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Economic Policy in Africa’s Youngest Country

Shanta Devarajan's picture

UPDATE: Here is a copy of an interview I gave to Otieno Ogeda, from the Pioneer newspaper in Juba.

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I felt truly privileged to participate in a workshop in Juba on “Growth and Sustainable Development in the new Republic of South Sudan,” organized by the Sudan People’s Liberation Movement. 

South Sudan, which becomes independent on July 9, 2011, faces extreme challenges and opportunities.  Devastated by civil war, the country has high and deep poverty.  The poverty rate is 51 percent. In a recent survey, among the assets of the population is “a pair of shoes”: among the poorest 20 percent, only 37 percent owned one. About 80 percent of the people earn their living from (mostly subsistence) agriculture.  Low levels of literacy (27 percent) translate to extremely weak capacity throughout.

Yet the fledgling country has several advantages, including a committed leadership and almost universal support from the population (99 percent voted in favor of secession).  The country also has oil revenues.  And being a late starter, the country can learn from (and avoid the mistakes of) other countries, many of which have been independent for over 50 years.

Against this backdrop, the SPLM leadership and a handful of us “guests” had a frank exchange of views on how to seize this opportunity to meet South Sudan’s many challenges.  Harvard’s Lant Pritchett said that to have sustained and inclusive growth—which is the only kind of growth South Sudan should be striving for—policymakers need to focus on a few things they can get done to boost agricultural productivity.  I followed by suggesting that to avoid government failures—such as elite capture, teacher and doctor absenteeism, and leakage of public funds—South Sudan could empower poor people more, by changing incentives and giving them information with which to monitor providers and hold politicians accountable. 

Oxford’s Tony Venables pointed out that oil revenues were an asset (current projections are that oil will run out in eight years) that should be used to develop human and physical capital for long-term growth.  Achieving this requires the proper balance among consuming, investing domestically and investing abroad the revenues from oil.  Norway’s Thorvald Moe further suggested that these balances can only be reached by having some fiscal rules, such as requiring that a fraction of oil revenues be saved.

The ensuing discussion was both fascinating and inspiring.  Lual Deng, the petroleum minister of Sudan, said that empowering poor people sounded like “the invasion of the NGOs” which further undermines the government’s legitimacy.  I replied that when NGOs move in to fill a vacuum created by failed government services, then government is already undermined.  But if the government contracted out services to whoever could deliver them most effectively, that could strengthen its legitimacy.

SPLM Secretary-General Pagan Amum Okiech gave a beautiful treatise on avoiding the resource curse:  First, South Sudan was neither producing nor selling oil; it was receiving a check for its oil.  Second, because the money comes as a check, it’s “easy money”—different from money that’s the fruit of one’s hard labor—and therefore more easily spent.  This temptation should be avoided.  He illustrated with an anecdote from his days as a rebel soldier.  One morning, his group of hungry soldiers approached a young goat herder and, addressing him as “Comrade”, begged (albeit while carrying guns) for one of his goats, so they could eat.  “Don’t call me ‘Comrade,’” the herder replied. “I don’t kill other people’s goats.”
 

Comments

Submitted by olugbenga adesanya on
Teach the leaders love. Let them embrace development in their hearts. Teach them to add value to the oil resource and commence with agribiz economic policy.

My proposal to the Government of Southern Sudan is. One They should employ oil engineers and oil well contracting companies in exploration. Pay them for their services and have full control of the oil from the ground. Sell direct to the world market rather than letting the usual oil company come in to do the exploration and pay a % for the resources. Most of the time you never can tell how much they are getting out because you depend on their report. God bless Southern Sudan so use it wise and invest on Agribusiness and required infrastructure to achieve a great Country.

Dear Shanta, I feel that a relatively low cost / zero cost effort to put in place a good financial services infrastructure so that people can transfer resources across space (remittances), state-space (insurance) and time (savings and loans) would be immediately welfare enhancing as well as build the foundations of a more sophisticated financial system to finance its growth. For this a pre-requisite is investment in good telecommunications infrastructure, ideally broadband and building a culture of partnership between banks and non-banks so that everybody is not compelled to do everything. If there is an interest in learning about this from the Indian experience we would love to play host to visitors from South Sudan. Regards, Nachiket Mor

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