JR-Publications-Sudan-Handbook-1

fRom slaVEs to oil 147

14 per cent of GDP in 2006. Although rising oil production and inter-

national prices finally began to contain the growth in Sudan’s deficit

growth in 2007–08, it is likely to have widened again in 2009 as a result

of reduced inflows associated with the global economic downturn.

In order to finance this current-account deficit, Sudan has been forced

to seek increased capital inflows, which have mostly come in the form

of foreign direct investment. Although no detailed breakdown of this

foreign investment is available, it is likely to have remained largely

focused on the oil sector, although infrastructure, finance, transport,

telecommunications and power have also attracted some interest. As a

result, China will have remained the most important investor in Sudan,

together with other Asian countries such as Malaysia and India, despite

a sharp increase in interest from the Gulf Arab states.

Foreign direct investment in Sudan rose steadily until 2004, in line with

oil-sector growth. There was a sharper increase in 2005–06, reflecting

investment in a number of new oil projects, as well as infrastructure-

building associated with the CPA and increased foreign interest in other

sectors of Sudan’s economy on the back of an oil price boom. Foreign

direct investment dipped in 2007, however, sounding a warning signal,

and it remained at a similar level in 2008, with a further decline likely as

a result of the global financial crisis in 2009.

Conclusion

The increased dependence of Sudan’s post-oil economy on the country’s

international partners renders it vulnerable to a new set of domestic and

international risks. The most pressing of these risks is uncertainty over

future international oil prices. Oil prices are inherently volatile and – as

Sudan discovered in its time as a cotton producer – dependence upon

a single commodity always constitutes a major vulnerability. This is

worsened by the fact that many of Sudan’s major investors, notably the

Gulf Arab states, also have oil-dependent economies.

Beyond the danger of a repeat of the oil price slump driven by the

The Sudan Handbook, edited by John Ryle, Justin Willis, Suliman Baldo and Jok Madut Jok. © 2011 Rift Valley Institute and contributors global economic downturn in 2009–10, there are specific factors that

(www.riftvalley.net).