Khartoum, (sudanow.info.sd)- Now that the south has officially seceded from the north and formed its own state, independent and sovereign as the presidential statement issued on this occasion wished, and as separation has become a reality, a number of questions will rise and various speculations about to its impact on the political, economic and social walks of life in both north and south Sudan.

The authorities concerned in the north have already begun preparations to surmount the problems that will arise due to the secession, with emphasis on the economic aspect, particularly the distribution of petroleum between the north and the south.

 Other neighboring African countries, especially Egypt, are linked to the south with a number of issues, including the shares of the Nile water. They are other countries which may be adversely affected or may benefit from the secession, including Kenya and Uganda which have good relations with the south. Some optimist experts, however, expect that the loss of the oil proceeds after the secession will make the north turn to exploiting agricultural and industrial resources and prospection of minerals in addition to investment and laying down proper economic policies.

Economic Challenges

There are several challenges awaiting the north after secession of the south. President Omar al-Bashir has conceded that secession of the south will leave negative effects as the north will lose its of the southern oil proceeds, impairing the foreign balance of trade as the petroleum sales constitute a significant portion of the country's exports.

Economist Al-Sheikh Sidahmed predicts that the economic decline will persist for 10 years and so will poverty, unemployment, budget deficit and lack of vision for economic building. Sidahmed says the petroleum exports reached 50 billion dollars over the last 10 years, a matter which he regards as mismanagement of resources. The economic decline, the economist goes on, will also cause a lack natural resources that are necessary for economic and social development in north Sudan (pasture, animal and forest production). It will also aggravate the scramble over sources among parts of northern Sudan and with Parts of southern Sudan. The communication sector will prolong the effects of secession as the communication companies are expected to face difficulties in their profit transfers abroad due to shortage of foreign exchange, forcing the companies to purchase foreign currencies for the black market, consequently raising the dollar rate of exchange.

This situation will also force some businessmen and investors to liquidate their businesses and transfer their capital abroad The secession is also expected to raise the cost of the Sudanese animal and agricultural exports as a result in a rise in the prices of the agricultural production inputs such as fertilizers, insecticides, machinery, fodders, etc., due to the rise in the rate of exchange of the dollar and its scarcity in the official banking institutions and the Sudanese exports will not be competitive in the international markets.

Under such circumstances, the author of the states will have to levy more taxes on highways to make up for their immediate needs and this, in turn, will raise the cost of exports. One of the factors of raising the foreign rate of exchange is dependence of the people in the Sudan on imports of food, clothing and other necessities from abroad; as the Sudan imports foods amounting to 1.6 billion dollars, which is 17% of its total imports, while its industrial imports amount to 6.8 billion dollars, including 341 million dollars in textiles. This redoubles the demand for foreign currencies to purchase the country's food and other imports, bearing in mind that the non-petroleum exports have decreased to only 148 million dollars during the first quarter of 2010 during which the proceeds of the non-petroleum exports are expected to go down to 592 million dollars, as the animal exports during 2008 reached about 45.552 million dollars and the agricultural exports during the same year counted for about 328.865. after the secession, the non=petroleum exports are expected to recede in terrific rate by 2011 due to a rise in the cost of production and to multiple taxes the authorities of the states and localities are expected to impose to fulfill their financial demands. The health sector is also expected to be affected by the rise in the prices of medical equipment and devices, thus raising the cost of the medical services which, in addition to migration of doctors, will heighten the burden on the citizen.

The day-to-day necessities, such as bread, will also be affected by the rise in the dollar rate of exchange as a considerable portion of wheat is imported Those circumstances will eventually lead to general recession in the country, particularly under an expected purchasing retreat due to the weak purchasing capability and to lack of new foreign investment in the national economy and the departure of some of the existing investment to safer and more stable countries after the expected rise in the foreign rate of exchange , the expected recession, lack of competitive ability in the international markets and the closure of the factories for those reasons.

The repercussions of the economic impaction of the secession include inability by the federal government in Khartoum to fulfilling its domestic undertakings of implementation of the peace agreements in Darfur and east Sudan, reconstructing what has been destroyed during the civil war in the Blue Nile State and finishing infrastructure projects in those areas and other parts of the Sudan. Moreover, the government may not be able to spend on any new armed conflicts or any security or political disturbance.

