Prospects of Foreign Direct Investment in The Sudan
January 19, 2009 By Dr. Adam & Associates LLP
Higher levels of investment and productivity are key elements to stirring growth in the Sudan as a developing country and raise living standards. Attracting investment is a competitive exercise which requires stable, sound macroeconomic policies where risk environment is highly low.
After sealing the Peace Accord in Nivasha on January 9, 2005 the international community has taken positive steps to re-engage with the Sudan. The Peace Accord stressed the need to structure sound economic management, enhancing institutional capacity, addressing macroeconomic imbalances and good governance. These aspects are essential prerequisites for socio-economic development. Even prior to the Peace Accord, bilateral Arab Funds such as Abu Dhabi Fund, The Kuwait Fund, and the Saudi Fund have established normal relations and embarked on furnishing new disbursements. Similarly, the IMF has lifted the non-cooperation order and restored Sudan's voting and relating rights, in addition, to providing technical assistance with successive Staff Monitoring Programs. However, with the Peace Accord, the key financial institutions such as IMP and the World Bank have started to examine options for re-engaging with the Sudan. Sudan has demonstrated a positive effort to clear external debt arrears. External debt is due to the Paris club members, multinational donors and non-Paris members mainly Kuwait and Saudi Arabia. The Sudan, over and above, the oil and mining sector is endowed with potential agricultural, animal resources and other non-hydrocarbon sectors providing sufficient inter -sector linkages. Due to present agricultural potentialities, the Sudan is called the food-basket of the Arab World.
The Ministry of Investment, implements investment government policy. Legal and institutional framework supports an investment climate apt to attract foreign direct investment. The Ministry of Investment is a member of World Association of Investment Promotion Agencies (WAIPA). Foreign investment in the Sudan is protected by binding international instruments. The Sudan is a member of World Bank's Multilateral Investment Guarantee Agency (MIGA), and the International Center for the Settlement of Investment Disputes (ICSID).World Bank Guidelines are used by foreign investment promotion agencies, including the Sudanese agency. It is expected that the International Finance Corporation (IFC), the private sector investment arm of the World Bank Group, whose mission is to promote sustainable private sector investment in developing countries, in coordination with Foreign Investment Advisory Services (FIAS) will act within the ambit of its mission, insofar as the Sudan is an emerging economy having considerable investment potentialities.
In line with United Nations Conference on Trade and Investment (UNCTAD) declared policy, it is also envisaged that domestic policies and international action would be mutually supportive in bringing about investment inflows. The Sudan is also a member of the African Development Bank, the Islamic Development Bank, the Inter-Arab Investment Guarantee, and the Agreement on Promotion and Guarantee of Investment among the member states of the Organization of the Islamic Conference. It is also full member of the COMESA and the Nile Basin.
The Sudanese Government's general policy maintains and constantly declares that foreign direct investment (FDI) has a constructive effect on a country's economy in terms of added technological, managerial and financial wealth. Active openness to technology, marketing channels, organizational and managerial expertise adds to domestic savings, investment and eventually secures an effective utilization of economic resources. Higher levels of investment and productivity are key elements to stirring growth in the Sudan as a developing country and raise living standards.
Attracting investment is a competitive exercise which requires stable, sound macroeconomic policies where risk environment is highly low. Stable, transparent and predictable open investment polices lend confidence to take the risk inherent in investing capital. The said general policy submits that political and social disturbances, currency risk, financial risk and government regulations are the most serious risks that forestall the investment decisions. Again, private sector investment depends on an investment climate characterized by a good legal framework maintained by constitutional guarantees against expropriation. Similarly, a favorable investment climate requires good governance in connection with quality of business regulations sustained by institutions competent to implement them.
The Ministry of Investment supported by other governmental bodies, restructures the general policy for the encouragement of investment in light of the objectives as contained in the Encouragement of Investment Act of 1999. It also determines the priorities in granting the licenses, and facilities. It is also responsible for issuing all the requisite directions, regulations and orders conducive to ensure a proper implementation of the Act. The Ministry of Investment undertakes the task of an overall supervision of the investment activities in the Sudan. One aspect of the Investment Act is that, it provides the Ministry of Investment with flexibility, sufficient to exercise a proper discretion within the ambit of well defined guidelines, capable to cater for any envisaged misuse. Accordingly, bureaucratic screening has been removed by entrusting administration of the law to one Ministry in coordination with other related ministries and governmental agencies. The Ministry of Investment is accountable to the President. A specialized body in the Ministry of Investment is assigned the job to prepare ad hoc feasibility studies for contemplated investment projects, in addition, to undertaking the requisite publicity prone to attract foreign investment.
