Role of the Government in the Economy and insurance; part of transportation; and most

international commerce and domestic wholesale trade. In

Syria Table of Contents addition, the government was responsible for the bulk of
investments, the flow of credit, and pricing for many
During the rapid economic development preceding and
commodities and services, including a substantial part of
following independence, government played a minor role.
wages.
Expansion resulted primarily from private sector
investment in agriculture and industry. Although the
economy grew rapidly, benefits were not shared equally.
Many people's incomes were very low, and most of the By 1986 the situation remained essentially unchanged. As
rural population lacked amenities; electricity, education, a result of these earlier measures, the government
health care, and an adequate diet were available almost dominated the economy--accounting for three-fifths of
exclusively in cities and in a few towns. In the 1950s, GDP--and exerted considerable influence over the private
disparities of income and social inequality contributed to sector. However, President Hafiz al Assad had liberalized
the rise of political leaders favoring a much stronger the structure somewhat to encourage more private sector
economic role for the government, including some leaders activity and investment. For example, the government
who demanded state ownership of the means of relaxed exchange controls and permitted private traders to
production. Economic conditions, primarily the need for import more goods, although over 100 of the most
large investments in roads, ports, and irrigation, also important foreign commodities were still exclusively
required more active government participation. imported by state trading organizations. In addition, the
government established six free trade zones where local
traders and manufacturers could import, process, and
reexport commodities freely. Also, private investment
Between 1958, after the union with Egypt, and 1965, a
(domestic and foreign) in portions of manufacturing and
series of laws were enacted that resulted in progressive
tourist facilities was encouraged through such measures as
socialization of the economy. By 1961 the state had
tax exemptions and cheap credit. The post-1970 measures
acquired control of the development of natural resources,
were more a rationalization of the economy to promote
and land reform measures had been introduced, although
greater private sector development than a dismantling of
not effectively implemented. Also, a new economic plan
government controls and ownership. As a result of these
that emphasized large public sector investments had been
measures, the private sector dominated agriculture and
formulated and the banking system had been moved
retail trade and was important in light industry--
toward nationalization through what Syrians called
particularly fabrics and clothing-- and construction,
"Arabization." In 1961, while Syria was still the junior
transportation, and tourist facilities.
partner with Egypt in the United Arab Republic,
widespread nationalization was decreed, but Syria
withdrew from the republic before completion of the
nationalization measures. Not until March 1963 did the Cotton, the country's most important export before 1974,
socialist transformation make headway. provided an extreme example of government involvement
in the economy. Areas put into cotton cultivation were
controlled by government licensing of individual farmers. A
government bank supplied the credit, most of which went
Between 1963 and 1965, a socialist economy was erected,
to cotton farmers; much of the credit was in kind, with the
although some laws enacted later extended and refined
bank purchasing, storing, and distributing the approved
the public sector. In 1963 agrarian reform stripped large
seeds, fertilizers, and other items. Government
landowners of their estates and much of their political
organizations purchased and graded the cotton, operated
power, provided some land to landless farmers, and
the gins and spinning mills, and marketed the products
improved conditions for farm tenants and sharecroppers.
internally and abroad. The government established the
In 1963 commercial banking and insurance were
price for cotton at all stages and subsidized prices for such
completely nationalized, and in 1965 most large businesses
inputs as credits, seeds, fertilizers, and fuel to run the
were nationalized wholly or partially. By 1966 the public
irrigation pumps.
sector included development of natural resources, electric
power, and water; the bulk of industrial plants, banking,
The effect on Syria's economy of the socialist measures of of most Syrians remained low by world standards, and
the 1960s was significant. First, there was a substantial substantial income gaps between various groups persisted.
exodus of trained personnel and capital from the private
sector, a trend that continued in the 1970s, although the
exodus was of a smaller magnitude and occurred for
Budget
different reasons. The other major consequence was a
rapid expansion of government responsibilities, even
With the progressive transfer of economic power from
though the government had few trained people, limited
private enterprise to the state, public finance became a
funds, and inadequate organization and procedures. The
major economic determinant. Even though the
