On the Priorities of Comparative Advantage of Agro-industry Commodities: the way towards Economic Transformation

Abstract

Economic development in Sudan has been facing more challenges than ever before in 2011 after South Sudan gets independence, where Sudan lost 75% from oil revenues. As a result, Sudan underwent structural reform that favored the concentrating in non-oil sector. Considering that agriculture has been largely contributing to the GDP, it seems that the main drivers’ of economic growth. One of the most important questions regarding the New Structural Economics framework is (a) why industrialization becomes one the most determinants of country’s economic development, (b) has Sudan’s economic structure change over the years from 1980-2015, and (c) what the nature of that change? The purpose of this work is to identify the priorities of agro-industry commodities that Sudan has to focus on. It develops theoretical framework to investigate the sectoral composition trends of output and employment, and discusses these on the New Structural Economics framework. This study adopted two empirical models to analyze the collected data, which are obtained from different sources. Many of the hypotheses were supported. Major findings of this study are as follows. The analysis of RCA and PAM revealed that Sudan had lower costs in producing of agricultural and agro-industries commodities, except textiles manufacturing. The share of industrial sector in total employment and total output has declined during 2001 and 2015 period. Further analysis reveals that structural change has a negative impact on Sudan’s economy and growth of labor productivity, the share of service in output has steadily increased, reflecting reallocation of employment away from agriculture towards service and trade activities. This study finds evidence of negative structural change on Sudan’s economy and the share of value added manufacturing sector has decreased dramatically.