New Official GDP Figures for South Sudan

Available at the all-new website of the South Sudan National Bureau of Statistics. 

Of note is that Gross National Income is higher in South Sudan than all of its East African neighbours. 

(Thanks LT for the notice). 

Footage from Juba as South Sudan became independent

This video was taken by Karuna Herrmann from the back of a motorbike on the streets of Juba as South Sudan gained its independence. My glass of Cava in the office in Connecticut doesn't quite compete.

Economic Prospects for the Republic of South Sudan

This post co-written with Abhijeet Singh and an anonymous third contributor

This coming Saturday, 9th July, the world's newest country will officially be born. What are the economic prospects for the new state? Will the new country be “economically viable” as a Western journalist smugly put it to Pagan Amum in London a couple of years ago? Now seems like a good time to take a look. 

The Economic State of Southern Sudan: A look at the Data 

Read almost any news article or NGO report on Southern Sudan and you will be sternly informed of the terrible situation in one of the poorest countries in the world. And yes, the challenges are real. Southern Sudan does indeed have some of the worst human development indicators in the world.

Only a third of the population above the age of six has ever attended school.

One in ten children don’t make it to their first birthday.

But it’s not all bad news.

The size of the economy in Southern Sudan is actually not all that small. There are not yet any official GDP estimates for the region, but two separate independent estimates, each using slightly different assumptions, put per capita GDP at around $1,300 (One from Ben Leo at CGD, another unpublished from an economist at an international organisation based in Juba). This is only slightly less than Northern Sudan, and puts Southern Sudan firmly in the lower-middle income category of states, similar to India, and richer than most other sub-Saharan African states. The government's annual budget, at the order of $250 per head, is substantially larger than the resources available to neighbouring Uganda, at only around $100 per head.

Whilst the economy as a whole is not that small right now, there is considerable uncertainty looking into the future. GDP relies incredibly heavily upon oil (which accounts for over 95% of the government budget). Most of the oil is located in the South, but it must be exported via the pipeline running through the North. Building a new pipeline heading South through Kenya is basically unaffordable. Greg Snyders estimates that the South will need to give the North 30% of their oil revenues to avert conflict. This is still a reduction from the present 50% which goes North, significantly increasing the resources available to GOSS. In addition to this uncertainty in the future oil-sharing agreement, there is uncertainty in future production (which has been estimated by industry consultants to have peaked, and to have declined by 50% in around 6 years from now), and uncertainty in global prices, which have ranged from $50 a barrel to $150 a barrel over the last few years. There is also the uncertainty of how much of the $35 billion debt owed by Sudan as a whole will be taken on by the South, though GOSS will be loath to take on much given that most of the debt is due to unpaid arrears by Khartoum on money borrowed to pay for projects in the North.

Poverty in Southern Sudan

The other main problem with an oil-based economy is that this wealth is not automatically distributed very widely, unless the government explicitly chooses to.

In 2005 someone scratched their head and decided that poverty must be about 90% of the population, and somehow this figure stuck. Just look at how poor they all are! However the latest actual survey of poverty in Southern Sudan found a rate closer to 50%. Although based on a different poverty line, Kenya also estimates poverty to be around 50%. The situation, though bad, is clearly not quite as dire as many would like to imagine.

Challenges and the need for realistic expectations

Despite this mixed picture, there are some unrealistically optimistic expectations about the future amongst many Southerners. The Vice-President recently proclaimed to be expecting $500 billion investment over the next five years (about as much as China receives). Plans for a new capital city show soaring skyscrapers emerging from the bush. The reality is that despite reasonable national income at present, there is still a shocking lack of infrastructure and enormous demands on public resources. There is also incredibly weak capacity in the central government. Even given the most optimistic scenarios, capacity in the government and investment in public infrastructure and services is going to be a slow process taking decades.

Southern Sudan is expensive. Partly due to poor infrastructure, partly due to a very high risk premium, and partly due to geography. It is sparsely populated with a large geographical spread (Kenya, Uganda and Rwanda combined). Not only is the density low (13 persons/sq. km, approx one-fifth the density of Uganda), but also this population is very dispersed (unlike say Australia or Canada or Libya, where population density is very low but most of it is concentrated in select urban centres). It is also landlocked and far from the coast. All of which means that the cost of trade is high.

The BSF's phase two completion report gives the unit cost of constructing lots of different things - on page 20, it has boreholes: the average cost of construction of a borehole is about £10,000. To put it in context, this is about ten times as expensive as a borehole in India. Even considering that the water table may be lower and that the terrain may be harsher than India, that probably doesn't come close to explaining this gap.

