Wednesday, January 02, 2008

Public-private partnership

In a dramatic move, the government has decided to lift taxes and customs duties on 13 basic commodities. The hope is that removal of the 4% sales tax on these foodstuffs will lead to relief and jubilation. This depends on the food importers and merchants lowering their prices for a corresponding amount. The government says that they will intervene if they don’t.

I used to by a kilo of rice (Sunwhite or Tiger) for about 25 piasters. The other day, my wife brought home a 2 kilo package for 1.65 dinars, or about 82 piasters per kilo. According to the latest mercantile exchange information, US produced rice ranges in cost from 22 to 28 dollars per hunderweight (100 pounds). So, each pound costs between 22 and 28 cents. Shipping for the US to Aqaba is about 6 cents per ton. So, the cost of rice reaching Aqaba should range from 43 to 51 piasters (assuming they are sending us the high grade stuff. Ha Ha.). Add to that other costs like insurance, retail costs and so forth, and one would expect the price to the consumer should range from 50 to 60 piasters.

So, who is making the extra 22 to 31 piasters on the kilo of rice? The 4% sales tax accounts for about 2 piasters. I am sure that there will be no problem in subtracting that. However, it seems clear that there is massive gouging by the importers, who apparently have agreed not to undercut each others prices. The head of the importers’ association is happy with the lowering of tariffs, and promises to cut prices accordingly.

Will the government actually do something to alleviate the effects of price fixing on the consumer? They have the legal tools to do this. I wouldn’t count on it, however. Food importers have become a political force to be reckoned with. A record number of them ran for parliament last time, and one of them actually won (Tareq Khouri; Amman third). One again, the game of mutual accommodation between government and "the private sector" will come at the expense of the average Jo. What else is new? Besides, we are so used to theatrics that we would not know any real positive action if we saw it.

6 Comments:

At 9:43 AM, Anonymous الاردني الحر said...

خلف، في مثل عربي ينطبق علي ما تتحدث عنه حاميها حرميها

 
At 10:45 AM, Anonymous Batir said...

Are you sure the sales tax is only 4% and not 16%?

 
At 10:48 AM, Anonymous Ahmad Al-Sholi said...

Thats because we lack unions to protect workers, and NGOs to protect society from business greed.. imagine if we have a strong agency saying that this item is in bad shape or highly priced and people follow that. lots of our problems will be solved in the union or agency concept.

 
At 10:48 PM, Anonymous Anonymous said...

is it the "importers' association" or the "food traders union"? The Ammon news article mentions the second.

 
At 1:09 AM, Blogger Tallouza said...

I went grocery shopping at a small bakkalah next to my home today. I was chatting with the owner about the prices and when we should expect them to go down. It seems that the suppliers have given themselves a self imposed grace period of at least 3 months - for the so called replenishment of existing stocks. I just wonder why when the Euro was going up, prices were automatically and immediately adjusted with rates equivalent if not higher to the appreciation of the Euro. The adjustment in prices was so immediate as if the order was being imported directly from Europe. Now that there are expected reductions in prices, suppliers have all of a sudden stocked up to their ears!!!! Give me a break! Besides, what is the total expected cost impact of these exemptions and how do they compare with the increase in prices of the other 99% of goods and products that we buy?

 
At 4:59 PM, Anonymous ananzeh said...

alot to say but nothing to do ...................

 

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