DR'ISAM ELZEIN ELMAHI

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CAPITAL FLOWS BETWEEN SUDAN AND THE NORTH
AFRICAN COUNTIES

• DR.ISAM ELZEIN ELMAHI

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FDI IN SUDAN
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In Sudan, the Encouragement of Investment
Act, 1990 (1990 Act No. 64), defines foreign
direct investment (FDI) in the context of
"invested capital". In the Act, invested capital
means, among others, the foreign exchange
transferred through one of the banks, registered
with the Bank of Sudan, and used in the
establishment, operation, modernization,
rehabilitation or expansion of the project the
local exchange which is discharged with on the
approval of the bodies concerned, to meet
obligations in foreign exchange due for payment
to the investor . The Bank of Sudan collects
data on FDI inflows into the country. The data on
annual inflows of FDI were also gathered from the
tapes provided by the International Monetary Fund
and the Organization for Economic Co-operation
and Development. In 1974, the government of Sudan
implemented the Development and Promotion of
Industrial Investment with an eye towards
attracting investors with concessions such as tax
incentives of up to 15 years. The policy was
extended in May 1980 into the Encouragement of
Investment Act, which provided customs, tax and
other benefits to the investors with the
agricultural, petroleum and mining industries.
Foreigners have played a leading role in the
development of Sudans oil industry, funding the
building of upstream resources, the construction
of industry infrastructure including the export
pipeline, and downstream facilities such as the
new al-Jeili refinery. As the success of these
projects has become apparent, the government has
sought private partners to boost investment in
other sectors with some success. This includes
the power sector, where the countrys first build
operate- transfer power plant came on stream in
2004. In the early 1980s a United States firm,
Chevron, discovered large deposits of oil in
fields near Bentiu in Unity state and Melut in
Blue Nile. In March 1997 Arakis had signed a
consortium agreement with the China National
Petroleum Corporation (CNPC), the Malaysian state
oil company, Petronas, and the Sudanese
state-owned firm, SudaPet, forming the Greater
Nile Petroleum Operating Company (GNPOC).
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The Sudanese Government had traditionally
participated in the regional integration schemes
both at the sub-regional and regional levels. As
of the end of the 2005, the country belonged to
several of the existing bodies such as the
Intergovernmental Authority on Development,
League of Arab States, Common Market for Eastern
and Southern African countries, African Union and
the New Partnership for Africa's Development.
Sudan is party to the Cotonou Agreement for the
renegotiation of the trade links between the
African, Caribbean and Pacific countries with the
European Union, under the Lomé Convention.
In 1971, Sudan nationalized the holdings of
foreign investors, mostly British. A
privatization effort and a move toward a mixed
economy began slowly in the early 1980s and
picked up momentum via negotiations with the IMF
in 1985. The 1980 Encouragement of Investment Act
provided for repatriation of profits, tax
incentives, customs relief, industrial rates for
transport and electricity. However, the
introduction of Shari 'a law in 1983 (unenforced
since 1985), along with foreign exchange
shortages, discouraged investors through 1986. In
1990, the government invited foreign investors to
purchase companies in the parastatal sector. Key
properties in the agricultural, tourist,
transportation and communications sectors were
identified as candidates for privatization under
the National Economic Salvation Program. In 1992,
the creation of four free-trade zones was
announced in an attempt to encourage additional
foreign investment. In 1999, a new investment
act guaranteed the equal status of foreign and
national projects and encouraged investment in
the sectors of agriculture, industry, and
tourism, amongst others. It gave total tax
exemptions for business profits and customs
duties for 10 years on capital projects, and 5
years for nonstrategic industries. Foreign
investment in 2000 included inflows from Canadian
and Araki oil interests, as well as European
investment .
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• Annual foreign direct investment (FDI)
  inflows were 98 billion in 1997, but rose to an
  average of 378 million 1998 to 2000. In 2001,
  FDI inflow increased to a record 574 million.
• Foreign direct investment is net
  inflows of investment to acquire a lasting
  management interest (10 percent or more of voting
  stock) in an enterprise operating in an economy
  other than that of the investor. It is the sum of
  equity capital, reinvestment of earnings, other
  long-term capital, and short- term capital as
  shown in the balance of payments.
• FDI performance in Sudan has been
  impressive and that Cleary shown since 2002. FDI
  has grown 223 since 2002 in financial services,
  energy and retail food sector.