The dispersion of the population, and the lack of adequate infrastructure to reach them, is also a huge barrier to expecting markets to emerge spontaneously. To put it in context, about half of the households in the country did not use cash at all in the week preceding the poverty survey (pg. 11 of the Key Indicators document).

Governance

There are also serious concerns on not only the capacity of GOSS but also the political will to prevent GOSS from becoming a kleptocracy. So far, the signs are worrying - two successive Ministers of Finance fired for having their hand in the till, disregard for budget procedures by key ministries, the collapse of Nile Commercial Bank due to political figures loaning money to themselves, and entirely infeasible infrastructure plans (animal shaped cities, new capital) taken seriously. Maybe all of this will improve after independence as the need to stay united and put on a brave face towards possible Northern aggression recedes, but in general there are reasons to be skeptical. In 2009 the Ministry of Finance (illegally) spent 13 times its annual budget.

The Good News: The best things in life are cheap

The greatest source of hope is the great dynamism that has already been seen in South Sudan since the CPA. Yes, things are still bad, but they are vastly better than they were in 2004. The 2010 Statistical Yearbook shows the number of businesses by their year of opening - over three quarters of the businesses opened in or after 2007; over half of the total businesses opened in 2009 and half of 2010.

The literacy rate for the first cohort to benefit from educational opportunities following the CPA is vastly better than any of their predecessors. Systemic issues remain, including the heavy dependence on donors and NGOs (although that is truer of health than education), but the broad message is entirely hopeful.

To borrow a phrase from Charles Kenny, the best things in life are cheap. Despite economic stagnation, conflict, and corruption, Africa as a whole has seen enormous improvements in the living standards of ordinary people over the past 50 years. Much of this has come not from increases in incomes, but the falling prices of key goods and the development and propagation of new technologies, in particular health-related technologies (the word technology used in its widest sense to include behaviours such as hand-washing). Although coming from a low base, the prospects for improvement in human development indicators is great.

Roundup

So - an economy probably larger than you expected, but still a whole host of problems, many of which have barely been touched upon here. Some really appalling human development indicators, but progress being made. Should we be optimistic about Sudan's economic future? A very qualified yes.

Sources:

Ben Leo, Sudan Debt Dynamics: Status Quo, Southern Secession, Debt Division, and Oil—A Financial Framework for the Future - CGD Working Paper 233,

BSF Report

Greg Snyders, Estimates of post-CPA oil sharing,

Uganda 2011-12 Budget Speech

Poverty Estimates from the SSCCSE

Key indicators for Southern Sudan

Statistical Yearbook for Southern Sudan (2010)

World Bank Country Economic Memorandum (2010)

2010 GOSS Budget

Riek to raise a Bajillion dollars

"We will raise 500 billion dollars from private investments in the next 5 years to build this nation."

says Riek Machar, Vice-President of Southern Sudan. 

CHINA, got $100 billion foreign direct investment last year so, er, good luck with that.

The Price of Peace for Southern Sudan

is $20-25 per barrel of oil transported, paid to Khartoum in oil pipeline fees, according to some back of an envelope calculations by Greg Snyders (or 30% of the value of Southern oil). Given that the North presently gets 50% of Southern oil, about half of that again would seem like a reasonable and easy to understand number to go for.

I have very little new to say about Southern Kordofan and Blue Nile. I continue to be an optimist about the prospect for peace between the North and the South, but just despair for those unfortunate enough to have opposed Bashir in the North. A no-fly zone seems to be totally off the table, which I think is a shame.

New rule - when indicted war criminals continue to flagrantly murder citizens within their own borders, they lose all of their military airforce privileges.

If you can bear the horror here is an anonymous eyewitness account of what is going on sent via Rebecca Hamilton. 

The new national anthem of South Sudan

South Sudan National Anthem by user9727461 (thanks Nick)

How Sierra Leone provided Free Health Care

On April 27, 2010, Sierra Leone started free health care for pregnant women, new mothers, and young children. John Donnelly takes an in-depth look at how the war-torn nation managed it.

There is even a brief cameo by Juba's finest payroll consultants;

A consultant from Booz & Company did an extensive analysis of the ministry's payroll of more than 7000 workers, which included all employees, even those who worked in remote health posts throughout the country. The analysis found more than 850 phantom workers, who were mostly retirees still receiving their salaries, however paltry. Those people were removed from the payroll, allowing the ministry to add 1000 new workers.

Stirring stuff - well worth reading the rest in full at the Lancet (although that Booz consultant does describe this as the "Hollyoaks version" of the story).