political instability of the 1960s and the small number of
government's fiscal responsibilities increased during the
trained people in the country further hampered
early 1960s, budgetary practices changed little until 1967,
development of effective organizations. Government
when legislation established a single, consolidated, and
services, including defense, became the main growth
centralized annual budget that covered all spending units
sector of the economy in the 1960s as people were added
of the public sector. This budget was closely geared to
to the payroll, but effective expansion was slow.
development plans and complemented a reorganization of
the banking system. Under the law each budgeted outlay
was to be matched by the funds required to finance it.
In the mid-1980s, observers characterized the government
and its activities as inefficient and excessively bureaucratic.
Much of the criticism was caused by the continuing
The budget legislation was accompanied by a
shortage of trained and competent officials. Part of the
reorganization of the Ministry of Finance and of auditing
criticism reflected continuing deficiencies in organizations
and statistical services. An annual foreign exchange budget
and practices. Government organizations were still trying
was instituted to preview probable foreign exchange
to catch up with the huge additional responsibilities that
receipts and expenditures, thus allowing the Ministry of
had been imposed on inexperienced government
Finance and the planning organization to anticipate the
personnel. By 1986, budgetary procedures and financial
government's needs in foreign and local currencies.
controls had steadily improved, but they were not as good
as the situation required or as officials desired. Proposals
for evaluations and implementation of projects were
deficient, but progress had been made, and the The new law required that budget accounts be closed 30
government sought advice and help from outside experts days after the end of the fiscal year. Unused funds were to
for more improvements. be returned to the treasury, although those already
committed were to be place in special, segregated
accounts in the treasury. This stopped the previous
practice whereby transactions continued to be recorded on
When the socialist transformation was taking place in the
budget accounts for several years after the end of a fiscal
1960s, the rationale was to promote economic
year.
development for the benefit of all. Although some direct
redistribution of income occurred, redistribution was
effected largely by way of pricing, subsidies, and tenancy
legislation rather than by taxation, although in 1986 data Since 1970, when the state introduced the consolidated
were insufficient for a conclusive opinion. Although growth budget, all expenditures and receipts of the ministries, the
afforded job opportunities at higher incomes, it had the central public sector administrative agencies, the public
negative effect of attracting even more workers to already sector economic enterprises, and the local, municipal, and
crowded urban areas. However, economic development religious administrative units have been combined into one
did provide gradual improvement of living standards; budget. Expenditures and receipts of the ministries and
considerable investments were made in roads, ports, central government administrative units were included in
schools, irrigation, and the Euphrates (Tabaqah) Dam that the general budget in full; other units were represented by
would facilitate future growth. Nonetheless, the economic inclusion of the net total surplus or deficit of their
wrenching of the 1980s restrained development; incomes respective budgets. Economic units financed almost none
of their own expansion. Instead they turned any surplus
(profit) back to the government and received funds via
budget expenditures for investments.
Although budgetary practices improved and the budget
became a more useful tool for officials, published budget
data in the late 1980s remained a difficult source from
which to interpret developments in the economy.
Expenditures and receipts continued to be published as
proposals only. Actual expenditures and receipts were not
available, although fragmentary data gave indications of
shortfalls; moreover, the proposed budgets were balanced,
and such important balancing items as proposed domestic
borrowing and anticipated foreign aid were not clearly
designated. Thus it was impossible to determine how
effective the government was in implementing programs,
whether deficits were incurred and, if so, their size, and
how dependent the government was on external
assistance. The uncertainties may have been intentional
for security reasons.
The budget gave few clues about the extent of Syria's
economic malaise in the mid-1980s. For example, it did not
reflect the rapid depreciation of the Syrian pound, the
steep rise in prices, the shortages of basic commodities,
nor the acute foreign exchange crisis which compelled the
government to reduce imports. However, budget data
during the mid-1980s clearly depicted the mood of
austerity underlying economic policy as well as the
government's commitment to reducing expenditures. The
1986 budget revealed a major decrease in expenditure in
real terms for the third consecutive year, as inflation--
estimated at between 20 to 30 percent--negated the 2
percent increase in spending.
