The decision to suspend imports for goods that have over 5% custom duties was supposed to be “temporary” when it was announced on September 22. The temporary nature of the decision was evident this morning when the decision was cancelled merely 12 days after it was adopted. SANA made the news official after the weekly Tuesday ministerial meeting which produced the announcement that the Syrian government abrogated the import suspension.
It was only few days ago that the Governor of the Central Bank said that the decision to suspend imports would “enable Syria to save six billion U.S. dollars annually to face the sanctions imposed by both the EU and the United States”.
The initial import ban announcement was met with shock and disbelief by the country’s business community. An atmosphere of fear, panic, anger and confusion was the way many described the mood in the country. Syria was already reeling from the seven-month crisis and the sanctions imp0sed on it by the EU and the US. The import ban was the final blow that crippled the economy and almost brought it to a standstill.
No government decides to suspend imports hastily. It is clear that government officials reacted in a panic-like atmosphere when the announcement was first made 12 days ago. The official reason at the time was to “save foreign exchange reserves”. Presumably, the need to do so has not changed since then.
The new plan now is for the Central Bank to stop financing “a large part” of the imports of the private sector. Food and medical items may be excluded. As for everything else, importers need to rely on their savings of foreign currencies outside Syria or by going to the black market. Mr. Chaar (Finance Minister) announced that this solution was adopted on the suggestion of the business community which had been using this financing mechanism anyway since the ban was announced. The public sector will still be able to rely on the Central Bank for financing their needs of foreign exchange. The private sector, on the other hand, will incur a nearly 10% disadvantage as today’s black market rate for SYP is 51.5 rather than the official rate of 47.
Mr. Chaar urged the business community to lower the prices of their products as they can no longer use the execuse of the import ban. During a press conference early this morning, he demanded that he did not want to hear that someone imported his products last week and hence the need still exists for higer prices and if such a case does exist, “it is life which involves profiting and losing”. He later warned that there is no longer an “economic or humane logic behind high prices from now on”.
It is fair to say that this policy reversal was a major embrarrasemnt to this government. The damage to the reputation of the economic team will take time to reverse.
Foreign Direct Investments (FDI) in the Arab world:
Staying on economics, the Arab spring has sparked a sharp fall in foreign direct investment. Egypt, for example, is expected to experience a drop from $6.4 billion last year to a mere $500 million in 2011, a 92% slide, according to a report from the Kuwait-based Investment and Export Credit Guarantee Corp. Foreign direct inflow into Syria are forecast to fall by 62% from $1.4 billion in 2010 to around $500 million this year. Remember that the initial goals of the Syrian government under Mr. Dardari were based on attracting close to $10 billion a year. Interestingly, investments are pouring into Iraq. The country expects FDI to more than double to $3.5 billion this year.
Erdogan and Russia
In a news conference in South Africa, the Turkish Prime Minister was quoted saying that the United Nations can’t “remain indifferent” to violence in Syria and must act to resolve the situation.
Russia, on the other hand, continues to reject the latest wording out of the UN Security Council when it comes to Syria. The final text is expected to be announced later today. Russia is expected to veto the text as it stands now.