‘Syria’s Revenues in Danger,’ Finance Minister Warns – Discussion by Ehsani2
Posted by Joshua on Saturday, March 17th, 2007
Ehsani2,
What do you make of a Syrian Minister talking about potential financial difficulties for the government.
It can indicate that the government is prepping the ground for privatization and possible government layoffs (get rid of the bloated bureaucracy). Remember they are working (supposedly) on establishing a stock market by the end of 07 which would serve as a great tool to dump the big government owned businesses that do nothing but bleed the economy. So, in a sense, that can be positive news. I will have to read the article again more slowly since my Arabic is not what it once was.
Syrian
You are absolutely right. They are laying the groundwork for the lifting of subsidies and “hopefully” for the divestiture of some of most bleeding public sector companies.
Desperate situations call for desperate measures.
In this case, hopefully privatization and the lifting of the subsidies will be the means to turn this ship in the right direction after 44 years of sailing into the abyss.
Ehsani2,
There are immense difficulties for sure, and balanced privatiztion is important, but lifting of subsidies? I doubt it!
As to the Finance Minister, on the two occasions when I met while he was doing the rounds outside Syria, he was for privatization but he was worried about a repeat of the Egyptian experience.
As to the news about the falling Oil revenue, I would take that with a pinch of salt. The true figures of the oil reserves were never publicized. The fields are extensions of the Iraqi fields. Very close actually.
His message in the Article four fold:
1- We intend to tax the “evaders” and will be tough with them, BUT the courts have the final word.
2- We need investment and we depend on it, so investors are safe,
3- Public Spending has to be curtailed
4- We need HELP, our Oil revenues are falling
But I do believe that it should be taken in the general context of the political dialouge going on. He is primarily highlighting the fact: Don’t forget that we need financial help!
But again Ehsani2, what is needed most is the Human Element. The managerial and the entrapernual element. They will bring in the money. They know where it is, they know how it is made, they helped make it for the investors, and they speak the language of those investors. Their mere presence would be an assurance to investors and to the country.
Brammertz: Lahoud’s Term Extension a Motive Behind Hariri Killing
A U.N. commission probing the assassination of ex-Premier Rafik Hariri said the extension of President Emile Lahoud’s term was one of three motives behind his killing.
corruption, and money taken out of the coubtry by Asad family and his loyalist, such as Khaddam Shehabi Makhloof etc. are major reason for the budget to be in such condition, one will ask how come real estate prices are such high,yet the tax on real estate is low,my bill for property tax on my house in Maliki is $20 , I was told my house worth $20 million lira last year, the same house in the USA have a tax bill of 2400 dollar, the goverment must be reduced, 2 million employee is too large for Syria, probably 1/4 of them are security forces,this is the cost of dictatorship.
$20 tax for a $400,000 dollar home! No wonder the government is running out of money. Where I live in the US the rate is 0.88/100 dollars.
Majed,
The system is broken. The example that you cited is one of so many things that need a total overhaul.
Ausamma,
The minister is telling you that oil is running out. Most independent analysts confirm this. Just because Iraq has an abundance of oil does not mean a neighboring country of her will also have it in abundance.
Your last paragraph was as follows”
“They know where it is, they know how it is made, they helped make it for the investors, and they speak the language of those investors. Their mere presence would be an assurance to investors and to the country.”
I am sorry but I don’t get it. The capital that is outside Syria is massive. It has not come back. What has come back to the country is a tiny fraction. Such investments do very little to improve the fiscal position of the government’s ledgers. I cannot see how this government can embark on a credible wave of privatizations or lifting of subsidies. Instead, the changes that are likely to come will be of the too-little-too-late category which has been the hallmark of this government’s economic policy.
The Syria of today is in desperate need of bold, decisive and visionary economic policy. Regrettably, what it will get is a cautious, indecisive and slow set of reforms that will do little to address the challenges facing it.
