Thank you very much, Mr. Chair.
I am a retired professor of economics from Simon Fraser University, but I've spent the last four months in Juba, southern Sudan, as senior advisor to the Bank of Southern Sudan. I've been working for Deloitte under a contract to USAID.
Our mandate was to help the Bank of Southern Sudan become independent from the Bank of Sudan, which is based in Khartoum; they will presumably vote for independence on January 9, 2011. The overriding concern we had was installing a new currency.
We had our initial meeting early in June, in Nairobi, with half a dozen senior Bank of Southern Sudan officials. We said you should use the U.S. dollar for the time being because everybody uses it anyway and it would be chaos to introduce a new currency. Within half an hour they had turned this completely around and said that's absolutely unacceptable; we want our own currency, as a symbol of independence.
That was a financial challenge, to make a new currency credible. After the 2005 comprehensive peace agreement, for example, the governor of the Bank of Southern Sudan, who is still the governor, permitted the photocopying of money so he could pay off the southern people's liberation army. Naturally, that money was not very credible.
But I'm not going to talk today about the problems of installing a currency, unless you want me to. I'm going to focus on Canada's role in Sudan, as I understand it.
I think we spend about $117 million a year in Sudan, mostly on Darfur and southern Sudan. Proportionally we spend more than the U.S. I believe we're the third largest donor, after the EU and the U.S. Since fiscal year 2004-05, we've spent over $1 billion.
About $100 million of the $117 million is spent by CIDA and $17 million is spent by DFAIT. I understand that DFAIT's projects are largely security related. We have RCMP officers who are training southern Sudanese police, including police women, and we have about 50 military advisors there. I'm not sure what they do because, unlike the Americans, we are not training the southern people's liberation army to move from being a bush army to a real army. We don't do that. But we do provide security support for delivering food and vehicles for part of the UN's effort and a lot of other things.
CIDA's projects, the $100 million, are focused on food aid and food security--delivering the food--on welfare and education of children and youth, and on institutions, governance, and justice. We're also putting money into supporting the EU's monitoring of the January 9 referenda. There are two of them, as you probably know: one in southern Sudan, and another one in Abyei, which is a contested area just north of the border. We're also going to support the Carter Centre with their election monitoring.
Like other donors, we spend a lot of money on short-term so-called emergency aid. That's to deliver food and to help avert the almost daily firefights and atrocities that occur in Darfur and between tribes in the south, especially between the two majority tribes, which are the Dinka and the Nuer. That's not to mention the firefights and violence instigated by civilian militia groups, such as the Lord's Resistance Army, which comes from Uganda and has now taken refuge in southeastern southern Sudan.
Both the north and the south have long histories of using these civilian militias. And both the north and south use their own greed and grievances at the time to attack territory in dispute, using these militias as proxy. It's probably true that the north is now using militia more than the south. Certainly that's what we were told by our friends in the south. The north is using these militia to stir things up in the south and in Abyei, with the intent of delaying or discrediting the upcoming independence votes scheduled for January 9, 2011.
The alternative to emergency aid is long-term investment in sustainable development. Schooling and health are obvious candidates. Children are now back in school, after 20 years of civil war and recruitment as child soldiers. But beyond elementary or, at best, high school, the prospects for education are dim.
I visited the University of Juba once when I was there, and it's a delightful place. They have a wonderful faculty of art, music, and drama—I'm a musician and I loved it—but they have no economics department, no business faculty, and no law school. Juba is kind of a cesspool of dirty water, mosquitoes, and cow dung, and that breeds cholera, yellow fever, meningitis, and of course malaria. Everybody gets malaria.
It's also kind of a cesspool of thuggery and murder. Now, to be fair, it's much better than it was even two or three years ago. In fact, people tell me they feel safer on the streets in Juba than they do in Nairobi, which now has the nickname “Nairobbery”. Nevertheless, we had all kinds of things happen. We had intertribal fights at the bars. Much to our annoyance, of all the foreign aid groups, those of us working for Deloitte were not allowed to go out after 10 o'clock at night, I think because they thought we would sue them. But the UN is out until two in the morning getting stabbed, getting into bar fights, and all kinds of stuff. Our security adviser told us about that every morning to scare us from staying out late.
