Oil and Challenges of Trade Policy Making In Sudan in a Globalizing Arena

The purpose of this study is to examine the potential impact of oil revenues on the economy of Sudan and the challenges facing the Government in policy making, particularly trade policy and allocation of oil revenues for long-run development and diversification of the production and export structure of the economy. The exploitation of oil resources has been accompanied by impressive liberalization of the economy by the Government of Sudan. Since then the country has been integrating into the world economy rapidly based on oil revenues. Yet, little has been achieved so far in integrating various sectors of the domestic economy despite relatively rapid GDP growth based on oil revenues. Rapid economic growth and diversification of the economy are among the main objectives of the Government. Therefore, the challenge facing the Government is to design and implement a long-term development strategy in order to build up a solid industrial and agricultural sector for sustainable development and expansion of non-oil exports. In such a strategy the design, and implementation, of trade and industrial policies and the way oil revenues are allocated, takes, inter alia, importance. Developing a conceptual framework of analysis, the author will argue that while export of petroleum provides financial resources for the acceleration of investment and growth, prospects for sustained growth and diversification will be still limited by some physical and institutional bottlenecks which can not be easily overcome by ample oil revenues. Trade in oil itself may have some detrimental socio-economic effects, including the attitude and policies of the Government, on the prospects for development and diversification of the economy in the long-run. Therefore, the Government policies, particularly trade policies, and the way oil revenues are allocated may not be necessarily conducive to long-run development and diversification of production and export structure. Proposing an alternative long-run trade and industrial policy for the country, the author will also outline the practical problems of its implementation under current international trade rules. ---------- *The author is a development economist with D.Phil from Oxford Univsity. He is currently an international consultant affiliated to the Institute of Economic Research, University of Neuchatel, Switzerland. He is the former Head, Macroeconomic and Development Policies Branch, UNCTAD and the author of a large number of articles, published in international journals, on trade and industrial policies, economic reform and other development policy issues. His latest book is: Trade Policy at the Crossroads; the recent experience of developing countries, Macmillan, 2005. This paper is developed on the basis of a part of a study undertaken for the World Bank under a DTSI project financed by the same Organization. The author benefited from interviews with Government authorities and comments from Mr. P. Shuler to whom goes his thanks. Comments are welcome and can be sent to author: M.Shafaeddin@Gmail.com.