Ehsani 2,
Oil, we will not know about. The oil minister says 2022!
What you Qouted was in reference to my saying that the Human Element is important. The Manegerial and Entrapernual Element; hence the “they know where the money is, they know how to get it..”
And, no Sir, I am not talking about “Syrian” money outside. I am not counting much on “such” money! I was talking about the massive capital you mentioned which is outside Syria. Gulf primarily. They are just looking for a way to invest it. Out of frustration, most of it is being pourd in Real Estate projects in Dubai, Bahrain and Qatar.
And your last paragraph seem to only highlight my point: the Human Factor. “Bold, decisive and visionary economic policy”, can not be expected to grow on trees. Sure, not on the existing trees. You are talking about total shakeup. With which I cannot agree more. It is needed. But is it gonna happen? Not if it is TOTAL. You are asking incumbants to vaccate their seats, and you have no assurance of the compatibility of the successors. And So, you have to accept a somewhat slower pace with a Big input from the outside. You need good change management. I would not trust the System to implement it, but at the same time I would not want to see it left to the likes of Ernest Young and KPMG alone.
I wish it was simpler!
“You are asking incumbants to vaccate their seats, and you have no assurance of the compatibility of the successors.”
This is not what I said. Syria’s economic system is akin to a patient diagnosed with a dangerous disease. The government keeps convincing us that an advil will do the job. It will not. I am afraid that the patient will end up dying.
Ehsani2,
I would be interested to hear the reasoning that leads you to be so pessimistic.
Syrian,
Which part would you like me to expand on? The fiscal situation? The labor situation and the low GDP growth relative to the growth of the labor force? The lack of an export policy? The insufficient infrastructure to attract business?
The lack of property rights? The subsidies system?
Ehsani2, of course you did not say that. But it was implied in “the bold visionary economic policy”. You can not have Al Hassan and Dardarri wake up one morning and put out such a policy. The good persons they are. But it is just not gonna happen. Look at that example $ 20 per year on an Al Maliki house! Hell, we have four houses in Damascus, and I never really bothered what taxes we pay on them. Look at that example and tell me how easy it would be to reform such a system overnight. hell, you can imprison as many people as you want, and Damascus will be calm next morning. Try to implement that $0.80/$100 propert tax mentioned above, and next day the army would not be able to get to into Damascus.
Ehsani2, again, and without taking any from the importance of change, but it is not that easy or simple.
And why did you skip over my remark that I am not counting on expat “Syrian” money to come into Syria to develope it? I hope it was unintentional, because if like myself you beleive that we should not count on it, then this leads to a worse conclusion; the WHOLE system, people and government. And that leads to examining wider considerations relating to other more important areas.
“We” need To change! We can not just dump it on the System and turn our back. “We” are the System.
Not to imply that we should despair, but if we do understand our collective shortcomings, then we will have a hope.
Ehsani2 and Syrian , I hope the subsidies in general and on a wide scale will be lifted but that should accompany support for the poor Syrians untill their income increase , rich Syrians should pay market value for products and that will decrease smugling to Lebanon and Jordon , they can do that like what we do in the US via subsdies on elecric and Gas bills for the low income Americans,most poor Syrians do not have cars to worry about Gasoline prices.
Majed , as you well know that many Syrians park their money in real estate , that make some people own many houses and with low taxes on real state owners do not have the presure to rent or sell empty houses ,that increases the problem of housing availabelty ,
To correct these problem ,first house should not have taxes (that will increase housing ownwrship )but taxes should be paied on all other houses and should be clear that money can not be given from father to children without paying gift tax so people will not avoid paying taxes by puting the after the firs house in the children names .having more houses available will decrease the prices and children will be able to start their families without living with their parents.
