The Role of the Sudanese Investment Climate in Attracting FDI in the Non-Oil Sector

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TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION1

Background of the study1

Research Aims & Objectives4

Rationale of the Study5

Organization of the Dissertation5

Time Frame6

CHAPTER 2: LITERATURE REVIEW7

Foreign Direct Investment: Theory and Evidence13

Theoretical Explanations of Foreign Direct Investment14

Foreign Resources for Economic Development18

REFERENCES21

CHAPTER 1: INTRODUCTION

Background of the study

In this world of globalization, the economic environment has been changing. Many countries are facing FDI expansion, liberalization of the trade, advancement of eth technology. These changes are creating opportunities as well as many risks in Sudan for accomplishing Sudan's development aims and objectives. In the international context, Sudan is facing difficult external economic conditions as this country is facing huge debts, the oil reserves deterioration and the exports losses, these challenges are hindering FDI in Sudan (Berhanu 2011).

In Sudan, the external financing is the main source of FDI. External financing is also important source for foreign exchange for supporting the current account deficits of the country. In 2006, the portfolio inflow and FDI were $3.5 billion, and this is due to the entrants of foreign investors in the country. Apart from the oil sector, the foreign investors also entered into the telecom sector, banking sector etc. the net inflow of Sudan decreased in 2009 and the foreign investors' projects in Sudan were $2.4 billion.

Sudan offers lucrative business opportunities for companies. The gross domestic product Sudan grew 7% in 2008/2009 and 4% in 2009/2010, largely due to the production of oil and direct investment flows from Arab countries (Berhanu 2011). The Sudanese agriculture sector is attracting investment from Middle and Far East. There are opportunities in food processing equipment, packaging of fresh fruit and plants, greenhouses, farm machinery, pesticides protection, irrigation equipment, organic agriculture, animal health and veterinary services, food protection and technology hygiene and quality control. The peace agreement and oil revenues have helped to increase construction projects in Sudan, particularly in Khartoum by foreign companies and local. Turkey, Qatar, China and Malaysia have invested in construction projects, including roads and bridges, airports, oil and gas, energy, investments in real estate, telecommunications, ports, dams and railways. Sudan produces basic material of cotton and wants to be able to process within the country for give benefit. England was the first country to import cotton then France, European countries West and East, China and Japan. Sudan is a country rich in mineral resources and the country is largely unexplored (Hassan 2010).

Foreign direct investment (FDI) from developing economies of Asia in Sudan is growing and can reach much higher levels, according to a joint report by UNCTAD and the United Nations Program for Development (UNDP). Most of this investment is currently being channelled to the natural resources of Sudan, although the report notes that, if appropriate measures are adopted, they could allocate more investment towards manufacturing industry (Berhanu 2011).

FDI mainly targets the primary sector, particularly relevant to activities related to oil. Sudan has become a major recipient country, at the same time reduce the inputs to countries like ...