97404 Republic of the Sudan Diagnostic Trade Integration  Study - Update REDUCING TRADE COSTS TO INCREASE COMPETITIVENESS AND RESILIENCE  Prepared for the Enhanced Integrated Framework Report No: ACS10972 REPUBLIC OF THE SUDAN DIAGNOSTIC TRADE INTEGRATION STUDY - UPDATE REDUCING TRADE COSTS TO INCREASE COMPETITIVENESS AND RESILIENCE Prepared for the Enhanced Integrated Framework October 31, 2014 Macroeconomic and Fiscal Management AFRICA Standard Disclaimer: This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202–0522–2422, e-mail pubrights@worldbank.org. iii TABLE OF CONTENTS ACKNOWLEDGEMENTS................................................................................................................................ vii ABBREVIATIONS AND ACRONYMS............................................................................................................. ix EXECUTIVE SUMMARY................................................................................................................................... xi DTIS UPDATE – PROPOSED ACTION MATRIX........................................................................................xiv INTRODUCTION............................................................................................................................................... 1 MACROECONOMIC OVERVIEW AND BUSINESS-ENABLING ENVIRONMENT................................. 5 Overview....................................................................................................................................................................5 Business-Enabling Environment...............................................................................................................................10 Lessons from the Implementation of the 2008 Action Matrix...................................................................................13 TRADE POLICY AND PERFORMANCE....................................................................................................... 17 Overview..................................................................................................................................................................17 Direction of Trade....................................................................................................................................................20 Characteristics of Exporters in Sudan.......................................................................................................................21 General Duty Schedules and Para Tariffs: High Levels of Protection.........................................................................24 Regional Trade Preferences........................................................................................................................................27 Export Duty.............................................................................................................................................................28 Import Restrictions, Domestic Manufacturing, and Productivity..............................................................................28 Trade and Poverty.....................................................................................................................................................29 Recommendations....................................................................................................................................................30 CUSTOMS ADMINISTRATION AND BORDER MANAGEMENT........................................................... 33 Overview..................................................................................................................................................................33 The Sudan Customs Authority..................................................................................................................................34 Customs Systems and Procedures.............................................................................................................................37 Customs Agents and the Licensing of Brokers..........................................................................................................40 Transparency, Information, and Communication Mechanisms.................................................................................42 Recommendations....................................................................................................................................................42 TRANSPORT, TRANSIT, AND LOGISTICS SERVICES.............................................................................. 45 Overview..................................................................................................................................................................45 Transport and Logistics Strategy...............................................................................................................................46 iv REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Transport Corridors..................................................................................................................................................47 Logistics Services......................................................................................................................................................48 Clearing and Forwarding Services.............................................................................................................................50 Trucking Services......................................................................................................................................................51 Inland Container Depots..........................................................................................................................................52 Modes of Transport..................................................................................................................................................54 Strengthening Regional Connectivity.......................................................................................................................59 Recommendations....................................................................................................................................................60 NATIONAL QUALITY INFRASTRUCTURE AND NON-TARIFF MEASURES........................................ 65 Overview..................................................................................................................................................................65 Standards Development in Sudan.............................................................................................................................67 Conformity Assessment and Accreditation................................................................................................................70 Product and System Certification.............................................................................................................................72 Inspection Services...................................................................................................................................................73 Metrology Services....................................................................................................................................................75 Testing Laboratories.................................................................................................................................................76 Recommendations....................................................................................................................................................76 OPPORTUNITIES FOR GROWTH THROUGH DIVERSIFICATION: AGRICULTURE....................... 79 Overview..................................................................................................................................................................79 Trade Performance of Major Agricultural Exports.....................................................................................................80 Factors Affecting Competitiveness of Agricultural Exports........................................................................................89 Recommendations....................................................................................................................................................91 TRADE-IN-SERVICES...................................................................................................................................... 93 Overview..................................................................................................................................................................93 Trade-in-Services in Sudan.......................................................................................................................................93 Professional Services Matter for Sudan’s Growth.......................................................................................................95 Recommendations..................................................................................................................................................102 OPPORTUNITIES FOR GROWTH THROUGH DIVERSIFICATION: TOURISM.............................. 103 Overview................................................................................................................................................................103 Size and Structure of the Tourism Sector................................................................................................................104 Tourism Policy and Institutional Framework..........................................................................................................107 Tourism Development Challenges..........................................................................................................................108 Recommendations..................................................................................................................................................111 APPENDIX....................................................................................................................................................... 115 Appendix 1: DTIS 2008 Action Matrix Scorecard..................................................................................................115 Appendix 2: Firm Level Exporter Dynamics – Product Details...............................................................................129 Appendix 3: Trade Gateway Performance: Port Sudan............................................................................................132 LIST OF REFERENCES.................................................................................................................................. 135 Table of Contents v LIST OF FIGURES Figure 1: Sudan’s Growth: Contribution of the Public and Private Sector 1998–2008...............................................5 Figure 2: Economic Activity......................................................................................................................................7 Figure 3: Inflation Developments..............................................................................................................................8 Figure 4: External Sector...........................................................................................................................................9 Figure 5: Doing Business Ranking for Sudan...........................................................................................................10 Figure 6:  Doing Business 2012 and 2014: Ease of Doing Business Ranking............................................................10 Figure 7: Starting a Business in Sudan and Comparators in Doing Business 2014...................................................11 Figure 8:  Doing Business 2014: Ranking by Component........................................................................................11 Figure 9:  Profit Tax (%) in Doing Business 2014.....................................................................................................12 Figure 10: Doing Business Indicators on Trading Across Borders...............................................................................13 Figure 11: Doing Business 2014: Ranking for Sudan and Comparators on Trading Across Borders...........................13 Figure 12: Cost to Import and Export (US$ per Container) for Selected Countries in Doing Business 2014.............14 Figure 13: Total Non-Oil Export Growth (Base Year 2008).......................................................................................18 Figure 14: Merchandise Trade, 1991–2011 (% of GDP)...........................................................................................19 Figure 15: Merchandise Trade and Services Trade, 2005–2011 (% of GDP)..............................................................19 Figure 16: Current Account Components, 2005–2013 (US$ million).......................................................................19 Figure 17: Total Number of Exporters.......................................................................................................................21 Figure 18: Exporter Concentration: Sudan Share of Top 5% – Change Over Time...................................................22 Figure 19: Distribution of Tariff Rates (2012) and Imports Based on Statutory Tariffs...............................................26 Figure 20: Distribution of Tariff Rates (2013) and Imports (2012) Based on Applied Tariffs.....................................26 Figure 21: Poverty Rates per State and by Gender of Household Head for Reduction in Tariffs from 0 Percent to 17 Percent............................................................................................................................................30 Figure 22: Components of Regulatory Compliance Framework................................................................................36 Figure 23: Risk Management Process Framework......................................................................................................38 Figure 24: Sudan Logistics Performance, 2007–2014................................................................................................45 Figure 25: Distribution of Traffic: Port Sudan and Khartoum (2013)........................................................................47 Figure 26: Trucking Fleet Capacity Utilization..........................................................................................................52 Figure 27: Traffic Volume Carried by Rail, 1961–2013.............................................................................................55 Figure 28: IWT Traffic Volume in Sudan, 2005–2012...............................................................................................57 Figure 29: Technical Regulations Framework Following Best Practice Guidelines......................................................66 Figure 30: Evolution of ISO 9001 Certificates in Sudan............................................................................................72 Figure 31: Services Value Added and Development in 2000–02 versus 2010–12.......................................................94 Figure 32: Sudan’s Exports of Goods, Exports of Services, and GDP Growth, 2005–2012........................................94 Figure 33: Exports of Transport, Travel, and Other Commercial Services, Sudan, 2005–2012...................................94 Figure 34: Services Imports, Sudan and COMESA....................................................................................................95 Figure 35: Average Productivity of Users vs. Non-Users of Accounting Services, Sudan and COMESA.....................96 Figure 36: Usage of Professional Services, Sudan........................................................................................................97 Figure 37: Demand for Accounting and Engineering Services in Sudan.....................................................................97 Figure 38: Average Gross Monthly Salaries in Sudan.................................................................................................98 Figure 39: Top Regulatory Constraints Faced by Professional Services Providers in Sudan.......................................100 Figure 40: Direct Contribution of Tourism to GDP, Selected Countries (2007–2012)............................................104 Figure 41: Direct Contribution of Tourism in Sudan to GDP (2007–2012)............................................................105 vi REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Figure 42: Direct Contribution of Tourism in Sudan to Employment (2007–2012)................................................105 Figure 43: International Tourist Arrivals (2007–2012).............................................................................................105 Figure 44: Cargo Dwell Time in Port Sudan Compared to Other Ports, 2014.........................................................132 LIST OF TABLES Table 1: Summary of Implementation of 2008 Action Matrix................................................................................14 Table 2: Principal Trade Partners of Sudan in 2006 vs. 2012/13.............................................................................20 Table 3: Sudan 2014 Tariff Structure......................................................................................................................24 Table 4: Sector Groups: Tariff Collection Rates, Imports and Exports for 2012 (Values in US$ million)................25 Table 5: Sudan: Rates of Excise Duties on Imported Goods (%)............................................................................27 Table 6: Revenue Collection Performance, Selected Countries 2012......................................................................33 Table 7: Sudan Customs Statistics..........................................................................................................................35 Table 8: Comparative Costs of Different Modes of Transport.................................................................................47 Table 9: Annual Absorptive Capacity for Members by Chamber............................................................................52 Table 10: Time Comparison (40-feet Container; Port Sudan – Khartoum)..............................................................56 Table 11: Comparison of Traffic since Privatization in 2008.....................................................................................57 Table 12: Time and Costs Associated with Transport within Sudan..........................................................................58 Table 13: Cargo Volumes, 2007–2012.....................................................................................................................59 Table 14: Costs of Using Different Regional Corridors that Compete with Routes through Sudan..........................59 Table 15: Completed Road Improvements Linking to Neighboring Countries.........................................................60 Table 16: Sudan Axle Load Limits Compared to EAC Countries.............................................................................60 Table 17: Sales of Standards by SSMO 2012–2014..................................................................................................67 Table 18: Samples of Imports During the Years 2012–2013.....................................................................................73 Table 19: Samples for Exports During the Years 2012–2014....................................................................................73 Table 20: Sub-sectors Share in Agricultural GDP: 2006–2009.................................................................................80 Table 21: Livestock Export Value and Sub-sector Share: 2008–2013........................................................................81 Table 22: Quarantine, Inspection, and Vaccination Regime for Sheep Exports.........................................................82 Table 23: Estimated Costs per Feddan of Sesame Production in Gedaref (2013/2014).............................................83 Table 24: Value Chain Analysis for Sesame Marketing from Gedaref to Port Sudan (Jan. 2014)...............................84 Table 25: Sesame Export Value and Quantities: 2008–2013.....................................................................................84 Table 26: Direction of Sesame Trade: 2012–2013....................................................................................................85 Table 27: Value Chain for Gum Arabic Marketing from El Obeid to Port Sudan in 2012........................................86 Table 28: Estimated Costs per Feddan for Cotton (Acala) Production – Gedaref (2013/2014) (Expected yield 4.5 quintal/feddan)..........................................................................................................87 Table 29: Other Tourism Service Providers.............................................................................................................107 Table 30: Container Operations Key Indicators.....................................................................................................134 LIST OF BOXES Box 1: The Trucking Industry “Bubble” in Sudan................................................................................................53 Box 2: Technical Committees for Standards.........................................................................................................69 Box 3: Domestic Regulation in Professional Services in Sudan.............................................................................99 Box 4: Rwanda Rising – A Nation Rebuilds and Rebrands................................................................................110 Box 5: UK Visa Reform Targets Chinese Tourists...............................................................................................113 vii ACKNOWLEDGEMENTS A t the request of the Government of Sudan, Marwan Younis Abdelsalam, Head of Information the World Bank took the leading role in the and Research Administration, Customs Authority, preparation of this DTIS Update. The core who assisted in obtaining critical customs data; and members of the team were: Michael Geiger (Task the Director and staff from the Sudan Standards and Team Leader), Robert Kirk (Lead Consultant and Metrology Organization. The team also wishes to Lead Author), Nora Dihel and Arti Grover (Trade- thank the EIF Donor Coordinator Ms. Maria-Luisa in-services), Clay Kerswell (Trade Facilitation), Imad Troncoso, European Union, for facilitating meet- Eldin Alfadil Abdel Karim Yousif (Agriculture), Maika ings with the donor community and for providing Watanuki (Logistics Services and Doing Business), valuable insights during the two team missions and Geoff Visser (National Quality Infrastructure), Ana the Validation Workshop. The report also benefited Fernandes and Esteban Ferro (Exporter Dynamics), from the constructive comments provided by the Eneida Fernandes (Tourism), Charles Kunaka EIF Secretariat in Geneva and the EIF Board on the (Transport), Reynaldo Bench (Port Specialist), Saef Concept Note and the draft Final Report. Ibrahim (Survey for Trade-in-services), Toru Nishiuchi The DTIS update team would also like to thank and Dr. Mohamed Ali Dingle (Review of 2008 the numerous stakeholders from the public and private Implementation Matrix), Dr. Ibrahim Ahmed Ibrahim sectors who provided helpful insights during the team Ibnoef (Livestock Exports), Mosllem Alamir (Country missions undertaken in 2013 and January-February Economist) and Jasmine Park (research assistance on 2014. These include the Hon. Minister of Trade, Mr. the trade data). Osman Omar El-Sharif; Mr. Eltahir Aidam, the former The analysis in the report benefited greatly from EIF Focal Point Director; and Dr. Maryam Elemam, very helpful comments and feedback provided by Undersecretary MIT and the current EIF Focal Paul Brenton, Philip Schuler, Michael Ferrantino, and Point Director; Dr. Najm Eldeen Daood Mohamed, Paolo Zacchia among others. Undersecretary MIT; Mr. A. Aziz Mabrook, Director The DTIS update was elaborated in close coop- of Foreign Trade, MIT; the Secretary General of the eration with counterparts in the Sudan govern- Sudanese Businessmen and Employers Federation Mr. ment, including: Manal Musaad, EIF Coordinator Bakri Yusuf Omer Al-Amin; and many government at the National Secretariat for WTO Affairs officials and private sector representatives for their (NSWTOA) Ministry of Trade (MIT), who facili- extensive cooperation and the valuable time spent tated the team Missions and the Validation Workshop; with the DTIS update team. ix ABBREVIATIONS AND ACRONYMS ABS Agricultural Bank of Sudan IAF International Accreditation Forum AFSEC African Electro-technical IGAD Intergovernmental Authority on Standardization Commission Development AIDMO Arab Industrial and Mining ICC International Association for Cereal Organization Science and Technology ARC Agricultural Research Corporation ICD Inland Container Depot ARP Agricultural Revival Program IDP Internally Displaced Persons ARSO African Regional Standards IEC International Electrotechnical Organization Commission ASYCUDA Automated System for Customs IFOAM International Federation of Organic Data Agriculture Movements BIPM Bureau de International des Poids ILAC International Laboratory et Mesures (international metrology Accreditation organization) I-PRSP Interim Poverty Reduction Strategy CASCO Conformity Assessment Policy Program Committee of ISO ISO International Organization for CEN Council for European Norms Standardization CENELEC European Committee for IUCEA Inter-University Council for East Electrotechnical Standardization Africa COMESA Common Market for Eastern and IWT International Warehouse Tracking Southern Africa Lab Laboratory DB Doing Business MCI Ministry of Culture and DTI Direct Trader Input Information DTIS Diagnostic Trade Integration Study MDG Millennium Development Goals EGAC Egyptian Accreditation Council MLF Ministry of Livestock and Fisheries ESP Economic Salvation Program MOAI Ministry of Agriculture and EU European Union Irrigation FOB Freight on Board MOF Ministry of Finance and National GAB Gum Arabic Board Economy GAC Gum Arabic Company MOT Ministry of Trade GAFTA Greater Arab Free Trade Area MRA Mutual Recognition Agreement GCA General Customs Administration MTAW Ministry of Tourism, Antiquities GMO Genetically Modified Organism and Wildlife GOS Government of Sudan NHA National Highways Authority GSA Gulf Standards Association NQI National Quality Infrastructure HS Harmonized Systems Convention NRTC Nile River Transport Company x REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE NSA National Seed Administration SPS Sanitary and Phyto-Sanitary NSW National Single Window measures OIML International Legal Metrology SSMO Sudanese Standards and Metrology Organization Organization PVoC Pre-export Verification of TBT Technical Barriers to Trade Conformity Agreement of the WTO SCC Sudan Cotton Company TFA Transitional Financial Assistance SDS Sudanese National Standards TTEA Technology Transfer and Extension SGS Société Générale de Surveillance Administration (www.sgs.com) VFR Visiting Friends and Relatives SMIIC Standards and Metrology Institute WCO World Customs Organization for Islamic Countries WTO World Trade Organization SPC Sudan Ports Corporation Fiscal Year January 1–December 31 Weights and Measures Metric System 1 Feddan = 0.42 Hectares 1 Kantar = 45 kg 22.22 Kantar = 1 Metric ton xi EXECUTIVE SUMMARY T he Diagnostic Trade Integration Study The imposition of financial and trade sanc- (DTIS) Update identifies priority Actions tions against Sudan has an adverse impact on the in support of the Government of Sudan economy, but the extent of the full effect needs to be (GOS) commitment to increase trade and diversify more carefully studied. The sanctions have particular the economy. The current study builds on the earlier impact on access to finance in foreign currency as well 2008 DTIS by identifying the major factors holding as the sourcing of inputs and replacement technical back the increase of agricultural exports and economic parts. For example, the Sudan Railway Corporation diversification. The report identifies a package of has explicit problems in maintaining their locomotive measures that will support Sudan to more effectively fleet. In customs, there are indications that impor- realize its economic potential. tant technical infrastructure and resources (e.g. scan- Reducing the large economic imbalances along ners) are not being used to their full potential because with the misalignment of the exchange rate is of on-going support and maintenance issues. In tour- required for building competitiveness and increas- ism, sanctions block access to tourism technology ing domestic and foreign investment. Despite imple- and the use of international credit cards. But the real menting a number of significant and difficult reforms impact is not known. For instance, it is not entirely Sudan continues to experience a large deficit that is clear whether the fact that Sudan’s non-oil exports are being met by short-term borrowing. The resulting concentrated in only a small number of markets is a pressure to raise government revenue has constrained consequence of sanctions against the country. In fact, much needed reforms aimed at reducing tariffs and Sudan is even isolated (in terms of trade flows) within para tariffs. Given the serious fiscal constraints, tariff Africa, where sanctions do not apply. However, sanc- reform must take into account the revenue implica- tions have exacerbated the isolation through increased tions and aim, in the short term, to be revenue neutral. difficulty in settling cross-border payments, which High tariffs and other trade taxes on imports affects trade with all partners. create incentives to produce for the domestic mar- Successfully encouraging exporters requires the ket and actively discriminate against exporters GOS to implement a package of (difficult) reforms. and potential exporters. Enabling exporters and Those reforms should focus to lower the barriers to potential exporters to obtain their inputs at interna- trade through reducing trade taxation, simplifying tionally competitive prices will stimulate investment border and regulatory policies, and improving trans- and growth and encourage diversification. Reducing port and logistics. trade costs and increasing trade represent the most Trade policy should be revised to simplify the powerful policy package available to the GOS for tariff schedule, reduce the proportion of peak tar- reducing poverty and placing Sudan on the path to iffs, and adopt a transparent and well-publicized meeting the MDG and advancing to middle income policy on eligibility for duty rebates. The tariff status. Outward oriented development is a necessary schedule is characterized by a high proportion of condition for countries that have achieved middle- peaks (15 percent and above), discriminatory excise income status. duties and a Development Tax of 13 percent, which xii REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE is a para-tariff. A comprehensive tax reform strategy barriers, and lowering transport costs will encour- that reduces reliance on trade taxation and promotes age investment and growth throughout the econ- growth and investment should be revenue neutral omy. The DTIS identifies trade related constraints and in many cases will results in increased govern- to growth in agriculture and the services sector with ment revenue. specific reference to professional services and tourism. There is a need to simplify and streamline bor- Throughout, the DTIS focuses on identifying policy der and regulatory policies. Sudan imposes many and regulatory measures that will assist with realizing Non-Tariff Measures (NTMs) that increase the price the potential for growth. of imports and the ex-factory price of Sudanese prod- High input costs, inefficient marketing and ucts. Many of these result from the high proportion transport networks, and regulatory restrictions of products that are required to be tested for manda- all contribute to the observed low productivity in tory standards. The testing frequently duplicates tests agriculture and underperformance of a key sector. already carried out by qualified laboratories in the Sudan has the potential to be a major producer and country of origin. Reducing the number of mandatory exporter of agricultural products to their neighbors, standards and replacing them with voluntary standards traditional trading partners in the Middle East and should be a priority. globally. Despite the potential and recent positive Continue to modernize customs clearance pro- growth the sector continues to underperform. Recent cedures. Multiple border agencies undertaking dupli- positive reforms in the policy environment, including cative and redundant checking and repeated requests the removal of the Gum Arabic Commodity Council for the same information all serve to increase costs and monopoly, increasing the role of the private sector, reduce competitiveness. Prioritizing the establishment privatizing previously state owned companies, and of a National Trade Portal will bring together all the removing duties on agricultural inputs are all deliver- information and forms required for moving goods ing results. The DTIS Update highlights three areas across borders. It is a proven technique for reducing where further reforms will reduce trade costs. These red tape and increasing transparency. Increased trans- include streamlining the procedures for the registra- parency regarding the correct application of trade poli- tion of seeds and other agricultural inputs, removing cies and administrative procedures would increase the the uncertainty over export licenses for staple crops predictability of trade costs and transit times, making (specifically sorghum), and improving productivity in it easier for companies to integrate into regional and the livestock sector. global value chains. Ensuring access to a wide range of services Sudan needs to reduce the price of transport from the backbone services of transport, electricity, and improve the quality of logistics services. In and communications to professional services is a the short term, improvements in road transport will key determinant in international competitiveness bring the highest returns. Priority actions include and efficiency. The report identifies the constraints ensuring 24/7 access to the dry port of Khartoum to the development of professional services, not- through either relocation or constructing a by-pass. ing how restrictive regulations in conjunction with Further investment in infrastructure along the Port a lack of regional cooperation are holding back the Sudan-Khartoum route would increase safety and development of the national market for professionals reduce delays. Modernizing the regulatory framework with adverse effects on competitiveness. The Action for logistics services will facilitate increased reliability Matrix recommends targeting major regulatory con- and reduce transport prices. straints such as easing entry requirements, eliminating Reducing trade costs through tariff reform, disproportionate restrictions that limit competition, increasing border efficiency, eliminating non-tariff establishing transparent procurement procedures, Executive Summary xiii and reviewing non-transparent licensing procedures. earlier DTIS throughout the world show that develop- Undertaking regulatory audits in all examined profes- ing a long list of constraints and barriers to develop- sional service sectors would be important to identify ment detracts from framing priorities and mobilizing specific areas where reforms could be fast-tracked in the necessary inter-agency and diverse stakeholder the context of the COMESA, and Tripartite FTA commitment to reform required to effect change. (EAC, COMESA, and SADC) services dialogues. Focusing on national level policy issues in need of Expanding the growth of the professional services strong political support and broad stakeholder engage- sector and enabling access by small and medium size ment, the authors hope the prioritized policy matrix firms will increase their productivity. with key activities will serve as an effective basis for Sudan has the opportunity to deliver significant dialogue among the various government ministries, growth in the tourist sector, however realizing this business and civil society, and with development requires both supply- and demand-side measures. partners. Addressing the limited and focused priority The GOS recognizes the potential of tourism to con- activities will have a significant impact and should be tribute to development and specifically requested the achievable with strong leadership by the Ministry of DTIS Update to identify what is required to increase Trade, and with high-level support from the Ministry demand. In the short run it is recommended that the of Finance and the Office of the President, strong link- Government of Sudan send a positive signal that it is ages with other strategies such as the I-PRSP and the open for tourism by reforming the Visa regime, lift- macroeconomic reform strategy, and strong support ing in-country bureaucratic procedures, and updating from development partners. the National Tourism Plan. A comprehensive devel- The DTIS Update presents an updated Action opment strategy will take several years to evolve and Matrix that summarizes the recommended policy requires improvements in policy and planning, human reforms. This matrix was validated with a wide vari- resource development, transport access, and product ety of stakeholders in Khartoum in September 2014. development and marketing. The recently updated Together, the action points will contribute to reduc- National Tourism Plan addresses these issues and pro- ing trade costs, thereby enabling Sudanese enterprises vides a useful road map for raising the profile of the and farmers to compete more successfully in regional sector and mobilizing resources for implementation. and global markets and realize the GOS objectives Learning from the past experience of many sim- of expanding and diversifying exports for increased ilar studies, this DTIS Update presents a focused economic growth. The recommendations accept that and prioritized updated Action Matrix that, going any changes in tariff schedules should be “revenue forward, can guide policy-making. Lessons from neutral,” given the existing challenging fiscal situation. xiv DTIS UPDATE – PROPOSED ACTION MATRIX Identified Constraint Action(s) Responsibility Monitoring Indicator Difficulty / Payoff I Trade Policy Not a member of the World • Continue with and expedite the ongo- Ministry of Trade • Working Party Meeting Con- High/High Trade Organization (WTO) ing WTO Accession Process vened during 2015 International sanctions restricting • Undertake study to assess the econom- Central Bank, Ministry of • Study Finalized (by July 2015) Medium/High market access and financial ic impact of financial sanctions and Finance services restrictions on sourcing and market access Tariff and tax policy on imports • Undertake study to evaluate the rev- Ministry of Finance • Study on Revenue Impact final- High /High discriminates against exporters enue impact of reducing tariff peaks, ized (by July 2015) Comment: Necessary given and potential exporters removing development tax, and elimi- the serious fiscal constraints nating import specific Excise taxes Complex and non-transparent • Adopt and publicize a clearly defined Ministry of Trade/Minis- • Tariff Policy published (by July High/High trade policies policy on tariff exemptions, duty prefer- try of Finance/Customs 2015) ences, and restricted products Authority/ • Regulations removing Export • Abolish export license require- Licenses issued (in 2015) ments—except for cultural/archaeo- logical products—by end 2015 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Existence of Non-Tariff Barriers • Develop and adopt procedures for Ministry of Trade, Min- • Government policy statement Medium/High (NTB) introducing new regulations based on istry of Agriculture and published listing the processes OECD Regulatory Best Practice Irrigation, Ministry of required for all new regulations Comment: First step is to pre- Principles by end of 2015 Livestock and Fisher- • Audit of existing regulations vent new Non-Tariff Measures • Audit existing regulations to identify ies, Ministry of Health, completed and outdated regula- to be introduced redundant and outdated procedures SSMO tions abolished and requirements by end of 2015 • Regulatory Audit Unit established • Use the Regulatory Audit to reform existing regulations (2016 onwards) (continued on next page) DTIS UPDATE – PROPOSED ACTION MATRIX (continued) Identified Constraint Action(s) Responsibility Monitoring Indicator Difficulty / Payoff National Quality Infrastructure • Prepare and adopt a National Quality SSMO and Ministry of • National Quality Plan produced Medium/High (NQI) imposes unnecessary Plan before end of 2015 Trade • Code of Good Practice Adopted trade costs • Reduce the number of mandatory • Published the mandatory Comment: Need to address inspections/tests through implementing standards changed to voluntary SSMO revenue and safety the WTO TBT Code of Good Practice standards concerns by the end of 2015 • SSMO Directive issued accepting • Agree on the principle of adopting certificates from international international standards as Sudanese accredited bodies National Standards wherever possible • SSMO begin reporting on post • Eliminate testing for those with certifi- market surveillance activities cates from internationally accredited • Notification of removal of re- conformity assessment bodies by intro- quirement for EQP ducing risk analysis on such shipments by end 2015 • Improve capacity to undertake post market surveillance of legal weights and measures for consumer protection by end 2015 • Remove the requirement to hold an Export Quality Permit by June 2015 II Customs, and Trade Logistics Multiple Border Agencies result • Adopt improved coordination / coop- Customs Authority/All • Progress report on One Stop High/Medium in multiple checks and a high eration mechanisms (establish a “lead” Agencies at the Border Services and implementation of level of physical inspections agency) to ensure integrated border NSW published Comment: Requires multi contributes to delays management, reducing the need for agency coordination physical inspections. • Improve existing One Stop Service and continue implementing the National Single Window Difficulty in obtaining • Introduce a National Trade Portal that Customs Authority/Min- • Project for NTP finalized and Medium/Medium information on trade rules and would contain all legally binding in- istry of Finance/Ministry funding secured Comment: Maybe an area of regulations formation on trade procedures, easily of Trade increased donor interest to accessible to the public (to be imple- finance mented by June 2016) Outdated comprehensive • Update and enhance the earlier cus- Customs Authority • Updated Modernization Strategy Medium/Medium customs modernization strategy tom modernization strategy finalized and published (continued on next page) DTIS UPDATE – PROPOSED ACTION MATRIX xv xvi DTIS UPDATE – PROPOSED ACTION MATRIX (continued) Identified Constraint Action(s) Responsibility Monitoring Indicator Difficulty / Payoff Inefficient clearing agents Revise requirements for obtaining a clear- Ministry of Trade/Minis- Licensing of Agents revised High/High ing agent license try of Finance/Customs Standards for clearing agents Introduce standards to ensure com- Authority published petence and integrity; these should be publicized Regulation allowing self-clearing Allow self-clearing by importers in published conformity with international agreements (introduced by June 2015) Incomplete regulatory Revise regulations for trucking and Ministry of Transport Regulations Revised and Published High/High framework for logistics service freight forwarding business on licensing, (LTU)/Union of Chamber providers business registration at the Ministry of of Transportation/Private Transport, scope of activities, and entry of Sector Standard Trading Conditions foreign operators drafted and published Develop standard trading conditions to clarify operational liability Inefficient rail network on the Expedite implementation of agreed Busi- Sudan Railways Corpo- Annual Report published of SRC High/High Port Sudan-Khartoum Corridor ness Plan and improve the availability ration covering implementation of busi- and reliability of rolling stock ness plan REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Access restrictions to Soba Dry Decide to build a bypass to Soba Dry Ministry of Transport/Su- Announcement published by Minis- High/High Port cause delays and increase Port or to develop a new dry port north of dan Railways Corpora- try of Transport costs Khartoum tion/City of Khartoum Absence of coherent logistics Develop a comprehensive logistics Ministry of Transport/ Logistics Strategy drafted and Medium/Medium strategy increases duplication strategy (by June 2015) and strengthen Transport Sector Cor- published and infrastructure development capacity in the Ministry of Transport to porations/ Customs Project funded to support capac- costs implement the National Transport Master Authority ity strengthening of Ministry of Plan Transport Large variations in dwell time Improve coordination between port ter- Ministry of Transport/ Time-Release Study conducted and High/Medium between different users at Port minal operations, regulatory controls and Port Sudan/Customs data on dwell times published Sudan removal processes for cargo (by Decem- Authority ber 2015) Conduct a time-release study and publish the results (continued on next page) DTIS UPDATE – PROPOSED ACTION MATRIX (continued) Identified Constraint Action(s) Responsibility Monitoring Indicator Difficulty / Payoff III Agriculture Multiple taxes and fees on Conduct value chain studies on two to Ministry of Agriculture Value Chain Reports finalized High/High agricultural commodities three selected commodities to identify all & Irrigation/ Ministry of Comment: Complex as State the taxes and charges levied by the Fed- Livestock/ State Govern- Governments face severe eral Government, States, and Regulatory ments funding constraints Agencies and commit to repeal those not based on a service (by end 2015) Lack of awareness and Establish a functioning SPS Enquiry Point Ministry of Agriculture SPS Enquiry Point Established Medium/Medium institutional weaknesses in and strengthen SPS capacity to support & Irrigation/ Ministry Project for strengthening SPS ca- meeting SPS requirements in increasing agricultural exports. Lever- of Livestock in partner- pacity designed and implemented export markets for livestock and age the recently approved STDF Project ship with a private firm SPS Quality Standards available on crops Preparation Grant or NGO/SSMO/Sudan line by December 2015 Support information system to dissemi- Trade Point/ Ministry of nate quality standards with all standards Trade published on the Internet by December 2015 Complex Regulations governing Review the process for approving agri- Ministry of Agriculture Report on procedures for importing High/High access to agricultural inputs cultural inputs for distribution in Sudan & Irrigation/Ministry of and distributing agricultural inputs (seeds/fertilizer) (report published by June 2015) Livestock/National Seed finalized Comment: Complex as mul- Streamline procedures for processing of Administration/National New procedures for processing tiple agencies involved plant material documentation (number of Pesticides Council/SSMO plant material documentation agencies reduced from four to one by end published of 2015) Conformity of Sudan procedures Develop plant variety protection in con- with UPOV Convention validated formity with the UPOV (1991) Convention (by 2016) IV Professional Services Non-transparent procurement Fast-track regulatory audits in all exam- Ministry of Trade/Profes- Report back on consultations High/High procedures, lengthy and ined professional service sectors com- sional Associations/Em- regarding the status of regulatory burdensome licensing / pleted by June 2015 ployers’ Association audits in accounting, engineering, Comment: Difficult, since the accreditation procedures, and Expedite reforms in the context of the architectural and legal services need exists to open protected competition issues COMESA, and Tripartite services dialogue listing specific items for action by sectors to competition when, March 2015. at the same time, Professional Report back on consultations Associations influence the regarding specific barriers to be regulations addressed as part of the regional DTIS UPDATE – PROPOSED ACTION MATRIX trade negotiations by end of 2014. (continued on next page) xvii xviii DTIS UPDATE – PROPOSED ACTION MATRIX (continued) Identified Constraint Action(s) Responsibility Monitoring Indicator Difficulty / Payoff V Tourism Infrastructure and policy Streamline in-country registration pro- Ministry of Tourism, An- In-country registration procedures Medium/Medium environment not conducive to cedures through one-stop shop by June tiquities and Wildlife eliminated by June 2015 tourism 2015 Electronic registration system (ERS) Strengthen statistics collection efforts and of tourists at airport established by publish results by December 2015 March 2015 Allow visas on arrival for select source First set of data collected through countries (begin roll out by January 2015) ERS published by June-September Reinforce regulations for cultural preser- 2015 vation and environmental protection (by Number of countries whose nation- 2017) als are eligible for visa on arrival Begin implementing the recently approved increases by agreed upon number national tourism plan every six months Progress reports on implementa- tion of the national tourism plan published every six months REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE 1 INTRODUCTION 1 The Diagnostic Trade Integration Study affecting agricultural trade and trade-in-services with (DTIS) Update identifies the trade related con- a focus on tourism and professional services. straints holding back Sudan from diversifying While infrastructure constraints remain a criti- and augmenting both regional and global trade. cal issue for Sudan and need to be supported, it The reduction in oil and petroleum exports follow- is also necessary to focus on the “soft infrastruc- ing the secession of South Sudan has provided addi- ture.” Recognizing that the Enhanced Integrated tional impetus to expanding agricultural production Framework and the Diagnostic Trade Integration and diversifying export revenues. The Update takes Studies (including the 2008 DTIS for Sudan) have stock of the progress in implementing the priority not been effective in addressing many of the broader recommendations from the earlier 2008 DTIS study issues requiring large-scale physical investments, this (specifically the Action Matrix agreed upon at the DTIS update focused on specific trade related policy Stakeholder Meeting) and focuses on identifying and and regulatory issues within the mandate and policy quantifying the trade costs constraining Sudan’s com- space of the Ministry of Trade and the National petitiveness with regional and international markets Implementation Unit. as the basis for developing a streamlined and updated This section provides a short introductory Action Matrix. overview of the key themes contained in the main Through the Three Year Emergency Program for report. Chapter 2 outlines the current macroeco- 2012–2014 the Government of Sudan (GOS) has nomic position and the level of trade openness, prioritized the maintenance of fiscal and external and summarizes the status of the business enabling stability with the aim of increasing the growth rate, environment. The chapter draws out the linkages creating jobs, and reducing poverty. The Interim between the Emergency Program, the Interim Poverty Poverty Reduction Strategy and the recent Five Year Reduction Strategy Program (I-PRSP) and the Five Development Plan (2012–2016) commit to private Year Development Plan and highlights the importance sector development, strengthening Sudan’s trade of using trade as a growth strategy. Finally, the chap- capacity and mainstreaming trade. The commitment ter summarizes the progress made in implementing to ensuring macroeconomic stability and improv- the recommendations from the 2008 Action Matrix. ing the business-enabling environment are necessary Chapter 3 describes Sudan’s recent trade devel- elements for a trade-led growth strategy. Increasing opments and challenges, highlighting the narrow investment in internationally competitive value-added commodity composition and market concentra- activities also requires a reduction in trade costs. The tion of the non-oil exports. A detailed review of DTIS Update identifies and quantifies specific trade the existing tariff schedules and other border taxes costs that determine the availability and price of inputs serves to highlight the high levels of trade protec- and the ability of producers to compete in regional tion, which results in significant anti-export bias. and international markets. The report focuses on Increasing export growth and diversifying the pro- tariff policies, regulatory issues impacting on trade, duction base will require a more neutral trade policy trade facilitation, transport and logistics, and policies that will enable exporters and potential exporters to 2 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE be able to source their inputs at internationally com- removing many of the multiple fees and charges and petitive prices. A neutral trade policy will consider in modernizing Customs legislation. However, many the interests of Sudanese consumers and not sim- serious challenges remain as 95 percent of shipments ply prioritize import competing industries or large are subjected to physical inspection. Introducing a exporters. Sudan’s existing policy creates incentives comprehensive customs valuation, risk assessment, to produce (inefficiently) for the domestic market as advance declaration, and the Authorized Economic firms and producers are able to recover the high costs Operator facility should be priorities. It is also nec- of their intermediate inputs and services through essary to streamline the roles of the multiple agen- increasing the price of the final product. The num- cies operating at the border to eliminate duplicative ber of tariff peaks should be reduced, discriminatory checks. The DTIS recommends developing a detailed excises abolished, and as the fiscal situation permits, Customs Modernization Strategy. Establishing a the Development Tax removed. Finally the report Trade Portal containing all the forms, procedures, and outlines the key characteristics of exporting firms charges required for importing and exporting should using a detailed database of exporters. This shows that be a priority, along with continuing with the existing exports are concentrated in a small number of product commitment to Integrate Border Management pro- categories across a relatively small number of firms. cesses. The trade portal should be designed to serve Chapters 4–6 focus on the administration of all traders—large and small. trade and look at a range of regulatory issues that Ensuring efficient and reliable transport route impact on trade costs and competitiveness. There networks throughout the country is critical for are separate chapters on the Customs Authority, logis- increasing welfare as lower transit costs will widen tics and transport costs, and the National Quality the market within Sudan while also increasing Infrastructure (NQI). In addition to the import exports. Sudan is geographically large with travel tariffs and para tariffs, firms are faced with an array distances of 1,500km required for livestock produced of non-tariff barriers including the requirement for in the Western states of Kordofan and Darfur. Sudan import permits for many industrial and agricultural has a relatively low density of transport infrastructure products (which was imposed in 2010), strict licensing with one major trade gateway. Chapter 5 outlines the requirements for seeds, fertilizer, and other agricultural major issues that determine the different modes of inputs, which all contribute to increased costs, reduced transport and the quality of logistics services. choice, and delays in the adoption of new technology. Chapter 6 assesses the existing National Quality The high cost of obtaining inputs, transport Infrastructure and makes recommendations for costs, and the imposition of multiple state taxes on ensuring technical regulations are implemented in livestock and other commodities all contribute to the least trade restrictive manner. Product safety is depressing productivity and hold Sudan back from important and the Sudan Standards and Metrology diversifying its productive base. Manufacturing is Organization (SSMO) has a vital role to play in dominated by a relatively small number of large estab- ensuring that non-conforming products and illegal lished companies serving the domestic market. Small- counterfeits which post health risks to consumers are and medium-scale enterprises account for the majority not distributed within Sudan. All too often regula- of firms, although employing less than one third of tions aimed at ensuring consumer safety function as total production. All these firms produce for the local non-tariff barriers. Currently the SSMO required the market, as they are not internationally competitive. retesting of many imported products that have already Efficient and predictable border clearances are satisfied equivalent safety requirements. This imposes essential. The Sudan General Customs Administration additional costs, creates uncertainty over delivery and (GCA) has made good progress since the last DTIS in approval times and diverts scarce resources away from Introduction 3 targeting high-risk products and faulty weigh scales for reducing the costs of doing business and increas- that cheat smallholders. Furthermore the number of ing international competitiveness. The survey of users mandatory standards (technical regulations) should be of professional services found those using account- reduced and limited to those that have the potential ing, architectural, and legal services had significantly to harm consumers. higher productivity. The report recommends reduc- Chapter 7 looks in more depth at the recent ing explicit trade barriers that limit the movement performance of the agricultural sector, which of natural persons and the commercial presence of contributes about 30 percent of GDP and pro- professional services. vides employment to almost 60 percent of the Finally, Chapter 9 takes an in-depth look at population. Agriculture is characterized by very low the opportunities for growing the tourism sector productivity in both arable and livestock farming. A in Sudan and identifies the constraints to growth. commitment to self-sufficiency and the frequent use The rich cultural history and scenic attractiveness of of temporary export bans on staple (sorghum) exports, Sudan provides ample evidence of the potential for onerous procedures regulating agricultural inputs tourism, however, realizing this potential will require (seeds, pesticides etc.), weak extension services result- a number of serious challenges to be addressed. The ing in unmet demand for veterinary services (with report classifies the challenges into five broad catego- consequent increased losses due to disease), and the ries: planning and policy, human resource develop- imposition of multiple taxes and charges at the state ment, image and marketing, product development level all work to undermine the competitiveness of and connectivity. In the short term the DTIS rec- the agricultural sector. ommends the Government send a clear signal that Chapter 8 addresses the important issues of Sudan is open for tourism through easing the visa trade-in-services through focusing on professional and regulatory requirements for tourists, developing services such as engineering, accounting, and law. a marketing strategy and developing the new national Access to high quality professional services is essential tourism plan into an action plan. 5 MACROECONOMIC OVERVIEW AND BUSINESS-ENABLING ENVIRONMENT 2 Overview through oil. At the same time the country had clear symptoms of Dutch Disease and agriculture suf- Sudan is a country of great—but largely unreal- fered badly during that time. Over the past decade ized—potential. Sudan holds the potential to be a oil exports fueled rapid economic growth with Sudan regional economic powerhouse. The largest economy more than doubling in size between 2000 and 2010 in the greater eastern Africa region, it has abundant and per capita income grew by more than 60 per- fertile lands and livestock, a reasonable manufacturing cent. As oil production and commodity prices rose base, and a strategic market location at the crossroads through 2004–2007 the largely government owned of sub-Saharan Africa and the Middle East. Oil discov- and managed oil sector experienced massive increases ery and export in the last decade fueled unprecedented in revenue. This enabled large investments in physical growth (GDP grew more than six-fold from US$10 and social infrastructure and encouraged large-scale billion in 1999 to US$65 billion in 2010). However, inward investment in the oil sector and related activi- much of this potential has not been realized due to ties. The growing dominance of the public sector as long-running conflict and governance challenges; and the growth driver based on oil revenues is highlighted the gains of the last growth decade have not advanced by its rapidly increasing share of GDP, from 6 percent productive public investment that contributed to pov- in 1999 to account for 40 percent in 2008. This is erty reduction, nor were those gains widely shared. illustrated in Figure 1. Sudan had a period of one decade where it ben- With the secession of South Sudan the country efited from extensive discoveries of natural wealth lost three-quarters of its oil reserves in July 2011. FIGURE 1: Sudan’s Growth: Contribution of the Public and Private Sector 1998–2008 Share of GDP (in %) Contribution to GDP growth (in %) 100 15 0.3 80 12 9 60 8.2 6 40 4.3 3 5.5 7.1 10.9 7.9 9.6 11.5 3.1 2.5 20 0 0.7 –1.3 –1.3 –1.5 –0.7 0 –3 1998 2000 2002 2004 2006 2008 2001 2002 2003 2004 2005 2006 2007 2008 Private sector Public sector Private sector Public sector Source: Page 4, Sudan: Towards Sustainable and Broad Based Growth, World Bank, Report No. 52512-SD, December 2009. Note: The public sector GDP is calculated as the sum of public consumption, public investment, and oil exports, net of import by the public sec- tor. In the absence of reliable data on public sector imports the ratio of public to private consumption was used to estimate their relative size of imports. 