The banks sector is also expected to be affected by the possible decline in imports and exports, impairing their profits because they are going to miss lines of facilities and financing from the foreign bank correspondents and also because of the expected deterioration of the rate of the Sudanese pound against the foreign currencies, a matter which lowers the profits of the Sudanese banks.

The shortage in foreign currencies curtails the diplomatic activities and curbs the movements of the official delegations abroad as well as those of the constitutional personalities, thus affecting the Sudan participation in the international forums. Moreover, the government may not e able to pay its membership fees in the international organizations making it imperative upon the government to cut down the number of its embassies abroad and the Sudan will thus absent itself from the international events and will no longer be an active player in the international activities and will thus recluse in an optional isolation.

The press sector is also expected to suffer from the secession repercussions due to inavailability and high prices of the print and printing inputs, raising the cost of the production of the newspapers and consequently raising their prices, impairing the circulation due to the low readership in addition to shortages in advertisement as a result of the expected commercial recession and in this situation many newspapers will close down.

As regards the aerial transport, some international airlines have suspended their flights to and from Sudan due to difficulties of transferring the prices of the tickets abroad. The insurance sector will also be faced with difficulties of getting the foreign exchange needed for meeting their reinsurance obligations for the international companies. The expected secession repercussions include affecting the trade between the south and the north and the rights of ownership, citizenship and movement.

As South Sudan gains independence and becomes an independent state, it will become a member of the Nile Basin organization and will thus have its share of the Nile water and of the Sudan quota which is 18 billion cubic meters. The new state of south Sudan will be in dire need of water to establish agricultural schemes to meet the food demands of its people. But the Naivasha deal concluded by the SPLM and the central government has granted all powers related to the Nile water because the unity option was given precedence for the two parties to achieve. This water issue could pose a problem for the north.

The foreign debts, which have reached around 34 billion dollars, will also pose an obstacle under insistence by the southerners that they would not pay their share in case of secession, although, in view of similar international experiences, the south cannot be exempted. Yet, if the south does not have to pay its share, the debts will pose a heavy burden on the north and the economic crises of the latter will be further aggravated if no other solution for the debt problem is found.

First: The Oil Issue

The Sudan currently produces 500,000 bpd 85% of which is produced in the southern fields, though the southerners say their oil is 90%. Under the Naivasha agreement of 2005, the central government gets 50% of the total oil proceeds.

Former Finance Under-Secretary Under-Secretary Sheikh al-Mek says the southern oil contributes about SDG6 billion. He explains that the loss in revenues might be more than SDG2 billion after deductions of the transfers and the spending on the southern commissions and the development projects. Mek adds that the Treasury will be missing an important foreign currency resource after departure of the proceeds of 74% of the oil fields in the south which have been the main lifeline to the federal treasury, as oil contributes 605% of the revenues.

This situation will have an adverse effect on the rate of exchange which is expected to score a record rate with the proceeds of the non-petroleum exports expected to be below 592 million dollars in 2010 and afterwards.

Mohamed al-Bashir al-Tigani believes that the new south Sudan state will also be affected by the secession as this secession does imply that there will be a wall separating the two countries which have common economic interests, in addition to the oil pipeline which stretches from the south to the north. The south has to reach agreement with the north to ensure that the pipeline would remain in place, Tigani said.

The south, for one thing, possesses no resources for export other than petroleum and even this survives no longer than 10 years, according experts. The south is lacking in infrastructures like the relatively proper ones in the north. Moreover, it cannot be ruled that the foreign debts should be paid only by the northern government and the south must pay its share.

Second the Nile Water Issue

Dr. Salman Mohamed Ahmed Salman, the expert in water laws and policies, regards the River Nile as the world's weakest river with the lowest water level compared with its length, the area of its basin and the number of its littoral states. It is the longest river in the world (6650 kilometers);one of its tributaries flows from the world's biggest lake (Victoria); the world's biggest sub area is on some of its tributaries in south Sudan (30,000 km2); it involves the world's oldest and most controversial agreement.

More than 300 million people depend on the River Nile, constituting 10% of the population of Africa and are expected to reach 500 million people by 2025. This population lives in 10 littoral countries which include the world's poorest five states and seven of those states have experienced or still experiencing armed conflicts during the last 15 years. The geopolitics of the Nile Basin and its littoral states was the topic of a workshop recently held in Shaja Hall of the University of Khartoum. It was pointed out in that workshop that 54% of the Nile Basin lies in south Sudan, that 90% of the area of south Sudan lies within the Basin and that 28% of the Nile water crosses the border from south Sudan to the north and further northwards to Egypt.

