Private Sector Development

1. Private Sector Development MCT&S, GOSS Presentation to the Sudan Donor Consortium Oslo, Norway May 5-7, 2008 Private Sector Development

2. Introductory Notes • We are grateful for pledges made by donors for PSDP. • The MDTF project declared effective in May, 2007 and the commitment made was USD 6.78 million for Phase 1, out of total Phase 1 costs of USD 11.1 million. • The PSD work reported here is supported by both MDTF, other donors and GOSS • We appreciate working with development partners • WB Group. • USAID and others which have thankfully transferred to us some best practices • We renew our commitment to the project and development of private sector and trade in general. Private Sector Development

3. Today we present … Background for Private Sector Development The PSD project Achievements to date Challenges going forward Proposals for future plans Private Sector Development

4. 1. Background for PSD Key Messages from this Presentation • Southern Sudan has begun to attract investors • We have begun the journey to strengthen our legal & policy framework for investment • We have begun to strengthen our institutions & markets to stimulate & support investment • We have started to harvest the value of dialogue with the private sector • We are on the way to building a financial infrastructure Private Sector Development

5. 1. Background for PSD Key background facts • Great Opportunities in South Sudan • Strategic location, water, fertile land, natural resources and Diaspora • But … No History of Private Sector Before Conflict • Northern Sudanese traders have been replaced by traders from other countries, still no real Southern Sudanese private sector • … Huge Investments Needs, • … But… High Risks • Insufficient legal and regulatory framework to attract investors (laws, private property rights) • Low level of skills & weak economic institutions (e.g. Markets) • Capital base destroyed by conflict • High real/perceived political risk • Few public institutions to support markets and a vibrant private sector • High incidence of poverty in periphery • Dutch disease – Impact of oil revenues on trade, competitiveness, labor markets, and exchange rate Private Sector Development

6. 1. Background for PSD Private Sector Development Can Resolve Some of the Post Conflict Constraints • Maintaining political support for peace • The peace dividend is a job at a living wage • Collier: half of countries that emerge from war revert to conflict in first decade • Reducing economic dependence on public sector / civil society as the main source of employment • Maximizing the role of the private sector as a partner in reconstruction • Addressing the root causes of conflict • Economic exclusion • Narrow development patterns • Avoiding Dutch disease • Reducing reliance on resource rents as the main source of public revenues • Avoiding emergence of a private sector based on resource rents, corruption Private Sector Development

7. 2. The MDTF PSD Project for Southern Sudan

8. 2. The PSD Project The PSD MDTF Project has 4 Components • Establish an enabling policy, legal and regulatory environment for trade and investment • Access to finance for medium, small & micro-businesses(especially microfinance) • Industrial Capacity Building • Market Development (through public private partnership) Private Sector Development

9. Implementation by Different GoSS Agencies 2. The PSD Project • Ministry of Commerce is the Coordinating Agency • Policy, legal & Regulatory Environment (with MOLACD) • Public-Private Dialogue (with Chamber of Commerce) • Business Plan Competition (with Ministry of Industry) • Bank of Southern Sudan (BOSS) • Microfinance • Ministry of Industry & Mining (with UNIDO) • Industrial Capacity building • Central Equatoria State (CES) • Market Development Private Sector Development

10. 2. The PSD Project Establishing an Enabling Policy & Regulatory Environment for the Private Sector • Rapid establishment of a foundational regulatory framework • Re-establishment & streamlining procedures for business registration • Development of an entrepreneurship policy • Establishment of a Public-Private Dialogue Forum • Building the Institutional Framework for an active and effective PPD Forum - Developing PPD Working Groups, Formulating evidence based reform agenda, Developing regular reform monitoring framework • Monitoring & Evaluation Private Sector Development

11. Increasing Access to Microfinance 2. The PSD Project • Establishing a Microfinance Apex Institution and a Board • Establishing a policy framework for microfinance • commercial microfinance differentiated from social safety nets or charity • Strengthening the regulatory framework for microfinance – Recruitment of a Senior Policy Advisor • Providing liquidity to MFI's - for direct lending to entrepreneurs • Technical Assistance to MFI's • Financing new MFI's & providing TA to Banks entering MF • Fueling innovation - to meet market demand for financial solutions • Outreach & Social Mobilization - all 10 states & disempowered groups Private Sector Development

12. 2. The PSD Project Industrial Capacity Building Component A Policy Framework to support industrial strategy, policy formulation and Capacity Building • Partnership with UNIDO on three sub-components • Develop Industrial Strategy and Policy Capacity • Develop Private Sector Support Institutions • Enhance Business Development Services in Southern Sudan Additional sub-components • Analysis of Industrial Competitiveness • Mining Sector Capacity Building Private Sector Development

13. 2. The PSD Project Market Development • Establishing a Wholesale Market • Building a physical marketplace >> with cold storage & market stalls making trade efficient & reducing capital costs for new entrepreneurs • Strengthening regulatory & administrative capacity • Demonstrating an effective public-private partnership for infrastructure • Increasing food security & improving nutrition • Establishing satellite assembly markets • Enhancing rural-urban linkages & promoting & commercializing agricultural production & raising rural incomes • Developing market information systems • Increasing the flow of products through the marketing system through better information & incentives Private Sector Development