6 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE As a result, the secession significantly deteriorated the implementation matrix of the agreement with South economic situation in Sudan. Post-secession Sudan Sudan in September 2012, which triggered new produced 38 million barrels of oil in 2012, down from economic momentum. Oil flows resumed in 2013 169 million barrels produced in 2010 by pre-secession thereby providing Sudan with both income from oil Sudan. The oil sector accounted for 4.2 percent of infrastructure usage and the agreed upon transitional GDP in 2012, falling from 15.6 percent in 2010. Oil financial assistance (TFA) from South Sudan. accounted for 28.1 percent of total revenues in 2012, On the domestic side, private consumption can declining from 61.3 percent in 2010; the importance also resume its role as a driver of the economy. The of oil in overall exports also fell dramatically from source of growth in Sudan changed considerably after 86.5 percent in 2010 to 38.9 percent of total exports the secession of South Sudan. Over the 2002–2011 in 2012. The budget balance deteriorated consider- period, thanks to abundant oil revenues, the Sudanese ably, registering a deficit of 3.8 percent of GDP in economy was driven by public consumption and 2012 from a surplus of 0.3 percent in 2010. Inflation investment. The share of private consumption was, (end of period) skyrocketed from 15.4 percent in 2010 on average, about 68 percent of GDP. In 2012, the to 44.4 percent in 2012, driven by a vicious circle of share of private consumption jumped to 81 percent weakening local currency in the parallel market, caused of GDP, a similar level observed before oil revenues by the monetization of the budget deficit. contributed significantly to the budget (Figure 2.4). The economic repercussions from the seces- Annual inflation soared in 2012 and 2013. sion of South Sudan are dramatic and continue to Since the peak of 47.9 percent in March 2013, infla- unfold. The 2012 economic growth rate was nega- tion dropped slightly for about six months but reached tive 2.6 percent. Two factors drove this decline: On the 40 percent mark again towards the end of the year the one hand, oil GDP shrank by 62.4 percent due to 2013 (Figure 3.1). The sharp and short-lived decline heightened tensions (and following suspension of oil in 2013 had been attributed to a fast decline in food production in South Sudan in 2012) and on the other price inflation and housing. But the package of cor- hand, non-oil GDP growth also declined from 6.0 per- rective measures in September 2013 reverted infla- cent in 2011 to 4.6 percent in 2012 (Figure 2.1). tion, which rose to 40.3 percent in October, primarily The 2012 deceleration in the non-oil economic attributed to reduced subsidies on petroleum products activity is explained by an economy-wide slow- and food staples. down in production (Figure 2.2). Agriculture, which Although the pace of food inflation decelerated accounts for 28 percent of non-oil GDP, experienced somewhat in mid-2013, the level of food prices a markedly lower growth rate in 2012 of 2.3 percent, remains at a historically high level. The poor are compared to 4.2 percent in 2011. Declining crop those most negatively affected by high food prices, production growth from 6.2 percent to 1.8 percent due to the high concentration of food consumption played a major role in this (Figure 2.3). Services, in their basket and limited means to preserve the which account for half of non-oil GDP also showed erosion of the value of their savings. The price level a slower growth rate in 2012 (3.2 percent) and was a of foodstuffs have almost doubled since March 2011 third lower than the 2011 rate of 4.8 percent. despite the government’s consecutive policy measures 2013 saw a modest recovery, but once again this to contain it (Figure 3.3). Earlier measures undertaken resulted from the resumption of oil flows. Annual by the government still remain active, including: cuts GDP growth in 2013 reached 3.2 percent driven by in import tariffs for wheat, flour, sugar and capital a more than 30 percent increase in oil GDP; at the goods; releasing grain stocks of domestic reserves; tax same time, non-oil GDP only grew by 2 percent. cuts on selected food products; and eased regulation This was made possible through the signing of the on imports of milk and chicken. With the limited Macroeconomic Overview and Business-Enabling Environment 7 FIGURE 2: Economic Activity 1. GDP Growth 2. Sectoral GDP Growth 10% 40% 8% Agriculture 20% 6% 0% Manufacturing 4% –20% 2% Construction –40% 0% –2% –60% Services –4% –80% 2005 2006 2007 2008 2009 2010 2011 2012 2013 –5% 0% 5% 10% 15% 20% GDP Non-oil GDP Oil GDP (right axis) 2011 2012 3. Crop Production 4. Demand Side Growth Decomposition 300% 120% 250% 100% 200% 80% 150% 60% 100% 40% 50% 20% 0% –50% 0% –100% –20% 2007/08 2008/09 2009/10 2010/11 2011/12 2012 1996–2001 average 2002–11 average Gum arabic Sorghum Groundnuts Sesame Private consumption Public consumption Private investment Public investment Net exports Source: 2.1, 2.2 and 2.4: IMF, 2.3. CBoS Annual Report. success of these policy measures to maintain price sta- transfers remained largely constant as a share to GDP. bility, the high level of food prices add to the already The current account balance was primarily driven by tight socioeconomic challenges of the poor and vulner- the trade balance and registered a double-digit deficit able, given the facts of high unemployment, foreign of 10.4 percent of GDP in 2012. exchange shortage, and international isolation. The deteriorating trade balance and the decline The trade balance deteriorated significantly in in goods exports is again mostly attributed to signifi- 2012, registering a deficit of 5.5 percent of GDP cant loss from oil exports following the secession. in 2012 compared with a surplus of 4.1 percent of Oil exports significantly declined from the pre-secession GDP in 2011 (Figure 4.1). Goods exports in 2012 level of 16.7 percent and 13.0 percent of GDP in 2010 declined by 53.2 percent (in U.S. dollars), its ratio and 2011, respectively, to 3.3 percent in 2012. Oil to GDP falling from 16.5 percent to 8.6 percent exports increased to 4.9 percent of GDP in 2013 thanks in 2011 and 2012, respectively. Contrarily, in 2012 to the signing of the implementation of the agreement goods exports registered a modest increase of 2.6 per- with South Sudan in March 2013. cent, its ratio to GDP increasing from 12.4 percent to Non-oil exports grew by 32.6 percent in 2012, 14.1 percent in 2011 and 2012, respectively. Given mostly attributed to gold exports. Gold exports net trade-in-services, net income receipts and current grew by 49.7 percent in 2012, exceeding the amount 8 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE FIGURE 3: Inflation Developments 1. Inflation (year-on-year) 2. Inflation, Tradables and Nontradables (y/y) 60% 45% 40% 50% 35% 40% 30% 30% 25% 20% 20% 15% 10% 10% 0% 5% Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 0% 2005 2006 2007 2008 2009 2010 2011 2012 Inflation Food inflation General Tradables Non-tradables 3. Prices of Selected Foodstuff (y-o-y, Khartoum) 60 50 40 30 20 10 0 Lamb Meat Chicken Fish, Fresh Wheat Dukhun grain Dura grain Cooking oil Tomatoes Mar-11 Mar-12 Mar-13 Sep-13 Source: 3.1–3: IMF andCBoS. of oil exports for the first time. In October 2012, there is much uncertainty over oil flows, which were Sudan began to export refined gold for the first time so important in the 2013 recovery, with the conflict with the hope that revenues from these exports would newly erupting in South Sudan in December 2013. compensate for oil revenue losses resulting from the The impact of the conflict in the South on economic South’s secession. activity and growth in Sudan is hard to quantify, but The modest growth in goods imports was driven likely to be substantial. Against this background, there by imports of petroleum products and, to a lesser is no alternative to reviving the non-oil economy. extent, of foodstuffs, growing by 43.1 percent and Trade can be a vehicle to diversify. 8.5 percent, respectively. Imports of capital goods, The I-PRSP 2011–16, approved in April 2012 on the contrary, shrunk by 6.4 percent, reflecting a and launched in November along with the ESP, decline in public investment after the secession. seeks to rapidly deliver more inclusive economic Given uncertainties over oil flows there is no growth that will reduce unemployment and pov- alternative to reviving non-oil economic activity erty and achieve the Millennium Development in Sudan; trade can be a driver. Looking forward Goals (MDGs). The ESP focuses on restoring Macroeconomic Overview and Business-Enabling Environment 9 FIGURE 4: External Sector 1. Quarterly Balance of Payments (% of GDP) 2. Oil and Gold Exports (US$, million) 10% 14,000 12,000 5% 10,000 0% 8,000 –5% 6,000 4,000 –10% 2,000 –15% 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 (est.) (prel.) Trade balance Current account balance Overall balance Capital account and Foreign direct investment Oil Gold financial account and portfolio (net) 3. Composition of Goods Export (% of total) 4. Composition of Goods Import (% of total) 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2011 2012 2011 2012 Petroleum & Petroleum products Sesame Machinery and equipment Manufactured goods Gold Livestock Rest Wheat and wheat flower Means of transport Chemicals products Rest 5. Exchange rates: Official and Black Market 9 120% 8 100% 7 6 80% 5 60% 4 40% 3 2 20% 1 0% Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Exchange rate: black market Official exchange rate premium (right axis) (left axis) Black market exchange rate (left axis) Source: 4.1–2: IMF, 4.3–5: CBoS. 10 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE macroeconomic stability, improving the business- FIGURE 5: Doing Business Ranking for Sudan enabling environment and providing social protection Enforcing contracts for the most vulnerable as the economy transitions to Trading across borders a higher growth path. The I-PRSP is organized around Paying taxes four pillars: i) strengthening governance and institu- Protecting investors tional capacity of the public sector; ii) reintegration Getting credit of internally displaced persons and other displaced Registering property populations; iii) developing human resources; and Starting business iv) promoting economic growth and employment cre- Ease of doing business ation. Under the fourth pillar the I-PRSP emphasizes 0 50 100 150 the necessity of increasing productivity and diversify- DB 2014 (out of 189 economices) ing the economy through supporting the private sector DB 2011 (out of 183 economices) with a priority on agriculture, including livestock, for- DB 2008 (out of 178 economices) estry and fisheries, manufacturing and services (p.50). Source: World Bank Doing Business Report, various issues. The I-PRSP aims, over the next three years, to develop more diversified commercial agriculture, tourism, energy, and mining sectors, as well as Free Trade Area (GAFTA); making credit more avail- development of the country’s infrastructure. It pri- able and affordable, especially to smallholders; and oritizes increasing exports as a key growth driver for addressing the skills gap. Governance and account- creating jobs and reducing poverty through advanc- ability problems also need to be addressed. While ing productivity. Reference is made to the challenges the government has made commendable efforts to of improving the business-enabling environment to stabilize the economy, putting the economy on the reduce both regulatory compliance and trade costs. path to sustainable inclusive growth requires reform- The I-PRSP highlights specific challenges, including ing the incentive structure to encourage increased high domestic transportation costs, lack of market private sector growth. Enhancing policy certainty and information and poor linkages along the value chain, predictability requires the reduction and removal of low agricultural productivity, a weak logistics sector, the legal and regulatory hurdles to business. lack of adherence to international standards, and inadequate energy supply. Doing Business 2012 and 2014: FIGURE 6:  Business-Enabling Environment Ease of Doing Business Ranking Mongolia The business environment in Sudan remains chal- lenging. The 2014 Doing Business (DB) report ranks Indonesia Sudan 149 out of 189 economies; it is ranked mar- Ghana ginally lower in comparison with some of its regional Uganda neighbors (Kenya at 129, Uganda at 132, and Ethiopia Ethiopia at 125). Enabling Sudan to benefit more fully from the Kenya export and growth opportunities offered by both the Sudan regional and global economy requires improving the 0 20 40 60 80 100 120 140 160 business environment; facilitating trade and regional integration within the Common Market for Eastern Ease of DB ranking 2012 Ease of DB ranking 2014 and Southern Africa (COMESA) and the Greater Arab Source: World Bank Doing Business Report, various issues. Macroeconomic Overview and Business-Enabling Environment 11 FIGURE 7: Starting a Business in Sudan and Comparators in Doing Business 2014 60 180 160 50 140 40 120 100 Rank Days 30 80 20 60 40 10 20 0 0 Sudan Kenya Ethiopia Uganda Ghana Indonesia Mongolia Procedure (No.) Time (days) Starting a business (rank) Source: World Bank Doing Business Report, various issues. Since 2008 Sudan has experienced a slight dete- Doing Business 2014: Ranking by FIGURE 8:  rioration in the business-enabling environment. All Component of the DB indicators experienced a relative decline in Mongolia their rankings,1 with “Getting Credit” and “Starting Indonesia a Business” indicators experiencing significant drops Ghana in comparison with other indicators. The secession of South Sudan in 2011 and the cross-border ten- Uganda sion resulting in the disruption of oil flows certainly Ethiopia influenced the changes to the business environment Kenya in Sudan. See Figures 5 and 6. Sudan Sudan lags behind the comparators in getting 0 20 40 60 80 100 120 140 160 180 credit and protecting investors, resulting in the Paying tax (rank) Protecting investors (rank) Getting credit (rank) lower rank for the ease of doing business. Sudan ranked at 170 for getting credit and 157 for pro- Source: World Bank Doing Business Report, various issues. tecting investors in the DB2014. When it comes to starting business, Sudan’s performance is similar to the comparator countries. Sudan ranked at 131 for enterprises (Figure 9). Since the previous DTIS was starting business while Kenya was at 134 and Ethiopia prepared, the new tax law has reduced the tax burden at 166, respectively. The difficulties to run business on business by reducing the corporate tax rate by an in Sudan lie more in the lack of support to investors average of 15 percent, and the capital gains tax by an and business people than administrative procedure. average of 5 percent. Moreover, the tax on labor has The strength of investor protection index is relatively been abolished.2 Corporate tax rates in Sudan differ, low at 3.3 out of 10 in DB2014. See Figures 7 and 8. depending on the business activities of the company,3 1 The number of economies for DB reports varies from year to year; Tax regime therefore, this drop in ranking cannot be explained assertively due to the deterioration of the Sudanese business environment. 2 Doing Business 2014 Economy Profile: Sudan. Compared to other indicators of doing business, 3 0% for agricultural activities; 10% for industrial activities; 15% for the tax regime in Sudan is relatively favorable to commercial and service activities, real estate rental companies, and 12 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Profit Tax (%) in Doing Business FIGURE 9:  was probably destined for the oil and petroleum sector. 2014 Therefore, following the secession of the South Sudan, 28.2 the amount of FDI has dropped.6 The government has 26 25.2 established incentives to encourage investment. The 22 new National Investment Promotion Law (provisional 18.1 18.4 16.1 decree) was signed by the president on March 2013. 13.8 This law prohibits discrimination against foreigners 10.2 and allows both domestic and foreign investors to have access to incentives described in the law and the regulation,7 such as licensing, tax exemption, and land access. In other words, foreign private entities Ethiopia Ghana Indonesia Kenya Mongolia Sudan Uganda SSA Avg OECD high income Avg can establish and own business enterprises, to repa- triate capital and profits, on condition that investors Source: World Bank Doing Business Report, various issues. open an investment account at the Central Bank of Sudan (CBS) before entering into business. Foreign and domestic private businesses may be registered as which effectively discriminates against the sectors with a sole trader, partnership, a limited liability company the relatively higher tax rates and distorts the alloca- (private or public), special concession, or branch of a tion of investment. foreign registered company.8 The standard Value Added Tax (VAT) is also Under the National Investment Promotion Law comparable with the neighboring countries. The (2013) all service sectors are, in principle, open standard VAT rate is 17 percent in Sudan, with a spe- to foreign ownership. However, existing govern- cial 30 percent rate imposed on telecommunication ment monopolies and other licensing requirements services. The VAT rate is similar to its neighbors; in effectively limit the opportunities for private invest- Uganda, the standard rate is 18 percent and in Kenya ment in the transportation, media, and communica- 16 percent.4 tions sectors. More precisely, sectors such as railway A wide range of activities and services are freight transportation, airport operation, television exempt from VAT. Activities related to agriculture broadcasting, and newspaper publishing continue to (agricultural products, seeds, and fertilizer), medicines, be effectively closed to foreign capital participation. bread and locally produced wheat flour, animals, meat, New legislation aims to reduce red tape for fish, chicken and chicken products, and milk and investors, both domestic and foreign. The High dairy products are all exempt. Financial, insurance, Council for Investment was established 2011 with a education, and medical services as well as the rental mandate to facilitate investment procedures and follow and sale of real estate for residential purpose are also exempt from VAT.5 banks, insurance and fund management companies; 30% for cigarette and tobacco companies; and 35% for companies engaged in the explora- Promoting Foreign Direct Investment tion, extraction and distribution of oil and gas, and their subcontractors. (Source: International Tax, Sudan Highlights 2013, Deloitte). 4 COMESA Tax Guide 2009. Sudan has encouraged private sector investments, 5 Investment Guide 2013, Africa legal Network. 6 Inward FDI to Sudan was US$2,894.4 million in 2010 and US$2,691.7 aiming at diversifying its economy with foreign million in 2011, respectively, COMESA Investment Report 2012. direct investment. Sudan had attracted substantial 7 The earlier Investment regulation 2000 (amended in 2003) is avail- able at http://www.sudanembassy.ca/Docs/Investment%20regulations.pdf amounts of foreign direct investment (FDI) after the (Sudanese Embassy for Canada). signing of the CPA in 2005, but most of the investment 8 2013 Investment Climate Statement Sudan, U.S. Department of State. Macroeconomic Overview and Business-Enabling Environment 13 Doing Business Indicators on FIGURE 10:  Doing Business 2014: Ranking FIGURE 11:  Trading Across Borders for Sudan and Comparators on Trading Across Borders Time to import (days) Mongolia Indonesia Documents to import (number) Ghana Uganda Time to export (days) Ethiopia Kenya Documents to export (number) Sudan 0 10 20 30 40 50 60 0 50 100 150 200 DB 2014 DB 2011 DB 2008 Rank Source: World Bank Doing Business Report, various issues. Source: World Bank Doing Business Report, various issues. up on implementing the incentives.9 In addition, a new For a country with sea access Sudan has a rela- National Agency for Investment is to be established tively low ranking on the trade facilitation compo- with financial and administrative independence under nent of the Doing Business indicators. As shown in the new law in 2013. It will act as the administrator Figure 11, the DB2014 ranking for Sudan (155th) on for licensing, granting investment projects, and the trading across borders is closer to the ones for land- preparation of investment plans. This Agency will locked countries and slightly worse than the regional also manage the “investment single window” with the average for sub-Saharan Africa (141). Landlocked coun- membership of the commissioners of the ministries and tries, such as Uganda and Ethiopia in the comparators, other agencies concerned with investment.10 often have more penalties than non-landlocked ones in trading across borders.12 Sudan, with relatively good Trading Across Borders port infrastructure, does not appear to be taking full advantage of its geographic location (see Figure 12). It Sudan has succeeded in reducing the number of is notable that the cost to import is close to the price days to import and export with the introduction of for the neighboring comparator landlocked countries. automation; however, the operational procedures to import and export have not changed much. The Lessons from the Implementation of the beginning of the introduction of ASYCUDA World 2008 Action Matrix coincided with the reduction of time to import and export. While cooperation between the related agen- The 2008 Action Matrix made recommendations cies has improved through the ASYCUDA system, the across four broad areas: (i) increasing productivity DB indicators imply the procedure with documents remained largely unchanged (Figure 10). The relatively 9 Investment Guide 2013, Africa Legal Network. 10 National Investment Promotion Law of 2013, National Agency for long time required for importing and exporting are Investment (English Translation). indicative of high trade costs. Indeed the time taken 11 Nathan Associates (2007), Calculating Tariff Equivalents for Time in Trade, USAID. for clearances may be converted into an ad valorem 12 Alvis et al. (2010) Cost of being landlocked Logistics Cost and Supply equivalent.11 Chain Reliability, World Bank. 14 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Cost to Import and Export (US$ FIGURE 12:  items is merely illustrative as the impact of each item per Container) for Selected varies widely. Countries in Doing Business Implementation has been very modest—only 2014 four of a total of 76 action items have been fully implemented. From the 76 action items, 16 relate Sudan to increasing productivity primarily in agriculture, Uganda animal husbandry, and fisheries; 15 focus on activities Mongolia aimed at reducing trade costs, seven on improving the Kenya incentives for investment; and 38 relate to institutional Indonesia strengthening within government for trade policy and Ghana promotion activities. Interviews with stakeholders Ethiopia from both government and the private sector estab- lished that four had been implemented fully, with only $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 one of these having a significant impact. Stakeholders Cost to export (US$) Cost to import (US$) considered that implementation had commenced (to Source: World Bank Doing Business Report, various issues. varying degrees) for a further 48 tasks, however, for more than one third (28) of the priority items no action was recorded. A summary of the progress is in the export sectors; (ii) reducing trade costs; contained in Table 1. A detailed assessment of each (iii) rationalizing the incentive regime; and (iv), recommended action is contained in Appendix 1. strengthening trade promotion and policy making The implemented actions largely relate to trade institutions. In aggregate the Action Matrix endorsed facilitation and, while positive, their aggregate 87 actions that were required to take place within impact is muted because of continued high trade 1–5 years with the majority earmarked for within costs and significant disincentives to export. The 1–3 years. The recommendations required action active involvement of donor projects at least partially across Ministries, Agencies, Regulatory Bodies, techni- explains some of the implementation. However, in cal working groups and other stakeholders. Eleven of many areas there has been either very limited progress the recommendations related specifically to the former or no action. These include: strengthening institu- Government of South Sudan and are not considered tional capacity for ensuring effective coordination, further. Recording implementation by the number of negotiation and implementation of trade agreements, TABLE 1: Summary of Implementation of 2008 Action Matrix Degree of Impact Implementation Status % % Action Category No. Actions 0 25 50 75 100 0 25 50 75 100 Increase productivity in Export 16 3 5 6 2 0 5 3 8 0 0 Sectors Reduce Trade Costs 15 3 4 3 1 4 8 2 4 0 1 Rationalize Incentive Regime 7 4 2 0 1 0 6 1 0 0 0 Strengthen Trade Promotion 38 18 8 7 4 1 23 10 5 0 0 and Policy Making Institutions Note: Number of recommendations excludes those specific to South Sudan. Macroeconomic Overview and Business-Enabling Environment 15 simplifying and harmonizing taxes, fees and charges, activities in the 2008 Action Matrix remained priori- and diversifying exports. ties for mainstreaming through government programs. The actions implemented following the DTIS The earlier Action Matrix was largely owned—and were largely implemented independently of the known only to—those who had been directly involved DTIS process. In each case the stakeholders were in its development. committed to implementation, independent of the It is important to learn the lessons from the DTIS. It is relevant to ask why the vast majority of earlier DTIS Action Matrix to ensure trade is actions saw either no implementation or at best only mainstreamed and prioritized. The experience from partial implementation. The assessment exercise car- mainstreaming and implementing the Action Matrix ried out as part of the DTIS process found that prime provide germane lessons for the DTIS Update. First, reason for weak or non-existent implementation was the Update should identify and quantify the key the absence of a constituency or high-level champion trade-related issues that require addressing in order with the mandate, capacity, and commitment to push for GOS to steer the economy towards more inclu- through specific reforms. The Ministry of Trade and sive growth and economic diversification based on the EIF National Implementation Unit did not have Sudan’s comparative advantages. Second, the priority the convening power to overcome resistance to many actions should only include those that can realistically of the reforms. Further, in a number of cases stake- be addressed through the leadership of the National holders asserted that a dearth of funding served as the Implementation Unit in the Ministry of Trade and binding constraint. with the support by the development partners in the No evidence exists that the earlier Action context of the Enhanced Integrated Framework, and Matrix functioned as a living document around hence should focus more on policy and regulatory which the Government of Sudan and stakehold- reforms rather than specific infrastructural projects. ers, including International Cooperating Partners, Third, the updated Action Matrix must be endorsed developed their priority interventions. During the and integrated into existing Government programs review of the progress on the Action Matrix interviews and strategic documents. Specifically the Action with a wide range of stakeholders in Sudan found Matrix could be a complement to the existing National many implementing agencies were unaware that the Emergency Strategy 2012–2014 and the I-PRSP. 17 TRADE POLICY AND PERFORMANCE 3 Overview updated the Memorandum on the Foreign Trade Regime in 2012 and has indicated its commitment to This chapter describes aggregate trends in export continue with the WTO Accession Process. Although performance since the 2008 DTIS and then, using negotiating with the EU as part of the Eastern and a rich new dataset on exporting firms for Sudan Southern African Group, Sudan chose not to sign an and comparator countries, drills down to examine interim Economic Partnership Agreement (EPA) in the characteristics of exporters. This is followed by December 2007 and is not expected to sign the EPA. a description of the structure of nominal protection, Sudan will continue to enjoy preferential access to the which measures the price-raising impact of tariffs EU under Everything But Arms (EBA), which pro- under both the General Tariff, and other duties and vides for duty- and quota-free access for all products surcharges that are applied. except for arms and ammunition for least developed Multiple tariff schedules in conjunction with countries. rebates on imported inputs and duty preferences, Economic sanctions by the United States along with additional para tariffs including dis- remain and represent an indirect barrier to trade. criminatory excise taxation and a Development Tax Since 1997 the United States has prohibited U.S. creates significant protection for Sudanese firms. firms and individuals from trade with Sudan or con- This encourages them to produce for the domestic ducting any business transaction with the GOS or market as this is much more profitable than exporting. state-owned enterprises. Imports of gum arabic are Simplifying and streamlining trade policies will create exempt from sanctions. The sanctions impact access a more neutral environment between producing for to finance, the sourcing of inputs, and replacement the domestic or the international market. Reducing technical parts (Sudan Railway Corporation explicitly anti-export bias will encourage investment in a wider mentioned the difficulty in maintaining their loco- range of economic activities while also stimulating motive fleet). The DTIS team was presented with increased linkages to the existing domestic agro- a number of illustrative examples of the impact of industries and manufacturing sectors. Furthermore, sanctions, however no comprehensive studies were reducing anti-export bias will increase Sudan’s relative made available. It is recommended that a study be attractiveness as a location for activities linked to either undertaken. regional or global value chains. This section provides an overview of Sudan’s Sudan remains outside the WTO and is recent trade performance. The review of trade per- not expected to sign an Economic Partnership formance (from 2008–2013) is based on detailed com- Agreement with the EU, however, Sudan partici- modity composition of trade data received from the pates in both the COMESA and GAFTA Free Trade Sudan authorities. The report documents the changes Areas. Sudan applied for Accession to the WTO in both the commodity composition and the geo- in 1994, submitted the first Memorandum on the graphical direction of imports and exports. However, Foreign Trade Regime in 1999 and participated in anecdotal evidence suggests that trade flows are con- the Second Working Party Meeting in 2004. Sudan sistently underreported at borders and trade statistics 18 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE might only draw an incomplete picture of the actual a series of exporter competitiveness indicators and trade flows for trade with neighboring economies. which control for the size and the level of develop- The 2008 DTIS summary of Sudan’s trade ment of the country using, respectively, GDP and performance noted that as oil exports increased in GDP per capita, and for time trends which are critical importance through the late 1990s the traditional to consider given that the sample period includes the agricultural exports declined in relative importance. recent global financial crisis years.13 Sesame, livestock, cotton, and gum arabic declined Following the reduction in oil exports after from 60 percent of total exports in 1998 to 13 percent secession gold emerged as the dominant export during the period 1999–2005. The secession of South accounting for 68 percent of total exports in the first Sudan, resulting in the loss of most of the oil reserves, quarter of 2012 and 45 percent in the first quarter has resulted in a large increase in the relative share of of 2013. This was followed by the traditional exports agricultural exports. Increasing efficiency and competi- of Sesame (oil seeds) at 18 percent for Jan-March 2013, tiveness with the agricultural sector is vital for restoring and live sheep at 9 percent over the same period. The economic growth and for promoting more inclusive commodity pattern of imports is more varied with cere- growth and development throughout the country. als, machinery, and electrical machinery accounting for But Sudan experienced strong total non-oil 10, 9.8, and 7.5 percent respectively. Other significant export growth between 2008 and 2012. This may be imports include sugar, vehicles, fuel, iron and steel, observed from Figure 13 which shows that total non- plastic products, and pharmaceuticals. Over the past oil exports increased fourfold over the five year period. decade the geographical pattern of trade has moved Despite the secession of South Sudan in 2011, Sudan away from the former traditional partners of the EU had the fastest growth in total non-oil exports rela- towards increasing trade with Asia including China and tive to its regional comparators: Ethiopia, Tanzania, the Middle East. The imposition of economic sanctions and Zambia. In order to rigorously benchmark the by the U.S. in 1997 blocks U.S. firms and individuals non-oil exporting firms in Sudan against the regional from trading with Sudan. Imports of gum arabic are comparator countries, cross-country regressions were exempted from the ban. While the sanctions appear calculated where the dependent variables are each of to have had a limited direct impact on merchandise trade since Sudan has found alternative buyers or sellers for most products, they impact adversely on financial Total Non-Oil Export Growth FIGURE 13:  flows and serve to discourage investment by western (Base Year 2008) multinational companies. 4 Merchandise trade as a proportion of GDP rose from a low of 10–15 percent prior to oil exploration in the early 1990s to more than 40 percent by 2005 3 (see Figure 14). With the expansion of oil production Export growth since the late 1990s, the share of merchandise trade 2 increased rapidly from 20 percent in 1999 to a high of 44 percent in 2005 before declining to 30 percent in 1 2008 2009 2010 2011 2012 13 The cross-country regressions are estimated on a panel of country-year Year exporter competitiveness indicators covering 2006–2012 and including Sudan Ethiopia Tanzania Zambia all developing and developed countries available in the Exporter Dynam- ics Database. Each regression includes a dummy variable identifying Source: Authors’ calculations based on data used for the Exporter the observations for Sudan whose coefficient will determine how Sudan Dynamics Database. performs relative to the benchmark countries. Trade Policy and Performance 19 Merchandise Trade, 1991–2011 FIGURE 14:  Merchandise Trade and Services FIGURE 15:  (% of GDP) Trade, 2005–2011 (% of GDP) 50 50 45 40 40 35 30 30 Percent 25 Percent 20 20 15 10 10 5 0 0 2005 2006 2007 2008 2009 2010 2011 1991 1995 2000 2005 2010 Year Year Merchandise trade Services trade Source: http://data.worldbank.org/indicator/TG.VAL.TOTL.GD.ZS. Source: Derived from http://data.worldbank.org/indicator. 2011. Figure 14 shows the relative trend between mer- the period decade. The large deficits on the current chandise trade and trade-in-services. The rapid growth account were balanced by growing capital inflows. in oil exports stimulated a construction boom, which From 2011 the trade balance has moved to a large increased the demand for trade-in-services through deficit. In 2012 imports were almost three times 2005–2006. The increase in inflation and exchange the value of exports. The recent growth in non-oil depreciation following the secession of South Sudan exports has been primarily driven by gold exports. has encouraged construction as real estate is considered During the first quarter of 2012 foreign direct invest- a stable store of wealth. The need to strengthen the ment (FDI) flows held up, and in conjunction with balance of merchandise trade after July 2011 resulted remittances almost offset, the current account deficit. in increases in gold and livestock exports. However, this trend did not continue and the current Figures 15 and 16 show how the merchandise account deficit widened through the remainder of (trade) and current account balance evolved over the year and continued into 2013. This continues to FIGURE 16: Current Account Components, 2005–2013 (US$ million) 4,000 2,000 0 –2,000 –4,000 –6,000 –8,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 Trade balance Income balance Services balance Current transfers Current account balance Source: Central Bank of Sudan, various reports. Estimate in 2012, forecast in 2013. 20 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE TABLE 2: Principal Trade Partners of Sudan in 2006 vs. 2012/13 Destination of Exports Destination of Exports Source of Imports 2006 Source of Imports 2012 2006 2013 China 18.2 China 17.7 China 62.9 China 56.7 Saudi Arabia 8.1 India 9.0 Japan 12.9 UAE 15.5 Japan 6.7 Saudi Arabia 7.7 Saudi Arabia 4.7 Saudi Arabia 6.3 Egypt 5.5 Egypt 6.4 UAE 3.3 Canada 1.7 UAE 5.5 UAE 5.0 Canada 1.9 UK 0.3 India 4.3 Bangladesh 3.9 UK 1.7 Egypt 1.4 Italy 4.0 Australia 3.8 Egypt 1.6 Ethiopia 0.7 UK 3.6 Turkey 3.7 France 0.9 Eritrea 0.6 Germany 3.5 Japan 3.4 India 0.9 India 0.7 Note: Shares are based on nominal US$ values of exports and imports Source: For 2006 DTIS (2008) and 2012 derived from trade data provided by Sudan Customs and the Central Bank of Sudan for exports in 2013. exert downward pressure on the exchange rate and the gum arabic14 and sesame most of Sudan’s agricultural anticipated further depreciation will advance export exports were destined for a small number of countries competitiveness and discourage imports. which rendered them vulnerable to market disruption. The report recommended prioritizing diversifying into Direction of Trade new markets. Sudan remains largely isolated from the rest Asia and the Middle East have increased in impor- of Sub-Saharan Africa (SSA, has very limited tance as a source for import and the major des- trade with COMESA except for Egypt; trade with tination for exports. The 2008 DTIS noted that GAFTA15 is much more important. Exports to the Sudan traded relatively less with Europe and the GAFTA countries—primarily Saudi Arabia and United States and more with non-OECD and other Egypt accounted for approximately 25 percent of developing countries. This trend has continued with total non-oil exports. With the notable exception of Sudan increasing its sourcing of imports from Asia Egypt, which is also a GAFTA member, Sudan’s trade and the Middle East. Table 2 shows that the largest with other COMESA members has remained mini- EU suppliers in 2006, Italy, Germany, and the United mal. Indeed, excluding Egypt, exports to COMESA Kingdom, witnessed a significant decline in their rela- account for less than 1 percent of total non-oil exports. tive shares—from accounting for more than 10 percent Trade with other Sub-Saharan African countries has in aggregate to less than 7 percent. Excluding sales of oil and petroleum Saudi Arabia is the major destination 14 Gum arabic is the one product explicitly exempt from the trade sanc- for exports, mainly livestock and oilseeds. Sudan’s trade tions imposed by the United States. 15 Members of COMESA implementing the Free Trade Area include with Sub-Saharan Africa is relatively modest although Burundi, Comoros, Djibouti, Egypt, Kenya, Libya, Madagascar, Ma- with the secession of South Sudan there is considerable lawi, Mauritius, Rwanda, Seychelles, Sudan, Zambia, and Zimbabwe. The other members of COMESA include the Democratic Republic of potential to increase trade to the new country. Congo (DRC), Eritrea, Ethiopia, Swaziland, and Uganda (which offers Sudan continues to depend on a very small an 80 percent preference on the MFN tariff rate to COMESA members. The members of the GAFTA include 17 Arab countries: Jordan, UAE, number of markets for most of its agricultural Bahrain, Saudi Arabia, Oman, Qatar, Morocco, Sudan, Syria, Lebanon, exports. The earlier DTIS highlighted that except for Iraq, Egypt, Palestine, Kuwait, Tunisia, Libya, and Yemen. Trade Policy and Performance 21 FIGURE 17: Total Number of Exporters well as the median non-oil exporter in Sudan is larger than their counterparts in most regional benchmark Kenya 4,610 countries. This evidence suggests that although the Ethiopia 1,826 size distribution of exporters in Sudan is skewed, it is Tanzania 1,796 less so than in other countries. Zambia 1,368 Sudan’s exporters are highly concentrated. Cameroon 928 Only 7 percent of firms have annual exports above Uganda 910 US$5 million, but they account for about 84 percent Sudan 787 of the country’s total non-oil exports. At the same time, about 50 percent of exporters export less than 0 1,000 2,000 3,000 4,000 5,000 US$100,000 annually, whereas in Ethiopia, Tanzania, Number of exporters and Zambia this proportion is closer to 70 percent. Source: Authors’ calculations based on data used for the Exporter Further with one in five firms exporting more than Dynamics Database. US$1 million per year, Sudan has the highest ratio among the sample of comparators. Interestingly, although very highly concentrated, Sudan exhibits not been significant; there is, however, considerable a lower concentration of exporter size than Tanzania potential for cross border trade with neighboring and Zambia but a higher concentration than in countries including South Sudan. Asia is an important Ethiopia. trading partner, accounting for almost 20 percent of Export concentration has increased in Sudan total imports and almost two thirds of total exports since the last DTIS in 2008. During the period prior in 2006. When oil exports are excluded Saudi 2008–2012 there was a substantial increase in the Arabia is the largest export partner accounting for concentration of Sudan’s non-oil export sector as more than twenty percent. the average exporter size increased more than two fold from US$1.29 million in 2008 to US$4.4 mil- Characteristics of Exporters in Sudan16 lion in 2012. In contrast, the median exporter size declined by 23 percent from US$100,000 in 2008 Sudan has fewer non-oil exporters than its com- to US$77,000 in 2012. The Herfindahl17 index of parator countries and the numbers are declining (Figure 17). While the number of exporters increased by 28 percent between 2008 and 2009, the following 16 This section is based on the exporter level data as included into the three years (2009–2012) saw a substantial decline in World Bank’s Exporter Database. The data was made available by Sudan the total number of exporters despite a consistent customs as part of the DTIS Update. It must noted that there are impor- tant unresolved data issues, but that these ultimately do not distort the increase in total non-oil export growth. overall trends in findings presented in this section: Many transactions Exporter data suggests a heavy presence of are registered as “Sudan” in the exporter-level customs data which ac- counted for more than 10% of non-oil exports in 2008 and 2011 and for small firms in Sudanese exports combined with a more than one-third of non-oil exports in 2012. Exporter-level customs few very large firms. The average size of Sudanese datasets for other countries often include transactions of exports from a given country to itself but those generally represent a minimal share of non-oil exporters is US$2.5 million per year, while total exports, as they do in the case of Sudan in years 2009 and 2010, median size is US$105,000. This difference between and can be attributed to recording mistakes. In the case of the data for Sudan despite the customs agency’s best efforts it was not possible to re- average and median suggests the existence of a skewed solve these recording inconsistencies. It is very likely that the transactions distribution of exporter size in Sudan, with a heavy recorded as exported to SDN are in reality ultimately being exported to other foreign destination markets. presence of small firms combined with a few very large 17 The Herfindahl Index is calculated for a given year as the sum across firms. Both the average non-oil exporter in Sudan as all exporters of the squared export shares per exporter. 22 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Exporter Concentration: Sudan FIGURE 18:  Tanzania). In 2008, 52 percent of Sudanese exporters Share of Top 5% – Change Over sold only one product to one destination market and Time accounted for 28 percent of total non-oil exports. 0.85 By 2012, only 36 percent of firms sold one product to one destination and accounted for just 3 percent Share of top 5% exporters 0.80 of total non-oil exports. In 2008, only 1 percent of Sudanese exporters sold more than ten products and 0.75 surprisingly they accounted for just 2 percent of total 0.70 non-oil exports; similarly, in 2012 only 2 percent of Sudanese exporters were highly diversified product- 0.65 wise and they only accounted for 3 percent of total non-oil exports. 2008 2009 2010 2011 2012 Sudan has no “export superstars,” but in most Year other countries a small number of multi-product Note: Shows averages for the period 2008–2012. multi-destination exporters account for the major- Source: Authors’ calculations based on data used for the Exporter Dynamics Database. ity of total exports in a country thereby driving the sector.18 Assuming “diversified exporters” to be ones that export four or more products to four or exporter market shares is significantly higher in more destinations, they represent only 5 percent of Sudan than in other countries after controlling for firms and 22 percent of total non-oil exports in 2008 country size and level of development. See Figure 18. and represent 11 percent of firms and 17 percent of Non-oil Sudan firms are amongst the least total non-oil exports in 2012. Comparable data from diversified when compared to regional neighbors Cameroon, Yemen, Egypt and Cote d’Ivoire all show and other low-income oil exporting countries. “diversified exporters” accounting for more than 40 Relative to their regional comparators the average percent of total non-oil exports. Sudanese firm exports two products, compared with Exporter dynamics measured by entry and eight products for Kenyan firms and six products for exit rates are significantly higher in Sudan than Zambian exporters. The average number of products in other countries. Sudan has the highest entry and per exporter in Sudan has however increased, particu- exit rates among all regional comparators. There is a larly since 2010, from 1.7 products to 2.7 products tremendous degree of churning in export markets: in 2012. on average in a given year, 59 percent of Sudanese Sudanese firms export to significantly fewer firms that export did not do so in the previous year destination markets than firms in comparator whereas 57 percent of Sudanese firms that were countries. Sudanese firms export on average to 2.2 exporting in the previous year stopped exporting. destination countries while most comparator coun- Entry rates by Sudanese firms into export markets tries’ exporters serve between two and three destina- declined drastically between 2008 and 2012. Exit tion countries and the time trend for Sudan indicates rates also declined however a slower pace than entry that the average number of destinations per exporter rates. In 2011 and 2012 exporter net entry in Sudan increased steadily from 2009 to 2012. became negative which indicates a decline in the Most Sudan non-oil exporters have a very number of exporters. limited portfolio of products and destination markets. This is broadly consistent with the port- 18 See for example Cebecci, Fernandes, Freund and Pierola (2012) and folio in other African economies (i.e., Ethiopia and Freund and Pierola (2012). Trade Policy and Performance 23 Sudan’s non-oil exports are concentrated in a account for 99 percent of total non-oil exports in that small number of markets; this is not solely a con- market in 2012, a very substantial increase relative sequence of economic sanctions against Sudan. to 2010 when the top 5 percent of exporters only The low level of diversification in terms of destination accounted for 45 percent of total non-oil exports. markets for its non-oil exports is not solely a conse- The average size of Sudan’s exporters to UAE quence of the economic sanctions imposed by the and Saudi Arabia has grown substantially during United States since 1997, as Sudan is isolated even the period, particularly those exporting to UAE. By within Africa. However, sanctions have exacerbated 2012, the average size of exporters to the UAE reached the isolation through increasing the difficulty in set- nearly three times that of exporters to Saudi Arabia. tling cross-border payments, which affects trade with The size of the median exporter is more homogeneous all partners including their African neighbors. The across destination markets than the size of the average United Arab Emirates has been a key trading partner exporter. It is important to highlight that the median for Sudan over the entire period; Canada was a par- size to all destination markets, except for those classi- ticularly important partner in 2009 but has declined, fied as exporting to Sudan, declines over the period. and since 2010 Saudi Arabia has steadily become an Precious metals are Sudan’s leading non-oil important market for Sudanese exports (Table 2). export. The number of precious metal exporters Following the secession of the South, Sudanese nearly doubled from 47 in 2008 to 87 in 2009 but firms now have the opportunity to export to South subsequently declined to 20 in 2012. However, this Sudan and numbers are rising. Owing to the security was not matched by a decline in the value of total situation following secession trade was limited, how- exports, on the contrary, that value increased by eight ever, with the agreement (in 2013) to open border- from 2008 to 2012. Sudan benefited from increasing crossing points an increase is expected in the number international gold prices that nearly doubled during of Sudanese firms exporting to South Sudan in 2014. the 2008–2012 period.20 However, the spectacular In 2012, 35 firms out of a total of 754 non-oil export- growth of precious metal exports was not only a ers exported 101 products.19 There are opportunities consequence of high prices but also stemmed from a for Sudan to export agricultural products and food- more than four-fold increase in the quantities exported stuffs to South Sudan as historically, prior to secession, between 2008 and 2009. the food deficit was met with imports from the north. Oil seeds are the second largest non-oil export Reducing trade costs across the border between Sudan sector in Sudan. The main product exported is sesame and South Sudan would represent a win-win for both seeds, which account for about 50 percent of the sec- countries by benefiting communities on both sides of tor’s total exports in any given year. A surge in the the border. number of oil seed exporters in 2009 was followed by The United Arab Emirates (UAE) is the main a decline in 2010. The level then remained constant destination market for Sudanese non-oil exports until 2012. The value of oil seeds exports declined and exporter concentration increased over the slightly from 2008 to 2010 but recovered by grow- period 2008–2012. Concentration in other destina- ing more than 50 percent from 2010 to 2012. This tions has been constant with only a slight increase in 2012. Only eight Sudanese exporters sell to Canada; 19 The top three HS-2 digit sectors exported to South Sudan are: live therefore that market is completely concentrated. The animals (HS 01) which account for 29% of exports, tobacco and tobacco substitutes (HS 24) which account for 18% of exports, and vehicles other share of exports accounted for by the top 5 percent of than railway or tramway rolling stock, and parts and accessories thereof exporter’s ranges between 50 percent and 60 percent (HS 87) which account for 17% of exports. 20 Although HS code 71 covers products other than gold, 99.5% of the in most destination markets. Some exceptions are value of Sudan’s exports in HS code 71 originates in the 4-digit HS code the case of UAE where the top 5 percent of exporters 7108 which is gold. 24 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE important growth was driven by growth in export vol- of two free trade areas—COMESA and GAFTA—and umes as quantities of oil seed exports doubled between offers duty free access under both, although the para 2008 and 2012.The oil seeds sector faced unfavorable tariffs continue to be levied. There is some limited over- unit value (price) movements over the period. lapping membership between COMESA and GAFTA Live animals are the third largest non-oil as both Egypt and Libya are members of both organiza- export sector in Sudan. Between 2008 and 2012 tions. The tariff schedules include general tariffs for all live animal exports increased five-fold. This surge countries, GAFTA, COMESA (members of the free is due to a combination of favorable unit value trade area), and COMESA (non-members of the FTA). (price) movements as well as a substantial increase The general tariff comprises five bands: duty in quantities exported. The number of live animal free (zero), 3, 10, 25, and 40 percent. Table 3 shows exporters increased from 139 in 2008 to 165 in 2011 the 2014 tariff structure. All tariffs are applied on an but dropped to 129 in 2012. The impressive growth ad valorem basis to the c.i.f. value of the import; there in the sector however only helped it keep up with are no specific tariffs. The 2014 tariff schedule contains other growing export sectors in Sudan, as its share in 5,221 lines at the HS 8 digit level and is based on the the value of total non-oil exports remained constant HS-2012 nomenclature.21 Approximately 8 percent at around 9 percent. The importance of live animals of general tariff lines are at zero, with a further in the total number of exporters has declined slightly 19 percent at 3 percent. More than half of all the tariff from 21 percent in 2008 to 17 percent in 2012. lines (56 percent) are 25 percent or above. The modal Entrants into live animal exports account for a larger (or most common) tariff rate is 40 percent account- share of total entrants than exporters of live animals ing for 41 percent of all tariff lines and 19 percent of account for in total exporters. Also, exiting traders in the total value of imports. The economy-wide average the live animals sector represented a particularly high general tariff is 20.1 percent.22 The simple average tariff share—28 percent—of total traders exiting in 2012. is higher for agriculture relative to industry with HS Chapters 1–24 showing a simple average of 33.2 per- General Duty Schedules and Para cent and HS Chapters 25–96 registering 19.0 percent. Tariffs: High Levels of Protection 21 This is 54 tariff lines fewer than previously reported before Sudan switched from using the HS 2007 to HS 2012 system of classification. The general tariff along with the imposition of addi- Since the 2012 HS six digit classification contains 5,205 lines Sudan has only 17 specific national level tariff lines at the HS 8 digit level. tional border duties or para tariffs results in Sudan 22 If “Other” unclassified imports are excluded the economy wide average having high levels of protection. Sudan is a member increases to 21.4 percent. TABLE 3: Sudan 2014 Tariff Structure Number of Percent of Tariff Lines 2012 Imports 2012 Imports Tariff (%) Tariff Lines in each Tariff Bands ($ million) Percent Zero 414 7.9 1,396 16.0 3 978 18.7 899 10.3 10 1041 19.9 3,226 37.0 25 859 16.5 1,532 17.6 40 1929 36.9 1,661 19.1 50 1 — — — Total 5222 Source: Derived from Sudan Customs ASYCUDA Database and COMTRADE. Trade Policy and Performance 25 Only 16 percent of imports in 2012 entered 6.5 percent. The difference between the statutory through the zero-rated tariff lines. Most capital rates (or ex ante tariff rate) and the ex post tariff rate goods (machinery and electrical) are duty free along is accounted for by duty exemptions and preferential with fertilizers (chemicals). Animal and vegetable tariffs. The sharp reduction in oil revenues following products have the highest percentage of tariff lines the secession of South Sudan has increased pressure at the maximum 40 percent duty. The 3 percent on all sources of revenue and resulted in increasing tariff mainly applies to intermediate products such dependence on tariff revenue which in 2012 accounts as chemicals, textiles, and metals, with higher rates for more than 30 percent of total government income. applied to industrial and consumer goods. There is Table 4 presents a breakdown of the average tariff one tariff line at 50 percent, which is reserved for rates by major sector groupings and shows the diver- personal imports. gence between the published schedules and the actual In 2012 the average listed tariff (ex ante) was duty paid on imports. These include regional prefer- more than twice as high as the actual duty collected ences under GAFTA and COMESA, various duty rate (ex post), highlighting the widespread use remission schemes, and exceptions for imports from of exemptions. In 2012 the average tariff weighted international organizations, diplomats, and returning by the commodity composition of imports was migrant workers. 