Syria & Economic Freedom in the Arab

World Report2009

1Fatima Aljijakli

BRIEF HISTORICAL BACKGROUND 1946 -1958 *: Syria had a relatively well-developed promising agricultural

and industrial base under Free Market .

1958-1961: When Arab Nationalist and socialites ideas dominated Syria the economy went under sever nationalization movement that targeted all sectors.

1963-2005: With Ba’ath Party assumed power, Syrian economy entered a new ear of centralized controlled economy.

1991: As the world was moving toward globalization, Syrian Government had to move fast to maintain income stability and new investment law was in order.

2006: Syria government made a what was described back then as a historical decision into moving toward the social market economy.

* Source: Report Of A Mission Organized by the International Bank for Reconstruction and Development 1956, World Bank Group.

Components of The Economic Freedom of the World Index

Size of government and taxation Private property and the rule of law Soundness of money Trade regulation and tariffs Regulation of business, labor and capital markets

Based entirely on objective or third party data for 141 countries

3

Economic Freedom Report of the Arab World: 2009 Annual Report

Source: Economic Freedom of the World: 2009 Annual Report, Fraser Institute

Syrian EFW World Rank 1980-2007

Note: In 2002 Fraser Report introduced new Arab Countries, that’s why Syria Regional Ranking had deteriorated more than the total score.

Syria had been fallen behind Arab countries average rating by 1.5-2 point since 1980 till date.

Syrian EFW Summary Rating 1980-2007

Source: Frasier Institute

Executive SummaryThe level of economic "freedom" remains low in Syria according to an annual survey published by the Fraser Institute.

Syria ranked Index (EFW), 124 out of 141 countries covered by the 2009 edition of the Economic Freedom with a score of 5.78.

Syria scored and ranked best in the sound money area, it ranked 82 globally and had a score of 7.79. Sound money covers divisions such as money growth, standard deviation of inflation, inflation rate and freedom to own foreign currency bank account.

Syria did worst in regulations, especially in labor market regulation with a rank of 123 and a score of 3.7.

As for the other indictors Syria raking was slightly unchanged ranging improvements or declines by fractions.

In the region, Syria ranked before last with only Algeria doing worst.

Size of Government

Size of Government: 5.81 General government consumption spending 7.44 Transfers and subsidies N/A Government enterprises and investment D. Top marginal tax rate: 2.00 (i) Top marginal income tax rate 8.00 (ii) Top marginal income and payroll tax rates:8.00

Source: Economic Freedom of the World: 2009 Annual Report, Fraser Institute

Size of Government Expenditure, Taxes and Enterprises

Source: Economic Freedom of the World: 2009 Annual Report, Fraser Institute

Syrian Arab Republic: Selected Economic Indicators, 2004-08

Prel. Proj

2004 2005 2006 2007 2008

(Change in percent, unless otherwise indicated)Total population (millions) 18.8 19.3 20.4 20.8 21.3Government finances Revenue 27.2 24.0 25.5 22.3 21.4Oil- related revenue 11.2 7.1 7.3 4.9 4.7Non-oil revenue 16.1 16.9 18.2 17.3 16.7Expenditure 31.4 28.5 26.6 25.7 24.9Current expenditure 19.0 18.1 16.3 16.1 15.4Development expenditure 12.4 10.4 10.3 9.6 9.5Credit to public enterprises 0.5 1.7 3.4 7.6 9.2

Credit to private sector 4.3 6.9 3.5 4.3 6.0Credit to private sector (change in percent)

35.0 45.9 17.9 20.2 25.8

Credit to private sector (in percent of GDP)

11.7 14.5 14.9 15.1 15.0

(In billions of U.S. dollars, unless otherwise indicated)Balance of payments Current account balance -0.4 -0.6 -0.9 -1.4 -2.3(in percent of GDP) -1.6 -2.2 -2.8 -3.3 -4.1

Source: Syrian Authorities & International Monterey Fund Staff Estimates and Projections, January 2009.