Ehsani;
I agree total overhaul is necessary, but should not include major increase in tax, nor it should be sudden, it must be gradual, remeber tax is close to be a crime.( I am from Milton Friedman school) in USA the tax is extremely high, as for Ugarite, remember your tax on property is .11/100 dollar, the rest is to pay for schools,hospital and bonds etc,which is not for services for the real estate. but again the cost of dictatorship is very high,since they need protection from the people.
Ehsani2,
It is this statement that made me ask the question.
I cannot see how this government can embark on a credible wave of privatizations or lifting of subsidies.
Can you see a different government able to embark on a credible wave of …
What are the different charactaristics of this other government and can the current government do anything to morph into a credible one.
P.S. I found this study (undated) which you may have seen. Just skimming through, there seems to be quite a bit of activity in the “reform” arena.
20 Page pdf file Here
Privatization and lifting of subsidies is likely to face a significant opposition. The security apparatus will warn against it. The Baath party dinasors will vote against it. The President is unlikely to push for it in this political environment. This is why I made the statement that I made. Taking risks is not the hallmark of this leadership. Maintaining the status quo has served it well. Versions of the status quo is what we will get. Changes are likely to be of the too-little-too-late category for as long as they eye can see. Indeed, Syrians have become genetically programmed to prefer the go-slow approach. Dramatic and bold changes are always met with calls of caution, patience and let-us-not-rush type of mentality. The Advil tablet approach rather than a cancer-removing surgery is what the nation has been taught to embrace. The result is Chinese-torture style cracking of the system.
The opposition to wholesale privatization and lifting of subsidies is not likely, it is absolutely there. The problem is not one of will, it is ability. Fixing the Syrian economy fast will require measures that no one is able to accomodate. Massive layoffs, increasing prices and complete destruction of the production system (as lousy as it is, it still produces) is not an overnight undertaking. The attraction of foreign investment can indeed create jobs that are superior to the jobs granted by the government and can start the incentive process for people to seek those jobs.
Ehsani2,
In your opinion, can the government be in the process of building a foundation from which a private economy can emerge? If not, what things can they do to facilitate the process faster?
When I ask about what they can do, I am asking you to take into consideration the popular opposition to the different policy alternatives that they may come up with.
Syrian , interesting discution.I am enjoying it.
why should the syrians give Bashar another seven years?
Are we better off now than what we were seven years ago?
Is inflation is under control?
Is the eceonomy is better?
is our relation with the arab countries improving,especially Lebanon,KSA or Egypt?
did we get back the Golan Heights,or is our army is stronger today that there is hope of regaining the Golan Heights?
is the enviroment better,the health care is improvingthe goverment services are improving.
is there freedom of speach,or the people who talk are still go to jail,? did we abolish emergency rule?or law # 49,or military tribunals for civilians who speak their mind?
do we have democratically elected representatives?
seven more years of what?
Let’s not forget the impact on the Syrian economy of the 1.2 million Iraqi refugees in Syria.
Let’s hope that Milton Friedman’s economic “philosophy” is not implemented in Syria. It would be a disaster.
Syrian,
A private economy can emerge when the government offers the sector an environment of reduced red tape and less burdensome regulation. The private sector is not allowed to enter into a fair competition in sectors where the public sector already has presence (and it is plenty).
What they “can” do is embark on an export drive concentrating on labor intensive industries. For that to happen, Syrian and foreign industrialists need to feel safe in investing the vast amount of money that is needed for such capital intensive manufacturing businesses. For that to happen, infrastructure needs to be overhauled. This is what they can do. I doubt that it will happen.
Ugarit,
What “philosophy” would you recommend?
investment can not succeed where there is dictatorship, you need democracy for investment to succeed.
Majed , Spain under Franco was very successful.and that was a dictatership.
What they “can” do is embark on an export drive concentrating on labor intensive industries. For that to happen, Syrian and foreign industrialists need to feel safe in investing the vast amount of money that is needed for such capital intensive manufacturing businesses.
