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French Version

Time to make a real commitment to reform

At last month's Baath Party Congress, hopes were high that Syrian President Bashar Assad would end doubts about his commitment to reform. It would, after all, have been an appropriate time to acknowledge the necessity of change.

Oil output, the mainstay of Syria's state-controlled economy, is in decline. GDP growth was a paltry 2.3 percent in 2004. Unofficial estimates put unemployment at more than 20 percent and 300,000 young Syrians are entering the job market every year.

Topping it all off, Syria's hasty retreat from Lebanon this spring will leave it without $4 billion in remittances sent home each year by Syrians working next-door.

But Assad's speech to the Baath party was not exactly a ringing endorsement of liberalism.

In addition to reaffirming Baathism and socialism as the country's guiding ideology, the president also described computers and technology as dangerous enemies.

Strangely for a man who founded the Syrian Computer Society, Assad said technology aimed at "the destruction of Arab identity" which had "overwhelmed Arabs and threatened their existence and cultural identity."

If all of this sounds to perplexing, there's good reason. It remains a mystery exactly what Assad, the Western-educated ophthalmologist, actually thinks about reform.

Since Assad took power in 2000, Syria looked poised to throw off the Stalinist system that had dominated the country since the Baathists seized power in 1963 and nationalized the economy.

Within the first few years of Assad's rule, the Syrian economy opened for the first time in four decades to private banks, universities, and newspapers.

Just last month, Syria announced it would open up to private insurance companies.

In an interview with The Daily Star last month, the general manager of the Syrian Insurance Supervisory Authority proclaimed: "The new law opening the market for insurance is in line with the government policy toward development and liberalization."

For all the pronouncements on liberalization, however, steps have been limited.

The Syrian government still controls all major industries, such as oil production, oil refining, port operation, telecommunications, air transport, power generation/distribution, and water distribution.

Syria's public sector, overstaffed and inefficient, is a drag on the economy.

Full privatization of the public sector has been ruled out, for reasons first lady Asma Assad pointed out in a recent interview with The New York Times.

She said: "The employee will give you his perspective as a government employee, he wants modernization, but he doesn't want the government to be able to fire him." The businessman, she added, "wants development, but he wants the market to remain closed, because he's benefiting."

How then, can Syria modernize?

Talk of following the "China model" of reform by opening the economy while maintaining tight political control was the fashion in the early years of Assad's rule.

This has faded, however, probably with the realization that Syria, without China's resources or geo-strategic position, could never keep up.

Oil, which accounts for 75 percent of Syria's exports, is down to about 530,000 barrels per day (bpd) from a peak of 590,000 bpd in the mid-1990s. As Syrian's large Jebisseh oil field has now hit maturity, the country's oil production should continue its decline in the next few years. It is even possible that Syria could be a net oil importer within the decade.

A pipeline that used to deliver illegal crude from Iraq helped offset the decline and offered a handy source of cash, but that dried up when the war broke out.

Today, Syria's economy is in a dangerous spot.

To create enough jobs, the economy needs to grow at about 7 percent per year, more than double its current rate. Even without the United States leading an international campaign to keep Syria isolated, this would be hard to do.

The 2003 Syrian Accountability Act will dry up Syria's $500 million or so of annual trade with the U.S. What's more important, though, is that tapping the expertise of American companies in developing its oil and gas industry will be increasingly difficult.

Syria depends on its Association Agreement with the European Union, which was initialed last September but now has a less than certain chance of being formalized.

Washington opposes signing the deal, and the EU has voiced concern about Syria's commitment to protecting human rights and stopping proliferation of weapons of mass destruction.

For Syria, which has a positive trade balance with the EU of almost $1 billion, the treaty is one of the last lifelines for its economy.

It's clear that market reforms are proceeding and signs of hope are on the horizon, especially if the EU rides to Syria's rescue by signing the association agreement.

The question, however, is whether reforms will proceed quickly enough to keep the whole system from imploding.

Beirut 01-08-2005
Will Rasmussen
The Daily Star

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