Sudan economy booms as Darfur crumbles

KHARTOUM, Sudan --New office blocks are popping up across the capital and the country's first shopping mall is packed. Nearby, cell phone and computer stores line city streets that just a few years ago were dusty lanes.

While many Sudanese displaced by three years of fighting in the Darfur region are living on handouts in refugee camps, the country as a whole is in the midst of an economic boom.

Sudan only began exporting crude oil in 1999, but this year it is expected to earn between $4 billion and $5 billion in oil revenue, said Abdul Rahim Hamdi, a former finance minister who still advises the government on economic matters.

The economy grew by 12 percent in 2006, the International Monetary Fund says -- up from 8 percent the year before -- and over $2.3 billion in direct foreign investment poured in last year, a nearly 50 percent rise from 2004.

This striking growth may seem like a hopeful sign for this African nation, which bears the scars of many wars and famines.

But some fear this sudden affluence may allow Sudan's government to ignore the threat of sanctions from the West, which so far has not been able to persuade Khartoum to allow U.N. peacekeepers into Darfur.

"The only effective pressure would be sanctions that would pinch targeted officials," like those believed to have shares in government-controlled oil companies, said Colin Thomas-Jensen of the International Crisis Group, a think tank.

U.S. and European companies are generally steering clear of investment here, but countries in Asia and the Mideast -- including China, Saudi Arabia and Libya -- are pouring money into the country.

Sudan sends more than two-thirds of its oil exports to China. China relies on Sudan for about 5 percent of the oil it uses. Because of this economic relationship, China -- which has a veto in the U.N. Security Council -- seems unlikely to permit the adoption of sanctions against Sudan that would cut off that strategic resource.

Still, the talk of sanctions by Western nations has raised concerns that Sudan's boom could go bust -- and that it will be Sudan's poor who would suffer.

"A better economy benefits everybody," said Hamdi, the former finance minister, who created the country's booming stock exchange. "I hope the U.S. understands that, rather than penalize all the Sudanese people."

Since the 1990s, Sudan has pursued rigorous economic reforms as well as oil revenue. The strategy has paid off.

The country's gross domestic product has soared from $3 billion in 1994 to an estimated $34 billion this year, while inflation dropped from 130 to 7 percent in the same period, Hamdi said.

"Broadly speaking, this country's economy is well managed," said IMF country delegate Wabel Abdallah.

But in the midst of prosperity, many Sudanese feel left behind.

"All the oil money is going to the government and its allies," said Jubara Hamed, a former army officer who now drives a taxi, as he sat amid old minivans and flashy new SUVs on a four-lane highway that did not exist two years ago.

Resentment over the way oil revenues are divided up has, in fact, exacerbated the nation's ethnic and regional divisions.

The government of President Omar al-Bashir faces three separate rebel movements in the east, south and west Darfur region -- all demanding more wealth-sharing as a key condition to sign peace deals.

In answer to its critics and foes, the government denies the money goes only to the elite.

Hamdi said nearly a third of Sudan's economy is driven by government spending, including a new health care system, universities and thousands of miles of new roads. Sudan's agricultural and service industries, he said, are also expanding.

All that could be threatened by sanctions, which have posed serious economic hurdles to growth in recent years, Hamdi said.

The U.N. imposed economic sanctions in the 1990s after Sudan hosted al-Qaida and other terror groups. Those measures were lifted in reward for its help against terrorism after the Sept 11, 2001, attacks.

The United States later reimposed its own economic sanctions as Sudan's civil war dragged on in the south. The U.S. recently stiffened those measures, due to suspicions the Sudanese government is orchestrating the violence in Darfur.

Three years of rebellion and brutal counterinsurgency in the region have killed more than 200,000 people.

Darfur's suffering seems a world away from the trading floor of the booming stock exchange in Khartoum, where brokers excitedly took orders on their cell phones one morning recently.

"We aren't the biggest exchange in the world," said general manager Isam Elzein Elmahi. "But we certainly have the fastest-growing business sector in Africa or the Mideast."

In his office high in one of Khartoum's largest office towers, Elmahi -- a Chicago-trained economist who sports a pinstriped suit and diamond-fitted watch -- hopes the government will next privatize part of its majority stake in the oil industry.

"We think the oil companies can drive our market much further up," he said.