UnderstandingSudan.org University of California, Berkeley © 2006 South Sudan Economic Development Possibilities Presentation material for policymakers,

UnderstandingSudan.org University of California, Berkeley © 2006

South Sudan Economic Development

Possibilities

Presentation material for policymakers, educators and activists

developed by: UnderstandingSudan.org

latest version: July 12, 2006


Objectives

• At the end of this class, students will be able to:1. Understand the present state of abject poverty

that characterizes the lives of many persons in southern Sudan

2. Know the magnitudes and financial management issues involved with the oil revenues and development assistance available to the Government of Southern Sudan

3. Evaluate alternative priorities for public spending in southern Sudan

4. Analyze investment strategies for the private sector in southern Sudan.


GeographySudan in the Region2

South Sudan1

Sudan in the World

1. http:// rightsmaps.com/html/sudmap1.html and2. http://www.alertnet.org/thenews/newsdesk/L03772791.htm


Southern Sudan emerging from civil war

• Southern Sudan has been zone of low-intensity conflict since 1955 with brief period of peace

• The war caused tremendous human suffering, a legacy that cannot be easily overcome

• E.g., Death from starvation due to wartime disruption of livelihoods– In 1998 famine in Bahr al-Ghazal, several

hundred thousand people died; documentary A Cry for Madiom shows horror of mass starvation


War legacy: Limited public infrastructure and

institutions• Infrastructure built during colonial period

destroyed and/or neglected during war• Roads mined and riverways (esp. White

Nile) blocked so commerce was limited• Little investment in education and health;

in 1990s government bombed schools and clinics

• No effective, legitimate, and functioning civil authority during most of war period


War legacy: Limited personal assets

• Strategy of warring parties to attack, massively displace, and manipulate civilians– Concentration of refugees and displaced persons

enabled warring parties to access (steal) international assistance, recruit soldiers, and control civilians in war zone and around oil fields

– Sudan had largest number of displaced persons and refugees in world

• People in southern Sudan have not been able to accumulate or inherit private productive assets (oxen, hoes, tractors, terraced fields, tree crops, education)


Result: Abject poverty• Incomes are very low because of limited

private productive assets and public infrastructure

• Most people earn livelihoods from manual labor, heavily dependent on using environment (low-input farming, transhumant cattle pastoralism, fishing, gathering)

• And because everyone else’s productivity is so low and there is so little infrastructure, the extent of the market, and hence room for specialization, is limited– So people spend a lot of time and energy on a wide variety of

activities that are low in productivity (i.e. go cut firewood, then build a shelter, then herd some animals, then fish in the river, then weed a field, then cook a meal)


Abject poverty is expressed in poor health

• High infant and child mortality• High maternal mortality• Severe malnutrition• Burden of easily preventable

diseases– Malaria– Onchocerciasis – Dracunculiasis – Kala Azar


Abject poverty compounded…

• Past low incomes due to war mean southern Sudanese inherit few consumption durables, so low incomes result in lower than usual standard of living– Typical household does not own adequate

quantities of quality housing, cooking implements, lighting, furniture, electronics (radios), transport (bicycles) and clothing

• Low incomes and social disruption of war mean that people are tremendously vulnerable to risk– Orphans, broken families– Weak social networks


There is room for optimism• Because of disruption of civil war, natural

resource base remains tremendous; peace and security will enable farmers and pastoralists to quickly attain incomes comparable to their counterparts in northern Sudan and neighboring countries

• Indeed, incomes based on manual labor-- exploitation with rudimentary tools of natural resource base-- may be higher than other regions, because many regions in Africa are severely degraded

• Moreover, because commerce has been so limited, tremendous opportunities for improving standards of living through simple trade in consumer goods (kerosene lanterns, improved stoves, utensils, clothing, bicycles)


New development-oriented, legitimate government

• Comprehensive Peace Agreement (CPA) resulted in new Government of Southern Sudan (GOSS)

• GOSS emerges from Sudan People’s Liberation Army (SPLA), coherent and unified rebel group with long history of intelligent compromise following inevitable fractures

• SPLA top command shares power after death of John Garang


Southern Sudan has development resources

• GOSS has control over two large revenue flows– 50% share of oil revenue from oilfields in

southern Sudan– Multi-donor Trust Fund (MDTF) for southern

Sudan and other forms of international assistance coordinated through the Joint Assessment Mission (JAM) process

• GOSS will be able to influence– International NGO assistance and remittances

from southern Sudanese diasporas


How large are resource flows?

• Oil revenue allocated to GOSS in 2005 was $750 million; projection for 2006 is $1.4 billion

• International assistance for GOSS in 2005 was $200 million; projection for 2006 is $700 million

• Overall, GOSS should be receiving steady stream on order of $2 billion per year

• Population is approximately 15 million, so revenue per capita is $130 per year.