Defense spending towered above all other budgetary
allocations in the 1980s. The cost of Syria's military
presence in Lebanon since 1976, coupled with the
government's desire to reach strategic parity with Israel,
accounted for the level of spending. Defense spending
averaged over 50 percent of current expenditures in the
mid-1980s, accounting for about 30 percent of total
spending.
Agricultural development also benefited from high
allocations in the mid-1980s designed to counteract the
governmental neglect of the 1970s. In 1985 allocations
rose 22 percent above 1984 figures, amounting to 20
percent of total spending. In 1986 figures indicated a 5
percent investment increase for the agricultural sector.
Allocations for the mining industry (including petroleum)
increased substantially in the 1986 investment budget. The
1986 allocations rose 46 percent above 1985 levels as
government officials targeted increased petroleum and
phosphate production and export in the Sixth Five-Year
Plan.
However, budget deficits continued in the 1980s because
of the rapid increase in defense expenditures and falling
revenues from exports. The government financed the
deficit through domestic borrowing and foreign aid.
However, in the mid 1980s, budgeted foreign aid grants
greatly exceeded actual disbursements by donors because
of depressed economic conditions in the Arab oil-exporting
states. Although Syria budgeted LS1.96 billion in foreign aid
grants in 1986, the country expected to receive only about
one-fifth of this figure and to incur a substantial budget
deficit. However, the country's internal and external public
debt remained moderate and did not impose an
oppressive annual repayment burden.
Revenues
The growth rate of proposed government revenues (in
current prices) averaged 14.3 percent a year between 1964
and 1970, 26 percent a year in the 1970s, and 8.3 percent
a year from 1980 to 1985. Growth in government revenues
in the 1970s reflected higher levels of foreign aid because
of Syria's key role in inter-Arab politics and increased
internal borrowing for development. Government receipts
included part of expected foreign financial assistance as
well as anticipated domestic borrowing. Actual receipts for
various revenue headings were not available, but many
economists believed that actual receipts were substantially
less than those shown in proposed budgets. Proposed
government revenues increased from LS1.2 billion in 1964
to LS2.8 billion in 1970, LS10.4 billion in 1975, LS1.2 billion
in 1978 and LS43 billion in 1985.
Syrian revenues were a much higher ratio of GDP than in
most countries of the world because budget receipts
incorporated the funds, including foreign aid and internal
borrowing, used for the bulk of the country's investments.
In fact, Syrian revenue structure differed from that of most
countries in a number of ways. Personal income taxes have
traditionally been low, amounting to only LS550 million, or
1.3 percent of total revenues, in 1985. Reluctance to tax
income stemmed from generally low incomes combined
with high tax-collection costs. Furthermore, tax rates were
low, with numerous exemptions for special interests,
despite a 1982 law enacted to close loopholes for certain
public sector ventures. Tax evasion also was common
among all social classes. Business income taxes were
relatively small as well, amounting to 10 percent (LS4.3
billion) of total revenues in 1985. Even so, this amount was
a significant increase over the LS510 million (3 percent of
total revenues) collected in 1977.
In addition, taxes on capital, real estate, and inheritance
yielded small sums. In 1985, taxes on capital brought in
LS50 million, real estate taxes produced LS400 million, and
inheritance taxes LS40 million, equivalent to about 1
percent of the total. Direct taxes and duties totaled LS6.24
billion in 1985.
Because they were easy to collect, levies on production
and consumption (including taxes on imports) were the
primary form of taxation. Like many other developing
countries, Syria relied on indirect taxes, which in 1985
amounted to LS4.16 billion, 10 percent of total revenues,
equal to two-thirds the amount of direct taxes and duties.
Customs duties and other fees on foreign trade, including
duties on cotton exports, amounted to LS2 billion in 1985.
Excise taxes on several commodities (e.g., cement, fuel,
livestock, sugar, and salt) made up the remainder of
indirect taxes.
Transfer of surpluses (after taxes and profits) from public
sector enterprises served as the main source of domestic
revenue. The share of these transfers (excluding foreign aid
and internal credits) reached 32 percent in 1970, 50
percent in 1976, and 31 percent in 1985 (LS13.1 billion). In
the 1960s, banking-financial and industrial public sector
businesses together provided the bulk of the surpluses. In
the 1970s, industrial concerns alone accounted for 75
percent of the surpluses transferred to the budget; this
figure declined slightly to 70 percent in 1985. In the 1970s
and 1980s, the government increasingly relied on the
pricing of commodities and services rather than taxes to
finance expenditures. In an effort to expand future budget
revenues, officials intended to increase efficiency,
productivity, and profits of public-sector business.
Foreign credits and grants and domestic borrowing also
provided supplemental funding for key development
