Sudan

Trade in Services

Foreign Direct Investment Policy

1. The Ministry of Investment is the authority on doing business in Sudan. There is also an umbrella federation of all Sudanese businesses. In January 2013, the Economic Development Sector of the Council of Ministers passed the National Investment Encouragement Act of 2013, later adopted by the National Assembly. This act ensures that foreign investors enjoy the same protections as Sudanese nationals.
    
2. Despite the legal protections guaranteed under the National Investment Encouragement Act of 2013, there are foreign investment restrictions in the transportation sector, specifically in railway, freight transportation, inland waterways barge service, and airport operations. Most telecommunications and media, including television broadcasting and newspaper publishing, are closed to foreign capital participation. Foreign ownership is also restricted in the electrical power generation and financial services sectors. In addition to those overt statutory ownership restrictions, a comparatively large number of sectors are dominated by large state-run entities, including, but not limited to, those mentioned above.
3. The number of state-owned enterprises is not known. While Sudan has a privatisation program, it is unclear how many entities are owned by the Government of Sudan. There are more than a reported 178 domestic and international companies operating in Sudan.
    
4. Sudan has a formal private sector, led by several business associations. These business groups are dominated by a number of large, often family-owned industrial, agricultural, and consumer products conglomerates.
    
5. In response to the loss of oil production and revenue following the secession of South Sudan in 2011, the Sudanese government is attempting to recover revenues by expanding existing oil and gas production, increasing mining operations (particularly gold mining), and expanding the agricultural and livestock sectors that had been the mainstay of the Sudanese economy prior to the advent of crude oil exports in 2000.
    
6. Following intense bilateral engagement, the United States lifted most economic sanctions on Sudan in October 2017 except for those on selected persons or entities. While Sudan has the potential to improve its investment environment in the long run and attract increased foreign direct investment, legal risks, gaps in infrastructure development – including air transportation – security challenges, and economic fragility continue to undermine commercial activity.
    
7. Sudan has been more vigorous in promoting foreign direct investment since the lifting of sanctions holding a number of well-attended conferences on banking, agriculture, and mining. Sudanese officials promised to make significant investment reforms, but its corporate tax rate is at an historical high of 35%. Other plans in the pipeline include: lowering the corporate tax rate and capital gains tax, and improving the timeliness of customs clearances, although challenges remain with associated costs.
    
8. In 2018, Sudan made starting a business easier by removing the requirement to have a site inspection to obtain the certificate of incorporation. Sudan also strengthened minority investor protections by easing access to evidence in shareholder litigation and increasing the rights and role of shareholders in private companies.
    
9. Trade missions, mainly from Saudi Arabia, Mainland China, Qatar, Kuwait, and the United Arab Emirates, visit Khartoum on a regular basis, often accompanied by public announcements of signed agreements and purported deals. Most foreign investment to date is related to natural resources, particularly in petroleum and gas exploration and extraction, and agriculture.
    
10. The Gulf nations are becoming more involved with infrastructure and real estate projects. Mainland China, Malaysia, Brazil, and India have made major investments in the oil sector, and Arab Gulf states, Brazil, and Egypt invested mainly in Sudan’s agricultural sector primarily in animal fodder. Gulf States have reportedly acquired large areas of agricultural land to grow feed for livestock. Sudan gave Saudi Arabia permission to use one million acres to cultivate agriculture in North-eastern Sudan in July 2016. The government of Sudan has also signed agreements with Chinese companies in August 2016 that allowed the companies to grow cotton on one million feddan (420,000 acres) of agricultural land (1 feddan = 0.42 acres).
     
11. Due to its strategic position and natural resource endowments, Sudan has potential to emerge as an attractive market for industrial and agricultural machinery and inputs. Sudan’s major dairies began purchasing thousands of dairy cattle in the past few years. Medicine and medical equipment as well as a variety of academic services remain in high demand; however, activities in these areas are minimal due to the difficulty in executing financial transactions with Sudan.
     
12. Sudanese investment law states that “just compensation” must be offered in the case of nationalisation or confiscation of all, or part of any investment, for “the public interest.” No mechanism exists for determining compensation or defining specific public interests.
     
13. The state has control of most of the agricultural land in Sudan and has appropriated millions of acres to Saudi Arabia and other countries.
     
14. Since 2016, there have been announcements in the media of major deals, land leases, and initiatives that promised to improve exports and to grow the agro-industries as the ticket to overcoming the country’s economic woes; but with few public details about the agreements.
     
15. Sudan is a member of the Convention on the Settlement of Investment Disputes between State and National of Other States (ICSID). It signed ICSID on March 15, 1967, ratified on April 9, 1973 and entered into force on May 9, 1973. Sudan is now the 159th contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
     
16. Sudan has signed bilateral investment agreements with Germany, Netherlands, Switzerland, Egypt, France, Romania, Mainland China, Indonesia, Malaysia, Qatar, Morocco, Oman, Turkey, Yemen, Bahrain, Ethiopia, Jordan, Syrian Arab Republic, United Arab Emirates, Libya, Tunisia, Algeria, Kuwait, Lebanon, Chad, Republic of Djibouti, India, Vietnam, Bulgaria, and Italy.
     
17. Sudan has bilateral taxation treaties with Egypt, United Kingdom, Malaysia, South Africa, Turkey, and Syria. Sudan and the United States do not have a bilateral investment agreement or a bilateral taxation treaty.

Sources: WTO – Trade Policy Review, Fitch Solutions, US Department of Commerce, Fitch Solutions

Fitch Solutions Risk Summary

ECONOMIC RISK
A shifting political environment and disrupted policy implementation will act as a constraint on GDP growth over the coming quarters. Consumer spending will remain weak given high inflation and downbeat economic activity. Government consumption is likely to rise once a planned sovereign council is established, as the authorities will seek to minimise public discontent by increasing subsidies and social spending, but fixed investment will remain weak given significant market volatility in the near term. The country will continue to be heavily reliant on oil for the foreseeable future, exposing the country to fluctuations in global energy markets.

OPERATIONAL RISK
Sudan is home to one of the most difficult operating environments globally. Particular areas of weakness are its security and trade and investment environments. Privatisation efforts have been slow and the state is dominant in the economy. Overall economic conditions remain challenging, underpinned by foreign exchange shortages and high inflation. While there has been some traction in the transport infrastructure pipeline following the announcement of several rail, port and airport projects in recent years, these are only expected to improve the country's logistics profile over the long term, contingent on an improvement in the security environment in the near term. On the upside, the country's young and large population and regionally competitive educational attainment levels, particularly in Khartoum, bode well for the labour market profile in the long term. The opportunity for economic reforms including prospects of renewed ability to use the services of international banks could also bolster exports and enable foreign investment more freely in the long run.

Source: Fitch Solutions
Date last reviewed: February 19, 2020

Fitch Solutions Political and Economic Risk Indices

Exchange Rate HK$/US$, average
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
7.77 (2019)