The water that can be saved from the sudd areas to flow in the Nile course may reach 20 Billion cubic meters. In spite of all this, the Comprehensive Peace Agreement (CPA) between the Sudanese government and the SPLM made reference to the Nile water in the power-sharing protocol rather than the resource-sharing protocol which has placed all powers related to the Nile water in the hands of the central government. This protocol has made no reference to projects for increasing the revenues of the Nile water from the Nile sudds in south Sudan and Jonglei canal on which work was stopped by the SPLM in 1984. This situation may create problems for north Sudan and other Nile Basin member states in case of secession of south Sudan, bearing in mind the water requirements of the new state, including such suspended projects as Anzara, Mogala, Tonj kenaf, Malakal paper plant and Zande Agricultural project in addition to the growing household appliances. There is, moreover, the need for hydroelectric power which can be generated from the projected dam in Nimole in south Sudan. Another problem is posed by Abyei territory and the dispute over its affiliation and if it is decided that the territory would be part of south Sudan, them most of South Kordufan will be moved out of the water basin.

The workshop opined that the secession of the south would further complicate the water problems in view of the real challenge that faces the Nile Basin nations with regards to striking a balance between the existing appliances of the passage or estuary states (Sudan and Egypt) and the growing requirements of the eight source states which will become nine after secession of south Sudan. However, this raises a question on whether a seceded south Sudan will join the passage or source states.

Dr. Salman believes that the 1959 agreement does not oblige the northern government to divide its quota in case of the secession as a bilateral agreement between the two countries. A number of the participants agree on the right of the source countries to demand quotas. There is also the challenge facing the Sudan which is that the Sudan utilizes only 14 billion cubic meters of its quota of 18 billion cubic meters. There is also the existing dispute between the source countries (Ethiopia, Kenya, Uganda, Tanzania, DRC, Burundi and Rwanda) on the one side, and the passage and estuary countries (Sudan and Egypt) on the other. The source countries are opposed to previously concluded agreement on the Nile water and are demanding redistribution of the Nile water on new basis.

Economic researchers Mohamed al-Nayr says that Egypt has fully used its quota and has been utilizing the surplus of the quota of the Sudan during the past years. But the Sudan, after the construction of Merowe Damin the north, the heightening of Er Rosaires Dam, southeast of the capital Khartoum and the projected dams in north and south Sudan, the Sudan needs to utilize its full quota.

The Ugandan Daily Monitor published an article by its writer Bernard Tapair predicting that this would lead to a renewed dispute between neighboring nations, such as Uganga which profitable commercial ties with south Sudan. Ambassador Bilal Gismallah, the Sudanese Consul General in Aswan, Egypt, believes that Israel attempts to incite disturbance within the source countries with a view to create instability in the Nile Basin countries.

Third: The Foreign Debt Issue

The issue of the foreign debts, which has now reached about 34 billion dollars, is considered one of the problems confronting both northern and southern states.

Fourth: The Animal Resources

The President of the Board of Directors of the Agricultural Bank, Professor Fathi Mohamed Khalifa, indicated that the first repercussion of the secession was shaping a demographic population map, showing that the farmers and shepherds constitute 70% of the population.

The impact of secession on natural resources is tremendous, Khalifa said, adding that there are other challenges of increasingly growing poverty and unemployment and production deterioration.

Economic Solutions

The solutions deemed by the government in the north include a declaration by President Omar al-Bashir that the government has an economic programme and new measures to cope with the situation that include cutting down the government expenditure and increasing the revenues, indicating that increasing the revenues will not be by levying new taxes but through fighting tax evasion and diversifying exports.

As regards the government measures, Bashir explained that his government would conduct a revision of the state structure and would impose strict measures to promote transparency and supervision, indicating the possibility of reconsideration of the state structure and cutting down the number of ministries for a substantial reduction of the government expenditure.

Finance Minister Ali Mahmud, in a recent encounter with the media, said the programme, under the theme "Sustainability of the Economic Stability in the Country", was approved by the Presidency and all the executive institutions of the state.

He said the programme is based on four pillars: Maintenance of the achieved economic gains, restoration of the revenue-expenditure balance, maintenance of a balance between the supply and demand by increasing the production of the strategic commodities and controlling the factors of lowering the living standards for the poor sectors of the community.