projects. The 1984 budget projected LS1.9 billion in foreign
loans and LS7.7 billion in "support funds" from Arab states.
After 1982, grants in oil aid from Iran also significantly
contributed to the growth of revenues. However, when
external aid declined in the 1980s, domestic borrowing
levels increased. Although the banking system provided
most of the internal credits, reserves of public enterprises
also provided some funds.
Until 1977,transit fees for crude oil pumped through
international pipelines across Syrian territory were an
important source of revenue. Pipeline payments, which
averaged about 25 percent of total domestic revenues in
the early 1970s, fell to zero in 1977. The pipeline reopened
briefly in 1979, was shut down in the early stages of the
Iran-Iraq War, and then reopened again in 1981 before
Syria closed down the pipeline from Iraq in 1982 as a show
of support for Iran in the Gulf war.
Expenditures
Proposed expenditures matched proposed revenues
because budgets submitted for approval were balanced.
However, actual expenditures usually fell considerably
short of those planned, although the fragmentary data
available in 1987 generally precluded measurement of the
amount of difference. In the 1980s, budgets began
including planned deficits, and investment spending
repeatedly trailed allocations. Only 70 percent of Syria's
1984 investment budget of LS17.85 million was actually
spent. Expenditures fell under two headings--the ordinary
budget covering current (recurring) expenditures and the
development (capital) budget. Beginning in the early
1960s, capital investments had become a much more
important part of the budget. Development expenditures
amounted to 42 percent of total expenditures in 1964,
increased to 50 percent in 1970, and peaked at 64 percent
in 1976. However, by 1980, development expenditures had
fallen back to 50 percent and in 1985 fell to 45 percent of
total expenditures. In the 1980s, normal proposed
revenues (taxes, duties, fees, and surpluses of public sector
enterprises) usually financed proposed current
expenditures, with a small remainder to help with capital
investments. Foreign aid and domestic borrowing financed
the rest of the development budget.
Throughout the 1970s and 1980s, defense spending
dominated current expenditures. Some observers
maintained that in the 1970s defense spending accounted
for approximately three-fifths of current expenditures,
although such amounts were not reflected in official
statistics. Offically, defense spending rose from LS675
million in 1970 to LS4.6 billion in 1978, increasing at an
average rate of 27 percent a year during this period. In the
1985 budget, defense spending again accounted for the
greatest portion of current expenditures. However, the
LS13 billion 1985 defense budget reflected only a 9 percent
rate of growth, slower than that in previous years.
However, a related item, internal security expenditures,
accounted for a further LS672 million in the 1985 budget.
Most of the remainder of current expenditures covered
operating expenses of ministries and agencies--largely
personnel costs.
Identifiable payments on the public debt amounted to
LS135 million in 1976 and 1977, less than 1 percent of total
expenditures. The 1984 budget allocated LS1.8 billion to
the public debt, equal to 7.6 percent of current
expenditures.
Identifiable price subsidies amounted to LS600 million in
1977 and LS1.4 billion in 1985, accounting for 9 percent
and 6 percent of current expenditures. Subsidies rose
rapidly in the mid-1970s as a result of higher rates of
internal and international inflation. The government
attempted to keep meat, bread, coffee, sugar, diesel fuel
(for irrigation pumps), and other essential items within
reach of the poor; the subsidized prices for sugar and
diesel fuel, for example, were about onequarter of the
regular market price in the 1980s.
In the 1970s, the government demonstrated its
commitment to economic development through sizable
increases in the development budget by increasing
investment expenditures an average of 26 percent a year.
Although they increased substantially from LS1.4 billion in
1970 to LS14 billion in 1980, growth of investment
expenditures slowed to just 6 percent a year in the 1980s
Growth and Structure of the Economy
Syria Table of Contents
At independence Syria had a relatively well
developed economic base. Rapid economic growth
began in the 1930s, accelerated in the 1940s, and
lasted until the late 1950s. Growth was based
primarily on the opening of new land to cultivation
and financed largely by wealthy urban merchants,
particularly from Aleppo. The new farms, which grew
wheat, barley, and cotton as main crops, were large,
using mechanization and irrigation as much as
possible. Industry also expanded rapidly, stimulated
by the needs of Allied Forces in the area during
World War II and domestic shortages of goods. Most
industries were small, consisting of powered flour
mills, bakeries, laundries, and repair shops, but also
including larger facilities, in particular textile mills.
In the mid-1950s, a group of economists from the
World Bank concluded that the period of rapid
growth based on private sector investment was
ending. The slowdown occurred partly because the
supply of new land that could easily be cultivated
was nearly exhausted. Further expansion of arable
land would require large public sector investments in
irrigation, drainage, and reclamation. Large public