How to make a government planning process from scratch

The Southern Sudan experience provides useful insight into appropriate approaches to developing planning and budgeting systems in other post-con¬flict settings. Above all, it injects a note of realism about what can be achieved. The key policy lessons are as follows: 

1. A strong technical lead by an integrated Ministry of Finance is essential. Although international technical assistance can provide support to system design and management, it is not a replacement for the leadership role and decision-making capacity of Government. 

2. When designing post-conflict support programmes, efforts are needed to fully understand the levels of local capacity, and the systems used prior to and during the conflict, so that starting points are realistic. 

3. For system development to be fully grounded, it needs to be aligned with the rate of improvement of local capacity. This means accepting that process development can take years, and that best practice, however desirable, cannot always be achieved overnight. 

The Ministry of Finance received continuous technical assistance throughout the development process, including long-term TA based in the Ministry, short-term consultants for training and quality assurance, and logistical and financial support for workshops. Although this support played a key role in the design and development of the systems, decision-making and strategic direction always belonged to the Ministry of Finance. In addition, the gradual recruitment of technical staff meant that the Ministry was increasingly able to manage systems itself, although with back-up support. Key providers of support included the UNDP’s ‘Support to Economic Planning’ project, Overseas Development Institute (ODI) fellows, USAID and more recently the ODI’s Budget Strengthening Initiative.

From a new ODI briefing paper by Fiona Davies and Gregory Smith.

Is Sudan heading back to war?

I'm still optimistic and think probably not, mainly due to the assumption that the SPLA could halt oil production or transportation altogether if they had to.

Jacob Akol, Chief Editor of the Gurtong media project worries about the possibility of Khartoum attempting to Annex the Southern Oil fields.

His next step is to invade the South and follow a line along the north bank of River Kiir (just below Abyei town) up to where it joins River Bahr al Gazal, continue along the north bank of that river all the way to its junction with the White Nile, and annexing Malakal northward, continue all the way to the border of Southern Blue Nile State with the South and Ethiopia. Such a border, which has been floated before, will include practically all the current functioning oil fields in South Sudan’s territory.

No doubt, President Bashir, armed to the teeth with latest weapons from China and Iran, must believe that his armed forces, alongside South Sudanese militiamen it has armed and continue arming to destabilise the South, will defend such a long border and continue to exploit the oil. If it were anyone else, not Omar Bashir, such a plan could never have been contemplated, leave alone executed; but it is Bashir, who by now must have come to believe that his long reign in power is blessed by Allah and will never end.

John Ashworth rules out oil in Abyei as an explanation for the recent Khartoum offensive, but offers a number of potential explanations;

Khartoum's motives for seizing Abyei, in direct contravention of the CPA, remain unclear. Perhaps it is simply that some elements within NCP feel that southern independence is as far as they can go and allowing Abyei to rejoin the South is a step too far (despite the fact that they have already agreed to it in principle in the CPA - "too many agreements dishonoured"). Perhaps it's a signal to the people of the Nuba Mountains and Blue Nile how far this regime is prepared to go to crush dissent. Perhaps it's a reward to the elements within the Missiriya who have supported the NCP agenda (but who clearly do not represent all Missiriya opinion). Perhaps it's just to sow confusion and delay, an old and well-tried tactic of NCP which is usually to their benefit. Perhaps it's part of a negotiating strategy; that NCP will eventually make a "generous" concession and withdraw from Abyei (despite President Omar Hassan al Bashir's rhetoric in article 1 below), and demand in a return a huge concession from the South and/or the international community. As some media reports have noted, oil may not be the key factor, as the oil fields around Abyei have now been exploited for many years and may be becoming depleted, but also
because the Permanent Court of Arbitration ruling has already redefined the boundaries of Abyei in such a way that most of the oil fields remain in the North even if Abyei rejoins the South. What one can say with some certainty is that it has little to do with an attack on SAF forces a few days ago. The troop build-up has been going on for months, and sporadic fighting for years, leading up to this convenient excuse for breaching the CPA yet again.

Finally, Ken Opalo considers Bashir’s domestic political audience.

A part of me still thinks that Bashir’s sabre-rattling is designed for the northern public. After all he will go down in history as the president who lost the south. In order to avoid immediate ouster he must, at least, pretend to put up a fight. My other side, however, thinks that Bashir (and his generals) might actually want war. Oil and water are on the line.

Time will tell.

"45 qualified civil servants due in South Sudan in June"

Only in Juba can this be a news headline.

Doing Business in Juba

  

The World Bank's Doing Business report on business regulations comes to Southern Sudan. Which is exciting if only because there are so few reports on Southern Sudan. This allows comparisons between the rules for doing business in Juba with other countries around the world (Juba would rank 159 compared with 183 other economies).

