The lifting of subsidies has nothing to do with who is pushing for it. It has to do with simple arithmetic. As I have been writing on this forum for over a year, the country’s fiscal position is in trouble. How can a country hold subsidies at 19% of its Gross Domestic Product?

As the population expands (doubles every 34 years), the pressure will intensify further. This policy was wrong from the start. The numbers were small so no one really paid enough attention. The country now faces an 8000 pounds gorilla that is of its own making. They know that they have to do away with the program but they are afraid of the political repercussions.

Subsidies and entitlements are very easy to start. They are much harder to stop. We now have a SYP 350 Billion problem. People have been under a false sense of security. They have marveled at how cheap their bread, electricity and heating oil is relative to their neighbors. No one thought about the costs of these programs. The government economic planners seem to have finally woke up and smelled the coffee.

The subsidies have to go , Syria can not afford them , The Syrian government still has to be able to care for the Syrian poor while letting the rich who can afford market prices for products pay for them , food stamps for the people under the Syrian poverty line can be used , people who have cars for pleasure should be able to pay market prices so are the people who travel abroad ,

As for electricity , Syria can give credit to the poor on their accounts and have one price for electricity , so the poor will be subsidized while the well to do pay the market price .

EHSANI2 said: “How can a country hold subsidies at 19% of its Gross Domestic Product?”

Why can it not?

EHSANI2 said: “People have been under a false sense of security.”

False sense of security! Since when has it become a false sense of security for people to be given essentials, such as subsidized bread? The life of people is far more important than the theories of economics.

Ugarit,
Nobody said that the Syrian people should not have bread or other necessities , the question is why the Syrian government should subsidize products the rich Syrians can pay for , wouldn’t it be better if the money that the government saves by charging these people market value is used to make the life of all Syrians better , we have to remember that many of these people go to the EU on vacation where they pay market value , it is only fair that they pay market value in Syria , Isn’t it? .

lifting of subsidies should be slow and gradual.

Majed
It looks like they are doing that.

UGARIT,

You don’t know what you are talking about.

When you GIVE essentials, someone has to pay for it right? Why stop at bread? Why not also give them a car and a paid vacation too? What are essentials? Bread, electricity, fuel, rice and sugar already make the list. I am sure that you would recommend more.

“The life of people is more important than economic theories?”

How profound.

Which “people” ? the poor? How poor? Is there a cut off limit? Do rich people concern you too or are these subhumans to be taxed to the limit to help spread their ill-gotten wealth and to use their tax revenues to subsidize your socialist/communist dream.

It is people with ideologies like yourself who have bankrupted this country. The Baath ideologues got it dead wrong. They are now trying to find a way to undo the fiscal disaster that they helped create in the first place.

Hmmm maybe Eshani2 could enlighten us what economical theory supports agriculture production subsidies in USA and EU. Also price regulation is/has not been unknown in the western countries.

What Eshani2 constantly forgets that Syria is now on the same economical “level” as western countries were 50 – 100 years ago. And at that economical development stage EU countries had subsidies, custom barriers, price regulation, state owned industries, investment benefits etc. “Free” economies in the west is a very new invention.

This slogan of completely free economies is pure BS. There are none in the world. EU countries have just recently privatized for example the state owned telecom companies. USA protects own industries with numerous ways. ETC. It is completely unrealistic to think that Syria can jump on the same “free trade” level as European countries and USA without some planing and gradual moves. Well it could, but then Syria would be owned by multinational corporates and Syrians would work for foreigners.

Offering some social security to the country’s poor by artificially low food prices, cheap electricity and petrol is one solution, but undoubtedly not without problems. But many countries have started their economical development using this king of price regulation.

dear joshua
there are no baathists and Non baathists in syria. this idea is only in the mind of foreign reporters and writers. in reality there is no place for an baathist to take or not take an action. all decrees are taken by the president recommended and dicussed by a few people only on the high level of power. this justifies the bad economic process which is driven not by creating a better life for the syrians but by the lack of cash for the gov.

any speculations about baathists and non baathist is rather very shallow. if dardari is not baaathist he is not anti-baathist and cannot be. the situation is that you cannot differentiate betweeen the baathist and non baathiost because both are not there…hope you can see this reality. it is quite like Iraq. the whole issue is about a well made ad machine which tries to blame non existed baathists for the mistakes which happened or may happen. if you tell anyone in syria baout that…they will laugh for long….

EHSANI2 said: “When you GIVE essentials, someone has to pay for it right? Why stop at bread? Why not also give them a car and a paid vacation too? What are essentials? Bread, electricity, fuel, rice and sugar already make the list. I am sure that you would recommend more.”

Clearly you’re in the upper tax bracket, 39% is it?, because you don’t seem to grasp how the others live. Hope you’re never in charge of the Syrian economy because you’ll facilitate further hardship on Syrians for the sake of the “correct” economic model. But of course, the Syrian stock market would look good under your system.

So paid vacation is wrong? Or did you mean paid time off?

