1. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Agriculture and Economic Reform in Syria: Impacts on Poverty and Inequality Benedetto Rocchi and Donato Romano Department of Agricultural and Resource Economics University of Florence with the collaboration of the Rural Development Division at NAPC

2. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Objectives A SAM of the Syrian economy: - households accounts (rural vs. urban, income deciles) - activities accounts (agriculture, food processing) Policy simulation assessment: - policy reform (  social market economy) impacts on poverty and inequality - changing environment: e.g. soaring food prices impacts on poverty and inequality

3. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Account classification 41 activities (from the NAPC Farming Systems Study + CBS data) 25 crops 3 livestock 13 non-agricultural activities (8 food processing + 5 other acts.) 51 commodities (from the NAPC Farming Systems Study + CBS data) 23 crops 8 animal products 13 agricultural processed products 7 other products 22 institutions (from the SPC-UNDP Poverty Study + CBS data) 10 rural households (per income deciles) 10 urban households (per income deciles) firms government

4. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Account classification 3 value added (from CBS + IMF data) hired labour other factors net fiscal revenue (taxes – subsidies) 2 capital formation (from CBS data) inventory change investment 3 rest of the world (from CBS data) goods and services (current account) financial flows (capital account) net lending (lending – borrowing) TOTAL: 122 accounts

5. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 SAM structure 51413201123

6. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Definition of policy reform scenarios change in existing (sector) policies towards a less distorted environment: dropping subsidies to agriculture and food processing production reducing by 20% the price of strategic crops abolishing the Price Stabilization Fund (food consumption subsidy) alternative use of budget saving: fiscal deficit reduction (= investment) public expenditure increase (proportional to the current composition) increase transfers to households

7. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Policy reform impacts

8. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Policy reform impacts on output % impact on output of agriculture food process. other activities total A) elimination of subsidies to agriculture and food processing 1. deficit reduction1.192.164.673.79 2. public expenditure increase0.590.992.522.03 3. transfers to households increase2.794.163.003.06 B) price reduction for strategic crops 1. deficit reduction0.210.370.670.55 2. public expenditure increase0.140.220.390.33 3. transfers to households increase0.420.630.450.46 C) elimination of Price Stabilization Fund 1. deficit reduction-0.80-1.02 0.92 0.43 2. public expenditure increase-1.57-0.09-1.87-0.40 3. transfers to households increase-0.04-0.07 0.14 0.09

9. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Policy reform impacts on income % impact on incomes of urban total urban 1 st dec urban 10 th dec rural total rural 1 st dec rural 10 th dec A) elimination of subsidies to agriculture and food processing 1. deficit reduction2.522.292.612.352.282.55 2. public expenditure increase1.551.671.561.26 1.36 3. transfers to HHs increase8.3514.966.925.326.853.87 B) price reduction for strategic crops 1. deficit reduction0.460.470.450.480.520.45 2. public expenditure increase0.340.390.310.340.380.29 3. transfers to HHs increase1.222.111.010.861.110.62 C) elimination of PSF 1. deficit reduction-1.41-5.24 0.10-3.12-6.84-0.39 2. public expenditure increase-1.87-5.54-0.40-3.64-7.32-0.95 3. transfers to HHs increase 1.34 0.74 2.13-1.72-4.68 0.23

10. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Policy reform impacts on poverty

11. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Soaring cereal prices: redistributive effects

12. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 The impact on poverty of soaring cereal prices

13. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Conclusions The estimated SAM for Syria is a suitable tool for policy impact simulations Policy lessons: crucial role of Government budget strategies on the outcomes of a given sector policy (reform) importance of output growth for poverty reduction existence of structural asymmetries in income distribution (e.g. rural vs. urban) Limitations: static model: only short-run impacts the classification of household groups by deciles may change as a consequence of simulated policies

14. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 Conclusions Future developments: analyze alternative policy mixes - less ‘extreme’ policy mixes - impact of debt service of production loans on HHs - decrease in oil production  foreign exchange  access to international food market alternative classification criteria for households sector (sector of occupation of the reference person, education level, composition of the household’s total income) regional disaggregation of the Syrian SAM CGE

15. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008 The impact of an exogenous shock

16. FAO Project GCP/SYR/006/ITA Workshop - Damascus, 1-2 July 2008