The COVID-19 inflation episode: Lessons from emerging markets


The COVID-19 inflation episode: Lessons from emerging markets


South Sudan at 2: Seeking to Build a Strong and United Nation

Celebrating a birthday while facing many challenges

On July 9, 2013, the citizens of South Sudan, which gained independence on July 9, 2011, will celebrate that phenomenal achievement. But, as they take time out to rejoice and honor and celebrate those who fought for the freedom they now enjoy, they must also recognize that building a nation requires a lot of work and sacrifice. 

The nation that they seek to build has significant endowments of natural resources, which provide citizens and the government with a solid foundation for nation building. Nevertheless, South Sudan faces many challenges. These challenges include effectively managing ethnic and religious diversity and providing the wherewithal for peaceful coexistence; achieving food security; confronting mass poverty and providing jobs, especially for restless urban youth; bringing several violent non-state actors, including rebel militia that currently threaten the peace, under the control of the government; resolving the country’s various conflicts with Khartoum, including those associated with the border and the use of the Republic of Sudan pipelines to transport South Sudan oil to export markets; and dealing effectively and fully with various governance issues, especially bureaucratic corruption and public financial malfeasance. 

Independence has provided the peoples of South Sudan with the opportunity for self-actualization. However, in order for them to effectively utilize this opportunity to maximize their values, which include creating the wealth that they need to meet their private and public obligations, they must provide themselves with institutional arrangements that are locally focused and, hence, reflect the values of the country’s relevant stakeholder groups. Such laws and institutions would necessarily enhance peaceful coexistence; provide an enabling environment for entrepreneurship and wealth creation; adequately constrain the state and minimize the engagement of civil servants and political elites in growth-inhibiting behaviors such as corruption and rent seeking; promote respect for human rights; and generally limit government tyranny. The government in Juba is yet to engage all of the country’s relevant stakeholders in democratic constitution making to produce such laws and institutions. As a consequence, South Sudan is still governed by its provisional constitution, a document that is essentially a product of political exigency. 

The failure to provide South Sudan with institutional arrangements that are capable of promoting the rule of law has left the government unable to deal adequately and effectively with a lot of issues, particularly venality in the public sector, destructive and violent ethnic conflict, and the challenges of building a robust private sector capable of creating the wealth that can be used to fight chronic poverty and improve living conditions. 

Struggling to manage the economy’s most important sector—oil 

The most important issue associated with the effective management of South Sudan’s oil sector, which is currently the backbone of the economy, is the dispute with Khartoum on the fees that Juba must pay to use the Republic of Sudan’s pipelines as well as disputed border areas; alleged support by Juba to rebel forces operating within the borders of the Republic of Sudan (particularly in Darfur, South Kordofan and Blue Nile); and the setting of an effective demilitarized buffer zone around the oil fields located on the border area. 

In April 2013, President Omar Hassan al-Bashir of the Republic of Sudan visited South Sudan for the first time since the latter gained independence in July 2011. During what appeared to be productive talks between al-Bashir and South Sudan President Salva Kiir, the two leaders agreed on several critical issues—they agreed to resume (i) cross-border trade; (ii) transportation of South Sudan oil through Khartoum-owned pipelines to export markets; (iii) efforts to normalize relations; and (iv) talks to deal fully with disputed regions along their extremely volatile border. Unfortunately, shortly after this ties-mending trip, al-Bashir was on television, wearing a military uniform, flanked by high-ranking military officers, and threatening to permanently close the oil pipeline because of what he argued was Juba’s continued support of rebel groups within the Republic of Sudan. These accusations have a significantly negative impact on relations between the two countries. Juba has denied Khartoum’s allegations, has stated categorically that it does not support rebels and has asked the al-Bashir government to seek the help of the African Union for the resolution of bilateral problems. 

 Oil is very important to the economy of South Sudan—it currently accounts for as much as 90 percent of public revenues. If this sector is managed well, it can provide a solid foundation for effective transition into a fully integrated economy with robust manufacturing, financial and services sectors. While the conflict with the Republic of Sudan appears to be the major obstacle to the effective management of this important sector, there are other problems, including corruption and public financial malfeasance. For example, in June 2012, Kiir accused several senior government officials of stealing as much as $4 billion from the national treasury. Since this pronouncement was made, no one has yet been taken to task for this grand corruption, nor has the government been able to recover any of the stolen funds. South Sudan cannot build a solid foundation for sustainable economic growth and development unless it deals effectively with corruption and other growth-inhibiting behaviors. 

Creating the environment for a brighter future 

As South Sudan citizens celebrate their country’s second anniversary of its independence, they face many problems. These problems can be grouped into two categories—international issues, the most important of which is settling its various problems with the Republic of Sudan and creating opportunities for trade and other forms of mutually beneficial exchanges between the two countries; and domestic challenges, which include reducing violent and destructive ethnic conflict, minimizing corruption, rent seeking and other forms of opportunism, addressing problems of extreme poverty, stabilizing the economy, increasing the national tax base and improving collections, achieving self-sufficiency in foodstuff production, significantly improving the country’s infrastructures, diversifying the economy and reducing its dependence on oil, creating and sustaining a robust private sector capable of providing jobs for all citizens who desire them, including restless urban youth, and generally creating an institutional environment within which all citizens of South Sudan can live together peacefully and maximize their values. Many of these issues are interrelated—for example, there cannot be peace if the government is unable to effectively manage ethnic diversity and enhance the ability of the various population groups to live together peacefully. And, of course, without peace, it would be very difficult for South Sudan to attract necessary investment (both foreign and domestic) to strengthen domestic productive capacity and enhance wealth creation. 

These problems and challenges are symptoms or manifestations of poorly developed laws and institutions. In fact, without a set of institutional arrangements that adequately constrain civil servants and politicians, the latter will continue to engage in growth-inhibiting behaviors, such as corruption and rent seeking, and derail the country’s development plans. Hence, the most important task for South Sudan as it celebrates its second anniversary of independence is state reconstruction through democratic constitution making to provide laws and institutions that guarantee the rule of law. Until this is done, the country will be unable to deal effectively and fully with the various problems that keep it poor and highly deprived.