The Minister said the government will shoulder thee cost of restoration of the economic balance by introducing a package of policies that include restructuring the state and decreasing the government expenditure. The state will undertake the provision of the main food commodities for six months in fixed prices pending stability of the situation and completion of the post-secession procedures. Speaking the petroleum issue, the Minister said the government would bridge the gap in revenues after losing the southern oil by benefitting from the petroleum infrastructure, inviting the foreign capital, training and rehabilitation and capacity-building of the human element and reducing the rate of unemployment.

The Finance Minister added that the secession of the south will have a negative effect on the state's general finances by reduction of the revenues of the treasury which will be redressed by expanding the taxation umbrella but not raising the taxes vertically. He said the loss of the petroleum proceeds would affect the domestic product in the fields of agriculture, industry, the services sector and the foreign sector as reflected in reduction of the foreign exchange resources in addition to the social impact resulting from the economic effects. The Minister said the state will cover the lost revenue of the southern petroleum by 2016.

The Finance Minister said 73% of the country's oil is produced in south Sudan, 26% in north Sudan and 1% in Abyei. He said, however, that the government has made some economic arrangements to avoid an economic collapse after the secession of the south. Mahmud made reference to the negative effect of the international financial crisis on the economy and the inflation it has caused.

He said the government would reach agreement for conveying the southern petroleum through the pipeline that runs across the north after July 9 to the benefit of the north. The two sides will hold negotiations on the issue in the coming days, said Mahmud, adding that the (Khartoum) government would use international experiences in order to reach an acceptable agreement. The Finance Minister pointed out that there are ministries and other executive positions in the states that have no specific or constitutional duties. He called for a revision of the organizational structure of some corporations and institutions.

For his part, Bank of Sudan Governor Mohamed Khair al-Zubair has called for finding a free rate of exchange within the supply and demand as a way for getting rid of the parallel (black) market. He predicts that the change of currency in the south would be to the interest of the north because any service offered to the south would be paid for in the dollar, hence increasing the foreign currency earnings for the northern government.

The central bank Governor said the monetary policies will during the next three years be directed to the provision of eight main strategic commodities. He warned that fixing the rate of exchange one time will have a negative effect on the other sectors, a matter that requires gradual measures.

 Omdurman to Halfa as the ground water is plentiful in the area. Moreover, 4.5 million feddans (acres) will be grown by foreign investors to be irrigated from Merowe Dam. The governor said his bank would in the coming period support all development banks so as to raise their production.

Zubair revealed that gold exports has bought into the treasury about 1.2 billion dollars in the past period and are expected to earn more 800 million dollars by the end of the fiscal year. The Governor indicated the importance of the earnings of the Sudanese working abroad. He pointed out that the thee-year pogamme included all social aspects for achievement of justice and provision of a dignified life of the citizens.

The Nile

Ligation and Water resources Minister Dr. Kamal Ali Mohamed said the secession of the south does not pose a water threat to the north. The quota of the Sudan will remain as it is while Egypt will three quarters of the water and fourth quarter will be divided evenly between the north and the south, Mohamed said. The water set for irrigation in the Nile Basin countries is of a small volume and does not affect the northern and southern states, he added.

The Irrigation Minister said there are tremendous quantities of ground water in the sandstone basin under Sudan, Libya, Egypt and Chad. The state has made plans to utilize this water but has put off those plans for security reasons, he said. The Minister said the water policy provides for supplying the countryside with the urban water. The Ministry currently implements clear water to legislation to avoid water-borne diseases, said Mohamed, that the Ministry has now a plan for providing the Darfur states with clean water. The Ministry has concluded contracts with 20 companies for work in Darfur but were targeted by the rebel movement, slowing down implementation of the plans, the Minister said. Yet, he said his Ministry has now implemented 100 ground water wells and 26 hafirs (reservoirs) and has rehabilitated 126 water stations which were affected by the war. The Darfur Rehabilitation Fund (DRF) plans to drill 304 ground water wells is going on in the "water harvest" projects, Mohamed said. There is also a plan for building 250 hafirs and 200 dams in Darfur, said Mohamed, indicating that 52% of the declared programme of Darfur has been implemented. The urban water has been provided in most of the IDP camps while allocations of 200 million dollars have been provided in the framework of Darfur strategy for a settlement from within the region, said the Minister, while 16% of Nyala water project has been implemented.

