Sudan - ECONOMY

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Sudan - The Economy

THE ECONOMY OF SUDAN continued to be in disarray in mid-1991. The principal causes of the disorder have been the violent, costly civil war, an inept government, an influx of refugees from neighboring countries, as well as internal migration, and a decade of below normal annual rainfall with the concomitant failure of staple food and cash crops.

The economic and political upheavals that characterized Sudan in the 1980s have made statistical material either difficult to obtain or unreliable. Prices and wages in the marketplace fluctuated constantly, as did the government's revenue. Consequently, information concerning Sudan's economy tends to be more historical than current.

In the 1970s, economic growth had been stimulated by a large influx of capital from Saudi Arabia and Kuwait, invested with the expectation that Sudan would become "the breadbasket" of the Arab world, and by large increments of foreign aid from the United States and the European Community (EC). Predictions of continuing economic growth were sustained by loans from the World Bank and generous contributions from such disparate countries as Norway, Yugoslavia, and China. Sudan's greatest economic resource was its agriculture, to be developed in the vast arable land that either received sufficient rainfall or could be irrigated from the Nile. By 1991 Sudan had not yet claimed its full water share (18.5 billion cubic meters) under the 1959 Nile Waters Agreement between Egypt and Sudan.

Sudan's economic future in the 1970s was also energized by the Chevron Overseas Petroleum Corporation's discovery of oil on the borderlands between the provinces of Kurdufan and Bahr al Ghazal. Concurrently, the most thoroughly researched hydrological project in the Third World, the Jonglei Canal (also seen as Junqali Canal), was proceeding ahead of schedule, planned not only to provide water for northern Sudan and Egypt, but also to improve the life of the Nilotic people of the canal zone. New, large agricultural projects had been undertaken in sugar at Kinanah and cotton at Rahad. Particularly in southern Sudan, where the Addis Ababa accords of March 27, 1972, had seemingly ended the insurgency, a sense of optimism and prosperity prevailed, dashed, however, when the civil war resumed in 1983. The Khartoum government controlled these development projects, but entrepreneurs could make fortunes through the intricate network of kinship and political relations that has traditionally driven Sudan's social and economic machinery.

In the early 1970s, public enterprises dominated the modern sector, including much of agriculture and most of large-scale industry, transport, electric power, banking, and insurance. This situation resulted from the private sector's inability to finance major development and from an initial government policy after the 1969 military coup to nationalize the financial sector and part of existing industry. Private economic activities were relegated to modern small- and medium-scale industry. The private sector dominated road transport and domestic commerce and virtually controlled traditional agriculture and handicrafts.

In the 1980s, however, Sudan underwent severe political and economic upheavals that have shaken its traditional institutions and its economy. The civil war in the south resumed in 1983, at a cost of more than �Sd11 million per day. The main participant in the war against government was the Sudanese People's Liberation Army (SPLA, the armed wing of the Sudanese People's Liberation Movement (SPLM)), under John Garang's leadership. The SPLA made steady gains against the Sudanese army until by 1991 it controlled nearly one-third of the country.

The dearth of rainfall in the usually productive regions of Sahel and southern Sudan added to the country's economic problems. Refugees, both Sudanese and foreigners from Eritrea, Ethiopia, Uganda, and Chad, further strained the Sudanese budget. International humanitarian agencies have rallied to Sudan's aid, but the government rejected their help.

When Jaafar an Nimeiri was overthrown in April 1985, his political party disappeared, as did his elaborate security apparatus. The military transitional government and the democratically elected coalition government of Sadiq al Mahdi that succeeded the exiled Nimeiri failed to address the country's economic problems. Production continued to decline as a result of mismanagement and natural disasters. The national debt grew at an alarming rate because Sudan's resources were insufficient to service it. Not only did the SPLA shut down Chevron's prospecting and oil production, but it also stopped work on the Jonglei Canal.

On June 30, 1989, a military coup d'�tat led by Colonel (later Lieutenant General) Umar al Bashir overthrew the government of Sadiq al Mahdi. Ideologically tied to the Muslim Brotherhood and dependent for political support on the Brotherhood's party, the National Islamic Front, the Bashir regime has methodically purged those agencies that dealt primarily with the economy--the civil service, the trade unions, the boards of publicly owned enterprises, the Ministry of Finance and Economic Planning, and the central bank. Under Bashir's government, Sudan's economy has been further strained by the most severe famine of this century, the continuation of the war in the south, and a foreign policy that has left Sudan economically, if not politically, isolated from the world community.

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Sudan

Sudan - ECONOMIC DEVELOPMENT

Historically, the colonial government was not interested in balanced economic growth and instead concentrated its development efforts on irrigated agriculture and the railroad system throughout the Anglo-Egyptian condominium. Incidental government investment had gone mainly into ad hoc projects, such as the construction of cotton gins and oilseed-pressing mills as adjuncts of the irrigation program. A limited amount of rainfed mechanized farming, similarly on an ad hoc basis, had also been developed during World War II. After the war, two development programs-- actually lists of proposed investments--were drawn up for the periods 1946-50 and 1951-55. These plans appear to have been a belated effort to broaden the country's economic base in preparation for eventual Sudanese independence. Both programs were seriously hampered by a lack of experienced personnel and materials and had little real impact. Independently, the private sector had expanded irrigated agriculture, and some small manufacturing operations had been started, but only three larger industrial enterprises (meat and cement plants and a brewery) had been constructed, all between 1949 and 1952. As a result, at independence the new Sudanese government's principal development inheritance was the vast irrigated Gezira Scheme (also seen as Jazirah Scheme) and Sudan Railways.

Not until 1960 did the new government attempt to prepare a national development plan. Since that time, three plans have been formulated, none of which has been carried through to completion. Work on the first of these, the Ten-Year Plan of Economic and Social Development, for the fiscal years ( FY) 1961-70, began in late 1960, but the plan was not formally adopted until September 1962, well over a year after its scheduled starting date. The total ten-year investment was set at �Sd565 million, at the time equivalent to more than US$1.6 billion. The private sector was expected to provide 40 percent of the amount. Unfortunately, the goals were overly ambitious, and the government had few experienced planners. The plan as prepared was not adhered to, and implementation was actually carried out through investment programs that were drawn up annually and funded through the development budget. Projects not in the original plan were frequently included. Investment was at a high rate in the first years, well beyond projections, and a number of major undertakings had been completed by mid-plan, including the Khashm al Qirbah and Manaqil irrigation projects, a sugar factory at the former site, another at Al Junayd irrigation project, and the Roseires (also called Ar Rusayris) Dam.

As the 1960s progressed, a lack of funds threatened the continuation of development activities. Government current expenditure had increased much faster than receipts, in part because of the intensification of the civil war in the south, and government surpluses to finance development vanished. At the same time, there was a shortfall in foreign investment capital. The substantial foreign reserves held at the beginning of the plan period were depleted, and the government resorted to deficit financing and foreign borrowing. The situation had so deteriorated by 1967 that implementation of the Ten-Year Plan was abandoned. Sudan's international credit worthiness became open to question.

Despite major financial problems, real economic gains were nevertheless made during the Ten-Year Plan, and per capita income rose from the equivalent of US$86 in 1960 to about US$104 at the end of the decade. Late in the 1960s, the government prepared a new plan covering FY 1968 to FY 1972. This plan was discarded after the military coup led by Nimeiri in May 1969. Instead, the government adopted a Five-Year Plan of Economic and Social Development, 1970-74. This plan, prepared with the assistance of Soviet planning personnel, sought to achieve the major goals of the May revolution (creation of an independent national economy; steady growth of prosperity; and further development of cultural, education, and health services) through socialist development.

During the plan's first two years, expenditures remained low, affected largely by uncertainties that stemmed from the civil war. After the war ceased in early 1972, the government felt that the plan failed to provide for transportation improvements and large-scale productive projects. In 1973, the government therefore established in the Interim Action Program, which extended the original plan period through FY 1976. New objectives included the removal of transportation bottlenecks, attainment of self-sufficiency in the production of several agricultural and industrial consumer items, and an increase in agricultural exports. To accomplish these goals, proposed public sector investment increased from �Sd215 million to �Sd463 million (however, actual expenditures during the five years, excluding technical assistance, were �Sd250 million). Private sector projected investment was estimated at �Sdl70 million originally, but the nationalizations carried out in 1970 and 1971 discouraged private investment in productive undertakings. Foreign private capital investment became negligible, and domestic private capital was put mostly into areas considered less subject to takeover, such as service enterprises, housing, traditional agriculture, and handicrafts. The denationalizations since 1972 resulted in increased private foreign investment in development. The final investment total during the first five years was considerably above the original plan projection. The plan failed to achieve its goal of a 7.6 percent annual growth rate in gross domestic product ( GDP), however, and was extended to 1977.

From FY 1973, after introduction of the Interim Action Program, through 1977, development expenditures grew to more than 1 billion Sudanese pounds. The government initiated several irrigation projects at Rahad, Satit southeast of Khashm al Qirba, Ad Damazin, and Kinanah; and established factories at Sannar, Kinanah, at Shandi on the Nile northeast of Khartoum, Kusti, Kaduqli, Nyala, and Rabak on the White Nile south of Khartoum. Roads between Khartoum and Port Sudan were paved with tarmacadam. Excavation began on the Jonglei Canal. Chevron discovered oil. The original plan called for almost half of investment to be provided by surpluses in the central government budget. Although this assumption appeared highly optimistic in view of the modest surpluses attained during the last half of the 1960s, tax revenues did increase as projected.

