Current Date:

Wednesday, 17 January 2018

New Outlook for the National Economy (3-3)

There have been recently a call by the Prime Minister for a “New Economic Outlook” for the National Economy”

, but we should note that this call  is not new but has been reiterated many times in the past by academia, civil society organizations and politicians. But now the endorsement of the demand by the demand by the prime minister gives a stronger momentum.
At the same time this call certify the failure of the previous policies and their non-capability to address the challenges that Sudanese economy will face in the Twenty First Century as they have failed to do so in the previous century. One of the best evidence of the failure of these policies is the country poor performance in the implementation of the MDGs (Millennium Development Goals) and the universal Human Development Index.

In discussing the call by the Prime Minister call for a New Economic Outlook ,we should bear in mind that the President of the Republic have affirmed  in his address on 2 Oct.2017 to the National  Assembly last October on the need to re-prioritize the state priorities and a two year development program. So, the PM call concede with the president major policy document.
In his address, the President has called for dependence in development on the local industries that target to include the largest proportion f of the pollution to achieve sustainable inclusive growth. And that is what we heart and soul highly commend and support. President Al Bashir also called for complementing economic freedoms with social justice for the poor and fair distribution of economic benefits. Al Bashir also focused on four areas basic education, health , connecting urban and rural development together and basic infrastructure specially roads, etc . These are the rea bases of development.
There is no problem in the wealth of material for the formulation of a new Economic Outlook. Just recently there have some very important workshops on Exports Challenges, Revitalizing the Textile and Leather industries, etc. In addition there are excellent contributions from the civil society organizations which can be reference documents for such a new policy. The World Bank reports and the SDGs documents must also be part of such consultation. In addition to the National Poverty Reduction Strategy Paper and the relevant country programs with the different UN Agencies and in particular the UNDP, UNICEF, UNDO, FAO, etc. This will assist in securing foreign funding for some programs. 
Agricultural Sector
The agricultural sector is the backbone of any genuine inclusive sustainable development project but same time be a diversified one including the other economic sectors. So, recovery and growth of this sector is a must.
Agriculture is a key sector of the Sudanese economy contributing about one-third to GDP and value added creation every year.
Agriculture provides a livelihood to about 65 percent of total population, employment to about 35 percent of the labor force in the country, 50 percent in rural areas (NBHS 2009), and is responsible for the supply of basic staple foods and animal products, in addition to the supply of raw material to the food industry. Agricultural exports are returning to prominence as ab important source of foreign exchange earnings after the decline of oil exports. Their share rose from 8 percent in 2011 to about 23 percent of total export earnings in 2012, with livestock alone reaching 19 percent.
About one-third of Sudan’s area is suitable for agriculture production.
The total land area of Sudan after secession of South Sudan is estimated at 446.4 million feddan, 134 million of which in principle, suitable for agricultural production.
Approximately 52 million feddan are forestland and 118 million feddan rangeland.
But the agricultural sector in Sudan operates below its true productive potential,  even though a great potential for further development exists through vertical (productivity) and  horizontal (land area) expansion.

Agriculture in Sudan is paramount for sustained future national economic growth, poverty reduction, food security,  and foreign exchange earnings. At present, Sudan’s main agricultural products are sorghum, cotton, groundnuts, sesame, millet, wheat, sugar cane, gum-arabic, and livestock, particularly live sheep and camels, and hides and skins.
There are three main agriculture sub-sectors  active in Sudan: pastoral livestock, cropping, and  fish production Animal husbandry and  cropping are similar in relative importance, both  with shares just below 50 percent of GDP (Animal  husbandry: 46.9 percent; cropping: 46.4 percent).
This is followed at a long distance by forestry/fishery, which accounts for 6.3 percent of GDP. In terms of employment, cropping accounts for 25.9 percent of total employment, followed by animal husbandry with 6 percent and forest/fishery with 2.4 percent

A renewed growth of the agricultural sector can lift many households out of poverty.  As most poor households engage in agriculture, policies supporting higher productivity will also improve livelihoods of the poor. In addition, increased production will reduce food imports improving Sudan’s trade balance. In the medium-term, a flourishing agricultural sector can regain market shares in the regional and global market. Thus, tapping into the agricultural potential of Sudan can lead to shared prosperity and sustainable growth. There is a lot that can be written in this context which we may do in the future.

It have been forecasted that the main changes by 2030 include:

Increased prominence for the agricultural sector
: Its shares in exports, value-added, and employment all increase (most dramatically for exports) while its share in total imports falls  and imports meet a smaller share of domestic  demand for agricultural products;

Reduced importance for extractives, especially in exports but also in value added and employment, combined with increased reliance on  imports to meet domestic demands; and relatively small changes in other sectors, even though manufacturing and private services both become slightly more open, with increased shares in total exports and imports, larger shares of output going to exports and imports meeting  larger shares of domestic demand.

The simulations show the strongest growth rates for from sectors that are capable of producing internationally competitive tradable. While the simulations cannot provide an accurate and detailed picture of the future sector structure of Sudan’s economy—it can highlight some of the main trends. Simulations suggest that in the absence of dominant resource-based exports, growth must be centered on sectors producing tradable that are exported and/or replace imports. It is therefore noteworthy that a sectoral
Focus of this CEM is to look at agriculture and trade of goods and services as a means to grow the endowments base of the country.