16 percent, which would have yielded $1.39 billion. However, the actual customs duty collected (often 23 Imports classified as “Other” are excluded from these calculations. referred to as the ex post tariff) in 2012 was $568 mil- In 2012 these totaled $973.7 million and yielded customs duties of lion,23 which represents an average collection rate of $15.9 million. TABLE 4: Sector Groups: Tariff Collection Rates, Imports and Exports for 2012 (Values in US$ million) Simple Avg. Customs Ex Post Import Ex Post Duty % Export HS Codes Sector Groups Tariff % Duty ($m) Duty % (cif) (incl. para tariffs) (FOB) 01–05 Animal Products 37.2 10.3 11.2 91.9 19.6 387.1 06–15 Vegetable Products 28.7 20.3 4.2 486.2 8.5 357.4 16–24 Foodstuffs 34.6 20.8 2.5 816.5 4.9 20.9 25–26 Minerals 8.4 0.2 0.8 31.2 2.5 9.9 27 Mineral Fuels 8.7 31.3 2.9 1,078.6 6.1 758.0 28–38 Chemicals 7.4 37.6 4.5 828.8 6.6 215.8 39–40 Plastic and Rubber 14.5 41.1 8.5 481.1 12.3 1.6 41–43 Hides and Skins 39.1 3.5 38.0 9.1 58.6 34.8 44–49 Wood 21.3 29.8 11.2 266.6 16.3 5.3 50–63 Textiles and Clothing 30.4 83.4 20.5 407.9 26.8 22.1 64–67 Footwear 35.1 26.9 37.2 72.4 48.7 0 68–71 Stone & Glass 32.3 22.8 19.5 116.9 33.4 2,003.3 72–83 Metals 24.7 53.6 5.9 913.1 7.8 19.3 84–85 Machinery and Elect. 28.7 77.2 4.6 1,666.3 7.5 4.9 86–89 Transport Equipment 15.8 93.6 7.8 1,197.0 22.9 223.2 90–98 Miscellaneous 20.9 15.9 6.2 255.0 11.0 2.2 Derived from data provided by Sudan Customs Authority 26 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Distribution of Tariff Rates (2012) FIGURE 19:  to 40 percent—a 3 fold increase in protection. The and Imports Based on Statutory private sector highlighted the impact of the tariff Tariffs increases on their cost structure. 40% Trade Policies–Tariff Policy and the Use of 30% Rebates 20% Sudan’s simple average tariff and trade weighted tariff rates of 20 and 22 percent respectively among 10% the highest in the world and are substantially higher than most countries in Africa and the Middle East. 0% Duty free 3% 10% 25% 40% Figures 19 and 20 and Table 3 show the allocation Tariff rates of the tariff lines between the five bands of zero, 3, Share of tariff lines in tariff band Share of imports in tariff band 10, 25 and 40 percent based on the imports in 2012 Source: Derived from TRAINS database for 2012. (from the Sudan CA ASYCUDA database) and the 2008–2013 tariff summary provided by the GOS. In 2012 just over half of all tariff lines are allocated Distribution of Tariff Rates (2013) FIGURE 20:  to the top two bands of 25 and 40 percent and more and Imports (2012) Based on than half of all imports are in these bands. In 2013 Applied Tariffs almost 37 percent of tariff lines, fall into the highest 40% 40 percent band. According to the detailed transaction 35% level data provided by Sudan Customs only 9.6 per- 30% cent of imports enter under statutory duty free tariffs, 25% however, the data provided by the GOS indicates the 20% widespread use of preferences as 35.8 percent of total 15% imports enter duty free. Statutory tariffs are generally 10% higher on final products than on intermediate inputs, 5% particularly in agriculture and light manufacturing 0% which encourages production for the domestic mar- Duty free 3% 10% 25% 40% Share of tariff lines in tariff band Share of imports in tariff band kets. The widespread application of tariffs on imported inputs undercuts local producer competitiveness and Source: Derived from data provided by the Government of Sudan. discourages integration into regional or international supply chains. In comparison with the earlier DTIS the number of products in the highest tariff band of Over the past two years Sudan have amended 40 percent has increased since 2008. Table 4 shows their tariff structure by decreasing a relatively few the value of imports according to the tariff that was tariff lines and increasing approximately 500 tariff actually paid (i.e. after receiving rebates). lines to the maximum 40 percent. The number of In addition to tariffs on imports Sudan lev- tariff lines at zero (for capital goods) increased from ies additional duties. In 2010 Sudan introduced 330 to over 400. The number of tariff lines at 3 percent a new border tax or para tariff—the Development has remained virtually constant. While over 400 tariff Tax—which was introduced in January 2009 at 5 lines increased from 25 to 40 percent, approximately percent and is now levied at 13 percent of the duty 100 appear to have been increased from 10 percent inclusive price on all imports except for capital goods, Trade Policy and Performance 27 raw materials, medicines, and goods imported under a number of the fees and has moved away from the Investment Encouragement Act. Value Added ad valorem fees which are incompatible with the Tax at 17 percent is levied on all imports except for GATT (1994) Article 8. The Sudan Addendum to agricultural inputs (which include fertilizers and the Memorandum of Foreign Trade Regime (April vaccines). For a good incurring duty at 40 percent 2012) noted that all non-tariff fees and charges had the combined effect of the import tariff and the been removed.24 The Sea Ports Corporation charges Development Tax will raise prices by 64 percent over were now levied as a specific value, however, the the CIF landed price. Civil Aviation Charge on imports remained on an There is also a 2 percent tax that is treated as ad valorem basis. a credit against the Business Profit tax and Excise The states have the right to levy fees against duties are levied on a wide range of imported services on a range of items. products. Contrary to WTO and international practices the excise duties and range of products are Regional Trade Preferences not aligned with the excise applicable to domestic production. The higher rate of excise duty levied Under the GAFTA and COMESA Sudan offers on imported products is analogous to an additional duty free tariffs for all qualifying imports. For Import Tariff. The discriminatory impact of the those members of COMESA that are not party to excise duties in terms of implicit tariffs is shown in the FTA, Sudan offers an 80 percent tariff preference Table 5. which reduces the 3 percent tariff to 0.6 percent, the The Customs Authority (CA) also levies fees 10 percent tariff to 2 percent, the 25 percent to 5 per- and charges for import transactions. The earlier cent, and the 40 percent to 8 percent. Tariffs of 0.6 DTIS listed the wide range of fees and charges lev- ied on import consignments in 2006 (Table 3.12 24 Except for an ad valorem rate of 3 percent on perfumes and cosmetics of that document). Since then the CA has removed for the Student Support Charge. TABLE 5: Sudan: Rates of Excise Duties on Imported Goods (%) Local Implicit Imported Products Subject to Excise Duty Import Producer Incremental Tariff Refrigerators, Washing Machines, Telephone Sets, Cables, Pistols, 10 10 Matches, Leather Products, Tomato Paste, Perfumes and Cosmetics, Honey and Soap Televisions, Three Wheel Cars, Cement, Air Conditioners, Ceramic 20 Paints 5, Mineral Paints 15 Tiles, Prepared Meat, Paints, Articles of Plastics, Fish, Dairy Products, Water, 10 Mineral Water 10 other Animal Products, Trees, Plants, Flower Products, Skins and Straw Cement 10 Cement 10 Products Others 20 Juices 25 10 15 Sweets, Furniture, Live Animals and Birds, All types of meat, silk prod- 30 30 ucts, feather products, artificial flowers, umbrellas, sticks, mineral water Motor Cars of a cylinder capacity less than 1000cc 75 60 15 Motor Cars of a cylinder capacity exceeding 1000cc 85 60 25 Water Pipe Tobacco 130 100 30 Cigars and Cigarettes 210 210 0 Source: Derived from Sudan: Tax Reform Strategy for Revenue Mobilization, IMF, May 2013. 28 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE and 2 percent may be considered “nuisance” tariffs (as the length of time taken for VAT refunds. Based on defined by the WTO) where the revenue raised is not interviews with the private sector it does not seem worth the cost of the additional time and paperwork that there had been any improvement since the ear- involved in the collection. lier DTIS (see DTIS 2008, paragraph 2.34). Delays Sudan has participated in the COMESA FTA in refunding VAT paid on imports is equivalent to a since its launch in 2000. COMESA FTA members tax on exports because it locks up working capital and have committed to aligning their national tariffs with reduces a firm’s ability to compete in global markets. the COMESA Common External Tariff (CET) within Many countries have circumvented this problem by five years. To date, no COMESA member is imple- allowing companies with a clear tax record to post a menting the CET and Sudan is still assessing whether bond rather than have to pay the VAT in full when the to implement the COMESA CET. The COMESA inputs are imported. Lesotho, which exports clothing CET has a three-band structure: zero for capital goods based largely on imported cloth, allows firms to use and raw materials, 10 percent for intermediate goods, the bond or deferred payment of VAT on their inputs. and 25 percent for finished products. In 2008 Sudan There is also evidence that delayed reimbursement submitted a list of sensitive products to be excluded encourages importers to under-invoice to assist their from the CET. Currently Sudan applies no customs cash flow. More efficient reimbursement may actually duties on imports from those COMESA countries result in an increase in revenue collected. that have signed the FTA protocol. Sudan offers duty free access to all qualify- Import Restrictions, Domestic ing imports from GAFTA members. This includes Manufacturing, and Productivity imports from Egypt, Saudi Arabia, and the United Arab Emirates, which accounted for approximately Import restrictions, which were imposed on a wide 20 percent of total imports in 2012. range of products in 2011, have been removed except for a small number of items for religious Export Duty reasons. Only individuals or firms that are officially registered by the Ministry of Trade may import (and Sudan levies export duty on two products, raw export) goods. hides and skins (15 percent) and iron waste and Manufacturing in Sudan focuses on supplying scrap metal (25 percent). It also intervenes in the the domestic market, and except for sugar, cement, export of staple commodity exports, specifically sor- and petroleum is characterized by medium and ghum. Licenses are required to export sorghum and are small enterprises. In aggregate the sector accounts routinely refused in years when Sudan is deemed not for less than 10 percent of total GDP with most of to be self-sufficient. While the restrictions on sorghum the activities linked the agricultural sector. These are intended to advance food security, they in fact serve include sugar, food and beverages, textiles, and leather. to discourage commercial production for export, drive Improving competitiveness within the agro-industrial down prices, encourage illegal trade, and contribute and manufacturing sector will create both direct to increasing food insecurity while also exacerbating employment in the urban areas and stimulate rural initiatives aimed at reducing poverty. incomes through the increased demand for agricul- Exporters experience delays in reimbursement tural inputs. The last Comprehensive Industrial Survey for VAT exemptions. Delays in exports are exempt in 2001 found the manufacturing sector employing from VAT and exporters are eligible for refunds of approximately 160,000, which accounted for 2 per- VAT paid on the imported inputs used in the pro- cent of the labor force. Two-thirds of the value added duction of the exports. Exporters complained about and 56 percent of the jobs were concentrated in the Trade Policy and Performance 29 food products and beverages sector. The 2001 survey of savings due to lower prices. Poor households are found that only two sectors, sugar processing and defined as households with a new consumption below manufactured petroleum products, accounted for the existing poverty line. 90 percent of export. These are both highly capital- Removing the tariff on food products would intensive activities dominated by a small number of reduce poverty levels in Sudan. In 2009 the poverty large companies. rate in Sudan was 47 percent. Removing the average Recent work based on a firm level survey (Nour, tariff of 17 percent on food products would reduce 2011) in 2010 concludes that Sudanese firms have poverty to 41 percent. The poverty rate varies consid- experienced declining productivity as a result of erably across states from 26 percent in Khartoum to the inability to recruit skilled workers. The Ministry 69 percent in Northern Darfur. of Industry has identified six priority sectors for sup- In both Khartoum and Northern Darfur, about port through the UNIDO Industrial Modernization 6 percent of the population would be lifted out Programme of Sudan (IMPS), which began in July of poverty by a removal of tariffs. This translates 2013. The sectors include: leather and leather goods, to 300,000 in Khartoum and 100,000 in Northern fisheries, agricultural fertilizers, animal feed, food Darfur. Poverty would be reduced by 21 percent in processing, fresh fruit and vegetables, groundnut and Khartoum and by only 8 percent in Northern Darfur. edible oils, cotton lint and spinning, and textiles. All Thus, removal of tariffs does not target states with of these sub-sectors are experiencing multiple con- highest poverty but reduces poverty equally across straints that reduce their competitiveness, including states relative to the population. outdated equipment, poor production techniques, Even a modest tariff reduction by 5 percent insufficient incentives for suppliers to provide inputs would lift half a million out of poverty. While a at competitive prices, and high marketing and dis- complete removal of tariffs might politically be dif- tribution costs. Many of the sectors continue to be ficult, a modest reduction in tariffs will also have characterized by large-scale public enterprises; how- a significant impact on poverty. A reduction of ever, the government has embarked on the privatiza- 5 percent would reduce poverty from 47 percent to tion of state-owned enterprises, including two of the 45 percent—equivalent to half a million people. A three tanneries with the third (Gezira) in the process more ambitious reduction by 10 percent would lower of being privatized. poverty to 43 percent (1.1 million), while a further reduction to 15 percent would lower poverty to 41 Trade and Poverty percent (1.6 million). Female-headed households stand to benefit With tariffs averaging 17 percent, the removal of more from moderate tariff reductions relative to tariffs on food products has the potential to reduce male-headed households. Female-headed households poverty by 12 percent. The impact of tariff reduction are slightly less often impoverished with 44.2 percent on poverty is estimated based on the assumptions that living below the poverty line compared to 47 percent the reduction in tariffs is equal across all food prod- of male-headed household. Figure 21.B shows the ucts and directly translates into an equivalent price poverty rates by gender of household head for tariff reduction of the food products. Thus, households reductions between 0 percent and 17 percent. A small spend less on food products. Further it is assumed that tariff reduction by 5 percent would reduce poverty the additional savings from lower prices are spent on among female-headed households by 5.4 percent additional food items in proportion to the food basket compared to 3.9 percent for male-headed households. used to calculate the poverty line. Therefore, consump- In contrast, a complete tariff removal would reduce tion of households is increased exactly by the amount poverty of female-headed households by 10.9 percent 30 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Poverty Rates per State and by Gender of Household Head for Reduction in Tariffs FIGURE 21:  from 0 Percent to 17 Percent A) Poverty Rates Per State 80% 70% 60% 50% 40% 30% 20% 10% 0% Al- Al- Blue Kassala Khartoum Northern Northern Northern Red Sea River Nile Sinnar Southern Southern Western White Gadarif Gezira Nile Darfur Kordofan Darfur Kordofan Darfur Nile 0% 5% 10% 15% 17% B) Poverty Rates by Gender of Household Head 48% 46% 44% 42% 40% 38% 36% 34% No change 5% reduction 10% reduction 15% reduction 17% reduction All Male-heades Female-heades Source: Authors’ calculations based on NBHS 2009 data. compared to 12.8 percent of male-headed households. Reducing the dependence on trade taxation Thus, already small tariff reductions would especially when Sudan faces severe revenue challenges and benefit female-headed households. a large budget deficit requires coordination with broader tax reform. Reducing tariffs and trade taxa- Recommendations tion may result in increased revenue when the import elasticity of demand exceeds unity. Reducing the num- The reduction of trade taxes and tariffs is required ber of tariff peaks (tariffs lines above 15 percent) and to increase and diversify exports. Existing tariff lowering the maximum tariff to 25 percent in con- and trade taxation policies result in an incentive formity with the agreed maximum for the proposed structure that discourages exports and encourages COMESA CET should be a priority. production for a heavily protected domestic market. Reducing the use of duty rebates and exemp- This results in higher prices for all products includ- tions to create a more transparent structure can ing basic commodities and foodstuffs, which reduces result in additional revenue while also reducing living standards and has a disproportionate impact anti-export bias. Currently many investments focused on the poor. on production for the domestic market qualify for Trade Policy and Performance 31 rebates. Under the new investment legislation all Excise taxation should not discriminate against approved projects qualify for duty rebates on the imports and should be imposed on a limited range importation of capital goods. Reducing the tariff on all of products. The rationale for levying excise taxes is to capital goods to zero would improve the incentives for discourage consumption. Excises are usually restricted all investors and have a minimal impact on revenue. to a small number of goods with a low elasticity of The large disparity between the listed (ex ante) tariffs demand that carry health externalities (for example, and the actual duties collected (ex post) by sector tobacco and cigarettes). Excise duties applied to indicates the widespread use of rebates and exemp- imports will need to be aligned with domestic excise tions in animal and vegetable products and foodstuffs. duties for Sudan to conform to the requirements of The reduction of tariffs on these products would have the WTO. a minimal impact on revenue. 33 CUSTOMS ADMINISTRATION AND BORDER MANAGEMENT 4 Overview border crossings, and two river ports. Not all entry points were operational at the time of the mission. The Sudan Customs Authority (CA) has imple- Table 6 highlights the relative revenue collection mented a number of reforms aimed at improving performance. the environment for traders over the past 6 years. Key indicators continue to show limited This study reviewed25 the current customs situation in capacity to facilitate trade across all the border the country and the reform program of the CA with agencies. For instance, Sudan ranked 155th out of an aim of identifying a range of areas where Sudan 183 countries in the “trading across borders” cat- Customs could take immediate further action to egory of the Doing Business Report 2013. There is reduce trade costs. The study considers it is important a wide difference between exports and imports: Time that these areas are addressed in a coordinated fashion to export is 32 days for Sudan, similar to the SSA through a comprehensive customs modernization average, but time to import is 21 percent longer in program as lessons from other countries suggest that Sudan than in the SSA average (46 vs. 38 days). Long isolated initiatives are unlikely to succeed. transaction times (and cost) are mirrored in the low Currently, customs control is based on the ranking of Sudan in the Logistics Performance Index somewhat outdated standard concept of near 100 (LPI) of 2012 where Sudan continues to rank 148th percent, real time, physical interventions, with par- allel documentary (paper based) processing and an 25 For this part, the DTIS Update undertook a “diagnostic assessment” accompanying automated ASYCUDA process. The that involved interviews and discussions with relevant government majority of international trade is processed through officials and private sector clients and stakeholders. This included the observation of operational practices and procedures and a review of avail- Port Sudan. There are in excess of 26 proclaimed entry able reports, documents prepared by the government and border agencies, points (22 of which are connected to ASYCUDA and other relevant literature, including recent assessments conducted by other international agencies such as the WCO and UNCTAD. The main and these account for more than 95 percent of mission in January 2014 undertook these activities in Khartoum, Port trade) including Khartoum Airport, numerous land Sudan, Garri Free Trade Zone, and Soba Dry Port. TABLE 6: Revenue Collection Performance, Selected Countries 2012 No. of No. of Total Revenue in Revenue Declarations $ collected $ collected per Country staff declarations local currency US$ million per staff per staff declaration Sudan 7,818 307,653 7,086,000,000 1,221.7 39 156,270 3,971 Kenya 1,456 667,417 707,400,000,000 8,300 4,250 5,700,549 12,436 Saudi Arabia 10,154 3,300,000 20,200,000,000 5,386 325 530,431 1,632 Jordan 3,185 1,033,604 288,160,000 407.6 325 127,975 394 Yemen 2,279 263,753 84,835,000,000 395 116 173,322 1,498 Source: WCO Annual Report 2012–2013; Kenya, KSA, Jordan and Yemen Customs Annual Reports 2012; Sudan Customs Administration and World Bank staff calculations. 34 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE out of 155 countries. Within the six LPI categories efficiency, effectiveness, and professionalism will of Customs, Infrastructure, International shipments, require a significant investment of time, resources Logistics competence, Tracking & tracing, and and government commitment. While the DTIS Timeliness, Sudan ranks below the SSA average in Update identifies a number of recommendations for all categories. immediate action, effective implementation of the key The CA shares border management respon- recommendations will take approximately 3–5 years. sibilities with many other national agencies but The DTIS recommends that the small (4–6 mem- currently there is limited interagency coordina- ber) dedicated team already established within the tion. Multiple agencies are present at the main CA (in accordance with the recommendations of the border entry points and while at Port Sudan a “one WCO mission for Columbus Program Phase 2) man- stop shop” approach has been implemented with the age the modernization process. This team should co-locating of some agencies. There has been limited report directly to and be authorized by the Director streamlining of procedures; duplicative and repetitive General. It is also recommended that an interdepart- checks continue. There is still no “single window” in mental committee be established to coordinate activi- any border entry point and coordination cannot be ties that require actions by other border management relied upon. The process for obtaining all the neces- or permit issuing agencies.27 Overall responsibility for sary import and export approvals can be long and coordination of border management reform will need time-consuming, especially if laboratory testing by the to be decided at Ministerial level. SSMO is required.26 In consultation with the Ministry of Finance and all responsible line ministries the GCA The Sudan Customs Authority should conduct a review of the existing administrative arrangements with the aim of improving performance Organizationally, the CA is part of the police standards, including revenue targets, of the GCA and force. While it is becoming more common for cus- minimizing potentially conflicting responsibilities. toms services to be under the administration of the These should be translated into clear performance Ministry of Interior, or similar as part of a “Homeland indicators. Security” type of border control framework, dual In order to reduce trade costs, a commitment responsibility and oversight is less common. For by the Sudan Customs Authority (CA) to increase day-to-day administrative and operational issues the consistency and coordination, transparency and GCA reports to the Ministry of Finance. However in efficiency, along with simplifying procedures would relation to organizational management and staffing be essential. While the CA currently delivers a basic matters it is part of the Ministry of Interior, form- level of services to traders and is committed to further ing part of the Sudanese Police, with a Police Major customs modernization its performance continues General as Director General. Under this paramilitary to falls short of client expectations. Interviews with organizational structure there is a strict hierarchical private sector traders and customs officials identified framework with promotion based on seniority, rather many aspects of customs administration where admin- than merit and limited flexibility in human resource istrative and procedural reforms had the potential to significantly reduce clearance times while maintaining customs integrity and protecting the revenue base. 26 These issues are covered in more detail under Standards and Conformity section of the DTIS. The findings and recommendations contained 27 This could be incorporated into the existing Technical Committee on in this study could be used as the basis for devel- Trade Facilitation and Electronic Business (a ministerial committee based in the Council of Ministers) and the National Working Group on Trade oping a comprehensive customs modernization Facilitation and Electronic Business (Chaired by the Customs Authority and reform strategy. Achieving improved levels of and based in the Ministry of Trade). Customs Administrationand Border Management 35 TABLE 7: Sudan Customs Statistics policy demands from other agencies. Clarification of Director General: Police Major Sefeddean Omer the expectations or desired outcomes by the Ministry General of Finance, in the form of administrative arrangement Number of Staff (2012) 7818 orders or similar, would allow the CA to develop a Officers 2162 more strategic approach to its operations, against Non-commissioned which it could undertake continuous monitoring and 5656 evaluation of performance by establishing appropriate Average weighted tariff 20.1% (0%, 3%, 10%, (2012) 25% and 40%) performance indicators. To this end, formal adop- Revenue (FY 2010) 7086 M SDG (71% of tion of the plan by appropriate Ministries should be Govt. tax revenue) pursued. Customs Duties 3567 The CA strategic planning process requires VAT on imports 1950 strengthening . The current CA Strategic Plan (2012–2016) is rather limited in scope and appears Excise (domestic) 1339 more a statement of ambitions, rather than a formal Misc. fees / charges 230 strategic management tool. It is also less clear how achieved performance is being tracked and progress measured against this plan. In order to address these management issues. Key organizational statistics are shortcomings the CA Strategic Plan should be revised shown below in Table 7. and updated in consultation with all key internal and The GCA is a member of the World Customs external stakeholders with the aim of using it as a basis Organization (WCO), ratified the WCO Revised for the development, agreement and implementation Kyoto Convention (RKC) without reservation in of a comprehensive and future oriented organizational 2009 and is a contracting party to the Harmonized reform strategy. Relevant Ministries should endorse System Convention (HS). Despite this, few of the the revised plan. provisions contained in the convention have been This analysis found that the CA is currently implemented, although many are the subjects of functioning and delivering a basic level of services actions listed in the strategic plan. Implementation to its stakeholders and clients and has good lead- of the provisions of the convention (and as a conse- ership and management skills. Yet, when compared quence, much of the recently concluded WTO Trade with performance in the region and international best Facilitation Agreement) should become the organiza- practices, most aspects of customs administration tion’s first priority. require reform and development. Senior management At an institutional level, the CA has a five-year has a good knowledge of contemporary organizational strategic plan covering the period of 2012 to 2016. development skills and abilities, however there appears However, while there are vision, mission, and values to be capacity constraints below this level and more statements in the strategy they are not clearly linked senior and middle managers need to be equipped with to the strategy. It is also unclear how implementation improved leadership and strategic management skills. will be achieved, performance tracked, and progress These capacity challenges result in restricted or at least measured against this plan, or how it will become unclear delegation of authority and encourage overly “actionable.”28 The plan is rather limited in scope and centralized decision-making in day-to-day operations, appears to be more a statement of ambitions, without clear purpose, rather than a formal strategic manage- 28 The WCO notes, in its report following the January 2013 “Columbus ment tool. Without this or any specific policy direc- Phase II” mission, that it was unable to improve on the strategic plan (as tion, the organization appears to be more reactive to planned) as it had been adopted before the mission. 36 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE which constrains senior management’s ability to focus model of the contemporary risk-managed regulatory on more strategic issues or on planning and organiza- compliance framework. tional performance. Existing organizational arrangements are The stated priorities and objectives of the CA to quite complex, with a range of operational border a modern customs administration require restruc- posts having inconsistent or duplicated practices. turing the existing organizational structure to align Moreover, there is no information system to monitor more closely with international best practices. There organizational performance. The lack of meaningful is significant opportunity to better align the organi- management information data is limiting the ability zational structure to make role and function clearer to develop a clear understanding of existing staffing or and align with established international practice. Due resource demands. A simplification of the reporting to unclear organization structure—with a mixture of and command structure, accompanied by appropri- overlapping geographical and functional account- ate delegation of authority and accountability is also abilities—decisions are centralized, including those necessary to improve organizational performance. regarding Customs operations. Given the inadequate The CA has a staff of about 7,800 regular level of organizational funding available, getting this employees, including 2162 officers. The proportion resource balance correct is crucial. The need to insti- of tertiary graduates or those with higher academic tutionalize contemporary “value adding” functional qualifications is unclear. Given the nature of contem- capacity such as risk-management, audit, and intel- porary customs administration, many of the technical ligence in the organizational structure, also makes skills and qualifications necessary to support a highly this a priority area for reform. Figure 22 illustrates a performing customs administration do not appear to Components of Regulatory Compliance Framework FIGURE 22:  Risk based procedures: Modification of Ayres and • Balance between control control and facilitation Braithwaite (1992) • Focus on identifying compliance and noncompliance enforcement pyramid Penalty • Information management focus Simplified procedures • • Prearrival assessment, clearance, and release Increased self assessment • • Real time intervention in high risk cases Formal warning Intervention by exception • • Post-transaction focus in majority of cases Reduced regulatory scrutiny • • Audits of industry systems and procedures Periodic payment arrangements • • Investigation where noncompliance suspected Persuasion Less onerous reporting requirements • Enforce noncompliance Reward compliance using administrative using administrative • Consultation and cooperation discretion discretion • Clear administrative guidelines Enforcement • Formal rulings and recognition • Education and awareness • Technical assistance Compliance assessment • Advice appeal mechanisms • Recognizes respective responsibilities Client service of government and industry • Provides for electronic communication • Establishes sanctions for noncompliers Legislative base • Enables flexibility and tailored solutions • Breaks nexus between goods and revenue liability Source: Widdowson David (2003), Managing Risk in the Customs Context, in Customs Modernization Handbook, Editors, Luc De Wulf and Jose B. Sokol, World Bank, Washington DC. Customs Administrationand Border Management 37 be present, and this is reflected in the organizational are levied to cover the full cost of services provided; structure. The current structure displays a relative however these charges may also contribute to inap- bias towards supervisory or administrative roles at propriate servicing policies and may not be used to the expense of operational and strategic management, support operations. where these technical skills are most necessary. Recent amendments to customs legislation are The strict hierarchical framework under the not sufficient for implementing WTO compatible organizational structure with promotion based procedures. While the creation of enabling legislation, on seniority rather than merit provides limited in itself, does not guarantee the implementation of flexibility in human resource management issues. new policies and procedures, without it no change is The reliance on non-commissioned staff also distorts possible. The issues regarding the adoption of GATT resource demands. It was suggested that total staffing (1994) Article 7 are a clear demonstration of this prob- establishment indicated a deficit of in excess of 5,000 lem. In this regard, and based on responses to ques- staff (2,000 in the officer class alone). Using standard tions obtained during the study, the Sudan Custom international benchmarks, it is difficult to identify a Act will need significant amendment to allow for the case for any additional staffing resources based on the adoption of contemporary practices and procedures. existing volumes and demands. The number of staff This view is supported by the findings of the WTO performing often redundant documentary checking TFA “National Implementation Plan” assessment and virtually 100 percent physical examinations with- (conducted by UNCTAD in March 2013) which out demonstrable results highlight this imbalance. identifies that for 11 of the 14 measures not imple- There are a number of other fundamental issues mented (where responsibility for implementation fall in the area of human resource management. The primarily to customs), implementation will require the most significant include: the necessity of updating the adoption of new or amendment of existing primary existing ethics and integrity programs to include trans- or subordinate legislation. parency issues; inadequate performance management practices; no appropriate mobility or staff rotation Customs Systems and Procedures policy (particularly in sensitive areas); undocumented job descriptions and duty statements; weakly defined The administration’s processes and procedures or inappropriate criteria for employment or promo- are characterized by a number of rather ineffec- tion; and insufficient focus on professional/technical tive operational activities. A lack of clearly defined development and publicized set of processes, along with excessive There are indications that important techni- human intervention in transaction processing, results cal infrastructure and resources (e.g. scanners) are in reduced transparency. Findings in relation to some not being used to their full potential because of key elements of customs procedures are detailed below. on-going support and maintenance issues linked to the U.S. sanctions imposed on the country. The Risk-based Compliance investment in such technical infrastructure needs to be accompanied by on-going support and maintenance The CA is trying to implement its border control contracts. It was not clear if the cause of the exist- responsibilities in the role of a traditional “gate- ing problems was a lack of funding or poor contract keeper,” a strategy that it is not well equipped management ability (or both), but regardless of the for nor is it seen as capable of achieving expected reason, using these resources to their full potential is outcomes. The existing control environment is based essential to achieving higher levels of organizational on a 100 percent real time documentary and physi- performance. It was noted that user services charges cal intervention in all transactions. While there is a 38 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE physical interaction with each transaction, the level Risk Management Process FIGURE 23:  of goods examination will vary based on personal Framework knowledge of the inspector. Given that there are few, if any, examples internationally where a 100 percent Establish the context inspection policy translates to 100 percent ”inspec- Monitor and review, compliance measurement tion” (consignment verification or validation) in an operational sense, it appears unlikely such practices Identify risks Communicate and consult result in the identification of many serious attempts at concealment, revenue evasion, or detection of prohibited goods. The only certain outcome is a lack Analysis risks of facilitation. It should be noted that some of these practices appear to be a direct result of requirements Assess & Prioritise risks to comply with government policy and do not neces- Risk assessment sarily reflect poorly on the strategic management of the CA or other border agencies. Treat risks The CA acknowledges that in adopting virtually 100 percent physical inspection it is not interven- Source: Risk-Based Compliance Management, World Bank 2012. ing in a systematic way. Even with a total inspection regime, there has to be some selectivity in the level of examination. Any examination of cargo for national assessment of the performance metrics associated with security objectives that is not driven by intelligence cargo examinations. These demonstrate that based (targeted), must involve a full search of all packages, on the current notional policy of 100 percent physi- which may take many hours to complete.29 Other cal examination, the volume of transactions and the border management agencies also need to be more number of examiners, it is simply not possible in the proactive in defining customs role and tasking CA time available to conduct a thorough examination.30 more specifically. The need to adopt risk-based com- Addressing the lack of an effective risk manage- pliance strategies is especially relevant in the area of ment policy requires fundamental changes to opera- standards and conformance (SSMO). tional activities. “Risk-management” is not a concept The inexistence of a functioning risk manage- that can simply be inserted into the clearance process. ment policy represents one of the key challenges for It requires a range of supporting operational activities the Sudanese custom system. Internationally there is and skills (profiling, analysis, audit, etc.) that funda- little evidence to demonstrate that meaningful border mentally change the compliance framework. A possible management reforms can be achieved without such a framework is depicted in Figure 23. Access to better risk-based compliance management approach. In this quality data, earlier in the transaction process is also instance it is also clear that in addition to improving essential. All of this would be a significant undertaking levels of trade facilitation, adopting advanced risk in the context of border management in Sudan. The management strategies would help improve border security outcomes by directing resources to inter- ventions in high-risk transactions. Previous studies 29 In a 100% examination environment, customs cannot afford to be shown to have “inspected’ a consignment that is later found to have by the World Bank have demonstrated that a lower contained prohibited or restricted goods. rate of inspection, as part of a risk-based targeting 30 While conducting a thorough examination is still a widely adopted practice, it has become less common in more advanced administrations. strategy, can actually result in increased detections by Risk management has also been shown to lead to increased inspection being more effective. This position is based on a basic effectiveness and detection rates. Customs Administrationand Border Management 39 Customs Administration recognizes the importance of establishing an effective risk management policy and had participated in discussions with potential interna- tional donors, including the World Bank, with the aim of finalizing a technical assistance project. Inspection and Cargo Control The non-strategic use of non-intrusive inspection (NII) resources and the physical inspection environ- ment is a concern. The existing non-intrusive (scan- ning) inspection equipment is not utilized to its full potential and/or is not being used effectively. There are Cargo examinations: Soba dry-port. a number of units in existence and the CA would like more to cope with peak demand. The problem with this proposition is that due to the immense cost of such show that scanning is more effective in some circum- equipment it needs be used at close to full operational stances than others and the skill of the image analyst capacity before a case for additional resources can be can have a huge impact on results. If “scan” results are made. This is currently not the case. Business process inconclusive, the only option is to conduct a physical and practices (both by customs and the private sec- examination. Decisions on suitability to scan should tor) create significant peak demand periods, while at be made based on information available to customs other times the equipment lies idle. Equally concerning before scheduling scanning. Training of operators and is the reliance on scanning, even when the inspection image analysts also needs improvement to achieve to be performed is beyond the technical capability of greater effectiveness of these valuable resources. the equipment and/or the skill of the image analyst.31 Physical examinations are carried out in inap- Previous internal assessments by the CA had propriate conditions. Inspection operations observed identified that scanning was not very effective in the at both Port Sudan and Soba highlighted an environ- case of mixed loads.32 Yet, lessons from other countries ment that was not conducive to maximizing detec- tions, speed of operations, or the quality of goods. Most examinations appear to be carried out on the bare ground where the container is parked, with no hard-stands available. It was noted that these inspec- tion activities were also carried out in an environment that was not conducive to ensuring the “integrity” of the shipment, allowing for opportunities to undertake unauthorized interventions that result in additional security risks. Furthermore, a lack of inspection skills training and resources/equipment makes these inter- ventions less effective. 31 X-ray scanners have technical limits with regard to the nature and com- position of the goods being scanned, beyond which their use is limited. One of two scanners, Port Sudan. (NucTech, 6Mev, double-tunnel). 32 See the 2013 Time Release Study challenges. 40 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Effective control would require much more seemed to be the biggest concern and agreed-upon emphasis to be placed on data collection, manage- performance levels may assist in this area as much as ment, and analysis to better target both risk and in many other areas of customs operations. The ear- the need for physical intervention. Control is also lier DTIS noted delays of four months in receiving achieved by the physical presence of customs officers rebates. Interviews with the private sector identified stationed at all points of entry/exit to controlled areas. that this remained a serious problem. Several private While business processes are not perfectly aligned with sector representatives indicated that the administrative contemporary practices, the main issues concern risk burden and the lengthy delays in receiving the rebate assessment and targeting practices. This also contrib- eliminated any benefits. utes to high levels of discretion being adopted without the necessary accountability. Compliance manage- Customs Agents and the Licensing of ment practices are not well developed or implemented. Brokers A limited “Trusted Trader” or Authorized Economic Operators (AEO) trail is in preparation. The use of a customs broker is mandatory and Supported by technical assistance provided by the licenses are a valuable commodity. The brokering Jordanian customs administration, a basic AEO type community is well organized and most appeared well program is being prepared, with five traders identified versed in customs law. While a broker may techni- as participants. However, there is no supporting crite- cally subcontract or lease out his license, the licensee ria for determining eligibility or identify of potential remains responsible for all work products. Traders are benefits offered to participants. not permitted to use an in-house broker, but some may Some progress has been made in relation to retain the full time services of a licensed broker. There automated payments. There is one bank (Faisal is no concept of a corporate license, but some bro- Islamic Bank) now capable of making direct payments kers operate as a joint commercial entity. Individual from customers’ accounts to customs as part of a trail. licenses are also restricted to individual physical loca- To date some 200 importers (or their agents) have tions (for example, Port Sudan or Soba dry port), so utilized this facility, but delays persist, particularly clearance of an individual transaction may require the with the transfer of funds from importer to the agents services of more than one broker. In such cases brokers account to enable payment. Further work is needed to form either formal or ad hoc partnerships and agree on promote and encourage this business process. commercial terms, so as clients only deal with a single There is currently no post-clearance audit capa- entity. Fees appear generally agreed upon. bility. There appears to be a lack of awareness of how T he rules for obtaining a customs broker this function enables the application of risk-based license are freely available and transparent. The compliance management. As such, a complete audit significant majority (>90 percent) of brokers are for- strategy linked to risk identification and any compli- mer (retired) customs staff (and some from the police/ ance management strategy, is yet to be developed. military) and obtaining a license seems to form part of Traders, who cited delays in refunds and oner- what is best described as custom officials’ retirement ous administrative procedures, criticized the man- packages. There are other brokers who have qualified agement of rebates, remissions and exemptions. through years of relevant work experience and examina- While many of these complaints were more related tion. Brokers were eager to receive additional training to “industry policy” issues (what should be exempt), and capacity building, but were obviously somewhat there were legitimate issues surrounding the inter- hesitant to agree to the ending of their monopoly. pretation of policy (inconsistency) and the nature For customs valuation, reference values con- of administrative practices. Timeliness of payments tinue to be used as the predominant method of Customs Administrationand Border Management 41 determining customs value. Despite a commitment airfreight shipments. The Customs Administration to apply the provisions of Article 7 of the GATT is now preparing to upgrade ASYCUDA World to (1994) (WTO Valuation Agreement) and the intro- ensure its compatibility with the proposed National duction of legislation to achieve this, “transaction Single Window (NSW). The CA stated that the move- values” are for the most part ignored. Notionally, the ment to ASYCUDA World has improved cooperation Brussels Definition of Value (BDV) is applied. Current between agencies and reaffirmed their commitment legislative provisions are for the most part consistent to introducing a Single Window. Preliminary discus- with the requirements of Article 7 with one signifi- sions with potential NSW providers have taken place, cant exception. Appended to the legislation, which but no work on specific business requirements has appears for the most part to be a direct transcription taken place. of the relevant provisions of Article 7, is a four year Duplication of the electronic process with phasing-in provision that allows transaction pricing paper does not allow the full benefits of automation to be ignored where it may have “an adverse effect on to be realized. Hard copy documentation is still being the national economy.” used in parallel to the automated processes. Manual Reference values33 are used for every transaction checking of transaction data against prime documents where duty/tax is collected. The concept of “adverse is time consuming, unnecessary, and results in proce- effect” appears to be interpreted as needing to collect dures that are excessively complex and slow. Most of as much revenue as possible as if actual transaction these activities could be performed “post” transaction values could be determined, the amount collected and achieve the same result. Manual checking also would be the amount owed (the correct legally pay- leads to excessively high “query” rates by customs, able amount) and there would be no “adverse” effect as resulting in high volumes of transactions requiring such. So in practice, the provision is applied to ensure physical interaction with officials at this initial screen- the revenue collected is greater than that would be pay- ing point, thereby increasing delays. able under Article 7. While the same outcome could Maximizing ASYCUDA’s selectivity and target- be achieved in a more transparent fashion by simply ing capacity (risk management module) is seen as a increasing duty rates, the current practice encourages key modernization enabler. The ASYCUDA34 World and supports inappropriate practices and adds costs system is capable of delivering most of the organization’s and time to clearances. needs. Currently its capacity is not being fully utilized, According to customs managers, the need to especially in relation to the risk management module. use of reference values is due to excessive use of It could be used as leverage to facilitate many of the fraudulent values on invoices provided by import- other reforms necessary. A robust customs IT system ers, especially from certain countries. This practice with appropriate functionality is crucial to the effec- cannot be disputed. However, the existing policy of tive operations of any contemporary customs admin- using reference prices does not encourage traders to istration. It is therefore important to address issues comply with customs regulations. There is a percep- that prevent the full implementation of automated tion that to be competitive, some traders may try and processing of cross-border transactions. A full transi- manipulate the system (by undervaluation). tion to the ASYCUDA World platform (adopting full Sudan began the transition from ASYCUDA ++ modular systems functionality) could help address to ASYCUDA World in October 2011 and it is now many of the current deficiencies. operational at almost all entry points. Direct Trader Input (DTI) can now be entered remotely and funds 33 It is not clear how these reference values are determined, but no evi- dence of any objective methodology or commercially supplied databases can be transferred electronically. A trail of pre-arrival or subscriptions services were observed. manifest submission has been conducted on some 34 Adoption of the ASYCUDA “Transit’ module is also yet to take place. 42 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Transparency, Information, and engagement and agreement of all agencies involved in Communication Mechanisms regulatory control of cross-border shipments, whether responsibility for enforcement is delegated to Customs There is significant scope to improve transparency or not, has to be achieved to ensure reforms are imbed- and communication mechanisms. Most border ded, institutionalized, and are sustainable. management agencies have websites, but not all of Communication between the CA and its clients is the relevant information is made publically available. currently insufficient. There is currently limited com- GCA does make some relevant rules and regulations munication between the CA and the users, a situation available and there is a Gazette notification system in that prevents the CA from adequately addressing users’ place. Sudan Trade Point was established in 2001, but issues and concerns. Clients complain about the lack its full potential has not been realized. Establishing of public information on obligations, rights and how the appropriate regulatory framework could help to interact with the CA, and they claim that the CA turn Trade Point into a “Trade Information Portal” does not meet clients’ expectations in relation to trade which would facilitate the development of the NSW facilitation, specifically with regards to consistency, effi- by ensuring better agency coordination. ciency, and transparency. A greater focus on education Establishing a more accessible, informal (but and communication would assist in bridging this gap. binding) appeals and rulings mechanism would There is a long history of collaboration and help encourage greater compliance with custom cooperation with international institutions (par- procedures. A greater focus on education and com- ticularly the WCO) and regional administrations. munication would assist in improving transparency Yet, it remains unclear what the benefits of these are and accountability. The existing systems of appeals currently are. A more strategic approach (in relation to through the courts are not well utilized. the provision of technical assistance) to the manage- Given the current requirements for clear- ment of these relationships would help deliver more ance approvals by multiple agencies, any attempt meaningful and sustainable outcomes. improve levels of trade facilitation must also focus on an “Integrated Border Management” approach. Recommendations As indicated earlier in this report, the Customs Authority shares border responsibilities with other Continue to modernize and reform the CA, which national agencies, including SSMO, Ministry of will contribute to a reduction of trade costs. Further Agriculture & Irrigation, Ministry of Livestock & reforms are required for the CA to effectively com- Fisheries, Ministry of Health, Ministry of Information ply with the provisions of Article 7 of the GATT and Communications, and Ministry of Interior. (1994) on Customs Valuation. Re-engineering CA Coordination among these agencies is limited, with business processes and procedures are required to too many independent interventions taking place (in implement the WCO TKC and the recently con- many cases on a transaction-by-transaction basis), cluded WTO Agreement on Trade Facilitation. which can take many days to be completed. Too often Develop a Trade Information Portal to provide the relevant agency is not physically present at the a single point of access for all trade related regula- point of importation, and obtaining their approval can tions, forms and procedures required for importing be a time consuming task, particularly where labora- and exporting. A Trade Information Portal will pro- tory testing may be required. Relationships between mote interagency cooperation between all the agencies the CA and other border management agencies need involved at the border, transparency, and due process, to be strengthened and used more effectively to coordi- and will act as preparation for the commitment to nate an improved border management approach. The implement a National Single Window. Customs Administrationand Border Management 43 Revise the licensing requirements for clearing integrity. Corporate entities should also be eligible agents to promote increased efficiency. The crite- to apply for a customs clearing license and importers ria for customs clearing agents require updating to should have the right to self-clear. focus on the demonstration of professional skills and 45 TRANSPORT, TRANSIT, AND LOGISTICS SERVICES 5 Overview sector, reflected in the LPI scores on timeliness and tracking and tracing of shipments. The scores for both Sudan has a relatively low density of transport of these dimensions have declined over the past seven infrastructure when compared with other countries years. One possible explanation for the continued in Africa. The transport system in Sudan comprises all decline in timeliness and tracking of shipments is the main modes: road, rail, air, maritime, and inland linked to the weak and archaic regulatory framework waterway. The country has one major trade gateway, for logistics services. These weaknesses were identi- Port Sudan on the Red Sea, while road transport is fied in the original DTIS, in which several actions for the dominant mode of inland transport. This chapter reform were proposed. presents a diagnostic of the state and performance of Sudan has made some progress in implement- the country’s transport and logistics system. It focuses ing the logistics related actions identified in the on three main categories of issues: infrastructure, regu- 2008 DTIS. Some of the actions that were imple- lation, and services along with three main attributes of mented either fully or in part include: the develop- system performance, cost, time, and reliability. ment of a dry port at Garri, which is now one of the Chapter outline. The chapter starts with a com- two major dry ports in the country; the involvement parative assessment of Sudan’s logistics performance of a foreign operator in Port Sudan; and regulatory based on the Logistics Performance Index (LPI). This reforms to allow firms to provide clearing services. is followed by an evaluation of the performance of the main transport corridor that accounts for more than 90 percent of the international trade traffic, and then Sudan Logistics Performance, FIGURE 24:  presents the main emerging and unresolved issues 2007–2014 relating to each of the core components of the logis- LPI Score tics system: road, rail, inland water, and air transport, 4 and the quality of logistics services offered by the Timeliness 3 Customs private sector. The chapter concludes with recom- 2 mendations for improving the costs and efficiency of 1 logistics services. 