Tuesday, June 08, 2004

Lebanon and the Syrian Economy

According to the Daily Star, The Lebanese Presidential vote is a Lebanese matter: Assad: "By Nayla Assaf

Syrian President Bashar Assad said over the weekend that the presidential elections here, set for November, were a 'purely Lebanese issue' and that Syria would not have the final say on extending the term of the current president, Emile Lahoud, through constitutional amendment.

Assad also stated that the presence of Syrian troops in Lebanon was 'temporary,' linking it to the Middle East peace process." Once there was peace in the region, Syrian troops would quit Lebanon, he suggested. Assad's comments came shortly after statements by US President George W. Bush and French President Jacques Chirac were made public which called for Lebanon's sovereignty and independence.

Assad told Al-Qabas that the Taif Accord (1989 National Accord Pact), which stipulates the redeployment of Syrian troops to the Bekaa Valley, had been implemented through a series of recent redeployments. Assad also stressed the sovereignty, independence and unity of Lebanon.

"It is true that we do influence the Lebanese situation and anyone who does not admit that is far off from reality. But throwing everything on us is wrong," he added.

According to Metn MP Pierre Gemayel, a member of the pro-sovereignty Qornet Shehwan Christian opposition group, Assad's statements may mean that President Emile Lahoud's term will not be extended. "If like he (Assad) says, Syria will not interfere in the presidential elections, then I believe that we will not witness a renewal of the presidential term. The Lebanese people do not want the constitution to be violated or amended."

Since it is unconstitutional for a president to run twice or have the presidential term extended, any such action would require that the constitution be amended, as it was previously done in 1995 when the term of then-President Elias Hrawi was extended for three years.
Al-Jazeera added:
"The (pullout) issue consists of stages. The first relates to the Taif agreement which has been implemented. The other is subject to a Lebanese-Syrian agreement, regional developments ... and the issue of peace," in the Middle East, Assad told Al-Qabas daily in an interview. He said Syrian troops were mainly in the Bekaa Valley along with the Lebanese Army to ward off any Israeli attack, which could put Damascus at risk. "We are no longer present in the Lebanese interior. There are no Syrian troops inside the Lebanese cities," Assad said. "The presence of Syrian troops is temporary and not at all permanent ... We talk about a strong and independent Lebanon. We recognize its independence ... and we always concentrate on Lebanese sovereignty," he said.

Syria has an estimated 20,000 troops stationed in Lebanon. Damascus is also closely linked to the Lebanese group Hezbollah based in southern Lebanon. The United States and several European countries have been pressing Damascus to withdraw from Lebanon and the US Congress has passed the Syria Accountability and Lebanese Sovereignty Act, which calls on Syria to end what it terms the occupation of Lebanon.
These reasuring statements about Syria's limited goals in Lebanon should go some way to dispell the notion of many that Damascus is secretly determined to carrying out some Greater Syria fantasy. Perhaps, most important, it will convince Syrians themselves that Lebanon is not an illigitimate country that must return to the bossom of its Syrian motherland.

Kurdish Media reported that
Aziz Daud, a Kurdish leader called for Syria to pass a law legalizing the formation of political parties
DAMASCUS, June 6 (AFP) - 14h50 - A Kurdish leader, Aziz Daud, called Sunday for the authorities to draw up a law authorising political parties in Syria, following a warning that the Kurds’ unofficial movements would no longer be tolerated.

"The decision to repressively ban the Kurdish movements will provide neither security nor calm," he said. "The solution would be to pass a law" on the creation of political parties, said Daud, who is secretary general of the Kurdish Progressive Democratic Party, in a statement. "The Kurdish political parties are patriotic movements which have been in Syria ever since independence (in 1946). They will not halt their political activities," insisted Daud.

"Their presence in Syria is like that of the National Progressive Front parties and banning them amounts to a discrimination against the Kurdish people," he said, in a reference to the country’s ruling seven-party coalition.

A human rights activist, lawyer Anwar al-Bunni, said Thursday the Syrian authorities had warned Kurdish leaders that their unofficial movements would no longer be tolerated, amid a crackdown on the minority.
Syrian Economy
The debate in Syria over whether to cut employees at the state industries and in ministries is heating up, as the following article suggests.