14. 3. Achievements to Date

15. 3. Achievements to Date The Project Coordination Unit has been Established & Staffing Ongoing • Procurement of office equipment progressing & nearly complete • Staffing ongoing & nearly complete • Delays at contracting stage due to MOLACD blocks Private Sector Development

16. A Foundational Enabling Legal & Regulatory Framework is Being Established With the assistance of the WBG (FIAS-ICTA), GoSS has reviewed & revised ten mercantile laws Company, Investment, Partnerships, Limited Partnerships, Registration of Business Names, Registration of Documents, Insolvency, Contracts, Agency and Sale of Goods Law 3 of these have been enacted into law through Provisional Orders Partnerships, Limited Partnerships and Registration of Business Names Law In addition, the Investment Law has been approved for signature by the President following which it will become law The remaining six are likely to become law before the end of June 08 subject to the House of Assembly timetable 3. Achievements to Date Private Sector Development

17. A Foundational Enabling Legal & Regulatory Framework is Being Established (cont.) The Company Registry has been re-started & 1600 businesses registered since May 2007 65% in construction, 25% in services The Public-private dialogue Forum has been initiated An assessment completed A structure agreed with stakeholders 2 Working groups are in formation Sensitization ongoing 3. Achievements to Date Private Sector Development

18. A Foundational Enabling Legal & Regulatory Framework is Being Established (cont.) Progress has been made in strengthening the policy framework Policy advisor has been identified Monitoring & evaluation framework for private sector initiated. The institutional framework for investment facilitation is being strengthened MCTS institutional assessment completed; reorganization ongoing Capacity needs assessment launched; staff trained Coordination among PSD ministries strengthened The Southern Sudan Investment Promotion Authority was established by Presidential Decree in June 2007. A Board has been appointed, and a Secretary General in place 3. Achievements to Date Private Sector Development

19. Microfinance will soon be available to small borrowers South Sudan Microfinance Development Facility (SSMDF) and the microfinance policy advisor in process of recruitment. First pilot round of Micro-finance Competition completed and awards totalling $1 million made to four MFIs Internationally renowned microfinance NGO – BRAC Two established Sudanese MFI's A Local Cooperative providing innovative rural finance solutions Finalising Disbursement and reporting procedures for the microfinance component of the PSD project Private Sector Development

20. The Industrial Capacity Building & Business Plan have Been Launched Industrial Capacity Building: A Memorandum of Agreement has been signed with UNIDO to build capacity at Ministry, Association and firm level. Technical Staff under the UNIDO sub-components in process of being hired TOR’s for the remaining two sub-components have been prepared Business Plan Competition Approx 1000 application received 60 applicants will be selected for training in “Business Plan Preparation”. After training, these 60 people will resubmit a proposal and the 20 best proposals will be chosen These 20 winners will receive a financial grant of 20,000 USD, to be deposited at a bank as collateral for a loan so that the winner can implement his or her business idea. 3. Achievements to Date Private Sector Development

21. The Wholesale Market Component has Been Launched Land title has been secured with the help of the State of Central Equatoria PPP Wholesale Market Study Tour Familiarization visit by the project team to similar markets in South Africa Purpose: To educate the implementation team on design, PPP, legal, & other technical aspects. Market concept at design stage with the contracted architect 3. Achievements to Date Trade and Private Sector Development

22. 4. Challenges Going Forward

23. 4. Challenges Going Forward Despite this Good Progress, Challenges Remain • The policy, legal & regulatory environment still weak & uncertain • Administrative procedures are still extremely stringent • Trade policy, including relevant institutions, still lacking • Economic activities are limited to big cities • Capacity in the business sector is still limited • Access to finance still problematic, particularly for MSEs Private Sector Development

24. 5. Proposals for Future Plans

25. Continue implementation and expanding existing program • Trade Policy: continue developing trade policies and regulations and oversight mechanism • Improving Access to Finance for microfinance and MSE’s • Institutional Development of Ministry Staff • PPD: Support the Public-Private Dialogue Forum/ partnership • Further support to the SSIA to build capacity and develop and implement an investment promotion strategy • PPP and Market Development: Continue improving market infrastructure and private sector institutions • Legal framework: work with MOLACD to implement promulgated laws; draft additional laws; seek to formalize more SMEs Private Sector Development

26. New Directions Establish standards & metrology system for Southern Sudan, including consumer protection structures Improve linkages with regional & international trade/economic related organizations; deepen regional integration Reduce investment constraints at state & local government level Establish PSD coordination mechanism for Southern Sudan 5. Proposals for Future Partnership Trade and Private Sector Development

27. In Conclusion Southern Sudan is open for business; investors are coming in We have made significant progress in improving the investment climate; access to markets, finance & BDS We have made progress in building a robust legal & regulatory framework for investment But a lot still needs to be done to attract investors & make them competitive. …We need your further support 5. Proposals for Future Partnership Private Sector Development

28. Thank you Private Sector Development