0 Overall logistics performance in Sudan is low Tracking Infrastructure and even has deteriorated over the last five years & tracing (World Bank, 2014). All components of logistics services rank lower in 2014 than they did in 2007 (Figure 24). However, in theme-specific rankings Logistics International of the LPI the country’s logistics systems have made competence shipments some improvements since 2010, especially related to infrastructure and customs. The same is not the case, 2007 2010 2012 2014 though, for services typically provided by the private Source: Logistics Performance Index, 2014. 46 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE These interventions should contribute to an improved This is a multi-modal approach involving both the logistics performance. Still, reforms in port operations public and private sectors. at Garri have only started recently, while firms are Sudan needs to develop a comprehensive yet to be registered to provide clearing services. Also logistics strategy. The need for large investments in among significant developments was the establishment Sudan’s transport and logistics system, in inland ports, of a one-stop-shop in Port Sudan and also in Soba Dry railways, roads, and services presents an opportunity Port, where the various government agencies involved for a coherent, comprehensive logistics strategy. Poor in border management are co-located. coordination between modes and services increases costs and jeopardizes reliability. Yet there is great Transport and Logistics Strategy potential for seamless services. The bonded areas with customs facilities and rail access established by the Historically, the transport system in Sudan was large oil companies are a good example of what can be characterized by effective integration of the dif- achieved. There, logistics service providers are able to ferent modes in operation—ports, railways and offer services by railway from the port to the bonded inland water transport—but modes are currently facility, using through-bills of lading. Systems put in not integrated. Since 1977 the level of integration place for such facilities can serve as a blueprint for the has declined and each mode has evolved separately. wider market, just as other systems for expedited clear- Currently, road transport dominates the transport ance that have been designed for humanitarian traffic. scene, while other modes have declined in impor- Some of the building blocks for an integrated tance and now only have niches in the market. Over logistics system are already in place. The main plank the past three decades the deterioration in modal is the National Transport Master Plan. However, coordination within the Sudanese transport system the infrastructure investments it defines need to be has resulted in services becoming fragmented with complemented with intermodal services to increase some key nodes such as dry ports emerging more for efficiency. There are a number of ports, including dry regulatory controls, rather than for mode interfaces ports, free zones, railway stations, and highways, but at a minimum and value addition as logistics plat- only a limited supply of intermodal services exists. forms when well planned. Only Garri seems to be For example, although the private sector expects the playing the latter role. There is considerable oppor- railways to be a preferred mode, weak intermodal tunity for enhancing the intermodal optimization logistics service does not allow the railways to compete of investments with transport by truck. Large firms such as ones in The Transport Master Plan, jointly developed the oil industry may be able to invest in building their between the Ministry of Finance and National own facilities to secure their supply chain, but most Economy and the Ministry of Transport, Road, and of the businesses in Sudan cannot afford to invest in Bridges, addresses the challenge of integrating the costly transport and logistics infrastructure out of their different modes. In several low- and middle-income pockets. As Sudan aims to diversify its economy, the countries the provision of infrastructure is rationalized support for intermodal transport services, particularly across various modes and services, so as to provide in connecting existing transport modes, becomes an integrated system able to serve different market imperative to bring products to markets. requirements. Current and emerging supply chain Infrastructure investments in Sudan’s transport needs often form the basis for well-defined logistics system need to be complemented with policy and strategies. A logistics strategy would seek to address regulatory interventions to better integrate logistics apparent bottlenecks in the system and would include services. Currently, each of the government agencies trade-related infrastructure, services and regulations. responsible for different modes of transport has their Transport, Transit, and Logistics Services 47 own investment plan. Such plans can be better coor- Distribution of Traffic: Port Sudan FIGURE 25:  dinated with an emphasis on intermodal interfaces. and Khartoum (2013) Importantly, this coordination is much more about Port Sudan institutional arrangements for co-production of plans 5.8m tonnes as it is about the actual investments.35 Fortunately, Sudan has in place multi-stakeholder groups work- Port Sudan (local) Khartoum and beyond ing on logistics related initiatives, which could be 0.4m tonnes 5.3m tonnes expanded and given a wider mandate. Two of the most relevant groups are a committee working on the Rail Road introduction of a national single window system and 0.5m tonnes 4.8m tonnes a technical committee in the Ministry of Trade that focuses on transport investments. Direct delivery ICDs Direct delivery 0.4m tonnes 4.1m tonnes 0.8 m tonnes Transport Corridors Source: World Bank staff own compilation, based on local data obtained in January 2014. In 2012 Port Sudan handled some 5.8 million tonnes of imports, most of which were destined quantity is transported by rail. Figure 25 shows the for Sudan. More than 90 percent of Sudan’s inter- modal split of import traffic as it moves between the national trade traffic passes through Port Sudan. In port and the major economic centers and clearance view of the importance of Port Sudan as a gateway points in Sudan, and Table 8 shows the comparative to the region and the world a more detailed review costs per ton kilometer and transit times. in contained in Appendix 3. Data from Sudan Ports The mode split of traffic over the inland trans- Corporation show that traffic volumes through Port port system is determined by cost and the quality Sudan were growing strongly up until 2009/10 and of service of each mode. Road transport is by far the then fell significantly in 2011. Volume rose from 4.7 dominant mode, even though direct costs from rail and million tonnes in 2008 to 5.4 million tonnes in 2009 inland water transport could be lower. However, a more (+16 percent) but then fell by more than a quarter to comprehensive measure of costs that also includes the 4 million tonnes in 2011, explained to a large extent cost of longer transit times and poor reliability suggest by the separation of South Sudan. However, since then that costs from these latter two modes are higher than traffic volume have started recovering, albeit slowly. for road transport. The total cost is therefore in part More than 90 percent of the landed volume moves inland, mostly to Khartoum and a few cen- 35 For instance a logistics strategy would be best placed to advise on how ters to the south and west. The majority of the traf- to respond to the request of the road transport union to reduce corporate fic is transported by road transport, while a smaller tax from the current 15 percent to 10 percent. TABLE 8: Comparative Costs of Different Modes of Transport Mode Distance (kilometers) Transit time (hours) Price (SDG/tonne/km) Road - Khartoum to Kosti 314 4 0.166 IWT: Kosti to Juba 1,486 0.559 Rail: Port Sudan – Khartoum 787 60 0.059 Source: Author’s own compilation, based on local data obtained in January 2014. 48 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE explained by the higher fixed costs and lower volumes Improving the regulatory regime for logistics of traffic carried by the two modes of transport. services promises to deliver significant efficiency Efficiency on the trade corridor between Port gains. The National Transport Master Plan in 2010 Sudan and Khartoum is a key determinant of estimated that the cost of logistics is very high, equiva- overall logistics performance of the country as it lent to 25–35 percent of GDP compared to 10–15 accounts for more than 90 percent of cargo handled percent for middle- and high-income countries. The through Port Sudan. The Port Sudan–Khartoum current regimes impose a high cost burden on logistics Corridor (PSKC) is comprised of road and rail links, service providers and the trading community. There a pipeline for petroleum products, and air transport are two main issues that need to be addressed in order services. The DTIS assessment focused on the move- to modernize Sudan’s logistics services and both are ment of goods traffic, as this is the most critical to regulatory: the first on market access, and the other trade competitiveness. on operational responsibilities. Traffic volume is one of the most useful indi- While trade logistics is an industry where cators of performance of a transport corridor and economies of scale can play a major role in cutting the transport and logistics sector within a country. costs and improving services, in Sudan restrictions Volume helps in measuring transport system capacity on market access result in a logistics system that is utilization and assessing any potential bottlenecks as dominated by small-scale operators. The main rea- a result of limits imposed by physical infrastructure sons for the prevalence of small scale operators include: and the productivity of cargo-handling operations.  The logistics services sector is regulated by Volume also helps identify opportunities for invest- multiple government agencies or ministries ment in infrastructure and logistics services. under a wide range of laws and regulations. The Sudan logistics system is not currently Customs clearing agents are under the control of operating at full capacity. As a result of the con- customs while trucks are registered in states but traction in international trade volumes on the Port issued a license for the carriage of international Sudan and Khartoum corridor, the overall logistics trade traffic by the Land Transport Unit under system of Sudan appears to have spare capacity across the Ministry of Transport, Roads, and Bridges. all modes of transport used for international carriage Also, a Clearing Agent License can only be issued of goods (seaports, railways, road, river, and air) and to an individual and not to a company while the most logistics services. Land Transport Unit (LTU) is, in essence, issuing a permit for a vehicle and is not required by law Logistics Services to oversee the organization of the trucking sector, only its capacity. The provision of logistics services typically involves  The regulations governing logistics services are customs clearing agents, trucking enterprises, and not easily accessible or transparent. Logistics forwarding and warehousing services. In some service providers in the private sector do not have countries, there are consolidated frameworks for regu- a clear understanding of the regulations. When lating these various businesses. However, the logistics prompted for views during the DTIS main mis- service market in Sudan is fragmented. A weakness in sion, indeed there were quite divergent responses. the regulatory regime for logistics services can induce For example, a number of providers understood inefficiencies and increase trade cost. This section that a minimum fleet size of five vehicles was looks into why the logistics service industry has been required to establish a trucking firm while others so fragmented, and what influence this fragmentation stated there is no requirement on minimum assets. has on logistics performance and efficiency. Information on transport related regulations is Transport, Transit, and Logistics Services 49 not clear and not readily accessible to logistics regulations to encourage increased participation service providers. by foreign logistics providers, with their links to  Specialist areas of logistics remain unregulated. regional and global supply chains will assist in For example, although several firms in Sudan improving connectivity and enhancing competi- provide freight forwarding services there is no tiveness. The trucking bubble of the last few years law that recognizes freight forwarding as a busi- probably has discouraged entry by foreign operators. ness. The firms use their international networks Foreign operators may have difficulty building a and other licenses (such as trucking) to provide network for business partnership, and without such freight forwarding services such as booking vessel a network it is difficult to survive in the fragmented space, issuing bills of lading, and related activi- regulatory regime. But again, foreign operators could ties. In addition, existing regulations do not cover bring their international network and experience to issues around the transfer of liability in a transport the Sudanese transport industry. So their participation chain. This is left to individual firms to agree with in the logistics service industry would be beneficial in their partners on how this will be handled and, as the medium and long term. a result, logistics service providers put a premium The highly fragmented logistics sector results on some services or take out additional insurance in a premium being placed on the management to cover potential losses. of liability for the risks faced during shipment. Barriers to entry in the logistics sector protect Standard practice is to rely on credibility between domestic providers. The dominance of small scale transport business partners rather than service quality. and individuals as service providers might appear This may be one of the reasons that laws do not rein- to suggest an industry with low barriers to entry. force control on operations. Normally, once a truck is However, some of the requirements raise the barriers loaded, liability should be valid for the entire journey to entry. For instance, foreign investment in logistics up to a delivery point. But in Sudan it is not clear who services is allowed but only under restrictive condi- takes out risk insurance, and owners of goods often tions. The National Investment Encouragement Act have to make their own arrangements at high cost and 1999 (amended in 2003, 2007, and 2013) prohibits on a shipment-to-shipment basis. discrimination against foreign capitals. The new act In the majority of trucking service contracts, in 2013 allows foreign and domestic private entities logistics service providers take liability and to establish and own business enterprises, to repatri- arrange insurance by themselves. The insurance ate capital and profits, with the condition of opening charges are often added to their freight price. an investment account at the Central Bank of Sudan Logistics services providers have coped with the lack (CBOS) before entering into business.36 However, of regulations on liability, taking full responsibility there are restrictions to foreign equity ownership in for the shipments at their own cost. Also, the cur- service industries, including railway freight trans- rent insurance scheme does not encourage trucking portation and airport operations. Trucking compa- operators to improve the quality of transport services nies are not supposed to be under this restriction, since trucking companies rely on insurance prepared but effectively they are. Likewise, foreigners cannot by logistics service providers, which is not a direct obtain a clearing agent license. Yet, local logistics ser- cost for trucking companies. vice providers clearly recognize that foreign investors Sudan regulations do not define logistics ser- would enhance the capabilities of Sudanese service vices adequately and are lacking some important providers. Foreign transport operators do not play a prominent role in Sudan. Reforming the 36 US Department of State 2013 Investment Climate Statement – Sudan. 50 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE other elements. The regulations found in the logistics At the same time, there are restrictive quali- services are i) the regulations of customs clearance fication requirements to obtain a clearing agent (2012) and the Customs Act (amended in 2010), license. First, obtaining a license requires substantial and ii) the regulation on organizing the work on land experience in the customs field with an individual transport (1992). Neither of these regulations defines needing at least 20 years of experience. As a result logistics very well. The laws do not reference logistics the majority of clearing agents are ex-customs officers services. In addition, there are no self-regulations and there are only a couple of companies that have voluntarily prepared by the industry. The regulations a corporate clearing license.37 Second, only Sudanese describing the licensing requirements covering cus- nationals may receive a license. As a result, it is impos- toms clearance and land transport (i.e., logistics service sible for private companies to apply for the clearing business) do not address liability issues nor stipulate agent license although the customs regulation enacted a minimum capital requirement. Regulations refer to in 2012 allows companies to be granted a license.38 the qualifications of agents, physical address, and taxa- With this present licensing system, the private logistics tion (in the new investment act), but do not define a service providers hire clearing agents in each customs required minimum capital. In theory, anyone can start location to handle their clients’ shipments. In addi- a trucking business once the vehicle is registered. This tion, as a prerequisite to apply for a license, a company covers the minimum capital to buy a truck but does should be a member of the union of clearing agents. not deal with liability insurance to enable transport As a result, the existing licensing regime for operators to cover accidental losses. clearing agents functions as a significant barrier to the emergence of modern logistics operations, Clearing and Forwarding Services where operators may want to offer door-to-door ser- vices. A licensing regime that is limited to individuals There is no licensing regime for clearing and for- prevents corporate entities from establishing seamless warding services—a core service in modern logis- and quality logistics services. Even more so, arranging tics. In order to facilitate door-to-door service, clearing subcontracts with other agents increases the overall agents handle customs clearance processes and arrange costs of services and has a negative impact on reli- land transport to a final destination or to a warehous- ability and accountability. ing facility. The providers of these logistics services can The prevalence of mostly one person opera- be individuals or corporate entities. tions, clearing agents, and logistics service pro- Customs clearing agents are licensed as indi- vider’s limits their ability to provide internationally viduals by customs. Currently, there are over 1,000 competitive logistics facilities and services, because licensed clearing agents in the main centers with 460 they are unable to realize the economies of scale in Port Sudan and 630 in the Khartoum area. Each that reduce costs and encourage increased invest- agent is registered to operate at a specific location, ment. Only a few large logistics companies are able such as Khartoum (including Garri Free Zoon and to build their own facilities. The rest, a large share Soba Inland Container Depot), Khartoum airport of the market, utilize infrastructure and space in the (exclusive), and Port Sudan (including Red Sea Free free zones for temporary warehousing and for value Zone). Since one agent can have only one location to added services. Sudan has two Free Zones managed work, agents in the different locations collaborate with others at different locations in order to provide coordi- nated services for the same client. Individual clearing 37 Companies that specialize in providing logistics services for specific commodities have a clearing license with the names of companies. agents have built a network of partners through social 38 Regulations for Customs Clearance process for the year 2012, The networks, which so far, seems to be working well. General Directorate of Customs. Transport, Transit, and Logistics Services 51 by The Sudanese Free Zones & Markets Co, Ltd.: social network. The clearing agents have a paper Red Sea Free Zone (26 sq km) in Suakin, and Al contract or only a verbal communication to entrust Gaili (Garri) Free Zone (20 sq km), 60 km North of subcontractors with a trucking service. Since there is Khartoum. According to users of the free zones, the often a long-standing business partnership between warehouses are well equipped and secure. Therefore, the agent and the subcontractor, the agents can pro- it is more efficient to use the free zones than building vide their clients with reliable trucking services. costly infrastructure. Garri Free Zone, for instance, Notwithstanding the fragmented structure of provides spaces for tenants to allow simple repackag- trucking services, the price of transport between ing and processing activities. Port Sudan and Khartoum may be considered competitive. Generally speaking, a round-trip cost Trucking Services for a 40-feet container is around US$1,000–1,500 plus VAT. Since most of the containers coming from Trucking is the main mode of transport in Sudan. Khartoum are empty, the transport cost is always lev- Customs clearing agents and private logistics com- ied for a round trip, which takes one and one-half to panies work with trucking companies to arrange two days. Now that the trucking bubble has ended, transportation on behalf of traders. As a result of the freight prices have become more competitive. deterioration of railway services over the years, more A national authority, the Land Transport Unit than 90 percent of goods are carried by road trans- (LTU) of the Ministry of Transport, regulates the port. The most common vehicle configuration is one trucking industry in a broader sense, in conjunc- that has two trailers and is capable of carrying two tion with state level supervision. The LTU has seven forty-foot containers. Three different logistics service offices across the country, all of which can process providers with widespread subcontracting dominate vehicle registrations. There are three steps to obtain a trucking services. permit for trucking business: There are three modes in providing truck- (1) Complete a registration at a state traffic ing services. First, relatively big logistics companies authority; (2) Arrange insurance for vehicles; and possess their own fleets and drivers. This is the most (3) Join the Transportation Union of Chambers. comprehensive way to manage whole logistics services (required for all corporate entities). under their control. Second, non-asset logistics service Only the LTU can issue an ID for each vehicle providers have contracts with their clients to arrange once these three steps are completed. The ID should trucking services; these companies have a subcontract be renewed annually. In principle, anyone can start a with trucking companies that owns fleets or hires trucking business if they have a truck, and those with individuals (not corporate) so that the companies are at least 10 trucks (five trucks for petroleum trucks), still able to provide a series of logistics services with can be register a company.39 Although a physical ID principle contracts with clients. For subcontracting, comes from the LTU, logistics service providers con- a paper contract is prepared between logistics service sider the state traffic authorities as a regulator, as there providers and subcontractors, which describes the is no clear enforcement on transport operations at the subcontractor’s responsibility to carry goods. The non- national level. asset logistics service providers tend to have unique Strictly speaking, the permit from the LTU criteria to meet the service quality expected from their is not a transport business license; rather, it is clients. Third, clearing agents make a contract with a registration for a vehicle. The LTU counts the their clients and contract out for trucking service to number of registered vehicles but does not have a individual truck drivers or trucking companies. The subcontracting by clearing agents is based on their 39 Source: the Union of Chambers of Commerce. 52 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE TABLE 9: Annual Absorptive Capacity for Members by Chamber Annual capacity* [Port Sudan The Chambers No. of means of transport Average Capacity tons – Khartoum] (million tonnes) Heavy Trucks 16,000 65 49.9 Petroleum and liquid 1,929 55 5 transport Lorries and trucks 30,000 10.8 Railways 600 cars 30 0.6 Source: World Bank staff own compilation, based on local data obtained in January 2014. *Note: Based on four trips per month; 48 trips per year, average registration system of trucking operators. Therefore, The absence of a requirement to register trans- while the number of vehicles registered can be deter- port operators makes regulating the trucking mined, it is difficult to get an accurate number of industry very difficult. One consequence may be an transport operators in Sudan. In 2014, there were inability to smooth the businesses through economic 17,000 double trailer vehicles (capable of carrying cycles. In fact, as Sudan has already experienced over two 40 ft. containers) and 56,000 vehicles (for 20 ft. the last several years, the trucking sector went through containers) registered at the LTU in Khartoum. On a boom and bust cycle (Box 1). the other hand, data from the Union of Chambers of Transportation suggest there were 151 private com- Inland Container Depots panies or individuals who are currently the members of the union. In addition, the union estimated that Dry port facilities have the potential to facilitate the about 2,000 individual truckers operating although transfer of cargo throughout the country. Shipping they are not the members. Figure 26 shows the num- lines can designate a dry port as the final destination of bers of vehicles owned by the members at the Union, the cargo and assume responsibility for transshipping which can provide a sense of size of transport industry. the cargo at seaports in neighboring countries. A dry port can therefore become the node for fast customs clearance and trans-loading of cargo. Trucking Fleet Capacity FIGURE 26:  Efficient Inland Container Depots (ICD) must Utilization streamline and minimize procedural requirements. 50,000 One way the requirements can be minimized is by 40,000 sharing information between the first point of entry (vessel notice and cargo manifest in the case of over- 30,000 seas imports) up to the dry port (import declaration 20,000 documents). Streamlining information requirements requires optimization and non-duplication of pro- 10,000 cesses between the seaport and the dry port. In many 0 instances, it is necessary to have appropriate legal 2006 2007 2008 2009 2010 2011 instruments in place covering the set of agreed upon Total tonnage of available Trucks Total freight actually transported procedures and the transit regime for the transmission Source: The Union of Chambers of Transportation. of information between point of first entry and place * Freight data for 2010 and 2011 were not provided. of final clearance. Under these circumstances, data Transport, Transit, and Logistics Services 53 BOX 1: The Trucking Industry “Bubble” in Sudan The Sudan trucking industry went through a boom and bust cycle over the past decade. In 2005, there were about 4,000 trucks registered at the Union of Chambers of Transportation. The freight was US$75–80/tonne on average in the trucking industry. At that time, the government took an initiative to promote the trucking industry. The government and the Central Bank of Sudan (CBS) supported the sector by providing loans for individuals to purchase trucks. As a result of this initiative many trucks were purchased and introduced into the market. The number of registered trucks jumped to 22,000 by the end of 2007, which translated into an estimated capacity of eight million tonnes per year. However, demand did not change much over the same period and consequently, there was an excess of supply of trucks that led to a drop in the transport prices. By 2007 the price of freight had fallen to less than US$30/tonne on average. The problems faced were compounded by sanctions that increased the costs to the operators for obtaining imported spare parts. As a result, many small trucking enterprises were not able to sustain their operations and went out of business. Since then the sector has stabilized at a lower level of supply. The number of operators registered with the Union has fallen back to 151 after having risen from 60 in 2005 to 260 between 2007 and 2009. The current level of supply is despite the continuation of some of the incentives to expand the trucking sector in the form of a tax exemption. Imports of 10 trucks or more are exempt from the duty payment and the operator benefits from a three-year income tax exemption. For 50 trucks or more trucks, in addition to the duty exemption, the operators are also exempt from paying income tax for 10 years. interchange between border agencies, especially cus- Railways, which has a dedicated container railway ser- toms, is critical to prepare and expedite border formali- vice. The dry port is undergoing some developments to ties. Current transit regimes would seem well suited improve security (through installation of close circuit to exploiting the benefits of a dry port. Presently, the television). However it still requires paving and addi- functional dry ports in Sudan are operated by customs. tional inspection sheds. Goods are currently exposed Sudan has five inland container depots at Soba, to dust and work has to stop when it is raining. Kosti, Garri, Al Gedaref, Madani and Al Obaied. Growth of Soba is constrained by the access Goods imported through Port Sudan can be trans- of trucks from outside Khartoum. Presently Soba ported under bond in transit to the dry ports of ICDs handles up to 90 declarations per day. In 2013 the dry as well as to the numerous privately owned bonded port handled a total of 394,285 TEUs. The clearance warehouses in the country. Of the five, the Soba Dry process is reported to take about three days while the Port is the largest, followed by Garri, which is growing landed cost of goods passing through the dry port is strongly as a destination and customs clearance node reported to be higher than goods cleared in Port Sudan. in the logistics system. Kosti had previously handled Soba provides for up to five days of free storage, with an significant volumes of traffic when the International excess time charged on the basis of weight. The main Warehouse Tracking (IWT) system was operating. It constraint is access to the dry port for trucks coming therefore still has potential, once the impediments to from outside Khartoum—the daytime ban on trucks IWT operations are removed. means all trucks arrive in the early hours of the morn- Soba Dry Port located some 10km from ing and most of the cargo clearance is in the morning Khartoum is the largest and oldest dry port in period. The dry port sees low volumes of activity for Sudan’s logistics infrastructure. Containers are trans- most of the day. The authorities have proposed to build ported under bond from Port Sudan to the dry port a new dry port to the north of Khartoum, which would where customs clearance takes place. Presently the dry not be affected by the daytime ban on trucks. port is connected only by road to Port Sudan since Garri Free Zone is increasingly replacing the use the railway line is not operational. In other countries, of private warehouses. Located some 70km to the railways provide the most efficient connectivity to dry north of Khartoum, Garri is an integrated facility that ports and in India the dry ports are operated by Indian includes a dry port as well as enterprises involved in 54 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE manufacturing, packing and packaging, and financial ii) Khartoum-Medani-Gedarif-Kassala-Haiaya-Port services. The dry port facility has grown to serve these Sudan, which is 1191 km long. These two main and other industries and many importers prefer the routes are in generally good condition. Both routes free zone as goods can be kept for extended periods have toll stations, seven on the first and nine on the without payment of import duties and taxes. It is used second one. The tolls are charged at a rate of 0.00342 also for the consolidation of exports. Current rates for SDG per tonne per kilometer. This rate has not been imports to Garri Free Zone, excluding VAT, are SDG revised since 2008, ostensibly to keep costs low and 6,000 for a 20ft container and SDG 8,000 for a 40 ft. promote trade competitiveness. However, as the cur- one while transit time is 48 hours. rent toll rate does not seem to be enough to generate Kosti Dry Port was built by the state-owned sufficient revenue for the National Highway Authority Sea Ports Corporation to speed up the transport (NHA) to maintain the trunk road network in the of goods from Port Sudan to the South, now South country in a good condition, a more detailed analysis Sudan. It was launched in 2005, though operations on the condition of the core network along the major began only in 2009. It was expected to handle material trade corridors is required. with a final destination in the South, which would be An operational practice that has serious rami- transported to Kosti’s dry port for customs clearance, fications for the rest of the road transport based inspection, and storage when the dry port becomes logistics system is a restriction on trucks entering operational. The facility has an area of two million Khartoum for 18 hours each day. Trucks are allowed square meters with a capacity of 150,000 containers. only between midnight and 6 am. The restriction The regulatory regime for clearing agents con- means trucks are parked outside the city for most of tributes to slower clearance times. The procedure the day before they can deliver goods or access the Soba for cargo cleared at inland facilities (especially the Dry Port. As a result, the Dry Port itself receives traffic dry ports), requires all cargo to be scanned in Port only very early each morning. Ideally there should be Sudan prior to leaving the port. The clearing agents continuous traffic flow to reduce the cost of moving then work with the importer to put up a bond, which goods and increase the utilization of vehicles. can be done anywhere in the country. The bond is equivalent to 125 percent of the applicable duties and Railway Logistics taxes for which typically, the importer pays insurance at a premium of 0.5 percent. The agent who will do At 4,578 km, Sudan has the most extensive railway final clearance inland works with a counterpart at network in Africa, after South Africa. It is a single Port Sudan. One of the implications of a regulatory track Cape gauge network whose construction started regime that allows only individuals to work as clearing in the 1890s. The railway’s main route extends from agents is that most do not have the capital to handle Port Sudan via Atbara to Khartoum with an alternate the bond and other payments. Invariably, they engage link between Haya and Sennar via Kassala. It has with the importer at all stages that require payment. branch lines to the north to Karima and Wadi Halfa, and more recent extensions added in the 1990s were Modes of Transport for transportation of Sudanese crude oil between El Mujlad and Abu Jabra and between the refinery in Road transport is the most important mode of Abu Khiraiz and El Obeid station and between Merwi transport for the movement of Sudan’s interna- Dam and El Ban. tional trade traffic. There are two alternative routes The railways in Sudan have historically had a that are part of the PSKC: i) Khartoum-Atbara- near monopoly on inland transportation. This is Haiaya-Port Sudan, which is 794 km long and; true especially in the important PSKC, which connects Transport, Transit, and Logistics Services 55 the country’s only deep-water port with the capital and Railways Corporation (SRC) carried about 0.5m the rest of the country. In fact, the transport system tonnes while the rest was carried by road. Currently, was, until the 1970s, organized around the railways, it is now apparent that SRC is playing a small and with both the seaports and river transport being part declining role in the movement of international trade of the same entity as the railways. The three were sepa- traffic in the country. The railway system suffers from rated in the late 1970s, which is also the time when numerous problems, especially poor condition of track traffic volumes carried by rail started to decline, except infrastructure and poor availability of locomotives and for a brief period in the early 1990s (Figure 27). rolling stock. SRC, together with Sudan Airways, seem But the railways have suffered from a vicious to be among the agencies most affected by sanctions cycle where they have lost traffic due to declining on the country. They are not able to obtain spare parts performance caused in part by competition from for some of the equipment including locomotives road transport which in turn resulted in even and planes. poorer performance of the railways. Government For the railways, the problems have been policy to encourage growth road transport caused the compounded by increased competition from road initial loss of traffic. Most new roads were constructed transport (while road transport costs more at 7,000 on routes parallel to railway lines on the Khartoum- SDG for a 40ft container between Port Sudan and Port Sudan, Wad Medani-Sennar-Kosti routes; also, Khartoum and rail 1,500 SDG for the same, road import duties on trucks were reduced to promote takes 48 hours while rail takes more 60 hours and is expansion of road transport. However, the government less reliable). See Table 10. As a result, SRC has been still sees the railways continuing to play a significant losing traffic for the past two decades. While there has role in transport of agricultural produce and other been the occasional increase in traffic, the overall trend low value commodities that move in large volume has been downward. Yet, the private sector associations over great distances. Sudan’s exports in the future, and private companies maintain that if the system therefore, appear to be adapted to railway transport. were to be improved then they would definitely use Nowadays less than one-fifth of traffic on the rail, because it is cheaper for the distances over which PSKC is carried by railway. Out of the approximately cargo is carried in Sudan (typically more than 700km). 3.8m tonnes of traffic on the PSKC in 2012 Sudan An efficient rail network would generally be more FIGURE 27: Traffic Volume Carried by Rail, 1961–2013 1,800,000 1,600,000 Traffic volume in tonnes 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Exports Imports Source: NTMP 2010. 56 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE TABLE 10: Time Comparison (40-feet Container; Port Sudan – Khartoum) Operation Truck (hours) Rail (hours) Loading onto vehicle/wagon 2 12 Transport 10 17 Unloading from vehicle/wagon 2 6 Trucking to destination 0 2 Total 14 37 Source: NTMP 2010. cost effective for shipments over 400km.The absence mean the total costs of services begin to approach of a reliable and cost-effective rail system increases those of road transport, making the mode even less transport costs for importers and exporters in Sudan. attractive. Historically, the section between Kosti and Juba Inland Water Transport has been the most heavily trafficked portion of the IWT network in Sudan. The system has been used Sudan has an extensive, though not continuously to carry heavy break bulk goods, especially between navigable, inland waterway that has significant Kosti and Malakal, Bor and Juba. For instance most of potential to provide a low cost and environmentally the traffic at Kosti River port is primarily foodstuffs, friendly transport service. The water way is formed cement, fuel, and sugar, the bulk of which are destined by the navigable sections of the Nile River, from Kosti for South Sudan (Table 11). going south to Juba in South Sudan (extending over IWT not significant for the movement of goods. 1,435km) and Karima to Dongola connecting to The volume of traffic using inland water transport has Egypt (330km). However, the waterway is normally historically never exceeded 300,000 tonnes and the navigable from July up until March. Waterweeds can highest volume in recent years was just over 120,000 be problematic between Malakal and Juba, slowing tonnes in 2010 (Figure 28). Presently, the only opera- down and damaging barge propellers. tional river transport is the ferry service for passengers Inland water transport (IWT) has not fared in the northern reach of the Nile River to Egypt. The well due to competition from road transport, which Nile Valley Navigation Transport Corporation, a is much faster and able to provide door-to-door Sudanese-Egyptian joint venture ferry service, oper- services. North of Kosti to Khartoum and beyond, ates one passenger ferry per week between Asuwan and the river has several sections that are shallow thereby, Wadi Halfa. It usually takes 16 to 24 hours. Traffic restricting the carriage of goods by barges. This poses on this section is comprised mainly of passengers and an interruption in flow, in a part of the national limited goods for trade. transport system that generates significant demand. The greatest potential for IWT still lies in traf- Continuing improvements to the road infrastructure fic to South Sudan. However, similar to the other are further eroding the competitiveness of inland modes of transport, traffic volume went down after the water transport services. Recently, a road connection secession of South Sudan in 2011, but fell even more between Sudan and Egypt (Qustul- Adendan- Wadi sharply at the outbreak of instability in the South, halfa 350 km) was inaugurated in May 201340 and is and was only 8,000 tonnes in 2012. Starting in late expected to dramatically reduce the cargo volume car- 2013 all river transport to South Sudan stopped. The ried by river transport. There is in fact a vicious cycle where the low volumes using inland water transport 40 http://allafrica.com/stories/201305200148.html. Transport, Transit, and Logistics Services 57 TABLE 11: Comparison of Traffic since Privatization in 2008 Cargo / goods Kosti to Juba Juba to Kosti Kosti to Malakal General Cargo (tons) 6,434 8,562 1,255 721 5,538 7,746 Dry bulk (tons) 0 4 0 0 456 1,078 Liquid bulk (tons) 1,519 3,223 0 0 1,045 461 Total Goods (tons) 7,953 11,789 1,255 721 7,039 9,915 Passengers 398 481 355 548 10 19 Source: NTMP 2010. FIGURE 28:  IWT Traffic Volume in Sudan, interventions have been proposed to revive the inland 2005–2012 water transport system, especially in South Sudan. 140 These include the provision of container handling Traffic volume on IWT, '000 tonnes 120 facilities, emergency rehabilitation at old Kosti port, 100 concessioning the new Kosti port, new infrastructure at Juba, and studies on dredging, navigation, and 80 river hydrography. Sudan has already taken significant 60 steps to improve IWT services through private sector 40 participation. 20 Recent reforms in allowing private sector firms 0 to provide inland waterway transport services pro- 2005 2006 2007 2008 2009 2010 2011 2012 vide a firm foundation for the future of the sector. Source: NTMP 2010. Up until 2007 core logistics services on the Nile were provided by a state enterprise, the River Transport prospects for IWT use in Sudan will continue to be Authority. The Authority was privatized in 2007 tied to economic and political cycles in South Sudan. resulting in the formation of the Nile River Transport For South Sudan IWT connectivity with Sudan is Company (NRTC). NRCT is 70 percent owned by important in the short and medium term as the low- the Aref Investment Group of Kuwait, 20 percent est cost means of transport for the northern part of by the Government of Sudan, and 10 percent by the the country. The limited coverage of road transport Government of South Sudan. The NRTC is the owner means the only other mode is air, which is much more and operator of the inland waterways infrastructure in expensive.41 Sudan under a 50-year lease. NRTC started operations Except for Kosti, most of the port infrastruc- in July 2008 when it bought the assets of RTC includ- ture of the inland water transport system has been ing the fleet and spare parts. It also signed a contract poorly maintained and is in poor condition. As a with an Egyptian firm to rehabilitate its entire fleet of river system, there is need for continuous dredging barges, including 17 push tugs (which have a capac- to remove silt. The need for dredging extends also to ity of 2,000 metric tons each) as well as numerous South Sudan. Juba port and the navigation channels smaller barges designed for carrying oil, dry goods, to the south all require dredging. There is also a lack of and passengers. One of its first major investments was navigation aids and handling equipment particularly to rehabilitate the facilities at Kosti. for containers. In general both the infrastructure and services require rehabilitation, as there are numer- 41 South Sudan: An Infrastructure Action Plan – Summary Report, ous vessels that are in a state of disrepair. Several 2013, AfDB. 58 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE TABLE 12: Time and Costs Associated with Transport within Sudan Route Mode of transport Time (days) Cost per tonne-km (US$) Khartoum–Malakal Road and river 7 75 Road 5 107 Khartoum–Juba Road and river 13.5 127 Road 7.5 Malakal–Juba River 2 270 Source: AICD calculations based on data from Yoshino and others 2009; UN Joint Logistics Centre (UNJLC) and Food and Agriculture Organiza- tion (FAO) 2005) and Keer-MISC (http://www.keer-misc.com), sited from South Sudan’s Infrastructure – Continental Perspective 2011, WB. In 2009, NRTC had 50 operational barges infrastructure and capacity for air exports. It has a at various stages of rehabilitation from the stock warehouse capable of accommodating 600 tonnes of inherited from RTC. The fleet included 13 pushers, exports and 120 tonnes of fresh produce. Space for plus four rehabilitated ones. It has an estimated total passengers is even more limited. Cargo throughput cargo capacity of 50,000 metric tons at that time.42 at Khartoum Airport has been on a general down- Prior to the closure of the routes to the South, traffic ward trend since 2007 except for a momentary volumes had been growing. pickup in 2011 (Table 13). Cargo volumes through The NRTC is not the only commercial operator the regional airports fell more significantly, from on the Nile as there are six other private operators close to 500,000 tonnes per year in 2008 to just of vessels,43 most with Egyptian capital. However, all over 20,000 tonnes in 2012. At Khartoum, cargo the others have ceased their operations, largely due to volume fell from 80,950 tonnes in 2007 to 37,780 the closure of the route to South Sudan. For instance, tonnes in 2012. the National Company for Multimodal transport The government is building a new airport some (NMT) of Egypt has engaged in river transport busi- 40km to the west of Khartoum. The new airport ness in Egypt, Sudan, and South Sudan. When it was is envisaged as a transportation hub to link Europe operational in Sudan, Keer Marine, private Sudanese and East and Southern Africa. It will have a runway river transport operator, was operating a fleet of barges long enough and infrastructure to handle the largest as well as ports in Sudan. The cessation of cross border aircraft in the world. The airport will have passenger transport between Sudan and South Sudan means capacity of 12 million per year and cargo warehouse the river transport service is only operational within space of 6,000m2 as well as a cold store with 500 South Sudan.44 tonne capacity. Presently, air transport is one of the sectors that Air Shipments seem most affected by international sanctions. The national airline, Sudan Airways is not able to maintain Sudan is connected by regional and international its whole fleet and has some aircraft grounded due to airlines to the key markets for fruit and vegetables lack of spare parts. Some of the international airlines and meat in the Middle East. There are eleven regional airports around the country, in addition to 42 River Cargo Transportation Assessment While Nile River Sudan, February 2009, UNJLC. the main air gateway of Khartoum Airport. Most 43 Sudan Interim Poverty Reduction Strategy Paper, No13/318, October of the international shipments by air pass through 2013, IMF. 44 Operated by a newly established Nile Barges for River Transport Khartoum, which account for more than half of Ltd, South Sudanese company. Source at http://nmt-eg.net/index.php/ the cargo volume. Khartoum airport has limited subsidiaries/nile-barges-sudan. Transport, Transit, and Logistics Services 59 TABLE 13: Cargo Volumes, 2007–2012 Khartoum Year Domestic International Regional Airports 2007 26,858 54,092 26,348 2008 25,086 50,084 452,581 2009 23,213 39,537 483,402 2010 20,866 32,303 83,889 2011 28,728 31,323 19,309 2012 12,780 25,000 20,060 Source: World Bank staff own compilation, based on local data obtained in January 2014. are also not able to repatriate their profits due to non- South Sudan have their traditional and established availability of foreign currency through the official trade routes: Djibouti for Ethiopia, and Douala for channels. The latter is one of the reasons given for Chad and the Central African Republic. In addition the withdrawal in January 2014 of Lufthansa from Chad has also relied on Libya for areas to its north the Sudanese market. and east. Recent geopolitical developments present Strengthening Regional Connectivity Sudan with an opportunity to improve regional connectivity. Sudan can serve as a trade gateway Sudan has potential to serve as a transit hub with to neighboring the countries and also as a potential four of the eight immediate neighbors being land- market for Sudanese exports, such as food products locked countries. This also creates the potential to and electronics. The existing routes to neighboring develop some value-added logistics services in activi- economies all require upgrading (Table 14). In addi- ties such as assembling or packaging for distribution tion some routes can be developed further including to these countries. However, all the countries except to Chad (via El Geneina) and the northern South TABLE 14: Costs of Using Different Regional Corridors that Compete with Routes through Sudan City in landlocked Port, Main Distance Transit Time* Transit Cost country corridor Mode (km) (days) (18 tonnes, 40’ container) Bangui, CAR Douala (Cameroon) Road 1,445 28 US$ 6,000a N’Djamena, Chad Douala (Cameroon) Road / Rail 1,830 28–60 US$ 8,500b via Ngaounderé Addis Ababa, Djibouti Road 771 30c US$1,472d Ethiopia Juba, South Sudan Mombasa (Kenya), Road / (Rail) 1,835 20 US$ 8,376e via Kampala Source: World Bank Doing Business Report, various issues. *Note: Time from arrive of ship to delivery at final destination in the landlocked countries. a WB PAD, 2012. b WB PAD, 2013. c WB 2013. d WB 2011. e Time and cost – USAID 2012. 