Viewing cable 08KHARTOUM1416, LEADING BUSINESSMAN ON SUDAN'S AGRICULTURE SECTOR,

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	PP RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHKH #1416/01 2620631
ZNY CCCCC ZZH
P 180631Z SEP 08
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 1920
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNFUR/DARFUR COLLECTIVE
RUCNIAD/IGAD COLLECTIVE

	C O N F I D E N T I A L SECTION 01 OF 03 KHARTOUM 001416 
 
SIPDIS 
 
DEPT FOR AF A/S FRAZER, S/E WILLIAMSON, AF/SPG 
NSC FOR PITTMAN AND HUDSON 
ADDIS ABABA FOR USAU 
DEPT PLS PASS USAID FOR AFR/SUDAN 
 
E.O. 12958: DECL: 08/12/2018 
TAGS: ECON EAGR EINV EAID PGOV PREL SU
SUBJECT: LEADING BUSINESSMAN ON SUDAN'S AGRICULTURE SECTOR, 
FOREIGN-INVESTOR ACTIVITY, AND GOVERNMENT MISMANAGEMENT 
 
REF: KHARTOUM 98 
 
Classified By: CDA Alberto M. Fernandez, for reasons 1.4 (b) and (d) 
 
¶1. (C) Summary:  In a wide-ranging conversation, Sudanese 
business magnate Osama Daoud outlined a project to gradually 
develop as much as 1.26 million acres in northern Sudan for 
agricultural production.  Daoud sees Sudan,s agricultural 
potential as immense, but says that it currently has far to 
go to even meet its own needs, let alone become a major 
exporter.  Daoud blamed much of this on mismanagement and 
corruption in the ruling NCP regime.  However, he also noted 
growing Korean, Saudi, Gulf-Arab and Chinese interest in 
developing Sudan as a supplier for their food needs.  He said 
that the GOS recently hit up Sudan,s business elite for 
donations to assist Darfur's war victims, much as it had when 
the conflict began in 2004 (reftel).  End Summary. 
 
¶2. (U) Recently, Econoffs called on leading Sudanese 
businessman Osama Daoud Abdel Latif to discuss reports of a 
major agricultural-development scheme by Daoud,s DAL Group 
in Northern Sudan.  Daoud heads a commercial conglomerate 
that includes food processing (DAL Foods Industries), 
construction (DAL Engineering), real estate (Al-Sunut 
Development Corp.), and the Sudanese Tractor Company 
(SUTRAC).  He also holds the Sudan franchise for Coca-Cola 
distribution in Sudan.  In addition, SUTRAC is the sole agent 
for the Caterpillar Co. in Sudan.  Al-Sunut Development was 
among the 30 Sudanese entities targeted for sanctions as 
Specially Designated Nationals (SDNs) on May 29, 2007. 
 
INVESTMENT IN AGRICULTURE 
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¶3.  (SBU) According to Daoud, DAL group holds title to 1.26 
million acres of land in his native Nubia (north of Khartoum, 
including River Nile State), where it plans gradually to 
begin development for wheat production. Daoud said that DAL 
Foods imports 1.2 million tons of wheat annually to mill into 
flour.  Originally, wheat was imported from Australia, but 
now about half comes from Canada.  He described the soil in 
the region as fertile, and said there is ample aquifer (not 
Nile River) water for irrigation.  Daoud noted that in 
addition to providing wheat for DAL flour mills, he also 
planned the project to resettle in their native region fellow 
Nubians who were displaced by the filling of Lake Nasser in 
the 1960s. 
 
¶4.  (SBU) With support from the Arab Authority for 
Agricultural Investment and Development (AAAID), DAL is 
developing a 25,000 acre pilot project, with a target date of 
November 2009 to begin cultivation.  Drilling for water has 
commenced, he said, noting that the main issue is how deep 
the water is underground.  In a few months there will be as 
many as 30 rigs on the site.  DAL has also made a preliminary 
agreement with a Saudi co-investor for an additional 100,000 
acres. 
 
SUDAN,S AGRICULTURE:  A LONG WAY FROM LIVING UP TO ITS 
POTENTIAL 
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- 
¶5. (SBU) Daoud believes that Sudan,s agricultural potential 
is immense, but said that it will be a long time before it 
even is able to meet its domestic demand, let alone become a 
significant exporter.  He vehemently disputed an August 10 
New York Times article, alleging that Sudan is growing and 
selling vast quantities of food for export while receiving a 
billion tons of free food for international donors.  The 
notion that Sudan is exporting vast quantities of food is 
"ridiculous," he said.  The only successful agricultural 
development project currently in operation is a Saudi-funded 
project in Berber in North Sudan, according to Daoud. "The 
rest is all talk." 
 