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The volume and number of foreign and foreign
investment in Sudan
Million US
Million US
The Volume of foreign and Foreign Joint
investment From 2000-2007
Million US
Source ministry of investment Sudan For
2007 this information covering the period up to
June of 2007
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The Number of foreign and foreign joint
investment From 2000-2007
Source ministry of investment Sudan For
2007 this information covering the period up to
June 2007
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When we look at the tables above, we find
that the volume of foreign investment and the
number of investment projects in Sudan are
increasing rapidly from 2000 to 2007, and that
due to the flexibility of the investment law and
investment advantage offered by Sudanese
government and the Sudan as well as strategic
point in central and east Africa and that make
easier for Sudan to attract foreign capital and
investment. Also we notice that the
services sector is the largest sector in terms of
the volume of foreign investments and in the
number of foreign investment projects. We find
that the industrial sector is the largest sector
since 2005. Egypt is the only country which
invested in the above mentioned
investments(240-250 million dollars). The rest of
North African Countries have no direct investment
in the Sudan.
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Capital flows in/out Sudan
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Capital Flows from Sudan to the North African
Countries
(Million US )
(-) not available
Some tourism from Sudanese people who travel to
Tunisia but no figure data.
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Capital Flows From North African countries to
Sudan
(Million US )
(-) not available
40 m US from Swaidi Steel Industrial joined
Giad Industrial Complex, 200 m US from one
individual group investment in cement industry.
30 m from Egyptian investors paid as capital
in other different investments.
60 m US investment in El-fatih Min September
Tower
50 m US Sudanese people worked in Libya
transfer money through different ways.
This data collected through interviews and
meetings with diplomats and Sudanese people live
abroad but no official data.
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Capital flows between Sudan and Mauritania
Sudatel in Mauritania Since the dawn of its
history, Sudatel kept participating effectively
in planning the countrys future. It is forcing
its way forward in a world where information
became the source of power. Since its
establishment Sudatel had been planning not only
to promote communications within the country, but
also to play roles at the regional and
international levels in the communication sector.
That is how the project of regional transmission
of movement came into being. It was through it
that the Company network expanded to Egypt and
Ethiopia, and it was through it that its cables
crossed the sea to Saudi Arabia, beside other
projects which are still under execution to
enhance this trend. In 2006 sudatel wins the bid
for the third operator in the Islamic Mauritanian
Republic the license consists of four
sub-licenses. The first is related to operating
a new network for mobile phones. The second is
related to the establishment of a system to
manufacture and produce credit cards for mobile
phones. The third is related to establishment of
a local network for communications and for
providing internet services. The fourth
sub-license is related to another communication
network that works through third generation
technologies. The license value amounts to 100
million. During the period extend from January
2007 to September 2007 they have spend about
200 million for establishing the network,
structure, hardware and software. The total
amount of sudatel investments in Mauritania come
to its final figure 0f 305 million as there
system of mobile now under operation.
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Capital flows between Sudan and Egypt
There are unseen figures. Although the Sudanese
community in Egypt is more than 6 million but the
capital flows is coming from others not from the
said community. Some Sudanese people buying
houses, villas, apartments and cars the estimate
number of these flows to be 5 billion, which is
about the amounts accumulated during the past
several years. Capital flows kept in saving
accounts in Egyptian banks to be 4 billion. As
an accumulate figure until mid 2007 Investments
on edible oil industries and meat imports
estimated 400 million. In 2003 Swaidi Steel
Industries joined Giad Industrial Complex with 40
Million US as a capital. Every year for
spending on summer vacations, educational
expenses and medical services to cover 400,000
Sudanese travelers. Every year Sudanese people
spend in tourism about 160 million. Medical
care is expected to be 250 million per year.
(This data is collected through interviews and
meetings with diplomats and Sudanese people
living in Egypt but no official data). A flow
from Egypt to Sudan seems to be in industry from
one individual group estimated about 200
million(in cement industry). 80 of the Sudanese
Egyptian bank paid up capital came from Egyptian
investors. (estimated about 30 million in
2006). There are some Sudanese people who are
enrolled for education in Egypt, this flows is
expected to be 90 million every year. Some
Egyptians investors have investments in Khartoum
Stock Exchange.
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Capital flows between Sudan and Libya
The largest Libyan investment in Sudan is
El-Fathih Min September Tower which is one of the
largest hotel and shopping centers in Sudan and
the cost of buying land hit 7 million dollars and
total investment amounted to 60 million dollars.
About FDI and portfolio investment are almost
nil.
Capital flows between Sudan and Tunisia
Which has no weigh, some tourism from Sudanese
people who travel to Tunisia but no accurate
figures? . Regarding FDI and portfolio
investment between Sudan and Tunisia are almost
nil .
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Capital flows between Sudan and Morocco
Morocco exports to Sudan comprise mainly
textiles, shoes and citrus fruits and some
Sudanese students taking education in Morocco but
no figure available. FDI and portfolio
investment are also nil .
Capital flows between Sudan and Algeria
Sudan and Algeria exports oil. Algeria mainly
exports to Europe, while Sudan exports to Asia
(China). But In 2007 we notice some export and
import between Sudan and Algeria . The export and
import between the two countries are very weak .
FDI and portfolio investment are also nil .
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The investment climate and investment acts in
Sudan
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The Investment Climate in Sudan
Sudan is rich with its abundant
resources which are represented in vast areas of
land, and various climates. It is special with
its fertile agricultural lands, large amounts of
fresh water, and a variety in its animal
resources. The extraction of petroleum gave Sudan
an important economic dimension. This is besides
the distinguished geographic location of Sudan
which makes Sudan a passage to other African
countries which qualifies it as one of the
commercial and investment inlets of those
countries. The importance of Sudan has increased
in the field of investment during the last period
due to its increasing economic importance from
one side and its abundant economic resources from
another. It has become the target for
businessmen from all around the globe who come to
start investments in Sudan, supported by the fact
that Sudan ranked second in the list of the most
attractive countries for investment according to
the reports of regional and international
organizations. The investment opportunities will
grow after the establishment of the peace process
which adds an effective third dimension to the
attractive investment climate. It will also allow
investors to utilize natural resources abundant
in Sudan's states more efficiently. The
establishment of a Ministry of Investment
reflects the attention that the state pays to the
investment processes through creating a suitable
investment climate and developing the promotion
means to raise them to an international level.
The Ministry has carried out efforts to prepare a
suitable environment through facilitating
procedures, unifying them at one window and put
in place the rules and procedures to facilitate
protecting investors rights.
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Investment Encouragement Policies in Sudan

