Sudan Must Diversify Before Oil-Rich South Vote, Hassan Says
June 10, 2010, 6:07 AM EDT
By Maram Mazen
June 10 (Bloomberg) -- Sudan must ease its dependence on oil by investing in agriculture and new industries before a January vote on independence by the southern region where most of the crude is produced, said central bank Governor Sabir Hassan.
“If Southern Sudan secedes, it could affect the economy negatively unless the government takes measures to counter it,” Hassan said late yesterday in a lecture in Khartoum, the Sudanese capital. He said the event was perhaps the first time the economic implications of secession have been discussed publicly.
Southern Sudan’s oil fields account for about 70 percent of Sudan’s crude production, Hassan said. Sudan’s output of 490,000 barrels a day is the third-biggest in sub-Saharan Africa, according to the BP Statistical Review of World Energy.
The independence referendum is part of a 2005 peace agreement that ended two decades of civil war between the mostly Muslim north and the south, which follows Christianity and traditional beliefs. The government of President Umar al-Bashir needs to take action to ensure the economy weathers the breakup, Hassan said.
“All kinds of investments are needed,” he said. “The thing that is needed more is strategic partnerships between the government and the Sudanese private sector from one side, and the government and the foreign private sector, especially for large scale projects, commercial farming.”
Hassan urged the government to focus on agricultural development and direct government spending on the switched priorities “starting from now.” Non-oil exports including gold, ethanol and animal feed reached almost $1 billion in 2009 and were worth $480 million in the first quarter of this year.
Oil Revenue
Oil proceeds contribute more than 7 percent to Sudan’s gross domestic product, accounting for between 40 percent and 45 percent of the country’s revenue, Hassan said. Southern secession could also affect foreign currency reserves at the central bank, Hassan said.
Northern Sudan must develop agriculture and industries such as gold mining and ethanol production to decrease its dependency on oil, Hassan said. Even so, while an independent south would “affect GDP negatively and economic growth in general,” Hassan said that “we should not exaggerate in this matter.”
Under the peace accord, northern and southern Sudan split the proceeds from oil pumped in the south. If the landlocked south secedes, the north will remain its sole export route through a pipeline ending in Port Sudan at the Red Sea. The two sides haven’t reached an agreement on how to divide the revenue after the referendum.
--Editors: Karl Maier, Alan Crawford