BUT FOREIGN INVESTORS ARE SHOWING INTEREST 
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¶6. (SBU) Though still in early stages, there is serious 
interest from the Middle East and Asia in developing Sudan,s 
agriculture sector.  For example, Daoud said, Saudi Arabia 
has decided to phase out domestic wheat production by 2014, 
in an effort to conserve water resources.  As a result, Saudi 
Arabia is investigating opportunities to invest in 
agriculture projects overseas to meet its import needs. 
Private Saudi companies are interested in Sudan, but they are 
reluctant to do so without support from the Saudi government, 
 
KHARTOUM 00001416  002 OF 003 
 
 
which remains cautious.  Daoud attributed the Saudi 
government's caution to Sudan,s problematic relations with 
the United States. 
 
¶7. (SBU) Daoud said that right now the most serious 
prospective foreign investors are South Korean, who have been 
given land that they have started to develop.  Daoud also 
stated that there are numerous Chinese companies interested 
in investing in or supplying Sudan,s agricultural sector, 
noting that he will be traveling to China soon.  He commented 
that China has established a US$5 billion fund to finance 
foreign-investment projects.  The United Arab Emirates also 
are eager to establish a food link with Sudan, he said. 
 
GOVERNMENT MISMANAGEMENT AND DYSFUNCTION 
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¶8. (SBU) Daoud expressed frustration that successive 
governments (not just the current NCP-dominated one) have 
mismanaged the agriculture sector, and decried the Ministry 
of Agriculture's bungling attempts to promote production.  He 
noted that when the Agriculture Ministry decided that wheat 
should be grown, it sought to do so through a parastatal 
corporation called "Sin" (in Arabic initials,) rather than 
turning to experienced private sector actors.  The resulting 
wheat was completely unsuitable for bread, he said.  Under 
GOS pressure, DAL eventually agreed to take over the 
operation, but "to date, it has not delivered a single sack." 
 Daoud added that the project was "a complete waste."  He 
stated that although DAL would soon be producing wheat on its 
own, it could do a lot more with government support. 
 
¶10. (SBU) Daoud also blamed poor policy planning for the 
squandering of Sudan's tremendous natural resource wealth. 
"Sudan will find out very soon that it does not have the 
(Nile River) water supply it thinks it does."  He asserted 
that Sudan could save 70% of the irrigation water it 
currently uses by changing from the wasteful flood-irrigation 
technique.  He argued that the GOS needs to establish a 
think-tank or policy planning apparatus for agriculture, 
lamenting that successive governments have simply "dusted off 
the old files of their predecessors" and repeated past 
mistakes. 
 
AN EXHAUSTED NCP 
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¶11. (SBU) According to Daoud, the Ministry of Agriculture's 
problems mirror those facing the rest of the government. 
"Even ministers can't solve problems anymore," he said.   "If 
you really want to get anything done, you need to take it to 
the President," adding that the President probably had better 
things to do than negotiate with DAL Group over seed 
shipments.  Each ministry has become a little empire, he 
observed, with ministers unwilling or unable to delegate 
responsibility to their staffs.  As a result, "the civil 
service is being destroyed."  Daoud stated that he had 
suggested to Vice President Taha that a Prime Minister 
function as CEO and manage the government's day-to-day 
operations. 
 
¶12. (SBU) Daoud agreed with econoff suggestion that perhaps 
the NCP has simply been in power too long and is exhausted. 
In his view, constant ministerial shuffles point to a lack of 
new talent.  This is a shame, he said, because there are many 
talented Sudanese overseas with managerial experience.  He 
noted that DAL Group has made a point of recruiting Sudanese 
expatriates for managerial positions.  With their 
international experience, "they are the backbone of DAL," he 
said.  Daoud added that there are many qualified Sudanese 
expatriates who would jump at the chance to serve their 
country in government, but that they are deterred by the 
NCP's Islamic-fundamentalist ideology. 
 
DARFUR DEJA VU 
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¶13. (C) Daoud remarked that the government recently had asked 
the Sudanese business elite for donations to assist Darfur 
reconstruction.  He recalled that the GoS had made a similar 
appeal at the start of the Darfur campaign in 2004 (which 
Daoud told CDA about previously - reftel).  At that time, 
they were told the money would be needed to assist civilian 
casualties in the government's planned offensive to crush the 
rebellion.  &It will all be over in two weeks,8 officials 
had told them then.  "I hope it works out better this time," 
he quipped, although he added that he was not hopeful this 
would be the case. 
 
KHARTOUM 00001416  003 OF 003 
 
 
 
COMMENT 
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¶14. (SBU) Daoud,s tour d,horizon provides a glimpse into 
the views of Sudan,s traditional, Westernized business 
elite.  There is no love lost between them and the NCP, which 
has systematically marginalized such businessmen politically, 
as well as economically by channeling business to favored 
firms and government front companies (such as Sin).  His 
anecdotal comments on government incompetence and the NCP,s 
exhaustion correspond with our own observations, but we warn 
against drawing political conclusions about the regime's 
degree of competence based on comments from the business 
community, which routinely complains about government 
mismanagement and would likely do so under any regime. While 
Daoud is rightly scathing about the regime's economic and 
management prowess, he has a healthy respect for its coercive 
abilities and skill at political survival. 
FERNANDEZ