In sum, the simulation results suggest that agricultural TFP growth has a generally positive impact on macro indicators and sectoral growth. However, given that it leads to appreciation of the real exchange rate, it may discourage other exports.
Export growth across all relevant sectors is boosted by smaller foreign exchange inflows from a non-trade source (here with lower worker remittances as an example), but in this case the impact on other macro indicators and sector growth tends to be negative, with the exception of strongly export-oriented sectors. In the context of lower remittances, higher agricultural TFP growth mitigates or may even overcome (depending on its strength) the negative macro effects of the loss in remittances. Stronger agricultural TFP growth also has significant positive effects on poverty reduction and employment.

Inclusive Growth

Economic growth is a necessary condition for economic and social development of any country and key for poverty reduction. But one of the key issues of a majority of the low-income countries is how to boost economic growth and how to maintain it for a longer period of time in order to catch up with the middle- and high-income countries. One of the most influential analyses in this field is the Growth Report of 2008 (World Bank 2008).
Looking at a set of high-growth economies  of the past, the Growth Report 2008 identified common characteristics of successfully applied growth models—the “ingredients of growth”—to inform policy formulation around the world.
The Growth Report analyzed the experiences of the thirteen fastest growing economies in the world that managed to sustain their growth rates of at least 7 percent in the last 25 years (or sometimes longer). Six of these thirteen economies even man-aged to reach the per-capita income level of industrialized economies.
There are seven “ingredients of growth” that could be particularly relevant for post-secession Sudan.
For an economy to grow there is a need for high levels of investment and savings. This “ingredient” of growth is related to the need for an initial accumulation of resources that can be used later on in the production of goods and services.
Typical for the high growth economies is that their overall investments (public and private) are around 25 percent of GDP. Within this envelope and especially shown by some of the successful Asian countries (China, Thailand, and Vietnam), the public investment in the infrastructure sector was between 5 and 7 percent of GDP.
The Growth Report 2008 emphasizes the importance of domestic savings as a counterpart of investments. Attracting FDI is important in that regard, but the Growth
Report argues that an economy should not only rely on foreign savings to avoid vulnerability to fluctuations in inflows, especially in downturn periods. The importance of domestic savings is their stability and relative predictability.

To foster structural change and growth an economy needs access to technology and knowledge through an active transfer of know-how. Technology transfer and inflow of know-how is usually associated with FDI inflows. In successful countries domestically owned companies are able to absorb technologies and know-how from advanced countries, thereby compensating for the relatively low capacity and resources for research and development.
Successful countries in the past have supported competition and structural change.
Public policy that clearly supports competition on markets is identified as key for the growth process in any economy. And the single most important government support for having competitive markets is to keep entry and exit barriers of markets low. This allows progressive and innovative firms to more easily enter markets, which contributes to bringing about new technology, products, and services.
More importantly, easy entrance of new and efficient firms has a spillover on incumbent firms in that it increases the need to raise the levels of their efficiency to stay in the market.
Policies that allow flexible labor markets to form and match supply and demand have been growth enhancing in other countries. It is further argued that policy measures that enable workers and employers to more easily match each other are particularly important.
Export-led growth is associated with high- growth countries, especially if it is of a diversified nature. The export sector played a critical role in the thirteen high growth countries, especially in the initial period of their growth process. Much more, policies to facilitate exports are most effective if they support export diversification. Designing policies for non-natural resource exports is particularly important in resource rich countries.
An active exchange rate policy can support export development. In the early stages of export growth, experience shows that a low (depreciated) exchange rate can support nurturing an export sector. Keeping the exchange rate low initially also prevents the need of an economy to rely overly on capital inflows (foreign savings), which are notoriously unstable and unpredictable thereby increasing the vulnerability to shocks. On the negative side, however, an exchange rate policy that pursues a depreciated path for export promotion tends to encourage mainly labor-intensive export sectors rather than higher-valued more technology intensive sectors that are critical for long-term structural change.
Sudan’s real exchange rate was overvalued for most of the past 40 years and that the nominal devaluations after the secession of South Sudan were not able to devalue the exchange rate in real terms due to simultaneous very high inflation rates.
Development of the financial sector is particularly relevant because of its ability to support the goal of high savings for high investments. A more developed financial system increases the level of financial inclusion, thereby helping the economy to better mobilize savings and to allocate them more easily to investment needs.
Another complementary determinant of growth is the financial openness of a country that, in the long run, aids the goals of financial development and deepening. Sudan’s international connectivity is significantly limited due to the role of economic and financial sector sanctions imposed on Sudan successively since 1997.
Macroeconomic stability is one of the main pre-conditions for ensuring long-term growth of an economy. The long-term growth objectives, is needed.
Looking at sub-Saharan and resource-rich African countries several key areas where identified so that policy makers could place greater priority in order for growth strategies to “work.” For example, governments should aim to provide greater support to the agricultural sector in direction of increasing the productivity. The majority of the labor force employed in Africa (formally and informally) is engaged in agricultural production. Hence, increasing productivity may be important for raising the output per-worker and the overall value added. This would also reduce the unemployment rate and aid the process of poverty reduction.