South Sudan split from Sudan over a year ago after decades of civil war that left the new nation with almost no industry or infrastructure outside of the oil sector.

The former rebels running the country are eager to bring in foreign investment to help develop the economy, but have struggled because of issues including instability, inflation, corruption and a lack of infrastructure and laws.

Nevertheless, South Sudan's cabinet announced last week the country would set up its own airline in a bid to better connect the landlocked nation with the outside world.

"We're going to develop a public-private partnership in order to establish a South Sudan airline ... It will be run commercially by an international, reputable company," Deputy Minister of Transport Mayom Kuoc Malek said in an interview.

"This project is a priority because as a landlocked country we need to reach the outside world, and the best way to reach the outside world is to have an aviation industry which is efficient," he said.

The government plans to take a 20 percent stake in the airline, sell 31 percent to the domestic private sector and 49 percent to international investors.

Some 22 airlines currently serve Juba International Airport, mostly from African neighbours such as Kenya, Uganda and Ethiopia.

South Sudan's economic future was thrown into doubt when it shut down its oil industry in January in a dispute with Khartoum over how much it should pay to export crude through Sudan.

The move erased the source of 98 percent of South Sudan's state revenues, although Juba has since reached an interim deal with Khartoum to open the way to resuming exports.

CHINESE LOAN

Malek said a committee planned to review tenders from companies and select one after about a month.

"There are companies which have shown interest, but we have to advertise to get more," he said. "We'll go for modern planes, the Boeings, the Airbuses, and also other suitable aircraft which can operate in the Republic of South Sudan."

The new country will also need to bring in experts to help set up the airline, he said. He did not say how long it might take to get the airline running or name any of the potential investors.

The biggest carriers in the region include companies like Kenya Airways (KQNA.NR) and Ethiopian Airlines. South Sudan said last week China would provide a $158 million loan to help finish a new airport in Juba.

The work will be done by Chinese companies and supervised by South Sudan's transport ministry, Malek said.

"Once we're satisfied, we tell the minister of finance ... to tell the Chinese Axim Bank that this part of work has been done, you pay that company," he said.

South Sudan seceded from Sudan after voting for independence in a referendum promised under a 2005 peace deal that ended decades of civil war. (Editing by Alexander Dziadosz and James Jukwey)

• A Permanent Economic Emergency