1. Is it labor or capital intensive industries you are promoting.
2. Every industry in Syria is likely to be Labor intensive. With labor being the cheap resource, investors will either seek labor intensive projects or will substitute labor for capital in order to take advantage of the cost savings. To give you an example, since my wife is not of Arabic heritage, I tend to rely on canned products for my middle eastern cuisine. I had wondered why I was not able to find canned middle eastern food of Syrian origin. Well, one day I found a canned pickled eggplant product that was the product of Syria, and I had to get some. Wouldn’t you know that the kind of can used was clearly not the automated type (Had a top that could be pried open with a fork.) The stuff was clearly canned by hand and I could not bring myself to eat it because I was concerned about the contamination possibilities that come up when you are hand packing for exports. The point is, canning is much cheaper in Syria when done by people than it is when done by machines. And as much as the government would like to modernize and introduce efficient technology, the incentive structure is there to use people and not machines.
Infrastructure is expensive but I believe the system is being overhauled. It was not long ago that I read somewhere that the government was providing additional phone lines and communication lines. I had seen an estimate that private automobile ownership increased 50% after the government reduced the import tarrifs on automobiles. New roads will be needed to accomodate this growth in automobiles and the government will have to provide them. Also, do not forget about the proposed improvements to the Tartous harbor, proposed rebuilding of the Iraqi oil pipeline, talk of trying to build new oil refineries…
Norman
I disagree IN 1995 a group of physicians(syrian american doctors) we presented the goverment with a plan to build GM factory in Syria,to build cars, it was denied.
Majed, 1995 was before Bashar took office , try now to open a factory , I think you will see diffrent reaction.
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Well Ehsani2,
If the oil is running out, how come we’ve stricken a 2 $ billion deal with Shell to prospect for oil around Deer Al Zoor area?
Dr. Landis:
Given the significance of Minister Al Hussein’s statement, don’t you agree we need a fresh post dedicated only for discussing it?
Unfortunately, I was unable to complete my analysis of the previous reports, but I am glad to see that the new Brammertz report confirms the impression that significant progress has been made in the investigation (they may even have found the video camera which was used to film the Adass tape (!); see §47) and that an extremist group was most likely involved in the attack, though it may not have acted on its own:
“44. … Another working hypothesis is that while an extremist group may have been involved in part in committing the crime as outlined in the tape and note, this group was actually manipulated by others for another objective not related to its own organizational aspirations.”
At the same time, the “motive to assassinate Hariri” discussed in §52-63 seems to point to Syrian and/or Lebanese opponents of Hariri rather than to an extremist group (e.g., it is unclear to me why such a group should be particularly concerned about Hariri winning the 2005 elections).
The new report merits a more detailed analysis and I will try to post more about it later.
I know some of the commentators are experts in their fields. My question is to Ehsani 2?
It seems to me that the government in Syria are too fragmented that the mister of finance on one wave and others on different waves. We hear from one minister but we do not see public and expert participation although there are plenty. This could be normal in Syria before 2000; however this is intolerable and is unacceptable in open economy. The government did not find their way in dealing with current and mounting economic problems. They need investors, experts and public participation but they keep all silenced. I believe they stuck with their own making and they are showing inability to find a way out of it. The recent news about widening Faisal Street and the confiscation of big part of the old city, shows how government is unable to stop its self from shooting themselves in the foot. Stupid acts continue, they could not realize that killing a sector dealing with building materials, a whole market, Almankhlia, with over 900 shops which has a face value (froogh) about 18 billion Syrian pounds, not to mention the chunk of the old city properties which is priceless is actually a removal of a big segment from the economic engine of the country. The old set of minds of the sixties, they still look at themselves as the savoir and at the merchants as the fat money mongers who are bad people who they should not worry about, are still life and well well. As an engineer working for a consultant in the USA, I find these types of projects are disastrous to the economy. Please if you can comment on this subject I do appreciate that.