As regards insurance against non-commercial risks, the Sudan is a signatory to the World Bank's Multilateral Investment Guarantee Agency (MIGA) convention. The Convention provides coverage against non-commercial risks such as transfer restrictions, breach of contract, war and civil disobedience. Investors under the Sudanese investment legal regime are exempted from payment of business profits tax for a period of ten years for strategic projects, and five years for non-strategic projects calculated from the date of commencement of production. This exemption may be extended for another period as the minister of investment deems fit. Again, an automatic exemption from payment of customs duties, surcharges and any other similar duties relating to imported machinery, equipment or apparatus necessary for production. The exemption covers all imported goods used by the investor's project. In connection with export, the exemption covers relief from export tax and duties in respect of project's products, including production charges and any other similar duties. Capital allowances are granted to investors who own depreciable assets and use the assets in the production of income. Depreciation allowance is calculated during the year of complete tax exemption on the basis of replacement value. Depreciable assets are grouped in classes, and the applicable allowance rates prescribed under the regulations, are applied. Any loss incurred during the period of complete or partial exemption, is to be considered as if incurred during the last year of such a period. The expenses incurred before production begins, and depreciation deductions arising within the period of exemption, are deemed to be a loss liable to be deducted from profit.
In connection with investment legal forms, in practice there are no administrative restrictions on foreign investment in the Sudan. International companies may open locations in the Sudan under a range of legal forms governed by the investor's strategies, plans and the degree of freedom that the Sudan operations are authorized by the parent company. Each option implies a specific obligation with regard to company law. A potential investor may form a strategic alliance with an already existing Sudanese's company on the basis of mere contractual arrangements. A foreign entrepreneur may start as a sole proprietor having a business name. A foreign company may establish an entity in the form of a branch or a subsidiary having an independent existence from its parent company. An investor may elect to set up a joint-venture in the form of a partnership or a limited liability company which is the form most often chosen by investors. Companies which elect to scrutinize for business in the Sudan before embarking on a project may decide short term solutions by allocating a liaison office which does not engage in commercial activities, or a sale representative whose mission is to take orders and put them forward to his or her company.
ABOUT THE AUTHOR: Dr.Mohamed Ibrahim M.Adam. Managing Partner of Dr.Adam & Associates.Commercial Law Group
Dr. Mohamed Ibrahim Mohamed Adam admitted to bar in 1976. Education. University of Khartoum, LL.B (hons) 1974; University of Aberdeen, United Kingdom PhD 1992 Commercial law. Prior to forming his own law firm, Dr. Adam served in the Sudan as a judge and legal counsel at the Attorney General Chambers. He also served as general counsel to a number of major domestic and multi-national companies in Saudi Arabia, including Alsalam Aircraft Company a joint venture between Boeing group and Saudi Airlines and other partners. Dr. Adam also acted as legal advisor for ISCOSA, a subsidiary of Siemens Westinghouse. He also served as legal counsel for Al Baraka Dallah Group, one of the major banking and investment institutions. Dr. Adam also acted as a general counsel for NIC, a joint stock company having international activities with about forty (40) subsidiaries.
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More information about Dr. Adam & Associates LLP
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
The Ministry of Investment, implements investment government policy. Legal and institutional framework supports an investment climate apt to attract foreign direct investment. The Ministry of Investment is a member of World Association of Investment Promotion Agencies (WAIPA). Foreign investment in the Sudan is protected by binding international instruments. The Sudan is a member of World Bank's Multilateral Investment Guarantee Agency (MIGA), and the International Center for the Settlement of Investment Disputes (ICSID).World Bank Guidelines are used by foreign investment promotion agencies, including the Sudanese agency. It is expected that the International Finance Corporation (IFC), the private sector investment arm of the World Bank Group, whose mission is to promote sustainable private sector investment in developing countries, in coordination with Foreign Investment Advisory Services (FIAS) will act within the ambit of its mission, insofar as the Sudan is an emerging economy having considerable investment potentialities.
In line with United Nations Conference on Trade and Investment (UNCTAD) declared policy, it is also envisaged that domestic policies and international action would be mutually supportive in bringing about investment inflows. The Sudan is also a member of the African Development Bank, the Islamic Development Bank, the Inter-Arab Investment Guarantee, and the Agreement on Promotion and Guarantee of Investment among the member states of the Organization of the Islamic Conference. It is also full member of the COMESA and the Nile Basin.
The Sudanese Government's general policy maintains and constantly declares that foreign direct investment (FDI) has a constructive effect on a country's economy in terms of added technological, managerial and financial wealth. Active openness to technology, marketing channels, organizational and managerial expertise adds to domestic savings, investment and eventually secures an effective utilization of economic resources. Higher levels of investment and productivity are key elements to stirring growth in the Sudan as a developing country and raise living standards.
