Policies Towards Foreign Direct Investment

Pursuant to Executive Order 13761, section 908(a)(1) of the Trade Sanctions Reform Act (TSRA) (22 U.S.C. 7297(a)(1)) has been waived with respect to Sudan.  That waiver removed restrictions on export assistance that limited U.S. Embassy Khartoum’s ability to provide the kind of support that the Embassy and the Foreign Commercial Service typically provided, including: business matchmaking services, market research on specific products or services, export advocacy, and provision of information concerning business opportunities.  See, e.g., 15 U.S.C. 4721.  American investors interested in understanding more about the 2017 lifting of U.S. sanctions on Sudan are encouraged to visit the U.S. Department of the Treasury’s website:

https://www.treasury.gov/resource-center/sanctions/Programs/pages/sudan.aspx 

U.S. businesses should be aware that investors could face difficulties in transferring money to Sudan as international financial entities continue to exercise extreme caution in processing transactions.  Their caution could be related to Sudan’s designation as a state sponsor of terrorism or because international financial entities are taking time to complete due diligence or considering the practicality of absorbing the high costs of accessing the Sudan market because of Sudan’s long absence from international banking.  Those who decide to pursue permissible commercial activity should be advised that U.S. banking institutions are independent entities and neither the U.S. government nor the Embassy can direct their business decisions.

Sudan is becoming a large market for a variety of U.S. agricultural harvesting equipment and inputs.  Sudanese farmers represent a significant source of demand for new seeds adaptable to Sudan’s hot and dry climate.  Currently, about 20 million hectares are under cultivation in Sudan; however, 84 million hectares are suitable for agriculture.  Rain-fed traditional farming practices continue to dominate, but large-scale mechanized farming is growing, especially along the Nile River and its tributaries.  There is a robust market for American-manufactured pivot irrigation systems, water pumps, and well-drilling equipment.  Sudan’s major dairies began buying thousands of American-breed dairy cattle in the past five years.

Sudan has a formal private sector, led by several business associations, one of which (U.S.-Sudan Business Council) is working with the U.S. Chamber of Commerce.  These business groups are dominated by a number of large, often family-owned industrial, agricultural, and consumer products conglomerates.  Many Sudanese corporate leaders studied in the United States and Europe and are fluent in English.

Sudan presents one of the most challenging business environments in the world for potential investors.  Sudan received a lower ranking from 162 (2019) to 171 out of 190 countries in the 2020 World Bank-International Financial Corporation’s “Doing Business Report – Ease of Doing Business.”  Sudan is ranked 173 of 180 countries on Transparency International’s 2019 Corruptions Perception Index, tied in ranking with Afghanistan and Venezuela.  Sudan is ranked 168 out of 188 countries in the 2019 UN Human Development Index (HDI), just ahead of Haiti and Afghanistan.  An estimated 47 percent of Sudan’s population live below the national poverty line, according to the HDI.

Political risk remains a concern.  Sustained popular protests over several months put an end to the 30-year rule of Omar Bashir in April 2019.  The CLTG assumed power in September 2019 and will have 39 months to implement the priorities set out in the constitutional declaration (signed August 17), including formation of a Transitional Legislative Council, appointment of civilian state governors, and holding new elections.  However, the military remains a strong force in the transitional government, chairing the Sovereign Council and maintaining decision making power over defense and security institutions.  The CLTG is currently negotiating with armed groups in Darfur and in the “Two Areas” of South Kordofan and Blue Nile States and with non-armed groups in northern, eastern, and central Sudan to bring an end to those conflicts.  Sudan and South Sudan have yet to demarcate their common border and continue to dispute the sovereignty of the territory of Abyei.  Armed UN peacekeeping missions (UNAMID and UNISFA) are located in Darfur and Abyei.

International air service to Khartoum is limited.  Egypt Air, Ethiopian Airlines, Kenyan Airways, Saudi Airlines, Turkish Airways, and several Emirati carriers (Etihad, Emirates, Fly Dubai, and Air Arabia) are among the major carriers that serve Khartoum.  No American carrier currently flies to Sudan.  Two private domestic airlines, Badr and Tarco, reliably service Khartoum, Port Sudan, and other sizable Sudanese cities.

In response to the loss of oil production and revenue following the secession of South Sudan in 2011, the CLTG has attempted 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.  Current oil production is estimated at less than 60,000 barrels per day (bpd).  Challenges the oil industry face include insecurity near oil fields, antiquated drilling equipment and oil wells, and lack of access to the latest technology.