Earnings from public corporations, however, fell short of projections, and growth in government current expenditures greatly exceeded revenue growth. As a result, not only were there no surpluses in the public sector, but the government had to borrow from the Bank of Sudan to cover the current expenditure account. Foreign capital, although abundant, also did not equal the spending on development, and, contrary to the expectations of the plan's drafters, the government had to resort to domestic borrowing to proceed with project implementation.

In early 1977, the government published the successor Six- Year Plan of Economic and Social Development, 1977-1982. Its goals and projections also appeared optimistic because of the worsening domestic economic situation, which was marked by growing inflation. The inflation stemmed in large part from deficit development financing (printing money), increasing development costs because of worldwide price rises, and rising costs for external capital. During the plan's second year, FY 1978, there was no economic growth as the deficit development financing in the mid- and late 1970s led the Sudan into a deepening economic crisis. At the same time, external debt pressures mounted, and Sudan failed to meet its scheduled payments. A substantial cutback in further development expenditures became unavoidable. The result was an abandonment of Six-Year Plan projections, a restriction of expenditures generally to the completion of projects under way, improvement of the performance of existing operational projects, elimination of transport constraints, and a series of short-term "rolling" programs that particularly emphasized exports.

In October 1983, the government announced a three-year public investment program, but efforts to Islamize the economy in 1984 impeded its implementation, and after the Nimeiri overthrow in April 1985, it was suspended. In August 1987, an economic recovery program was initiated. This program was followed, beginning in October 1988, by a three-year recovery program to reform trade policy and regulate the exchange rate, reduce the budget deficit and subsidies, and encourage exports and privatization. There was little possibility for early economic recovery offered by the military government of General Umar al Bashir that took office on June 30, 1989. The government's economic policies proposed to Islamize the banking system, but foreign business interests viewed this measure as a disincentive to do business in Sudan, because no interest would be paid on new loans. Furthermore, Islamic banks and other economic supporters of the regime were to be granted disproportionate influence over the economy, which led to widespread resentment among other sectors. Finally, the government did not go far enough to satisfy the International Monetary Fund ( IMF) or other major creditors that it had sufficiently reduced subsidies on basic commodities, thus reducing its budget deficit. Bashir had announced an economic recovery program in mid-1990, but in 1991 its results were still awaited.

The late 1970s had seen corruption become widespread. Although always present, corruption never had been a major characteristic of the Sudanese economic scene. The enormous sums that poured into Sudan in the late 1970s from the Arab oil- exporting countries, the United States, and the European Community, however, provided opportunities for the small clique that surrounded Nimeiri to enrich themselves. This corruption fell into three principal categories: embezzlement of public funds, most of which left the country, agricultural acquisition schemes, and investment in the mercantile sphere.

The most common ways of embezzling public funds were acquiring liquid assets from banks or government agencies, selling the state's assets, selling state land, and smuggling. The siphoning off of liquid assets usually required the connivance of a high government official. Between 1975 and 1982, more than 800 cases were reported of embezzlement of, on the average, more than �Sd1,000. In one case, principal bank officials embezzled �Sd3 million; another bank made a loan of �Sd200 million to a businessman whose business was fictitious.

State property sold by embezzlers included gasoline and medicines. State officials also sold real estate in residential areas at below the market price. An impressive residence would then be built on the property for rental to diplomatic officials or executives of multinational companies. In the past, small operators penetrating the vast and unpatrolled borders of Sudan carried out smuggling, but in the late 1980s it became a vast and sophisticated business. Of the smuggling operations uncovered, one involved �Sd2.5 million in cloth, another �Sdl million in matches, and a third �Sd0.5 million in automobiles.

Another highly profitable form of corruption was the selling of state farmlands, each about 30,000 feddans (1 feddan is equivalent to 0.42 hectares). Mechanized Farming Corporation (MFC) officials sold large numbers of feddans at low prices to senior officials in Khartoum; many of the latter exploited the land for profit at the expense of the peasantry and caused profound ecological deterioration.

As corruption ran rampant during the late 1970s until Nimeiri was overthrown, commercial companies, particularly in the export- import trade, profited through their influence on public policy and through special permits they received. The Islamic institutions that dominated Sudanese banking facilitated this corruption. These banks, of which the most important was the Faisal Islamic Bank, possessed privileges not enjoyed by Sudanese national banks, such as exemption from taxation and the right to transfer profits abroad. An example of the combination of political power and financial capital was the Islamic Development Company. Established in 1983 as a limited shareholding company with an authorized capitalization of US$1 billion, the company was chartered to invest in agriculture, industry, services, construction, and Islamic banks. In practice, it concentrated on the export-import trade, where high profits could be made quickly and easily, in contrast to the slow returns of agricultural development projects. The board of directors consisted of ten persons, four Sudanese and six foreign nationals, mostly Saudis, including a son of the late King Faisal ibn Abd al Aziz Al Saud. Of the Sudanese, three belonged to the National Islamic Front, and the fourth was the son of the leader of the Khatmiyyah, a Muslim religious group associated with the National Unionist Party. All had connections with Islamic banks and the Sudanese parliament. Their purpose was to strengthen the Islamist movement's economic power by tying their commercial enterprise to the state in order to achieve a privileged position in the marketplace. They accomplished this aim by granting shares valued at US$100,000 to founding members and to prominent persons, ranging from the republic's president to wealthy Muslim businessmen.

Between 1978 and 1985, agricultural and industrial production had declined in per capita terms. Imports during much of the 1980s were three times the level of exports. By 1991 the value of the Sudanese pound against the dollar had sunk to less than 10 percent of its 1978 value, and the country's external debt had risen to US$13 billion, the interest on which could be paid only by raising new loans.

Two reasons for this decline were the droughts and accompanying famine occurring in the 1980s and 1991, and the influx of more than 1 million refugees from Eritrea, Ethiopia, Chad, and Uganda, in addition to the persons displaced by the continuing war in southern Sudan who were estimated to number between 1.5 million and 3.5 million. Nevertheless, the decline in Sudan's agricultural and industrial production had begun before these calamities. Few development projects were completed on time and those that were failed to achieve projected production. After 1978 the GDP steadily fell so that the vast sums of money borrowed could not be repaid by increased productivity. Sudan found itself in a cycle of increasing debt and declining production.

These economic problems had two fundamental causes. First, in planning little thought was given to the impact of any one project on the whole economy and even less to the burden such huge projects would place on a fragile infrastructure. Some ministries undertook projects by unilaterally negotiating loans without reference to the Central Planning Agency. Second, remittances by Sudanese laborers in the Persian Gulf (thousands of workers were based in Kuwait and Iraq, until many of them were expelled) placed a stress on Sudan's economy, because the government was forced to relax its stringent currency controls to induce these workers to repatriate their earnings. Such funds were largely invested in consumer goods and housing, rather than in development projects.

Sudan

Sudan - AGRICULTURE

In the early 1990s, agriculture and livestock raising were the main sources of livelihood in Sudan for about 61 percent of the working population. Agricultural products regularly accounted for about 95 percent of the country's exports. Industry was mostly agriculturally-based, accounting for 15 percent of GDP in 1988. The average annual growth of agricultural production declined in the 1980s to 0.8 percent for the period 1980-87, as compared with 2.9 percent for the period 1965-80. Similarly, the sector's total contribution to GDP declined over the years, as the other sectors of the economy expanded. Total sectoral activities, which contributed an estimated 40 percent of GDP in the early 1970s, had fluctuated during the 1980s and represented about 36 percent in 1988. Crop cultivation was divided between a modern, market-oriented sector comprising mechanized, large-scale irrigated and rainfed farming (mainly in central Sudan) and small-scale farming following traditional practices that was carried on in the other parts of the country where rainfall or other water sources were sufficient for cultivation.

Large investments continued to be made in the 1980s in mechanized, irrigated, and rainfed cultivation, with their combined areas accounting for roughly two-thirds of Sudan's cultivated land in the late 1980s. The early emphasis on cotton growing on irrigated land had decreased. Although cotton remained the most important crop, peanuts, wheat, and sugarcane had become major crops, and considerable quantities of sesame also were grown. Rainfed mechanized farming continued to produce mostly sorghum, and short-fiber cotton was also grown. Production in both subsectors increased domestic supplies and export potentials. The increase appeared, however, to have been achieved mainly by expanding the cultivated area rather than by increasing productivity. To stimulate productivity, in 1981 the government offered various incentives to cultivators of irrigated land who were almost entirely government tenants. Subsistence cultivators produced sorghum as their staple crop, although in the northerly, rainfed, cultivated areas millet was the principal staple. Subsistence farmers also grew peanuts and sesame.

Livestock raising, pursued throughout Sudan except in the extremely dry areas of the north and the tsetse-fly-infested area in the far south, was almost entirely in the traditional sector. Because livestock raising provided employment for so many people, modernization proposals have been based on improving existing practices and marketing for export, rather than moving toward the modern ranching that requires few workers.

