Where best to direct domestic revenue and ODA
Official Development Assistance (ODA) to fragile states has increased from 11.7 billion USD to 50.8 billion USD between 2000 and 2010, now representing over 30 % of developing countries ODA (OECD 2013). As global poverty levels continue to fall, the share of the world’s poor living in fragile states, including low-income countries has increased to over 40 percent.
To capture and benefit from ODA, South Sudan needs a deliberate strategy to build a few strategically essential agencies rather than to invest in improving government effectiveness across the board and all at once. This is because the agenda for development (and for external assistance) could be hopelessly long when starting from scratch. To make progress, a limited, doable set of objectives and programmes should be chosen in the framework of an immediate-medium and long-term programme. Likewise, It is vital that the international community is more realistic about what its plans can achieve and recognise that transition processes require long timeframes and more importantly depend mainly on domestic operations and actors, rather than external donors and expatriates alone. The following three areas could first be targeted and enhanced by ODA:
- Financial Management;
- Civil service management (recruitment, training and human resource management)
- Construction and works.
The issue of how international organisations engage in fragile states and the type or nature of the partnership between donor countries and fragile recipient states is yet to be addressed satisfactorily. However, from a developmental perspective, it should target small businesses. SME (formal or informal) play a significant role in the development of nations in part because they are the first adopters and users of technologies and are highly flexible. Small businesses are the missing link for inclusive and sustainable economic growth and development (ITC 2015).
Policy tools to policymakers
Romer (1987, 1990) offers an array of policy tools to politicians to spur structural transformation and stimulate growth. The prospect of capturing positive externalities (Idem) and spillover effects from innovative enterprises is an essential aspect of the model (Romer 1986). Making it possible for larger and foreign companies (MNCs) that enter the country to increase the local stock of human capital including through apprenticeship programs and collaborations with the University of Juba, the Lologo Vocational Training Centre and other planned but still to be delivered technical schools to support the emerging class of young skilled men and women. Such empowered people are often better able to articulate their economic and political interests which in turn strengthens the checks and balances mechanisms in young and fragile democracies (Aerni 2006).
98% of government revenues came from selling oil making South Sudan a mineral-dependent economy. Such countries are characterised by:
- disproportionately higher productivity in the oil sector compared to agriculture and other productive areas;
- a tendency towards currency overvaluation;
- difficulties attaining competitiveness for the local population since many of the businesses are from neighbouring countries – including Eritrea, Ethiopian, Kenya and Uganda; and
- a disproportionately small number of formal sector jobs due to the scarcity of backward and forward linkages with the rest of the economy.
A challenge is to diversify the economy and exports away from crude oil. One way is by deepening technological change add value to products. Else the membership of the EAC means little without production networks and value chains that create valuable opportunities to participate in the East African economy gainfully. It implies acquiring the capacities to absorb knowledge and technology to encourage endogenous development. Otherwise, the country will remain excluded from regional markets when others take advantage of the local market, resources and access to government procurement as well as UN procurement.
South Sudan, therefore, faces the pressing need to implement diversification strategies, create linkages between the hydrocarbon and mining sectors with the rest of the economy and upgrade domestic skills and technological capabilities to address structural problems.