• In order to lessen the government impact on
  economics and production, the policy of
  privatization was adopted to pave the way for the
  private sector to play its role in the national
  economy.
• Adoption of Free-market policy.
• Encouragement of export import as well as
  interior exterior trade.
• Encouragement of agricultural production.
• Implementation of new taxation policies to
  encourage the capital flows.
• Paving all the restrictions that handicap the
  investment climate and environment.

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The Investment Act Analyses
The last version of the investment act is
different from the oldest one so the investment
law in the Sudan was reformed to be one of the
laws encouraging investment in Africa. Through
the policies formulated by the government to
encourage the investment in the Sudan, we find
that in the last five years an increase in
capital flows in and out of Sudan. The law of
investment gave significant features to
investors and businessmen which include -The
granting of the right to own property for
investment projects regardless of the source of
the capital nationality, Sudanese, Arab or
foreign. -Granting of strategic projects , full
exemption from customs duties for capital
equipment once the licensing of the project
issued and for up to ten years, renewable for
another five years. If adding new
production lines customs exemption on
machinery and equipment for the same period for
the new production line will be granted.
Offering a piece of land at incentive prices.
Giving an exemption of business tax on
investment projects for up to 10 years just
after the first year of beginning
production. No restrictions on the movement of
capital transfers for investment projects The
investor's right to repatriate project profits
abroad without restrictions.
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And the investment climate reviwed to accelerate
development by Focused role of public sector
-Clear regulatory framework
-Privatization Reduction in administrative
procedures -Business start-up
procedures -Overlapping tax
administration at federal and state level
- Labor market inflexibility Strong
Institutions -Enforcement of poverty
rights- including land- and contracts Market
access -Completion of WTO accession
process -Information
-Infrastructure and efficient port logistics
Now that the civil war is over, the investment
climate in Sudan is becoming healthier and
deserves more attention from the media. The
countrys economic policies, investment
regulations, outward orientation, and economic
performance are all good indicators of the
successful path.
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• In the past three years, the foreign direct
  investment (FDI) inflow to Sudan almost tripled
  from 574 million in 2001 to 1.5 billion in
  2004, according to 2005 World Investment Report
  issued by the United Nations Conference on Trade
  and Development. Out of the 1.5 billion of
  inward FDI, 400 million came from Saudi Arabia
  alone. Among Arab countries, Sudan came in third
  in attracting investments as the Sudanese state
  ministry for investments. The performance of the
  Sudanese economy is as impressive as its ability
  to attract foreign investments.
• Regarding economic policies and investment
  regulations, Sudan is making a huge transition as
  the country tries to liberalize its economy.
  Following free market principles, the Sudanese
  government announced that its investment strategy
  includes the following economic policies and
  regulations
• Developing its financial market
• Privatizing state-owned enterprises
• Limiting state monopolies over sectors
• Allowing capital mobility
• Allowing the transfers of profits to foreign
  investors
• Giving tax exemption incentives for foreign
  investors
• Guaranteeing that private companies will not be
  against nationalization and confiscations
• Giving a free land to foreign investors for
  strategic projects
• Allowing the transfer of foreign capital in
  case of investors withdrawal from the market.