Schooling and education are no-brainers, but it's much more difficult to foster long-term economic growth, independent of foreign aid and oil, because southern Sudan is almost totally dependent on foreign aid and oil. Foreign aid is running at about $2 billion a year, but that doesn't go into the average person's pocket. In fact most of it probably lines the pockets of consultants and goes back out of the country. Oil is virtually the only export. There is agriculture, but it's relatively small. Oil is the major export by far, and oil revenue is about $2 billion a year.
Oil revenue represents 98% of the government's non-aid revenue, and about 30% of the budget of southern Sudan's government is for the military and mostly imported equipment—recently helicopters, when I was there, and some out-of-date Russian tanks. In short, some of the oil and government money disappears into private pockets, and it's typically deposited abroad, or at least across the border in Kenya.
To summarize, about $4 billion a year flows into southern Sudan, and about half is from foreign aid and half from oil, plus a few hundred million as remittances from the southern Sudanese diaspora living abroad, sending money back.
The population of southern Sudan is a little over eight million, so from government revenue alone, if you divide the eight million people into $4 billion you get about $500 a year that should go into each person's pocket. Very little income is generated by domestic production, and much of the domestic production is production in kind. It's cattle, subsistence food crops, and so on, that are never traded and therefore never monetized. But the per capita income in Sudan is not $500 a year; it's less than $300 a year, or about 80¢ a day. Admittedly, that $300 a year ignores all the income in kind, like delivery of food aid, which is substantial. Nevertheless, $200 million are missing, and a lot of that is from capital flight--wealthy, powerful people sending money abroad--or wasted aid.
So the difference between what flows into the region and out again, just to repeat, is in military spending, wasted aid, and corruption. To put it another way, most of the money that flows into southern Sudan flows out again by way of military imports, consultants' incomes, not that consultants are completely useless--I was one—and capital flight.
Any country that relies heavily on either oil or foreign aid is subject to disincentives to develop other sources of income. Moreover, the oil production in Sudan is likely to peak in 10 or 12 years. So it's imperative for Sudan to develop another export industry. The best prospect is agriculture. Sudan is not only the largest country in Africa, it is one of the most fertile. The beautiful Nile River runs from Uganda in the south all the way north to Egypt. There's the Blue Nile. We were encamped on the White Nile in Juba.
Traditionally the main agricultural enterprise has been cattle. The southern Sudanese particularly are cattle herders. They don't call them cattle in Sudan. They are genderless, but they call them cows, whether they're male or female. We had herds of cows right beside our camp, and there was an abattoir and they were slaughtered as we slept; the stench was terrible.
What I'm getting at is that now agribusiness, big, large-scale agriculture in crops, is well under way: cotton, maize, palm oil, and even flowers. It's particularly under way in the north, but there's more potential really in the south because the south is more fertile. The agribusiness, like the oil, is funded and organized by foreign firms. Most of the oil is funded and organized by the Chinese, but the agriculture is subsidized by the Middle East and a lot of other people.
So far, so good, and there's nothing wrong--as an economist, I don't think there's anything wrong, in principle--with foreign direct investment. But in Sudan, principle has floundered in the face of unprincipled investors, who are aided and abetted by Sudanese government officials, both in the north and in the south. In the past year alone, southern Sudan's department of agriculture has sold off thousands of hectares, millions of acres, of fertile land to foreign firms. Now, there's nothing wrong with that either, in principle. Here in Canada we sell off our birthrights of oil and potash to foreigners. But in practice what's happening, I'm told, in southern Sudan and in the north is that communities and tribes and subsistence farmers have essentially lost their traditional tenure on the land. There are virtually no land tenure laws in northern Sudan.
Since the food shortage in 2007, the Sudanese government, mostly in the north but increasingly also in the south, has sold or long-leased--a long lease is typically 70 years--hundreds of thousands of hectares, millions of acres, of agricultural land. They're now leasing more land long term than any other country in Africa--