Monday, February 27, 2006

"The Economy is Worse Today" by an Aleppine Businessman

I recently wrote a dear friend - a businessman in Aleppo - to find out how the economy is fairing in Syria. I had recently written a short post about government efforts to liberalize economic regulations, relying heavily on government news announcements. It was an optimistic appraisal. A number of friends wrote to warn me not to be optimistic. "Government plans do not translate into action," they reminded me. "The economy is in the dumps." So I wrote my Aleppine friend to get a bird's eye view. Here is his response. (I hope others doing business in Syria will give their appraisals of the situation.)I have one reservation about some of these observations (see end of post).

K., writing from Aleppo
February 27, 2006
for "Syria Comment"

The economy is worst than it was a few months ago. Prices have gone up due to the falling price of the Syrian pound and do not come down when the price of the dollar moderates. The increase in fuel and cement costs have hit people hard and increased the sense of pessimism among the residents of Aleppo. The paltry rise in government employee salaries came as a real blow. Everyone expected more. Private sector employees cannot ask for an equivalent 5% rise in their salaries due to the high unemployment rate, which always seems to be increasing.

The government is never short of plans and declarations about the improving economy. But they never seem to materialize. People are, as always, distrustful of the government. To give you one example, the chamber of industry finally managed, after years of lobbying, to cancel import permits for good necessary to local industries. As soon as this law was implemented, however, goods arriving at the ports were denied entry on the pretext that they were banned from import (at least the import permit listed the conditions for such imports). Bribes became more substantial because goods sat at port with increasing demurrage charges and holding costs. In recognition of the increased damage to industrialists and businessmen, the same chamber of Industry recently succeeded in re-installing the old system of import permits, which it had so assiduously struggled to abolish. Ultimately, well-intentioned reform only succeeded in opening up new and unexpected avenues for bribery and graft. The wolves are many and shepherds few and unarmed.

In short, the intricate details are never dealt with on the ministerial level. Technocrats are frequently brought from the outside to reform a system of governance that, ultimately, can only be repaired by determined leadership from the inside and by fixing the judicial system, which is broken. The results so far are very discouraging. The general attitude is that the government is so confused and does not know what it is doing.

Another example is the story of a UNDP program praised by the UN as the most successful program in the world (and being implemented as a model in other countries) to develop rural areas in Jabal el-Hoss south of Aleppo. The director, who was appointed by both the government and the UN, was an honest man who constructed the program from scratch. He organized the community and gave its leaders responsibility to issue micro loans to small farmers. It became a real success because the director of the program was a very honest man. (I know the director because he has been a consultant at my farms for 10 years.) Recently, he was fired because he would not give out concessions to people higher up at the Minister's level. Outraged by his temerity and refusal to honor them, they accused him of corruption and impugned his professional integrity even though an independent auditing commission from the UN had reviewed his program only 2 months prior to his being fired. The Saudis are now courting him to implement a similar program for them. The UNDP was furious; it threatened to pull out of Syria because the minister acted on his own initiative in firing the project director without consulting the UNDP representative, as he was required to do. Despite this lamentable travesty of justice, the Minister of Agriculture was renamed to the new government. Things are not changing.

Food Items are 20% higher than last year. Real Estate prices are taking a hike due to the 150% rise in cement prices. Imported raw materials are much higher due to global inflation and rising fuel costs. Salaries are stagnant. Unemployment is growing. As for this "5 year plan," how can we be optimistic. We have never heard how much of the previous 5 year plan was implemented, and presume the worst. Once more, a plan from the top does not deal with the obstacles at the bottom. You ask anyone about the 5-year plan and his first reaction will be a smile bitterly.

As for corruption, I have not heard or seen any effective steps taken from the government to fight corruption. Business goes on as usual. Work on the road junctions from Aleppo airport to town has halted. The money allocated for the project and contractors ran out, and the project is incomplete. The budget allocated did not cover much. No one seems interested or courageous enough to demand an accounting of how the money was spent.

Aleppo was recently chosen as the Capital of Islamic Culture. A committee was appointed by the government in early 2005 to organize and oversee the cultural events. The committee consisted of two priests, two communists and a bunch of artists from the actors union. No one from the religious community was even informed that the committee was being formed. For the whole year, this committee did nothing. They did not even advertise their existence to the public. At the end of 2005, the news broke and banners were raised throughout the city, declaring its new status as the capital of Islamic culture. At this time, a few Muslim scholars started to organize and joined the committee. They are now rushing to organizing some events. According to SyriaNews, the budget allocated by the government is a mere 35 Million SP or 650,000 USD. The governor of the city decides where to spend this insignificant amount and he is spending most of it to repave the streets and clean the building. The scholars are trying to raise additional funds. It is a mess. Last year’s work is being hastily done now. This cultural event has turned into a mockery of the people, but only a very few can find humor in it.

