflict in Darfur region (an area of 496 thousand square kilometers); and freshly hatched conflicts in Southern Kordofan, and Blue Nile States. The nature of the three civil conflicts, like that of the old South Sudan civil war, is political. One of the most devastating, and long lasting, implication of the political dominance of the NCP in the then unified Sudan and the emerging ROS is the depletion of the institutional capacity of the country. It is known that when the old Sudan became independent, it inherited a fairly decent institutional governance structure: a highly competent civil service that was able to deliver public goods in a satisfactory fashion given the poverty of the country; an independent, and relatively highly competent, judiciary; and, a national army with no sectarian or factional allegiance. Over time various political regimes tampered with the autonomy of this institutional set-up under a variety of purgatory schemes. Such schemes, while weakening the inherited institutional capacity, were not wide ranging. Under the Sudanese Islamic Movement empowerment strategy (tamkeen), such a precedent was taken to the extreme where wholesale changes in the leadership of the civil service and other organs of the state were implemented and where Islamic party loyalists were installed in leading posts irrespective of relevance or competence. Moreover, employment in government was also restricted to party loyalists, ushering in a phenomenon of social exclusion on top of poverty. In addition to social exclusion the Islamic empowerment strategy paved the way for total non-transparency in the conduct of the affairs of the state. Endemic corruption became a trade-mark of the Islamic regime. Official accounts of corruption are routinely reported by the Auditor General but popular stories are more telling. According to Alfred Taban Logune (2006); a respected Southern journalist, bidding “for government contracts, particularly in the oil sector, is still not public, and contracts are awarded to people close to the regime. People close to the government hurriedly set up companies, many in Malaysia and China, to take advantage of the newfound oil money, as did the ruling National Congress Party. One such companybased in China and owned by the National Congress- reportedly skims a commission of 35 percent for all trade with Sudan. Bilateral trade between Sudan and China had been valued at US$1.2 billion a year in recent years”. 7 That the elections, conducted during the period 11-15 April 2010, were flawed was widely accepted to the extent that Human Rights Watch issued a report with the title Sudan Flawed Elections Underscore Need for Justice. The CPA troika (USA, UK and Norway) also declared the elections flawed and not measuring to international standards but proceeded to accept the results! 6 The post-9th July 2011 new ROS was born as an autocracy with a highly weakened institutional set-up. To further appreciate the political-institutional challenge facing ROS it may be instructive to have a look at the comparative governance indicators of ROS compared to the best and worst performing countries in the world. Governance indicators are based on the understanding that governance "consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced, the capacity of the government to effectively formulate and implement sound policies, and the respect of citizens and the state for the institutions that govern economic and social interactions among them"8. On the basis of the above definition six governance indicators are identified and a methodology for measuring them is developed (Kaufmann, Kraay and Mastruzzi (2009)). Each of the indicators is normalized such that countries scoring a value of zero can be interpreted to have an average institutional set up, while countries scoring negative values can be understood as having weak institutions. The latest results are reported for 2008. On the understanding that these indicators change very slowly over time we may use the results as representing 2011. To guess the results for ROS we use the population weights of the population census in addition to assuming that ROSS would assume the indicators of the worst performing country (or countries). Our results for ROS are reported in table (1). Table (1): Political and Institutional Indicators: Republic of Sudan 2011 Indicator Best Country Voice and Accountability 1.53 (Norway, Sweden) 1.53 (Luxemburg) Political Stability and Absence Violence/Terrorism Government Effectiveness Regulatory Quality Rule of Law Control of Corruption of 2.53 (Singapore) 1.92 (Singapore) 1.96 (Norway) 2.34 (Finland) Republic Sudan -1.66 of Worst Country -2.22 -2.20 (Eritrea, N. Korea) -3.28 (Somalia) -1.12 -0.99 -1.18 -1.38 -2.51 (Somalia) -2.77 (Somalia) -2.69 (Somalia) -1.90 (Somalia) The table clearly shows that ROS is starting from a very low base of institutional arrangements including, as we already suggested, the political arrangements. This conclusion is borne out by the negative scores calculated for ROS. Given the starting political situation in the country, and the continued pronouncements of the political leaders of the current regime, a peaceful transition to a democratic regime is highly unlikely. On more than one occasion leading politicians of the current regime argued that they have usurped political power by the barrel of the gun and that he who is