Fishing was largely carried out by the traditional sector for subsistence. An unknown number of small operators also used the country's major reservoirs in the more populated central region and the rivers to catch fish for sale locally and in nearby larger urban centers. The few modern fishing ventures, mainly on Lake Nubia and in the Red Sea, were small.

The forestry subsector comprised both traditional gatherers of firewood and producers of charcoal--the main sources of fuel for homes and some industry in urban areas--and a modern timber and sawmilling industry, the latter government owned. Approximately 21 million cubic meters of wood, mainly for fuel, were cut in 1987. Gum arabic production in FY 1986-87 was about 40,000 tons. In the late 1980s, it became in most years the second biggest export after cotton, amounting to about 11 percent of total exports.

Land Use

By 1991 only partial surveys of Sudan's land resources had been made, and estimates of the areas included in different landuse categories varied considerably. Figures for potentially arable land ranged from an estimate of 35.9 million hectares made in the mid-1960s to a figure of 84 million hectares published by the Ministry of Agriculture and Natural Resources in 1974. Estimates of the amount actually under cultivation varied in the late 1980s, ranging from 7.5 million hectares, including roughly 10 or 11 percent in fallow, to 12.6 million hectares.

Substantial variations also existed in land classified as actually used or potentially usable for livestock grazing. The ministry and the United Nations Food and Agriculture Organization (FAO) have classified about 24 million hectares as pastureland. The 1965 estimate of land use classified 101.4 million hectares as grazing land, and in 1975 an ILO-United Nations Development Programme (UNDP) interagency mission to Sudan estimated the total potential grazing land at between 120 million and 150 million hectares.

Forestland estimates also differed greatly, from less than 60 million hectares by staff of the Forestry Administration to about 915 million hectares by the Ministry of Agriculture and Natural Resources and the FAO. Dense stands of trees only covered between 20 million and 24 million hectares of the total forestland. Differences in land classification may have been accounted for by use of some woodland areas for grazing and some traditional grazing lands for raising crops. Given the dearth of rainfall during the 1980s and early 1990s, the ecological damage from mechanized farming, and the steady march of desertification, discrepancies in these statistics had little meaning in 1991.

It was generally agreed, however, that in the late 1980s Sudan still had a substantial amount of land suitable for future cropping. The ILO-UNDP mission believed that two-thirds of the potential area for livestock grazing, however, was already in use. In addition to land suitable for cultivation and livestock grazing, Sudan also had about 76 million to 86 million hectares of desert. Additionally, an area of about 2.9 million hectares was covered by swamps and inland water, and about 280,000 hectares were occupied by urban settlements and other man-made features.

Land Tenure

The right to own property, to bequeath it to heirs, and to inherit it was established by the Permanent Constitution of 1973; this right was suspended in 1985. Sudan had long had a system of land registration through which an individual, an enterprise, or the government could establish title to a piece of land. Such registration had been extensive in northern Sudan, especially in Al Khartum, Al Awsat, and Ash Shamali provinces. Before 1970 all other land (unregistered) belonged to the state, which held ownership in trust for the people, who had customary rights to it. In 1970 the Unregistered Land Act declared that all waste, forest, and unregistered lands were government land. Before the act's passage, the government had avoided interfering with individual customary rights to unregistered land, and in the late 1980s it again adhered to this policy.

The government owned most of the land used by the modern agricultural sector and leased it to tenants (for example, the Gezira Scheme) or to private entrepreneurs, such as most operators of large-scale mechanized rainfed farming. In the late 1980s, however, the great area of land used for pasture and for subsistence cultivation was communally owned under customary land laws that varied somewhat by location but followed a broadly similar pattern. In agricultural communities, the right to cultivate an area of unused land became vested in the individual who cleared it for use. The rights to such land could be passed on to heirs, but ordinarily the land could not be sold or otherwise disposed of. The right was also retained to land left in fallow, although in Bahr al Ghazal, Aali an Nil, and Al Istiwai there were communities where another individual could claim such land by clearing it.

Among the transhumant communities of the north, the rights to cultivated land were much the same, but the dominant position of livestock in community activities had introduced certain other communal rights that included common rights to grazing land, the right-of-way to water and grazing land, the right to grass on agricultural land unless the occupier cut and stacked it, and the right to crop residues unless similarly treated. In the western savannas, private ownership of stands of hashab trees could be registered, an exception to the usual government ownership of the forests. But dead wood for domestic fuel and the underlying grass were common property. Water, a matter of greatest importance to stock raisers, was open to all if free standing, but wells that had been dug and the associated drinking troughs were private property and were retained by the digger season after season. In northern Sudan, especially in the western savanna where increasing population and animal numbers have placed pressure on the land, violations of customary laws and conflicts between ethnic groups over land rights have been growing. Resolution of these problems has been attempted by local government agencies but only on a case-by-case basis.

Irrigated Agriculture

In 1991 Sudan had a large modern irrigated agriculture sector totaling more than 2 million hectares out of about 84 million hectares that are potentially arable. About 93 percent of the irrigated area was in government projects; the remaining 7 percent belonged to private operations. The Nile and its tributaries were the source of water for 93 percent of irrigated agriculture, and of this the Blue Nile accounted for about 67 percent. Gravity flow was the main form of irrigation, but about one-third of the irrigated area was served by pumps.

The waters of the Nile in Sudan have been used for centuries for traditional irrigation, taking advantage of the annual Nile flood. Some use of this method still continued in the early 1990s, and the traditional shaduf (a device to raise water) and waterwheel were also used to lift water to fields in local irrigation projects but were rapidly being replaced by more efficient mechanized pump systems. Among the first efforts to employ irrigation for modern commercial cropping was the use of the floodwaters of the Qash River and the Baraka River (both of which originate in Ethiopia) in eastern Sudan to grow cotton on their deltas. This project was started in the late 1860s by the Egyptian governor and continued until interrupted by the turbulent period of the 1880s, leading to the reconquest of the country by the British in 1899. Cultivation was resumed in 1896 in the Baraka Delta in the Tawkar area, but in the Qash Delta it only resumed after World War I. Between 1924 and 1926, canals were built in the latter delta to control the flood; sandstorms made canals unfeasible in the Baraka. Between the 1940s and the 1970s, various projects were developed to irrigate land. In 1982 both deltas yielded only one crop a year, watered by the flood. Adequate groundwater, however, offered the eventual possibility of using pump irrigation from local wells for additional cropping or for supplementing any flood shortages.

The drought that affected Sudan in the 1980s was a natural disaster that had a crushing effect on the country's irrigation systems. In 1990-91, for instance, water was so scarce in the Tawkar area that for the first time in 100 years the crops failed.

As of 1990, the country's largest irrigation project had been developed on land between the Blue and White Nile rivers south of their confluence at Khartoum. This area is generally flat with a gentle slope to the north and west, permitting natural gravity irrigation, and its soils are fertile cracking clays well suited to irrigation. The project originated in 1911, when a private British enterprise, Sudan Plantations Syndicate, found cotton suited to the area and embarked on what in the 1920s became the Gezira Scheme, intended principally to furnish cotton to the British textile industry. Backed by a loan from the British government, the syndicate began a dam on the Blue Nile at Sannar in 1913. Work was interrupted by World War I, and the dam was not completed until 1925. The project was limited by a 1929 agreement between Sudan and Egypt that restricted the amount of water Anglo-Egyptian Sudan could use during the dry season. By 1931 the project had expanded to 450,000 hectares, the maximum that then could be irrigated by the available water, although 10,000 more hectares were added in the 1950s. The project was nationalized in 1950, and was operated by the Sudan Gezira Board as a government enterprise. In 1959 a new agreement with Egypt greatly increased the allotment of water to Sudan, as did the completion in the early 1960s of the Manaqil Extension on the western side of the Gezira Scheme. By 1990 the Manaqil Extension had an irrigated area of nearly 400,000 hectares, and with the 460,000 hectares eventually attained by the original Gezira Scheme, the combined projects accounted for half the country's total land under irrigation.

In the early 1960s, the government set up a program to resettle Nubians displaced by Lake Nubia (called Lake Nasser in Egypt), which was formed by the construction of the Aswan High Dam in Egypt. To provide farmland for the Nubians, the government constructed the Khashm al Qirbah Dam on the Atbarah River and established the Halfa al Jadidah (New Halfa) irrigation project. Located west of Kassala, this project was originally designed to irrigate about 164,000 hectares. In 1982 it was the only large irrigation project in the country that did not use the waters of the Blue Nile or White Nile. The resettlement was effected mainly after completion of the Khashm al Qirbah Dam in 1964. Part of the irrigated area was also assigned to local inhabitants. The main commercial crops initially introduced included cotton, peanuts, and wheat. In 1965 sugarcane was added, and a sugar factory having a design capacity of 60,000 tons was built to process it. The project enabled 200,000 hectares of land to be irrigated for the first time. Heavy silting as well as serious problems of drainage and salinity occurred. As a result, by the late 1970s the reservoir had lost more than 40 percent of its original storage capacity and was unable to meet the project water requirements. These problems persisted in the early 1990s.

