Referendum, Response and Consequences for Sudan: The Game between Juba and Khartoum

1. Referendum, Response and Consequences for Sudan: The Game between Juba and Khartoum Ibrahim Elbadawi, Gary Milante and Costantino Pischedda World Bank, DEC-RG

2. Referendum and Response • Introduction to the Fragile Peace in Sudan • The Comprehensive Peace Agreement • Developments and timeline of the CPA • Escalation and Military Expenditures in Sudan • Opportunity Costs in Development, MDGs • Game Theory and the threat of conflict in Sudan • A basic model • The impact of militarization • Expanding the model to allow for democratization • Conclusions • The Confederate Solution and a Neutral Abyei Zone • International Cooperation and Contributions to the Peace

3. Sudan, April 3rd, 2008 • Comprehensive Peace Agreement signed in 2005 by the National Congress Party (NCP) and the Sudan People’s Liberation Movement/Army (SPLM/A) • Together formed the Government of National Unity (GNU) controlled by the NCP (52%) and SPLM (28%) • Formation of Government of Southern Sudan (GoSS) • Implementation of oil sharing agreement • Established: • Demarcation or process for identifying borders • Formation of Joint Integrated Units (JIUs) • Timeline for census (2008?) and election (2009) • Protocol for referendum on southern secession (2011)

4. Despite this elaborate peace process… • Darfur – DPA constantly overshadows the other peace processes (often rightfully so). • EPA – Eastern Peace Agreement • Border issues – Primarily the issue of Abyei remains unresolved. • SPLM suspended participation in the GNU in October 2007 • As recently as January/February 2008 there were clashes between the SPLA and the Messeriya tribesmen over grazing lands around Abyei and Abak • NCP rejected Boundary Commission decision • Census has fallen behind schedule • Oil

6. Some brinksmanship during the October walkout of the SPLM “Now we order the Popular Defense Force (PDF), the legitimate son of the people, to open their camps and gather their mujaheddin. Not to wage war, [but] it is obvious we should be ready.” - Sudanese President Omar al-Bashir October 2007

7. Excessive militarization • As the peace process moves forward both the GNU and GoSS have increased spending on their militaries (2007 estimates): • Total Oil Revenues: $2749.6m • GNU military expenditures 34% of non-oil revenues • Average military expenditure for most low and middle income countries is 14-15% of government revenues.

8. Citation of the Referendum paper in the popular press: Arms race, uneasy peace in Sudan In the south, the parliament voted to double its budget to cover military spending, and the north spent 20 percent of its budget on the military. By Heba Aly | Correspondent of The Christian Science Monitor from the November 12, 2008 edition: http://www.csmonitor.com/2008/1112/p06s02-woaf.html “A July 2008 study by the World Bank Development Research Group says both Khartoum and Juba are playing a dangerous game. “ Also see The Times (Nov 13): http://www.thetimes.co.za/News/Article.aspx?id=879846

9. Table 3: Development Indicators, Sudan vis-à-vis Sub-Saharan Africa

10. Opportunity Costs of Military Expenditure • Public health expenditure in Sudan is only 1.4% of GDP (WDI, 2007). • Total military expenditures: 3.7% of GDP • Shifts from military to health and education expenditures would need to be accompanied by improvements in quality of governance. With these improvements… • If for example, the quality of the bureaucracy were to improve from 1 to 3.7, results from Rajkumar and Swaroop (2002) suggest that a 10% increase in health expenditure could lead to a 4.5% reduction of under-five mortality • If CPIA were to improve from 2.5 to 3.25, results in World Bank (2004) predict that a 10% increase in health expenditures could lead to a 6.95% decline in maternal mortality ratio

11. Engagement in these “Political” Issues • Data and the analysis that follows suggests that continued excessive militarization (militarization beyond what is necessary to maintain the peace) and brinksmanship are at the expense of human development in Sudan. • The Bank and the international community are developing the tools for engagement on the technical issues of post-conflict development, but if we cannot discuss issues of credibility or the very high opportunity costs of militarization, is this a “naïve” approach to post-conflict development? • We contend that identifying opportunity costs, helping to ascertain which actors in peace agreements are credible or non-credible and promoting solutions as a neutral arbiter are all comparative advantages for the Bank.

