Page last updated at 23:16 GMT, Wednesday, 28 January 2009

Sudan beckons for new investors

By James Melik
Business reporter, BBC World Service

Mosque in Khartoum, capital of Sudan
Sudan's economy has relied heavily on a large influx of foreign aid

Of all the places on this planet where you might think of investing, Sudan would surely not normally be at the top of anyone's list.

Sudan's economy is hindered by economic mismanagement, political instability and poor infrastructure, while reforms are often slow or delayed.

Furthermore, corruption is perceived as rampant. Sudan ranks 172nd out of 179 countries in Transparency International's Corruption Index for 2007.

Relatives of high government officials often own companies that do business with the government and usually receive kickbacks for that government business.

But that is not the view of Philippe Heilberg of Jarch Capital in New York, who told Business Daily his company was leasing 400,000 hectares in the relatively more stable south part of the country.

We have pledged that at least 10% will go back to the communities where we make our money

Philippe Heilberg, Jarch Capital
The area he has rented is about 70 times the size of the island of Manhattan. He plans to grow crops on that land and has also taken a stake in a Sudanese farming company.

"The land is rich in oil and minerals and it is the largest area of organic farmland in the world," he says.

"It has all the recipes for great growth. Just because it hasn't happened doesn't mean it will not," he enthuses, "and there is definitely a will for this finally to occur."

Stability threatened

Although Sudan is the largest country in Africa, it also outstrips most others in misery and dysfunction.

Natural resources: modest reserves of oil, natural gas, gold, iron ore, copper, and other industrial metals
Agriculture: cotton, peanuts, sorghum, sesame seeds, gum arabic, sugarcane, millet, livestock
Industry: motor vehicle assembly, cement, cotton, edible oils and sugar refining

Trade freedom, monetary freedom, and freedom from corruption are all weak in Sudan, while the average tariff rate is very high, and significant non-tariff barriers further impede trade.

Inflation is also high, and the state subsidises a wide array of goods and influences prices through state-owned enterprises.

Until the beginning of significant oil production in 2000, the economy was predominantly agrarian, and most Sudanese remain engaged in agriculture.

A two-decade civil war between the Khartoum government in the north and the Sudan People's Liberation Movement/Army in the south claimed an estimated 1.5 million lives before ending in 2005.

cotton picker in Sudan
The majority of people are still involved with work on the land

Separately, fighting broke out in Sudan's western Darfur region in early 2003, as militia groups backed by the Muslim government of President Omar Hassan al-Bashir attacked non-Arab tribes.

More than two million people have been displaced and more than 200,000 have been killed, according to the United Nations.

Community benefit

Against this backdrop, Mr Heilberg says that local people would benefit from his deals.

"We have leased an immense amount of land which will acquire billions of dollars of investment over the next decade," he says.

To make investment worthwhile, the company will need to put in significant infrastructure for both the agriculture sector as a whole and also for transportation.

Such a vast tract of land will require a tremendous amount of labour, so there will be jobs and wages paid.

"It is very important to us that wherever we make our money, we give back to the community," Mr Heilberg says.

We have gone to the elders and the people who matter for this
Philippe Heilberg, Jarch Capital

"If the community is not satisfied with its business partner, that cannot be good business.

"In addition, we think, morally that is the right thing to do, so we have pledged that at least 10% will go back to the communities where we make our money and that will be in the from of projects which benefit the community as a whole."

Mr Heilberg, who has no backing from any government, says he has gone for a populist approach.

"We have gone to the grass-roots - we didn't go from the top down, we went from the bottom up - we have gone to the elders and the people who matter for this," he says.

"Sudan is anarchic and not a great starting place to invest," Mr Heilberg admits, "but I see such tremendous potential in this country which has been ravaged by war."

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