Sudan Referendum May Lead to $100 Billion Conflict, Group Says
By Sarah McGregor
BLOOMBERG
Nov 24, 2010
A return to conflict in Sudan after an independence referendum in its semi-autonomous southern region may cost more than $100 billion in lost economic output and humanitarian and peacekeeping aid, a study said.
Southern Sudan is scheduled to vote on a proposal to secede on Jan. 9, almost six years after a cease-fire agreement ended two decades of conflict between the north and south that left 2 million people dead and displaced more than 4 million.
“While oil revenue and wider economic growth provide substantial financial incentives for leaders on both sides to resist a return to conflict, the referendum is one of many issues which could trigger an escalation of violence,” according to a report commissioned by Aegis Trust, a London-based charity that campaigns to stop crimes against humanity around the world.
Sudan, Africa’s largest country by area, is sub-Saharan Africa’s third-biggest oil producer, according to the BP Statistical Review of World Energy. Southern Sudan accounts for as much as 80 percent of Sudan’s daily output of 490,000 barrels. All of Sudan’s crude exports are carried through a pipeline running north to Port Sudan on the Red Sea.
Agreement on how to share oil revenue should Southern Sudan opt for independence is an outstanding issue of the 2005 peace accord, along with the issue of border demarcation.
Economic Cost
The cost of a conflict to Sudan’s gross domestic product would be $50 billion, while neighboring countries stand to lose $25 billion of their GDP and peacekeeping and humanitarian aid may cost an additional $30 billion, the study said.
“If the oil supply were to be shut down with the outbreak of civil war, then Sudan would immediately lose 10 percent to 20 percent of its gross domestic product -- equivalent to $6.5 billion to $13 billion in 2010,” the report said. “That amount would be lost for every year until oil production was restored.”
The study, entitled “The Cost of Future Conflict in Sudan,” was done by Frontier Economics Ltd., a London-based research company, in conjunction with the Institute for Security Studies, a Cape Town, South Africa-based organization, and the Society for International Development in Washington, it said.
Researchers explored cost implications in four post- referendum cases. They range from a scenario of “peace,” in which security improves as both sides resolve their differences, to a “high conflict” situation in which an outcome of succession is rejected and Sudan descends back into violence.
The majority of southern Sudanese favor independence, the Washington-based National Democratic Institute said on Oct. 20, based on a survey of 63 focus group in 48 locations conducted between Feb. 5 and March 16.
Respect Result
Sudanese President Umar al-Bashir and his Southern Sudanese counterpart, Salva Kiir, said they will respect the referendum result, according to an e-mailed statement from Kenya’s presidency. The leaders made the commitment at a regional meeting in Ethiopia on Nov. 24, according to the statement. Kenyan President Mwai Kibaki chairs the Inter-Governmental Authority on Development, or IGAD sub-committee on Sudan.
Any outbreak of war may also have consequences for neighbors such as Ethiopia, Uganda and Kenya, deterring investors and jeopardizing security with a cross-border spill- over of weapons and fighting, according to the report. Conflict in Sudan may cost bordering nations about 34 percent of their projected economic output over a decade, with Kenya and Ethiopia losing as much as $1 billion annually, it said.
Redirected Investment
“While there may be some positive impacts on the region -- from investment being redirected from Sudan to the other countries -- the evidence suggests that the net impact of conflict would be significantly negative,” the report said.
Sudan’s economy is forecast to grow 5.5 percent this year and 6.2 percent in 2011, compared with 4.5 percent last year, according to data on the International Monetary Fund’s website.
Groups overseeing the implementation of Sudan’s peace deal including the African Union, the League of Arab States and IGAD should ensure the referendum runs smoothly to help prevent Sudan from plunging into conflict, the report said.
“The analysis suggests that those involved in efforts to avoid further conflict in Sudan should ask themselves: Are we doing enough to avoid a war that might cost over $100 billion and hundreds of thousands of lives?” it said.