60 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Sudan (via Kosti) as new markets by upgrading exist- Sudan Axle Load Limits Compared TABLE 16:  ing road and river connections. In order for Sudan to EAC Countries to attract transit traffic to and from the landlocked Axle group Sudan (tonnes) EAC (tonnes) countries, its own logistics system has to offer a supe- Single 10 10 rior service. Given the current low performance of Double 16 18 many of the neighboring countries this represents a Triple 22 24 significant opportunity for Sudan (Table 14). Some GVM Up to 76 56 of the critical agencies such as SRC and NHA have Source: World Bank staff own compilation, based on local data already developed plans for improving connectiv- obtained in January 2014. ity with Sudan’s immediate neighbors. Such infra- structure connectivity will provide a backbone for improved services to reduce logistics costs. However, for benefits to be maximized it would be important Africa region. However, Sudan permits trucks to carry to also review and modernize practices for transit two 40 ft. containers up to a gross vehicle weight of under customs bond. Current practices are tailored 76 tonnes. This is 20 tonnes more than the maximum to domestic operations and result in increased costs permitted in the EAC countries. for international transit. The National Highway Authority is already Recommendations implementing a program of highway improvements to connect to neighboring countries, with several There are six main interventions that could be sections already completed (Table 15). Connections implemented to reduce trade costs in Sudan to Eritrea, which is not landlocked, are largely com- through addressing transport and logistics chal- pleted while several links to the South are still in need lenges: i) Address the key bottlenecks in the road of financing. Similarly some of the neighbors, espe- transport sector; ii) improve the railways; iii) reform cially Ethiopia, are also building roads towards their the regulation of the logistics sector and develop a common border with Sudan. comprehensive logistics strategy; iv) improve inland Differences in axle load limits and vehicle water transport in conjunction with other modes; technical requirements increases the costs of cross v) strengthen safety regulation oversight in civil border transport services. Table 16 shows that the aviation and; vi) strengthen regional land transport axle load limits for Sudan are lower for than the East connectivity. TABLE 15: Completed Road Improvements Linking to Neighboring Countries Project name Length Connecting country Wadi Halfa – Dongla 417 Egypt Port Sudan – Gabatiet 280 Egypt Gedarif – Doka – Gallabat 160 Ethiopia Kassala – El Lafa 24 Eritrea Gadami – Hemishkorieb 82 Eritrea Tokar – Garora 180 Eritrea Khartoum – Rabak – Jowd 411 South Sudan Source: National Highway Authority. Transport, Transit, and Logistics Services 61 Address the key bottlenecks in the road trans- the emphasis on enhancing competitiveness of the port sector, which will remain a dominant mode railways by improving services, which is scheduled for of transport for Sudan, even on the core PSKC. As the Long Term phase should be a guiding principle such it is important to make improvements to remove even in the short term. In addition it is important to some of the current bottlenecks. The government (1) improve the infrastructure conditions and ser- has already invested significantly in improving road vice performance on the core corridor linking Port infrastructure including the shorter route between Sudan and Khartoum; and (2) to develop links to key Port Sudan and Khartoum via Atbara, however, there dry ports, to facilitate quick turnaround of wagons are still sections of the route that need widening, as well as customs clearance. The railways have an especially those that carry high volumes of traffic. advantage over road transport in the management Such widening will reduce delays but will help also of transit cargo for inland clearance. Railways have a to improve safety. simpler regime that can be exploited to competitive  Explore the available options for address- advantage. ing delays due to truck restrictions in the  It is important to expand the role of private Khartoum area. Two methods suggested here are: operators by allowing more third party access build a bypass and new bridge to connect to the to the track infrastructure. The experience with Soba Dry Port without passing through the city the current private operators has demonstrated or relocate the dry port to an area north of the the viability of this approach. city. Each option has pros and cons, and there Improve the regulatory regime for logistics ser- would also be different cost and performance vices promises to deliver significant efficiency gains. implications. These options need to be studied The National Transport Master Plan in 2010 estimated in detail. In the short term it is clear that Soba that the cost of logistics is very high, equivalent to needs paving for proper management of traffic 25–35 percent of GDP compared to 10–15 percent and to improve the overall environment for cus- for middle- and high-income countries. The current toms staff and users. regimes impose a high cost burden on logistics service  Improve the registration system for trucks. The providers and the trading community. Land Transport Unit (LTU) of the Ministry of  Logistics services should be defined in the law Transport is responsible for the vehicle registra- that clarifies the market access requirement and tion, but the actual regulator is a traffic authority operational liability. The regulations found in at a state level. The LTU regulates the truck- the logistics services are i) Regulations of customs ing business through a law that translates into clearance (2012) and Customs Act (amended Organizing the Work on Land Transport (1992). in 2010), and ii) Organizing the work on land The LTU also imposes an inspection on the regis- transport (1992). Neither of these regulations tered vehicles. In addition, state traffic authorities defines logistics very well. The existing regulations in each state register and regulate trucking opera- describe the licensing requirements covering cus- tions in practice. Therefore, the LTU does not toms clearance and land transport but stop short have statistics on truck operators at the national of addressing liability issues and do not stipulate level. Manual registration at the state level also a minimum capital requirement. contributes to the lack of sharing information  Amend the regulations to encourage increased with the central government. participation by foreign logistics providers, Improve the railways through implement- with their links to regional and global supply ing some of the actions already identified in the chains. This will assist in improving connectivity established Railways Business Plan. In particular and enhancing competitiveness. Foreign operators 62 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE can bring their international network and experi- especially those that are landlocked. Playing such ence to the Sudanese transport industry. a role would increase the volume of traffic through  Infrastructure investments in Sudan’s trans- the Sudanese system, which in turn would lower port system should be complemented with unit costs especially at the port and on the railways interventions to better integrate logistics ser- and also offer opportunities for value added services, vices. Currently, each of the government agencies including packaging and redistribution. However, responsible for different modes of transport has for Sudan to exploit the apparent opportunity, the their own investment plan. Such plans can be performance of the corridors linking it to neigh- better coordinated in the logistics strategy with boring countries has to be superior to alternative an emphasis on intermodal interfaces. connections for those countries. The case of South Improve inland water transport in conjunc- Sudan and the alternatives that have emerged since tion with other modes. River transport has poten- independence is illustrative of the competing alter- tial to increase regional trade via the Nile River in natives that exist. the long term. Some government agencies, such as Sudan can take several actions to improve its Sudan Railways Corporation and National Highways connectivity to neighboring countries. The three Authority, are looking to improve regional connec- main actions are: tivity in their plans for infrastructure investment. i. Continue strategic investments in connecting Moreover, the advantage of investing in river transport transport infrastructure and services to neigh- would be much cheaper than roads construction. Since boring countries. Both the National Highway private operators were active in Sudan, reviving river Authority and Sudan Railways Corporation have transport once the operation to South Sudan resumes prepared plans to improve the connectivity of the remains a positive prospect. road and railway networks to neighboring coun-  River transport would also benefit from priori- tries. Priority should be to connect to Ethiopia, tizing IWT in Sudan in coordination with other which is keen on alternative links especially for its modes of transport. It is recognized that the reha- Western part, as well as to Chad and the Central bilitation of river ports and handling facilities, as African Republic. The latter two countries were well as dredging of the ports is required. In addition, served in part by connections to Libya, which are it is important to increase efficiency of port opera- no longer reliable, as well as to Central Africa, tions and intermodal connections. Otherwise, river especially Cameroon, which are longer. transport cannot compete with the road network ii. Harmonize technical standards with neighbor- although it has a cost advantage. The system would ing countries. Fundamental to regional connec- therefore be able to provide better quality services tivity is the harmonization and standardization to the South once operations can be restarted. of infrastructure and services standards across Strengthen air safety regulatory oversight to countries. improve global connectivity. Effective oversight iii. Establish institutional mechanisms to develop is vital for safety and also necessary for access- regional corridors. Coordination with neighbor- ing European airspace. With improved oversight, ing countries is an imperative in order to make Sudanese airlines would be able to expand their inter- sure there are proper and compatible linkages in national networks. This would also provide a boost to infrastructure and services for cross border opera- the tourism sector. tions. This is a multi-stakeholder exercise requir- Last, prioritize improving regional con- ing the coordination of the many stakeholders nectivity. Sudan has potential to serve as a transit involved in the transforming a regional route into country for several of its immediate neighbors, a trade and transport corridor. The parties include Transport, Transit, and Logistics Services 63 the government agencies responsible for infra- port, terminal operations, freight forwarding, structure (ports, roads, railways, border posts) and cargo clearing, finance, etc.). Further, the regional for regulation of services (transport, customs, economic communities are able to support har- immigration, security, health, agriculture, trade, monization efforts through mobilizing technical etc.), and private sector operators (roads, rail, and financial assistance. 65 NATIONAL QUALITY INFRASTRUCTURE AND NON-TARIFF MEASURES 6 Overview SSMO has committed itself to improving the quality of its services and has obtained ISO 9001 In Sudan the National Quality Infrastructure certification of its management systems. It also has (NQI) is characterized by a centralized approach subjected several laboratories to accreditation audits. through a government institution, the Sudan As part of its mandate to promote quality in the Standards and Metrology Organization (SSMO). country, SSMO pursued ISO 9001 certification to The NQI includes standardization, testing, certifica- lead the industry by example. The laboratory services tion, metrology, and accreditation, which are neces- division has a quality management system in place sary for proving that products or services meet public and in order to improve the recognition of the results policy objectives such as health or safety. The SSMO delivered has begun a program to seek accreditation to was established in 1992 as a government institution ISO/IEC 17025:2005 (General requirements for the and functions as both a regulatory body and a test- competence of testing and calibration laboratories).45 ing and certification agency for many of the imports The structure of the SSMO is consistent with subject to Technical Regulations. Testing and certifica- the approach taken by standards institutes in the tion is also carried out by other agencies including the 1980’s prior to the establishment of the WTO. At Ministry of Health and the Ministry of Agriculture that time, the primary focus of the organizations was and Irrigation. Currently SSMO is in the process of around developing and implementing basic health establishing an independent accreditation body and safety and quality standards on all commodities. The draft legislation has been prepared. Modernizing the liberalization of trade practices and the increase in technical infrastructure to bring it in line with best global competition has meant that Standards Institutes practice requires a shift in focus to supporting vol- like SSMO are now increasingly looking to their role untary claims of conformity especially in support of in providing recognized commercial services in sup- imports and exports. port of industries that wish to voluntarily demon- The SSMO reports to the Cabinet Council and strate to regulators that their products meet required is responsible for standards development, accredi- technical standards. Customers of such services see tation, metrology, testing, and inspection. The value if the conformity assessment services are widely SSMO was established by the Sudan Standards and recognized, the technical standards are aligned in Metrology Act of 1992, which was updated in 2003 different jurisdictions, and they can have their prod- and 2008. The SSMO has 21 branches in cities and ucts tested once and accepted in many locations. The regions across Sudan with 1,379 staff members, most of whom are inspectors. Due to the large geographical area of the country and the many places where prod- 45 As part of the ISO/IEC 17025:2005 accreditation, 36 test methods in 11 labs have been accredited to date: six from the Khartoum labora- ucts can enter the market, coupled with an approach tory complex and the remainder at the SSMO facility in Port Sudan. to regulation which demands a 100 percent verifica- Accreditation audits were conducted by the Egyptian Accreditation Council (EGAC) in late 2013. Reports indicate that only minor obser- tion of compliance of all products, such a large and vations were raised. These were all addressed and the laboratories were distributed inspection force is required. accredited in May 2014. 66 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE co-location of services in a single body can lead to should be developed and effected within a compli- perceptions of potential conflicts of interest in that ant regulatory structure. The framework is illustrated the decisions made in one branch can be perceived as in Figure 29 and shows that the technical regulation favoring another branch rather than addressing real should fall within a broader policy framework. Much problems in the market. more, technical regulations should include technical Sudanese standards are developed to include requirements based on a standard and if possible, the requirements that can be verified using the test standard should adopt an international standard or be equipment in SSMO laboratories and they do not aligned as much as possible. In the interest of transpar- allow for alternative means of demonstrating con- ency the administrative procedures should name the formity. Only standards that can be declared manda- regulatory authority and specify the sanctions that can tory and for which the inspection function can charge be applied for non-compliance. In fact, transparency inspection fees are published. Apart from its own tests, to and building the trust of the economy is at the SSMO recognizes test results obtained from Sudan heart of the framework through ensuring attention University Research Labs, the Food Research Center, to due processes by all of the essential components of and industrial institutions for research. Other than the NQI. Finally, clarity as to how conformity to the these specific laboratories, SSMO requires samples technical requirements of the regulation can be dem- to be retested in the SSMO labs. Disputes over mea- onstrated would also have to be provided. surements between parties are referred to the Board Sudan is committed to acceding to the require- of Director (BOD) following a written submission ments of the WTO TBT agreement and the Sanitary to the SSMO Director General. The BOD comprises and Phyto-Sanitary (SPS) agreement as part of the representatives from all the regulatory bodies, national WTO accession process. To this end the Ministry of exporters and the private sector. Some private sec- Trade has a dedicated WTO accession unit whose role tor representatives felt that their membership of the is to coordinate the efforts of the different agencies SSMO BOD inhibited appeals in cases where the responsible for reaching a satisfactory level of compli- SSMO carried out the tests. ance to the requirements of the WTO TBT and WTO A first step towards modernizing the NQI system SPS agreements as they relate to the trade practices would be to prioritize reforms that conform with the and trade infrastructure in Sudan. The SSMO has WTO Technical Barriers to Trade (TBT) Agreement. The WTO TBT agreement seeks to reduce unnecessary or unfair technical barriers by promoting transpar- Technical Regulations Framework FIGURE 29:  ency of regulations by all parties. The TBT Agreement Following Best Practice stipulates that the technical regulations should be kept Guidelines to the minimum that is necessary for the country to Policy achieve legitimate objectives, which include protection Impact of health and safety, protection of the environment and Technical regulation Assessment the elimination of deceptive practices (Article 2–3). Legislation The agreement further recommends that the technical Product/process Administrative characteristics procedures regulations should seek to use international standards as their basis (Article 2–4) and recognize assessment Technical Regulatory Conformity Sanctions of conformity from competent sources as evidence of requirements authority assessment conformity to stated requirements. Source: EAC Quality infrastructure (http://www.eac-quality.net/better- The WTO TBT Agreement articulates a frame- business-with-quality/technical-regulations.html. work that indicates how technical regulations Note: Schematic outline in conformity with the WTO TBT agreement. National Quality Infrastructure and Non-Tariff Measures 67 been mandated to operate both the WTO TBT and schedule of fees was recently amended and published as WTO SPS enquiry points. a regulation under the act in 2012. It should however be noted that it is not possible to enforce compliance to Standards Development in Sudan all of the standards that are currently in the collection as several of the published standards are not suited to As part of its mandate obtained by the 2008 regulatory enforcement (such as test methods). SSMO act, the SSMO develops standards through The accessibility of standards to industries 51 active technical committees that meet weekly. wishing to export products that are not regulated In those weekly meetings the committees review cur- is limited by this approach. Conformity to standards rent standards and develop or adopt new standards for quality management like ISO 9001:2008 are to meet new demand. Under the SSMO act of 2008 required by many purchasers of products, these stan- the SSMO is the pinnacle standards body in Sudan dards are not readily enforceable as mandatory stan- responsible for the maintenance of the collection of dards but should be made available for those wishing national standards, which are numbered as “SDS” as to follow them voluntarily. Sudanese business in par- Sudanese Standards. The official catalogue of approved ticular has problems obtaining standards from sources standard includes about 3,000 standards. outside the country due to foreign exchange controls Since national standards are declared manda- and the inability to purchase over the Internet. tory through a formal Cabinet process, all Sudanese Standards are not readily available to those standards are formally approved and deemed to be wishing to implement them. The sales and informa- mandatory. The 2008 act makes provision for the tion function is not obvious to visitors to the SSMO developed standards to be voluntary and then allows facilities, which is not visited by many clients. The for them to be declared mandatory through a separate sales of standards are low and revenues received from process. In practice however, all Sudanese standards the sale of standards are not significant (Table 17). In are declared mandatory. As a consequence, if a stan- an attempt to attract more sales, the selling price of dard has been approved for a product; all products standards was reduced by half in 2013 but it appears produced and sold in the country must conform as if the number of units sold remained the same in to the standard. Prior to a new technical regulation 2013 and is on course to perform similarly in 2014. being applied the SSMO has stated that it undertakes The low number of standards sold is a concern, and an intensive promotion campaign to raise awareness although the sale of standards is not the only measure of the new requirements. The SSMO is mandated to of relevance of the collection of standards, it is a strong inspect production; points of import; and points of indicator that attention should be paid to both the sale to verify conformity. SSMO is entitled to collect content (standards being developed) and the way in a levy related to the cost of regulating the product; the which it is made available. TABLE 17: Sales of Standards by SSMO 2012–2014 Year Unit Price in Sudanese Pounds No. of standards sold Total Amount in Sudanese Pounds 2012 150 598 89,700 2013 65 577 37,505 2014 until 12.3.2014 65 72 4,680 TOTAL 1,247 SDG 131,885 Source: World Bank staff own compilation, based on local data obtained in January 2014. Note: The unit price of standards was dropped in 2013 in an attempt to increase sales and use of standards. 68 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Standards are not sold in the remote facilities be noted. Guidance on a transparent way of adopt- in the country. The SSMO web site makes provision ing international standards is provided in ISO/IEC for customers to place orders for specific standards by guide 21:2010 (Regional or National Adoption of downloading an order form and e-mailing it back to International Standards). According to the Standards SSMO; customers are also able to order international Administration staff at SSMO the organization is or foreign national standards for the purposes of export committed to aligning with international norms in this manner. This method may appear clumsy in and in particular aligns its standards with those comparison to other national standards bodies that set by the CODEX Alimentarius commission for have on-line sales portals but due to sanctions and food and food products, regional standards such as associated limitations in the banking infrastructure in those of COMESA, the European Union (CEN/ Sudan, the full range of e-commerce applications is CENELEC), AIDMO (Arab Industrial and Mining not possible. In order to increase the use and minimize Organization) and SMIIC (Standards and Metrology confusion related to standards, SSMO has, over the Institute for Islamic Countries). last two years, provided free copies of standards that There is scope to increase adoption of more are declared mandatory by certain ministries. international standards where possible and enforce The complete catalogue of Sudanese Standards requirements in unique national standards to fol- is available only in Arabic. Some 3,000 standards low international practices on drafting standards. have been approved and are considered current; each International standards undergo a rigorous technical year some 400 new standards are approved, of these review as part of their development, which seeks to about half are formal revisions of already existing stan- eliminate problems associated with incorrect referenc- dards to bring them in line with changes in the mar- ing of requirements. The risk is reduced if the inter- ket; in 2013, 384 standards were approved of which national standards are adopted as national standards. 174 were revisions. This number is comparable with However, in cases when standards need to be drafted economies of similar size. The catalogue is available to serve unique national needs, the standards devel- on the SSMO website with standards classified by opment department should adopt editorial guidelines the technology unit responsible for approval. There is in line with international best practice. Guidance on also a search function to allow customers to search for the drafting of standards as contained in the ISO standards by subject and SDS number. A list of some Directives part 246 is available to members of ISO 450 translated standards was provided and SSMO is wishing to amend their own procedures and should working on a program to ensure that as new standards be incorporated as part of the editorial policy. are approved, they are available in both Arabic and There is scope to significantly reduce the English. This will improve the transparency of the number of standards deemed mandatory and standards. increase the number of voluntary standards as There is also collection of 434 translated pub- well as to harmonize processes with the code of lished standards, of which 17 were clearly adopted good practice for standardization in the WTO from ISO or IEC standards. For the remainder, it TBT agreement. The SSMO has requested training is not clear if they are adopted or if they have been programs for its staff on the implementation of the adapted from foreign standards or if they are unique. code of good practice. As a rule of thumb, standards If they differ from international standards no record should be selected more based on needs identified is made as to how they deviate. The WTO TBT by industry rather than SSMO or other regulators code of good practice on standards development requires that when national standards deviate from 46 http://www.iso.org/iso/standards_development/processes_and_proce- international norms in the same area, this should dures/iso_iec_directives_and_iso_supplement.htm. National Quality Infrastructure and Non-Tariff Measures 69 BOX 2: Technical Committees for Standards Members of technical committees are appointed by the General Manager responsible for Standards Administration according to tightly defined guidelines laid out in the Standards and Metrology act of 2008. The act makes provision for a cross-section of membership from the private sector, academics and industry experts, consumer protection societies, and regulators. Committees are kept small (limited to 7 persons) although allowance is made for additional members to join upon request. However, this is subject to approval. SSMO has good participation by its stakeholders represented on its technical committees. The technical committees cover most areas of the economy with each covering quite a wide spectrum of work and meet on a very regular basis; the organization claims that the committees each meet every week (which is well above international practice). Representatives serving on the committees are recompensed at a defined rate; this is not uncommon in countries where the majority of standards users are more likely to be affected by standards than driving an agenda to set standards to their own advantage (Standards “takers” rather than standards “makers”) but the market relevance of the standards being developed can sometimes be questioned. The technical committees fall into the areas as follows Standards development is currently dominated by the regulators, drafts are not publicly circulated, insufficient time is allowed for comment, and the standards do not generally follow international standards. The work is carried out in committees of not less than 7 (seven) members who represent the interests of the different stakeholder groups although it should be noted that the interests of regulators tend to dominate these committees with Industry being represented by a single seat from the Businessman’s Federation and consumers on the whole are very poorly represented. During the final enquiry phase of the development process, drafts of the standard are circulated to parties who the committee identifies as “possibly having an interest” for their comment and approval, drafts are not circulated publically or made available to possible stakeholders outside of Sudan (the code of good practice requires that a public enquiry forms part of the process). The prescribed comment period of 60 days for members of the public or interested parties outside the country who may be affected by the publication of the standard is not maintained. The draft standards and technical regulations are not currently being “Notified” to the WTO TBT committee via the National Enquiry point as required in the WTO TBT agreement. Most of published Sudan standards are not adoptions of international standards. The WTO Code of Good Practice strongly advises that international standards be used as the basis for technical regulations. Furthermore, the current standards work program across all the committees is not made available publicly within Sudan or to the trading partners of Sudan as required by the code. Overall, there is scope to review committee procedures in order to improve the openness of the process and to ensure full compliance to the substantive provisions of the WTO TBT Code of Good Practice for standards development. This would allow stakeholders who have a legitimate interest in the standards being developed to make their input and have their voice heard either directly or through legitimate representative structures. (See Box 2). The provisions of the WTO TBT agree- the SSMO, participation in international standards ment guide its members how to develop, implement, organizations is coordinated and maintained. The and enforce technical regulations in such a way that participation in international committees is currently reduces unfair and unnecessary barriers to trade in focused on areas that seem strategically important to order to open up its markets while at the same time the economy, and at this stage include: cement; food; maintaining adequate levels of protection. The agree- environmental management; and information and ment promotes the use of National Standards to refer documentation. There is no clear process in place to to technical requirements of technical regulations describe how SSMO chooses which technical com- and Annex 3 of the agreement outlines47 how these mittees to be involved in, and it does not track how standards should be developed. effective its participation in the process has been. SSMO is a full member of the International Some national standards bodies have established Organization for Standardization (ISO) and cur- advisory forums or advisory or steering committees rently serves on 12 international technical commit- tees. Through the international relations function at 47 http://www.wto.org/english/docs_e/legal_e/17-tbt_e.htm. 70 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE that help to set national priorities and identify which on what SSMO is able to test rather than the risks committees to be involved in in order to achieve those associated with the product or current developments priorities. in the field. This practice implies that if a product While the Sudanese standards are published is not tested AND the prescribed test method is not by the SSMO, it is not assumed that the standards used, it does not conform to the requirements of are exclusively for the enforcement by the SSMO. the standards and, by extension since the standard is For example, regulators under the Ministry of Health mandatory, the producer or seller who cannot provide enforce standards that include the requirements for evidence does not comply with the law. Current best medical products. This is in line with international practice would allow for flexibility and can be over- best practice for technical regulations where all regu- come by redrafting the requirements. The unofficial lators refer to a single collection of national standards English translation of the Standards and Metrology but in Sudan the coordination between the different Act of 2008 provides for flexibility by allowing the regulators is at times problematic. The problems asso- tests undertaken in verifying conformity to be selected ciated with this approach include: based on risk and for a mechanism of recognizing the  Not all of the standards published in the stan- equivalence of the results obtained using alternative dards catalogue are suitable as technical regula- test methods and places the authority for this with tions – they include standards methods on how the SSMO but the current wording of the standards to determine parameters and basic procurement undermines these provisions. type standards (such as SDS 161:2013 Sports Socks for Sudanese army and police forces). Conformity Assessment and  Some of the standards are not enforced at all (by Accreditation SSMO or other regulators) creating confusion as to which of the remainder of the collection must Within the SSMO, the Standards Administration be adhered to (such as standard test methods Department performs the function of Conformity although commencing in 2013 the SSMO began Assessment. As part of this function test reports and to provide these to the Food Research Center, certificates of analysis issued by laboratories and certi- National Health Lab and other regulators). fication bodies other than SSMO are assessed in order  More than one regulator enforces some aspects to issue a certificate of conformity for the product of the standards (such as maximum levels of or consignment. In this process the SSMO officers Aflatoxin which is measured in ground nuts by assess the claims, the competence of the bodies mak- both the SSMO and the Ministry of Agriculture). ing them, and the test methods and standards referred While the SSMO tests Aflatoxin levels for import/ to. In cases where standards other than Sudanese export purposes and the Ministry of Health for National Standards (SDS) are used, the unit consults Safety purposes, it is the same test and is therefore with members of the technical committee to make a duplicative. judgment as to whether the standards used achieve the The standards do not allow for alternate ways same objectives as the SDS. The accreditation status of demonstrating conformity. In the case of the of the issuers is verified and taken into account when English translations of SDS standards provided, nearly making the assessment. all contain provisions that state that the “product shall The process for equivalence certificates is used be tested” and list or reference a single method to be for a variety of imports and is in high demand. used for the test. Comments received from members The high demand for these certificates highlights of the private sector and other laboratories operating the extent to which the SDS standards and con- in Sudan suggest the test methods chosen are based formity assessment procedures are not aligned with National Quality Infrastructure and Non-Tariff Measures 71 international norms and practices. Locating the The Standards Act (2008), and the Metrology issuing of equivalence certificates in the standards Act of 2008 makes provision for the SSMO to be the administration ensures a clear separation from the national point in Sudan responsible for accredita- testing laboratories. This is important, because there tion. The organization formally recognizes certificates is a potential conflict of interest if the testing labora- and test reports and enters into recognition agree- tories administered the certificate of conformity since ments with inspection bodies outside the country for they have an interest in maximizing the number of the purposes of pre-export verification of conformity test results. While the process appears to be useful schemes as mentioned above. However, there is no in reducing procedural barriers brought about as a formal accreditation body operating in the country result of the different standards, a concern raised by at this stage. The function of an accreditation body is Industry is that it is simply another cost and proce- to formally recognize the competence of conformity dural delay standing in the way of importing prod- assessment bodies and test laboratories and to enter in ucts; the demand for the service would be significantly to mutual recognition agreements (and multi-lateral reduced if the appropriate standards could be aligned arrangements) with other countries to ensure that with international norms. claims of conformity made by bodies in Sudan are rec- The SSMO has entered into recognition agree- ognized and accepted at face value outside the country. ments with several International inspection bodies Accreditation is a formal process of recognizing that carry out pre-export verification (PVoC) in the competence of laboratories and other providers the countries of origin for products imported into of conformity assessment services and is normally Sudan. Multinational inspection bodies such as independent of the functions being recognized. At Bureau Veritas48 are recognized as well as bodies that this stage the SSMO is the largest provider of con- concentrate on countries or regions from where sev- formity assessment services in the country. There are eral products are imported such as the Gulf States and other laboratories operating in the country but SSMO China. Although these agreements are in place, the covers most of the market for conformity testing in inspectors operating at ports of entry into Sudan still the country with some 20 laboratories as part of the carry out inspections on all consignments. Indeed the group. The Standards and Metrology act of 2008 pro- “double check” by SSMO is stated in the agreement vides for SSMO to host the Accreditation Committee signed with the international inspection company. or Council which will represent the main institutional It is noteworthy that the inspectors do acknowledge vehicle for establishing an independent Accreditation that the PVoC reduces the risk of non-compliance so Body. This arrangement might be regarded as a the verification inspections are often limited to very significant conflict of interest if the Accreditation superficial checks. Inspection fees are still charged and department and the bodies that it recognizes as being the procedural delays associated with these inspections competent (the laboratories, certification and inspec- are a source of frustration to importers and customers tion services offered by SSMO) are not functionally of imported products. If the pre-shipment clearance independent of one another. In order for accreditation process is not trusted, a better model would be to hold to function efficiently (and in accordance with inter- the PVoC partners more accountable for their action national best practices) it is necessary for decisions to and performance, for this reason in other countries be made without fear or favor to both business units where the PVoC model is used, the number of partners within SSMO and its competitors. is kept low and restricted to those that have a juristic presence in the country so that they can be made to 48 SSMO informed the consultants that two “well known” international answer for their performance in the countries’ courts companies offering inspection services had been excluded from Sudan if need be. because of misconduct by their local agents. 72 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Sudan should consider establishing an accredi- Evolution of ISO 9001 FIGURE 30:  tation focal point with powers to enter into agree- Certificates in Sudan ment with trading partners with accreditations 100 based on service bodies outside the country . 80 The small number of clients in Sudan would cau- tion against creating a new accreditation institution 60 independent of the SSMO. ISO has developed guid- ance for developing countries to consider establish- 40 ing a quality infrastructure and financing National 20 Standards bodies.49 In this guidance the ISO notes that experience with many international accreditation 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 bodies suggests that they require a significant number (more than 100) of clients before they can operate in a Source www.ISO.org. sustainable manner. A standalone accreditation body Note: The number of accredited ISO 9001 certificates issued to com- panies in Sudan is the last 15 years showing very little change in the for Sudan with only a few possible laboratories being landscape over the last five years despite sanctions and the split with accredited is not viable at this stage and instead the South Sudan in 2011. country should consider an accreditation focal point in the country to formally enter in to agreements with trading partners but that will base accreditations order to effectively implement the approved scheme. based on the services of bodies outside the country. A A product certification scheme has been used in other cooperative model has been proposed in the Southern economies to promote product quality and in some African region with some degree of success; the model cases even assist local industry to compete against could be replicated in other regions through bodies imported products based on an underlying assurance such as COMESA or EAC. of quality and value by the issuer of the mark. For instance, successful mark schemes include the BSi Kite Product and System Certification mark issued by the British Standards Institute, and the SABS mark, issued by the South African Bureau International certification bodies are operating in of Standards. Product marks of this nature can be Sudan and several organizations have been certified regulated, voluntary, or a combination of the two. In to international management systems standards. the case of voluntary marks, the mark holder adds to The ISO international survey of accredited certificates the value proposition of the product by an indepen- issued in 2012 shows that in Sudan 84 companies are dent endorsement by a trusted and respected body, certified to the ISO 9001 Quality Management sys- this reduces the marketing costs and allows market tem; 14 to ISO 14001 Environmental Management access. In the regulated example, the mark is owned systems and three to ISO 22000 Food Quality by the regulator and users of the mark can affix the Management systems. The certification activity is logo if they meet all of the regulatory requirements largely driven by export markets and has remained indicating to inspectors and users that the product relatively constant over the last few years despite meets all regulatory requirements, which can be use- economic sanctions and the independence of South ful when dealing with appliances and components Sudan (Figure 30). that will be used in a larger system which is itself the A product certification scheme operated by subject of regulations such as building materials used SSMO has been approved but not yet launched. The SSMO indicated that capacity building is required in 49 ISO.org 2010. Financing NSBs – ISBN 978–92–67–10534–5. National Quality Infrastructure and Non-Tariff Measures 73 in construction. The uses are quite distinct and needs the SSMO, while small amount of income is obtained to be processed in a quality policy, as it will require from the sale of standards and testing and certification careful coordination between the standards, testing, done for commercial clients. The SSMO employs sev- certification, and regulatory environment in consulta- eral inspectors to inspect batches of products related tion with consumers and industry in order to find the to the licenses requested. The organization maintains best product for the needs of the market. several laboratories that test samples drawn by the inspectors in support of the licensing and inspection Inspection Services process. Not all of the products for which licenses are issued are tested. Tables 18 and 19 indicate the number Inspection services constitute a large portion of of samples received for analysis by the laboratories in the activities of the SSMO. The primary focus of the support of inspection activities. The figures show that SSMO remains the protection of the people of Sudan inspection activities related to imported products far and the Sudanese economy through the enforcement exceed those of exported products. SSMO indicates of the technical regulations declared mandatory that the bulk of the work is concentrated at Port through the formal approval process of SDS docu- Sudan, Halfa, and the Quality Assurance and inspec- ments by the Cabinet. Of the 1,378 staff employed tion administration in Khartoum. by SSMO the majority are employed in the inspection The inspectorate function controls all imported function, many of whom are stationed at the 21 satel- and export consignments, issuing licenses for lite facilities outside of the city of Khartoum. each.50 Press reports51 indicate that SSMO issued The inspection function is responsible for 64,873 import licenses and 5,211 exportation permits inspecting products entering the market as well in 2013. With such a high number of certificates being as products destined for export. For the control of issued, one would expect that if the inspections were imports the SSMO inspects all products at ports of supported by test results, that the laboratories would entry for compliance with the appropriate regulations. An inspection fee is levied on the importer according 50 The mandate of the SSMO also extends to the granting of licenses for to the schedule of fees published as a regulation under the export and import of precious metals. In 2013 the SSMO reported analyzing 20,256 kilograms of Sudanese Central Bank exported gold the Standards and Metrology Act. The fees collected bullions, and a further 4,595 kilograms from local companies. through the issuing of licenses fund the operation of 51 Source: www.Sudan safri.net accessed 26 January 2014. TABLE 18: Samples of Imports During the Years 2012–2013 Year Soba Branch Garri Branch Airport Branch Branches income Release and Bond Total 2012 1,848 820 52 725 405 3,850 2013 2,342 943 26 842 371 4,524 Source: Compiled by DTIS Team, based on local data obtained in January 2014. Unfortunately data was not available for the larger locations at Port Sudan, Halfa, and Khartoum. TABLE 19: Samples of Exports During the Years 2012–2014 Year Sent Samples Non-conformed samples Rejected Samples 2012 512 39 4 2013 607 51 9 2014 75 3 2 Source: SSMO. 74 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE be busier than they are at present. Table 18 and 19 at the production site and all imported products at indicate that roughly 10 percent of the licenses issued the point of entry into Sudan. SSMO has a presence are inspected by the laboratories of SSMO (5,211 at all border posts and a team of inspectors operat- export permits and 600 samples tested; 65,000 import ing in the field to carry out inspections of all import permits and 4,500 samples tested). consignments and production lots. Inspectors collect Products destined for export are inspected inspection fees on samples as prescribed in the regula- by the SSMO, levies charged, and export licenses tions to the SSMO act published in 2012 and if they provided prior to clearance. The Inspection and are of the opinion that it is required for samples to be Quality Control unit will test against the customer tested, they draw the appropriate samples for further specifications for the exported product or, in the processing. Inspection fees are collected on all lots absence of these, will make use of an appropriate SDS. subject to the inspection levy but not of all of these The program is intended to help exporters to access are sampled and tested. international markets and at the same time protect Samples drawn through the inspection process the reputation of the local economy by controlling are prepared for analysis by the inspectors before the quality of exported products. Interviews with the being received by the labs for analysis. This process local manufacturers and exporters however indicated ensures that the labs do not have direct contact with that the industry found very little value in this service, the parties submitting their samples and in many cases stating that their clients did not recognize the analyses do not know if the products are local or imported or provided by SSMO often requiring that the tests be if the products are destined for local consumption or repeated on receipt. Industry expressed concern at export. This is positive as it reduces the risk of lobby- both the cost and administrative delay incurred as a ing and encourages impartial test results. result of this process. The issuing of export licenses High levels of taxation and fee collection as based on conformity to technical regulations is a tech- well as procedural delays stemming from extensive nical barrier to trade that imposes additional costs on and uncoordinated inspection activities are a hin- Sudanese exporting companies. The blanket regulation drance to private sector development and growth. of exports reduces the competitiveness of exports. Members of the Businessmen Federation as well as its The WTO and international best practice allows Chamber of Industries express concern over the lack for exceptions to be applied when protecting vul- of coordination and recognition between regulators. nerable activities such as antiquities, archaeologi- Anecdotal evidence suggests that in the food indus- cal, and religious and cultural artifacts; scarce and try regulators from SSMO as well as those from the non-renewable resources (such as hard-wood spe- Ministry of Agriculture and Irrigation take samples cies), and knowledge systems (such as traditional and conduct the same tests against the same stan- medicines and cures). Table 19 was supplied by the dards before releasing consignments. The differences export quality unit of SSMO and indicates the number in testing between the SSMO and the Ministry of of samples inspected for export purposes in the previ- Agriculture and Irrigation are not clearly understood ous two years and in the first two months of 2014. It is by the private sector. interesting to note that less than 10 percent of samples Improved coordination between regulators do not conform to the stated standard and that the could lower time requirements and cut cost in process allows for the samples to be reworked or reclas- inspection services related to standards. And in fact, sified prior to the export license being granted; the the SPS steering committee within the Ministry of resultant percentage of rejected export licenses is low. Agriculture and Irrigation is beginning to address the The Inspection and Quality Control depart- coordination of regulations related to food products and ment inspects all domestically produced products animal preparation, and similar programs should be put National Quality Infrastructure and Non-Tariff Measures 75 in place to deal with technical barriers to trade issues. through SSMO at the moment. Industry and the test- Further, the Ministry of Agriculture and Irrigation has ing community alike obtain a lot of their traceability established a WTO accession unit. Significant progress from metrology laboratories outside the country and has been made in agreeing to a common food protec- include facilities in Egypt, South Africa, France, and tion strategy and improving harmonization of the the Gulf states. SSMO has signed several bilateral associated technical regulations. While a number of agreements and has recently joined OIML and BIPM laboratories are in place to support the regulation of with the aim of enhancing measurement traceability the food industry in Sudan, many of them are quite in Sudan. poorly resourced and attention needs to be placed not SSMO has the mandate to control enforce only on the enforcement of regulations but also on the legal metrology regulations in the country. The provision of a reliable and transparent testing resource inspectors issue permits for new measuring devices to support the development of agricultural products and instruments entering the country however very and the associated processing industries.52 little post market surveillance of the performance of measuring devices in the market place takes place. Metrology Services The legal metrology division does not have the staff, the equipment, or the resources to effectively police SSMO is mandated to provide measurement the market and effectively cover the market in order traceability to the Sudanese market. However, the to provide confidence in the trading infrastructure in laboratories are not accredited and currently are not the country. While the legislation provides the man- capable of delivering traceability to the accuracy levels date to enforce the regulations, inspections do not needed in high technology industries. There are also occur frequently and the body relies on complaints other parameters that are needed and not available by aggrieved citizens in order to direct its activities. Culturally, however, Sudanese citizens are reluctant to lodge formal complaints or report their colleagues SSMO Testing Areas for transgressing laws to the authorities. Without suf- General Chemistry ficient market intelligence the inspectors are not able Milk and Milk products Lubricants and oils to focus their efforts and do not succeed in identifying Carbohydrates deceptive practices based on short measures. Cereals products Addressing private sector needs calls for the Gum and Gum products Water and mineral salts establishment of a reference laboratory in the coun- Aflotoxin try. A laboratory is needed that can provide, oversee, Medical and pharmaceuticals or source measurement traceability for reference by Environmental Microbiological both the public and provide sector. This is true as in Multi-purpose devices some cases disputes between the in-process labs of the Textiles manufacturers and the labs of the SSMO and other Children’s toys Paints regulators have arisen as a result of each getting differ- Ceramics and Porcelain ent results when testing samples of the same product. Cement Since the function of metrology forms the basis of reli- Steel Electrical and electronics able measurement and trust, it is important that the Plastics Pesticides Fertilizers and pesticides residues 52 Economic sanctions pose certain challenges in terms of laboratories Genetically modified organisms (GMO) not being able to get access to equipment, reagents, and reference mate- rial in order for them to be effective in supporting technical regulations. 76 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE function is well established in the country and should be The SSMO laboratories do not operate as com- in a position to serve both the private and public sector mercial ventures and do not contact potential clients equally and be a source of reference test methods and or promote their services. Laboratories are run as chemical traceability. Operational considerations are cost centers in the branch and inspectors bring in all quite different from those of providers of conformity work done by the laboratories. This arrangement may assessment or inspection functions and would therefore be good for ensuring the impartiality of the analytical consideration should be given to placing this function in staff but the lack of approachability of the laboratories an independent structure in order for it to deliver on its prevents industry from using SSMO for testing assis- own unique enabling mandate, and enabling it to seek tance during product or process development. traceability of measurement and conduct research into Several other laboratories are available to indus- improving the measurement capability in the country. try in support of quality improvement and gaining access to markets, however, none of the laboratories Testing Laboratories has been accredited. The SSMO and other regulators can use the same laboratories in the course of verifying SSMO has several laboratories covering a wide range compliance to technical regulations—most notably, of products with particular focus on key areas iden- the University of Khartoum and other universities, tified as being critical in terms of their mandate, who carry out certain testing on behalf of SSMO and which includes so-called strategic goods such as others and include the protein analysis and genetic wheat, flour, pesticides and herbicides, steel, and mapping of meat and food products in support of spe- cement. In 11 of these labs, a total of 36 areas have cific regulations (such as meat origin, and the presence recently undergone accreditation assessments by the of contaminants and substances of concern). Egyptian Accreditation Council (EGAC) and have The Department of Industry also has laborato- now received accreditation to ISO/IEC 17025. The ries situated in the Industrial Research Cooperation scope of accreditation covers the testing performed on (IRC) to support industry in improving quality and the critical products and the methods chosen reflect accessing markets. While the intent is to support those prescribed by the national (SDS) standards. The industry, the laboratories are not accredited, are not equipment related to these analyses is well maintained, well staffed and not well resourced enough to fulfill as would be expected in a lab seeking accreditation; that mandate effectively. While high sample num- however, in many cases they do not reflect the latest bers are claimed, the laboratory areas do not appear technology which can provide: i) better sensitivity; to be handling more than a few samples per week. ii) better accuracy; iii) increased and improved sample The analyses performed are very limited to very basic handling; and iv) better use of reagents and thereby proximate analysis, which is used for food production reduced costs per sample. It appears that the develop- (moisture, fat, protein, carbohydrates and total caloric ment of technical regulations requiring testing is very values). The limited scope of testing available to the strongly influenced by the laboratories of the SSMO industry does not offer much support when seeking setting requirements and levels around what can be to improve their processes. tested rather than the market needs, the product risks, or the international trading environment related to that Recommendations product. A national quality strategy could help set the priorities and areas where alignment with international Substantial regulatory reform in the NQI is standards is desirable. But this would have to be devel- required to support Sudan’s ability to compete in oped in a consultative process taking into account all the current international trading environment. The stakeholders in order to reach a consensus position. quality infrastructure should be modernized, taking National Quality Infrastructure and Non-Tariff Measures 77 into account current international best practice and iii. Meet all of the requirements of the WTO TBT the needs of stakeholders in the country. Currently and WTO SPS agreements and accede to the all of the functions of the NQI are housed in the WTO. The standards development process should Sudanese Standards and Metrology Organization be reviewed in order to ensure that adherence to (SSMO), and the Sudanese National Standards all substantive requirements of the code of good (SDS) describes virtually all trade goods entering or practice for standards development contained leaving the country. Further, all published SDS stan- in Annex 3 of the WTO TBT agreement. The dards have been declared compulsory (technical regu- National SPS and TBT enquiry points should lations) which requires that the products described by also be fully operational. these standards are subjected to inspection by SSMO iv. Promote the value of voluntary standards and inspectors and the suppliers of these products are liable voluntary conformity assessment in improv- to pay an inspection fee (a schedule of fees is gazetted, ing quality and accessing competitive markets. the latest version of which was published in 2012). SSMO is currently promoting the value of the Reforming the NQI requires implementation of the standards and quality to various organizations following recommendations: and groups; this promotional activity should also i. In conformity with the new SSMO strategy, include its role in support of industry with the increase the adoption of international stan- possible goal of increasing this part of the business. dards as Sudanese National Standards and The voluntary component will include voluntary expend the role of voluntary standards in the standards testing, management certification, and Sudanese economy. Currently regulations are not voluntary certificates. aligned with international norms and the national v. Repeal the requirement that all products des- quality infrastructure does not facilitate access to tined for export be inspected by the SSMO in international markets. The enabling legislation order to obtain an export license. Rather, this should be reviewed to examine how to eliminate inspection for quality by SSMO should become potential conflicts of interest between branches a service offered to private firms on request. At of the quality infrastructure can avoided. This present it is apparent that many firms deem the should draw on best practices; the recent regula- testing unnecessary and question its relevance, tory reforms provide a useful benchmark. other than to raise revenue for the SSMO. ii. More closely align Sudanese standards with vi. Improve the degree of post market surveillance international standards. The current collection of legal weights and measures to ensure a reliable of standards is not closely aligned with interna- system of verification and consumer protection. tional standards. Although national standards are A program should be launched to increase surveil- developed based on international requirements lance of measuring devices used in trade in the mar- and make use of international test methods, the ket place to increase consumer confidence and form requirements often differ potentially creating a the basis of improving quality. SSMO indicated it technical barrier to trade. Full records of the align- would benefit from technical assistance in this area. ment and deviation from international standards vii. Reform the regulatory framework by estab- should be maintained for all published standards lishing a functionally independent metrology and should be reported. The standards catalogue institute that can provide needed traceability should include reference to the source documents and accurate reference measurements. Prioritize if the standards are adoptions, or, if they are adap- development of a National Metrology Institute to tations of international documents, highlight the provide traceable and accurate measurement ref- extent to which they differ,. erences to underpin the standards infrastructure. 