According to the Public Authority for Geological Research, Sudan’s confirmed gold reserves amount to 533 tons, and only 20 percent of Sudan’s land is being exploited for gold.  The U.S. Geological Survey (USGS) reports that 105 tons of gold, 1.9 million tons of zinc, 500,000 tons of copper, and 4,500 tons of silver are located in the Red Sea Hills in northeastern Sudan.  The Gum Arabic Council reported that formal gum Arabic exports in 2018 amounted to 75,000 tons, while informal exports accounted for another 30,000 tons.  Sudan, the largest exporter of crude gum Arabic, accounts for over two-thirds of the global market.  Production of sorghum and millet in 2019 was reportedly 36 percent below the record 2018 output of 14 million tons, according to the Ministry of Agriculture and Natural Resources.  Wheat production in 2019 was roughly 600 million tons and is expected to double in 2020.  Sudan has 166 million heads of livestock, according to the UN Food and Agriculture Organization (FAO).

Limits on Foreign Control and Right to Private Ownership and Establishment

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 government monopolies, including those mentioned above.  Such monopolies, together with a high perceived difficulty of obtaining required operating licenses, make it more difficult for foreign companies to invest.

Other Investment Policy Reviews

Sudan has not undergone any third-party investment policy reviews (IPR) through the Organization of Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or the UN Conference on Trade and Development (UNCTAD) in the last five years.  UNCTAD’s last IPR of Sudan was in 2015.  The last International Monetary Fund (IMF) Article IV Executive Board Consultation was on February 21, 2020.  The IMF concluded that regime change “created a window of opportunity for fundamental reforms to address major macro imbalances and lay the groundwork for inclusive growth.”  The IMF noted there exists broad agreement between the government and the IMF about Sudan’s reform priorities but found “the authorities have yet to put together a fully coherent and viable plan that enjoys broad public support and can plausibly attract adequate donor financing.” https://www.imf.org/en/Publications/CR/Issues/2020/03/10/Sudan-2019-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-Executive-49254 .

The World Bank and IMF provide technical assistance to Sudan.  World Bank projects in Sudan total USD 181 million.

https://www.worldbank.org/en/country/sudan/overview#2 .

Facing a severe foreign exchange reserves shortage, the CLTG tightened conversion and transfer policies.  Domestic businesses have no assurance of obtaining needed levels of foreign currency for international transactions.  The transitional civilian government strictly controls incoming hard currency from exports and business owners wishing to retrieve cash can only make withdrawals denominated in Sudanese pounds at the time of this report.  Foreign companies operating in Sudan must have the Central Bank of Sudan’s permission to repatriate profits and foreign currency.  The Investment Act of 2013 enshrines the right to repatriate capital and profits, provided the investor has opened an investment account at the Central Bank of Sudan before entering into business.  To avoid banking delays, many Sudanese firms complete a significant amount of transactions outside of official channels or complete transactions abroad in U.S. Dollars, Euros, Riyals, or Dirhams.  Whether or not the government will revise its practices to ensure a steady stream of foreign exchange once international correspondent banking resumes remains to be seen.  The Investment Act also established courts to handle investment issues and disputes.

The gap between the black market and official exchange rates has widened since publication of the previous report.  The official rate set by the government is 55:1, while the parallel market rate has reached 130:1 (as of May 1, 2020).  The government increased the official rate to 55:1 in March 2020 in an effort to unify exchange rates.  Nonetheless, this divergence adds to the difficulty and complexity of settling accounts and repatriating profits and foreign exchange.  While Sudanese and foreigners are permitted to hold foreign currency accounts in private commercial banks, access to the currency can be delayed and/or limited without prior notification.  Individuals and businesses often resort to obtaining hard currency on the black market.  Local businesses may avoid holding significant cash in domestic deposit accounts altogether.  Sudan’s inflation rate as of March 2020 was 81 percent, up from 71 percent in February and 64 percent in January.  The rise in inflation has been attributed to price increases of food commodities, devaluation of the Sudanese currency, and shrinking imports.

Business Facilitation

According to UNCTAD, Sudan has put in place a relatively open investment legislative framework and many laws are in line with good practices.  However, their implementation is often impeded by the absence of secondary legislation, insufficient institutional capacity, and lack of coordination between different levels of government. https://investmentpolicy.unctad.org/investment-policy-review/205/sudan 

Sudan’s investment authority lists the process by which businesses must register to operate at: http://www.sudaninvest.org/English/Default.htm .  The website outlines procedures for companies that wish to invest, including forming and ending relationships and license applications.  There is no online business registration process.

Outward Investment

Sudan tasks its investment authority with facilitating local and foreign investments.  Some U.S. companies have sent exploratory teams to Sudan to test the waters and its investment climate.  The host government has given warm receptions to U.S. investors, although some existing investors expressed concern about lack of payment for certain contracts signed prior to the CLTG.  Sudan does not restrict domestic investors from investing abroad.  http://www.sudaninvest.org/English/Invest-Services.htm 

Investment Incentives

The Sudanese government lists the following investment incentives:

• Exemption from taxes on profits for a term of not less than ten years;
• Free land or land at an incentivized price for the project;
• Nondiscriminatory treatment of the capital of investment, whether be it public, private, cooperative, or multi-sector capital;
• Guarantees the capital shall not to be nationalized, confiscated, or expropriated except through a law and against indemnity;
• Guarantees that money invested in a project shall not be confiscated or frozen, except through a judicial order;
• Recognition that the investor is entitled to transfer his or her money and profits; and
• Customs privileges for vehicles.