The Daily Star reported on Monday, June 07, 2004, that Syria's textile sector loses $32 million dollars
DAMASCUS: Syria's state-run textile industry has lost $32 million in recent years, the ruling party's Al-Baath newspaper reported Sunday, slamming the figure as "catastrophic." "The state textile industry has registered losses of 1.622 billion Syrian pounds ($32 million) while some companies made a profit of only 78 million Syrian pounds," the daily said.

The textile industry is traditionally considered a pillar of the Syrian economy, but has been hamstrung by "high production and energy costs, as well as high levels of waste," Al-Baath said. It added that some members of the industry "feared introducing reforms that could enhance its performance." Syria has in recent years implemented reforms to develop its private sector, but the government insists that state industries will not be privatized. - AFP
Asad is priming the economic pump in Syria by increasing state employees' salaries by %20 again. He did this once before in 2002. My brother-in-law, who works for the Ministry of Agriculture was very pleased at the time, as were most Syrians. In 2002, the salary increase accounted for around 1.25% of growth out of a total GDP growth of 3.6% that year. This form of Keynesian economics may beef up economic growth, which, at a projected 3%+ expansion this year will just nose out expected population growth. 3% is considered anemic for Syria, which needs to grow much faster to really improve living standards and provide jobs for the many young people pouring into the job market as well as for those already languishing in the ranks of the unemployed, which is officially calculated to be 25%.

This is why so many officials are reluctant to cut overstaffed state factories and ministries. About 2m Syrians receive state salaries - (1.2m employees, 400,000 military, and 400,000 retirees). That is around one out of every 4 adults. Unfortunately, this is not out of line with other MENA countries. According to the IMF, something like 30 to 35 percent of GDP in the region is coming from central government expenditures. Something like 30 or 35 percent of wages comes from the public sector.

What's more, large layoffs would undercut the government's pump priming. But without layoffs, many argue, inflation will rear its ugly head and eventually wipe out tonic of increased salaries. Syria needs strong medicine. Some of these problems are described in a recent report by The Oxford Business Group: Damascus, June 7th .

Income Tax
Here is a factoid which reveals just how large Syria's economic problems are. Modern governments depend on income taxes to supply the bulk of revenues. Not Syria.
Mohammad al-Atrash, Min. of Finance, provided the following statistics to explain how inadequate and lopsided taxation is in Syria.

The Public sector contributes 13% of GDP.
The Private sector contributes 87% of GDP and employs 60% of the workforce
but
In taxes, the Public Sector paid 92 bil SYP
The Private sector paid only 10 bil in SYP - or 1/9th of income tax is paid by the private sector which generates 87% of GDP!

The only people who pay income tax in Syria are government employees, because they have it taken directly from their salaries. There is no effective tax collection system for the private sector. Instead, Syria imposes high tariffs. Import and export duties, which impede trade, have been funding a disproportionate amount of gov. revenue.

But tariffs will be dramatically reduced once Syria begins to comply with the new trade agreements signed with the EEC and eventually the WTO. As this revenue stream to the government dries up, new taxes will have to be implimented. Most important will be enforcement of the income tax. This is an extremely difficult undertaking. It probably surpasses the bureaucratic capabilities of the government. How can one administer an income tax in a country where no one has a bank account, and where every one still pays their bills by walking over to the electric company or gas company to pay it in cash? Not even the mail is trusted to convey business.

What's more, enforcement of an income tax - even if it were possible, would surely provoke widespread public resistance. It can come as little surprise that the Syrian government has been dragging its feet.

The quick fix will be to impose a VAT tax on consumption like Europe.

The key to all fiscal reforms must be an efficient and reliable banking system. This is where Syria is light-years behind its neighbors, especially Lebanon. Hopefully the entrance onto the Syrian stage of Lebanese banks with their many years of experience will guide this revolution smoothly. The impact of new capital markets and mortgage possibilities are already having an impact. Apartment prices have been skyrocketing in Damascus this year. Now is the time to buy. A third bank just opened its doors in Syria two days ago. What Syria needs is stability and time now. Bashar seems to have a taste for diplomacy. His trips to Spain and Kuwait this week show that he knows how to smooth the waters. Hopefully he will have the courage and authority to gore a few sacred Syrian cows as well.

1 Comments:

At 8/17/2007 01:20:00 AM, Blogger Maldives Islands said...

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