interested in gaining such power should seek it through such means. This is an open invitation to political opposition forces to organize in military format. Thus far traditional political parties did not heed the invitation to 8 See the Worldwide Governance Indicators website: www.worldbank.org/governance/wgi. 7 armed struggle9; but, newly emerging regional political opposition forces are in the process of obliging10. If the current regime is toppled by regional armed movements, however, the emerging governance regime may, or may not, measure up to a democratic governance arrangement. It is this scenario that represents the conundrum of the prospects for political freedoms in the ROS. Equally violent and problematic is the democratic transition that could be effected by the politically uncommitted youth who have access to modern social media ala Tunisian and Egyptian revolutions and uprisings. On various occasions the leaders of the current regime insinuated to a Libya-Syria style repressive reaction to such political mobilization. IV. Economic Challenges: 4.1. Economic Structure: Irrespective of the prospects for regime change ROS faces the challenge of effecting a structural transformation of its economy. To appreciate this challenge it is perhaps worthwhile to look at the initial production structure of the ROS economy. To begin with it is known that prior to the cessation of the South, the old Sudan over the period September 1999- 9th July 2011 became an oil producer (and an oil exporting country). Indeed over this period oil dominated the export earnings of the country (contributing about 95% in 2008), as well as government revenue (contributing about 66% in 2008). Despite the pre-2011 relative importance of the oil sector in the then unified economy there did not exist official estimates of the GDP share of the oil sector. One possible way of estimating this share is to use the reported GDP growth rates of the oil and non-oil sectors together with the overall GDP growth rate. For the four years following the signing of the CPA (i.e. 2006-2009) we estimate the share of the oil sector in GDP as 10.1% in 2006; 10.6% in 2007; 13.2% in 2008; and, 13.6% in 2009. The projected GDP share of the sector for 2010 is 12% while that for 2011 is 11%11. Given the above estimate it will probably be safe to suggest that a reasonable guesstimate of the share of ROSS in non-oil GDP of the country could have been 9 Salih (2003) provides a comprehensive discussion of the evolution, institutionalisation and governance of the traditional North Sudan political parties. The discussion reveals that these parties would not be qualified to effect a democratic transition. 10 Among these the Justice and Equality Movement (JEM) of Darfur is the most credible and capable. The leader of JEM, Dr. Khalil Ibrahim, was assassinated by the NCP government during the third week of December 2011 (23rd or 25th of December). This event marks another twist in the repressive inclination of the ruling regime which will have negative political implications for the future. 11 These estimates are based on the IMF (2011: 19, table 1). Estimates by the Ministry of Finance and National Economy (MFNE: (2011: 8-9, table 1) give higher shares for this sector for 2009. 8 equal to its historical share in overall GDP in 195612 (i.e. a share of 13.6%). Recalling that non-oil GDP is projected to account for 89% of the country’s GDP in 2011 (leaving 11% for the oil sector) it can be suggested that ROSS would start with the equivalent of 22% of the projected 2011 GDP of the unified country (0.136x0.89+0.85x0.11). This implies that the GDP of ROS would amount to 78% of the GDP of the unified economy. In this respect it is to be noted that the IMF (2011: 25, table 6) medium-term macroeconomic scenario projected the 2011 GDP of the unified economy as US$65.6 billion, which means that the starting GDP for the ROS would be about US$51 billion (IMF, (2010: 28, table 6)). This estimate, together with that of total population, means that the starting per capita GDP for ROS would be about US$1536. Given the above GDP estimate an attempt can be made at this stage to guess the likely production structure of the ROS economy. This can be done using the officially reported production shares of the three major production sectors for the year 201013, together with the above assumptions about the share of sectors for the ROSS. It can be confirmed that the economy of ROS would have an initial production structure such that the share in GDP of the agricultural sector would be about 33%; that of the industrial sector would be 22%, while that of the services sector would be 45%. Such an initial production structure needs to be restructured for the purpose of increasing the efficiency of the economy. As is well known the fundamental requirement of structural transformation in the development process is embodied in the famous dual economy model (Lewis (1954)). Such a model looks at a typical economy of a developing country as composed of two broadly defined sectors: a large rural (traditional, or agricultural) sector characterised by low productivity; and a relatively small urban (modern, or industrial) sector characterised by high productivity. Among the highly aggregated descriptive features of such a model economy is an asymmetry in production techniques: that in the low productivity sector is labour