Economics 211

Comparing the Economic Development of Sudan and Libya

Professor George Hartner

March 20, 2014

University of Regina In comparing the economic growth of developing countries, in this case Sudan and Libya, it is important to understand the variables impacting the growth of the two nations. These variables include social conflict, corruption within the institutions, transportation issues and the commodities in which their economies are structured around. Social conflict has had a great impact on both of the nation’s economic prosperity as well as their infrastructure. As well, corruption has greatly impacts the availability of financial resources for the citizens of either nation. In this comparison of nations, I will argue that Libya is more economically developed and has more economic potential than Sudan. The commodities in Libya offer a future of wealth for the nation and the potential for immediate growth economically and socially. Social conflict and civil war has affected and continues to affect many nations around the globe. Sudan is a nation which has been involved in decades of civil war and as a result has left the nation struggling to survive, leaving almost no basic infrastructure to create order within the nation. They were left without schools, a functioning government or financial institutions. From this, many problems have arisen. Groups such as the Lebanese Hezzbollah terrorist sect have set up training grounds inside the borders of Sudan, presumably receiving support from the nation. The lack of an official government body being in place has lead to a blind spot on basic human rights, with major violations happening such as imprisonment without reason and torture. Lastly, without an official government, Sudanese rebel and terrorist groups have played an increasing role in destabilizing neighbouring governments 1. All of these issues caused by civil war have led to a trade embargo placed on Sudan by the United States. This embargo places heavy restrictions and fees in order to trade with the US, especially in their main exports such as oil, creating even more economic turmoil for the already struggling nation of Sudan. In regards to Libya, the few years of civil war have been less detrimental to their economic growth than their counterpart's decades of civil war. During the 2011 Revolt there was a $73 billion drop in GDP and a $10,000 per year decrease in GDP per capita. However, after the political leader Muammar Gudaffi was forcefully removed from office in the same year, the country’s economic situation started to improve. The GDP per year has increased $40 Billion while the GDP per capita has grown by $6,000 per year. The revolt in Libya did the exact opposite of destroying the nation's infrastructure; rather it returned basic diplomatic freedoms to the people. The citizens were now able to vote for the first time since Gadaffi assumed the role of leader some 40 years prior. The country could now focus on building back up their economy to where it once was, ranked in the top 5 most prosperous African nations. Despite the prosperity of the nation as a whole, many of the six million people of Libya were not seeing any of the return. The country was bringing billions of dollars in oil on a yearly basis. Unfortunately, none of this money was being invested in the people; it was not being invested in the nation's infrastructure or any type of advancement or betterment of the nation 1. Gadaffi, the Libyan dictator, was suspected of keeping much of the money for himself. Corruption ended up ruining the potential economic prosperity for the people. However, Libya was home to the largest oil reserve on the African continent, therefore the country itself still prospered 2. This created a flawed worldview of Libya, with outsiders seeing a nation thriving in the oil industry, when in reality, its people were struggling. Gadaffi at one point was even credited with being the man who financially saved Libya, even going so far as saying he was saving the African economy 3. The Libyan economy is based around mainly government run businesses, leaving little room to allow for private entrepreneurships due to having a central planning structure 2. In theory this should create the most benefits for the people of the nation, however with the history of government corruption it has not been the case. Now with Gadaffi out of power, economic prosperity for the Libyan people could see an improvement. The Sudanese government is bound to be corrupt simply by structure. Before they were taken over by an interim government the country was ran by several different military leaders, as well there was divide between the north and south regions. As history has proven over and over again, such as with General Noriega in Panama and Fidel Castro in Cuba, military rulers tend to be corrupt and tend to lead the nation down the wrong path. The situation in Sudan has been no different. These leaders lead their regions into wars with one another and in turn have created a separation of north and south Sudan. Their desires for money and power have led their nation as a whole to bring in less money per year than Libya, a nation with 31 million less people 1. After 2005, the 1nation signed a peace agreement in hopes to bring an end to the violence felt throughout the country. Unfortunately, a western rebel conflict has begun which has killed up to 400,000 people and displaced 2 million more, again making it difficult to even think about economic prosperity or growth4. Transportation issues are mainly of concern in Sudan. One major issue in the nation is that they have a very poor railway system. This in turn greatly limits their transportation of goods considering their already very low rates of production in the country 5.The other major issue surrounding transportation is the ongoing hostilities within the nation. The South hold most of the profitable oil reserves and rebel groups looking for valuable resources will often use violent and hostile means in order to acquire them 6. This makes it difficult to transport goods to, from and even within Syria difficult. Although the economy in Libya is structured around oil and the exportation of it, the recent revolution allowed private entrepreneurship to begin to blossom opening up the possibility for a more market based economy. However, energy resources, consuming 95% of Libya's export earnings, are still providing the nation with a good sum of income. After the revolt of 2011, the country gained $40 billion in GDP and is still rising 1. The possibilities of economic growth are enormous. Especially considering the massive foreign investment that is directed towards oil and other growing businesses in the nation. And unlike their counterpart Sudan, the US does not have an embargo placed on Libya. This allows for the US, one of the world's largest purchasers of oil, to continue to put money into Libya by exporting their oil 1. Sudan's story is a little bit different. They continue to struggle greatly with their economic growth. Civil wars and rebellions paint the landscape and with the difficulties surrounding exporting oil, the country relies on agriculture to sustain its economic needs 1. Unfortunately, the civil wars have also caused a lack of reliable agricultural institutions and supplies. With no central institution governing the production of agriculture the process has become very slow and considering that agriculture is one of their main commodities, this adds to the stress faced by the Sudanese economy. Production issues are just another setback felt by the nation as they struggle to create economic growth. With slow production and a lack of supportive institutions for one of the main exports, the likelihood of Sudan’s economy rebounding from such disparity is unlikely. In conclusion, each variable concerning economic growth goes in favour of Libya. Both countries have been involved in civil conflict throughout their history. Sudan's civil wars have destroyed their infrastructure and their institutions and continue to keep the nation at a stand-off with itself. Libya's most recent conflict in contrast, has freed the nation of a corrupt leader and will hopefully place more money in the hands of the people. Syria has not been so successful in ridding there officials of corruption. Ex-rebels control the government of the south while an interim government is in the North. In the south, corruption is at the government’s very foundation. In the north, the battle for a sustainable government is still underway, with many radicals being placed in charge. Lastly, the oil exportation in Libya has much more potential and is already more prosperous than that of Sudan. A major factor is the US embargo on Sudan and their subsequent investment in Libyan oil. The success of the economy in Libya is spectacular in comparison to Sudan considering the vast amount of oil both of these nations hold. Both have had equal opportunities and pitfalls as nations, but Libya has begun to embrace the economic and democratic changes needed in order to create a successful nation for its people.

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