Home | Comment & Analysis    Saturday 30 November 2019

Why has economic liberalization failed in Sudan?

By: Alhadi A. Khalifa

The regime of Omar Albashir in Sudan introduced economic liberalization in 1992, shortly after the free economies in the West triumphed and their model proved capable of being copied elsewhere. According to Dr Abdulrahim Hamdi, the motive of liberalization was to invigorate the economy by opening up the country for foreign investment. However, having been tried for almost the lifetime of the regime, the liberalization policy failed disastrously, leaving behind a ravaged economy that brought about the downfall of the dictator on April 11, 2019, why?

Naturally, the human resource factor ranked first among the reasons that account for the failure. The implementation of liberalization policy fell into the hands of officials who were dismissed by Dr Hassan Al Turabi as incompetent and easily corruptible for their lack of erudite political thought and sufficient training to run the country. Al Turabi also spoke of their weak resistance to the lure of power and wealth, among other things. After all, their party did not do much to educate them to take the national interest to heart, he said.

Further, when the regime introduced liberalization, the state structure was in a state of a shake-up. The policy of the so-called “empowerment” was running amok: random changes to the system violently rocked the state from top to bottom, creating gaps and cracks that enabled corruption to strike in depth. Meanwhile, qualified civil servants were laid off and replaced by ones loyal to the system. In a relatively short time, the state administration fell in the grip of “Muslim Brothers” who were instructed by their party to bring their concept of “brotherhood” to fruition: to care for, and “empower,” each other in a situation where the primary concern of the regime was to serve the interests of the Islamic movement and the envisaged trans-border nation of Islam rather than create a state whose raison d’être is typical to that of the modern nation-state.

Liberalization also occurred in the complete absence of law, accountability, and one leader. The rise of the schism in December 1999 that sent Dr Hassan Al Turabi to retirement and kept Albashir in power resulted from some elites’ objection to the plural leadership that chaotically ran the country from the regime’s accession to power onwards. The schism set the stage for the National Congress Party (NCP) to rule free-handedly, turning the state into a vast web of business relations that still lacked a central authority to bring the situation under control. At this point, the regime’s power elites “hijacked” the liberalization policy to achieve their goals and proceeded to enforce privatization without regard for the so-called Public Property Disposal Law the regime had enacted.

The privatization machine overran productive and nonproductive public sector companies indiscriminately. None of the power elites thought of hedging strategic national entities – like Mobitel, Sudan Airways, Bank of Khartoum, large agricultural schemes, and many others – from the sway of predatory privatization. Often without consulting the bodies concerned, they sold profitable companies either to the NCP, to themselves, or to foreigners at prices much lower than what they could actually fetch, most times in return for commissions. In a press conference held in July 2019, the legal advisor at the Cabinet of Ministers, Mr Mohamed Ahmed Alghali, revealed that the Coral Hotel, previously known as “Hilton Hotel,” was sold for only US$ 48 million although, according to Sudanese experts, it could fetch US$ 139 million. This sale price could barely cover the value of the land where the Hotel stood, the experts said. They also sold the presidential villas to Alkhaleej Bank at US$ 50 million, and the Bank immediately leased them to a foreign embassy at US$ 50 million a year! Likewise, in a clandestine operation following the privatization of Sudan Airways, they sold the Heathrow line in 2008, with the help of brokers, without notifying the ministries of transport and finance or even Sudan Airways itself. The case has never been seriously investigated despite repeated appeals in the press to do so, which makes one believe that liberalization was deliberately “contrived” to enable the regime’s loyalists to run away with the state’s assets with little or no concern to the national interest!

The liberalization policy drained the state’s assets to dirty hands with negligible revenues to the national budget. In the press conference mentioned above, Mr Mohamed Ahmed Alghali confirmed that the sources of corruption and waste of public wealth were the public sector (NCP) companies that caused excessive “bleeding” to the economy rather than brought revenues to the treasury. Using their political leverage to get exempted from taxes and customs duties, these companies raided the market like grasshoppers and grabbed the lion’s share of it, much to the disadvantage of competing businesses that lost the competitive edge and left. Mr Alghali announced that out of 431 operating public sector companies, only 43 appeared in the budget profile, of which only 12 contributed to the treasury. One of the regime’s alternative options to close this income gap was to levy high taxes on domestic businesses whose owners it identified as opponents which, among other things, increased production costs and forced 30% of factories to shut down, dissuading potential investors.

Thus, the liberalization policy backfired, undermining the very objective it intended to achieve. Privatization flung the door open for corruption and caused severe damage to the economy as it weakened the private sector and disorganized the market, allowing a cartel of NCP companies and companies of power elites to take control of it. The mass sale of profit-making companies, and subsequently the closure of businesses that failed to compete, resulted in the lay-off of hundreds of thousands of workers who joined the army of the jobless and discontented. Politically, privatization weakened the state’s power when politics became subservient to business. In the regime’s final days, things got so worse that the President himself failed to combat the corruption he once admitted was rampant. No surprise: the Sudanese public opinion had it that the President himself, his family, and his Party’s power elites were deeply involved in corruption.

The author can be reached at hadikhalifa@gmail.com