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7/30/2019 Final Rough Congo
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ASSESS COMMERCIAL RISK FOR DOINGBUSINESS WITH CONGO AND SUDAN
Chirag Janyani 10
Dhanyashree Thykatil 12
Dhiren Boricha13
Ishani Potfode 18
Neha Hallale 23
Vikrant Kotkar50
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REPUBLIC OF SUDAN
Capital: Khartoum (N.Sudan), Juba (S. Sudan)
Independence : 1956
Currency: Sudanese pound
Population: 34,206,710 (includes population of South Sudan)
President: Omar al-Bashir
Language: Arabic, English
Literacy rate: 61.1%
North of Sudan with closer ties with Arab is predominantly Arab or Muslim
while South is predominantly non- Arabized or Christian
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HISTORY
Independence : 1956
First Sudanese Civil War: 1955-1972
Second Civil War : 1983
Darfur conflict
Comprehensive peace agreement
Separation: 9th July 2011
Deteriorating relationship between South and
North Sudan
Widespread humanitarian crisis persists
The nation is deformed by the sins of war
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ECONOMY
Sudan is an extremely poor country, which is fighting with itself since more than 50
years
GDP growth rate: -3.9%
Unemployment rate : 18.7%
Industries : Oil, Cotton ginning, textile, cement, petroleum refining,
sugar
Exports: $8.79 billion
Export partners: China 68.1%, Japan 14.3%, India 5.6%
Imports: $8.08 Billion
Import partners: China 20.2%, Saudi-Arabia-9.1%, UAE 6.7%, India 6.3%
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PREFERRED SECTOR FOR PRIVATE INVESTMENT
Meat processing
River and rail transport
Food processing
Animal husbandry
Roads and bridges
Sugar
Telecommunication
Airports
Hotel and resorts
Refrigerated warehouses
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ADVERSE IMPACT OF SECESSION ON ECONOMY
Current Account: After a substantial surplus of US$ 2.7 billion during Jan-June2011 prior to the secession, the current account balance drastically turned into a
large deficit of US$ 1.5billion during July-September 2011, and f due to the loss of
oil export
Foreign Exchange: Loss of main source of foreign exchange through oil exports
have left Sudanese pound depreciating by 50%
Inflation: Inflation has increased to a staggering 28.6% mark
Exports: Exports have drastically comedown by 74%, particularly petroleum
exports have dramatically dropped to US$678 million from US$6.6 billion
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The discovery and exploitation of
oil in Sudan has generally been
associated with a shrinking of the
non-oil tradable goods sector
All of Sudans fast growing sectorswere either related to oil or non-
tradable services, while the growth
of agriculture and manufacturing
has been slower than the growth
rate of the overall economy
Sudan missed the opportunity to
build the foundation for a
diversified and sustainable
economy
Major sectors contributing to growth
1.2
2.9
4.2
4.9
7.3
10.2
10.3
10.5
11.3
11.5
0 3 6 9 12 15 18
Livestock
Irrigated cro ps
M anufacturing
Rainfed crops
Transport &
communications
Trade,
restaurants and
Electricity & water
Other services
Construction
Other mining
Oil
M ining &
non-tradable
sectors
Tradablesectors
Ave rage growth rate (2000-08)
39.3
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SUDAN HAS FAILED TO BUILD THE FOUNDATION
FOR PRIVATE SECTOR LED GROWTH
Following the dominance of the oil
sector, the public sector has become
the principal contributor to the
growth process, while private sectorgrowth has been considerably
weaker.
During the last ten years, the public
sectors share in GDP has increased
from 6 percent to nearly 40 percent,
which has become an impediment to
the development of
a robust private sector
Share of GDP (in %)
-
20
40
60
80
100
1998 2000 2002 2004 2006 2008
Private sector Public sector
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COMMERCIAL RISKS INVOLVED IN DOING
BUSINESS IN SUDAN
Commercial environment is highly challenging:
- Doing business 2010 rank: 154 out of 183 countries
Infrastructure :
- Quality of roads, rail, ports and airport is low- Inadequate infrastructure is one of the major deterrent for investors
Corporate governance
- Establishing a business is a lengthy and cumbersome process
- Investor protection is inadequate
Capital accounts Exchange regulations
- Resistance includes non-resident purchase of shares
- controls on non- residents acquiring commercial or financial credits
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ECONOMY OF YOUR COUNTRY
Explain which goods
and services are
produced in your
country. How dopeople typically
provide for the needs
of themselves and
their families?
Country risks are on high priority to enable investors take major decisions.
Sudan and Congo have high country risks hampering future investment plans
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NON-TARIFF BARRIERS
Non-Tariff barriers are a major
obstacle to trade
The process and costs incurred
are comparatively higher to
OECD
Sudan Region
average
OECD
average
Documents required
for export (number)
6 7.8 4.3
Time required forexport (days)
32 33.6 10.5
Cost to export (USD
per container)
2050 1941 1089
Documents required
for import (number)
6 8.8 4.9
Time required forimport (days)
46 39.4 11
Cost to import (USD
per Container)
2900 2365 1145
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LEGAL AND REGULATORY ENVIRONMENT
Sudans judicial environment is
complex and unreliable
Contract enforcement is a lengthy
and costly procedure
Sudan score -1.50 in World banks,
Worldwide Governance indicators,
reflecting the unreliability of the
judicial system, its proneness topolitical interference and
manipulation
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CORRUPTION AND SECURITY RISK IN SUDAN
Over years Sudan has become
synonymous with corruption
2011 corruption perception index
176 out of 180
Sudan suffers from Inter-and intra-
tribal conflicts
Such conflicts get polarized in an
ethnic political environment
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SOUTH SUDAN THE YOUNGEST NATION OF THE
WORLD
Separated from Sudan with which it had
engaged in over 50 years of political and
economic conflict
Challenges before economy
- Over regulation on investments
- Poor human capital
- weak infrastructure
- establishment of an effective
constitution
Experts foresee a bright future for South
Sudan, but they do not expect change to
happen over night
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COMMERCIAL RISKS CONGO
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DEMOCRATIC REPUBLIC OF CONGO
Location Central Africa 2nd largest country in Africa
4th most populous country in Africa and 19th in world
Capital Kinshasa
Official Language French
Independence from Belgium in 1960
Currency- Congolese franc
President - Joseph Kabila
Prime Minister - Augustin Matata Ponyo
Referred as Zaire from 1971 to 1997
Main Religion Groups Kongo,Luba,Mongo
252 Languages out of which Kikongo Kituba, Lingala, Tshiluba and Swahili have thestatus of national language
About 600,000 Pygmies are aboriginal people of DR Congo.