intensive relying on an abundant supply of labour and land; while that in the high productivity sector is capital intensive relying on labour and capital. The supply of labour to the modern sector is infinitely elastic at an institutionally fixed wage. In the context of such an economy development takes place in the form of capital accumulation in the high productivity sector supported by the migration of labour from the low productivity sector, implying the idea of structural economic transformation14. The structural transformation process has been subjected to empirical studies by a specialized development literature on the patterns of economic and social 12 Such an assumption would be consistent with the observations made by the late John Garang on the state of the economy of the South and the challenges facing the SPLM: an economy “starting from scratch” in infrastructure: “since creation, there has never been a single tarmac road in Southern Sudan”; and that needs to be transformed from its “present subsistence traditional agriculture”. See “SPLM Chairman’s 22nd Anniversary Address at a Mass Rally in Rumbek on 16th of May 2005; www.gurtong.org. 13 Use was made of the official figures reported in MOFNE (2010: 9, table1) for the unified Sudan. 14 For a most recent deployment of such a concept of structural transformation see UNCTAD (2010). 9 development (Chenery and Syrquin (1975) and Syrquin and Chenery (1989)). In this literature a structural transformation indicator, such as the GDP (or employment) share of a sector, is used as a dependent variable to be explained by the level of development (as represented by real GDP per capita) and total population. The relationship is usually posited as non-linear in income and population (e.g. quadratic)15. Focusing on the GDP share of the three production sectors (agriculture, industry and services) in addition to the manufacture sub-sector, the most important results of the vast specialized literature are usually summarized in four stylized facts of structural transformation which can be stated thus: over a long period of time as real per capita GDP increases, the share in GDP of (i) Agriculture is expected to decline and reach a minimum; (ii) Industry is expected to increase and reach a maximum; (iii) Services is expected to increase and reach a maximum; and, (iv) Manufacturing is expected to increase over time without necessarily reaching a turning point in terms of real per capita income; Can such an economic transformation be effected by a developing economy like that of the ROS? The answer is in the affirmative. A relevant example is given by Malaysia: a country that has frequently been compared to a number of African countries in terms of initial conditions and subsequent growth performance and development achievements. As noted in Ali (2010) the “Malaysian growth story can be viewed as a narrative of the structural transformation of a predominantly agricultural economy to a more industrialized economy, and then to attempts to transform it further in the latter part of the 1990s towards a knowledge-based economy” (Yusof and Bhattasali (2008: 30)). The story demonstrates, among other things, the vital role that a developmental state, appropriately defined, can play in transforming a developing economy into a prosperous high middle income one in a period of about three decades or less. The prospects for ROS to achieve such a structural transformation would depend crucially on its ability to launch a sustained growth process. In the Arab context and over the period 1985-2008 Ali (2011) defined a sustained growth process as one that requires an average annual real GDP per capita growth of 2.8 percent or more with relatively low volatility for the entire period 1985-2008; where relatively low volatility is defined by a coefficient of variation for the growth rates of one but less than three. On this definition of sustainability it is found that only one Arab country (namely Egypt) recorded sustained growth over the period in question. Combining the sustainability and volatility of the Arab countries growth processes, a sustained, relatively low volatility, growth country is classified as having achieved a classical structural transformation of its economy over the period 1970-2007 if the respective GDP shares of the conventional three sectors of agriculture, industry, services, in addition to that of the manufacturing sub-sector, obey the stylized facts of 15 Other transformation indicators include a host of variables relating to trade (composition of exports and imports); labor employment (e.g. share of agricultural employment in total); labor productivity; final demand (e.g. consumption and investment); and, social indicators (e.g. fertility and life expectancy). 