People continue to ask why Abdul Halim Khaddam was left to steal and steal and now is being condemned while many others like him today continue to steal without being stopped by anyone. Why is Miro not investigated for corruption when his dealings are common knowledge among the masses?

The Minister of Finance is very active at reforming the tax system so taxes are on the rise. What is certain is that last year we paid less tax than this year. This is further complicating the stagnant economic conditions of the country.

The Government has now been busy for three years, organizing committees to assess and repay landowners who had their lands confiscated in the land reform acts of 1958, 1963, 1965, 1971 ..etc. The act stipulates that full payment should actualize within 40 years (can you believe the injustice). Even though it has been now 48 years and still no payments have been made. It does not look like these committees are doing anything. Courts are refusing to hear cases in this regard pending the results of these committees. We don't even know if they are going to appraise the lands at 1958 prices when 1 USD equaled 3 SP or if prices will be assessed according to the worth of the land today.

Most important is the Justice system. It is as corrupt as ever, and verdicts are handed to the highest bidder. The system is very slow. If you have all the necessary proof that someone owes you money, the case will take no less than 3 to 4 years before you get your money returned, and only then so long as you are prepared to devote up to 50% of the total for buying your rights.

You asked me for some observations about the economy, so here they are – just a few of in a never-ending list. Use what you see is fit on “Syria Comment” without using my name since it is not yet the time to air dirty laundry. Let me know if you need more details. I don't want to use the government server, so please use this new email address in talking about "sensitive issues."

Very best, K
Addendum: My sister-in-law, who worked for the UN's World Food Program until recently, is visiting. She read K.'s remarks about the UNDP project at Jabal al-Hoss and doubted that his account captures the full story. She said that there have been a number of UNDP and WFP programs in Jabal al-Hoss over the years and "there has always been a question mark over them. The region is very poor. A great deal of money has been spent on Jabal al-Hoss over the past decade, but the results are ambiguous," she insisted. "There have been very poor follow up studies so we really don't know how effective the projects have been." She doesn't know about the particular program described by K. however.

She also doubted K's assessment of the Agriculture Minister. She said he had a good reputation and suggested there may have been other complications K. may be unaware of. On the whole, she said, the top officials at the wazara al-ziraa have been responsive to UN demands, cooperative, and genuinely interested in local development. She said that usually issues of corruption involve government project managers who are directors of a nahiyya or Qada, not the top administrators in the ministry.


At 2/27/2006 08:42:00 PM, Blogger norman said...

These are complains you find when you move from govorment controlled economy to free market one, the prices are higher because they were artificialy low because of govorment support the increase of price of real estate propably has more to do with speculater of an economic recovery in syria than from raising the sement prices i beleive 20%,price gouging is another posibelity , about paying money to land owners who lost their land in the socialist revolution which started with Nasser not Bashar Asad is a noble endevor and the Syrian govorment should be recognized for it ,in the US there is a law which is called (immenent Domain)it allows the govormrnt to confiscate land for the public good and pay market value for properties not the value that the owners think they deserve so land owners should be very happy for that ,they should be paid todays prices in todays Syrian money,other options enclude to pay that time prices with dollar .about the taxes that the Syrians pay only employees pay taxes as about 70% of buisness owners do not declair a profit ,how can a country function without tax revenew ?.on top of that they complain instead of offering solutions.there are stories and st=ories about how some people sold stores in the endustrial zone in Homs for 20 milion syrian pound to pay only 20 thousands Syrian pounds in taxes ,others pay off poor govorment employees bribery so they do not pay their fair share of taxes the they blame the poor govorment employee who can not afford feeding his kids Flafel on his salary.instead of blaming themselves for bribing them in the first place ,the one who offers bribes is as guilty as the one who recieves it and should be punished.

At 2/27/2006 08:59:00 PM, Blogger George Ajjan said...

I had asked these questions on Ehsani's post about "Hugo Chavez Economics", but the thread died out, so I hope now readers will offer comments and discuss the following questions:

How would you rate the Syrian agricultural sector?