Dear Trustquest and all the other participants,
One of the main areas of contention with my writing on the economy seems to concern the issue of the oil industry. Some believe that by 2010 the country will start to face a declining output. Many don’t believe this. Instead, they think that this is too alarmist and that 2022 is the earliest for such problems to surface. For the record, the issue is not whether the oil will run out. It is that the country’s demand for energy is running ahead of its ability to export it. As this product’s import bill exceeds what it earns from its exports, the government’s finances will suffer immensely. This is what this minister was trying to tell us.
More generally, the fact that we are even discussing and arguing over this point is a clear indication the country’s economic planning is non-existent. Given the importance of this sector to the country, one would have thought that a professional and objective study would have been performed and then presented to the public by now. The guesswork must stop. Syriacomment readers and others must rely on hard figures and data form the government rather than arguing amongst themselves with subjective statements that add little to our understanding of the basic facts. My comment here is not directed exclusively at the oil sector. The labor situation is very alarming. The number of jobs being created is far below the number of new people entering the labor force and seeking jobs. For the record, this occurs when a country’s economy grows below its potential (defined as the growth of the labor force plus productivity). The government seems largely silent on the issue and its repercussion on society.
But who is in charge?
As far as I recall, this President is yet to make a single appearance to exclusively discuss the economy. Why hasn’t he taken the time to make a speech to inform the public about the country’s oil sector and about the fiscal challenges facing its people? Instead, what we are left with is reading through the tealeaves to understand what Dardari, Hussain or others have to say. One is for privatization. The other is against it. One says that the oil sector could be in trouble by 2020. The other says that we need not worry till 2020.
This must stop. We need to learns “facts”. The president needs to step forward and articulate “HIS OWN” economic views and agenda.
One suggestion is for him to appoint one person to be the country’s economic czar. That person must report to the President himself. He must be a respected figure in international finance. He must have the respect of the international community of bankers and investors. He must set a new standard by declaring his full wealth before taking office. In sum, his integrity and qualifications must be beyond any doubt, He must finally get introduced to the world with this brief statement by the President:
“I have appointed this man to be the country’s economic czar. He reports to me directly. He promotes and represents my personal agenda. The buck stops at his desk when it comes to any questions or policy matters relating to the economy. I want to assure the people that I will hold a daily briefing with this man and will be personally involved in this critical issue given its importance to the country’s people”
Ehsani2 – Syria Comment's "Mr. Economy" – initiated a discussion in the previous comment thread about Syrian Finance Minister's interview with Syria News in which he ran though some economic forecasts and proclaimed that the country's revenues were in danger. Ehsani answers questions on why he things that is so. It is an interesting discussion and deserves its own post. (T_Desco promises a run down on the new Brammertz report. He gives a few preliminary observations below.)
First here are two recent articles demonstrating that the government is worried.
"Crackdown on state corruption in Syria" by The Oxford Business Group on Tuesday, 13 March 2007: (Thanks Atassi)
Here is an article on Syria's talks with Iraq on linking their energy networks in a deal that could lead to the country importing Iraqi crude as its own production declines, a senior Syrian official said on Tuesday.
Now for Ehsani's comments and the discussion:
EHSANI2 said: Dr. Landis,
As you recall, I have long held the view that the Syrian economy’s prospects were in a much worse shape than was commonly believed.
On their part, most government officials had followed the unified and consistent theme that there was nothing wrong with the economy. Indeed, all we heard was that investments were soaring and that a 7-8% economic growth was in the offing.
The article below needs no comment. I expect it to be the first of many that will start to warn the public that the country’s finances are in a desperate position. Only three sectors in the public sector are not in the red. Oil is going to be experiencing a deficit as early as 2008. If higher tax collections is going to indeed be the only source of future revenue, then God help this country’s economy.
When the country’s Finance Minsiter claims that the government’s “revenues are in danger”, there is not much else to say for the rest of us.
http://www.syria-news.com/readnews.php?sy_seq=50255