But doing business reports only tell us so much. They tell us the de jure rule, not necessarily what firms actually end up doing. One might suppose that sometimes deals are struck to bend the rules.

Lant Pritchett and Mary Hallward-Driemeie (also at the World Bank) are doing research comparing the official rules as measured by Doing Business, with what firms actually report when surveyed (on for example, the time it takes to get permits).

“Doing Business” (DB) provides measures of the time and costs associated with fully complying with an array of business regulations.  Enterprise Surveys (ES) ask a wide range of firms about their actual experiences in doing business.  We use three comparable indicators in both: time to get an operating permit, time to get a construction permit, and time to import goods, to compare these distinct de jure (DB) and de facto (ES) approaches to assessing the “investment climate” in over 100 countries ... 

cross-nationally there is very little association between the ES distributions and DB numbers ...The de jure environment appears to only affect some firms

None of which is to say that the Doing Business reports are not useful - just to be careful to remember that they are not necessarily representative of what actually happens.

Dinka Hip-Hop

via Pete Martell

Rajiv and Salva, Best Friends Forever

Erik Solheim and Andrew Mitchell are well jealous (please excuse my immature humour). (Sudan Votes.com)

Blattman's 7 top tips on Southern Sudan

I hate linking to Chris Blattman's blog because you all read it anyway, or if you don't you should, but when it comes to Southern Sudan.... here are his ideas in response to Duflo/Banerjee's suggestions. 

I know too little about Sudanese politics to give specific recommendations, but here’s a sample of suggestions based on what I think I know: 

1. Build compacts, possibly unequal and unsavory ones, with warlords and other big men, giving them a stake in continued peace, even if it means they control crucial ministries or development organs. 

2. But for goodness sake try not to give up the ministries or development organs. There are non-pecuniary ways to buy people off. And spread it out so you get petty barons rather than oligarchs. They’ll be easier to deal with in 20 years when you have the strength. 

3. Next, give every incentive for elites, especially the ones apt to war, to invest in fixed assets whose value depends on stability and growth. Make them entrepreneurs. Oil rigs don’t count. Property in Juba does. So do plantations and small factories, even if they need subsidies to operate at first. This is hard, and will require attention and dedication. 

4. Aim for minimal corruption in twenty years, not two. 

5. Create a minimally competent police force, one that is less criminal than the criminals. And a court system, with particular attention to the places where ethnic groups repeatedly clash over land or rights or respect. Target programs to these hotspots to buy some measure of content. 

6. Train and educate the military like the bejeezus, and at all costs do not let it slip into factions. 

7. Roads, roads, roads. Not only are they good for growth, they are good for exerting state control and building a sense of nation.

I think the third point is a really good one. The rest, particularly 1 and 6, are things that are probably high priorities for the leadership already. You would have a hard time persuading them after 21 years of war that peace and stability is not the top priority. And they know plenty about balancing different armed factions in the pursuit of peace, having already brought different independent militias into the SPLM.

So: a big chunk of the budget is effectively already ring-fenced for salaries, the army, and road construction.

The question then is what to do with the small amount that that is discretionary and remaining, and I do think that there is space to deliver some social services in the simplest and most effective way possible, which might just be cash and/or health services. I do have a hard time with the poverty alleviation vs growth policy trade-off, and don’t know what the answer is. Its interesting that Duflo/Banerjee make no mention of macro/growth policy, contrasted with Lant Pritchett’s advice which is all macro/growth and no mention of social policy.

South Sudan Emerging

Advice from Esther Duflo and Abhijit Banerjee for Southern Sudan

In the New York Times. Banerjee goes with universal cash transfers and health insurance. Sounds good to me.

Q [David Leonhardt]. Let’s broaden the discussion from education. If you each could have a few minutes with the new leaders of South Sudan — the world’s newest country and a very poor one — and they asked you how they could best improve the lives of their citizens, what would you tell them? 

Ms. Duflo: In just a few minutes, we could not cover very detailed ground. So we’ll have to focus on the basics. First of all, I would try to convince them that a key priority would be to invest enough money and talent in running good quality social services for the poor, including free access to good schools, preventive medical care, and hospitals. This may not seem like rocket science: but these are basic human priorities, and these are also domains where some things are known about what may work. 

Second, I think I would try to convince them to run anti-poverty policy in a more intelligent way than what we see in most countries. In particular, I may try to encourage them not to listen too much to the elevator pitches of all the other experts, and stake their entire policy course on the basis of those… Of course they’ll have to start somewhere, and there is a body of knowledge available to choose policies that are likely to work. But they will still have a lot more to learn about the best ways to achieve their objectives. So I would like to advise them to always keep some margin to experiment, in order to find the best programs to reach those goals. 