As regards Port Sudan, the water productivity has been raised from 20 cubic meters to 70,000 cubic meters in addition to building a desalination station with a capacity of 10,000 cubic meters. There is a project of supplying the city with water from the River Nile at a cost of145 million dollars in addition of a programme for the war-affected areas.

Dr. Ahmed al-Mufti, the jurist and member of the Sudan delegation to Nile Basin negotiations, disagrees with what has been said and the secession of south Sudan and the problems it will make to the countries of the region. He said it is the south that will be the region's most affected country which already suffers deep-rooted problems of tribal conflicts and disputes over resources and power. The Nile Basin countries are committed to international accords that cannot be violated, Mufti said, adding that if it has seceded, the south will be party to those accords after its agreement with the Nile basin countries and it can be one of those countries.

Whether the Sudan remains a united country or divided into two states, it is agreed that the full and sustainable administration of the Nile water will a responsibility of all partners, with the agreements being respected, no negative effect will be faced by any country, even Egypt, and, instead, there will joint cooperation among all member states.

For his part, Atem Garang, an SPLM leader and Deputy Speaker of the Federal parliament, says, after its secession, the southern state will try to have good relations with all of its neighbors. The south is an important market to Ethiopia, Eritrea, Kenya and Uganda, said Gaang adding that those countries have an adventurous investment spirit that fears no loss. He criticized the northern capital which he described as "cowardly" that has not ventured even when the south was part of the northern government.

Garang said the petroleum poses no problems because it is governed by existing agreements and any arising problem can be taken to international courts.

Dr. Mohamed al-Nour, the lecturer of economics in the International University of Africa, says the secession will be accompanied by major economic problems topped by petroleum which will be a joint venture between the southern and northern states for several reasons, including the common borders. The dispute, however, will be over the oil wells and their positions, said Nour, noting that The Hague Court of Arbitration has resolved the dispute over the oil=rich Abyei territory. `Yet the question of the distribution of the oil wells will remain in place and Nour says there are contracts with oil companies which are legally difficult to abrogate and those companies may continue operations until the expiry of their contracts. The Sudanese government, moreover, has a long oil pipeline stretching 1,600 km from Hijlej to Bashir port on the red Sea in addition to other pipelines from Adaryale and Foula region in west Kordufan.

The economist believes that the southern government is inclined towards Kenya and Uganda with regards to the economic transactions and be contemplate exporting its petroleum via the Kenya Mombasa port. However, Dr. Nour says stretching a pipeline to Mombasa will be highly expensive as the Kenyan geographic terrain is so high that a pipeline through it would cost billions of dollars, a cost the southern government would not as there must be constructed numerous stations to pump the oil during its journey to the ocean, The running of such a pipeline will be costly and the cost of transporting one barrel to Mombasa will be very high compared to the Red Sea pipeline, the economist said.

It seems that it God-destined that the two parts of the Sudan would maintain bilateral relations even after the secession, he noted.

AS for the agricultural gap, a number of economic experts have warned that the Sudanese economy would continue declining for 10 years after the secession and have advised the state to concentrate more on agriculture than on petroleum.

Professor Ahmed Ali Ginaif says that the next period of time requires a swift action to guarantee an economic stability in its known indications in view of the scarcity of the resources in the north. The secession of the south should lead to a comprehensive development in northern Sudan, Genaif said. He called for a reaction in the form of a comprehensive development for reaching advanced levels in all walks of life, in addition to accelerated action in implementing development project and petroleum explorations.

Dr. Nour expected that the Arab countries, in particular, would come for investment in northern Sudan in view of the abundant natural resources its possesses, the most important of which is the agricultural sector -both fauna and flora. The economist believes that the south has isolated itself during the past years and the southern government will thus rely on such poor countries as Uganda and Kenya, which tend to benefit from the south rather than vice versa Economist Ahmed Tigani Salih called for introducing more incentives for attracting investors and for facilitating acceptance of the financing terms and mitigating the conditions of the Ministry of Finance and Bank of Sudan to ensure There is what he called

For his part, economist Mohamed Ibrahim Kebej said the Sudan had the chance of being the world food basket but did not seize this chance. There is what he called an unbalanced development in Sudan, a situation which he said had caused grievance and led to wars, underlining the need for reconstruction and development of the country side.

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