Syria Gears its Economy Toward FreeMarket Principles
Syria is open for business. The government has begun an ambitious reform program that will gradually transform the country’s previously centrally planned economy into one based on free market principles. It is an arduous process that will take time to complete—but one that is already bearing fruit.
The liberalization process took off in 1991, augmenting Syria’s share of foreign direct investment (FDI) over the past 6 years. This process, however, intensified significantly with the passing of the new investment law of January 2007 that removed all tariffs for FDI purposes and allowed for the free movement of capital in and out of the country. Moreover, the establishment of the new stock market will permit, among other things, private Syrians companies to go publc allowing people to hold and trade shares.
In 2005, Syria also signed the World Banks’ Convention on the Settlement of Investment Disputes between States and Nationals of Other States. This gives foreign investors the ability to address any disputes with the Syrian government at the World Bank, rather than in Syrian courts.
The banking and insurance sectors are spearheading the liberalization process in Syria. Several private banks have already opened, and the government passed a law allowing for the privatization of the insurance industry.
Beyond the financial sector, the Syrian government has enacted major changes to rental and tax laws, and is considering similar changes to the commercial code and to other laws affecting property rights.
Several trade agreements are also in the works, promising a surge in economic trade between Syria and the rest of the world. Syria has inked an Association Agreement with the European Union, which entails formalizing channels for political dialogue and establishing a free trade agreement that will, for the first time, open up the manufacturing and services sectors to intense competition.
Syria, along with other Arab countries, is also working diligently on establishing the Arab Free Trade Area (AFTA) that will facilitate commercial movement along borders. Finally, Syria is also working toward its membership in the World Trade Organization (WTO).
Tourism: A Pillar Oil remains the principle engine of Syria’s economy; however, the government hopes tourism will take its place once the oil runs out, according to Tourism Minister Saadalla Agha Al Kalaa.
“Tourism must be the major pillar of our national economy,” Al Kalaa said. “We think that we can compete in tourism better than in other fields because of our potential for tourism, which is huge.”
Last year, more than 3 million overnight visitors came to Syria and spent over billion. Al Kalaa said that by 2010, the government is aiming to host 8 million visitors who will spend around billion. Tourism has grown at an average annual rate of 16 percent since 2000, and at that rate, Syria could come very close to achieving its goal.
Al Kalaa noted that such levels of growth would necessitate class=”import-text”>2007August,Syria Special Sponsored Report,investment.txt billion in investment annually. Several tourism workshops have taken place attracting international and domestic investors and generating more than 30 investment proposals for the sector, worth more than 0 million total.
This year alone, billion in investments have been earmarked for the tourism sector, Al Kalaa noted—a tremendous increase from the billion for the entire 32-year period from 1972 to 2004. “This is new for Syria—this importance put on tourism,” he said.
Syria’s leaders realize that generating investment from within the country, and from abroad, entails cleaning up cumbersome rules and bureaucracy, as well as reducing government corruption.
Al Kalaa said a great push has been under way to do just that. Rules limiting foreign ownership in companies and projects no longer exist, and the government is also revising labor laws for the tourism sector, aiming at making the workplace more efficient.
Deregulation is under way in other sectors, as well. Syria plans to reduce, or even eliminate, public sector monopolies in several industries. In the transportation sector, private companies are being invited to manage the country’s ports, airports, highways and railways through build-operate-transfer and other forms of investments.
“The name of the game today is unlocking the potential,” Deputy Premier for Economic Affairs Abdullah Dardari told the Daily Star newspaper. “It’s there. The macroeconomic basics are good. All you have to do is turn the key and unlock the potential. We will announce very soon a large number of state joint stock companies and [initial public offerings] in many industrial fields. The idea is that people can share in this economic boom that we project, and bring back the middle class in Syria. It has many long-term connotations.”
Private Schools and Universities Syria has also opened its university system to private investment. Eight private universities have already been established around the country and several more are in the process of obtaining licenses.
The University of Kalamoon is one of those institutions leading the way, with students taking classes in medicine, dentistry, engineering, architecture and other fields. Kalamoon has a cooperation agreement with the University of Glamorgan in the United Kingdom, which helps its Syrian counterpart with quality assurance and other technical matters.
The German-Syrian University, another stand-out institution, cooperates with the University of Otto-Von-Guericke Magdeburg in Germany. It is established according to German standards and is accredited by German institutions.
Several prestigious, renowned private elementary and high schools have opened as well. Schools such as Choueifat, Montessori and the Syrian International School are building on the foundation established by older private schools, such as the American School in Damascus and ICARDA International School of Aleppo.
Equitable Growth Last year, Syria’s economy grew by 5.1 percent, according to the International Monetary Fund, dragging itself out of a recession that saw minimal growth over the previous few years. The government aims to achieve an annual growth rate of 6 percent by 2010 and to increase investment from the current 18 percent of gross domestic product to 25 percent, during the same period.
As eager as the government is to increase foreign investment, it is also keen on ensuring that economic growth is equitable and does not create social instability. For that reason, Syria is adhering to a gradual reform program that will ensure that any growth resulting from the liberalization processes will also be equitable.
About the Author
Imad Moustapha, Ambassador of Syria to the United States