79 OPPORTUNITIES FOR GROWTH THROUGH DIVERSIFICATION: AGRICULTURE 7 Overview Agricultural crops and livestock (at approx- imately 46 percent each) account for more This chapter reviews Sudan’s agricultural trade 90 percent of total output with forestry and fisher- patterns over the past five years, focusing on the ies representing 7 percent. Arable farming comprises trends in imports and exports and identifying three different systems: the traditional rain-fed sector, the major traded crops. It also will identify factors the mechanized rain-fed sector, and the irrigated sec- influencing the availability and price of agricultural tor. The other farming sectors are livestock, fishery, inputs such as seeds, fertilizer, and pesticides, and and forestry. identify the trade costs and the role of standards in Subsistence farming characterized by low agricultural trade. Finally, based on the analysis of productivity, the absence of new technology and Sudan’s agricultural sector and taking into account modern farming practices, remains the dominant political economy constraints the report identifies type of agriculture within Sudan. It occupies more priority reforms and recommends possible sequenc- than 60 percent of the total cultivated land (about 22 ing, including measures that can be implemented million feddan) and employs two-thirds of the agricul- nationally and those that may be more effectively tural population. Characterized by private small-scale addressed at the regional level. farms with access to considerable communal grazing Agriculture provides a livelihood to approxi- areas that support extensive livestock production. This mately two thirds of the population, and accounts farming system is mainly located in western states for almost one third of GDP (2008–2012). such as Kordofan and Darfur in addition to White Following the reduction in oil revenues after the Nile and Blue Nile states. It mainly produces sor- secession of South Sudan, agriculture represents the ghum, sesame, and millet and practices pastoralism. key to delivering growth, poverty reduction, and sus- This is reflected in its lower average contribution to tainable development. Agricultural exports increased the total agricultural GDP of only 14 percent during from 8 percent of total exports in 2011 to 23 percent 2006–2009 (Table 20). The traditional rain-fed sector 2013. Sudan’s main agricultural products are sorghum, received few support services such as credit, research cotton, groundnuts, sesame, millet, wheat, cane sugar, and extension. Public investments in basic infrastruc- gum arabic, and livestock. ture for rural and agricultural development are also The agricultural sector has the potential for negligible. The consequence is low and declining or significant growth. Sudan’s land is rich and fertile stagnating yields for most crops. The pastoralists and as it benefits from the proximity of the Blue and small farmers in the traditional sector are the most White Nile rivers and offers great potential for further vulnerable to poverty. development through both vertical (productivity) and The share of the large-scale semi-mechanized horizontal (land area) expansion. Sudan’s land area is rain-fed sector is declining because of low yields estimated at 446.4 million feddan, with 30 percent resulting from mono-cropping, unsustainable land suitable for agricultural production. management, environmental considerations, and 80 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE TABLE 20: Sub-sectors Share in Agricultural GDP: 2006–2009 2006 2007 2008 2009 Average Irrigated sector 29.3 29.6 28.9 29.5 29.3 Mechanized rain-fed 3.5 2.6 2.7 2.7 2.8 Traditional rain-fed 13.7 13.0 15.0 15.3 14.3 Livestock 47.4 47.0 46.9 46.2 46.9 Forestry 6.4 6.5 6.1 6.1 6.3 Source: Ministry of Finance, Central Bureau of Statistics. uncertain government policy resulting in fluctu- growth in livestock productivity. Most livestock ating incentives to producers. Covering an area of are raised under semi-nomadic and nomadic sys- about 14 million feddan and accounting for 2.8 per- tems. The livestock herds include camels, sheep and cent of agricultural GDP (2006–2009), these farms are goats (raised in desert and semi-desert zones) and located in the states of El Gadaref, Blue Nile, White cattle (owned mainly by pastoral and agro-pastoral Nile, Sennar, and Southern Kordofan and cultivate groups). The livestock population was estimated at sorghum, sesame (recently introduced) sunflower. 104.9 million heads in 2012. Livestock production The secession of South Sudan and an increase in gold has always been an integrated part of traditional rain- mining has had a serious impact on the availability fed farming and is making an increasing contribu- of seasonal labors. This has contributed to the decline tion to the welfare of this farming system as a whole. in the semi-mechanized farming areas, especially for Risks to the sector include decreasing pasture as a sesame. The sector is not engaged in large-scale live- result of drought and desertification, the expansion stock production. of crop areas, shortage of cattle routes, and lack of Irrigated farming systems along the River Nile water for animals. have significant potential for growth and diversify- Fish production is small-scale and almost totally ing production to higher value vegetables and live- focused on local markets. Important fishing sites in stock. In 2006–2009 such farming systems accounted Sudan are either suffering from overfishing (e.g. Jebal for 29 percent of agricultural GDP with production Awlia Reservoir) or remain largely unexploited (e.g. concentrated on wheat, cotton, sorghum, and ground- Lake Nuba and Red Sea). There are opportunities to nuts. Almost 5 million feddan within the Nile basin, expand fish production through investing in aquacul- the River Nile, Khartoum, Gezira, Sennar, Blue Nile, ture, offshore fisheries, and land-based fisheries and and White Nile states are irrigated. Schemes in Gezira supplies. (2.1 million feddan), Rahad, Suki, and New Halfa (1 million feddan) continue to be managed by the Trade Performance of Major Central Government, but some of the estates in Gezira Agricultural Exports have recently been privatized and more are scheduled. Agricultural services are provided and supported by the This section addresses the performance and factors government through facilitation of credit, input sup- influencing the production, marketing and trade ply and extension services. Management inefficiencies, of Sudan’s major agricultural exports. Prior to the poor water management, low productivity, and large discovery and exploitation of oil, agriculture accounted debt burdens characterize government-owned estates. for most of export revenues. Over the past five years Limited attention to animal health and breed- agricultural exports have increased from US$329 mil- ing improvements continue to constrain the lion in 2008 to US$1,625.9 million in 2013, and the Opportunities for Growth through Diversification: Agriculture 81 share in total export has increased from 3.3 percent main trade partners: Saudi Arabia, Egypt, and other in 2008 to almost 23 percent in 2013. Livestock and Gulf states. The strong demand for Sudanese livestock sesame seeds now account for more than two-thirds has been underpinned by the Sudan government’s of the total agricultural exports, while the traditional commitment to rehabilitate the livestock export facili- staples of gum arabic and cotton have seen their relative ties through the provision of veterinary services and shares decline over the period 2008–2013. quarantine centers. The livestock sector remains underexploited Livestock exports increased almost tenfold over due to lower productivity as production is domi- the period 2008–2013. Table 21 summarizes Sudan’s nated by subsistence rather than commercial recent export values of livestock products and indicates production. More than 80 percent of the Sudanese that the growth is led by the increase of sheep exports rural population relies on rain-fed traditional farm- from $44 million in 2008 to $477 in 2013, primarily ing and associated livestock rearing for their liveli- to Arab countries. Live sheep exports account for more hoods. There are about 39 million sheep, 30 million than 70 percent of livestock exports and are mainly goats, 29 million cattle, and 4 million camels in destined for Saudi Arabia and to a lesser extent the Sudan with a positive yearly growth rate. Livestock United Arab Emirates and Lebanon. The export of are raised in almost all parts of Sudan, but mostly live camels across the border to Egypt accounted for concentrated in western Sudan (Kordofan and Darfur 14 percent of livestock trade, while hides and skins (at states) and owned by nomadic tribes. Production 10 percent of livestock export) are sold to a wide range requires increasing stocking rates. The degradation of countries including the United Kingdom, China, of the rangeland has exacerbated the conflict over United Arab Emirates, Turkey, and Saudi Arabia. Meat land between pastoral groups and farmers especially exports destined mainly for the UAE, Egypt, Qatar, in Darfur. Realizing the potential for growth requires and Jordan exhibited large annual fluctuations and investments in conflict resolution, rangeland man- have declined from a peak in 2010, primarily because agement, and increasing technical inputs in modern of the inability to compete with other suppliers due to livestock management. high cost, quality consideration, and unreliable sup- Livestock export has become an increasingly ply.53 There is a good opportunity to generate more important part of the economy competing with cash-crop sales as the fastest growing non-oil export sector. There is a surge in commercial livestock mar- 53 No cold or frozen meat is exported from Sudan because of inadequate abattoirs, handling, and transport facilities for chilled meat. Small assign- keting of camels, goats, sheep and cattle, which is ments of whole carcass of sheep and goats and quarter carcass of beef are connected with strong export demand from Sudan’s exported through special arrangement between exporters and importers. TABLE 21: Livestock Export Value and Sub-sector Share: 2008–2013 Sheep Goats Camels Cattle Meat Hides and Total % % % % % skins % ($m) 2008 90.0 1.2 1.2 0 1.0 6.5 49.2 2009 72.4 2.6 12.1 1.6 4.6 8.2 202.1 2010 60.5 2.7 6.6 1.4 22.8 7.3 190.9 2011 69.8 2.3 11.6 1.5 5.0 11.1 357.8 2012 66.1 2.1 14.4 3.3 8.8 8.5 432.0 2103 70.0 1.5 14.4 1.1 2.2 10.6 681.9 Source: Bank of Sudan Annual Reports and trade digests. 82 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE TABLE 22: Quarantine, Inspection, and Vaccination Regime for Sheep Exports Location/timing Activities Inspection and vaccination close to First veterinary inspection and vaccination. Animals held in an inspection center under production area observation for 7–10 days. Entry into a quarantine area Second inspection at inland quarantine station by veterinarians. Blood sample taken from every animal for brucellosis testing. Animals held for 7–10 days. Inspection on the way to the port Third animal inspection in quarantine area by veterinarian. The group of animals receives three certificates: for number of animals, free from infectious and noninfectious diseases, and for animals in good health. Prior to loading on ships Fourth inspection seven days prior to shipment. Animals are held in quarantine and inspected to verify that they have no evidence of infectious or noninfectious disease and are not generally weak. Animals with a certificate are eligible to If animals pass this final inspection all animals intended for export are issued an interna- be loaded on ships tional animal health certificate Source: DTIS 2008. income and value added from meat exports if these maturity and hence harvesting is labor intensive and constraints are addressed. costly. Large commercial farmers are reluctant to pro- Progress in the vaccination and inspections duce sesame due to shortages in the labor force due program for sheep destined for export54 adopted to the secession of South Sudan and gold mining. by the Ministry of Livestock has been sufficient Approximately 80 percent of Sesame production is to prevent any import bans or restriction being grown on small fields (about 5 fedden) with little or no imposed by Saudi Arabia and the other GAFTA use of machinery or modern inputs. Sesame yields over markets since 2007. The livestock diseases prevalent the period 2002–2012 ranged for mechanized farms in Sudan require all animals to undergo quarantine, from 96–135 kg/fed to 81–88 kg/fed for tradition- testing, and vaccination before export and before ally produced sesame during the 2002/03–2012/13. slaughtering if the meat is to obtain an international Despite the low yields sesame production remains health certificate. The SPS requirements for the export profitable with high profit margins for sesame growers of livestock are shown below in Table 22. in Gedaref. Increasing productivity through adopting Expanding meat exports continues to be con- improved production and using higher quality inputs strained by substandard meat processing facili- will create jobs and increase incomes in the rural area. ties and practices. Increasing meat exports would Ensuring access and availability to agricul- eliminate the SPS hurdles involved in exporting live tural inputs as well as rural extension services is animals and increase value added in Sudan. At pres- vital to advancing productivity and promoting the ent, the meat processing facilities in Sudan primarily competitiveness of sesame and other oil seeds. The supply the domestic market and do not have either high central market buying price at approximately 93 the capacity or the quality to meet foreign markets percent of the Freight on Board (FOB) price reduces SPS requirements. Sesame production is profitable despite the low productivity levels relative to other major 54 The program was approved by the Saudi authorities and requires 100 producing countries.55 Oil seeds are predominantly percent testing of all animals bound for export. 55 Yields are approximately half those of Nigeria and less than one fifth of produced under rain-fed conditions. Sesame requires those of China, 27 percent relative to Ethiopia and 58 percent compared careful handling to avoid the seeds shattering at to the levels in India. Opportunities for Growth through Diversification: Agriculture 83 profitability to the exporter. Sesame farmers receive Sesame exports in 2008–2013 accounted for about 78 percent of the final FOB export price when about 32 percent of agricultural exports and about they sell to a local village assembler or receive about 93 3.3 percent of total export. Table 25 shows exports percent of the FOB price when selling at the central value, quantity and share of sesame seed during the market (Table 23). The difference in price between period 2008–2012. The international price of sesame “farm gates” (sale to a village assembler) and sale to exported from Sudan receives favorable prices com- the export point (central market) at Port Sudan may pared to other African exporting countries because be explained by: transport costs (28 percent); fees for of high quality and grading (e.g. recent world prices SPS certificates and other regulatory requirements (5.2 declared by Sudan Trade Point are US$2135/ton for percent); state tax (1.8); and port charges (3.2 per- sesame from Sudan compared to US$2050/ton for cent). The handling costs at Port Sudan and Gedaref sesame from Ethiopia and US$1900/ton for sesame account for 18 percent of all marketing costs. Table 24 from Nigeria). shows the supply value chain analysis for sesame pro- Sudan’s markets for sesame are quite diver- duced in Gedaref. sified and Sudanese sesame has now penetrated Sudan exports about two-thirds of its sesame markets in China, Europe, and African countries production, and is among the main exporters as well as traditional markets in the Gulf and Arab of sesame seeds worldwide. Exporting countries countries. Gulf and Arab countries are the major include India, Ethiopia, Nigeria, Sudan, China, importers of sesame from Sudan with a share of more Paraguay, Myanmar, and Mexico. Sudan ranks sec- than 34 percent in 2012, followed by China with a ond after India in area cultivated. With a 10 percent share of 25 percent (see Table 26). Ethiopia may be share in total world export of sesame, Sudan’s ranked considered the major competitor for Sudan in African fourth after Nigeria, India, and Ethiopia who had, sesame producers. respectively, 38, 20, and 16 percent shares of the An estimated five million people are involved market in 2010. in gum arabic with the belt covering 12 states in TABLE 23: Estimated Costs per Feddan of Sesame Production in Gedaref (2013/2014) Items SGD/quintal Percent of Cost Initial land and machinery preparation 6.9 4.4 Operational costs 35.3 22.5 Harvesting 60.7 38.6 Marketing cost 16.8 10.7 • Packaging • Transport to Gadaref • Marketing fee • Other costs Zakat 30 19.1 Unseen costs (5 %) 7.5 5.0 Total cost 157.3 100.0 Farm gate price 500 Farmers profit margin 342.7 Source: Planning Administration, Ministry of Agriculture and Irrigation, Gedaref State. Note: Expected yield 3 quintal/feddan. (Quintal = 100 pounds or 45 Kg). 84 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE TABLE 24: Value Chain Analysis for Sesame Marketing from Gedaref to Port Sudan (Jan. 2014) Percent of total Percent of Activities SDG/Ton marketing cost FOB price Farm gate price 11,110 78.5 Buying prices (central market) 13,200 93.2 Marketing cost: • Handling and grading 81.5 13.2 • Sacks and strings 60 9.7 • SSMO export certificate 6.1 1.0 • Quarantine certificate 3 0.5 • Transport to Port Sudan 130 21.1 • Transport value added tax (17.5% from transport cost) 22.75 3.7 • Transport fees (20% from transport cost) 26 4.2 • Handling at port 30 4.9 • Port fees 20 3.2 • Sterilization fee 5 0.8 • Certificate of origin fee 5 0.8 • Phyto-sanitory certificate fee 3 0.5 • International accredited cert. fee 9 1.5 • Export fee (state level) 11 1.8 Total marketing cost 616.5 4.35 Sub-total cost 13,614.3 Insurance (1.5%) 204.2 Total cost 13,818.57 FOB price 14,160 Net margin 341.4 2.41 Source: Compiled from data collected during main mission. * The average local price during January is 700 SDG/Quintal, and average world price is US$2400/Ton. TABLE 25: Sesame Export Value and Quantities: 2008–2013 Export Share Quantity Value Unit value Agricultural exports Total exports (1000 ton) (US$ million) US$/Ton (percent) (percent) 2008 96.7 141.9 1467.4 36.1 1.2 2009 137.6 143.3 1041.4 31.2 1.7 2010 224.1 167.3 746.5 38.2 1.5 2011 211.8 231.0 1090.6 30.2 2.4 2012 208.9 223.5 1069.8 28.5 6.6 2013 242.7 472.7 1947.6 29.0 6.6 Average 186.6 229.9 1227.2 32.2 3.3 Source: Central Bank of Sudan Annual Reports (various issues), and Trade Digests (various issues). Opportunities for Growth through Diversification: Agriculture 85 TABLE 26: Direction of Sesame Trade: 2012–2013 2012 2013 Country Value (US$000) Share (%) Value (US$000) Share (%) Industrial countries (Greece, Netherland, 16,590 7.4 11,476 2.4 Ireland, United kingdom) Turkey 519 0.2 12,872 2.7 COMESA (mainly Egypt) 21,490 9.6 63,127 6.5 Other African countries (Algeria and Tunisia) 647 0.3 102,946 21.8 Asia (mainly China) 57,438 25.6 87,590 18.5 Arab Countries (Saudi Arabia, Lebanon, 76,254 34.1 90,030 19.0 United Arab Emirates) Source: Central Bank of Sudan Annual Reports (various issues), and Trade Digests (various issues). Sudan, extending from the eastern borders of Sudan price). Low prices in conjunction with poor support with Ethiopia to the Western borders with Chad services led farmers to cultivate alternative crops. The and Central Africa, covering an area of 500 thou- GAC also faced administrative problems that led to sand square kilometers. Sudan produces high quality inadequate international promotion and marketing (hashab) which comes from Acacia Senegal, and a lower of gum arabic. In addition other factors outside the grade (Talha) harvested from Acacia seyal but with the company affected production, including the limited same unique properties as an emulsifier. Productivity involvement of banks in financing production, mul- remains low and on-farm research has identified the tiple fees and taxes imposed by states and the lack of potential for quality improvements and productivity- strategic stocks to buffer price shocks. per-tree improvements of 47–60 percent through bet- In 2009 the gum arabic trade was liberal- ter tapping methods ized with the removal of GAC concessions on the Recent reforms in the marketing of gum ara- marketing and export of raw gum arabic and the bic have improved the incentives for production. suspension of the floor price system. The Gum Onerous taxation and multiple fees reduced the incen- Arabic Board (GAB) was established to coordinate tives to produce and market gum arabic resulting in reform measures and support the regeneration of the a substantial decline in Sudan’s share of the work sector. The main objectives of the GAB are similar to market over the past four decades. Average produc- the former GAC, without the monopoly power or tion declined from an average of 45 thousand in the concessions. GAB is responsible for promoting gum 1970s to only an average of 11 thousand tons during arabic export, opening new markets, providing finance 2001–2008. Following the reforms there is a sign services and quality control. Further reform measures of production recovery as it increased to 30 thou- have eliminated 13 taxes and charges that had been sand tons in 2012 and was estimated to increase to levied on gum arabic.56 80 thousand tons in 2013. Gum arabic producers receive about 84 percent From 1969 to 2009 the state run Gum Arabic of the final FOB export price when selling at central Company (GAC) has the monopoly concession market (auctions). Table 27 shows the value chain for to export raw gum arabic. The GAC implemented gum arabic marketing from El Obeid to Port Sudan in a floor price system for gum at buying centers (auc- tions) that resulted in low prices being paid to produc- ers for several years (about 10–15 percent of export 56 World Bank, Report Number. (ISR9718). 86 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE TABLE 27: Value Chain for Gum Arabic Marketing from El Obeid to Port Sudan in 2012 Percent of total Percent of Activities SDG/Ton marketing cost FOB price Farm gate price 8865.05 84.6 Buying prices (central market) 8865.05 84.6 Marketing cost: • Handling and grading 28.62 10.9 • Local transport 36.57 13.9 • Transport to Port Sudan 60.0 22.9 • Transport value added tax (17.5% from transport cost) 10.5 4.0 • Transport fees (20% from transport cost) 12 4.6 • Tax • Fees 51.38 19.6 • Handling at port 62.5 23.9 Total marketing cost 261.57 2.9 Total cost 9094.12 FOB price 10475* Net margin 1338.88 13.1 Source: Planning and Agricultural Economic Directorate, Ministry of Agriculture and Irrigation. Notes: * FOB price calculated at US$2500/ton and 4.19/US$ exchange rate in 2012. 2012. The major marketing costs from El Obeid to the to members of Gum Arabic Producers Associations export point at Port Sudan include transport costs (48 (GAPAs) in five states (South Kordofan, North percent), fees (19 percent), and port charges (23 per- Kordofan, White Nile, Sinnar, and Blue Nile) who cent). There is an improvement in the ratio of buying then provide technical extension and advice to small prices to the FOB prices reflecting higher prices at auc- gum producers. This has facilitated increased produc- tions, which has had a positive impact on producers of tivity and improved market access. gum arabic. There is still a concern that profitability Expanding the gum arabic sector requires fur- is reduced through individual states levying taxes and ther reductions in the multiple taxes and fees levied other charges without providing a service.57 at the state level, enhancing research and extension The “Revitalizing the Sudan Gum Arabic services to farmers, and strengthening the Gum Arabic Production & Marketing Project”58 has increased Producer Associations. the income levels of beneficiary households by The production and export of cotton has 65 percent. The percentage of the gum price received declined sharply over the past decade due poor by small gum producers has increased from 15 percent margins. Factors contributing to the low profitability to 50 percent due to increased yields and higher prices through the liberalizing the marketing by abolishing 57 It is not included in value chain analysis, but during the main mission the monopoly of the Gum Arabic Council. About 130 the Secretary General of the Gum Arabic Board confirmed that taxes and associations in five states consisting of over 11,000 fees represented about 30% of the marketing cost. 58 The project is financially supported by World Bank (Multi Donor farmers (25 percent women farmers) are involved. Trust Fund (MDTF)) and International Fund for Agricultural Develop- The project provides technical and financial support ment (IFAD). Opportunities for Growth through Diversification: Agriculture 87 Estimated Costs per Feddan for Cotton (Acala) Production – Gedaref (2013/2014) TABLE 28:  (Expected yield 4.5 quintal/feddan) Items SDG/ feddan SGD/quintal Percent Initial land and machinery preparation 127 28.2 5.7 Operational cost 148 32.8 6.6 Inputs (seeds, herbicides, fertilizers, pesticides, etc) 1525.5 339 68.4 Finance cost 263 58.4 11.8 Harvesting 78 17.3 3.5 Irrigation fee 70.5 15.6 3.1 Administration fee 19.5 4.3 0.8 Total cost 2231.5 495.6 Farm gate price 550 Farmers profit margin 244.8 54.4 11.1 Source: World Bank staff own compilation, based on local data obtained in January 2014. and productivity include deteriorating irrigation The share of cotton in agricultural exports infrastructure in the Gezira Scheme, poor manage- declined sharply from 15 percent in 2008 to only ment of water distribution and maintenance, and the 1.5 percent in 2012 as farmers in the Gezira scheme reluctance of farmers to grow cotton especially after moved away from cotton production. The quantity new Gezira Act 2005.59 The bulk of Sudan’s cotton exported declined from 139 thousand bales to only production is in the irrigation schemes especially 13.4 thousand bales in 2012, despite an improvement the Gezira Scheme. During the last season a small of world prices. There was a partial recovery in 2013, scale trial of planting genetically modified cotton although only for short and medium staple cotton. (seeds were imported from countries like Brazil and The sharp decline in export is due mainly to reduc- China) were carried out to solve the problems of tions in area and production of cotton, especially in low productivity and high cost of production with the Gezira Scheme. Sudan’s current markets for cotton promising results. are concentrated in a few countries, especially China The cotton sector faces high costs of produc- and Egypt, with an import share of 33 percent and tion and has low productivity due to limited use 19 percent respectively in 2013 of agricultural inputs such as fertilizer. Cotton On the world market, the Sudan Cotton yields (Acala) averaged 528–1014 kg/feddan (seed Company (SCC) has sold virtually all the cotton cotton) during the period 2002/03–2013/14 in grown under irrigation in the country over the last the irrigated sector. There is a substantial difference 35 years. Cotton producers are paid on delivery at between productivity in the irrigated and rain-fed the “farm gate” according to grade and type of cot- sectors, as yields ranged between 151–606 kg/fed for ton. The SCC has in the past financed a substantial the rain-fed sector. The yield trend in both sectors was declining through 2011; however, during the last 59 The largest scheme, Gezira, has experienced a complete change in two seasons an improvement in yield is registered. management in 2009/10 through the implementation of the 2005 Gezira Table 28 shows that cotton production returns a yield Act, effectively privatizing the scheme and transferring the responsibility for irrigation to land-owner, water-user associations devolving control of 11.1 percent to the farmer, which is equivalent to and, by association, planting decision-making to the farmers, thereby SDG 54 per Quintal. allowing planting flexibility within the water delivery regimes. 88 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE part of the costs of inputs for cotton production. vegetables account for less than 1 percent of total However, recently the role of the SCCL in cotton agricultural exports. The major constraints facing the marketing has been more limited, hampered by the production of fruits and vegetables are low productiv- deterioration of cotton production and the changing ity characterized by lack of improved seeds, low yield, environment of production, especially in relation to lack of uniform output quality, and poor post-harvest the Gezira scheme. handling. Research facilities, extension services, and Sorghum is the main staple crop grown in marketing channels all need to be improved. Sudan. The average area under sorghum cultivation The government has encouraged the estab- was about 21.2 million feddan (about 40 percent lishment of specialized companies to support the of the total cultivated area), with an average pro- production and export of fruits and vegetables to duction of 3.4 million tons and an average yield of meet international standards. These include: the 233 kilograms per feddan during 2007/08–2013/14. Sudanese Company for Horticultural Exports which The irrigated farming system produced 20 percent is expected to contribute to the supply of inputs such of the total output of sorghum in Sudan, while the as seeds, packaging material, transportation facilities, mechanized rain-fed system and traditional farming and marketing experience in melon, green beans, system produced 80 percent of the total sorghum. onion, mango, and lime; the Bustan Investment The production amounts of the sorghum crop had Company and the Neshaishiba Investment Company continued fluctuations in area and yields due to for production and export of Galia melon; and the dependence on unpredictable rains, pest infestation, Export Promotion Village which aims to provide and price changes. grading facilities (sorting and packing) with modern The Government restricts the export of sor- technologies and supply of appropriate transporta- ghum when they determine there is a deficit within tion and storage facilities (including cold transporta- the country. This policy creates confusion for produc- tion and cold storage facilities) to reduce costs and ers and traders; the uncertainty over the possibility increase export competitiveness of Sudanese fruit and of an export ban discourages production for export. vegetable exports. Export quantities varying from zero to 243,000 tons. The National Institute for the Development of In 2013 Sudan exported sorghum to Saudi Arabia, the Horticultural Exports was established in 1993 Spain, Greece, and Belgium. Recent exports of sor- to conduct studies and research on promotion of ghum have been motivated by a high production in Sudan exports of fruits and vegetables. The institute season 2012/13 and rising prices of sorghum in the is expected to conduct socio-economic studies that world market. include marketing surveys, technical and economically There are substantial opportunities to expand viable studies for exports, and field technical studies the production of fruits and vegetables. These related to field experiments for improving productiv- can be grown throughout Sudan, with potential for ity and quality of horticultural crops. growing large quantities in the vast irrigated areas Sudan has gone from being a net sugar exporter along the Nile, and in areas where there are large in the 1990s to a large net importer as domes- reserves of underground water and good soil, such as tic policies discriminate against local producers. in Darfur. The irrigated areas are reasonably close to Sudan is a relatively low cost producer of sugar and existing major airports and seaports for the transport has potential to expand production to supply both of commodities to international markets. The main the domestic market as well as expand access into exported fruits include mangos, grapefruit, bananas, the preferential GAFTA, COMESA, and EU (under melons, and lemons; the vegetables include green EBA) markets. Regrettably, a combination of both beans, onions, and sweet peppers. To date fruits and domestic and international policies have undermined Opportunities for Growth through Diversification: Agriculture 89 this potential and resulted in the domestic industry the major sugar companies, and developing incentives experiencing severe short-term losses. for the delivery of services (health, education) to local Domestic producers face a tax burden of communities through introducing tax credits. Recent US$126/tonne over imported sugar. Following a work has identified sugar’s high water requirements record surge in commodity prices in the 2000s, the relative to alternative crops and additional analysis is global price of sugar has subsequently declined by required taking into account long-term environmental 45 percent in US$ prices in the four year period end- sustainability. ing July 31, 2014. Sudan introduced significant tax changes in June 2012 when the import tariff of 40 per- Factors Affecting Competitiveness of cent, the excise duty of 17 percent, VAT of 17 percent, Agricultural Exports and Advanced Business Profit Tax of 1 percent were all reduced to zero on imports. Excise, VAT, and BPT The availability and access to agricultural inputs61 continue to apply to domestic producers who also at competitive prices is one of the main factors have to pay state taxes and a surcharge for the White affecting the productivity, profitability and com- Nile Project. This leaves domestic producers with a tax petitiveness of agricultural production. Agricultural burden of $126/tonne (2013/14). The overvaluation inputs are exempt from both custom duties and the of the exchange rate has further exacerbated the chal- use of the official exchange rate for their imports. lenges facing the domestic sector. However, according to the Agricultural Bank of Sudan The growing divergence between import prices (ABS), imported agricultural inputs are not duty free. and officially agreed-upon domestic prices are There is tariff for imported fertilizers and seeds of crowding out sales of domestic sugar. The decline in 3 percent, insecticide and pesticide on small contain- the international price of sugar, coupled with a signifi- ers of 10 percent, plus a 13 percent development tax. cant decline in the landed price (Khartoum) of sugar However large containers of insecticide and pesticide has not been matched by a comparable reduction in of 200 liters are zero-rated. the final price of sugar paid by consumers. Attempts The supply of agricultural inputs is mainly to maintain the officially agreed-upon domestic price through the state-owned ABS, with the private to consumers in local currency and also the margin sector playing a minor role. The Federal Ministry of between the ex-factory price and the consumer price Agriculture and Irrigation is responsible for qualifying have resulted in increasing volumes of imported sugar companies for agricultural inputs imports through being sold below the agreed-upon fixed prices. Indeed, tenders. The Ministry is also providing services to in 2014 sales of imported sugar virtually drove domes- the farmers through the extension unit, and provides tically produced sugar from the market. subsidies to the small traditional rain-fed farmers In the near term, expanding the Sudanese sugar (in kind). The Ministry of Agriculture is responsible industry requires a competitive exchange rate and for setting agricultural standards for imported and the implementation of tax neutrality between exported commodities through the Plant Quarantine domestically produced and imported sugar.60 In Department. the longer term, further work is required on envi- Most the local seeds are marketed without any ronmental sustainability given sugar’s heavy water quality control. Improved seeds are concentrated use. Consumer prices would benefit from abolish- in the irrigated sector; and minimally used on the ing the official price, and the removal of excise duty (subject to ensuring that this is revenue neutral). 60 This would require at current prices (2013/14) a levy on imports of $126/tonne. The earlier DTIS recommendations (which remain 61 Specifically seeds, chemical, machineries, and post-harvest material valid) included reducing government involvement in such as packaging. 90 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE rain-fed firms, notably in Blue Nile State. Local seed, the appropriate regulatory body. Pesticides require either kept from the previous year or bought from a letter from the National Pesticide Council. Seeds local markets, is the main seed source throughout require a germination certificate from the Ministry Sudan. These seeds, comprising second generations of Agriculture (Seed Unit), and certificates from of improved varieties, are marketed without quality both the Plant Quarantine Department and the control other than local knowledge of their source. Plant Protection Department. The National Seed Improved seed technology is essential for Administration (NSA) is responsible, under the Seed bridging the gap between yields in demonstration Law of 2010, for certifying and monitoring the pro- trials and farmers’ fields. Until recently, seed pro- duction, release, and utilization of all seeds. The NSA duction and certification was handled by the central has limited technical and financial resources and is government through the Seed Unit of the Extension currently receiving technical assistance through an Department in the Ministry of Agriculture and IFAD project. The government Agricultural Research Irrigation. National seed production was limited to Corporation (ARC) has a program for seed multi- field crops, while horticultural crop seeds were usually plication for registered and certified seeds. There is imported. In a move to improve production of good- virtually no effective competition from private sector quality seed and boost the use of improved seed, the seed companies. Arab Sudanese Seed Company was formed through The government provides agricultural exten- public-private partnership. The government donated sion services in Sudan through the Ministry of physical assets and has a share of 42 percent of the Agriculture and Irrigation and the Ministry of company’s capital. The Arab Authority for Agricultural Livestock and Fisheries. Increasing agricultural pro- Investment and Development (AAAID) financed the ductivity requires that extension services be improved. remainder. Given the fiscal constraints facing the Government Agricultural input supply faces many con- it is recommended that private companies selling straints. These include: i) a distorted agricultural inputs (seeds, fertilizers) and major marketing/buying inputs market; ii) deferred payments that increase companies be encouraged to deliver technical advice the cost; iii) a shortage of storage capacity and through extension services and the increased use of unspecialized input stores; iv) low local production contract farming. of inputs, for example, the local production of seeds The Technology Transfer and Extension covers only 10 percent of domestic needs; v) lack of Administration (TTEA) is the responsible body hard currency; and vi) a delay of inputs supply, lack for agriculture extension services. The objectives of substitute, and high insurance cost. Most recently, of TTEA include the development of agriculture; there is a shortage of labor supply with increased improvement in production quality; enhancement of daily rates due to the return of internally displaced farmers’ income through rational exploitation of natu- persons (IDPs) to the South, more attractive non- ral resources; comprehensive human prosperity via agricultural labor opportunities in the fast-growing profitable, sustainable agriculture; and making agri- urban centers and in the gold fields, and the large cultural products competitive in international markets increase in harvestable area. with the aim of assuring food security and increasing Cumbersome regulations, technically weak agricultural revenues. TTEA has four main thematic public agencies, and restrictions on private sec- programs, namely improving crop productivity, pro- tor involvement undermine the availability of motion of improved seeds, integrated mechanization, agricultural inputs. All agricultural inputs require and rural women development. The TTEA estab- an SSMO certificate and restricted products require lished administration networks in the state ministries additional certificates and letters of permission from responsible for agriculture and worked closely with the Opportunities for Growth through Diversification: Agriculture 91 states, ARC, and universities to facilitate the transfer Recommendations of technology to farmers. The TTEA also maintains a Technology Transfer Center and relevant stations The recommendations in the earlier DTIS whose mandate is to transfer technical information (2008) remain valid. The agricultural sector contin- to stakeholders including farmers. ues to be characterized by low productivity, limited Government delivery of livestock and fishery stock off take, and high animal morbidity and mor- extension services do not appear to be contribut- tality rates stemming from a combination of insti- ing to significant increases in productivity. For tutional and farm level constraints. Removing the livestock extension services, the General Directorate monopoly of the Gum Arabic Council has stimulated of Extension, Technology Transfer, and Pastoralists’ higher production and allows farmers to benefit from Development is responsible for extension matters increased prices. related to livestock owners, pastoralists and fishermen. Increase access to agricultural inputs through The Directorate runs its grassroots programs based on reforming the procedures for licensing seeds and fer- the needs of pastoralists, animal owners, producers tilizer, and funding research on the benefits of using and fishermen. It develops strategies and programs micro dosages of fertilizer and other inputs. Further of animal resources sector that concentrates on live- work is required on land tenure policies to increase stock, trans-boundary and zoonotic disease control, the security of tenure, which would encourage longer in addition to the promotion of animal production term investments. and fisheries. Extension services need to be strengthened Prioritize involving the private sector in and expanded. Private extension services should be delivering extension services. In addition to the encouraged alongside the commitment to improve Federal Government, state ministries of agriculture the quality of government extension services. The and state ministries of livestock and fisheries62 also private sector has the potential to play an important provide extension services. Some universities make role in providing information on quality standards a contribution to extension mainly through train- for export markets. ing. Examples include the Extension and Rural Remove the numerous state fees and taxes that Development Department at Sudan University of are not related to a service provided. This will be Science and Technology and the Department of challenging given the fiscal position of many states Agricultural Extension and Rural Development at and their demand for revenue. Documenting the University of Khartoum. Famer-based organizations, build-up of fees and taxes along selected agricultural including Farmer Union and Pastoralist Union, play value chains would assist in highlighting their adverse key roles in farmer-to-farmer extension activities, impact on expanding and diversifying production. influencing extension policy, assessing extension performance, and helping in setting extension pri- orities. Extension services remain weak and more attention needs to be given to using “tried and tested” approaches with well-trained professionals, including 62 In some states, the two ministries have been merged to form a single the private sector. ministry. 93 TRADE-IN-SERVICES 8 Overview This chapter focuses on professional services, a set of higher-value knowledge-intensive services Services and trade-in-services have an important sectors that are characterized by high regulatory role in economic diversification. Services are essen- intensity and are crucial for skills generation. A tial intermediate inputs and have the potential to diagnostic of professional services markets in Sudan enhance productivity and increase technology and based on a recent World Bank Survey on Professional skills transfers through significant positive spillover Services highlights the demand and the constraints effects throughout the economy. Services sectors can to the provision of adequate professional services in help Sudan diversify its economy and reduce poverty. Sudan. The chapter shows the importance of both For example, while the agricultural sector is viewed exports and imports of high-value added, sophisticated as an important engine of growth, it has remained far services and professional skills for export diversifica- below its potential and the country has stayed a net tion and increased competitiveness. The chapter also importer of agricultural products. The productivity illustrates how regulatory and trade policy reforms of farms will have to improve to increase agriculture can be coordinated as part of regional and multilateral production. That means better transport infrastruc- negotiations. Policy recommendations call for action ture, agricultural technology, and support services in four areas: education, regulation of professional including financing. services, trade policy, and labor mobility at both the Sudan’s economy faces numerous challenges national and international level. that hamper the development of the services sector. While services such as transport and logistics, finan- Trade-in-Services in Sudan cial services, or energy are addressed in the context of various World Bank or other development partner Sudan’s share of services Value Added (VA) in GDP projects, higher-value knowledge-intensive services is lower than expected for a country at its level such as business services remain largely neglected. of development. A comparative assessment of the Weak regulatory frameworks characterize most share of services VA in GDP for Sudan and selected business services sectors. While regulatory self-assess- Sub-Saharan African countries reveals that Sudan’s ments by ministries and regulators seem to suggest falls below the fitted curve in 2000–2 and 2010–12, that the frameworks in place are adequate, the private implying a smaller services sector than expected for sector points to numerous regulatory weaknesses. Also, the country’s level of development (Figure 31) stakeholders from both the public and the private sec- Growth of services exports remains below that tors mentioned the absence of adequate regulations of goods exports and GDP growth. Sudan stands and standards. There seems to be a strong interest in in stark contrast with most neighboring countries developing the necessary regulatory framework using regarding growth of services exports compared to that “good practice” from the region or elsewhere as guid- of goods exports and GDP. While most Sub-Saharan ance. Additional constraints in business services sec- African countries register more dynamic growth rates tors are skills shortages and mismatches. for services as compared to goods exports or GDP 94 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE FIGURE 31: Services Value Added and Development in 2000–02 versus 2010–12 100 100 SYC Average Services value added Average services value added 80 80 as % of GDP, 2000−02 as % of GDP, 2010–12 MUS SYC MUS 60 KEN 60 ZMB RWA RWA MWI UGA MOZ KEN MOZ UGA SDN MWI 40 ZMB 40 SDN 20 20 6 8 10 12 6 8 10 12 Average log GDP per capita PPP,2010−12 Average log GDP per capita PPP,2000−02 Source: World Development Indicators. Note: The figure shows scatter plots of average services value added as a percentage of GDP against the log of average GDP per capita in pur- chasing power parity (PPP , current international USD) for the periods 2000–2002 (left panel) and 2010–2012 (right panel). The line indicates the fitted values obtained by a linear prediction of the relationship between share of services in total value added and income per capita. This line re- flects a stylized fact that in richer countries the services sector tends to represent a larger share of the economy. The figure can be used to analyze whether the share of the services sector is higher or lower than what it should be given a country’s level of development. Sudan’s Exports of Goods, FIGURE 32:  Exports of Transport, Travel, and FIGURE 33:  Exports of Services, and GDP Other Commercial Services, Growth, 2005–2012 Sudan, 2005–2012 25 25 20 20 Index 2005=1 Index 2005=1 15 15 10 10 5 5 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012 Exports of goods Exports of service GDP Other commercial Transport Travel Source: World Development Indicators. Source: World Development Indicators. growth, Sudan’s services exports performance remains export diversification and provide new opportuni- below potential (Figure 32). ties for export development. Indeed, a recent sur- Interestingly, Sudan registers more dynamic vey of providers of professional services carried out growth rates for other commercial services exports by the World Bank shows that about one-third of than for exports of travel or transport services respondents in Sudan reported exports of services (Figure 33). This suggests that some modern, high in 2011 (19 out of 60), a higher proportion than value added services sectors already contribute to in most COMESA countries (15.7 percent at the Trade-in-Services 95 COMESA level). These exports of professional ser- regulatory policies and regulatory heterogeneity pre- vices concerned, for the most part, regional clients, vents Sudan from fully benefiting from the potential and represented on average a third of exporters’ total gains from greater trade-in-services. Again, regional revenue. This suggests that there is potential to develop cooperation to facilitate the movement of various Sudan’s services exports provided an appropriate trade professionals could help address skills shortages or policy and regulatory framework are put in place and gaps in relevant sectors. obstacles faced by professionals are lifted domestically Ensuring efficient access to a wide range of and at the regional level. services is a key determinant in international com- Sudan’s services imports are undiversified. petitiveness and efficiency. This chapter identifies the Imports of services can drive Sudan’s competitive- constraints to the development of professional services, ness. Imports of intermediate inputs such as trans- showing how inadequate domestic regulations in port services, construction, insurance, and other conjunction with a lack of regional cooperation holds business services can improve the productivity of back the development of the national markets for manufacturing and services firms. Also, services services, creates skills shortages and skills mismatches can help address shortages in crucial sectors of the with negative implications for competitiveness, and economy. For example, imports of professionals help limits exports. alleviate Sudan’s skills shortages in healthcare, educa- tion, or professional services. However, at this stage Professional Services Matter for Sudan’s Sudan’s services imports are for the most part com- Growth prised of transport and travel services (Figure 34). Sudan’s access to competitive services from which Professional services contribute directly and indi- to draw high quality services inputs is inadequate. rectly to economic growth, including by lowering Poor access to such critical services translates into a transactions costs and by creating spillover effects competitive disadvantage in any sector, be it services, of knowledge to other sectors. For example, engi- manufacturing or agriculture. The fragmentation neering and IT services are knowledge-intensive sec- of regional markets for these services by restrictive tors essential to the productivity and sustainability Services Imports, Sudan and COMESA FIGURE 34:  Services Imports, Sudan and COMESA COMESA 2012 Sudan 2012 Sudan 2005 0 10 20 30 40 50 60 70 80 90 100 Transport Travel Communications Construction Insurance Financial ICT Royalties OBS Personal recreation Source: World Development Indicators. 96 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE of other economic activities, including the oil sec- Respondents to the World Bank Survey of tor. Civil engineering is critical for the development Users of Professional Services listed a number and maintenance of a country’s physical infrastruc- of channels through which professional services ture, while electrical engineering is important to affect their productivity and performance. While the operation of public networks such as utilities or many respondents indicated that they use accounting commercial facilities and communication systems.63 services because of statutory requirements, they also IT-based services including application services name accounting services as useful for maintaining (such as application development and maintenance, and improving existing activities within enterprises system integration, IT infrastructure services, and and as helpful in accessing loans. Accounting and IT consulting), or IT engineering services (such as audit services also help manage costs, expenses, and manufacturing, engineering, and software product income of the firm, disclose the company’s financial development) also have an important impact on health, undertake future planning, and comply with productivity and growth. Accountancy is critical for tax laws and requirements. Engineering services help accountability, sound financial management, and firms understand technological advancements and good corporate governance.64 how to use them effectively to construct, install, and Users of professional services in Sudan are more maintain their machinery in normal operating condi- productive than non-users. Data from the World tion. Still, such knowledge-intensive services remain Bank Survey of Users of Professional Services in Sudan largely neglected and their development and export show that firms that use accounting services—whether potential remains overlooked. externally outsourced or provided in-house—have higher average labor productivity than firms without High demand for professional services in such professional services linkages (Figure 35). Also, Sudan the labor productivity gap between users and non- users of accounting services is higher in Sudan as The business surveys undertaken in Sudan report compared to the COMESA average. a high level of demand by the surveyed firms. The results of the user surveys (Figure 36) suggest that accounting, engineering, and legal services are impor- FIGURE 35:  Average Productivity of Users tant intermediate inputs in the production of many vs. Non-Users of Accounting sectors with more than 50 percent of all interviewed Services, Sudan and COMESA enterprises using such services at least once per year. Labor productivity Demand for these services is expected to increase with (annual revenue in thousand USD per employee) economic growth in Sudan. 14 There is demand for basic and more sophisti- 12 cated professional services. The surveys show that 10 there is demand all types of services, from accounting 8 and auditing, to tax advice and management consult- 6 ing. Financial auditing is the main source of revenue 4 2 63 See “Trade in Engineering Services.” Cattaneo, O. et al, In “Interna- tional Trade in Services: New Trends and Opportunities for Developing 0 Countries.” The World Bank, 2010. Accounting-Sudan Accounting-COMESA 64 See “Regulatory Reform and Trade Liberalization in Accountancy Users Non users Services.” Trolliet and Hegarty, in “Domestic Regulation & Services Trade Liberalization.” eds. Aaditya Mattoo and Pierre Sauvé, World Bank and Source: World Bank Surveys of Professional Services in COMESA, 2013. Oxford University Press, pp. 147–166, 2003. Trade-in-Services 97 Usage of Professional Services, FIGURE 36:  The high usage of professional services and the Sudan higher productivity of Sudanese firms that use pro- 100 fessional services than that of non-users may suggest that professional services are equally important for 80 the development of the economy as they are in more 60 developed economies. 40 Skills shortages of both highly skilled and 20 middle level professionals are observed in Sudan 0 Accounting Architecture Engineering Legal Despite demand for professional services Sudan Users Non-users is characterized by limited availability of profes- Source: World Bank Surveys of Professional Services in COMESA, 2013. sionals and skills mismatches in engineering and accounting services. While detailed data on the exact magnitude of professional skills shortages in Sudan for accounting and auditing firms in Sudan, followed is unavailable, consultations with practitioners con- by accounting/bookkeeping and management consult- firmed that the current demand for qualified accoun- ing and tax advice (Figure 37A). Engineering firms in tants or engineers in Sudan is growing and is much Sudan earn, on average, the largest fraction of their larger than the available supply. revenues from providing planning and managing Supply of professional services is limited by maintenance survey sites, other services related to engi- rent-seeking opportunities. Even though profession- neering and project management services (Figure 37B). als in Sudan receive high nominal wages relative to FIGURE 37: Demand for Accounting and Engineering Services in Sudan A. Demand for accounting services in Sudan B. Demand for engineering services in Sudan Main sources of revenue – accounting Main sources of revenue – engineering Planning and managing 19% 71% maintenance, survey sites 10% Financial auditing 41% Other services related 18% to engineering 8% Project management 17% Accounting 13% (incl. monitoring of execution) 12% (incl. bookeeping) 23% 15% Engineering consulting 18% Design and planning 10% Management 11% 13% consulting 12% 6% Construction cost management 8% 5% Tender and contract 6% Tax advice administration 13% 12% 5% Feasability studies 9% Other services 1% Environmental assessments 2% related to 5% accounting 11% 1% Testing and certification 4% Sudan COMESA Source: World Bank Surveys of professional services in COMESA, 2013. 98 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE their counterparts in other African countries, reflect- Explaining the skills shortages and ing their scarcity relative to demand for their services, the underdevelopment of markets for interviews revealed that there are limited incentives professional services in Sudan to become and practice as a professional in Sudan given rent-seeking opportunities in the public and Factors related to education, domestic regulation, the oil sectors. A more severe scarcity of engineers as trade and labor mobility explain skills shortages and compared to that of accountants in Sudan is reflected skills mismatches in professional services in Sudan. by the earnings differential between those two types Weaknesses in primary, secondary and tertiary edu- of professionals (compare Panel A and Panel B of cation limit the ability of students to acquire profes- Figure 38). sional skills. From a regional perspective, enrollment It is worth noting that discussions with the in higher education is higher in Sudan than in other private sector revealed that Sudan is facing not Sub-Saharan African countries and is similar to that in only a shortage of highly skilled professionals Middle Eastern and North African countries, but the but also middle-level skills shortages. Middle-level education sector shows weak learning outcomes at all professionals who can provide services to underserved levels.65 Given the relatively high enrollment rate in client segments and produce large economic gains higher education, it is important that students acquire are sometimes an underappreciated category of pro- the skills that match those needed by the labor market. fessionals. For example, accounting technicians can A weak regulatory framework can explain the provide basic recordkeeping services needed by SMEs. underdevelopment and the segmentation of mar- Engineering technicians can provide basic or standard- kets for professional services. Professional services ized engineering services and are crucial in supporting have traditionally been subject to a high degree of engineering projects. Thus, the absence of middle-level regulation, as a result of direct governmental regula- professionals in Sudan needs to be addressed. In the tion and of rules adopted by self-regulatory bodies context of the shortages of professionals at all levels (professional associations). These regulatory mea- and given that it is less costly and less time consuming sures affect the entry and operation of professionals to train middle-level professionals, the development of middle-level/technical professionals should be Sudan’s priority in terms of skills formation. 