What are the prospects for additional fully-owned foreign manufacturing facilities in Syria? Nestle was the first, from 2001 I believe. I was recently informed that a French cheese company is only the 2nd. Why the slow pace?

Is the "licensee" manufacturing model an effective one for the Syrian economy? How should it be modified/altered?

At 2/27/2006 09:30:00 PM, Blogger majedkhaldoon said...

the french cheese company, is built by a rich syrian man his name is Abdulrahman Attar, he has property in syria ,france ,and Texas, he has connection with the goverment, his brother was murdered by the goverment 30 years is estimated that he worth over 100,million dollar.
the syrian agriculture sector is rated 4/10, mainly because the lack of equipment, in Sasaa ,south of damascus, there are only three trucks that can plough the land,the other factor is lack of water, no one can dig a well, unless he is able to bribe, a simple well cost million lra worth of bribe, there are many farms in Ghab area, and in Heffeh that are very cheap, the farmers left there and came to Damascus ,drive a taxi ,they make more money and tell their relative that they live in Damascus, something to be proud of.Corruption is a widespread in syria,a group of Nyrses in Almujtahed Hospital, stole a lot of Medicines, to sel them in many Damascus Pharmacies, and so on.

At 2/28/2006 05:27:00 AM, Blogger I Want to Break Free said...

To Norman,
The complaints are there to support the argument that we have no such transition to a market economy. The situation is not a socialist nor a free market economy -- it is simply a very bad economy going nowhere!!! The price of a cement bag (government price from the cement government company) was 180 SP and now it is 420 SP. (this was done by a new decree). You do the math. As for paying for land owners, why not let the courts decide what is right instead of interfering and making committees that do not work. Please give me some honest courts first. The Baath made most of the land reform acts and Nasser made only one. (the ruling progressive front coalition in syria is composed of 90% basthist and Nasserists, so it is still the same government responsible for the acts and it is their responsibility to make restitutions). The last one was issued under Hafez Assad. As for most countries, they make it mostly on VAT taxes and not income taxes (except the US). Anyway, syria's model is based on very high taxes (20,000 USD income is taxed with 63%) and high custom tarrifs, and therefore bribes are a necessary part of a system which was not put there in the first place to function without. Finally, you sound too theoretical to be actually living in Syria feeling what is on the ground.
Regands to Norm

At 2/28/2006 09:58:00 AM, Blogger t_desco said...

A new Asia Times article by Ashraf Fahim extensively quotes a very well-known expert on Syria . ;-)

Syria in US's too-hard basket

Dr Joshua Landis, an expert on Syria from the University of Oklahoma (and author of the blog, says the US has gone out on a rhetorical limb without the wherewithal to back up its bravado. "The US is in a bad policy position because it has pursued a very aggressive anti-Syrian policy yet it doesn't have the power to follow through with it, to change the regime, which I believe will take military force," he told Asia Times Online. "It's unwilling, on the other hand, to come to some understanding with Assad, which could also produce benefits for the US, whether in Iraq or in Lebanon and Palestine."

Washington is also paralyzed by the fear of what might come after Assad. The majority Sunni population could be even less amenable to US interests than the ruling minority Alawite clique, and Islamist gains in elections in Palestine, Iraq and Egypt hint at similar rumblings beneath the opaque shell of Syria's body politic.

The initiative to fund the Syrian opposition and recent State Department efforts to gather it under one banner cannot be effective in the short term, said Landis. "The problem is the Syrian opposition in exile are extremely weak and none of them have many followers in Syria."

Longtime secular opponents of the Syrian regime living inside Syria issued a statement on February 21 rejecting US funding. And Landis believes that the effort is further weakened because the exiled opposition does not reflect the Islamist trend. "There is every indication ... that if you were to have elections you would have something along the order of what you've had in every other [Arab] country, which is 65% of people voting for some kind of Islamist tendency."

US attempts to isolate Syria, however haphazard, are also foundering on the international community's unwillingness to destabilize Damascus, with the region already groaning beneath the shadow of Iraq's maelstrom. Also, for such states as Russia and China, Syria as well as Iran are chips in the great game in the Middle East in which the teetering Iraq project has illuminated hairline fractures in US regional hegemony.

Thus, even as the investigation into the murder of Hariri reveals the possible culpability of Syrian officials, it also reveals a lack of international political will to hold them accountable. Landis points out America's failures to get the UN Security Council to take decisive action.