10 structural transformation as real GDP per capita increases. According to the available evidence none of the Arab countries that achieved positive growth over the period since 1985, including Egypt, was able to satisfy the requirements of a classical structural transformation. Within this production structure the ROS economy emerges as a high unemployment economy. According to MFNE (2011: 17), basing itself on the 5th population census, total labour force in the ROS can be taken as 8.4 million persons, with an annual growth rate of about 1.3 percent. Total employment can similarly be taken as 6.9 million, with an annual growth rate of about 0.9 percent, giving an unemployment rate of about 17.9 percent16. This means that ROS is starting with about 1.5 million unemployed persons. More seriously the number of those who were unemployed and seeking work for the first time can be taken as 1.1 million representing about 70% of the total number of the unemployed. In this respect it is noted that “more than half of them were in the young age groups of 10-14 and 20-24”. In addition to these structural features of the economy, and as is well known, ROS will be starting as a highly indebted economy. As of September 2011 total external debt of the old Sudan was estimated as US$36.2 billion, of which US$30.6 billion are arrears. According to World Bank (2011: 3) ROS and ROSS agreed to a so-called “zero-option approach regarding debt. In this approach ROS would take on all debt as the continuing state” under conditions relating to debt relief by the donor community. This means that ROS will emerge with a debt/GDP ratio of about 71%. 4.2. Economic Policy: Effecting a structural transformation is a long-term development challenge. During short-terms it is economic policy, especially macroeconomic policy, which presents a challenge for ROS. The post-9th July 2011 new ROS was born with an Islamic regime that fully subscribed to economic liberalization of the IMF-World Bank variety. It will be recalled that the central message of IMF-World Bank policies was to "get the prices right, unleash the markets and rein in the state". The principal components of this policy package included: anti-industrial policy stance; liberalization of agricultural markets; financial liberalization; opening-up of economies and the liberalization of trade regimes; allocation of budget resources to education on the basis of the rate of return; and, administrative reforms to enable technocrats to initiate and implement market-based economic reforms (see, for example, Mkandawire and Soludo (1999)). The story of the nature of the belief in IMF-World Bank policies goes back to the early days of the current regime. It is now known that such belief in economic liberalization was grounded in the grand political strategy of empowerment (tamkeen), a corner stone of which was economic empowerment of the members of the Sudanese Islamic Movement17. The economic liberalization policy, ala the IMF 16 These estimates are based on the 2008 estimates for Northern Sudan and the growth rates calculated for inter-census years with a base in 1993. 11 and World Bank model, was officially adopted by the Islamic regime on the 3rd of February 1992. Not surprisingly the privatization of public enterprises was one of the most important vehicles of empowering the members of the Islamic Movement to the exclusion of the rest of the population. The economic empowerment of the members of the Islamic movement created strange bed fellows of liberalization and monopoly, though theoretically a contradiction in terms. However, it could be understood as a home grown type of an Islamic economic policy. The post-9th July 2011 ROS inherited this type of confused policy orientation. In the context of the grand Islamic empowerment strategy the overall objective of economic policy seems to have been the survival of the political regime, rather than achieving production efficiency in the allocation of resources as the IMF-World Bank model claims in its structural adjustment programs. Prior to September 1999, when the old Sudan exported its first oil shipment, the Islamic state became an addict of predation within the context of its strange policy mix of liberalization and monopoly. This habit continued to plague the economy and society even after the country became an oil producer and after the signature of the CPA. Given the overall strategic objective of the survival of the Islamic regime, and despite the grave doubts about the credibility of all type of information that it releases, a cursory look at the allocation of budget resources would help in ascertaining the nature of the economic policies that ROS would start with. According to a Ministry of Finance and National Economy (MFNE; 2010: 47) official document the total expenditure envisaged for 2011 was estimated at 11.9 billion Sudanese pounds (where the pound is translated by the official IMF documents as guinea and where Sudanese pound is abbreviated as SDG). Of this total SDG 6.5 billion is allocated to the defence, security and police (representing about 55% of total expenditure). By contrast about SDG 421 million is allocated to each of the education and health sectors (representing 3.6% of total expenditure for each). Moreover, a so-called sovereignty sector is allocated SDG 1092 billion (representing 9.2% of total expenditure; double that for the education and health sectors combined). Another catchall sector called the assorted sector is allocated about SDG 2030 billion (representing about 17.1% of total expenditure). To further appreciate the above allocation of budget resources it may be instructive to note that MFNE (2010: 30) projected the 2011 GDP of the unified Sudan as SDG 190 billion. According to our own previous estimate of the share of ROS in GDP this will mean that the 2011 GDP of ROS should amount to about SDG149 billion18. This implies that the total 2011 expenditure resources of ROS would amount to about 8% of GDP: 4.4% of GDP for defending the survival of the regime and 0.03% for each of the education and health sectors. 