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- Lessons to learn from the Malaysian model -

Foreign alliances are helping to smooth Sudan's transition from dependence on aid to economic self-reliance

Until 1990, Sudan was a major recipient of foreign aid from international financial institutions and the US. Then the flow of funds virtually dried up, except for emergency relief, when the country entered a period of economic isolation. But this enforced self-reliance proved an unexpected catalyst for profound change.

The minister for national industry and investment, Abdel Halim Ismail al-Mutaafi, says the drop in overseas aid forced the government to take tough measures and adopt the policy of a free market economy, moving away from one of subsidies and support to agriculture and services. People were encouraged to work hard and there was a concerted effort to maximise exports in order to raise the hard currency needed to pay for imports. The recent price rise of oil provided a useful boost to a previously struggling industry. Oil has proven to be a magnet for foreign investment, particularly from the Far East. China has long held an interest in Sudan, but an intercontinental partnership has also emerged with Malaysia.

Cooperation is by no means restricted to the exploitation of oil. On a recent visit to Kuala Lumpur, Dr Al-Mutaafi told Malaysian business leaders that Sudan would welcome investment in power generation, pharmaceuticals, telecommunications, aerospace, car manufacturing, mining, ports and the agro-industry. "You have progressed well and have strong technology and political stability," he told his hosts. "Malaysia can forge an excellent partnership with us and we can become the gateway for each other's products in the markets of South East Asia and North Africa." Dr Al-Mutaafi had suggested the formation of a joint team of Malaysian and Sudanese officials who would draw up a strategic development plan for Sudan, based on Malaysia's experiences.

The recent price rise of oil has boosted industry

The governments of the two countries are already discussing plans to build a hydroelectric plant in the north of Sudan. The $700 million project, located on the Nile, has a 2,000MW capacity and would also lay the groundwork for a modern irrigation scheme. Dr Al-Mutaafi says that Malaysia would also help Sudan to formulate a 20-year industrial master plan for the country. "We have asked for Malaysia's assistance to improve our economy so that it will become one of the best in Africa," he says.

Malaysian oil company Petronas has been largely instrumental in helping Sudan to tap its own resources and place the republic among the rank of oil exporting nations. Petronas has invested about $800 million in Sudan, its single largest overseas investment to date. Dr Al-Mutaafi has invited Malaysian firms to invest in the energy and electronic manufacturing industries, food processing, technology, road construction and other infrastructure projects. He would also like Malaysia to participate in the automobile industry and hopes that it will set up production lines. Malaysia is viewed as a model, given the country's successful diversification from its heavy reliance on agriculture.

The government in Khartoum has asked Khartoum: car manufacturer Hyundai Malaysia to draw up a development plan based on its own model to enable Sudan to switch from a predominantly agricultural based economy to one that stresses industrial development. "Malaysia is a true friend," says Abu El Gasim El Khidir, the head of Khartoum State Investment Corporation. "Malaysia knows our needs and its entrepreneurs are genuinely interested in ensuring technology transfer and that the benefits gained from ventures are symbiotic."

The South Koreans are also showing an interest in the African country. Car manufacturer Hyundai plans to open a new assembly line in Khartoum under the supervision of Sudan Master Technology (SMT), which has built a vast industrial complex 30 miles south of the capital. A package of incentives has been introduced to encourage foreign participation, including exemption from business profit tax for partners who invest for a minimum of 10 years. "We will allow free movement of their profits and capital to secure the investment," says Mr al-Mutaafi.

"Since Sudan became an oil producer, the initial thrust of growth and reform has been in the petrochemical industry. Our other main objective is to maximise gains in industries linked to raw materials. We are also finding opportunities for export-oriented food industries such as sugar, oil seeds, meat, gum arabic and sweets," he adds. Import substitution, the growth in export industries and the attraction of foreign investment have gone hand-in-hand with a concerted privatisation drive. Although this has not happened as fast as the government would like, Mr al-Mutaafi estimates that about three-quarters of the state sector is now in private hands. "We are having some problems with the textile industry, but it is seen as an area for investment in Sudan so we want to privatise it," he says.

Khartoum Airport, Sudan Airways, Sudan Shipping Line, plus several power projects and large agricultural ventures, are also expected to be sold or put out to tender. As in many other developing countries, the transition to privatisation has often been painful. Tagelsir Abdelsalam, the former minister of telecommunications, knows some of the potential difficulties from his experiences on the boards of several companies. "Some people call me the 'butcher of privatisation' because you have to lose staff when you privatise - no private sector company will take on surplus workers. "Telecommunications was the first case for us. The process was very harsh, but we acted courageously. When we established the phone company Sudatel, we employed only 1,900 people out of the 8,600 employees of the former state enterprise at a time when there were only 50,000 installed lines."