To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net.
To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net.
BLOOMBERG
Nov 24, 2010
A return to conflict in Sudan after an independence referendum in its semi-autonomous southern region may cost more than $100 billion in lost economic output and humanitarian and peacekeeping aid, a study said.
Southern Sudan is scheduled to vote on a proposal to secede on Jan. 9, almost six years after a cease-fire agreement ended two decades of conflict between the north and south that left 2 million people dead and displaced more than 4 million.
“While oil revenue and wider economic growth provide substantial financial incentives for leaders on both sides to resist a return to conflict, the referendum is one of many issues which could trigger an escalation of violence,” according to a report commissioned by Aegis Trust, a London-based charity that campaigns to stop crimes against humanity around the world.
Sudan, Africa’s largest country by area, is sub-Saharan Africa’s third-biggest oil producer, according to the BP Statistical Review of World Energy. Southern Sudan accounts for as much as 80 percent of Sudan’s daily output of 490,000 barrels. All of Sudan’s crude exports are carried through a pipeline running north to Port Sudan on the Red Sea.
Agreement on how to share oil revenue should Southern Sudan opt for independence is an outstanding issue of the 2005 peace accord, along with the issue of border demarcation.
Economic Cost
The cost of a conflict to Sudan’s gross domestic product would be $50 billion, while neighboring countries stand to lose $25 billion of their GDP and peacekeeping and humanitarian aid may cost an additional $30 billion, the study said.
“If the oil supply were to be shut down with the outbreak of civil war, then Sudan would immediately lose 10 percent to 20 percent of its gross domestic product -- equivalent to $6.5 billion to $13 billion in 2010,” the report said. “That amount would be lost for every year until oil production was restored.”
The study, entitled “The Cost of Future Conflict in Sudan,” was done by Frontier Economics Ltd., a London-based research company, in conjunction with the Institute for Security Studies, a Cape Town, South Africa-based organization, and the Society for International Development in Washington, it said.
Researchers explored cost implications in four post- referendum cases. They range from a scenario of “peace,” in which security improves as both sides resolve their differences, to a “high conflict” situation in which an outcome of succession is rejected and Sudan descends back into violence.
The majority of southern Sudanese favor independence, the Washington-based National Democratic Institute said on Oct. 20, based on a survey of 63 focus group in 48 locations conducted between Feb. 5 and March 16.
Respect Result
Sudanese President Umar al-Bashir and his Southern Sudanese counterpart, Salva Kiir, said they will respect the referendum result, according to an e-mailed statement from Kenya’s presidency. The leaders made the commitment at a regional meeting in Ethiopia on Nov. 24, according to the statement. Kenyan President Mwai Kibaki chairs the Inter-Governmental Authority on Development, or IGAD sub-committee on Sudan.
Any outbreak of war may also have consequences for neighbors such as Ethiopia, Uganda and Kenya, deterring investors and jeopardizing security with a cross-border spill- over of weapons and fighting, according to the report. Conflict in Sudan may cost bordering nations about 34 percent of their projected economic output over a decade, with Kenya and Ethiopia losing as much as $1 billion annually, it said.
Redirected Investment
“While there may be some positive impacts on the region -- from investment being redirected from Sudan to the other countries -- the evidence suggests that the net impact of conflict would be significantly negative,” the report said.
Sudan’s economy is forecast to grow 5.5 percent this year and 6.2 percent in 2011, compared with 4.5 percent last year, according to data on the International Monetary Fund’s website.
Groups overseeing the implementation of Sudan’s peace deal including the African Union, the League of Arab States and IGAD should ensure the referendum runs smoothly to help prevent Sudan from plunging into conflict, the report said.
“The analysis suggests that those involved in efforts to avoid further conflict in Sudan should ask themselves: Are we doing enough to avoid a war that might cost over $100 billion and hundreds of thousands of lives?” it said.
To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net.
To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net.
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