Abstract

Syria faces many challenges in the next years (cooperation, partnership, and free trade treaties with Lebanon, other arab countries, Europe, and the world). Development financing is related to saving which depends on income level and money stability. Long and medium term financing aims to transform savings into real investments.

The article treats the subject within the supply (saving) and demand (investment) visions. The supply is compound of local saving, foreign saving, and money creation. Local savings have several categories:

¨ Personal savings including special savings that are inelastic to the interest rate fluctuations, low income and middle fortune savings, high-income savings and rental bourgeoisie. In Syria, the latter does not exist. Post Saving Fund, Popular Credit, and Real Estate Bank compete to attract syrian savings, in addition to the private sector: money collectors (accused to waste 300 million dollars through informal investment channels), merchants etc. Despite the permission to make deposits in foreign currencies, results were mediocre (until 1999, only 19 million dollars of deposits belong to 5500 depositors). In 2000, householders savings in syrian banks include 200 m$, 1200 m$, 170m$, 400m$, and 100m$ belong respectively to low income class, middle-income class, farmers, middle and high-income in the real estate sector, outside the banking system.

¨ Business sector savings include the savings of the public, mixed, private, and informal sectors.

¨ Public budget saving results when receipts exceed expenses. Most syrian budgets show deficits (generally financed by local borrowing from the Public Debt Fund, foreign aids, or borrowing). The article mentions the inexactitude of available public figures.

The foreign saving, in 1998, is estimated to 100 million dollar (less than 1% of private investment in arab countries, less than 0.1% of arab investment abroad).

Available funds for development in Syria approximate 6.7 b$ (excepting arab and international loans supposed to increase 10% annually). This is sufficient to create a marginal growth of 134-235 m$ a year (1-3 or 1-5 capital coefficient). This may realize 2000-11650 of marginal increase in GDP per capita (insufficient to maintain the current average of individual income).

Banking credits create money and the financing opportunity to sustain investment. These resources include sovereignty loans (incoming from former ex-eastern bloc with generous conditions and long or unlimited term), arab and foreign governmental aids, loans from arab and foreign governmental and quasi-governmental development funds and banks.

In developing countries, borrowing from central banks disguises the misleading of economic policy. These countries are experts in hiding, manipulating figures, or postponing their announcement.

On the demand side, if not invested in real or financial capital asset, the saving will be useless. Income from speculation can not help in development.

Many objective circumstances rule the development financing in Syria (such as the internal and external political circumstances, economic consideration, social factors).

Investment environment suffers from multiple exchange rate, instability of money, lack of adequate statistics, degradation of public sector etc.

The lecturer presents proposals about the priority of economic factors, the attitude vis-à-vis foreign and local private investments, the relation between finance, economy, international trade, and information technology, the reform of tax system etc.

In his comments on the article, Dr.A.KANAAN focuses on the inefficiency of financing in Syria because of credits orientation on behalf of public sector, lack of credits to the private sector, the dysfunction of banking mechanism etc.

According to him, government did not update its exchange rate, credit, and interest rate policies. The government still finances agricultural subsidies (not included in general public budget) by issuing money. The delay in budget publishing affects the bulk and the investments productivity. He criticized the public policy concentrating on tax exemptions on the expense of a healthy investment environment. Syria remains undecided about entering the WTO and the partnership with Europe.