Mr. Banerjee: Since they will no doubt want more specific suggestions, here are two policies that I think every poor country should implement. A small universal cash grant to everyone over 12, based on biometric identification. This guarantees that no one has to face the humiliation of being totally indigent, and from our evidence, makes people more productive as well. Making it universal is important, so that they do not attempt to identify the poor (which is very difficult to do effectively in poor countries). 

Second, a free universal health insurance policy that covers catastrophic health events, which allows people to go to private or public hospitals. Catastrophic health shocks do enormous damage to families both economically and otherwise, and are easy to insure, because nobody gets them on purpose. On the other hand, insurance policies that only treat certain catastrophic illnesses are hard to comprehend, especially of you are illiterate and unused to the legalistic nature of exclusions etc. Therefore people do not value them as much as they should which makes it hard for markets to supply them. This is an obvious thing for governments to take on.

Closely following the release of More Than Good Intentions, Duflo and Banerjee also have a new book out "Poor Economics." I'm about 2 chapters in and so far it is fantastic.

New Sudan Bombing Data

Sudan researcher Eric Reeves has painstakingly compiled a downloadable spreadsheet of 1,414 referenced bombing incidents by the Khartoum government in Sudan since 1993. From the report:

This report grows out of my belief that the almost complete anonymity and invisibility of Sudanese civilian victims of targeted aerial military assaults is morally intolerable. So, too, are such attacks on humanitarian aid workers and operations, including hospitals and feeding centers.  There have been many casualties among relief personnel. For more than twelve years, these assaults have been standard counter-insurgency strategy on the part of the National Islamic Front/National Congress Party regime in Khartoum.  As I argue and as the facts demonstrate, such a strategy—obscenely destructive in its consequences—has no historical precedent anywhere in the world. It would be presumptuous to dedicate such a document to so many thousands of victims; it must stand simply in memoriam. ER - May 2011

via John Ashworth

The Role of Economists in Government

I don't recall who said it, but it has been said that the role of economists in government is to stop bad ideas, and then to stop them again when they come back again. Evidently some local authorities in Southern Sudan need an economist, or at least someone minimally literate in markets.

From the Tribune; 

Johnson Sebit Aki, a staff officer at the traffic police in Wau, said the illegal commuter transport business in the town is well known to the traffic police but the major obstacle has been lack of support from the members of public in curbing the menace. 

Aki cited an incident which recently occurred in Wau town, where traffic police were alerted the passenger of a commuter bus where passengers were charged twice the acceptable fare. However, on arrival the passengers insulted the police officer.

"They asked our officers to stay away as the payment was a consensus reached between them and the conductor. From such reactions we also lose appetite to continue dealing with them," he said.

 and Gurtong;

RUMBEK, 28th April, 2011 [Gurtong] - Butchers operating in Rumbek township have been apprehended by security officers following their decision to increase the price of meat without due consultation with relevant authorities in Lakes State.

Also to be filed under "Reasons to be doubtful of the effectiveness of decentralised systems of government." 

New Draft Constitution

The Republic of Southern Sudan has a new interim constitution for the period following independence.

John Ashworth compiles reactions here. The most worrying thing for me is the removal of Presidential term limits, which means that the current Vice-President Riek Machar has been completely ignored after publicly declaring a preference for term limits a few months ago. 

Cash Transfers Pilot in Southern Sudan from Save the Children

“Before the project started, I used to sit under a tree near the market and drink tea. Then the project started. I was able to save a little bit and buy a goat. One day, my goat became pregnant. Now I am able to sit under the tree and drink tea with milk.”
                                                                                              -UCT recipient, Mathiangdit Boma




Being an avid tea drinker myself, and knowing how much milk the Sudanese like in their tea, this story makes me (and, I imagine, Mathiangdit)  very happy.

In all seriousness, with fantastic timing I was just emailed a report from September 2010 evaluating Save the Children’s pilot cash transfer program in Northern Bahr el Ghazal, Southern Sudan, which although isn’t really capable of measuring impact does importantly show that cash transfers are technically feasible in remote and conflict-affected areas.

• If appropriate security precautions are followed and existing  security mechanisms utilized, cash  transfer is possible  in post-conflict settings where security  is considered a risk.
• Cash transfers are not misused. 
• The most important priorities for use of cash transfer are expenditures on education, health and assets. 

I couldn’t find a copy online so here it is (hope Save don’t mind sharing - putting a link on their Sudan page would be nice!).