65 World Bank (2012), The status of the education sector in Sudan. FIGURE 38: Average Gross Monthly Salaries in Sudan Panel A: of accounting professionals Panel B: of engineering professionals Average gross monthly salary of Average gross monthly salary of accounting professionals (USD) engineering professionals (USD) 1,514 1,552 1,098 1,088 1,033 948 733 732 486 464 417 404 Managers Senior professional Junior professional Managers Senior professional Junior professional Sudan COMESA Source: World Bank Surveys of professional services in COMESA, 2013. Trade-in-Services 99 and professional services firms, and can undermine and legal professionals in Sudan are among the least competition and constrain the growth of the sector. restrictive in Sub-Saharan African countries.66 Also, Based on the results of a regulatory self-assess- there are no price regulations affecting professional ment performed by Sudanese ministries and profes- services, and advertising prohibitions concern only sional associations, Sudan seems to have a moderate accounting services. A more detailed description of regulatory framework for professional services. the regulatory frameworks in all examined professional Entry requirements, such as pre-qualification require- services in Sudan is presented in Box 3. ments, licensing or membership in a professional asso- The private sector identifies several regulatory ciation, as well as regulations affecting the conduct/ barriers affecting professional services in Sudan. operations of professional service providers such as Additional information on the severity of regulatory price regulations, advertising prohibitions or restric- barriers comes from the 2012–13 World Bank business tions on multidisciplinary activities, tend to be less stringent in Sudan than in neighboring countries. For 66 Highly skilled professionals in the different professional services sectors generally have exclusive rights to perform certain activities (e.g., auditing, instance, according to the interviewed authorities, the representation of clients before courts, advice on legal matters, feasibility range of exclusive activities reserved for engineering studies, design and planning). BOX 3: Domestic Regulation in Professional Services in Sudan In Sudan’s accounting sector there are mandatory continuing education requirements for members of the profession, while for both the accounting and the legal sector there are additional requirements include passing the professional examinations to become a full member of the profession. There are practical training requirements to become a full member of the accounting, engineering and legal professions: one year for law practitioners, three years for accounting professionals and five years for engineers. In addition, the accounting and the legal professions are also subject to other educational or vocational requirements over and above the academic degree to enter the profession (example, the legal profession requirement is a one-year post-graduate course). All three sectors also regulate access to the profession through compulsory licenses or authorization granted by the Sudan Bar Association in legal services, the Accountancy and Audit Profession Organization in accounting services, and the Engineering Council for engineering services. Licenses are renewed periodically (for example, every two to five years for engineering). In the engineering sector, although there are no requirements for passing a professional examination to become a member, there are requirements pertaining to practical training (a few years for engineering technicians and five years for engineers). All these requirements are in addition to the mandatory university degree obtained to practice legally. In Sudan, engineering and legal services are not subject to exclusive rights of practice by engineers or lawyers; the scope of exclusive rights is broader in accounting services. Highly skilled professionals in professional services sectors have exclusive rights to perform certain activities (e.g., auditing, representation of clients before courts, advice on legal matters, feasibility studies, design and planning). The argument in favor of exclusive rights is that they can lead to increased specialization of professionals and guarantee a higher quality of service. But the negative price and allocation effects of exclusive rights, which act as monopolies, can be substantial, especially if they are granted for standardized services that can be provided at a lower cost by less-regulated or non-regulated providers, such as the middle-level professionals in these sectors. In the accounting sector, except for matters related to management consultancy services, investment advice, legal advice and representation, and expert witness in accounting, all other accounting type works fall under the exclusive rights domain of certified accounting professionals. The following activities are specifically provided by accounting professionals only: traditional accounting (bookkeeping); statutory audit; non-statutory audits; audit of mergers and of contributions in kind; insolvency practice; international audit; tax advice, and tax representation Regulation affecting the conduct/operations of professional services providers in Sudan seems to be less severe than in many neighboring countries. In all professional services, fees tend to be negotiated freely between practitioners and clients, but there is a Fee Committee at the Bar Association that deals with complaints from clients. All types of legal entities are permitted in engineering. By contrast, only sole proprietorship and general partnerships are permitted in accounting. Also, advertising is prohibited in accountancy but seems to be allowed in engineering and legal services. Source: Regulatory surveys undertaken in 2012 and 2014. 100 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE surveys and is presented in Figure 39. This suggests restrictions, and broader labor mobility limit competi- that transparency and requirements to participate in tion and the efficiency of professional service providers public procurement as well as the speed of accredita- in Sudan. Key barriers relate to regulations pertain- tion and qualifications procedures are among the top ing to licensing and qualification requirements. The regulatory constraints faced by professional services accounting and legal sector uses the labor market test providers in Sudan. Restrictions affecting competi- or economic needs test for license application by foreign tion such as advertising prohibitions and fees/price services providers. Other explicit trade barriers affect- regulations are also important barriers for business. ing professional services in Sudan include: nationality Trade barriers and immigration regulation can requirements to provide certain professional services, explain the segmentation of markets for profes- prohibitions against using the name of the parent sional services. Trade barriers can limit competition company, requirements to employ a certain percent- and the efficiency of professional service providers. In age of nationals, and restrictions on the composition of general, foreign entry restrictions include: i) restric- management of foreign professional firms established in tions on the movement of natural persons (nationality Sudan. Foreign professional degrees are recognized on and residency requirements, quotas, economic needs an ad-hoc basis. Similarly, work permits are allocated test, limits on the length of stay, and recognition of and extended on a case-by-case basis. The public pro- academic and professional qualifications); ii) restric- curement of government contracts for accounting and tions on the establishment of commercial presence legal services are also quite rigorous in Sudan—foreign (restrictions on foreign ownership, limits on the type providers to the government cannot sell numerous of legal entry, and limits on the scope of business); services. There are ownership and control limits and iii) restrictions on cross border trade (entry restrictions restrictions on the form of entry for foreign firms in all and limits on the scope of business); and iv) restric- professional services sectors. In terms of trade restric- tions on labor mobility (procedures for hiring a for- tions on importing professional services through mode eign worker). 1 (cross-border trade), there is little possibility for a Trade restrictions in professional services are domestic resident firm/individual to obtain professional quite severe in Sudan. Explicit barriers to trade cover services directly from a foreign professional services firm foreign entry restrictions and discriminatory conduct or office located outside the country. FIGURE 39: Top Regulatory Constraints Faced by Professional Services Providers in Sudan Transparency of public procurement procedures (%) Requirements to participate in public procurement... Speed of accreditation and qualification procedures... Speed of licensing procedures (%) Number of competitors (%) Registration & other administrative procedures to... Fees/prices (%) Technical standards (%) Advertising and marketing (%) Accreditation and qualification requirements (%) Licensing requirements (%) Cooperation between professionals (%) Shared exclusive rights (%) Multidisciplinary activities (%) 0 10 20 30 40 50 60 70 80 Source: World Bank Surveys of professional services in COMESA, 2013. Trade-in-Services 101 Implications for policy action have emphasized the coordination problems between employers, professional associations, and education The national markets for professionals and pro- institutions in the content of educational programs for fessional services in Sudan remain underdevel- engineers and accountants. Policy actions to encour- oped. The main priorities relate to coordinating the age collaboration between universities, professional needed regulatory reforms with trade liberalization, associations, and the private sector (for example and addressing the skills shortages and the skills mis- through internships) could help students acquire skills matches affecting professional services. This suggests and practical training. Such collaborative actions are policy action in the following areas: education, regu- required to better understand and strengthen the links lation of professional services, trade policy, and labor between the curricula and the skills required to sup- mobility at the national and regional levels. port the expansion and diversification of the economy. The requirements for medium and high-level skills in Policy action at the national level more sophisticated business services need to feature in Sudan’s Education Sector Plan to mobilize both Reforms at the national level need to focus on the internal and external financing. development of framework conditions that facili- tate the growth of professional services and address Policy action at the regional and multilateral skills shortages and skills mismatches. In the short levels term, reforms need to focus on the developments of the necessary regulatory framework and incremental, Regional integration and multilateral negotiations qualitative improvements in domestic regulations offer opportunities for implementing regulatory that hamper the growth of the sector. Top regulatory reforms and reducing the skill gap through services constraints identified by the private sector include liberalization. Sudan is a COMESA member and is regulations regarding participation in public pro- currently negotiating its WTO accession. How far and curement processes, competition issues, and the how quickly Sudan will proceed depends on political qualification and licensing requirements and reg- and economic considerations. Ideally, liberalization istration and other administrative procedures that would be non-preferential so that domestic users of limit the entry and the operation of professional professional services have access to, and domestic pro- services firms. The regulatory reform process needs fessionals can benefit from, exposure to the best service to involve the private sector. In the long term, facul- providers in the world. This protects countries from ties and other training programs must be created, suboptimal regional providers. If, however, reciprocal improved and expanded to satisfy professional train- liberalization at the regional level is politically more ing needs, but this must be planned and carried out feasible, then Sudan ought to weigh the unquestion- in a manner that will increase not only the quantity able benefits of market opening, even in the narrow but also the quality of offerings. regional context, against the possible costs of giving Sudan should continue earlier progress made a first-mover advantage to what may be a second-best in the education sector. For example, its success at regional service provider. increasing enrollment at the primary and secondary Steps need to be taken by Sudan to relax the levels generates growing demand for vocational and explicit trade barriers applied to the movement of higher education. The absence of links between edu- natural persons and commercial presence of profes- cational systems, employers, and users of services pre- sional services. Examples of possible reforms include: vents young graduates from acquiring market-relevant articulating the economic and social motivation for skills. Several stakeholders from the private sector nationality and residency requirements; minimizing 102 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE restrictions on the forms of establishment allowed; and the region and boost service exports. Sudan could learn developing a transparent and consistent framework from East Africa’s experience with MRAs in account- for accepting professionals with foreign qualifications. ing and architectural services. The EAC Common The reduction of explicit trade barriers also needs to be Market Protocol, adopted by the Multi Sector Council complemented with the reform of immigration laws in 2009 includes an annex on a framework agreement and rules on the hiring of foreign workers. on MRA for academic and professional qualifications. Deeper regional integration, through regula- The five EAC countries have already signed an MRA tory cooperation with neighboring partners who in accounting services and implementation focuses have similar regulatory preferences, can usefully on the following areas: requirements for education, complement non-preferential trade liberalization. examinations, experience, conduct and ethics, pro- Regional integration would also enhance competition fessional development and re-certification, scope among services providers, enable those providers to of practice, and local knowledge. To assist with the exploit economies of scale in professional education, preparation of potential MRAs Sudan countries could and produce a wider variety of services. Regional benefit from technical assistance in the context of the integration brings further benefits in that a larger DTIS implementation. regional market is able to attract greater domestic and foreign investment; and regionalization may help take Recommendations advantage of scale economies in regulation, particu- larly where national agencies face technical skills or Sudan needs to engage in deep regulatory coopera- capacity constraints. tion at the regional level and use multilateral trade Regional integration may help Sudan take liberalization and regional integration to reform advantage of scale economies in regulation, par- and strengthen its professional services sectors. ticularly where national agencies face technical The government could engage with donors to secure skills or capacity constraints. Regional initiatives technical and financial assistance to strengthen the such as the program that is currently being devel- capacity of regulatory organizations, and develop oped by the Inter-University Council for East Africa appropriate regulation. (IUCEA) in terms of designing university curricula The pace of integration is largely dependent and research, and creating university/industry partner- upon Sudan’s political motivation and convic- ships for fostering knowledge could provide guidance tion that such liberalization is beneficial to the for Sudan’s education reforms. Also, collaboration domestic constituencies. To improve such prospects, with the IUCEA could contribute to the reduction the promotion of more frequent and open dialogue of education-related differences that fragment the between the key stakeholders involved in professional regional market for education and encourage trade in services—professional bodies, private sector provid- education between Sudan and neighboring countries. ers, users of services, higher education institutions, Opening up regional boundaries and establish- trade negotiators—is important. Sudan’s participation ing Mutual Recognition Agreements (MRAs) would in COMESA and the WTO accession can help the facilitate Sudan’s services integration with its country with the development of a meaningful reform African partners. The free movement of COMESA program that includes the elimination of explicit nationals without work permit requirements would be barriers and regulatory, educational, and immigra- of great help to increase business opportunities within tion reforms. 103 OPPORTUNITIES FOR GROWTH THROUGH DIVERSIFICATION: TOURISM 9 Overview characterized by semi-desert conditions, the North is dominated by the arid Nubian Desert, the East con- Sudan has an opportunity to become an important tains over 700km of Red Sea Coast, and the South global tourism destination. While largely unknown, contains forested mountains, swamps, and rainforest. Sudan has compelling attractions that could be The country has eight national parks, two of which of strong interest to tourists that seek out culture, are marine-based. Some of the land-based parks have adventure, wildlife, and scuba diving opportunities. pockets of terrestrial wildlife that attract tourists inter- Realizing this potential requires the removal of regu- ested in safaris. There is also a small hunting market. latory and policy constraints, ensuring stability and Yet the country’s top nature tourism product is scuba security, and improving the country’s image in inter- diving along the well-preserved coral reefs that line national markets. Addressing these issues will provide the Red Sea Coast. the foundation for a productive and dynamic tourism The 2011 secession of South Sudan has helped sector in Sudan that can make significant contribu- create momentum towards tourism development in tions to economic growth, employment generation, Sudan. First, the secession has contributed to a process cultural and environmental preservation, and social that may lead to the onset of normalization of rela- inclusion. tions with the wider international community, which Sudan is home to a number of world-class tour- is an important step towards attracting more tourists. ism attractions based on its unique cultural and Second, the loss of a significant portion of Sudan’s oil natural resources. However, the reality of a country revenues after the South Sudan secession68 has forced rich in natural and cultural resources has been over- the government to look at new ways to diversify the shadowed by the negative consequences of a lengthy economy. Among the various options, the government civil war and social conflict culminating in the seces- has made some indications that tourism could become sion of South Sudan in July 2011. Even after South a greater priority. Sudan’s secession in July 2011, Sudan continues to The Qatar-Sudan Archaeological Project signed suffer from insecurity.67 in April 2013 is a high profile development in sup- In terms of culture, the country is well endowed port of the sector and has the potential to serve as with temples, monuments, and tombs dating a catalyst for broader based tourism development back to the time of ancient Egypt, with which in the future. The government of Qatar69 has agreed the Sudanese lands were closely connected. In fact, Sudan hosts a collection of pyramids that even out- 67 From internal rebellion, tensions with neighbors, and permeable numbers those found in Egypt. The influences of borders that expose the country to security threats. Christianity (6th century) and Islam (7th century) are 68 ISN 2014–2015: It is estimated that Sudan has lost around 70 percent of the oil revenue due to the secession of South Sudan. also reflected in churches, mosques, and numerous 69 Qatar-Sudan Archaeological Project’s CEO: “This agreement comes religious antiquities. in the framework of the joint Qatari-Sudanese project which aims to develop archeological research and exploration, and protect archeologi- The country has a diversity of natural attrac- cal heritage in the Republic of Sudan, particularly in the River Nile and tions in line with its varied ecosystems. The West is Northern states.” 104 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE to provide Sudan with a grant of US$135 million show that it is open to tourism and truly work towards to develop the country’s cultural heritage, with a its facilitation. strong focus on archaeological sites and museums. Without stability and security, tourist develop- The project will also address some tourism challenges ment efforts will yield limited returns. With them, faced by Sudan, such as accommodation, marketing, and in combination with effective sector stewardship, interpretation, and transportation to the archaeo- the country’s image will improve. logical sites. For it and subsequent initiatives to be successful, significant improvements will be needed Size and Structure of the Tourism Sector to improve the country’s tourism enabling environ- ment. Impediments related to tourism planning and Sudan lags far behind most of it regional compara- policies, human resource development, image and tors such as Egypt, Ethiopia, Tunisia and Yemen marketing, product development, and air and land in regards to the development of the tourism sec- access will be discussed further within this chapter. tor. Obtaining reliable figures on tourism spending Recommendations to address these challenges will is a major challenge with estimates ranging from also be provided. US$94 million in 2010 to US$687 million in 2012. But issues related to the Sudan’s country image Even using the recent high estimates Sudan’s tour- prevail as the key obstacle to further development ism industry is very small (Figure 40). According to of the tourism sector. Addressing those issues requires Sudan’s Ministry of Tourism, Antiquities & Wildlife a demonstrable commitment to tourism by enacting (MTAW), the country earned US$687 million from key policy changes. Image problems are particularly 555,710 international tourist arrivals in 2012. Official prevalent among post-conflict countries. Yet many data submitted by Sudan to the United Nations World countries, particularly in Africa, have seen success Tourism Organization (UNWTO) for 2011 had in their post-conflict tourism development efforts. reported receipts of US$185 million based on 536,000 Sudan needs to take some critical initial steps, firstly international arrivals. It is difficult to reconcile this reducing the bureaucracy and red tape required for large year-on-year increase in receipts, particularly obtaining visas, permits, and licenses. Sudan needs to in light of the fact that first semester receipts from South Sudan had been included in the 2011 figures. Furthermore, UNWTO reports official receipts figures Direct Contribution of Tourism to FIGURE 40:  from 2010 as US$94 million based upon 495,000 GDP , Selected Countries international arrivals to Sudan. (2007–2012) 12 Contribution to GDP and Exports 10 Tourism’s total contribution (when including both 8 direct and indirect services) to the Sudanese econ- 6 omy in 2012 is 3.1 percent of GDP. Yet, according to 4 the World Travel and Tourism Council (WTTC) the tourism sector directly contributed only 1.3 percent to 2 Sudanese GDP in 201270 (see Figure 41). This figure 0 reflects the economic activity generated by industries Egypt Ethiopia Sudan Tunisia Yemen Arrivals Reciepts 70 WTTC figures are for Sudan and South Sudan (as if secession had Source: UNWTO (2014) Note: Average for the period 2007–2012. not occurred). Opportunities for Growth through Diversification: Tourism 105 Direct Contribution of Tourism in FIGURE 41:  Direct Contribution of Tourism in FIGURE 42:  Sudan to GDP (2007–2012) Sudan to Employment 2.0 (2007–2012) 1.8 200 1.6 Contribution to employment in '000 180 1.4 160 1.2 140 1.0 120 0.8 100 0.6 80 0.4 60 0.2 40 0 20 2007 2008 2009 2010 2011 2012 0 2007 2008 2009 2010 2011 2012 Source: WTTC (2013). Source: WTTC (2013). such as hotels, travel agents, airlines and other pas- senger transportation services (excluding commuter given the loss of second half arrival figures due to the services), and restaurants. secession. It is important to note that most of the Tourism was directly responsible for 137,000 jobs international arrivals do not come from leisure tourists. in Sudan or 1.1 percent of total employment in 2012 Based on information provided by local tour opera- according to the WTTC and earned $90 million in tors, it is estimated that no more than 10 percent of visitor exports. Figure 42 gives the details, but it must the arriving tourists are leisure travelers. The majority be noted that this data also includes South Sudan. This are business tourists and those visiting friends and rela- represented only 1.7 percent of the countries’ exports tives (VFR). Leisure tourists tend to be the most highly that year. As was the case with contribution to GDP, coveted tourists as they generally spend more overall the 2012 figure is higher than that of the preceding year than other types of tourists. VFR tourists generally do (121,500) but well below the estimate of 173,000 from not stay in hotels or take tours around the country. 2009. When considering jobs indirectly supported by The business tourist segment includes a high number the sector, tourism’s total contribution to employment was estimated at 350,500 jobs (2.9 percent of total employment). These figures differ considerably from International Tourist Arrivals FIGURE 43:  MTAW’s official estimates for sector employment in (2007–2012) 2013: 13,500 direct jobs and 9,000 indirect jobs. 600,000 Number of international arrivals 500,000 International visitors 400,000 Sudan received an estimated 555,710 international 300,000 tourist arrivals in 2012. This represented a year-on- 200,000 year increase of 3.6 percent, surprising in light of the fact that South Sudan seceded in the middle of 2011 100,000 (see Figure 43). The increase in international arrivals 0 from 2010 to 2011 (from 495,161 to 536,400) was even 2008 2009 2010 2011 2012 greater (8.3 percent) and also somewhat unexpected Source: Ministry of Tourism, Antiquities and Wildlife. 106 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE of foreign aid workers, particularly those with projects Sudan Airways has also suffered from a 2010 ruling in the Darfur area. MTAW estimates that among the by the EU71 banning it from flying into any of its leisure tourism segments, cultural and beach/diving member countries due to safety concerns. tourists generally stay 7–14 days, wildlife tourists stay Sudan Airways currently offers regularly sched- 10–30 days, and adventure tourists stay 7–10 days. uled domestic flights to five locations: El-Fasher, Every year a sizeable number of African Geneina, Kassala, Nyala, and Port Sudan. There are Muslims travel through the country en route to four other domestic air carriers operating in Sudan. Mecca as part of the Hajj pilgrimage, blurring While the country has 72 airports, only 15 have paved Sudan-bound tourism statistics. Those pilgrims runways. often use Port Sudan as a departure point to cross It is hard to access Sudan by land due to poor the Red Sea, and hence camp in the Sudanese terri- roads. The most convenient crossing points are from tory for several weeks while waiting for their licenses Ethiopia and Egypt, although the latter is often closed to be issued. Their in-country expenditures are likely due to diplomatic and trade issues between Sudan to be quite limited. In addition to international tour- and Egypt. The principal seaport is Port Sudan, from ists, MTAW estimates that there are another 55,000 which ferries cross to Jeddah in Saudi Arabia. Another domestic tourists that travel through the country. commonly traveled route is the Lake Nubia ferry that The largest number of international arrivals connects Wadi Halfa in the north to Aswan, Egypt. into Sudan comes from Europe. While MTAW does not publish arrival statistics broken down by country Accommodations of origin, it indicates that the largest number of tour- ists comes from Europe, followed by Asia, the Middle According to MTAW, the country’s establishments East, Africa, and the Americas. The high season for offer a total of 16,700 beds. Of these, 8,118 are in tourism is from November to May, which corresponds categorized hotels and 8,582 in uncategorized hotels. with the cooler months. Temperatures between July The total number of accommodations establishments and September can be extremely high and therefore has not been published. However, MTAW indi- act as a deterrent to most leisure tourists. cates that there are only 10 hotels with four or five The main gateway into Sudan by air is the stars—most of which located in or near Khartoum. Khartoum Airport (KRT), which receives flights MTAW also estimates that there are 60 leisure tour- from 19 destinations in Africa, the Middle East, and ism-oriented resorts. It is common in Sudan to rent Asia. The Port Sudan airport receives flights from two apartments or villas, with MTAW statistics indicating international destinations: Cairo and Dubai. In 2013, that there are 3,846 apartments and 55 villas avail- KLM and Lufthansa decided to cancel their operations able to tourists. into Khartoum; at present there are no nonstop flights to/from Europe. The most frequent routes connect Tourism Service Providers Khartoum with Jeddah (33), Cairo (33), Juba (20), Qatar (17), Addis Ababa (16), and Dubai (15). MTAW indicates that there are total of 14 registered Sudan Airways has served as the national carrier tour operators in Sudan, with scuba diving being one since 1940. Since its privatization in 2007, 80 percent of the most important tourism activities. According of shares in Sudan Airways belong to the government to MTAW, there are only three diving operators in the and 20 percent to private shareholders. The airline is country. Apparently only one is internationally certified currently experiencing severe financial troubles. This in part stems from the U.S. sanctions that began in 71 Aviation Safety Network: http://aviation-safety.net/database/operator/ 1997, which increase the cost of aircraft spare parts. airline.php?var=5245. Opportunities for Growth through Diversification: Tourism 107 TABLE 29: Other Tourism Service Providers new museums and conducting archaeological surveys, Type of Service Companies research, and excavation There are several private tourism associa- Car hire companies 113 tions73 organized by specific sub-sectors. Yet they Ground transportation 40 have few members and therefore do not represent Travel agencies 14 the majority of businesses in the industry. They Scuba Diving Operators 3 include the Hotel Association, Tour Operation Restaurants 269 and Travel Agencies Association, Limousine Source: MTAW (2014). Association, Apartments Association, and Touristic Transportation Associations. There is no umbrella by the Professional Association of Diving Instructors organization to represent the interests of the entire (PADI). Most tourists who come to Sudan for diving tourism sector organization. Because of the asso- tourism book their tours through international opera- ciation’s limitations, private sector operators within tors who operate live-aboard diving vessels. There are an the tourism value chain tend to work on an isolated estimated 15 live-aboard vessels working off the coast basis. Hotels generally have their own advertising of Sudan. These vessels, most of which fly international programs and for most activities such as cultural flags, have all necessary diving equipment and offer all- heritage travel and scuba diving rely on direct con- inclusive service to tourists, including a decompression tacts through the Internet and international tour chamber in one of the vessels. There are other tourism operator representation. service providers and Table 29 contains the number In 2004 the MTAW developed a 25-year of companies involved in other key areas of tourism tourism strategy with technical assistance from service provision. Overall, tourism service providers UNWTO. It contains 24 specific suggestions, out of are still limited in numbers, somewhat reflective of the which seven items have been subsequently prioritized: limited tourism sector in general. i. Enactment of laws regulating tourism activities in Sudan; Tourism Policy and Institutional ii. Execution of comprehensive surveys (comprising Framework tourism assets, infrastructure, facilities and man- power) in all states; The Ministry of Tourism, Antiquities and Wildlife iii. Preparation and dissemination of improved pro- (MTAW) is the sole body charged with managing motional materials; the tourism sector in Sudan and is responsible for iv. Drawing up of a tourism investment portfolio for all tourism development issues in Sudan includ- the local and foreign markets; ing policy setting, standards and licensing, tour- v. Facilitation of entry procedures (immigration, ism investment promotion, wildlife protection, customs); and marketing. The MTAW, is organized into three vi. Training of staff through co-operation with specialized units:72 i) The General Directorate for friendly and sisterly nations; and Conservation and Protection of Wildlife, responsible vii. Rehabilitation and modernization of Arous tour- for establishing and maintaining parks and reserves; ist village and Erkowit summer resort (both near ii) The Police Department for Tourism Security and Port Sudan). National Heritage, responsible for tourist safety as well as the protection of antiquities, artifacts, and 72 http://world2013.itu.int/exhibitors/ministry-of-tourism-antiquities- national heritage; iii) The National Cooperation for wildlife/. Antiquities and Museums, responsible of establishing 73 Information given by the MTAW. 108 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE In 2007, the Government of Sudan created a and Planning, Human Resource Development, Air and six-year political plan that included a strategy for Land Access, Product Development, and Marketing. tourism. It has little specific detail, but lists a number of objectives and goals. Within the objectives section, Policy and Planning it highlights how tourism can boost the economy, cre- ate employment, attract foreign investment, improve The current visa regime is not conducive to tourism. living standards, alleviate poverty, and empower com- Unlike most other export sectors, tourism depends munities to protect wildlife. The list of goals includes upon the customer coming to the place where the increased protection of cultural heritage, establish- products and services are supplied. As this entails ment of more museums and monuments, creation cross-border movements of tourists, immigration and of new nature reserves, establishment of new tourism entry/exit control regulations play an important role in training institutions, construction of new accommo- the sector. Travel to Sudan is bureaucratic, time con- dations and tourism facilities, and the establishment suming, and expensive for the tourist. Unlike nearly of tourism ministries at the state level.74 every other country in Africa, no tourists are eligible The Tourism Development Plan (2014) rep- to obtain visas on arrival in Sudan. Instead, all tourists resents a welcome update taking into account the need to procure visas prior to arrival (or work with a changes following the secession of South Sudan. registered local tour operator who can arrange for a Tourism plans provide critical guidance for manag- counter visa for an additional cost). This process is not ing the sector and given the fast-changing nature of only expensive (approximate visa cost is US$100) but the industry most tourism plans are updated every also requires the additional logistical burden of having 5–10 years. The new plan looks to the tourist sec- to acquire a letter of invitation/introduction. Those tor to support local community development, create not living in cities with a Sudanese consulate must bear employment, and contribute to protecting the natural the additional costs of sending application materials and cultural heritage. The plan contains a long list of to a Sudanese consulate through a courier service. commitments including increasing the size of reserved In-country bureaucratic procedures are an areas (to 17 per cent of total land area), carrying out impediment to the free flow of tourists. Visitors a tourism survey, developing a media plan to improve are required to register with the Ministry of Interior the image of Sudan, rationalizing the legal and regula- within three days of entering the country. Registration tory framework, facilitating the issuing of visas, and costs US$60 in Khartoum and can consume the bet- establishing investment incentives for the private ter part of a day. Alternatively many hotels will com- sector. The 2014 Plan identified three broad activity plete the registration on behalf of the tourist, but this areas: infrastructure development (and rehabilitation), still entails the tourist spending at least 24 hours in legal and institutional reform, and tourism promotion. Khartoum before proceeding to the desired destina- The updated Tourism Development Plan represents a tion. Registration can be also done at the Red Sea for positive step forward by the GOS. tourists that fly directly into Port Sudan. Additionally, tourists are required to obtain permits from the Tourism Development Challenges Ministry of Tourism for land travel and photography of any kind (at no cost). These extra burdens and costs, A number of severe challenges to tourism develop- for which no parallel can be found within countries ment can be identified in order for Sudan to realize trying to promote tourism, act as a strong deterrent its potential to become a viable center for tourism to prospective tourists. in the region. The most significant constraints are highlighted below organized into five categories: Policy 74 http://www.anc-sudan.com/sixyears.htm. Opportunities for Growth through Diversification: Tourism 109 U.S. sanctions against Sudan blocks access to origin, purpose of visit, port of entry, or month of tourism technology and use of credit cards. The U.S. entry. MTAW also does not regularly conduct tourist embargo has had a negative impact on tourism to the motivation and expenditure surveys. As such, it does country, both in terms of creating a much more chal- not have accurate figures for key data areas such as lenging business environment for operators as well as length of stay, primary and secondary motives for visit, creating a major inconvenience for tourists. Tourism daily expenditures, area(s) visited, level of satisfaction, businesses face major challenges when trying to obtain and intention to return. Additionally, statistics on essential equipment such as commonly used front accommodations establishments and other tourism desk and restaurant management systems. Without service providers appear to be incomplete. the ability to use credit cards, they must spend time and money to obtain licenses in order to make inter- Human Resource Development national transfers of funds. The embargo also results in high transactional costs for tour operators and Low institutional capacity constrains tourism hotel owners to receive funds sent by international development. As MTAW is responsible for every tour operators via non-commercial banking systems aspect of tourism development in the country, much such as Western Union or wired through third-party depends upon its ability to effectively guide the sector. accounts in neighboring countries. Yet there are important capacity constraints within Most importantly, international tourists are MTAW. Likewise, there are important gaps within the accustomed to using a credit card to guarantee ser- private sector, both at the association and individual vices prior to arrivals or paying for services once in business level. the country. Many also rely upon being able to with- The tourism workforce lacks skills required draw local currency through ATM machines. Yet, as by industry. Tourism business owners report that ATM and credit cards are not accepted in Sudan, tour- there is a significant gap between the skills that the ists are forced to bring all the funds needed for their tourism labor force currently possesses and those that trip in cash. For example, a family of four visiting the they require. More specifically, the existing labor force, country for 10 days (at an average expenditure rate of while friendly and welcoming, does not have the nec- US$150 per person) would need to carry US$6,000. essary language and service training needed to work in This is not only a major inconvenience, but also creates the sector. Two training colleges and four universities safety concerns. Likewise, it represents an added risk offer tourism courses; however these institutions lack to tourism businesses, which have to ensure services qualified instructors as well as the necessary training (accommodations or tours) without a guarantee of equipment and facilities. being paid in case the tourists do not appear. Tourism statistics collection efforts have Image and Marketing numerous gaps undermining efforts for tourism planning and development. It is difficult to under- Perception of insecurity continues to harm the take tourism planning and development without tourism image. Years of civil war and social strife robust and reliable statistics. This is a problem that have resulted in a very poor tourism image for the many African countries face. Yet in the case of Sudan, country. This is regularly reinforced through the news tourism statistics collection and reporting is particu- media and many governments’ official travel warn- larly rudimentary. Data on international arrivals and ings. Marketing and public relations activities that receipts, arguably the most important tourism metrics, are able to effectively reinsert post-conflict countries appear to have inconsistencies. Furthermore, MTAW onto the international tourism map are highly chal- does not publish arrivals information by country of lenging endeavors that require effective marketing 110 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE accompanied by financial resources. Yet the tourism whatsoever. The number of tour operators, restaurants, sector in Sudan has a very modest marketing opera- and other tourism service providers is also indicative tion. The Department of Tourism’s annual marketing of a nascent sector. Furthermore, there are very few budget of approximately US$200,000 allows for only tourism sites or attractions that have been planned the most basic of promotional activities. As such, the and are under skilled management. The vast country country has only been able to attend a few international only has eight national parks and of these, half do not tourism fairs in recent years and has not been able to have management plans. update its marketing materials. Of note, however, is Attracting private investment into the tour- that MTAW launched an International Tourism and ism sector is difficult in Sudan’s case. Attracting Marketing Fair75 in 2013 to inform the market of the both domestic and foreign tourism investment is country’s tourism attractions and investment opportu- highlighted as one of the sector’s top priorities both nities. Lessons could be learned from other countries, within the 2014 tourism strategy and the 2007 six-year notably Rwanda, which turned around its image after political plan. With the exception of the large com- civil war and genocide in the 1990s (Box 4). mitment from the Qatari government, investment has not materialized. This is fact one of the main reasons Product Development that the range of tourism products is so limited. For domestic investors, capital is very difficult to access Sudan’s array of tourism products is very limited. within the country. Furthermore, few foreign tourism Given Sudan’s limited focus on tourism in the past, investors are attracted to the country given the poor it is not surprising that there are few well-developed current investment climate. This includes a number products, evidenced by the fact that there are only ten of the issues mentioned earlier such as the onerous five- or four-star hotels in the entire country. Outside of the capital, few hotels of international standards 75 Organized by the Ministry of Tourism, Antiquities & Wildlife. Venue: exist, with vast spaces that have no lodging options Buri Fair Ground, Khartoum, 8–12 April 2013. BOX 4: Rwanda Rising – A Nation Rebuilds and Rebrands In 15 years, Rwanda has changed its reputation from that of genocide to that of a premier tourism destination in East Africa. Kigali, the capital, boasts internationally branded tourist hotels, gourmet cafes, Wi-Fi, and shopping malls. The leadership of President Paul Kagame has been much credited with the rebranding success. The two most striking elements to the re-branding campaign are as follows: 1. They dramatically changed the message. The story about poverty and genocide was acknowledged—and then replaced by one of optimism, investment and success. The president spent much time in the U.S. courting businessmen and showing a different face to the one people were expecting. 2. They practiced what they preached. These were not empty promises and fabricated successes. Each positive story that came out could be witnessed and validated, lending huge credibility and a real sense of optimism and change to the nation brand. In a digital age where everyone has a phone and can be a reporter, this truth becomes more and more important. The country was also very successful in positioning itself around its primary tourism draw: highland gorillas. With limited financial resources to conduct its branding campaign, the country utilized creative and cost-effective mechanisms. For example, it enlisted the support of Hollywood celebrities such as Sigourney Weaver (who played Dian Fossey in the movie “Gorillas in the Mist”) and Daryl Hannah. It also generates a large amount of international press by inviting international luminaries to participate in Kwita Izina, the annual gorilla naming ceremony. Based on box from The World Bank (2013b). Opportunities for Growth through Diversification: Tourism 111 visa regime, financial difficulties related to the U.S. Recommendations76 sanctions, and lack of strong sector leadership. Land policy also remains a challenge for investors. Short-term policy recommendations The infrastructure at or near tourism sites is insufficient. Numerous infrastructure gaps exist Streamline in-country registration procedures in and around tourism sites of current or potential through a one-stop-shop. While each country must importance. MTAW highlights the lack of electric- balance economic benefits against security needs, it ity along the Eastern Circuit, Northern Circuit, and is recommended that the current in-country require- national parks such as Dinder and Senganaib. It also ments be greatly streamlined and facilitated through indicates the scarcity of water along the Northern a “one-stop-shop” approach. This would allow the Circuit. Road and airport infrastructure is discussed tourist to visit one single office, where he or she would in the following section. be able to officially register and also obtain permits for travel and photography in a timely manner. Air and Land Access Eventually, however, it would be advantageous from a tourism perspective to eliminate such requirements International air access is limited and on the decline. altogether. Lufthansa and KLM’s cancellation of routes connecting Improve statistics collection efforts. Reliable and Khartoum to Frankfurt and Amsterdam, respectively, consistently collected data is necessary for measuring makes attracting European tourists considerably more the sector’s performance and making important deci- difficult. Furthermore, the EU ban of Sudan Airways sions in areas such as product development, invest- prevents the airline from filling the gaps created when ment promotion, and marketing. MTAW should these two airlines abandoned their Sudan operations. first focus on ensuring that accurate arrivals data is Nevertheless, there is still good international access collected and input into electronic systems. It can to Khartoum via the Middle Eastern hubs of Doha, then be parsed into meaningful data sets that reveal Dubai, and Abu Dhabi. Yet access to Port Sudan, a important information such as country of origin, logical tourism hub for Sudan, is currently limited purpose of visit, port of entry, and monthly/seasonal to just one weekly flight each from Cairo and Dubai. flows. Soon thereafter, the information should then There is limited and unreliable domestic air be placed on the MTAW website so that it is easily coverage. Sudan is not only a very large country, accessible to all public and private sector stakeholders. but also its principal tourism attractions are quite Collect visitor expenditure and satisfaction sur- spread out. Yet the number of domestic routes to key veys at least once every two years. This would be done tourism areas such as Port Sudan is very limited and ideally with data capture both in the high and low unreliable, which makes trip planning very difficult season. Such feedback would provide important data for tour operators and individual tourists: even a few regarding the visitor’s reason for visit, length of stay, hours delay can adversely impact carefully laid travel expenditures, and level of satisfaction. Finally, inven- plans for successive days. tories capturing data on accommodation capacity and This is paired with inadequate road access to sector employment should be conducted annually. key tourism sites. The limitations in air travel are all the more constraining in light of the country’s poor 76 Recommendations are divided into three categories: short term, me- dium term, and long term. Short term initiatives are those who imple- road network. The main road to the principal tourism mentation should begin within the next year. Medium term initiatives sites in the North and Nile states is extremely busy are those whose implementation should begin between one and two years from the current date. Long term initiatives are those that would with heavy goods and access to several cultural sites likely commence after two years, although earlier implementation should is challenging (with inadequate signage). not be precluded. 112 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Provide short courses to build MTAW tour- demand and availability of investment capital. Given ism capacity. A survey should be conducted within the large amount of capital that had been pledged by MTAW to determine critical knowledge gaps amongst the Qatari government, the upcoming archaeological staff members. These may include areas such as tour- project should to some extent dictate future tourism ism planning, product development, and marketing. development corridors. An area on the Red Sea Coast A series of short courses should then be offered to with strong scuba diving potential would also seem to address these needs. If suitable trainers cannot be be a logical option for initial development. found in Sudan, they can be recruited from countries that have faced similar challenges to Sudan. Medium-term policy recommendations Offer Training-of-Trainer courses in key hos- pitality themes. Based on a review of critical skills Allow visas on arrival for select source countries. In and knowledge gaps among tourism service provid- order to facilitate travel to the country, as well as send ers, several courses should be offered utilizing the a strong signal to the market that Sudan is truly open training-of-trainers format. Courses should be geared for tourism, visas on arrivals for select countries should towards front-line service workers such as hotel recep- be offered at all major border posts. The list of eligible tion workers, waitstaff, cleaning staff, and tour guides. countries may be small initially, as this may allow for Those taking the course, however, would be managers easier buy-in from the country’s security apparatus. of hotels, restaurants, and tour operators (including Gradually, as confidence builds, more countries can be representatives of the private sector associations) as well added to the list. It is important to note that the coun- as instructors at the tourism training institutions. They try’s security should not be compromised through this would then be able to pass on the information through policy, as immigration officials will still be able to con- subsequent training courses to their staff and students. duct full background checks on incoming tourists and Develop marketing/PR strategy to improve the compare their names against the country’s “watch list.” country’s image and international visibility. It is pos- The country will still retain the right to refuse entry sible to change negative perceptions of a country and to anyone deemed a security risk. See Box 5 for some create a positive national image through a skilled mar- insights from the UK on attracting Chinese tourists. keting and PR campaign. For example, Rwanda (Box 4), Reinforce regulations for cultural preserva- in the aftermath of the genocide, was able to successfully tion and environmental protection. One of the position itself as the world’s premier destination for see- advantages of having received few tourists in the past ing mountain gorillas. Sudan should similarly design a is that important cultural and natural resources have strategy aimed at positioning it as an up-and-coming not been over-exploited. This includes some virtually tourist destination, highlighting its unspoiled archaeo- untouched archaeological sites and the still pristine logical sites and pristine coral reefs. The plan must coral reefs that line the Red Sea. Yet as Sudan prepares outline a cost-effective approach through the strategic to receive more tourists, it should heed lessons learned selection of appropriate distribution channels. These from other destinations that allowed unplanned and will likely include engagement with the international poorly regulated tourism to inflict irreversible damage media through press releases and press trips that can on some its most treasured assets. This is an opportune help present the country in a different light. time for Sudan to review legislation that governs its Focus tourism development efforts on a few cultural and environmental heritage so as to ensure priority clusters. While there are a number of that tourism will serve to protect rather than degrade areas that seem to hold tourism potential, destina- the country’s valuable resources. tion development should take a phased approach. Build on the new national tourism plan. The Priorities should be set based upon studies of market new national tourism plan recognizes Sudan’s present Opportunities for Growth through Diversification: Tourism 113 BOX 5: UK Visa Reform Targets Chinese Tourists In a targeted attempt to lure Chinese tourists to the UK, the Government has simplified the visa application process for Chinese nationals. Tourism body Visit Britain recently calculated that 61 percent of Chinese people who chose not to come to Britain were put off by the visa process. As Chinese visitors spend around three times as much as other visitors, the UK believes they should be doing anything they can to attract more in order to help to boost the economy. The UK attracted around 149,000 visits from China in 2012, but European rivals such as France and Germany outperformed it. Visit Britain is looking to increase this number to 382,000 visits by 2020. New measures include a shortened online application form, with translated forms available by April 2013, dedicated embassy staff to help business travelers with their applications, reduced documentary requirements and the option for applicants to keep their passports while visas are processed. The Government identified all these measures as areas where they could out-compete the visa requirements of the Schengen member states, as well as Australia and the U.S. “China is a key growth market for international tourism and a market in which Britain needs to compete effectively to ensure that we continue to be in the top 10 of tourism destinations. Improvements in the visa process will support our ambition to attract 40 million visitors a year by 2020.” Visit Britain, January 2013. Based on box from The World Bank (2013b). situation and outlines the overall vision and strategy Create a national tourism brand. As an extension for sustainable development of the country through of the marketing strategy, Sudan should endeavor to tourism. While a large number of interventions and produce a highly recognizable brand. An experienced actions are proposed it would be useful to develop this destination branding company should be engaged to further by producing a very specific and practical action ensure professional output. Also, a highly inclusive plan. The focus should include national-level as well as process should be utilized to ensure broad stakeholder destination-level approaches. It is important that the buy-in. The brand should ultimately highlight the detailed action plan be created through a collaborative country’s comparative advantages within both the process, including all sectors involved in tourism devel- regional and global context. opment (i.e. environment, transport, health). This can Search for ways to integrate local communities help secure broader sector buy-in among key stakehold- into tourism offerings. If tourism does not benefit ers. A solid strategic approach to tourism development local populations, it is unlikely to succeed in the long will also help inspire confidence among potential inves- run. Destination development should be driven by the tors. It is recommended that it be accompanied by a potential livelihood opportunities for local popula- Monitoring & Evaluation plan so that implementation tions. Communities that are well integrated into tour- performance can be regularly tracked. ism plans and able to derive benefits from tourism are Upgrade the tourism training institutions. The far more likely to help preserve the natural and cultural most critical component of this endeavor will be to resources that attract tourists. Furthermore, interac- build the capacity of instructors. This can be achieved tion with communities tends to greatly enrich the in part through the aforementioned Training of tourist’s experience, thus adding value to the product Trainers courses. Also, Sudan may seek to undertake that is being offered. exchanges through which seasoned faculty of schools Work with the Civil Aviation Authority to in allied nations spend a few weeks or even a semester improve safety so the EU Ban on Sudan Airways is teaching courses. They may also provide guidance on lifted. The cancellation of Lufthansa and KLM flights course curricula. Upgrading of equipment and facili- combined with the EU ban serve as a major barrier to ties to better reflect current industry realities will also attracting tourists from most of the largest cultural, be important. natural, and adventure tourism markets. Sudan’s Civil 114 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Aviation Authority should work diligently to improve Long-term policy recommendations the internal procedures it uses to ensure that Sudan Airway’s planes are maintained and serviced accord- Strategically upgrade the tourism infrastructure in ing to the highest international safety standards. Once the country. Based on key tourism sites and circuits the ban is lifted, Sudan Airways will then be able to that have been prioritized, infrastructure upgrades will re-establish direct flights between Sudan and Europe. be critical. These should primarily focus upon areas Negotiate with international airlines to increase such as electricity, water, and Internet connectivity. flights to Port Sudan. Given the unreliable access This will involve liaising with other government agen- from Khartoum, Port Sudan will need to receive more cies so that they can incorporate tourism requirements direct international flights if it is to develop into a into their decision-making processes. tourism hub. If foreign carriers see significant invest- Prioritize strategic tourism roads for upgrad- ment in hotels and infrastructure, they will be more ing. MTAW should ensure that its road priorities are inclined to add routes or increase current frequencies underscored when the government makes plans for to Port Sudan. This is particularly likely in the case national road upgrading projects. MTAW has indi- of the proactive and highly competitive carriers from cated that roads leading to Dinder National Park as Gulf countries. Nevertheless, there is still an important well as Nagaa and Musawarat are of prime importance. role for the government to play in attracting additional Furthermore, decisions should be based on the tour- airlift. In some cases, this may include provision of ism clusters that will be prioritized for development fiscal incentives for entering into the market. in the coming years. 