The multipurpose Roseires Dam was built in 1966 and power- generating facilities were installed in 1971. Both the water and the power were needed to implement the Rahad River irrigation project located east of the Rahad River, a tributary of the Blue Nile. The Rahad entered the Blue Nile downstream from the dam and during the dry season had an insufficient flow for irrigation purposes. Work on the initial 63,000 hectares of the project began in the early 1970s, the first irrigation water was received in 1977, and by 1981 about 80 percent of the prepared area was reported to be irrigated. (In May 1988, the World Bank agreed to provide additional funding for this and other irrigation projects). Water for the project was pumped from the Blue Nile, using electric power from the Roseires plant, and was transported by an eighty-kilometer-long canal to the Rahad River (en route underpassing the Dindar River, another Blue Nile tributary). The canal then emptied into the Rahad above a new barrage that diverted the combined flow from the two sources into the project's main irrigation canal. Irrigation was by gravity flow, but instead of flat field flooding, furrow irrigation was used, because it permitted more effective use of machinery.

In the 1920s, private irrigation projects using diesel pumps also had begun to appears in Al Khartum Province, mainly along the White Nile, to provide vegetables, fruit, and other foods to the capital area. In 1937 a dam was built by the Anglo-Egyptian condominium upstream from Khartoum on the White Nile at Jabal al Awliya to regulate the supply of water to Egypt during the August to April period of declining flow. Grazing and cultivated land along the river was flooded for almost 300 kilometers. The government thereupon established seven pump irrigation projects, partially financed by Egypt, to provide the area's inhabitants with an alternative to transhumance.

This irrigation project eventually proved successful, making possible large surpluses of cotton and sorghum and encouraging private entrepreneurs to undertake new projects. High cotton profits during the Korean War (1950-53) increased private interest along the Blue Nile as well, and by 1958 almost half the country's irrigated cotton was grown under pump irrigation. During the 1960s, however, downward fluctuations in world cotton prices and disputes between entrepreneurs and tenants led to numerous failures of pump irrigation projects. In 1968 the government assumed ownership and operation of the projects. The government established the Agricultural Reform Corporation for this purpose, and the takeover began that year with the larger estates. Subsequently, as leases expired, the corporation acquired smaller projects, until May 1970 when all outstanding leases were revoked. A considerable number of small pump operations that developed on privately owned land, chiefly along the main Nile but also on the Blue Nile, continued to operate.

Since the 1950s, the government has constructed a number of large pump projects, mostly on the Blue Nile. These have included the Junayd project on the right bank of the Blue Nile east of the Gezira Scheme. This project, with an irrigated area of about 36,000 hectares, went into operation in 1955 to provide an alternative livelihood for nomadic pastoralists in the area. It produced cotton until 1960, when about 8,400 hectares were converted to sugarcane. A sugar factory built to process the crop (with a potential capacity of 60,000 tons of sugar a year) opened in 1962. In the early 1970s, the Japanese-assisted As Suki project, also of 36,000 hectares, was established upstream from Sannar to grow cotton, sorghum, and oilseeds. In the mid-1970s, the government constructed a second project near Sannar of about 20,000 hectares. In addition to cotton and other crops such as peanuts, about 8,400 hectares of the area were devoted to raising sugarcane. The cane-processing factory, with a design capacity of 110,000 tons of sugar a year, opened in 1976. Several smaller Blue Nile projects added more than 80,000 additional hectares to Sudan's overall irrigated area during this time.

In the 1970s, when the consumption and import of sugar grew rapidly, domestic production became a priority, and two major pump-irrigated sugar plantations were established on the White Nile in the Kusti area. The Hajar Asalaya Sugar Project, begun in 1975, had an irrigated area of about 7,600 hectares. The sugar factory, completed in 1977, had a potential annual capacity of 110,000 tons. The Kinanah Sugar Project, which had almost 16,200 hectares under irrigation in 1981 and had a future potential of over 33,000 hectares, was one of the world's largest sugar- milling and refining operations. In 1985-86 production reached more than 330,000 tons a year. This project, first proposed in 1971, was beset with funding problems and overruns that increased overall costs from the equivalent of US$113 million estimated in 1973 to more than US$750 million when the plant opened officially in early 1981.

The Kinanah Sugar Project, unlike the country's four other government-owned sugar projects, was a joint venture--among the governments of Sudan, Kuwait, and Saudi Arabia, and the Arab Investment Company, the Sudan Development Corporation, Kinanah Limited, and the AAAID, including local Sudanese banks. An initial trial run in the 1979-80 cane season produced 20,000 tons of sugar. Yield increased to an estimated 135,000 to 150,000 tons the following season. Production at the Hajar Asalaya factory did not get under way until the 1979-80 season because of cane and sugar-processing difficulties. Problems have also affected the other three state sugar factories, but as a result of proposed World Bank management, the output total of these four government operations for the 1984-85 season improved to nearly 200,000 tons. Output declined to 159,000 tons in 1985-86 because of the drought. In 1989 sugarcane production reached 400,000 tons.

Rainfed Agriculture

Cultivation dependent on rainfall falls into two categories. Most Sudanese farmers always have relied on rainfed farming. In addition to these traditional farmers, a large modern mechanized rainfed agriculture sector has developed since 1944-45, when a government project to cultivate the cracking clays of central Sudan started in the Al Qadarif area of Ash Sharqi Province, largely to meet the food needs of army units stationed in the British colonies in eastern Africa (present-day Kenya, Tanzania, and Uganda). An average of about 6,000 hectares a year was cultivated between 1945 and 1953, producing chiefly sorghum, under a sharecropping arrangement between the government and farmers who had been allocated land in the project. These estates proved costly, however, and in 1954 the government began encouraging the private sector to take up mechanized farming in the area, a policy that continued after Sudan gained independence in 1956. Under the new approach, the government established several state farms to demonstrate production methods and to conduct research. Research activities have been very limited, however, because of staffing and funding problems, and the farms have been operated essentially as regular production units.

The private sector response was positive, and by 1960 mechanized farming had spread into other areas of the cracking clay zone in Ash Sharqi and Al Awsat provinces. The government set aside rectangular areas that were divided into plots of 420 hectares (later raised in places to 630 hectares) each. Half of these plots were leased to private farmers, the other half left in fallow. After four years, the originally leased land was to be returned to fallow and the farmer was to receive a new lease to an adjacent fallow area. When the demand for land grew faster than it could be demarcated, areas outside the designated project limits were taken over by private individuals. The four-year lease proved unpopular because it meant new investment in clearing land every four years, and apparently much of the worked land continued to be cultivated while fallow land was also placed under cultivation. By 1968 more than 750,000 hectares were being cultivated, of which it was estimated that more than 200,000 hectares constituted unauthorized holdings. The average agricultural production growth rate declined, however, from 2.9 percent in the period between 1965 and 1980, to 0.8 percent in the period between 1980 and 1987, the latest available figures. Reportedly, for the 1991-92 season, the Ministry of Agriculture and Natural Resources planned for about 7.3 million hectares of food crops to be planted, with about 1.6 million hectares planted in the irrigated sector and about 5.7 million hectares in the rain-fed areas.

The investment requirements for mechanized farming favored prosperous cultivators, and eventually most farms came to be operated by entrepreneurs who raised capital through mortgageable property or other assets in the urban centers. Through arrangements with other individuals, these entrepreneurs frequently managed to control additional plots beyond the legal limit of two. Their ability to obtain capital also permitted them to abandon depleted land and to move into newly demarcated uncleared areas, a practice that had a deleterious impact upon the environment, deprived the indigenous inhabitants of work opportunities, and increased desertification. In 1968, to expand the operator base and to introduce more control over land allocation, crops, and farming methods, the government established the Mechanized Farming Corporation (MFC), an autonomous agency under the Ministry of Agriculture and Natural Resources. From 1968 through 1978, the IDA made three loans to the government to enable the MFC to provide technical assistance, credit for landclearing and machinery, and marketing aid to individual farmers and cooperative groups. The MFC also became the operator of state farms.

In the late 1970s, about 2.2 million hectares had been allocated for mechanized farming, and about 420,000 hectares more had been occupied without official demarcation. About 1.9 million hectares in all were believed to be under cultivation in any one season. Of the officially allocated land, more than 70 percent was held by private individuals. Private companies had also begun entering the field, and some allocations had been made to them. State farms accounted for another 7.5 percent. About 15 percent of the total allocated land was in MFC-IDA projects. The largest proportion of mechanized farming was in Ash Sharqi Province, 43 percent; the next largest in Al Awsat Province, 32 percent; and about 20 percent was in Aali an Nil Province. Mechanized farming had also been initiated in southern Kurdufan Province through a project covering small-scale farmers in the area of the Nuba Mountains, but under a different government program. Proposals also have been made for MFC projects using mechanized equipment in other areas of southern Kurdufan (some have already been tried) and southern Darfur provinces. There were serious feasibility problems in view of competition for land and conflicts with traditional farming practices, difficult soil conditions, and the probable negative effect on the large numbers of livestock of nomads.