Attracting investment is a competitive exercise which requires stable, sound macroeconomic policies where risk environment is highly low. Stable, transparent and predictable open investment polices lend confidence to take the risk inherent in investing capital. The said general policy submits that political and social disturbances, currency risk, financial risk and government regulations are the most serious risks that forestall the investment decisions. Again, private sector investment depends on an investment climate characterized by a good legal framework maintained by constitutional guarantees against expropriation. Similarly, a favorable investment climate requires good governance in connection with quality of business regulations sustained by institutions competent to implement them.
The Ministry of Investment supported by other governmental bodies, restructures the general policy for the encouragement of investment in light of the objectives as contained in the Encouragement of Investment Act of 1999. It also determines the priorities in granting the licenses, and facilities. It is also responsible for issuing all the requisite directions, regulations and orders conducive to ensure a proper implementation of the Act. The Ministry of Investment undertakes the task of an overall supervision of the investment activities in the Sudan. One aspect of the Investment Act is that, it provides the Ministry of Investment with flexibility, sufficient to exercise a proper discretion within the ambit of well defined guidelines, capable to cater for any envisaged misuse. Accordingly, bureaucratic screening has been removed by entrusting administration of the law to one Ministry in coordination with other related ministries and governmental agencies. The Ministry of Investment is accountable to the President. A specialized body in the Ministry of Investment is assigned the job to prepare ad hoc feasibility studies for contemplated investment projects, in addition, to undertaking the requisite publicity prone to attract foreign investment.
As regards insurance against non-commercial risks, the Sudan is a signatory to the World Bank's Multilateral Investment Guarantee Agency (MIGA) convention. The Convention provides coverage against non-commercial risks such as transfer restrictions, breach of contract, war and civil disobedience. Investors under the Sudanese investment legal regime are exempted from payment of business profits tax for a period of ten years for strategic projects, and five years for non-strategic projects calculated from the date of commencement of production. This exemption may be extended for another period as the minister of investment deems fit. Again, an automatic exemption from payment of customs duties, surcharges and any other similar duties relating to imported machinery, equipment or apparatus necessary for production. The exemption covers all imported goods used by the investor's project. In connection with export, the exemption covers relief from export tax and duties in respect of project's products, including production charges and any other similar duties. Capital allowances are granted to investors who own depreciable assets and use the assets in the production of income. Depreciation allowance is calculated during the year of complete tax exemption on the basis of replacement value. Depreciable assets are grouped in classes, and the applicable allowance rates prescribed under the regulations, are applied. Any loss incurred during the period of complete or partial exemption, is to be considered as if incurred during the last year of such a period. The expenses incurred before production begins, and depreciation deductions arising within the period of exemption, are deemed to be a loss liable to be deducted from profit.
In connection with investment legal forms, in practice there are no administrative restrictions on foreign investment in the Sudan. International companies may open locations in the Sudan under a range of legal forms governed by the investor's strategies, plans and the degree of freedom that the Sudan operations are authorized by the parent company. Each option implies a specific obligation with regard to company law. A potential investor may form a strategic alliance with an already existing Sudanese's company on the basis of mere contractual arrangements. A foreign entrepreneur may start as a sole proprietor having a business name. A foreign company may establish an entity in the form of a branch or a subsidiary having an independent existence from its parent company. An investor may elect to set up a joint-venture in the form of a partnership or a limited liability company which is the form most often chosen by investors. Companies which elect to scrutinize for business in the Sudan before embarking on a project may decide short term solutions by allocating a liaison office which does not engage in commercial activities, or a sale representative whose mission is to take orders and put them forward to his or her company.
ABOUT THE AUTHOR: Dr.Mohamed Ibrahim M.Adam. Managing Partner of Dr.Adam & Associates.Commercial Law Group
Dr. Mohamed Ibrahim Mohamed Adam admitted to bar in 1976. Education. University of Khartoum, LL.B (hons) 1974; University of Aberdeen, United Kingdom PhD 1992 Commercial law. Prior to forming his own law firm, Dr. Adam served in the Sudan as a judge and legal counsel at the Attorney General Chambers. He also served as general counsel to a number of major domestic and multi-national companies in Saudi Arabia, including Alsalam Aircraft Company a joint venture between Boeing group and Saudi Airlines and other partners. Dr. Adam also acted as legal advisor for ISCOSA, a subsidiary of Siemens Westinghouse. He also served as legal counsel for Al Baraka Dallah Group, one of the major banking and investment institutions. Dr. Adam also acted as a general counsel for NIC, a joint stock company having international activities with about forty (40) subsidiaries.
Copyright Dr. Adam & Associates LLP
More information about Dr. Adam & Associates LLP
View all articles published by Dr. Adam & Associates LLP
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
