Structural Transformation and Economic Management (1)

Expert Advisory Group

A group of Sudanese experts (Expert Advisory Group) have posted a paper on; Towards a Sustainable Political Transformation in Sudan: Elements of a Roadmap for dialogue and discussion. This part concern the proposed economic reforms published in the hope that it will enrich the debate on this critical issue at the present.

Recent Past

Prior to June 1999, the structure of the Sudan economy was similar to that of most developing countries, especially Sub-Saharan ones, where agriculture dominated production, employment and exports; industry (inclusive of mining) was rudimentary with manufacturing very marginal, and services fairly large. Such a structure is a distorted one with a major feature of low productivity. The developmental challenges facing such economies is seen to be structural transformation where resources are shifted from low
productivity sectors to relatively high productivity ones. In the early stages of development, effecting a structural transformation in a country required deliberate action by governments to manage the economies concerned.
Such was the conventional wisdom of development thinking up to the 1980s before the advent of the so called “Structural Adjustment Programs” (SAPs) technically developed by an IMF-World Bank coalition and imposed on developing countries by the donor community. SAPs imposed a neoliberal economic ideology on developing countries. The central core of such an ideology is to “get the prices right, unleash the markets and rein in the state”.
It is now well known that since June 1989, the Sudan economy (unified and subsequently split) was managed by a political regime that fully subscribed to the neoliberal economic ideology. The central core of the ideology is marketed to the population as being consistent with Islamic values and dictates. Since 1997, however, the unified Sudan was implementing economic policies under successive IMF Staff Monitored Programs (SMP).
Such policies continued to be used even after the country became an oil exporter in September 1999 and after the secession of the South, which meant the loss of an estimated 75% of oil production. These programs, according to the IMF “provided the authorities with comprehensive frameworks to design and implement policies and reforms to address their economic challenges. They helped the authorities to stabilize the economy through tight monetary and fiscal policies and supported the modernization of tools to manage the economy, including through reforms in monetary operations, tax policy, and public financial management.”
As is well known, a major promise of such programs is that they help
countries ignite growth. A huge literature exists that attempts to test this claim, using sophisticated quantitative methodologies. In the case of Sudan under the current ruling regime, a simple before-and-after test is recently reported. Average real per capita GDP growth is compared across four periods: 1985-1989 representing a period before Ingaz (with an average growth rate of 2.2 percent average real per capita GDP); 1990-1997 a before oil production period (with a growth rate of 2.3 percent average real per capita GDP); 1998-2010 a before secession period (with a growth rate of 4.1 percent average real per capita GDP); and 2011-2015 the current Sudan (with a negative growth rate of 1.4 percent average real per capita GDP).
A major feature of the growth process that happened in the country was that it did not have a human face, ala UNICEF; and it was a jobless growth process, ala the International Labor Organization (ILO). The human facelessness of the oil driven growth process is shown to exhibit itself in the none-inclusive nature of the growth as reflected in the increase in the spread and depth of poverty. The joblessness nature of registered growth is evidenced by the fact that the unemployment rate remained high for the three respective Inqaz sub-periods at 15%, 14.8% and 14.7%. This is perhaps not surprising in view of the fact that it was oil driven, and oil production is a capital intensive economic activity. Moreover, and as noted above, the policies adopted over the period 1990-2016 did not have a social content to speak of.
Moreover, it can easily be shown that almost all of the economic policies and programs implemented since 1990 did not have any social protection policies to speak of, except perhaps for a bloated and highly distortive Zakat arrangement. 36 Despite this, a spate of recent papers attempted the evaluation of social safety nets and social protection programs in country.
The general conclusion reached by these papers is that the country’s existing programs are complicated in institutional structure, limited in coverage, lack coordination, and lack monitoring and evaluation.

Development Reorientation

Appreciating the low level of development from which the country will be starting, the multiple challenges noted above would require the pursuit of enlightened and relevant development policies. To explore such relevant policies, it is imperative to recall, albeit briefly, the type of development policies pursued by developing countries prior to the 1980. The story, briefly told, is that in the 1960’s, most of the newly independent developing countries, diverse as they were, adopted a planning approach to effect deep seated changes in their economies and societies. Such an approach was widely supported by the major theoretical and policy propositions of the pioneers of development economics. These propositions, we hasten to note, were fully adopted by the United Nations which eventually formulated them in detailed policy and planning manuals for the benefit of policy developing countries. Even the World Bank contributed to the art of
designing national development plans at the time.
The pioneers of development thinking formulated grand and visionary
models of development strategy that aimed at effecting a structural
transformation with a central role assigned to the government in planning and programming development. The policy content of these models was informed by the observation that the developing economies were characterized by pervasive market failures, and that to correct or avoid market failure, central coordination and allocation of resources are required.
Moreover, government action to correct market failure found considerable theoretical support in welfare economics. In addition to pervasive market failures, the role of the government was justified on the belief that the supply of entrepreneurs was limited in these countries, and that major structural changes, rather than marginal adjustments, were needed to effect development. Thus, the “government of a developmental state was to promote capital accumulation, utilize reserves of surplus labor, undertake
policies of deliberate industrialization and economic diversification, relax the foreign exchange constraint through import substitution, and coordinate the allocation of resources through programming and planning.”
Programming and planning to develop, to coordinate the allocation of
resources by the government, is understood at the time as an alternative way for rational, consistent and coordinated economic and social policies. An obvious reason for why developing countries need to plan their development is the recognition that, under the then existing historical conditions, development would not take place automatically. Under such understanding, the essential role of planning economic development is in assuring the required productive investment for growth and development.

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