Sudan Country Profile
General Information
Political Climate
Sudan, Africa's largest country, achieved independence from Britain and Egypt in 1956, and has been embroiled in civil wars for most of its subsequent history. Although the country still manages to produce economic growth, it is currently considered so politically unstable that it is ranked third on the Fund for Peace Failed State Index 2010. Since 1989, Sudan has been governed by the Islamist Nationalist Congress Party (NCP), which is headed by President Omar al-Bashir. Sudan had been torn by civil war and other types of unrest for decades. In January 2005, however, the long north-south civil war ended when the NCP and the Sudan People's Liberation Movement (SPLM) reached a Comprehensive Peace Agreement (CPA). The agreement resulted in the formation of a semi-autonomous government of Southern Sudan (GoSS) headed by the SPLM. Subsequently, the SPLM became the NCP's main partner in the transitional government in the capital, Khartoum, despite this trust between the two parties remains weak. A referendum for Southern Sudan was agreed upon as part of the CPA. The referendum took place from 9 to 15 January 2011 in a peaceful manner. According to a February 2011 news article by BBC News, nearly 99% of South Sudanese voted for full independence from North Sudan. The formal declaration of independence will take place in July 2011, and Salva Kiir is now the first elected President of South Sudan. A February 2011 news article by Sudan Tribune reports that the demarcation process will include mapping of the contested areas, including the oil-rich region Abyei. A separate referendum was supposed to be held in Abyei to decide whether it will be part of the north or the south, but is now postponed due to disputes between NCP and SPLM concerning who is eligible to vote. There are a number of contested issues between the two regions which remain unsolved, such as state property, foreign debts, previous international treaties signed by the Sudanese government, and the future of the oil industry. Several observers including Eurasia Review, express their belief that it will probably take longer time to reach an agreement on controversial issues between the two regions. Furthermore, there are tremendous development challenges facing the newborn state, such as the development of a constitution and managing South Sudanese’ expectations, according to a February 2011 news article by PBS Newshour.
Sudan has a federal political structure with the country being divided into 25 states. These states all have local governments that are responsible for implementing policies and providing public services, but their capacity to handle these tasks is very weak. According to Freedom House 2010, the 2005 Constitution ensured a bicameral parliamentary system; 52% of the seats in the National Assembly are allocated to the NCP and 28% to the SPLM, while the rest are divided between other north and south political groups. Elections have generally not been free, and there have been many irregularities in the electoral processes. In the April 2010 presidential elections, Sudan's first multi-party elections in 24 years, President al-Bashir was re-elected with 68% of the vote, as international observers voiced concerns regarding fraud and voter intimidation. The area of Darfur has been a conflict area for several years. The conflict centres mainly on the dispute between the Arab Janjaweed nomad militia, which is backed by the Khartoum government, and black African farmers. In February 2010, President al-Bashir signed a ceasefire agreement with one of Darfur's main rebel groups, the Justice and Equality Movement. According to a February 2010 article by BBC News, it is estimated that 300,000 people have died during the Darfur conflict. Nonetheless, two arrest warrants issued for President al-Bashir by the International Criminal Court in March 2009 and July 2010 for crimes against humanity and genocide remain valid.
Freedom House 2010 reports that Sudan is considered one of the most corrupt countries in the world. Corruption is a considerable problem all over Sudan, characterised by grand scale theft of public funds as well as petty corruption. Public servants are known to demand bribes to conduct their services and high-level officials obtain extra income from importing goods without paying the proper taxes and tariffs. Due to the low level of salaries, people often have two or three untaxed jobs to supplement their income, a practice that Global Integrity 2006 has termed 'survival' arrangements. According to the US Department of State 2009, government officials are frequently involved in corruption. They can do so with impunity as officials suspected of corruption are rarely investigated, even though the Auditor General has called for the prosecution of members of government for embezzlement of public funds. According to Global Integrity 2006, although the government has said it does not tolerate corruption, only a few civil servants who have embezzled funds have been arrested and prosecuted. The government has failed not only to present national budgets, but also to explain to the National Assembly why large amounts of funds are secretively used by the presidency 'for classified security operations'. In 2009, President of South Sudan, Salva Kiir, reshuffled his cabinet following allegations of corruption and mismanagement, sacking his finance minister and two other officials, as reported by Reuters in June 2009. According to a 2011 news article by Reuters, President Salva Kiir has announced a new ‘zero-tolerance’ policy on corruption that is now in place in the new southern state. The 2005 CPA stipulates equal shares of the oil revenue between the central government in Khartoum and government of Southern Sudan. However, due to absence of transparency, such an arrangement is virtually impossible to uphold. According to Freedom House 2010, the southern government relies heavily on oil revenues, which constitutes 98% of its annual state budget. Most of Sudan’s oil is situated in the South, while the infrastructure for oil is situated in the North. With the formation of the nation of South Sudan as a result of the January 2011 referendum, numerous contested issues, including the distribution of oil wealth, remain difficult issues that need to be addressed and resolved.