17 For the details of the empowerment strategy of the Islamic Movement see Abdel Salam (2010: 291318). 18 This is almost identical to our estimate derived from IMF source above of US$51 billion at an exchange rate of SDG2.9 per dollar. 12 Assuming that a peaceful democratic transition can be effected, highly doubtful as it may be, and recognizing that ROS is a poor country with very limited public resources, there is no reason to believe that a developmentally relevant allocation of budget resources can’t be agreed upon. We hasten to note, however, that public resources will be needed to reform the current institutional set-up to make it consistent with a democratic governance regime. While the cost of such reforms could be calculated there exist as yet no such estimates, partly due to the lack of data but importantly due the institutional weakness of political opposition forces19. V. The Challenge of Social Arrangements: As noted in section (II) above social arrangements are a core concept in human development. Indeed their inclusion in HDI is a major distinguishing feature of the human development approach compared to other competing approaches. The post-9th July 2011 ROS was born as a low human development country. After appropriately manipulating the information provided in the UNDP (2011: 127-130; tabl1 1) for the unified country we are able to recalculate the HDI for ROS. Our results are presented in table (2) where a comparison is made with Norway, the highest human development achiever, and the Congo Democratic Republic, the lowest achiever. Table (2): Republic of Sudan: Human Development Indicators 2011 Indicator Norway Republic of Sudan Democratic Republic of Congo HDI Rank 1 172 187 HDI 0.943 0.386 0.286 Life Expectancy at Birth (years) 81.1 60.0 48.4 Mean Years of Schooling (years 12.6 4.2 3.5 Expected Years of Schooling (years) 17.3 6.0 8.2 GNI per Capita (constant 2005 PPP$) 47557 1873 280 Source: UNDP (2011: table 1), except for ROS which is own calculation. It is interesting to note that UNDP ranked the unified Sudan in 169th position out of 178 countries, with an HDI of 0.408: on the basis of a life expectancy at birth of 61.5 years and a per capita GNI of PPP$ 1894, but lower education indicators of 3.1 mean years of schooling and 4.4 expected years of schooling. The conventional HDI does not include a political freedom sub-component. One way of introducing such a component is to use the Freedom House measures of political rights and civil liberties (each one of them ranging from one, for highest achievement to 7 for lowest achievement). The simple (or geometric) average of the two gives a composite index for the dimension of political freedoms. For 2011 the old unified country was classified as non-free with a score of 7 for both the political rights and the civil liberties sub-components. Applying the HDI normalization methodology it can be shown that the normalized political freedom index for ROS will work out as 19 One would have expected the political opposition forces to have engaged in collecting and collating all manner of detailed data relating to the mobilization and use of national resources over the years since 1989. Moreover, one would have expected these forces to concern themselves with the fundamental and strategic question of how to go about managing the economy and society of the country assuming that the current regime is changed. Dealing with such question would require a process of continuous monitoring of relevant data! 13 0.143. An extended HDI, incorporating the freedom dimension for all countries considered by HDR 2011 is calculated. The initial condition for ROS human development achievement is reported in table (3). Table (3): Republic of Sudan: Extended Human Development Indicators 2011 Indicator Norway Republic of Sudan Extended HDI Rank 1 184 Extended HDI 0.957 0.299 Life Expectancy at Birth (years) 81.1 60.0 Mean Years of Schooling (years 12.6 4.2 Expected Years of Schooling (years) 17.3 6.0 GNI per Capita (constant 2005 PPP$) 47557 1873 Average Freedom Score 1.0 7.0 Source: as in table (2) in addition to Freedom House (2011). Eritrea 187 0.279 61.6 3.4 4.8 536 7.0 Comparing the above two tables it is clear that ROS is starting from an extremely low base of human development, ranking as it does only three places above the lowest performing country under the extended HDI. The above very low achievements in human development are reflected in that based on income poverty. According to CBS (2010-b 52-57) an analysis of the National Baseline Household Survey (NBHS) conducted in 2009 showed that 46.5% of the population of ROS was living below a national poverty line of SDG 114 per person per month (equivalent to US$1.8 per person per day). The incidence of poverty varied among ROS regions from a low of 26% of the total population of Khartoum to a high of about 63% for Darfur. Though the design of the NBHS is highly suspect, these incidence results are indeed high even by Sub-Saharan African standards confirming that at the initial stage of its emergence ROS is indeed a very poor country20. Be the above as it may, it is perhaps comforting to note that over the period 19802011 none of the developing countries for which the HDI was calculated reported a decline in its HDI except for Liberia21. This