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The Sudanese government is also trying to restore
its position in the international institutions
after its absence during the war years. Sudan
aims at regaining its seat in the International
Monetary Fund. The country is also trying to join
the World Trade Organization (WTO) its
application is progressing in the organization.
Sudan is one of 10 least developed countries
trying to become a full WTO member. Sudan has
come a long way in free trade. The country is a
member of the Common Market for Eastern and
Southern Africa (COMESA) agreement. On Oct. 31
Sudan and nine other member states of COMESA
(Djibouti, Egypt, Kenya, Madagascar, Malawi,
Mauritius, Sudan, Zambia and Zimbabwe) eliminated
their tariffs under COMESA rules. With all
these efforts and economic indications, Sudan is
showing to the world that it is coming back to
secure its place after the war period. The
government has finally realized the importance of
joining the global economy, and for an economy
endowed with resources such as Sudan, it is
important for the world and Arab countries to
re-evaluate its return. To promote the
investment climate the Sudanese government has
furnished many regional agreements aimed at
encouraging investment and creating trade
opportunities with other nations Sudan joined
the COMESA trade bloc. Sudan joined the Arab
Free Trade Organization . Sudan is looking
forward to joining the World Trade
Organization. Sudan has strengthened relations
with regional and international organizations
and corps related to investment.
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The Relations between Khartoum Stock Market and
North African countries
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The relations between Khartoum Stock Exchange and
the North African Stock Markets are almost
non-existent except the relations with Egypt.
Khartoum Stock Exchange has very strong relations
with Egyptian stock exchanges with regards to the
exchange of expertise and training and
consultation in the development of both the
Sudanese and Egyptian bourses. Egyptian bourse
considered one of the strongest bourses in Africa
and the relations with these strong bourses is a
benefit to the Khartoum stock exchange. As for
relation with the other North African Countries
bourses is expected soon to be very close
relations especially after Khartoum Stock
Exchange joined the African Union of bourses
(ASEA).
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Conclusions AND Recommendations
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Sudan abounds with great and is the huge expanse
of territory and natural resource. The advantage
of fertile agricultural land and abundant water,
and animal wealth and great variety. The
emergence of Petroleum gave important economic
dimension. The distinguished geographical
location Sudan may make it a springboard for many
African countries which qualified investment and
commercial input to these States. The Sudanese
government is aware of the need to encourage both
local and foreign investment to sustain economic
growth and reduce the use of public funds to
undertake investment projects it is committed to
carrying out a privatization program since early
90s Sudan has increased in importance in recent
times in the area of investment so as to increase
its economic and multiple resources by the other.
Sudan occupies fifth place as attractive for
investment between Arab countries. reports
regional and international institutions and the
best proof guide. It also said that investment
opportunities will grow at the completion of the
peace process, which adds a dimension of the
influential investment climate attractive, as it
will enable investors from the best use of its
abundant natural resources of the various holders
of Sudan. Many factors have helped to create a
climate attractive to invest in Sudan. On top of
these factors earnest desire of the government in
the development of the investment environment to
attract foreign investors to the country. This
has been reflected on the large number of
investors who have visited Sudan with the
intention of creating investments, has
implemented many of those along with a successful
investment.
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Flows between Sudan and North African countries
depend entirely on the adoption of trade between
those countries and some of these flows are still
below the level required, and therefore must
develop capital flows between Sudan and North
African countries by facilitating trade and
investment environment among them. Through these
research divisions we dealt with topics related
to capital flows between Sudan and North African
countries. This research is divided into five
chapters. Chapter one introduces the topic by
highlighting the International capital flows
particularly in Africa, the objectives of the
study its scope and what study shows. Chapter two
shows the theoretical framework of Capital Flows.
Chapter Three describe the capital flows between
Sudan and North African countries analyze its
trends and volume compared to other regions in
the world and take flows between Sudan with any
country included (Egypt, Algeria, Libya, Morocco,
Tunisia, Mauritania) and FDI trends, FDI in Sudan
. In this part we analyzed the data. Chapter
Four addresses the investment climate and
investment acts in Sudan, analyses the investment
act , the relation between Khartoum Stock
Exchange and the others Capital Markets, the
Monetary policy in Sudan from (1990-2007) and
explaining the main obstacles to capital flows to
and from the country . The concluding Chapter,
Chapter Five draws lessons for encouraging
capital flows between Sudan and North African
countries. There are no strong
correspondence relationships or agreements
between North African Countries Banks and the
Sudanese Banks. Also there are no direct flights
or active shipping lines between the said
countries and Sudan except for Egypt .Therefore
the capital flows between Sudan and Egypt Seemed
to be greater in size while with the other
countries of North Africa very low or almost nil.
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• Recommendations

1. A recognized body for all ECA countries to
carry out investment studies is highly needed. 2.
A special rating agency for the ECA countries
economies is required. 3. An agreement between
the Sudan and each ECA member country is needed
for the encouragement of capital flows between
these countries. 4. A strengthened information
network between the ECA countries for the
exchange of investment data is required.
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• Thank you !
• Dr.Isam Elzein