Friday, March 17, 2006

Gum Arabic Company--IPO in the Making?

Despite the 10D Detective's recent focus on the petroleum market in Sudan, the country's primary resources are agricultural (but oil production and export are taking on greater importance since October 2000). Although the country is trying to diversify its cash crops, cotton and gum arabic remain its major agricultural exports.

Although gum arabic, a resin exuded from the acacia tree, is a little known substance to a majority of the American public, it affects almost everyone's daily lives. Gum arabic, a derivative of the acacia tree, is an important ingredient in various products ranging from soda and candy to pharmaceuticals. European traders, who imported the products from Arabian ports such as Jeddah and Alexandria, coined the term `gum arabic’ and most gum traders of the time were associated with Arab countries.

The main uses of gum arabic are in the food industries, particularly confectionery, which uses about 60% of world consumption. It is also used in flavorings and in pharmaceutical preparations as a building and emulsifying agent. Other industrial products that use technical grades of gum arabic include adhesives, textiles, printing, lithography, watercolors, paints, paper sizing and pottery glazing.

Gum arabic exports from Sudan compose 70 to 90 percent of the world's supply. The state-owned Gum Arabic Company has a monopoly on the export of the crop.
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Other African suppliers of gum arabic include the nations of Senegal, Nigeria, and Mauritania, exporting 5.5%, 5.1%, and 4.9% of total world exports, respectively.

The gum arabic produced by countries other than Sudan is cheaper—but there is consensus that—alternative supplies are generally of lower quality, because the cleaning and grading are not as effectively and strictly regulated.

The US alone imports 4,000 to 5,000 tons of gum arabic from Sudan, approximately US$9 million a year.

“You don’t need a weatherman
To know which way the wind blows.”
[Bob Dylan]

Due to pressure from interested businesses, the United States House of Representatives passed legislation exempting gum arabic from the embargo. Some companies like Coca-Cola (CCE-$20.69) and Pfizer, Inc. (PFE-$26.05), reportedly rely heavily on gum arabic supplies from the Darfur region for the gum arabic used in their products.

Let us pray we do not have to invade Sudan to "guard this strategic resource." If we do find ourselves in Sudan to protect the unrestricted outflow of gum arabic, the 10Q Detective predicts that it will be under the cover of a U.N. mandate to protect the refugees in Darfur, or to seek out Osama Bin Laden and/or his associates in, "The Base," Al-Qaeda.
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And while we our troops are "visiting" in Khartoum, perchance Don Rumsfield, the U.S. Secr. of Defense, could ask some of his old friends, to come into Sudan and create a blueprint for a Western-style democracy--like his footprint in Iraq--replete with a capital market system. To take it one step further, why not privatize the Gum Arabic Company--take it public in an IPO?
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After all, Rumsfield has experience selling the idea of capitalism to totaletarian regimes. For example, in the year 2000, while on the Board of Directors of the global technology company, ABB Ltd. (ABB-$12.37), he approved the sale of engineering and design services and sytems' components to North Korea for two nuclear power plants!
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Sending in the armed forces to seek out "WMD"--weapons of mass destruction--would probably not fly this time around with the American public. The IPO story would probably make for better headlines on Wall Street.

4 comments:

amir said...

You can buy shares of the sudanese arabic gum company in their local stock exchange.

(I do not understand the purpose of the article. Is there a conclusions, or a question?)

David J. Phillips said...

Amir:

Thank you for the review of my article @ www.10qdetective.blogspot.com .

The point of my follow-up blog [re: GUM ARABIC COMPANY] to SUDAN Divestment had to do w/ the hypocrisy of the US Government--it's ok to tell US Companies not to do business in Sudan on ETHICAL grounds--BUT when the U.S. NEEDS gum arabic--because of its importance to the U.S. economy--ITS OK to EXEMPT gum arabic from these same sanctions. SLIPPERY SLOPE argument: the slaughter in Darfur is ok as long as it doesn't involve the gum arabic trade!

amir said...

I will try later to post a reply regarding the 'ETHICAL' part of your story.
In short, while people think they are doing the 'right' thing, they are actually destroying innocent lives indirectly. This is from a true observer (me) who lived in Sudan for more than 10 years prior to the Oil Age (prior to 1999).

# 56 said...

The "Divestment" efforts will achieve nothing. China is pouring itself into any void. If the Chinese will not act a NATO enforced, via the air, free zone is the only solution. Or the genocide will continue. expect the latter, nobody has the taste for blood, nobody cares when folks on that continent die. By the way, Rummy is SecDef no longer, David.