95% Population Christian
Contains great biodiversity
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Try To use this picture somewhere else
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SECOND CONGO WAR
Began in August 1998 and Ended in 2003
Deadliest War in Modern African History
Involved 8 African countries and 25 armed groups
Killed approximately 5.4 million people
Establishment of Transitional Government of Democratic Republic of the Congo
Following agreements were signed The Sun City Agreement (imposing democratic government and regular elections in
the Congo
The Pretoria Accord, under which Rwandan troops agreed to withdraw.
A separate treaty, the Luanda Treaty, followed, between Uganda and the Congo
Establishment of Transitional Government of Democratic Republic of the Congo
First Election - 30th July 2006
Continuing death toll due to disease and famine
Almost 45000 people dying every month
2/3 rd of the population affected by Malnutrion
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CURRENT ECONOMIC SCENARIO
Home of vast potential and mineral wealth
Untapped deposits of raw mineral US $ 24 trillion
Informal Sector major part of economy(not reflected in GDP data)
GDP growth 3% per year
GDP by sectorAgriculture(34%),Industry(11%),Services(34%)
Largest Producer of cobalt ore, major producer of copper and industrial diamond
Establishment of SEZ for revival of its industry
Possess 50% of African forests and river system that could provide hydro-electric
power to entire continent
Poor transport system
Water transport accounts for 2/3rd
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CONGO- EXPORTS AND IMPORTS
Export partners
(2010)
China
47.30%Belgium
Finland
UnitedStates
Zambia
Import partners
(2010)
South Africa
Belgium
Zambia
Zimbabwe
China
Kenya
France
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POLITICAL RISK
Regime of President Modatu lasted 32 yrs(1965-97)
Toppled by Laurent Kablia in May 1997 by Uganda and Rwanda
Transition from Civil War to Semi Presidential Republic
Highly unstable and lack of transparent political process
Corruption(Ranked 168 in Report by Transparency International)
Ministers are frequently arrested and released with no judicial process
Lack of effective legal system
Sudden Eruption of conflict(Congo Wars and regional fights)
Geographical Remote Central Government
Frequent arrest of Government leaders
Dealing with issues of local content and empowerment
Government officials in desperate need of revenue have been known to extract
dubious taxes and fees from local business
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SOCIAL RISK
Poor Infrastructure No road network which leads difficulty in fuel distribution
Extremely depilated Rail Network
Inefficient and Unsafe air transport
Significant legal and risks also as per African standards
Weak Judicial System(According to World bank Report178th rank in 183 economies)
Chart 250 ethnic groups
Second highest rate of infant mortality
Educational Rate- 67%
Worst numbers of woman Sexual violence and rape cases in world
Role of Media
The constitution provides for freedom of speech and the press, the government hasrestricted this right in practice.
Arrests, murders and other harassment of Journalists is frequently reported.
Great difficulty for print media both in gathering of information and physicaldistribution
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ECONOMIC RISK
Drop in national output and government due to Congo War I & II
Second lowest nominal GDP per capita (216$)
High Risk of Natural Disaster
Tortuous procedures for closing a Business(5.2 yrs to resolve bank currency
proceedings)
Weak Banking System
40% corporate income tax
3% to 50% personal income tax
Separate Tax Regime for Mining Sector
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INVESTMENT CLIMATE
Congo was beset with political and economic problem which discouraged foreigninvestment
Improved political stability lead to Effectively exploits its vast wealth of mineral
and agricultural resources
Congo has had a bilateral investment treaty with countries such as united states,
Belgium, china, Egypt, France, Germany, Greece, Israel, South korea
Conversion and Transfer policy:
Local Currency
Right to private ownership and establishment:
Protection of property rights:
Labor
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CORPORATE TAX RATE
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LEGAL ASPECT-CONGO
Legal and regulatory risks are significant as the standard of governance isextremely weak, even by African standards Weak Judicial System
Inconsistent application of complex legal and
administrative codes and the lack of due process are the primary problems
Weak Judiciary i.e. prone to corruption
Difficulties in enforcement of commercial contract which includes
1. Number of Procedures(43)
2. Higher cost involved than any sub African country
3. Administrative time involved (610 days)
4. Tortuous procedures for closing a Business(5.2 yrs to resolve bank currency
proceedings)
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MAIN CHALLENGES OF DOING BUSINESS IN
CONGO
High Cost of doing Business (For small and medium sized enterprises) Poor or non existent infrastructure
Regulatory and tax uncertainty
Difficult and costly logistics
Surfeit of bureaucracy
Skills shortages
Finance(Banks have perception of high risk in Africa) Different language and Business Culture
Choice of local Partners
Weak Local Private Sector
A lack of market Information
Problems with work permits
Non-payment of contracts Onerous requirement for operating licenses
The cost of tendering for contracts
The security of people and assets
Reputation Risk
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THANK YOU