time trend in human development achievement is in sharp contrast to results pertaining to economic growth and the observed divergence in per capita income levels between poor and rich countries. Factors that can explain this puzzle include the role of ideas and innovations at a global level; the role of institutions, policies and equity; and, the role of markets, states and social contracts22. Except for the global dissemination of ideas and innovations the remaining factors contributing to human development are political in 20 It should be noted that the methodology used for estimating the incidence, depth and severity of money-metric poverty did indeed follow up-to-date practice in this respect. However such estimates are as good as the underlying distribution of consumption expenditure on which they are based. Such underlying distribution, in turn, is as good as the design of the sample of the survey. We suspect that either the design was flawed or else that the returns of the survey were tampered with prior to the stage of the poverty analysis. 21 See UNDP (2011: 131-134, table 2). 22 For details see UNDP (2010: 45-64). 14 nature. Thus, it seems that we came a full circle to confirm that the major challenge facing ROS is a political one requiring as it does a change in the political regime. VI. Relevant Development Policies: Now, assuming that a democratic transition can be effected, hopefully, though highly unlikely, in a peaceful manner, and appreciating the low level of development from which ROS will be starting, the multiple challenges noted in the above sections would require the pursuit of enlightened, and relevant, development policies. As is well known, in the 1960s most of the newly independent African states, diverse as they were, adopted a planning approach to effect deep-seated changes in their economies and societies. This was not surprising, given the major theoretical and policy propositions of the pioneers of development economics23. These pioneers formulated grand, and visionary, models of development strategy that aimed at effecting structural transformation with a central role assigned to the government in planning and programming development24. The policy content of these models was informed by the observation that “a less-developed economy was characterized by pervasive market failures. To correct or avoid market failure, they advocated central coordination and allocation of resources. The newly expanding subject of welfare economics also provided considerable rationale for government action to correct market failure” (Meier (2001: 14)). In addition to pervasive market failures, the role of the government was justified on the belief that the supply of entrepreneurs was limited in these countries, and that major structural changes, rather than marginal adjustments, were needed to effect development. Thus, the “government of a developmental state was to promote capital accumulation, utilize reserves of surplus labor, undertake policies of deliberate industrialization, relax the foreign exchange constraint through import substitution, and coordinate the allocation of resources through programming and planning”. Programming, and planning, to coordinate the allocation of resources by the government is understood as “just another word for rational, deliberate, consistent and coordinated economic policy”(Rosenstein-Rodan (1955: 679)). An obvious reason for why developing countries need to plan their development is the recognition that, under the then existing historical conditions, development would not take place automatically. Under such understanding the essential of planning economic development is in “assuring an amount of productive investment which is sufficient to provide for a rise in national income substantially in excess of the rise in population, so that per capita national income increases. The strategic factor is productive 23 The pioneers of development economics of the 1940s and 1950s, and their followers up to the early 1970s are dubbed by Meier (2001) the first generation of development economists in contrast to a second generation that emerged in the 1970’s. Classical examples of visionary models of development include Nurkse’s “vicious circle of poverty”, Rosenstein-Rodan’s “big push”, Leibenstein’s “critical minimum effort” and “low-level equilibrium trap”, Lewis’ “dual economy model”, Rostow’s “take-off stage”, and Chenery’s “two-gap model”. The ideas expressed in these early contributions to development economics are called the "high development theory" by Krugman (1997). Lewis (1954) dual economy model is one of the most quoted papers in the development economics literature. 