"Both Detlev Mehlis [the former UN chief investigator into Hariri's death] and Serge Brammertz [the current one] have indicated that they have evidence that they feel confident would implicate the top Syrian administrators, so in theory they should just go to an international court, prove it and put them in a jail," he said. "But you have to get the UN Security Council to vote on all of this, and it's clear that America doesn't have the votes."
Asia Times

One should note, however, that there are conflicting reports on Brammertz and the evidence implicating Syria. The Daily Star and Asharq Alawsat reported in late January that the evidence was sufficient:

UN 'has enough evidence to pin Hariri's assassins': source
January 26, 2006

UN Chief Investigator Serge Brammertz "has enough evidence to pin Hariri's assassins," according to judicial sources, as Lebanon's top officials prepare to discuss the nature of the court that will try those accused of assassinating former Premier Rafik Hariri.

The judicial sources said that Brammertz, who succeeded Detlev Mehlis in leading the UN probe investigating Hariri's murder, "has told a Lebanese officials whom he met since his arrival in Beirut last Thursday, that he has enough evidence and information from the files he received from Mehlis to determine and pin those involved in Hariri's assassination."
Daily Star

Brammertz reportedly has evidence to identify those involved in Hariri killing

Judge Serge Brammertz, the newly appointed head of the UN investigation into the assassination of former Lebanese Prime Minister Rafiq Hariri, has informed Lebanese officials that the dossier handed over to him by his predecessor Detlev Mehlis contains enough information enabling him to identify those responsible for the murder and demand they stand trial.

According to informed sources, Brammertz indicated that he intended to complete his mission within the next two or three months and prepare a final report to the UN Security Council. ...

Meanwhile, diplomatic sources at the UN headquarters have indicated that the investigation team “has recovered the voice recordings of Syrian officials that include threats to Prime Minister Hariri. These recordings are one of the most important peices of evidence in the investigation that [Former investigator] Detlev Mehlis wanted to keep confidential.”

The same sources predicted that the “Syrian leadership would have become aware of these recordings and was, therefore, preventing its officials from meeting with the investigators.
Asharq Alawsat

After being briefed by Brammertz in New York, a diplomat struck a more cautious note:

Brammertz, who is due to give the Security Council a report in March, briefed some Security Council members last week. One diplomat in New York suggested the inquiry might slow down so he could see if evidence collected so far could stand up in an international court.
Reuters, Feb 16, 2006

More recent reports are less optimistic about the evidence:

A Middle East news agency reported that Mehlis' successor was surprised to find lack of evidence in the files, and that he expected a period of years before the "truth" is found.
As'ad AbuKhalil, February 26, 2006

Baabda estime que Brammertz soulèverait « d’autres options » que Mehlis

Les milieux de Baabda se sont félicités hier du « style » avec lequel Serge Brammertz, le nouveau chef de la commission d’enquête internationale sur l’assassinat de Rafic Hariri, mène son action et évoquent la possibilité de le voir soulever « d’autres options que celles de son prédécesseur », Detlev Mehlis.
L'Orient-Le Jour, 28 Février 2006

At 2/28/2006 03:28:00 PM, Blogger ugarit said...

Syria can add to its economic portfolio by enhancing its information technology (IT) infrastructure and industry. It can become a software development and information technology hub for the EU. I know India is doing it but Syria is the bridge between Europe and Asia and its culture and history is more similar to Europe, relatively speaking, of course. One possible area is the arena of open software and systems information technology.

However this would necessitate a large intellectual and technological investment. Syria should lobby the EU's IT firms to assist.

At 2/28/2006 09:17:00 PM, Blogger norman said...

The land confiscation law was a bad one and should have been chalenged in the courts at that time , the problem is that the constitution was either dismissed or non existent ,the question is what to do now ,after 9/11/2001 the US established a comition which set the amount that the american govorment will compensate the victems families to avoid lrolonged court proceedings Syria can do the same and if any land owner does not agree he can go to court and risk loosing his case or compensation of lower amount ,and yes i live outside Syria but that gives me better view of what is important which is to look for the future not the past ,yes Syria should correct the mistakes of the past but not to dwell on them and continue the hate which is destroying Syria.

At 3/01/2006 10:46:00 AM, Blogger I Want to Break Free said...

To Norman,
How about auctioning off the assets of the Assads and the Makhloufs and paying pack what the government owes to deprived ex-land owners. If they can not pay for it, why not return it back to its rightful owners. The US government did not make a law and confiscate property then did not compensate. Let me just point out that your anoology is completely off-track


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