Final Rough Congo

7/30/2019 Final Rough Congo

1/29

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


2/29


3/29

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


4/29

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


5/29

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%


6/29

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


7/29

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


8/29

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


9/29

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


10/29

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


11/29

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


12/29

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


13/29

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


14/29

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


15/29

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


16/29

COMMERCIAL RISKS CONGO


17/29

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


18/29

Try To use this picture somewhere else


19/29

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


20/29

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


21/29

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


22/29

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


23/29

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


24/29

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


25/29

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


26/29

CORPORATE TAX RATE


27/29

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)


28/29

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


29/29

THANK YOU

Date post:	04-Apr-2018
Category:	Documents
Upload:	ishani-potfode
View:	215 times
Download:	0 times