sector investments were also needed in electric
power, ports, and the transportation system. Thus,
economic conditions required an expanded role for
government at about the same time that socialist-
oriented political leaders became more influential.
Only the waning portion of this period of rapid
growth is reflected in contemporary official statistics
because statistical services developed late and
reliability of data was uncertain. Although statistics
improved slowly over the years, problems remained
in the late 1980s. Many economic measurements
were best viewed as indicative rather than precise.
Moreover, sharp yearly fluctuations in agricultural
output caused by variations in rainfall further
compounded economic analysis. Although
agriculture's share in the economy had declined over
the years, even in the late 1980s the wide swings in
annual harvests had pronounced effects on such
sectors as trade, transportation, finance, and
industry.
Specific data concerning the growth of the economy
extend back to 1953. Such data, measured by GDP at
market prices in terms of constant 1963 prices,
indicates that growth averaged 6.3 percent a year
between 1953 and 1976. The period of rapid growth
led by the agricultural and industrial sectors ended in
1957 because of a prolonged, 4-year drought that
severely curtailed agricultural output. In the 1960s,
land reform, nationalization of key industries, and
the socialist transformation of the economy affected
the pace and scope of economic development.
Growth of the economy, measured by GDP at market
prices in terms of constant 1980 prices, averaged 9.7
percent a year during the 1970s. Real growth peaked
at 10.2 percent in 1981 but steadily declined from
3.2 percent in 1982 to -2.1 percent in 1984.
The pattern of growth by sectors was uneven.
Between 1953 and 1976, the value of agricultural
output (in constant 1963 prices) increased by only
3.2 percent a year, slower growth than in other
sectors of the economy. In the late 1970s, the value
of agricultural output (in constant 1980 prices)
increased by an average of 9.3 percent a year,
despite large weather-induced fluctuations in
output. From 1981 to 1984, output fell each year,
although 1985 levels surged to approximate 1983
yields.
Although agricultural output remained relatively
fixed, industry and construction rapidly increased in
the mid-1970s, stimulated in large part by the oil
boom in the Persian Gulf states. Construction grew
16.3 percent a year during the 1970s, while output
of the mining and manufacturing sectors increased
7.1 percent a year. In the early 1980s, average yearly
growth in these sectors was 5.6 percent and 7.9
percent, respectively. The growth of electric power
and the extractive industries, particularly crude oil
and phosphates, aided industrial expansion.
The expansion of government services in the 1970s
and 1980s helped sustain economic growth. In the
1970s, government services grew at an average of
12.4 percent, contributing 14.1 percent to GDP in
1976 and rising to 19.6 percent in 1984. State
commitment to expanding the educational system,
health care, and social services, to extending public
sector enterprises as part of the nationalization
program, to constructing new commercial, industrial,
and residential facilities, and increasing defense
expenditures contributed to this high rate of
government service growth.
As a result of the varying sectoral growth rates, the
economy gradually shifted from an agrarian-based
structure prior to 1970 to an economy based on
services and the commercial sector in the 1980s (See
figure 1, Growth and Structure of GDP, 1980-85). In
1953, agriculture contributed nearly 40 percent of
GDP compared to 30 percent in 1963 and
approximately 20 percent in 1984 (at constant 1980 4. Gordon is twice as old as Tony was when
prices), according the World Bank figures. Official Gordon was as old as Tony is now. The combined age
Syrian government sources placed agriculture's share of Gordon and Tony is 112 years. How old are
of GDP at 16.5 percent in 1984. From 1953 to 1976, Gordon and Tony now?Answer
industry, including extractive industries and electric
Ans: Gordon 64 and Tony 48 .
power, increased from about 10 to 22 percent of
GDP. In 1984, industry contributed 15.1 percent of Sol.
GDP. Construction, trade, and transportation
retained approximately the same relative importance When Gordon was 48, Tony was 32(ie half the age
as they had had in the mid- 1970s. By 1976, Gordon is now).
government services contributed over onehalf of
GDP. In 1984, the GDP share from government
services increased to 61 percent, according to official
Syrian statistics, while the World Bank ranked that
sector's 1984 constribution at 57 percent.

. 13. ABCDEFGH We use the formula of the classical probability.

What letter comes two to the right of the letter P(E) = n(E) / n(S) = 1 / 4
which is immediately to the left of the letter
that comes three to the right of the letter that
comes midway between the letter two to the
left of the letter C and the letter immediately to
the right of the letter F? Answer

Ans: H .

Sol.

H. Question 2

Two coins are tossed, find the probability that

two heads are obtained. Note: Each coin has
two possible outcomes H (heads) and T (Tails).

Solution

The sample space S is given by.

S = {(H,T),(H,H),(T,H),(T,T)}

Let E be the event "two heads are obtained".

E = {(H,H)}