24 15 investment” Lange (1961: 695-696)). A major controversy that surrounded the experience of planning in developing countries, including African ones, had to do with the policy content of the planning approach to development, especially the methods recommended for the mobilization of resources for productive investment. As it happened the methods recommended for use in various proportions depending on the development stage of country included the nationalization of industries, finance, trade, and foreign owned natural resources; the contribution to state finance from agrarian reform; in addition to general taxation, public loans and deficit financing. In this respect it is significant to note that a method of inducing private savers to undertake productive investment was also recommended (Lange (1961: 696)). In this respect it is noted that such inducement of private savers can be achieved by, among other measures, the taxation of unproductive use of wealth, compulsory saving, appropriate restrictions on the distribution of profits, and compulsory loans. Thus, for those infatuated with the role of the private sector in the development process there is no ground for equating the practice of comprehensive planning with an antagonistic dispensation towards the private sector, however embryonic such a sector may be. The demise of planning the development of poor countries started with the advent of a second generation of development economists (1975 up to the present). This second generation is seen as having been “almost moralistic, dedicated to a somber realism grounded on fundamental principles of neoclassical economics” (Meier (2001: 17)). Neoclassical economics is seen by this generation as being good for the governments of the developing countries. “Governments were admonished not only to remove price distortions but also to ‘get all policies right’. Not differences in initial conditions but differences in policies were now thought to explain the disparate performances of developing countries. A country was not poor because of the vicious circle of poverty but because of poor policies. Markets, prices and incentives should be of central concern in policy making” (Meier (2001: 17)). The new development wisdom was embodied in the Structural Adjustment Programmes (SAPs) of the World Bank and the IMF which were imposed on developing countries, especially African countries since the early 1980s and up to the end of the 1990s. In this context it is now firmly established in the specialized literature that the World Bank’s commissioned Berg Report provided the theoretical justification for SAPs.25. The advent of SAPs, with the accompanied array of conditions, marked the end of post-independence attempts at development planning in developing countries. From the above rather brief outline it should be clear that the planning approach to development and SAPs approach to the management of the macroeconomics of a developing country share two basic, but differentiated, features: (a) a focus on economic growth: with the planning approach aiming at achieving economic growth over a relatively long period under successive 5 year plans; while SAPs promising the achievement of economic growth in shorter periods of time; and, (b) a concern with 25 For an interesting account of the institutional, World Bank, events that eventually gave rise to SAPs see, for example, Stein (2008). 16 policies: with the planning approach seeking to identify relevant development policies for the mobilization of required investment resources to achieve the planned rate of growth, while SAPs imposing macroeconomic policies believed to be effective in achieving higher rates of growth. As is well known in the early years of the development experience of developing countries over the period since 1960 and up to the middle of the 1970s, development policy revolved around social equity mechanisms including public expenditure on health and education, food price subsidies, agricultural input price subsidies, other social transfers and public employment. From the middle of the 1970s up to the end of 1990s, under SAPs, such policies came to be labelled as "poor economic policies". After wasting two decades on experimentation with SAP policies, the donor community is rediscovering that what they dubbed as "bad economic policies" do, after all, constitute relevant development policies in the context of poor countries, especially those in Sub-Saharan Africa26. Be the above as it may, and in recognition of the urgent need to formulate “relevant development policies” the United Nations Department for Economic and Social Affaire (UN DESA) commissioned a number of policy notes to help developing countries in preparing “national development strategies” as per the recommendation of the UN Social Summit of 2005. According to the preface of the volume collecting these notes the objective of preparing them is to “provide those at the country level who shape and set policies, with a range of policy alternatives to the standard policy solutions that have prevailed over the past two decades… and to help countries take advantage of and expand their policy space”. The areas relevant to the formulation of national development strategies included macroeconomic and growth policies (Ghosh (2007)); trade policy (Gibbs (2007)); investment and technology policies (Khan (2007)); financial policies (Chandrasekhar (2007); social policy (Ortiz (2007)); and, state-owned enterprise reform (Chang (2007)). A careful reading of the individual policy notes will show that five of them are dealing with details under the theme of macroeconomic and growth policies. In what follows, therefore, we will discuss the major thrust of the policy suggestions dealing with this umbrella theme. As a reflection on the experience of developing countries with SAPs policies Ghosh (2007) notes that while macroeconomic stability is a necessary condition for development and growth “the record of the past two decades shows that recently fashionable ideas, and policy recommendations, of what makes for good macroeconomic management and for such stability have been overly narrow. Indeed, in many countries they have wrought the opposite of what was intended”. The experience of the “past two decades”, it is suggested, gave rise to a broad “understanding that macroeconomic management in open developing economies should be guided by” a planning framework. The most important guidelines for the design of relevant development policies would include the following: 26 See, for example, the Commission for Africa (2005) and the World Bank (2005). 