Legal Structure and Security of Property Rights

Legal Structure and Security of Property Rights 5.12 Judicial independence 4.36 Impartial courts 4.23 Protection of property rights 7.69 Military interference 3.33 Integrity of the legal system 8.33 Legal enforcement of contracts 3.22 Regulatory restrictions of sale of real property 4

Source: Economic Freedom of the World: 2009 Annual Report, Fraser Institute

Legal Structure and Security of Property Rights

Source: Doing Business 2010 Syrian Arab Republic Report, World Bank Group –IFC, 2009

Access to Sound Money

Access to Sound Money 7.79 Money growth 8.68 Standard deviation of inflation 8.25 Inflation: most recent year 9.22 Freedom to own foreign currency bank accounts 5.00

Access to Sound Money

Standard deviation of inflation 8.25 Inflation: most recent year 9.22

Money growth 8.68

Freedom to Trade Internationally Freedom to Trade Internationally 5.60 A. Taxes on international trade 5.17 (i) Revenue from trade taxes (% of trade sector) 7.55 (ii) Mean tariff rate 6.08 (iii) Standard deviation of tariff rates 1.89 B. Regulatory trade barriers 6.30 (i) Non-tariff trade barriers 5.01 (ii) Compliance cost of importing and exporting 7.60 C. Size of trade sector relative to expected 5.38 D. Black-market exchange rates 8.69 E. International capital market controls 2.44 (i) Foreign ownership/investment restrictions 4.89 (ii) Capital controls 0.00

Freedom to Trade Internationally Black-market exchange rates

Freedom to Trade Internationally

Source: Doing Business 2010 Syrian Arab Republic Report, World Bank Group –IFC, 2009

Regulation of Credit, Labor and Business

Regulation of Credit, Labor and Business 4.50 A. Credit market regulations 4.79 (i) Ownership of banks 0.00 (ii) Foreign bank competition N/A (iii) Private sector credit 4.36 (iv) Interest rate controls/negative real int. rates 10.00 B. Labor market regulations 3.69 (i) Minimum wage 4.02 (ii) Hiring and firing regulations 3.66 (iii) Centralized collective bargaining 7.01 (iv) Mandated cost of hiring 4.83 (v) Mandated cost of worker dismissal 2.58 (vi) Conscription 0.00 C. Business regulations 5.02 (i) Price controls 2.00 (ii) Burden of regulations 3.84 (iii) Bureaucracy costs 5.80 (iv) Starting a business 5.93 (v) Extra payments/bribes 3.77 (vi) Licensing restrictions 7.57 (vii) Cost of tax compliance 6.23

Regulation of Credit, Labor and Business

2009 The Syrian Arab Republic eased business start-up by lowering the paid-in minimum capitalrequirement and allowing online access to standardized incorporation forms. *

A. Credit market regulations

* Source: Doing Business 2010 Syrian Arab Republic Report, World Bank Group –IFC, 2009

Regulation of Credit, Labor and Business Doing Business Report 2010 *

Source: Doing Business 2010 Syrian Arab Republic Report, World Bank Group –IFC, 2009

RECENT GOVERNMENT ACTION TO IMPROVE ECONOMICAL FREEDOM 2009

Recent changes in regional -international relation had foster the reform -linearization environment in Syria, where the Syrian government had lunched or will launch the a new pack of policies and programmers such as:

A. Size of the Government:• Lunching Public –Privet Partnership• Fostering the implantation of B.O.T and upgrading relevant laws. • Lunching Syria Public Sector ( industrial-Services-Touristic) Enterprises

into B.O.T contract.• Reducing the petroleum subsidies.B. Legal Structure and Security of Property Rights:• Modernizing juridical system.• Property Right Laws.

C . Access to Sound Money:• Lunching Syria First Stock Market.• Loosen up regulation on Banking, Insurances and Private Exchange Firms.• Allowing Private Public Banks to expend their Capitals.C. Freedom To Trade Internationally:• Euro-Mediterranean Partnership.• Bilateral Agreement with Turkey.• Arab Common Market. D. Regulation of Credit, Labor and Business:• Labor: New Labor Law had been effective this year 2009 which sets a new

modern laws between employees and employees but still hold minimum wages and other restrictions.

• Creating Career Management Center: Prepare and guide to new university graduate into the business world.

• Modernizing higher and applied education.• Business: Fighting corruption, bureaucracy and a study to modernize

business regulation to attract investors.

FINALLY TRACING BACK POLICES CHANGES IN SYRIA DURING THE PAST 60YRS SETS UP A GOOD EXAMPLE HOW CAN ECONOMICAL FREEDOM FOSTER GROWTH.

THAK YOU