Only a few crops had been found suitable for cultivation in the cracking clay area. Sorghum had been the principal one, and during the early 1980s it was planted on an average of about 80 percent of the sown area. Sesame and short-fiber cotton were also grown successfully but in relatively smaller quantities, sesame on about 15 percent of the land and cotton on about 5 percent. Soil fertility has reportedly been declining because of the continued planting of sorghum and the lack of crop rotation. Yields have apparently decreased, but in view of the area's greatly varying climatic conditions and the uncertain production data, definitive conclusions on trends appeared premature.

<>Livestock
<>Fisheries
<>Forestry

Sudan

Sudan - Livestock

In the early 1990s, drought caused a dramatic decline in livestock raising in Sudan, following a period in the early 1980s when livestock provided all or a large part of the livelihood of more than 40 percent of the country's population. Livestock raising was overwhelmingly in the traditional sector, and, although initial steps had been taken to improve productivity and develop market orientation, for the modern monetized economy the sector represented largely a potential asset. In 1983 Sudan's more than 50 million animals comprised the second largest national herd in Africa, next in size to that of Ethiopia. An FAO estimate in 1987 indicated that there were about 20.5 million cattle, 19 million sheep, 14 million goats, and 3 million camels. Other animals included 660,000 donkeys, 21,000 horses, a small number of pigs (kept by such non-Muslim peoples as the Nuba) and 32,000 chickens. By 1991 these numbers had been reduced by perhaps one-third by the drought of 1990-91; the August 1988 floods in the south, described as the worst in Sudan's history; and the ravages of civil war in the south. Poultry was raised mainly by farm families and villagers. A small modern sector consisted of limited government commercial operations and a few semicommercial private ventures.

Sudanese cattle are of two principal varieties: Baqqara and Nilotic. The Baqqara and two subvarieties constituted about 80 percent of the country's total number of cattle. This breed was found chiefly in the western savanna regions and in fewer, although significant, numbers farther to the east from Aali an Nil to Kassala in Ash Sharqi. The Nilotic, constituting approximately 20 percent of all cattle, were common in the eastern hill and plains areas of southeastern Al Istiwai, which were free of the tsetse fly, and in those parts of the Bahr al Ghazal and Aali an Nil lying outside the tsetse-fly zone. Because of periodic rinderpest epidemics, the total number of cattle was relatively small until about 1930, when it stood at an estimated 2 million. A vaccination program begun about that time and mass inoculations during the succeeding decades resulted in a great increase in numbers, which by 1970 had reached about 12 million. In the vast areas used by pastoral herders (estimated to be 80 million to 100 million hectares), cattle husbandry was conducted in an economic, cultural, and social context that had evolved over generations. This included an emphasis on increasing herd size as an investment for future family security. Small surpluses (usually bulls) were available for subsistence use, exchange, or sale for local consumption or export. Cattle were also used for marriage payments and among the Nilotes for rituals. Numbers of cattle also helped to establish or increase status and power in a social system in which cattle were the measure of wealth.

Most Nilotic cattle were kept by transhumant groups. Migrations , related to the wet and dry seasons, usually did not exceed 150 to 160 kilometers. The majority of the Baqqara strain of cattle belonged to the Baqqara Arabs. The latter were largely nomadic, but since at least the early 1900s had a settled base on which crop cultivation was practiced. The farmers, their relatives, or their agents moved the cattle over traditional migratory routes northward during the rainy season and southward to the area of the Bahr al Arab as the dry season progressed. Migrations in either direction might amount to 400 kilometers. The expansion of mechanized rainfed agriculture in the region used by the Baqqara, continued government efforts to enlarge the cultivated area, and pressures on the land from the growing population have gradually reduced grazing areas. At the same time, traditional cultural forces have brought about a steady increase in cattle numbers. The result has been increasing overstocking and pasture depletion until the outbreak of civil war in 1983 and the devastating droughts of the 1980s and early 1990s decimated not only the Nilotic herds but livestock throughout Sudan. Many families and indeed whole ethnic groups who have traditionally survived on their cattle, sheep, goats, or camels, lost all of their herds and were forced to migrate to the Three Towns (Omdurman, Khartoum, and Khartoum North) in search of sustenance.

Sheep were herded chiefly by transhumants in Darfur and Kurdufan. Large numbers were found in the drier areas at greater elevations than the usual cattle zone. Several breeds were raised, but the predominant and preferred one was the so-called desert sheep, which had both good weight and good milk yield. Villagers in Al Awsat also raised large numbers of sheep, mostly on a nonmigratory basis. Fodder was obtained from crop residues on irrigated and rainfed farms and from vegetation along the rivers and canals. Goats, of which there were three principal breeds (desert, Nubian, and Nilotic), were found throughout the country south of the northern desert areas. They were raised mainly by sedentary families for milk and meat. Goat meat, although less popular than mutton, formed part of the diet of most families, particularly those having low incomes. Goat milk was an important source of protein, and many families in urban areas kept a few goats for their milk.

Camels were largely concentrated in the desert and subdesert regions of northern Darfur, northern Kurdufan, and southern Ash Sharqi. They were kept almost entirely by nomadic and seminomadic peoples, for whom the animal represented the preferred mode of transport. Camels were also important for milk and for meat. Camel ownership and numbers were sources of prestige in nomadic societies.

Sudan

Sudan - Fisheries

Sudan's total production of fish, shellfish, and other fishing products reached an estimated 24,000 tons per year in 1988, the latest available yearly figures. This compared with estimates of a potential yearly catch exceeding 100,000 tons. The principal source of fish was the Nile River system. In central and northern Sudan, several lakes and reservoirs have been formed by the damming of the river and its branches: the 180-kilometer section of Lake Nubia on the main Nile in Sudan and the reservoirs behind the Roseires and Sennar dams on the Blue Nile, the Jabal al Awliya Dam on the White Nile, and the Khashm al Qirbah Dam on the Atbarah tributary of the main Nile. These bodies of water accounted for about 11,000 tons of fish against a calculated potential of about 29,000 tons.

Production from Lake Nubia through 1979, the latest figures available in 1991, was only 500 tons a year, or about one-tenth of the estimated potential. Inhabitants around the lake, which had formed gradually in the 1960s, had no previous experience in fishing, and the first significant commercial exploitation of the lake's resources had been undertaken by the government's Fisheries Administration. In 1973 a private company also started operations. In the mid- and late 1970s, an ice plant and a cold storage facility were built at Wadi Halfa with assistance from China. China also furnished thirty-five two-ton fishing vessels, a number of transport launches, and other fishing equipment. Cooling plants were constructed at Khartoum and Atbarah to hold fish that were brought from Wadi Halfa by railroad. Although ice was used in the shipments, substantial loss occurred, especially during the hotter months. To what extent fish production from the lake and availability to consumers were increased by these new facilities was not known in 1991.

The largest potential source of freshwater fish was southern Sudan whose extensive river network and flooded areas in As Sudd were believed able to provide 100,000 to 300,000 tons annually on a sustained basis. Statistics on actual production were unavailable in 1991; much was consumed locally, although limited quantities of dried and salted fish were exported to Zaire where it was in great demand.

The country's second source of fish, the Red Sea coastal area, was relatively unexploited until the late 1970s. Annual production toward the end of the decade amounted to about 500 tons of fish, shellfish (including pearl oysters), and other marine life. In 1978 the British Ministry of Overseas Development began a joint project with the government Fisheries Administration to raise output by making boats, motors, and equipment available to fishermen. Included was an ice plant built at Sawakin to furnish local fishermen with ice for their catch. By 1982 the project was well advanced, and about 2,000 tons of fish were taken annually. A sustained catch of 5,000 tons might eventually be possible.

Sudan

Sudan - Forestry

Since the early 1900s, extensive areas of woodland and forest have been converted to agricultural use. Large amounts of land classifiable as woodland have been cleared in the development of large-scale mechanized rainfed farming in Ash Sharqi and Al Awsat states, and smaller amounts in Aali an Nil and southern Kurdufan states. Although Sudan had a large quantity of natural forest, by 1991 much of it remained almost totally unexploited. In the late 1970s, FAO estimated that the country's forests and woodlands totaled about 915,000 square kilometers, or 38.5 percent of the land area. This figure was based on the broad definition of forest and woodland as any area of vegetation dominated by trees of any size. It also included an unknown amount of cleared land that was expected to have forest cover again "in the foreseeable future." An estimate in the mid-1970s by the Forestry Administration, however, established the total forest cover at about 584,360 square kilometers, or 24.6 percent of the country's land area. More than 129,000 square kilometers (about onequarter ) of this amount were located in the dry and semiarid regions of northern Sudan. These forests were considered valuable chiefly as protection for the land against desertification, but they also served as a source of fuel for pastoral peoples in those regions. The continued population pressure on the land has resulted in an accelerated destruction of forestland, particularly in the Sahel, because charcoal remained the predominant fuel. The loss of forestland in the marginal areas of the north, accelerated by mechanized farming and by drought, resulted in a steady encroachment of the Sahara southward at about ten kilometers a year in the 1980s.