12. Modeling the threat of conflict • This excessive militarization crowds out human development, while both actors claim they want peace. How can this be? • “Making Unity Attractive” vs. “Making an Offer that Cannot be Refused” • Why use game theory? • Backwards induction problem • Simplifies the analysis • Useful for identifying credibility constraints • Still, care must be taken to avoid oversimplifying or trivializing these decisions

13. A Basic Model of Referendum and Response • Two Actors, Khartoum and Juba: • A = Tax revenue to Khartoum based on CPA defined borders, 0<A • B = Tax revenue to Juba based on CPA defined borders, 0<B • R = Petroleum revenues, 0 < R • MK, MJ = Military expenditures by Khartoum and Juba • δ = Share of petroleum revenues (land) that Khartoum can secure through war, positively related to MK and negatively related to MJ. • γMJ, γMK = Total cost of war for Khartoum and Juba

14. Figure 1: Extensive Form Model of Referendum and Response Referendum [Juba] Partition Unity Response [Khartoum] • Khartoum A+(R/2)-MK • Juba B+(R/2)-MJ War Peace • Khartoum A+ δR- γMJ –MK • Juba B+(1-δ)R- γMK –MJ • Khartoum A-MK • Juba B+R-MJ

15. Table 1: Pure Strategy Nash Equilibria in the Basic Game Unity Peaceful Partition

16. Table 2: Some Estimates of Terms in Payoffs (all figures in million $, except number of troops, see paper for notes)

17. Given Results from the Basic Game • Equilibrium is determined by how much oil can be captured by Khartoum and how expensive Juba can make war. δR < γMJ • Both actors have an incentive to make war expensive, making offers that cannot be refused. • Note, though that war can not happen in this basic model…

18. Figure 2: Military Expenditure Effect on Payoffs Khartoum A-M*K A+δR- γM*J –M*K A+(R/2)-M*K MK → ← MJ Juba B+(1-δ)R- γM*K –M*J B+(R/2)-M*J B+R-M*J ←MK MJ →

19. Figure “2.98”: Utility of Military Expenditures for Khartoum UK U*K UK | M1J UK | M2J > M1J M*K MK

20. Figure “2.99”: Best Responses to Juba’s Military Expenditures by Khartoum MJ U′K U ′′K MJ M′′K M′K MK

21. Figure 3: Military Expenditures and Outcomes under the Assumption of War U*J MJ U*K U′K M*J M*K MK

22. Threat of conflict and military expenditure in Sudan • Not all costs of war are internalized • Also, no gains from oil revenues if not controlled • No credible commitments to future division of oil or to lower military expenditure • JIUs slow in formation • Additionally, proxy armies and proxy power available to both actors, substitute for military expenditure • Arab militias, The Popular Defense Force, Arab nomadic tribes • Disenfranchised in Southern Kordofan, Southern Blue Nile, Nuba Mountains • Also, incomplete information gives an incentive for both actors to represent strength, which might further contribute to brinksmanship (figure 4).

23. Simplified Figure 4: Extensive Form Model of Referendum and Response with Incomplete or Asymmetric Information Referendum [Juba] Partition Unity Response [Khartoum] • Khartoum A+(R/2)-MK • Juba B+(R/2)-MJ War Peace • Khartoum A+ ?K–MK • Juba B+ ?J–MJ • Khartoum A-MK • Juba B+R-MJ

24. Incomplete and Asymmetric Information • Can lead to accidental war, even if neither actor actually wants war • Actors cannot send credible signals about capability because they have an incentive to exaggerate • Could lead to escalation as exaggerations may lead to armament in self-defense • Any feedback in this loop can lead to the vicious circle of an arms race.

25. Democratization • One means for augmenting credibility might be extending the political franchise, so that payoffs more and incentives are aligned with the public. • If, apart from all of the other advantages of limited democratization, such political progress were able to contribute to credible limits to arms escalation, then it could conceivably make a peaceful partition or other pareto preferred solution possible. • Assume MDK<M*K and MDJ<M*J

26. Figure 7: Military Expenditures under Democratization (or other commitment devices) UDJ U*J MJ U*K UDK M*J MDJ MDK M*K MK

27. Figure 8: Extensive Form Model of Referendum and Response with an Election Democratization (2009 Elections) [Khartoum] None Limited Democratization Basic Game (Figure 1) Referendum [Juba] Table 1 δR> γM*JδR< γM*J Khartoum A+(R/2)-M*K A-M*K Juba B+(R/2)-M*J B+R-M*J Unity Partition Khartoum A+(R/2)-MDK Juba B+(R/2)-MDJ Response [Khartoum] Peace War Khartoum A+δR-γMDJ-MDK Juba B+(1- δ)R- γMDK-MDJ Khartoum A-MDK Juba B+R-MDJ

28. Potential for democratization • Previous attempts at democratization and development of non-fractional democracy. • 1956-58, 1964-69, 1985-89

29. Other commitment devices or increases in payoffs from cooperation • 5.1 Investing in Economic Interdependence • Khartoum: A+(R/2)+C • Juba: B+(R/2)+C • 5.2 A Cooperative Confederate Option • Khartoum: (A+ θR) + C > A + δR - γMJ, • Juba: [B+ (1-θ)R] + C > B + R, where θ < min{1/2, δ} • 5.3 A Neutral Abyei Zone

30. Role for the International Community • Any support for peace must not substitute for military expenditures (What exactly do over the horizon military guarantees mean?) • Political competition should be encouraged to better align payoffs of public to those of policymakers • Capacity and institution building so that diversion of expenditures from military to human development are effective • Investments in cooperation (C) so that neither side has an incentive for conflict • Engagement on these “political” issues…