SIMOHURRTA asked EHSANI2: “Hmmm maybe Eshani2 could enlighten us what economical theory supports agriculture production subsidies in USA and EU. Also price regulation is/has not been unknown in the western countries.”

That question can’t be answered because supply side “economists” ignore facts and reality to fill their pockets with more cash.

The 2007-2008 World Economic Forum’s Global Competitiveness report was just released. Syria ranks much better than many would have expected. Full ranking here.

The Arab World Global Competiveness Report 2007 by the WEF included this detailed analysis about Syria (based on 2006 data). According to this year’s report, Syria’s score has improved slightly and it moved up 4 spots on the ranking. This year’s country analysis is not accessible yet.

The Syria Report has issued its views on this here: http://www.syria-report.com/article2.asp?id=2595&rub=6

The WEF report follows a subjective methodology (as it bases its analysis on indicators produced by different organizations) and there are many “issues” with its data. However, it is still a factor in most decisions taken in doing business.

I am not an expert in Economics, so Ehsani2 and others please help me answer few questions brewing in my head for some time now:

1) Fiscal deficit is usually a disaster when it constitutes more that 20% of the Country’ GDP! Right? How do we stand on that one?
2) I always thought that there was large amount of money that does not circulate in the economy and hence the Economy is smaller in Size that it should/could be. Does anyone have an estimate on how big the economy could be if that money is used?
3) How much does income tax account into the budget and the GDP. What are the numbers for competitive economies? How much is it in Turkey?
4) I come from a family of merchants and I know for a fact that merchants don’t pay half as much as they should. The government can’t just ask the poor to pay taxes what is being done to that effect?
5) How about service providers/contractos? How do they pay their income tax?

6) What is the percentage of subsidies that goes into commercial/industrial use as apposed to domestic consumption?

7) Inflation is rising due to strong demands, right? Is it possible to eliminate customs on goods every time the market price exceeds the international market price? Would that help?

Thanks

Idaf,
Look at table 3 on page 9. Syria is ranked as a stage 1 country. What are you happy about in this report? Turkey is a stage 2 country for example.

The ranking is important because how different factors in the competitive index are weighed depends on it. So the “competitivenes” of Syria is computed as that of a third world country. This is not really a race you want to be in.

I have been very impressed by the remarkable comments posted in this and previous threads, that were stimulated by Josh’s selection of articles. I see a glimmer that Syria might be at the edge of a new economy that will raise the standard of living for all its citizens. It has happened elsewhere and it can happen in Syria.

Many countries that transitioned from a managed economy had economic problems that remind us of Syria today:
1. Subsidies that impaired the government’s ability to adequately provide needed services (the health system for example).
2. A set of outdated regulations that stifles entrapreneurship and trade.
3. Import tarrifs that protect inefficient industries.
4. Inadequate compensation of government employees that breeds bribery.
5. A system of taxation that is increasingly ignored and evaded and lacks adequate accountability.
6. Insufficient capital to maintain and improve the infrastructure.
7. Spending national resources on adventures that are economically non-productive.

Consider the experience of the countries that made the transition from a managed economy. The Baltic countries are a good place to start. They began with fewer resources than Syria has now and today they have one of the highest standards of living in Europe. Every negative expressed in the comments in this thread were experienced in those countries and they came up with successful responses.
Study the transition in Russia. I think you will conclude that is not the way to do it. But in studying Russia note how far behind the rest of Europe Russia had become in economics, technology, product development, infrastructure, even safe air transports.

My concern for Syria, and I direct this comment to our blog site friends in Syria, is the negative attitude of “no can do” and “see, the others guys are wrong, too”. Negativity stifles creativity. It prevents progress. This is the most serious long term danger to the Assad regime. Syria’s real danger is not foreign countries, not internal disputes.
Some in this thread complain of a hegemony in the ME by America and Saudi Arabia. Wake up. Hegemony in the manner of pre 1914 international affairs does not exist any more.
There is more to be gained by friendly cooperative relations with a neighbor than by 19th century colonial type economic exploitation. Consider the economic advantages of a friendly, non intrusive relationship with Lebanon. Lebanon as a friendly neighbor has much to offer in financial services, tourism, trade and in many other ways. There is a commonality of peoples, a high amount of trade, and many common concerns. Syria has much to gain and little to lose that is worthy by extending the hand of friendship and cooperation.
France and western Europe are rejected by some Syrians because of their “history of colonialism.” There is no colonialism today. Europe has had no war since 1945. I cannot think of a time after 1200 AD that Europe has experienced peace for so long. Europeans are basking in the sunshine of peace and prosperity. They are in no mood for military ventures (even us Americans cannot stir them up). Instead, they have extended to you the hand of friendship, cooperation and even financial aid. Take their hand. Your people will be the better for it.That does not mean Syria has sold out to the west. It means Syria has joined the family of nations and desires to be an active economic participant.

One does not have to agree with my remarks about hegemony, 19th century colonialism or France in order to support an inspired economic change for the betterment of the people of Syria. There is no better calling for a government than to adopt measures that will provide a life for our children that is better than the life we have today.