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THE LIE OF GOVERNMENT SUPPORT

THE LIE OF GOVERNMENT SUPPORT

THE LIE OF GOVERNMENT SUPPORT
Syrian Economic Forum - 2017-05-24

Facts and figures on government support for bread loaf

"Government protection" is a term that I have heard over the last few days during a lecture by a famous economic researcher, who talks about the government protection of national products by imposing high taxes on imported goods in order to support domestic products. Or monopoly of the trading of some domestic products by the government under the slogan of protecting the national products. The lecturer strongly attacked these interventions, claiming that there is no mentioning of government support at all. The government does not lose, and there must be a hidden outlet through which it gains more than it pays under the pretext of social support!

I did not strongly agree with all of this offensive language from Mr. Jason O'Rich, the author of "When the Poor Protection is Crushed!" except when I analyzed the recent decision of the Syrian regime about determining the price to buy the wheat from the local Syrian farmers, only then I started to get convinced with the writer’s idea about the negatives and illusion of government protection.

Returning to our subject, the Syrian government has set the price at which Syrian wheat will be purchased from Syrian farmers at 140 Syrian Pounds (US $ 0.259). The price of 1 ton of wheat is about $ 259. This price exceeds the price set by the Syrian government last September which was 125 Syrian pounds per kilogram noting that that the exchange rate of the Syrian pound against the dollar remained almost the same.

In the same context, sources from the Syrian interim government told the Syrian Economic Forum, that the interim government has the intention to buy wheat from Syrian farmers in areas under their control and beyond the control of the Syrian regime at $ 265 per ton, but there is nothing official so far.

Numbers and facts

  • In 2010, shortly before the outbreak of the Syrian Revolution, the Syrian government set the wheat purchase price at 20 Syrian Pounds per kilogram ($ 0.41) (exchange rate: $ 1 = 48 SP). Thus, the alleged government subsidy for wheat has decreased by 38%.
  • The global price per ton of hard wheat is approximately $ 325-420 according to its type, while the price of one ton of soft wheat is approximately $ 170-280 according to its type. According to the figures, Syria's production of hard wheat is higher than soft wheat. The Syrian government used to export hard wheat (which is used in the manufacturing of pasta) and import soft wheat (which is used for making Syrian bread), which achieves large financial savings equivalent to $ 150 per ton. Therefore, the government does not pay any amount to actually subsidize the flour. On the contrary, it monopolizes the export of wheat under the pretext of protecting Syrian food security, to achieve financial savings, part of which is used to support the bread, so that the Syrian farmer is the biggest loser and the Syrian citizen a victim for a 40 years old lie!
  • For the Syrian interim government, the opposition often determines the price of buying wheat from farmers in areas under its control a few days after the Syrian government has determined the purchase price. The price set by the interim government exceeds the price set by the Syrian regime by a few dollars. The interim government is located in the trap created by the Syrian regime.

Recommendations

  1. The purchase price of wheat from Syrian farmers, whether by the government of the Syrian regime or the Syrian interim government, should be close to the world price of hard and soft wheat.
  2. Allow Syrian businessmen to freely import and sell wheat.
  3. To follow the principles of free economy concerning the wheat season, by determining the price based on supply and demand, and activating the role of the private sector in the purchase and sale of wheat, and not monopolize its trade to the government only.