• NGO budgets and remittances largely unknown


Public policy objective of GOSS

• Public spending and economic policy should reduce poverty and effects of poverty (Millennium Development Goals)

• But…– GOSS is not monolithic– GOSS has limited capacity– Present GOSS will not always be in

power– Not clear what expenditures or policies

best accomplish goals


The public policy context• Southern Sudan has few civic

institutions to provide protection and guidance to citizens– Property rights are extremely tentative– Price signals are missing because

markets not well-organized– Productive sectors neither competitive

nor organized through civic associations

– Economic policy watchdog groups and investigative press are limited


Two big public policy dilemmas

• How much and where should state replace, direct, or guide private sector activity?– Logging and lumber processing– Energy production and retailing– Large-scale farming– Agro-industrial processing

• Should state devolve property rights to traditional social institutions that vary from region to region?– Kin/clan groups of Dinka and Nuer– Kingdoms of Shilluk and Azande


The public expenditure tradeoff

• Given the goals, how should these resource flows be allocated?– Infrastructure?

• Roads• Schools• Health clinics• Telecommunications

– Big project investment?– Cash transfers?– Microlending?– State capacity?– Saved for future generations?

• Every expenditure has an opportunity cost


What is actual expenditure allocation of GOSS?

• Joint Assessment Mission (JAM) of 2005 resulted in “pre-approved”priorities– Schools and schooling ($1,223 million)– Clinics, water, and health services ($1030

million)– Road infrastructure ($242 million)– Other infrastructure ($1,057 million)– Building civil service/ government

capacity/rule of law ($700 million)


What was basis for this allocation?

• This allocation was not, apparently, based on consideration of consistent measures of the impact of components of public spending on poverty

• Is such consideration even possible?• Needed are cost-benefit statements of the

following form, for each category of spending:– E.g. A $100 million road-building program will result in

50,000 people raising their incomes from $100 per year to $200 per year, and will improve the health of 50,000 persons by .5 DALY (Disability-Adjusted Life Years, the standard measure of how health impacts life expectancy)

– Such an analysis depends on the availability of estimated of the impacts of public expenditures; e.g. A $1 million increase in road expenditures results in a decline in poverty from 37% to 35%


For example: What is poverty-reducing effect of expenditures on

road-building?


Implicit arguments about roads

• Common statements: – “How can development happen without

roads?”– “With a paved road a pregnant woman

can get to hospital if in danger”• Implicit arguments:

– Paved roads are effective poverty reducing investments, with high returns

– Paved roads are effective poverty mitigating expenditures, improving health access directly


Road hyperbole• In a recent 2004 opinion piece in The Economist,

noted development economist Jeffrey Sachs made the following observation: “Without a multi-lane highway from Kampala, the capital, to the port of Mombasa in Kenya, and without a network of roads connecting villages to such a highway, the [Ugandan] economy is trapped in a straitjacket.”

• The statement is appropriate for a newsmagazine, where hyperbole is to be expected, but is plainly just hyperbole: the Ugandan economy grew rapidly over the 1990s, but then slowed in the early 2000s, plainly because of deterioration in governance, and all without a highway and network of roads of the sort envisioned by Sachs and presented as essential in its entirety. There was no straightjacket.


Before being able to estimate poverty-

reducing impact of building roads, have to

address some preliminaries


What kind of road network?• How much should be all-weather

paved roads?– Paved roads cost $250,000 per kilometer– Graded macadam roads cost $10,000 per

kilometer• Should network link existing towns,

or “open up frontier”?• Link to northern Sudan, or south to

Uganda and Kenya?• Be designed for military resistance

against northern Sudan?


Back of the envelope calculation

• Suppose a 100 km. paved road costs $250,000 per km. to build, and lasts for 10 years with no maintenance

• Suppose the road links two large population areas of 150,000 persons each with each other and with the border with Kenya

• Suppose the paved road results in a reduction in the prices of imported goods by 10% and an increased in the farmgate price of exports by 10%, and that imported goods are 30% of consumption and exports are 30% of income



• Since the alternative to building the road is to simply give away $20m of purchasing power, the only effect we need to measure is the first-round increase in purchasing power of those affected by the road

• We do not need to measure the multiplier effect, since that does not depend on the source of income

• So what is the effect? If people’s annual income is $100, then real purchasing power increases by 10% of $30 and incomes increase by 10% of $30, so net income increases by $6 per year. There are 300,000 persons, so this is $1.8m per year.



• The road lasts 10 years, so the benefit is $18m over the 10 years. This is less than the cost of building the road.

• The example illustrates the important things (parameters) to measure– How much does a paved road (compared with

a graded road) reduce transport costs of farm produce and consumer goods?

– How important are “exports” and “imports” in the budgets of poor persons in southern Sudan?

• These considerations make immediately clear one conclusion: the benefits of roads go disproportionately to rich persons.

UnderstandingSudan.org University of California, Berkeley © 2006 South Sudan Economic Development Possibilities Presentation material for policymakers,

Documents

civil war southern sudan

government of southern

university of california

geography sudan

war period slide

oil fields sudan

war legacy

war zone