http://sudanembassyke.org/index.php/economy-investment/why-invest-in-sudan/ 

Foreign Trade Zones/Free Ports/Trade Facilitation

The Free Zones and Free Markets Law of 1994 governs such zones.  The investment authority reports that projects in areas designated as Free Trade Zones and Duty Free Zones enjoy the following policies:

• Exemption from a tax on profits for 15 years, renewable for an extra period;
• Exemption from personal income tax for salaries of expatriates;
• Exemption from all customs fees and taxes except service fees for products imported into or exported abroad from the zone;
• Exemption from all taxes and fees for real estate inside the zone;
• Authorization to transfer invested capital and profits from Sudan abroad through any bank licensed to operate in the zone;
• Exemption from customs fees for products of industrial projects established in the zones depending on materials used and local costs incurred in production and provided the value be estimated by a designated committee;
• Guarantees that money invested in the zones may not be frozen, confiscated, or arrested;
• Authorization to store goods transiting Sudan in zones under the supervision of customs police; and
• Authorization to rent its land and buildings according to the terms it agrees upon and without being bound by any other law.

http://www.sudaninvest.org/English/Sudan-Invest-FreeZone.htm 

Capital Markets and Portfolio Investment

Sudan has a stock market (KSE) which is located in Khartoum.  The KSE has over 60 companies (http://www.kse.com.sd/ ) that include Sudanese Animal Resources Company, Financial Investment Bank, and Blue Nile Insurance.  Since 2018, there have been two more companies listed in the Industry sector, 11 more companies listed in the Investment and Development sector, and four more companies listed in the Telecom and Media sectors.  The total market value of all sectors is currently listed as 8,684,351,734,000 SDG (USD 157,897,304,255). http://www.kse.com.sd/Pages/default.aspx?c=550&sid=1 

Money and Banking System

Historically, Sudan has not had access to international banking institutions as it was under comprehensive U.S. economic and financial sanctions until late 2017.  Despite lifting of these comprehensive sanctions, international banks remain wary of operating in Sudan due to reputation risk associated with Sudan’s continued designation as a state sponsor of terrorism.  Most foreign banks operating in Sudan are based in Gulf states, such as Saudi Arabia, United Arab Emirates, or Qatar.  Sudan faces a monetary crisis, with limited foreign exchange and a significant currency black market.  The Central Bank of Sudan lists banks operating in Sudan at: https://cbos.gov.sd/en/content/operating-banks-sudan 

Foreign Exchange and Remittances

Foreign Exchange

Remittances come into Sudan via the informal market.  International banking institutions have not begun transactions with Sudan although U.S. financial sanctions have been lifted.  Foreign investors should be aware that they might face problems making or receiving payments.  The exchange rate is determined by the Central Bank and the Ministry of Finance.  The official exchange rate does not float with the international markets.  However, the vast majority of transactions in Sudan are determined by the parallel market rate (130 SDG: 1 USD), currently at more than double the official rate (55 SDG: 1 USD).

Sovereign Wealth Funds

Sudan has a sovereign wealth fund called the Oil Revenue Stabilization Account, established in 2008.  The Natural Resource Governance Institute (NRGI) ranked it 32 out of 34 funds in its 2017 Resource Governance Index.

https://resourcegovernanceindex.org/country-profiles/SDN/oil-gas .

The exact number of state-owned enterprises is unknown, although government officials acknowledge that the defense and security agencies may control over 100 companies.  The NRGI ranked the state-owned Sudanese Petroleum Corporation (SPC) 69 out of 84 SOEs in its 2017 Resource Governance Index.  NRGI assessed that though the SPC discloses sufficient information about joint ventures and subsidiaries, it is opaque in its commodity sales, production, and government transfers.  Other areas for improvement included financial reporting and corporate governance.
https://resourcegovernanceindex.org/country-profiles/SDN/oil-gas .

While there have been civil disturbances and political violence associated with the protests against the Bashir regime and the declining economy, damage to property has not been directed specifically at U.S. business interests.  The 30-year Bashir regime was ousted in April 2019 after months of massive protests against the deteriorating economic situation.  After brief rule by the Transitional Military Council (TMC), the constitutional declaration was signed in August 2019, and the CLTG led by Prime Minister Abdalla Hamdok took office in September 2019. This transitional government has a 39-month mandate to establish basic democratic institutions and hold elections.  Despite government efforts to resolve high inflation, exchange rate disparities, and fuel and bread shortages, these issues remain concerns and potential investors should take note.

There is no DFC agreement between Sudan and the United States.

* Source for Host Country Data

Table 3: Sources and Destination of FDI
Data not available.

Table 4: Sources of Portfolio Investment
Data not available.