115 APPENDIX Appendix 1: DTIS 2008 Action Matrix The degree of impact is presented based on the fol- Scorecard lowing key (where relevant this impact is represented by the author’s perceived decline in trade costs. For In this annex, the status of each action of the example, 25% represents a low reduction in trade costs DTIS 2008 is presented, as per December 2013. The caused by the action in 2013 compared with 2008): status is presented based on the following key: 100% – Full intended impact 100% – Fully implemented 75% – Above average rate of impact 75% – Mostly implemented, but key areas are 50% – Average rate of impact missing 25% – Below average rate of impact but above 50% – Half implemented insignificance 25% – Implementation has started, but imple- 0% – Insignificant or zero impact mented is well below half way 0% – Implementation has not started, or imple- mentation started but the effort ended over the past ten years. 116 Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Increase Productivity Staff, equip, and fund research 50 50 Research for raising productivity in agricultural crops continued with lim- in Export Sectors into raising yields of existing and ited budget and a lot of varieti es that suit Sudan conditions were released Activities 1 A: potential exports (main emphasis on cereals, cotton, and horticultural crops). For animals Increase resources research has been implemented with attention to boost vaccines produc- for agricultural and tion satisfying the needs to protect livestock from contagious diseases and animal husbandry continue efforts of genetic improvement as well as efforts to propagate and fisheries and findings of research in aquaculture. Research centers in Darfur state needs micro-agro industrial to be improved. They are lagging behind due to insecurity and lack of research budget. 2% of agricultural GDP spent on 0 0 No quota for agricultural research. Support from donors has declined. research over 5 years Select priority sectors for targeted 75 50 For animals, research is targeting genetic improvement for beef and dairy research efforts, with specific as well as poultry and improving quality of produce. In agricultural crops sequencing of activities over a research is targeting export-oriented goods (traditional and new). Because five-year timeframe of limited budget from government and lack of external support, achieve- ment is attributed to classification of historical contributions and results of improving practices Carry out land tenure policies 0 0 The land tenure issue has not solved because of its complexity. Govern- REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE and studies ment owns 90% of land and lends to farmers with long-term lease con- tract. However, if a farmer lives at the land for more than 10 years, s/he can claim land entitlement, which makes the land tenure issue complex. Government seems to give up solving this complexity. Instead, government now gives 25% of newly irrigated, developed area to investors living in the area as compensation. Adopt input subsidies policy to 75 50 Government provides subsidies for emergency intervention case-by-case small producers only. Government stopped subsidies in 2011 and now provides support in other forms. The main reason is lack of government prioritization (and also lack of budget?). Subsidies scheme until 2011 was: 25% of fuel price, pesticide and fertilizer price, 22% for other inputs, and free seeds for sorghum and cotton. The reason for stopping subsidies is mismanage- ment and corruption. Now farmers get subsidized input at subsidized price through banks, not from government because banks are more reliable than state governments, which can use the funds for other purposes. (continued on next page) (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Coordination of research institu- 25 25 National coordinator for agricultural research was placed at Ministry of tions at the national level Science and Technology until 2011. Recently ARC designed three com- mittees for research coordination (crop protection, husbandry, varieties). Higher Council for Research has been proposed but not realized. The progress is limited due to a lack of government interest. Strengthen & support production 25 25 Support to exporters has been implemented by distributing manuals. Ex- and marketing cooperatives and port centers were established but are not functioning due to limited export establish export centers competitiveness of small-scale agricultural products exporters. The main reason is, therefore, attributed to lack of constituency. Provide credit support to small 50 50 Outside the state development support funds, credit support to small pro- agricultural producers and to ducers was rarely implemented due to lack of collateral. Microfinancing is potential agricultural export currently developing by government support and under the supervision of the producers. Central Bank. It is regulated at a ceiling of 12% from the Commercial banks’ lending packages (note: not limited to agricultural producers). 29% of micro- finance goes to agriculture, slightly less than agriculture share in GDP. Average loan ranges from SDG 500–1000. Sudan is ranked 2nd after Bangladesh in terms of number of clients in microfinance. A national com- prehensive Microfinance Strategy was passed in 2013, aiming to increase i) the number of clients from 494,000 in 2012 to 1.5 million in 2017, and ii) Increase share of microfinance to GDP from 1% to 3%. Crops insurance is led by the Government owned insurance company in order to facilitate seasonal lending by banks. Government pays 50% of insurance premium. Linking small farmers to a trading program started in 2010 jointly with WFP , MOAI, commercial banks and insurance company, to provide finance and fund extension program. (continued on next page) Appendix 117 (continued) 118 Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Activities I B: Creating awareness of market 25 0 Because of lack of institutional capacity, the Ministry of Trade reported that Strengthen access and competitiveness there was very little activity taking place. agricultural, agro- Strengthen extension programs 50 50 Extension programs are strengthened for agriculture in all states through agri- industrial animal to disseminate technology and cultural centers in localities but in limited states for agro-industry due to limited husbandry, and practices for increasing yields budget. FAO under EU funding contributed to propagate Farmer Field School fisheries extension (FFS) and Community Animal Resource Development Associate (CARDA) sys- services tems of extension in fife states. Agricultural Revival Program (ARP) secretariat did similar work using the expertise of Agricultural Engineers Association Select priority sectors for targeted 50 50 Targeted extension program was selected for priority sector (e.g., fertilizers extension efforts, with specific application for crops and crop protection and veterinary services) Through sequencing of activities over a piloting by the ARP secretariat remarkable results were attained by using five-year timeframe compound fertilizers. With limited government budget and external sup- port, not much was achieved in other priority sectors. Enhancing the capacity of tech- 50 50 Enhancing the capacity of technology transfer and extension services nology transfer and extension had been implemented under ARP initiative. Farmers have benefited and services using the village as a wanted the service to be continued. The main reason not to satisfy these center for providing services and demands is limited budget. Nevertheless, the Ministry wishes to continue knowledge in line with ARP with this initiative. REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Activities I C: Establish training programs in 25 25 Establishing training in marketing is developing gradually because it is Establish vocational marketing services of major ag- difficult to identify a set of training modules that satisfy the requirements education in ricultural exports at trade schools without external technical assistance. Recently the Development Research agriculture and and universities and Studies Institute of University of Khartoum is getting assistance from manufacturing ITC Geneva to accomplish such assignment in the future. Establish a training center well 25 0 The VTC Established training programs that have been implemented; notably equipped with latest textile train- transformed previous engineering program to locally demanded textile de- ing machinery velopment program. Limited progress is due to a lack of financial resources. Develop integrated human 50 50 The sector continues to receive external support from UNIDO, which pro- development program to improve vided funds for the improvement unit in the White Nile Tannery. Further, quality of hides and skins the new UNIDO Industrial Modernization Programme includes leather and leather products as one of the priority sectors. Establish training activities in 0 0 Not implemented because of lack of recognition and low government packaging of exportable products prioritization II Reduce Trade Costs Recruit, train, and equip customs N/A N/A N/A due to the secession of South Sudan. Activities II A: staff in Southern Sudan Raise capacity Integrate customs operations at N/A N/A N/A due to the secession of South Sudan. of customs southern borders into nation-wide administration in administration Southern Sudan to national standards (continued on next page) (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Activities II B: Permit private investment in and 0 0 The government does not permit private investment in and management Improve trade logistics management of inland container of inland container depots because current legal framework does not services depots allow private investment. Once a free trade zone is established, govern- ment plans to privatize management of inland container depots. But under current political situation, priority is not given to this issue. Permit corporate entities to pro- 0 0 Both the General Customs Administration (GCA) and MOF officials said vide customs clearance services that the government does not permit fully private corporate entities to provide customs clearance services due to a lack of government priori- tization. Similarly to private investment in container depots, government is interested in permitting this in the near future. The corporate entities currently under operation are ex-customs officers. The main reason for no progress is a lack of government priority. While GCA supports opening up customs clearance to private corporate entities, MOF stated that the cur- rent situation is fully privatized. Services providers are grouped in associations at sea ports as well as air ports Provide technical assistance for 50 50 The Sea Ports Corporation is organizing such activities in connection with freight forwarders from the In- the freight forwarders when funds are available ternational Federation of Freight Forwarders Associations Conduct comprehensive review of 50 0 This activity is entrusted to The National Committee on Trade Facilitation regulatory framework govern- as reported by high officer of the National Customs Authority. ing entry and operation of trade The National Committee on Trade Facilitation was formed in 2007 to logistical services providers address problems of trade facilitation. A working group was established in 2011 to assess the needs and priorities to facilitate trade. Notable achievement was the preparation of the national plan for the enforce- ment of the requirements of trade facilitation in March 2013 with support from UNCTAD. The plan finds that out of 39 international standards on trade facilitation, Sudan: i) fully applied 14 standards such as the right to appeal, pre-shipment procedures and temporary entry; ii) partially applied 15 such as publication of customs time release study and freedom of tran- sit; and iii) did not implement 10 standards such as single window. However, implementation of partially applied and non-implemented standards shows limited progress. There could be two reasons behind this: i) the report has not been approved by the Cabinet; and ii) lack of budget and donor support to enforce the remaining standards not implemented. (continued on next page) Appendix 119 (continued) 120 Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Activities II C: Conduct WCO time release study 100 0 The study was conducted by the GCA and a copy was provided with Reduce bottlenecks at to clarify contributors to bottle- explanations on progress. Port Sudan necks Introduce single window for all 25 25 The effort is still underway to introduce a single window for all border border clearance operations clearance operations. Sudan needs i) to fully implement recommenda- tions by the above reports; ii) to promote cooperation between customs authority and other relevant government agencies and border control; iii) to establish network connectivity among government agencies; and iv) to enhance capacity building of their staff. The main reason for progress at Port Sudan and no progress at land border points is attributed to external support. Accelerate concession of port 100 25 Implementation was delayed because of resistance from interest groups. management Acceleration of concession of port management was implemented. 10 companies bid for concession of port management and Philippine’s com- pany won the bid. Port management started in October 2013, so cannot evaluate the impact at this moment. Raise storage fees to discour- 100 100 This was fully implemented by putting facilities in an enclosure far away age use of port facilities as a from the port yards. REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE warehouse Introduce one-stop shop for all 100 50 The one-stop shop has been introduced at Port Sudan. Establishment of border clearance operations one-stop shop is particularly important at border posts with South Sudan, Ethiopia, and Eritrea. (continued on next page) (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Activities II D: Develop nation-wide standards 25 0 Government formed a joint technical committee to reduce overlap. But Build/ Improve SPS action plan with the objective of the committee is temporally stopped due to change in personnel. Federal capacity reducing regulatory overlap and ministries and agencies handle issues related to SPS matters due to lack of increasing investment in trade reform in legislative and regulatory framework. Investment in key function- alities and enhancement of rules supporting implementation are limited. This leads to following constraints: i) the number of mandatory standards that are aligned with international standards is relatively low; ii) the ability to provide traceability to the market is very low; iii) no accreditation body to formally recognize competence that is able to enter into cross border agreements; and iv) the non-acceptance of international tests results in widespread redundant testing. Raise awareness of quality assur- 50 50 SSMO has state offices which are entrusted with raising awareness among ance and regulatory compliance producers on quality assurance and compliance but there is still a long among producers way to go Provide extension services to 75 50 This activity was implemented jointly (SSMO in coordination with Ministries producers to introduce good of Agriculture, and Livestock and Fisheries) but with average degree of management practices (especially impact along value chains for livestock/ meat, horticulture, and processed foods) Strengthening institutions respon- 25 0 Due to lack of i) sufficient legislative and regulatory framework; ii) suf- sible for SPS activity ficient operations such as inspection procedures and certification system; and iii) infrastructure, capacity of SPS-related institutions remain weak. The main reason for this lack of progress is lack of capacity, budget, and interest. Activities II E: Revise customs laws to comply 25 0 The legislation was amended however, Customs continues to rely on physi- Streamline national with WTO rules on valuation, cal inspection and use the BDV customs procedures appeals, etc. and harmonize them Undertake institutional changes 0 0 There has been no progress in using risk assessment and post-clearance with WTO rules to introduce risk-based selection: auditing is not being implemented. develop risk profiles, introduce post-clearance activities, etc.) (continued on next page) Appendix 121 122 (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure III. Rationalize Introduce single window for all 25 25 Refer Action 24. Incentive Regime border clearance operations Activities III A: Eliminate taxes on imports other 0 0 Taxes on imports continue to be applied and additional border taxes have Simplify and than ordinary customs duties (i.e., been imposed since the last DTIS (Development Tax). Capital goods and harmonize taxes, fees, “other duties and charges”) agricultural inputs are exempted from customs as well as Development and charges Tax. Undertake state-level review 25 0 Presidential decrees were issued to harmonize and rationalize taxes and with the objective of rational- fees levies on interstate trade but still the states constitutions not fully con- izing sub-national taxes and fees sistent with fiscal federalism. levied on interstate trade, in light of the state and lower level legal framework Harmonize taxes on crops and 0 0 This was not implemented. The Tax on livestock is intended to encourage livestock to eliminate bias against processing/value-adding activity. The transportation of livestock across livestock production states might in some cases make them subject to interstate taxes, which are considered illegal by the Federal authorities. Activities III B: Eliminate export tax on raw hides 0 0 Export tax on raw hides and skins are equal. The export tax rate on raw Eliminate measures and skins hides and skins remains since the earlier DTIS. The stated intention of the REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE that restrict exports Government is to impose the export tax on the raw materials to encourage the leather-processing sector. Reduce scope for discretion in 0 0 Discretionary licensing of sorghum export was removed when the Ministry sorghum export licensing of Agriculture and Irrigation determined that domestic production ex- ceeded national demand. The policy of retaining the discretionary power to ban exports remains unchanged. Activities III C: Adopt single, nationwide tariff N/A N/A N/A due to the secession of South Sudan. Introduce more schedule for all imports uniformity and Conduct a study on viability of 75 0 The study was conducted and plans are ready for execution to encourage predictability into free zones investments and cross border trade with neighboring countries. The Free trade policies Zone and Duty Free Markets Act was enacted by the legislative assembly in 2008. However, the law has not been enforced due to lack of institutional capacity. (continued on next page) (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure IV. Strengthen Trade Establish channels of interna- N/A N/A N/A due to the secession of South Sudan. promotion and Policy- tional technical input on priority making Institutions policy issue Activities IV A: Develop foreign trade and invest- N/A N/A N/A due to the secession of South Sudan. Build capacity for ment promotion strategy for GoSS to contribute Southern Sudan national trade policy- makings Establish training programs on N/A N/A N/A due to the secession of South Sudan. export competitiveness, trade policies, and trade agreements for GoSS and private sector bodies Invest in IT for trade-related infor- N/A N/A N/A due to the secession of South Sudan. mation systems, data manage- ment, analysis, and dissemination Establish systematic regular coop- N/A N/A N/A due to the secession of South Sudan. eration between MoFT and MCI Build capacity for GoSS to con- N/A N/A N/A due to the secession of South Sudan. tribute to national trade policy- making (continued on next page) Appendix 123 124 (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Activities IVB: Establish Trade Points in Southern N/A N/A N/A due to the secession of South Sudan. Improve trade Sudan promotion services Establish Trade Information Cen- N/A N/A N/A due to the secession of South Sudan. ter in Southern Sudan Identify technical requirements for 25 25 Some work aimed at identifying alternative livestock and meat markets access to alternative livestock and was carried out however there was no follow-up. meat export markets Identification of the poor’s trad- 75 25 The UNDP in partnership with relevant central and state agencies con- able goods, mainly in the rural ducted various pro-poor value chain analyses mainly in Darfur states for areas groundnuts, livestock, hibiscus and honey. Establishment of shareholding 25 25 Not implemented, but the cooperative training center of the Ministry of trade company owned by the poor is planning to encourage clusters of each export commodity to organize themselves at the local and state themselves in cooperatives. In the website of the Ministry of Social Welfare, level for exports there are three social security funds functioning in all states and localities, the most important of which is the Zakat Fund based on Islamic doctrines to support the poor with a very efficient income distribution facility. Formulation of good governance 50 25 Efforts are underway if measured by formulated constitutions and enacted practices and anti-corruptions laws following the Comprehensive Peace Agreement settling the long REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE laws, acts, and other legisla- standing war in southern Sudan and Peace Accords for Darfur and Eastern tive requirements to protect the Sudan, but unfortunately there are still outstanding issues need to be taken poor’s incomes towards social inclusion as expressed clearly by the Higher Coordination Council for Decentralized Government Data dissemination about export 50 50 The Sudan Trade Point and Trade Information Centre have taken the task market prices effectively and they have enlisted 3,3000 clients who receive export market prices on daily basis by email. Data delivered includes: exchange rate, international and domestic prices of main export commodities (sesame, gum arabic, metals, etc.). The disseminated data is restricted to the ones obtained without fees and charges. Data with charges are not collected due to budget constraint. Information on related preferen- 75 50 The Trade Information Centre and the Sudan Trade Point provide infor- tial markets mation on both preferential markets and other markets. The information includes: i) import regulations; ii) names and addresses of foreign buyers and suppliers; iii) foreign market situations; and iv) schedule of interna- tional trade fairs. (continued on next page) (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Strengthen capacity of public 25 25 Only through the recently established National Agency for Insurance and private trade development and Finance of Exports, was it possible to achieve some results. National institutions Development and Trade Policy Forum (NDTPF) was intended to trade de- velopment institutions connecting public and private sectors. As explained in Action 73, NDTPF has not been functioning. Strengthen the national Export 0 0 The Export Development Council, (the decision to establish this was made Promotion Council in 2005) is currently attached to the Ministry of Trade (MoT) It still has not effectively served as trade promoting body. Lack of progress is attributed to lack of government priority. Trade promotion has been made through existing goods-specific organizations (Gum Arabic Board), chambers of commerce (Sudanese Businessmen and Employers’ Federation) and trade information centers (Sudan Trade Point and Trade Information Center. Although they have been strengthened to provide services, countrywide trade promotion is still lacking in Sudan. Develop national and sectoral 0 0 Not implemented although many studies addressed how to boost non-oil export strategy to identify export exports because of lack of institutional setting for coordination. potential products Activities IV C: To support EPA negotiations, 100 0 A series of works have been done by the EU under the Sudan Economic Help exporters conduct a study to identify means Partnership Agreement Negotiation and Implementation Support (SENIS) maximize benefits of meeting European regulatory program. The program studied regulatory framework including: i) legal; from trade requirements ii) SPS; iii) competition; and iv) trade-in-services. However, the studies were agreements conducted by the EU ownership, not the Sudanese government. There- fore, impact of the study to support EPA negotiations is limited as Sudan is reluctant to further advance the EPA negotiations due to the unsigned Cotonou Agreement with the EU. Creating awareness about chal- 0 0 First of all, the government needs to understand the implications of ac- lenges benefits of membership cession to WTO accession, i.e., benefits, costs and risks. Only after the in the WTO and the process of government recognizes these implications will it start to establish effective accession communication and coordination within the government and with private sector in order to raise their awareness. This action should remain valid for 2014 DTIS update. Establish program to train private 0 0 Training activity has not been established well as pointed out in 2008 sector organizations in meeting DTIS for two reasons: i) firms that aggressively export to COMESA markets COMESA rules of origin require- have already implemented voluntarily to meeting the COMESA and other ments preferential agreements’ rule of origin requirements; and ii) both govern- ment and other traders are reluctant for competition and have no interest Appendix in exporting as they lack external competitiveness. (continued on next page) 125 126 (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Establish a Public-Private-Partner- 0 0 Due to inactivation of NDTPF (refer Action 73), PPP has not been estab- ship (PPP) on MTS (Multilateral lished; attributed to lack of interest in both public and private sectors. trading system) Commission marketing studies 50 25 Various Government entities noted that marketing studies were undertaken identifying export opportunities in with external funds through COMESA as part of the preparation for mov- preferential markets ing towards a customs union. Strengthen the export strategy 25 0 There has been little increase in capacity to promote exports. capacity in Sudan. Elaborate an in-depth national 25 0 Implemented by the three-year Emergency Economic Programme export strategy (2012–2014) after the secession of South Sudan. It identified four export crops: livestock, oilseeds, gum arabic and cotton. However, it just identi- fied items but lacked clear strategy to increase exports of these items because of lack of government interest and capacity. Identify products and services 75 25 This activity has been considered as a top priority to guide the strategic with high potential, contributing planning of the various government entities and the private sector as to diversification of exports reported by the Ministry of Trade. Identified products and services are: horticulture, medicinal and aromatic plants and spices, and a wide selec- tion of value added agro-industrial products. REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Undertake sector export strate- 25 0 Still pending issue awaiting strengthening of the institutional capacity (with gies additional staff) Activities IV D: Formulate trade policy for Sudan 50 50 The Ministry began the process but has not produced a draft trade policy Increase coordination and strengthen trade policy in for discussion. in trade and policy overall policy setting making Study to clarify responsibilities 0 0 The trend of Government restructuring just started in Mid 2011 after the in trade policy making between secession of Southern Sudan and more concrete steps are yet to be taken relevant bodies after a careful study Strengthen and institutionalize 0 0 Refer Action 62. public private cooperation (continued on next page) (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Strengthen Export Credit and 75 50 The National Agency for Insurance and Finance of Exports (NAIFE) was Guarantees Agency through capi- established in 2005 and started its operation in January 2006. The main tal and awareness raising objective is to promote Sudanese exports (excluding oil and gold) through insurance and re-insurance of Sudanese exports and lending to export- oriented firms. NAIFE also provides promotional activities to enhance competitiveness of Sudanese exporters. Volume of export credit and guarantees has been increasing since its establishment from US$79 million in 2010 to US$188 million in 2013. NAIFE provides short- and medium-term finance and guarantees to pre- and post-shipping finance for exporting goods and services. Beyond export credit and guarantees, NAIFE also provide short- and medium-term lending to export-oriented firms to help expand their capacity. Activities IV E: Broaden mandate of NDTPF on 0 0 Very little that has done to improve awareness on trade policy issues be- Improve awareness on public awareness and coordina- cause of limited budget and lack of external support. trade policy issues tion to all trade negotiations NDTPF has not been functioning. Since its establishment in 2004, NDTPF suffered from i) lack of budget, ii) continuous change in members repre- senting stakeholders, iii) lack of interest and weak participation of mem- bers, and iv) lack of training. Therefore, primary action should be to reacti- vate NDTPF with sufficient budget and giving incentives for stakeholders. Activities IV F: Training staff 0 0 Refer Action 57. Strengthen National Link to best practice institutions 0 0 Same as above. Export Promotion Council Link to private sector 0 0 Same as above. Activities IV G: Modernize units for multilateral, 50 50 Such units which are the affiliates of the Ministry of Trade with representa- Strengthen trade regional (WTO, GAFTA, COME- tive in the bilateral negotiations are performing with sub-optimal staffing policy making capacity SA, GSP, GSTP) and bilateral and facilities because of limited budget and lack of external support negotiations Training of staff (English, Com- 25 25 Only partially (not regularly) implemented by the Training division at puter, Trade economics, and Ministry of Trade because of low government prioritization and limited Trade law) budgets. Establish Monitoring & Evaluation 0 0 Not implemented because of low government prioritization and lack of capacity institutional capacity. Strengthen trade missions in key 0 0 Not implemented. embassies (continued on next page) Appendix 127 128 (continued) Implementation Degree of Theme Activities rate % Impact % Reasons for success/ failure Strengthen trade policy department 0 0 Those laws enacted by the legislative assembly in 2009 have not been to implement and monitor new enforced due to lack of institutional capacity. Therefore, the relevant trade laws, include anti-dumping, com- policy department has not been strengthened to effectively implement and petition, and trade regulation laws monitor those laws. Strengthen and modernize MoFT 25 0 Little was accomplished outside the domain of the trade sub-points. How- state offices ever, with expanding the mandate of the Ministry to cover internal trade and look after the cooperative movement, trade offices will be strengthened Activities IVE: Awareness raising and training 50 25 Although no new foreign trade institute has been created, Sudan Trade Strengthen in trade issues (Foreign Trade Point (STP) has been expanding its capacity to raise awareness and pro- Information, Research Institute to be created) vide training at state level through its nation-wide network. The objectives and training in trade of STP include: i) development of foreign trade systems, and compilation, documentation and dissemination of trade information; ii) facilitation of business process and raising awareness of small and medium-sized enter- prises and assist them in reaching to international markets; iii) promotion of exports and investments; and iv) strengthening of links between local institutions and international institutions. Strengthen trade information 50 50 Trade information is provided through the Trade Information Centre and system on federal and state level STP. These institutions have established and developed trade informa- REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE tion infrastructure to expand their outreach. Those data includes: i) trade statistics; ii) foreign market information; and iii) trade promotion and facilitation. Though budget is limited and there are some overlaps in their mandate, capacity for trade information system has been improved. Remaining challenge is to further improve their capacity and expand their reach to potential exporters in rural area. Establish modeling capacity to 0 0 Not implemented because of lack of external support evaluate costs and benefits of new trade agreements Review and improve capacity to 0 0 Very little was done because of low government prioritization. Sudan itself review trade policy regularly still lacks capacity for trade policy-making. Increase awareness-raising, in- 50 25 Only with the recent curricula of University of Khartoum on trade and formation, and research capacity development various courses and postgraduate degrees were designed to on trade and environment and the needs of concerned government agencies and the private sector and trade and poverty more impact is expected in future Appendix 129 Appendix 2: Firm Level Exporter In terms of the exporter size distribution, the Dynamics – Product Details Herfindahl Index indicates a high concentration of precious metal exporters’ shares in Sudan, and exports Precious Metals77 only get more concentrated over time. Exports of precious metals are driven almost entirely by a few Precious metals are Sudan’s leading non-oil export. very large exportes. In 2012 nearly 100 percent of The number of precious metal exporters nearly exports were concentrated in the largest 10 percent doubled from 47 in 2008 to 87 in 2009 but subse- of firms selling more than US$5 million annually. quently declined to 20 in 2012. However, this was not This stands in contrast to 2008 when firms with matched by a decline in the value of total exports. On more than US$5 million annual exports accounted the contrary, that value increased by eight-fold from for 21 percent of the total number of exporters and 2008 to 2012. Sudan benefited from increasing inter- 77 percent of total precious metal exports. The data national gold prices that nearly doubled during the indicate that small exporters thrived in 2012: 65 per- 2008–2012 period. However, the spectacular growth cent of Sudan’s precious metal exporters exported less of precious metal exports is due not only to high than US$100 thousand in that year. prices but also to a substantial increase in quantities In 2012 there were only six destinations recorded exported, particularly between 2008 and 2009 when for Sudan’s precious metals exports: United Arab quantities increased more than four-fold. Emirates, Sudan, Canada, Swaziland, EU, and Aruba. Although the value of precious metal exports has The United Arab Emirates was the only destination been increasing since 2008, its share in Sudan’s total with multiple Sudanese firms exporting whereas there non-oil exports declined from 2010 to 2012. There is is only one firm that serves in each of the other desti- a significant concentration of precious metal exports: nations. Seventeen Sudanese precious metal exporters precious metal exporters represent 3 percent to 10 per- sold to the United Arab Emirates in 2012, of which cent of the number of exporters in Sudan but account only one was an entrant. The entry rates of pre- for over 60 percent of the value of total non-oil cious metal exporters into the United Arab Emirates exports. In 2012 the precious metal sector represented droppped dramatically between 2009 and 2012 less than 1 percent of the number of entrant exporters while the exit rates doubled during the same period. and 5 percent of the “exiter” exporters from Sudan. Exporter entry and exit rates cannot be calculated for Since the value of exports increased and the num- the other destinations because only one incumbent ber of exporters declined between 2008 and 2012 in exporter serviced those destinations. the precious metals sector, the average size of precious metal exporters naturally increased. The size of the Oil Seeds78 average precious metal exporter was 5.5 million in 2008 and 100 million in 2012. The size of the median Oil seeds are the second largest non-oil export sec- precious metal exporter is trended upward until 2011 tor in Sudan. The main product exported is sesame but then dropped dramatically. In terms of the average seeds, which account for about 50 percent of the size of precious metal exporters, the growth is driven by growth of incumbent exporters. The average size of entrants is much smaller than that of incumbents and 77 Although HS code 71 covers products other than gold, 99.5% of the that gap widens with time. Suprisingly, the median value of Sudan’s exports in HS code 71 originates in the 4-digit HS code 7108 which is gold. incumbent in precious metals is smaller than the 78 The oil seeds export sector is defined by all export products within median entrant in the sector The median size of both 2-digit code HS 12. The label for HS 12 is “Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruits; industrial or medicinal incumbents and entrants falls from 2009 to 2012. plants; straw and fodder” that for short is referred to here as “oil seeds”. 130 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE sector’s total exports in any given year. A surge in the what is seen in other sectors, and accounts for nearly number of oil seed exporters in 2009 was followed by 70 percent of oil seed exports. a decline in 2010 and then remained constant until In 2009, entrants into oil seeds exports represent 2012. The value of oil seeds exports declined slightly almost three-quarters of the total number of Sudanese from 2008 to 2010 but recovered by growing more oil seeds exporters with the other 26 percent being than 50 percent from 2010 to 2012. This important incumbent firms, as shown in Panel A of Figure 25. growth was driven by growth in export volumes as But in 2012, only 59 percent of oil seeds exporters quantities of oil seed exports doubled between 2008 were entrants. Panel B shows that not only the num- and 2012.The oil seeds sector faced unfavorable unit ber of entrants declined between 2009 and 2012 but value (price) movements over the period. the entrants’ share in total oil seeds exports also fell Although the value of oil seed exports increased dramatically from from 78 percent to 28 percent. between 2008 and 2012, its share in Sudan’s total This implies that entrants in 2012 were fewer and non-oil exports declined dramatically from 30 percent substantially smaller than in 2009. Panel C shows that in 2008 to 10 percent in 2009 and thereafter. The oil exit rates have also declined but not nearly as fast as seeds sector accounts for an important share of the entry rates. About 62 percent of oil seeds exporters number of Sudanese exporters, about 25 percent each that exported in 2008 did not export in the following year. The oil seed sector’s shares of exiters are close to year and that rate decreased to 59 percent in 2012. its share of exporters; however, its share of entrants The average number of destinations per Sudanese is higher (close to 30 percent). The higher entry rate oil seeds exporter increased from 2 in 2009 to 2.3 relative to the exit rate suggests that the oil seeds sec- in 2012. The main destinations for Sudanese oil tor is a growing export sector for Sudan. seed exports in 2012 are the destination registered The average size of oil seed exporters declined as Sudan itself (27 percent), China (19 percent), from US$1.2 million in 2008 to US$800 thousand Egypt (18 percent), Saudi Arabia (5 percent), in 2009 but then almost doubled until 2012, reaching and the European Union (5 percent), as seen in US$1.5 million in 2012. This increase in the average Figure 26. China has rapidly become a crucial mar- size of exporters was driven by the increase in the aver- ket for Sudanese oil seeds exports accounting for only age size of incumbents, as the average size of entrants 2 percent of those exports in 2008 but for 29 percent actually declined over the period. The median oil seed in 2010 and declining to 19 percent in 2012. China exporter is much smaller than the average exporter and also increased its relevance in terms of the share of actually declined from US$220 thousand in 2008 to Sudanese oil seeds exporters it attracts which increased US$150 thousand in 2012, after increasing between from 5 percent in 2008 to 13 percent in 2012. Egypt those years. The median size of incumbents increased and Saudi Arabia are historically important markets whereas the median size of entrants declined from for Sudanese oil seed exports but their importance 2009 to 2012. has been declining. The share of oil seed exporters The Herfindahl Index of Sudanese oil seed export- selling to Egypt declined from 37 percent in 2008 to ers’ market shares suggests low levels of concentration 19 percent in 2012 while the share selling to Saudi taking on a value of 0.04 in 2008 and 0.03 in 2012. Arabia declined from 20 percent in 2008 to 16 per- The size distribution of oil seeds exporters is mostly cent in 2012. The European Union has accounted for characterized by small exporters, nearly 70 percent of relatively constant shares of Sudan’s oil seed exports which sell less than US$500 thousand. In contrast, the (5 percent) and oil seed exporters (13 percent). largest exporters selling more than US$5 million repre- Entry and exit rates for Sudanese oil seeds export- sent 10 percent of exporters in 2012, which is actually ers’ dynamics are high in the four main markets a relatively high share for this size group compared to although they declined in 2012, particularly in China. Appendix 131 In 2009 entry rates were higher than exit rates in all animals exporter market shares in Sudan fell from four destinations whereas in 2012 exit rates were 0.13 in 2008 to 0.03 in 2012 and generally suggests higher than entry rates in all four destinations. a low degree of concentration. In 2008 92 percent of exporters had annual exports of live animals of less Live Animals79 than US$500 thousand (with 55 percent being small exporters with annual exports below US$100 thou- Live animals are the third largest non-oil export sector sand) but that share of small exporters declined to in Sudan. Between 2008 and 2012 live animal exports 15 percent in 2012 while the share of medium-sized increased five-fold. This surge is due to a combina- and large exporters grew. Sudan’s live animal exports tion of favorable unit value (price) movements as well become increasingly more concentrated in the larg- as a substantial increase in quantities exported. The est exporters from 2008 to 2012 while the share of number of live animal exporters increased from 139 in exports accounted for by small and medium-sized 2008 to 165 in 2011 but dropped to 129 in 2012. The exporters decreased. impressive growth in the sector however only helped it Sudan’s live animal exporters are not very diversi- keep up with other growing export sectors in Sudan, as fied by destination, selling on average to 1.27 desti- its share in the value of total non-oil exports remained nations in 2008 but that number improved over the constant at around 9 percent. The importance of live 2008–2012 period to 1.74. The main destination for animals in the total number of exporters has declined live animal exports in 2012 is Saudi Arabia (66 per- slightly from 21 percent in 2008 to 17 percent in cent). In 2008 that percentage was a mere 8 percent. 2012. Entrants into live animal exports account for In contrast, Egypt, which was the main market for a larger share of total entrants than exporters of live live animal exporters in 208 with 78 percent market animals account for in total exporters. Also exiters in share declined by 2012 to only 8 percent of exporters. the live animals sector represented a particularly high Entrants into Sudan’s main destination markets share—28 percent—of total exiters in 2012. for live animals, Saudi Arabia and Sudan, exhibit The average size of live animal exporters grew declining entry rates between 2008 and 2012 whereas from US$500 thousand in 2008 to US$2.6 million the entry rates into Egypt and the United Arab in 2012, almost doubling between 2011 and 2012. Emirates increase between 2008 and 2012, as seen in Most of the growth in exporter size was due to the Figure 33. Another important pattern to highlight is size of incumbents although the size of entrants also that exit rates in all four main destinations in 2012 increased between 2009 and 2012. The median size were higher than in 2008 and higher or equal to the of live animals exporters also increased from 2008 corresponding entry rates. until 2012, primarily due to the growth of the median incumbent rather than growth of the median entrant. The majority of live animal exports are accounted for by the largest exporters selling over US$5 million 79 The Live Animals export sector is defined by all export products within annually every year. The Herfindahl index of live 2-digit HS code 01. 132 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE Appendix 3: Trade Gateway process takes several days, this can lead to delays to the Performance: Port Sudan beginning of the customs and other government agency clearance process of the cargo as the delivery order is one Port Sudan is the main gateway for imports to of the documents that are required. Second, container Sudan. Exports, especially livestock, agricultural management in the yard is not well organized, which goods, and oil (crude and derivatives) are handled at leads to difficulties in locating containers for physical specialized facilities mainly in Swakin. It is largely a examination or removal from the port. Some logistics feeder port, with goods transshipped through ports services providers have ended up engaging runners to in the Middle East. locate containers for these purposes. The Sea Ports Corporation (SPC), a state owned The SPC is committed to both expanding company, has operated Port Sudan since 1974. It capacity and improving operational efficiency comprises terminals and facilities for general cargo, and has recently brought in a private company to including bulk, containers, and petroleum products. manage Port Sudan. They plan to increase the use General cargo is handled in the North Port, which also of information technology systems through either a has facilities for bulk shipments, roll-on roll-off, and port community system or single window system so vehicle carriers. It can also handle a limited number of that the various service providers can share documents containers. There are warehouses adjacent to the berths electronically and as efficiently as possible. It is also as well as grain silos. There is also the Green port, which critical to improve overall terminal management prac- is used for general cargo and bulk. It has equipment to tices. A significant development related to this was the discharge grain directly into trucks. The South Port is signing in late 2013 of an agreement between SPC the main container terminal in Sudan. SPC also operates and ICTSI of the Philippines for the latter to man- a yard for empty containers located some 2 km from the age the port and improve its operational efficiency. It main container terminal. An oil terminal was opened is still too soon to assess the impact of this initiative. in 2004 and is used for exports of petroleum products. The DTIS Update focuses on the Port Sector Port Sudan has almost halved the dwell time to management and operations with emphasis on Port 15 days since the last DTIS. Port Sudan has signifi- Sudan as main gateway for Sudanese foreign trade cantly reduced the dwell time from 28 days recorded (mainly imports) and on Swakin in respect of livestock in the AICD, which was based on a survey in May export trade. Further, the DTIS Report 2008 [matrix 2007, to 15 days in March 2014 (based on interviews with users), exceeded only by Douala in Cameroon. Cargo Dwell Time in Port Sudan FIGURE 44:  The ports of East Africa, Mombasa and Dar es Salaam Compared to Other Ports, 2014 have managed to reduce their cargo dwell time by taking various measures including increasing storage Port Sudan Douala charges, using off-dock container yards and adopting Mombasa several measures to expedite clearance of cargo. Durban The high dwell time in Port Sudan reported Singapore by the earlier DTIS was explained in part by port Hong Kong operational procedures and container manage- Port Klang ment. Although there have been significant reductions Thailand Tanjung Priok in dwell time 15 days remains high and results from 0 5 10 15 20 two primary factors. First, under the port operational Cargo Dwell Time (days) procedure, delivery orders are only released after the outturn for a vessel is provided. When the discharge Source: World Bank Doing Business Report, various issues. Appendix 133 of actions] was compared with the current situation reduce dwell time. Contrary to the recommendation in order to update the recommendations. expressed in 2008, the effect of such increase should be The Ministry of Transport, Roads and Bridges is reviewed prior to proceeding. Increasing storage fees as the line ministry in charge of the port sector which an incentive to reduce storage periods is a frequently is being managed and administrated by the Sea Port proposed option to accelerate the cargo clearance and Corporation (SPC), which is provided with a large evacuation process in order to free storage capacity. degree of autonomy including financial manage- Generally this is a sound approach, however, in the ment. Both private operators and the SPC provide case of Port Sudan ample storage space is available and commercial operations. All marine operations (services there is currently no need to increase the costs for mer- related to ships’ approach and berthing operations) are chants with the often-observed risk of abandonment provided by SPC without any private sector participa- of cargo because of high additional costs. Overall, the tion. Cargo handling operations are being provided team learned that tariffs and storage fees have not been as follows: General Cargo—on-board stevedoring increased for the past four years. performed by private companies and shore handling Improving efficiency at Port Sudan should covered by SPC; dry bulk cargo—active operation be the preferred strategy. The earlier DTIS rec- 100 percent performed by private companies who ommended facilitating the establishment of ICDs own also the main equipment (cantilevers, un-load- to simplify and accelerate the cargo clearance and ers, etc.); liquid bulk cargo—the terminals are under evacuation processes. This has already taken place supervision of SPC whereby the manifold operations and remains an option for assisting in improving are being assured by cargo owners. Private operators, internal distribution networks, however, it should under supervision of SPC, perform livestock opera- be considered complementary (and not as a sub- tions (in Swakin). Containerized Cargo: In October stitute) to the necessity of improving efficiency at 2013 SPC signed a management contract with Manila Port Sudan. Improving efficiency at the Port is a first (Philippines) based container terminal operator ICTSI best option as this minimizes cargo handling. It is The agreement includes both container terminals in important to recognize that establishing additional Port Sudan (old and a new one). Services are being ICDs will incur further costs and liabilities when provided in the name and for account of SPC who is cargo is moved by third parties away from the entry in charge of billing and financial management. point (Port Sudan). The DTIS 2008 recommendations targeted Private operators appointed, in most cases, by reducing the bottlenecks at Port Sudan. Following the merchants, handle virtually all cargo operations the inauguration of the new container terminal in and the major service provider for third parties is the 2012, waiting times have been almost eliminated. containerized cargo operator. Since the inauguration In 2013 SPC signed a three-year manage- of the south terminal, earlier sporadic congestion has ment contract with ICTSI for the handling of been overcome. containerized cargo at both terminals. The pro- Landing process time is small relative to time posed concession of port management has not taken since departure from cargo origin. The duration place. However, in respect to the containerized cargo of availability of consignments while cargo is still handling, the present management contract may be on board should not be considered as critical as the extended or replaced by a concession through a com- landing process duration is very small relative to the petitive bidding process; this will be decided toward period of time since departure from cargo origin. the expiration of the present management contract. Most of the cargo originates in the Far East and is The availability of storage space largely obviates transshipped at either the Port of Salalah (Oman) or the need to increase storage fees as an incentive to Jeddah (Saudi Arabia). 134 REPUBLIC OF THE SUDAN – DIAGNOSTIC TRADE INTEGRATION STUDY – UPDATE TABLE 30: Container Operations Key Indicators after landing and 25 percent are being released within Crane productivity 22 moves per crane hour 1 and 2 months after landing. [ship to shore] The periods of storage prior clearing goods lead Average Container 650 containers load + to an average dwell time of a container of 25 days moves per call discharge within the port premises (under custody of SPC). Berth Occupancy [in %] < 50% This is a relatively high number but as a simple average Source: World Bank staff own compilation, based on local data it must be interpreted cautiously as presently there are obtained in February 2014. more than 1,000 TEU in a so-called abandoned status (under customs custody and ready for auction as the Port Sudan has significantly improved crane maximum storage time is 60 days, thereafter goods and discharge productivity. The discharging/loading are being transferred to an outside depot for auction). process performance is shown in Table 30. There has The Costs of Port passage of a container through been a significant improvement in productivity since all the operational cycles of the port facilities is not the AICD. Indeed crane productivity at Port Sudan high when compared to other ports in Africa. The compares well; the values are in the range of modern total cost consists of: Handling charges (invoiced by container terminals with infrastructure of similar age. SPC) and Handling fees (charged by shipping agen- As a consequence of the irregular timing of cies). To these basic costs, merchants incur additional arriving vessels, the facilities experience periods charges, which according to the counterpart the team of time without activities while at other times the spoke to, were not always considered to be justified. terminals reach almost full capacity. Since inaugu- Some of the additional costs could be avoided by not ration of the new container terminal (south), waiting incurring in demurrage/detention and additional times of ships due to berth occupancy does not occur. storage time. Procedural obstacles attributed to the However, the high rate of equipment failures (avail- banking sector were mentioned as an important fac- ability of around 70 percent only) reduces operational tor. It appears that half of all cargo is cleared and efficiency. The horizontal movement of containers released during the free time while the other half from alongside ship to the first import or discharging incurs additional storage and demurrage/deten- stacking area follows the discharging cycle of the ship tion charges. More information is required on the to shore gantry cranes. Once containers have been 50 percent that incurs demurrage/detention charges. stored into the stacking yard and vessels’ discharging An objective assessment of SPC’s operations operations have been completed (closure), the storage and port management would assist in provid- time commences, as well as the potential container ing a benchmark assessment for a discussion on demurrage time. future role and strategic targets. Recent increases The standard free storage time amounts to of stevedores’ remuneration (by 70 percent) will, in 14 days, thereafter 7 Euros/TEU/day apply . the absence of corresponding productivity increases, Shipping lines concede different periods of free demur- contribute towards augmenting cargo handling costs. rage/detention time. 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