The productive forest extended below the zone of desert encroachment to the southern border. It included the savanna woodlands of the central and western parts of the country, which were dominated by various species of acacia, among them Acacia senegal, the principal source of gum arabic. Gum arabic was Sudan's second largest export product, accounting for 80 percent of the world's supply. It is nontoxic, noncalorific, and nonpolluting, having no odor or taste. It is used widely in industry for products ranging from mucilage (for postage stamps) to foam stabilizers to excipient in medicines and dietetic foods. In 1986-87 Sudan produced more than 40,000 tons marketed through the Gum Arabic Company. In the late 1980s the drought severely curtailed production.

The principal area of productive forest and woodland, however, was in the more moist southern part of the country. Covering an area of more than 200,000 square kilometers and consisting mainly of broadleaf deciduous hardwoods, it remained largely undeveloped in 1990. Timber processed by government mills in the area included mahogany for furniture and other hardwoods for railroad ties, furniture, and construction. Domestic production of timber fell far short of local needs in the 1970s, and as much as 80 percent of the domestic requirement was met by imports.

Plantations established by the government Forestry Administration in the mid-1970s totaled about 16,000 hectares of hardwoods and 500 to 600 hectares of softwoods, most were in the south. They included stands of teak and in the higher elevations of the Imatong Mountains, exotic pines. Eucalyptus stands had also been established in the irrigated agricultural areas to serve as windbreaks and to supply firewood. A gradually increasing forest reserve has been developed, and by the mid1970s it covered more than 13,000 square kilometers. Additional protection of forest and woodland areas was provided by several national parks and game reserves that encompassed 54,000 square kilometers in the mid-1970s.

Since 1983 the civil war virtually halted forestry production in southern Sudan, from which came the overwhelming amount of forestry products. According to FAO estimates, however, in 1987 Sudan produced 41,000 cubic meters of sawn timber, 1,906,000 cubic meters of other industrial roundwood, and more than 18 million cubic meters of firewood. Each of these categories showed a substantial increase from production levels in the 1970s. The insatiable demand was for charcoal, the principal cooking fuel, and the one major forest product not dependent upon the south. Because wood of any kind could be turned to charcoal, the acacia groves of the Sahel have been used extensively for this purpose, with a resulting rapid advance of deforestation. To improve government forestry conservation and management policy, as well as the issue of land use, in 1990-91 plans were underway to establish a forestry resource conservation project, funded and cofinanced by several international development agencies and donors.

Sudan

Sudan - MANUFACTURING

The development of modern manufacturing received little direct encouragement in Sudan during the condominium period. British economic policies were aimed basically at expanding the production of primary products, mainly cotton, for export. Imports and traditional handicraft industries met the basic needs for manufactured goods. Indirectly, however, the vast Gezira Scheme cotton-growing project induced the construction of ginneries, of which more than twenty were in operation by the early 1930s. A secondary development was the establishment of several cottonseed oil-pressing mills. During World War II, small import substitution industries arose, including those manufacturing soap, carbonated drinks, and other consumer items. These operations did not survive the competition from imports after the war's end. Foreign private interests invested in a few larger enterprises that included a meat-processing factory, a cement plant, and a brewery, all opened between 1949 and 1952.

At independence the Sudanese government supported an industrial development policy to be effected through the private sector. To facilitate this process, Khartoum adopted the Approved Enterprises (Concessions) Act of 1956, to encourage private Sudanese and foreign investment. The act placed few restrictions on foreign equity holdings. By 1961, however, the government had concluded that the private sector lacked interest or funds to establish enterprises important to the national economy, and so it entered the manufacturing field. The first government project was a tannery opened that year, and this was followed in 1962 by a sugar factory. In 1962 Khartoum formed the Industrial Development Corporation (IDC) to manage government plants. During the decade, several additional government enterprises were built, including a second sugar factory, two fruit and vegetable canneries, a date-processing plant, an onion-dehydrating plant, a milk-processing plant, and a cardboard factory. During this time, the private sector also made substantial investment, which resulted in factories making textiles and knitwear, shoes, soap, soft drinks, and flour. Other private enterprises included printing facilities and additional oil-pressing mills. Among the largest private undertakings was the foreign-financed and foreign-built oil refinery at Port Sudan, which opened in 1964. Well over half the private sector investment during the decade came from foreign sources.

Government participation in the manufacturing sector increased dramatically after the 1969 military coup and the adoption of a policy aimed at placing the country's economic development in government hands, although private ownership continued. During 1970 and 1971 Khartoum nationalized more than thirty private enterprises. In 1972, however, to counter the drop in foreign private investment that followed, Nimeiri announced that private capital would again be accorded favorable treatment, and the government passed the Development and Promotion of Industrial Investment Act of 1972, containing even more liberal provisions than precoup legislation.

As the economy remained dependent on private capital, as well as capital investment from developed nations, the government incorporated further incentives for the favorable treatment of such capital in a 1974 revision of the industrial investment act, and added provisions against arbitrary nationalization. Moreover, in 1972 Khartoum denationalized some enterprises nationalized earlier, and returned them to their former owners under an arrangement for joint government-private ownership. One of the largest of these enterprises was the Bata Shoe Company, which was returned in 1978 as a reorganized joint company in which Bata held a 51 percent interest and the government 49 percent. The most successful such enterprise, however, was the Bittar Group, which in 1990 had become the largest undertaking in Sudan. Begun in the 1920s, nationalized in 1969 but returned to its owners in 1973, it has diversified into products ranging from exports of vegetable oils to imports of wheat, sugar, and insecticides. The firm has been active in a wide range of projects involving agriculture, electricity, and such industrial products as household and office equipment, soap, and detergents.

Throughout the 1970s, the government continued to establish new public enterprises, some state-owned, others in conjunction with private interests, and some having foreign government participation, especially by the Arab oil-producing states. The new plants included three sugar factories, among which was the Kinanah sugar-milling and refining factory; two tanneries; a flour mill; and more than twenty textile plants. A joint venture with United States interests built Sudan's first fertilizer plant south of Khartoum, which was in operation by 1986. Private investment continued, particularly in textiles. About 300 million meters of cloth were produced annually in the 1970s, but output fell to 50 million meters in 1985. In 1988, the textile industry functioned at about 25 percent of capacity. The latter figure reflected the effects of the civil war, the dearth of hard currency for spare parts to maintain machinery, and the debt crisis.

Since independence Sudan's modern manufacturing establishment has emphasized the processing of agricultural products and import substitution. The production of foodstuffs, beverages, and clothing has accounted for a large part of total output. Significant import substitution industries included cement, chemicals, and dry battery manufacture; glass-bottle-making; petroleum refining; and fertilizer production. In the late 1980s, estimates of the contribution of modern manufacturing to GDP varied from about 7 to 8 percent a year, including mining (compared to about 2 percent in 1956). Employment in the sector had risen during that period from possibly 9,000 in 1956 to 185,000 in 1977, including wage earners in government enterprises. Almost three-quarters of large-scale modern manufacturing was located in Al Khartum, attracted by market size, higher per capita income, better transportation and power infrastructure, and access to financial and government services.

Total manufacturing output, however, had not met expectation by the end of the 1970s and steadily declined in the 1980s. Overall output in some subsectors had grown as new facilities began operating, but the goal of self-sufficiency had generally not been attained. Shortages of domestic and imported raw materials, power failures, transportation delays, lack of spare parts, and shortages of labor ranging from qualified managerial staff and skilled workers to casual laborers had been drawbacks to effective operations and increased output. Losses of skilled labor and management to the Persian Gulf states have been particularly debilitating. In the 1980s, many factories operated below capacity--frequently at well under 50 percent of their potential. In some instances, low production also was related to poor project planning. For example, the government cannery at Kuraymah in Ash Shamali was already constructed when scientists found that the surrounding farming area could not produce the quantity of crops the plant could process. The milk-processing facility at Babanusah south of Khartoum had a similar record of poor planning. Efforts to improve the transportation and power infrastructure, whose deficiencies have been major contributors to the manufacturing problems, and rehabilitation of existing plants were among the basic goals of the 1977-82 Six-Year Plan of Economic and Social Development. That plan was never effectively implemented. Some progress has been reported, but in 1990 the production problems faced earlier by manufacturing persisted.

Sudan

Sudan - MINING

In 1990 the mining industry accounted for less than 1 percent of the total GDP. A wide range of minerals existed in Sudan, but the size of reserves had not been determined in most cases. The discovery of commercially exploitable quantities of petroleum in the late 1970s offered some hope that the sector would play an increased role in the economy in the future. However, from February 1984, some months after concessions were allotted, oil exploration operations had been suspended in the south, where the largest deposits were located, as a result of the region's security problems. Nonhydrocarbon minerals of actual or potential commercial value included gold, chrome, copper, iron, manganese, asbestos, gypsum, mica, limestone, marble, and uranium. Gold had been mined in the Red Sea Hills since pharaonic times. Between 1900 and 1954, several British enterprises worked gold mines in the area, and extracted a considerable quantity of the metal--one mine alone reportedly produced three tons of gold between 1924 and 1936. Gold also has been mined along the borders between Sudan and Uganda and Zaire, but not in commercially profitable amounts. During the 1970s, the government's Geological Survey Administration located more than fifty potential gold-producing sites in different parts of the country. Several joint ventures between the Sudanese Mining Corporation, a government enterprise, and foreign companies were launched in the 1980s; these undertakings produced gold at Gebeit and several other mines near the Red Sea Hills beginning in 1987. In 1988, about 78,000 metric kilograms of gold ore were mined in Sudan. In late 1990, Sudan and two French mining companies formed a joint venture company to exploit gold reserves in the Khawr Ariab wadi in the Red Sea Hills.