Business and Corruption
Sudan has been experiencing an economic upturn, characterised by growth and relatively low inflation. The Sudanese economy grew by a rate of 7% in 2008, but dropped to about 5% growth in 2009, reflecting the impact of the global financial crisis, according to African Economic Outlook 2010. The exploitation of oil reserves and peace were the main engines of this economic success. However, foreign direct investment has also prompted growth as well as a boom in the service sector, especially transportation and communication. Apart from the oil sector, Sudan's economic growth is narrowly based and limited in reach. Sudan has also continued privatisation reforms, despite ongoing problems with bureaucracy and corruption. These reforms have been seen as largely benefiting companies operating in the construction and telecommunications sectors with connections to the NCP. Similarly, according to the Bertelsmann Foundation 2010 privatisation has often been associated with the regime and its supporters.
Nonetheless, despite these reforms, Sudan's economy continues to be hindered by economic mismanagement, political instability and poor infrastructure. Furthermore, several sources, such as the Bertelsmann Foundation 2010, report that corruption in Sudan is rampant. Foreign investment is concentrated in construction and transportation, sectors that are recognised worldwide as being highly corruption-prone. Moreover, large proportions of Sudan's business practices are carried out in an informal and non-uniform way. This, for instance, applies to business inspections which, according to Global Integrity 2006, are carried out by government officials in an uneven way and leave much to the discretion of officials, which may result in higher risks of corrupt practices.
Companies that seek to do business with the Sudanese government should know that doing so often entails bribes and kickbacks. Moreover, government and business elites are strongly interlinked in Sudan. For instance, a January 2009 news article by BBC News reports that relatives of high-level government officials often own companies that do business with the government and provide their relatives in government with kickbacks in exchange for this business. This practice has earned political figures in the northern and southern regions of Sudan the reputation of being corrupt. Companies are generally advised to develop, implement and strengthen integrity systems, and to carry out extensive due diligence before committing funds or when already doing business in Sudan.
Regulatory Environment
According to African Economic Outlook 2010, Sudan's regulatory environment can be characterised by corruption and a lack of transparency in regulatory enforcement of regulations. Sudan encourages foreign investment to spur economic growth and employment. The government created a Ministry of Investment in 2002 in order to attract domestic and foreign investment in various sectors. The ministry has successfully promoted an investment act intended to promote competition, and it has set up one-stop shops for business registration and a trust fund to promote micro-credit for small companies. In addition, exemptions from customs fees and taxes have been provided for certain investment projects, and investors for 'strategic projects' have been eligible for free land grants, as reported by eStandards Forum 2010. Despite these efforts, the business environment in Sudan continues to be characterised by corruption and a lack of transparency in enforcement of regulations. The lack of transparency in Sudan is maintained not only because of the weak administrative setup that allows for poor record keeping and lax budget handling, but also due to the lack of legislation providing public access to government information and the lack of government providing such access.
African Economic Outlook 2010 reports that Sudan performs marginally better with respect to trading across borders and enforcing contracts, but that it performs poorly in dealing with construction permits, access to credit and starting a company. According to the World Bank & IFC Doing Business 2011, starting a business in Sudan, requires companies to go through an average of 10 procedures over 36 days, at a cost of 34% of GNI per capita, which is less time consuming and nearly three times less costly than the regional average cost. The cost and time of registering property and paying taxes are also much lower than the regional average. However, a general weak spot associated with such business operations in Sudan is the high number of procedures that companies are required to go through. The large amount of documents, payments and procedures related to doing business increases the time spent interacting with public officials and inspectors and, thereby, the risks of corruption and demands for facilitation payments. Companies are generally advised to access the website of the Ministry of Investment, which provides information related to investment legislation and opportunities, as well as specific services concerning required documents, licences and permits.
Sudan's legal system is a combination of English common law and Islamic Sharia law. There are separate judicial hierarchies for the two systems. In general, the laws that do not refer to Southern Sudan are based on Sharia law. Tribal courts function in rural areas to resolve disputes over land rights. An independent judiciary that functions free from political influence still does not exist in Sudan, but the Comprehensive Peace Agreement includes international training of the judiciary to start a process towards independence. However, international arbitration is an option for companies operating in Sudan, as the country is a member of the International Centre for the Settlement of Investment Disputes (ICSID). Companies might find it in their interests to include provisions for alternative, international dispute resolution in their contracts. Access the Lexadin World Law Guide for a collection of legislation in Sudan.