17 (i) A planning approach: in the context of a planning approach to the management of an open developing country “macroeconomic policy needs to be developed within a coordinated framework, so that fiscal, monetary, exchange rate and capital management are consistent”. The consistency of the macroeconomic policies needs to be ascertained for the medium term to provide the “contours within which macroeconomic and public expenditure strategies are organized”. (ii) The design of macroeconomic policy: in a planning approach macroeconomic economic policy is expected to be based on the overall objectives of the plan. Economic growth, livelihood stability and employment generation must be given significance, and should not be crowded out by overly narrow focus on macroeconomic stability and inflation control. (iii) Objective of Policy: it is not just the aggregate rate of economic growth, but also the pattern of that growth, which is crucial. For most countries, the primary goal should be productive employment generation providing decent work. This requires more than macroeconomic policy alone; in particular, industrial policies providing carefully considered incentives to promote desired investment and financial policies including directed credits will play a role. (iv) Public Expenditure: the significance of public expenditure in sustaining and expanding the productive human resource base of the country through social spending must be recognized. Macroeconomic policies must ensure that public expenditure in the social sectors is maintained at adequate levels. Developing country governments need to be more confident of the positive effects of appropriate expansionary fiscal policy and, in particular, of the critical role of public investment. (v) Revenue Mobilization: there needs to be more emphasis on raising public resources in ways that do not adversely affect the poor through effective implementation of progressive direct taxation, flexible trade taxes, and taxes on capital movements. (vi) Monetary and Exchange Rate Policy: monetary policy should accommodate fiscal policy, not the other way around, and both should be targeted to real economic goals such as employment generation, livelihood protection and expansion and poverty reduction. Exchange rates should be flexibly managed even to the point of creating a band within which market forces are allowed to work. This requires some control over capital account movements, preferably through a range of flexible instruments. We hasten to note that the above guidelines imply, for all intents and purposes, the reinstatement of the crux of the development policies of the 1940s and 1950s of the pioneers of development economics. Needless to note that such reinstatement would require taking note of the economic and political changes that took place in the world over the past sixty years or so, including those brought about by the third wave of globalization. 18 VII. Concluding Remarks: After noting the initial demographic and geographic conditions of the Republic of Sudan (ROS) that emerged following the birth of the Republic of South Sudan on the 9th of July 2011, this paper suggested the use of the human development approach to explore the development challenges and prospects of ROS. Three dimensions of these challenges and prospects are proposed: the political-institutional dimension which is shown to be the key challenge facing the country and requiring regime change and a deep-seated democratic transition; the economic dimension which is shown to have two components: a long-term one of structural transformation, and a short-term one requiring the continuous design of relevant development policies including macroeconomic policies; and a challenge of social arrangements which is shown to be linked to both the political-institutional, and economic dimensions. We argued that the key to unlocking the human development potential of the ROS is the resolution of the political dimension. Under a democratic governance regime, and after a transitional period where the institutional set-up of the country is appropriately reformed, it is possible to resolve issues pertaining to the sharing of wealth and political power in an amicable fashion without resort to violence. Long-run prospects for human development can then be approached in a planning framework where the relevant development policies can be agreed upon without prior convictions or simple-minded beliefs. The democratic governance regime would provide for the accountability of the governments of the day to the Sudanese public in matters pertaining to the design of relevant development policies. Among the relevant development policies for the case of a poor country, in terms of real per capita income, and a low human development achievement country like ROS, is macroeconomic policies. 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