Chrome ore was mined in the Ingessana Hills in Al Awsat. In the late 1970s, output was reportedly more than 20,000 tons a year, of which more than four-fifths were produced by the Ingessana Hills Mines Corporation, a subsidiary of Sudanese Mining Corporation. A private operation produced the remainder. The ore was exported, chiefly to Japan and Western Europe. In the 1980s, the establishment of ferrochrome processing facilities had been discussed with Japanese interests, but the estimated 700,000 tons of reserves were insufficient for profitable longterm operations. By 1983, when the civil war brought a halt to all production in the Ingessana Hills, chrome production had declined about 50 percent to only 10,000 tons per year. In 1988, production of chromium ore was estimated at 5,000 metric tons. Asbestos had also been found in the Ingessana Hills area. It was reportedly of good commercial grade, and mining possibilities were under study by a Canadian subsidiary of the United States firm of Johns-Manville. A small pilot extraction plant had been built, but larger scale operations were dependent on locating adequate reserves and on the ending of the civil war.

Large gypsum deposits, estimated to contain reserves of 220 million tons, were found along the Red Sea coast. Reportedly of high purity, the ore was mined mainly north of Port Sudan. In the late 1980s, about 20,000 tons were produced annually, about 6,000 tons by the Sudanese Mining Corporation and the remainder by private operations. Gypsum was used mostly in the production of cement. Limestone, found in substantial quantities in Sudan, was mined both for use in making cement and for other construction materials. Marble was also quarried for the latter purpose.

There has been some commercial mining of mica, exploitable deposits of which had been located in Ash Shamali Province by a UN mineral survey team between 1968 and 1972. The Sudanese Mining Corporation produced about 1,000 tons of scrap mica in FY 1978, but output reportedly slumped thereafter to about 400 tons annually. Manganese and iron ore, of which several large deposits exist in different parts of the country, have been mined at times but only on a small basis by international standards. There were more than 500 million tons of iron ore deposits in the Fodikwan area of the Red Sea Hills, and beginning in the late 1980s a project had been planned to produce between 120,000 and 200,000 tons a month. Exploitation of Sudan's mineral deposits, however, depended in large part on foreign companies willing to undertake such risks in the face of the country's mounting problems, and on international market factors.

Uranium ores have been discovered in the area of the Nuba Mountains and at Hufrat an Nahas in southern Kurdufan. Minex Company of the United States obtained a 36,000-square-kilometer exploratory concession in the Kurdufan area in 1977, and the concession was increased to 48,000 square kilometers in 1979. Uranium reserves are also believed to exist near the western borders with Chad and Central African Republic. Another potential source of mineral wealth was the Red Sea bed. In 1974 officials established a joint Sudanese-Saudi Arabian agency to develop those resources, which included zinc, silver, copper, and other minerals. Explorations below the 2,000-meter mark have indicated that large quantities of the minerals are present, but as of 1990 no actual extraction had been undertaken.

Sudan

Sudan - ENERGY

In 1990 the chief sources of energy were wood and charcoal, hydroelectric power, and imported oil. Wood and charcoal were principally used by households for heating and cooking. Substantial quantities of wood fuels, amounting to roughly onefifth of the country's annual consumption, were also used by commercial operations--chiefly baking and brickmaking and, to a lesser extent, tobacco curing. Some use was also made of other vegetable matter including sugarcane bagasse, which met a significant part of the energy needs of the sugar mills, and cotton stalks, used locally by households. Consumption of wood and charcoal has continued to increase as the population has grown, and some concern has been voiced at the gradual depletion of forest and woodland resources serving the large towns. Overuse of the sparser vegetation in the semidesert grazing areas reportedly was resulting in some fuel deficiencies in those regions, as well as in desertification.

The country's hydroelectric potential has been only partially exploited. Major undeveloped hydropower sources existed at the several cataracts on the main Nile downstream from Khartoum. Natural gas was discovered in the early 1960s along the Red Sea coast in a fruitless search for petroleum. In the mid-1970s, further quantities were found during additional oil explorations, but development was not considered at the time to be commercially feasible. In October 1988, Sudan announced that natural gas production would start in one year; presumably this would come from the 85 billion cubic meters of gas reserves Chevron had earlier estimated. The 1979 and later petroleum discoveries in southern and southwestern Sudan added a new potential domestic energy source. However, these deposits to date have yielded little oil because petroleum companies, such as Chevron, had suspended oilfield explorations in these regions because of the civil war. Sudan had no known deposits of coal or lignite as of the early 1990s.

Electric Power

The only sizable area of the country having electric power available to the public was the central region along the Blue Nile from Khartoum south to Ad Damazin. The central region in the early 1990s accounted for approximately 87 percent of Sudan's total electricity consumption. The area was served by the country's only major interconnected generating and distributing system, the Blue Nile Grid. This system provided power to both the towns and the irrigation projects in the area, including the Gezira Scheme. Another small, local, interconnected system furnished power in the eastern part of the country that included Al Qadarif, Kassala, and Halfa al Jadidah. The remaining customers were in fewer than twenty widely scattered towns having local diesel-powered generating facilities: Shandi, Atbarah, and Dunqulah in the north; Malakal, Juba, and Waw in the south; Al Fashir and Nyala in Darfur; Al Ubayyid and Umm Ruwabah in Kurdufan; a few towns along the White Nile south of Khartoum; and Port Sudan. About fifty other urban centers in outlying regions, each having populations of more than 5,000, still did not have a public electricity supply in 1982, the latest year for which statistical information was available. Rural electrification was found only in some of the villages associated with the main irrigation projects.

Approximately 75 percent of the country's total electric power was produced by the Public Electricity and Water Corporation (PEWC), a state enterprise. The remaining 25 percent was generated for self-use by various industries including foodprocessing and sugar factories, textile mills, and the Port Sudan refinery. Private and PEWC electricity generation increased about 50 percent in the 1980s, to an estimated 900 gigawatt hours in 1989 in attempts to counter frequent cuts in electric power. PEWC also handled all regular electricity distribution to the public. In 1989 PEWC power stations had a total generating capacity of 606 megawatts, of which about 53 percent was hydroelectric and the remainder thermal.

The largest hydroelectric plant was at Roseires Dam on the Blue Nile; it had a capacity of 250 megawatts. Other hydroelectric stations were located at the Sennar Dam farther downstream and at Khashm al Qirbah Dam on the Atbarah River; the latter was part of the small power grid in the Al Qadarif-Kassala area. The Sennar and Roseires dams were constructed originally to provide irrigation, Sennar in 1925 and Roseires in 1966. Electric-power generating facilities were added only when increasing consumer demands had made them potentially viable (Sennar in 1962 and Roseires in 1971), yet power generation in Sudan has never satisfied actual needs.

The Blue Nile Grid, in addition to its Roseires and Sennar hydroelectric plants, had thermal plants at Burri in eastern Khartoum, where work on a 40-megawatt extension began in 1986, and in Khartoum North, where a 60-megawatt thermal station began operation in 1985. In the late 1980s, two additional stations producing 40 to 60 megawatts each were under consideration for Khartoum North.

The demand for electricity on the Blue Nile system increased greatly in the late 1970s, and power shortages have been acute from 1978 onward. Shortages have been blamed in part on management inefficiency and lack of coordination between the PEWC and irrigation authorities and other government agencies. Demand continued to grow strongly during the 1980s as development projects were completed and became operational and the population of the Three Towns increased dramatically. New generating facilities were completed in 1986 under the Power III Project, almost doubling generating capacity in the Blue Nile Grid. The project included work on the Roseires units, funded by IDA, and on the Burri and Khartoum North installations, funded by the British Overseas Development Administration. In 1983, recognizing the need for more electricity the government began seeking support for the Power IV Project to be funded by the World Bank, the African Development Bank, and the Federal Republic of Germany (West Germany) to bring the entire electrical system up to its full generating capacity. The plan was later scaled back from the initial cost of US$100 million and renamed Power V Project.

Petroleum Use and Domestic Resources

In 1982 roughly four-fifths of the nation's energy requirement for industry, modern agriculture, transportation, government services, and households (in addition to wood fuel, charcoal, and the like) was provided by imported petroleum and petroleum products. Approximately 10 percent of these imports were used to generate electricity. Foreign exchange costs for oil imports rose dramatically after 1973 and by 1988 amounted to almost 46 percent of earnings from merchandise exports. Dependence on external sources might lessen when the security situation permits Sudan's domestic petroleum resources to be exploited.

The search for oil began in 1959 in the Red Sea littoral and continued intermittently into the 1970s. In 1982 several oil companies were prospecting large concessions offshore and on land from the Tawkar area near the Ethiopian border to the northern part of the Red Sea Hills. No significant discoveries were reported. In 1974 Chevron, a subsidiary of Standard Oil Company of California, began exploration of a 516,000-square-kilometer concession (later reduced to 280,000 square kilometers by voluntary relinquishment) in southern and southwestern Sudan. Drilling began in 1977, and the first commercial flow was obtained in July 1979 at Abu Jabirah in southern Kurdufan Province. In 1980 major finds were made at the company's Unity Field near Bentiu in Aali an Nil Province, where further drilling by early 1981 had brought in forty-nine wells having a combined flow of more than 12,000 barrels a day. The company has estimated this field's reserves at from 80 to 100 million barrels, but exploration farther south placed the reserves at more than 250 million barrels. Other oil companies--including some from the United States, Canada, and France--have also obtained concessions, and by 1982 almost one-third of Sudan had been assigned for exploration. Oil exploration and production have been hampered, however, by the almost total lack of infrastructure and by the civil war in the south of the country. Chevron had found small aircraft and helicopters essential for transport, the latter for moving portable rigs and equipment and for general use during the rainy season when all roads and locally constructed air strips were washed out.

The domestic processing of crude petroleum began in late 1964 when the Port Sudan oil refinery went into operation. The refinery, which was financed, built, and managed by the British Petroleum and Royal Dutch Shell companies--from July 1976 as a joint equal shareholding project with the government--had a capacity of about 21,440 barrels per day. Its capacity was well in excess of Sudan's needs at the time it was built, and refined products were exported. Local demand had quintupled by 1990, well beyond the plant's capacity. As a result, more than one-third of the gas oil (used in diesel motors and for heating) and well over two-fifths of the kerosene required for domestic use had to be imported. A substantial quantity of other products refined by the plant in excess of Sudan's own needs were exported.

The domestic petroleum discoveries led to intensive discussion within the government concerning the establishment of a new refinery. Southern Sudan pressed for construction near the oilfields in the south, but it was decided finally to locate the refinery at Kusti on the White Nile about 315 kilometers south of Khartoum. In August 1981, the White Nile Petroleum Company (WNPC) was set up by the central government as a subsidiary of the Sudanese National Oil Company to handle the undertaking. The government held a two-fifths share in WNPC, Chevron Overseas Petroleum Corporation another two-fifths, and the International Finance Corporation the remaining one-fifth. Plans called for a 550-kilometer pipeline to be built from the oilfields to the new refinery. By early 1982, however, the estimated costs of the refinery and pipeline had risen to at least the equivalent of US$1 billion as against an earlier project allotment of about one-third that figure.

The Kusti refinery was predicated on production for domestic consumption. Its estimated capacity (in early 1982) of between 15,000 and 25,000 barrels a day would meet only part of Sudan's overall requirements, however, and the quality of the petroleum would restrict economic production to certain products, so the Port Sudan refinery would have to continue operating. In view of the greatly increased cost estimates of the new plant, the World Bank in 1982 undertook a study of an alternative plan that might be more attractive to foreign capital. Under this plan, the proposed pipeline would run to Port Sudan, and an extension to the existing refinery would make it possible to export surplus refined products and even earn foreign-exchange credits. Contracts were let for the construction of the pipeline, but the government canceled them in September 1986. Further seismic studies were undertaken in the swamps (As Sudd) of Aali an Nil, but all of Chevron's exploration and development activities came to an abrupt end in February 1984 when guerrillas from the southern Sudanese insurgent group known as Anya Nya II attacked the main forward Chevron base across the Bahr al Ghazal River from Bentiu, killing four Chevron employees. Chevron immediately terminated its development program and, despite repeated demands by successive Sudanese governments, has refused to return to work its concession until the safety of its personnel can be guaranteed by a settlement of the Sudanese civil war. Total, the French oil company, shut down its operations several months later.

The Nimeiri government pressured foreign oil companies to resume exploration and drilling and hoped to encourage them to do so in part by forming the National Oil Company of Sudan (NOCS) in a joint venture with Saudi Arabian entrepreneur Adnan Khashoggi. After Nimeiri was overthrown, the new government dissolved NOCS but continued to press companies to renew work. As a result, Chevron stated in late 1987 that it would begin a sixty-day, twowell drilling program in southern Kurdufan in 1988, but postponed this because of the spread of civil war. Several other foreign companies indicated an interest in petroleum exploration in 1988, following the completion of a three-year World Bank study of Sudan's hydrocarbon potential. The minister of energy and mining had announced in May 1987 that Sudan's confirmed oil reserves totaled 2 billion barrels, with an estimated 500 million barrels recoverable.

Sudan

Sudan - FINANCE

Banking

The traditional banking system was inherited from the AngloEgyptian condominium (1899-1955). When the National Bank of Egypt opened in Khartoum in 1901, it obtained a privileged position as banker to and for the government, a "semi-official" central bank. Other banks followed, but the National Bank of Egypt and Barclays Bank dominated and stabilized banking in Sudan until after World War II. Post-World War II prosperity created a demand for an increasing number of commercial banks. By 1965 loans to the private sector in Sudan had reached �Sd55.3 million.

Before Sudanese independence, there had been no restrictions on the movement of funds between Egypt and Sudan, and the value of the currency used in Sudan was tied to that of Egypt. This situation was unsatisfactory to an independent Sudan, which established the Sudan Currency Board to replace Egyptian and British money. It was not a central bank because it did not accept deposits, lend money, or provide commercial banks with cash and liquidity. In 1959 the Bank of Sudan was established to succeed the Sudan Currency Board and to take over the Sudanese assets of the National Bank of Egypt. In February 1960, the Bank of Sudan began acting as the central bank of Sudan, issuing currency, assisting the development of banks, providing loans, maintaining financial equilibrium, and advising the government.

There were originally five major commercial banks (Bank of Khartoum, An Nilein Bank, Sudan Commercial Bank, the People's Cooperative Bank, and the Unity Bank) but the number subsequently grew. The public was dissatisfied with the commercial banks, however, because they were reluctant to lend capital for longterm development projects. Since the Nimeiri government decreed the 1970 Nationalization of Banks Act, all domestic banks have been controlled by the Bank of Sudan.

In 1974, to encourage foreign capital investment, foreign banks were urged to establish joint ventures in association with Sudanese capital. Banking transactions with foreign companies operating in Sudan were facilitated so long as they abided by the rulings of the Bank of Sudan and transferred a minimum of �Sd3 million into Sudan. Known as the "open door" policy, this system was partly a result of Nimeiri's disillusion with the left after the unsuccessful communist coup of 1971. Several foreign banks took advantage of the opportunity, most notably Citibank, the Faisal Islamic Bank, Chase Manhattan Bank, and the Arab Authority for Agricultural Investment and Development.

In addition, the government established numerous specialized banks, such as the Agricultural Bank of Sudan (1959) to promote agricultural ventures, the Industrial Bank of Sudan (1961) to promote private industry, the Sudanese Estates Bank (1966) to provide housing loans, and the Sudanese Savings Bank established to make small loans particularly in the rural areas. The system worked effectively until the late 1970s and 1980s, when the decline in foreign trade, balance-of-payments problems, spiraling external debt, the increase in corruption, and the appearance of Islamic banking disrupted the financial system.

Islamic Banking

The Faisal Islamic Bank, whose principal patron was the Saudi prince, Muhammad ibn Faisal Al Saud, was officially established in Sudan in 1977 by the Faisal Islamic Bank Act. The "open door" policy enabled Saudi Arabia, which had a huge surplus after the 1973 Organization of Petroleum Exporting Countries (OPEC) increases in the price of petroleum, to invest in Sudan. Members of the Muslim Brotherhood and its political arm, the National Islamic Front, played a prominent role on the board of directors of the Faisal Islamic Bank, thus strengthening the bank's position in Sudan. Other Islamic banks followed. As a consequence, both the Ansar and Khatmiyyah religious groups and their political parties, the Umma and the Democratic Unionist Party, formed their own Islamic banks.

The Faisal Islamic Bank enjoyed privileges denied other commercial banks (full tax exemption on assets, profits, wages, and pensions), as well as guarantees against confiscation or nationalization. Moreover, these privileges came under Nimeiri's protection from 1983 onward as he became committed to applying Islamic doctrine to all aspects of Sudanese life. The theory of Islamic banking is derived from the Quran and the Prophet Muhammad's exhortations against exploitation and the unjust acquisition of wealth, defined as riba, or, in common usage, interest or usury. Profit and trade are encouraged and provide the foundation for Islamic banking. The prohibitions against interest are founded on the Islamic concept of property that results from an individual's creative labor or from exchange of goods or property. Interest on money loaned falls within neither of these two concepts and is thus unjustified.

To resolve this dilemma from a legal and religious point of view, Islamic banking employs common terms: musharakah or partnership for production; mudharabah or silent partnership when one party provides the capital, the other the labor; and murabbahah or deferred payment on purchases, similar in practice to an overdraft and the most preferred Islamic banking arrangement in Sudan. To resolve the prohibition on interest, an interest-bearing overdraft would be changed to a murabbahah contract. The fundamental difference between Islamic and traditional banking systems is that in an Islamic system deposits are regarded as shares, which does not guarantee their nominal value. The appeal of the Islamic banks, as well as government support and patronage, enabled these institutions to acquire an estimated 20 percent of Sudanese deposits. Politically, the popularity and wealth of Islamic banks have provided a financial basis for funding and promoting Islamic policies in government.

Sudan