DAMASCUS, 2 August 2005 — Syria wants to move toward a market economy but faces huge obstacles with a weak growth rate, unemployment estimated at 20 percent and slumping oil production, experts say. The ruling Arab nationalist Baath party in June gave the green light for a “social market economy,” a cautious departure from the state-controlled socialist system the country has seen for the past several decades.
But Finance Minister Amer Lutfi warned against moving too fast toward a free market, predicting economic and social “crises” because Syria “had not yet established adequate institutions.” The government must establish the rules of a market economy, proceed with institutional reforms, develop human resources, boost technology, create political transparency and strengthen civil society - all at the same time - according to economic expert Nabil Sukkar, who runs a private consulting firm in Damascus. “Radical economic and political changes are needed” to reform the economy and the administration, Sukkar said.
The Syrian economy must register an annual growth rate of seven percent to absorb the 300,000 new arrivals on the job market and fix the unemployment problem, investment experts say, adding that eight to nine billion dollars of investment per year is necessary to do that.
Economic growth stood at 2.4 percent in 2004, while the annual demographic growth rate is 2.7, according to official figures. Over the course of the past two years, Syria has begun to tackle modernizing its administration and reforming the judiciary system with the support of Western, and particularly French, experts.
Major new laws have authorized the creation of private banks for the first time in 40 years. However, the creation of a stock exchange is still on hold. Syria “missed the 1990s” by failing to install basic but necessary reforms and today “the task is enormous,” Sukkar told AFP.
In addition, Syria must find a way to remedy depleting oil production foreseen for 2010, which represents about 70 percent of its current exports. Syria currently produces 450,000 barrels per day, far less than the world’s largest crude exporter Saudi Arabia produces at 9.5 million barrels per day. Sukkar believes Syria risks “losing the economic stability” oil receipts have provided until now, at the same time as it must move ahead with structural reforms.
In another alarming statistic, 30 percent of Syrians are affected by poverty. More than five million people are classified as poor, while two million live below the poverty level according to a recent study by the United Nations Development Fund.
Meanwhile, the private sector is ineffective in its current form, Sukkar said. Small companies with less than 10 workers comprise 95 percent of the sector.
Large companies, many of which are linked to the wealthy or those in power, often have incompetent administrations, poor or outdated technology, and lack transparency. Sukkar also drew a bleak picture of state institutions, particularly denouncing the “interference of the (Baath) party” in state matters as well as “miserable salaries” of public workers. In addition, the fight against corruption has weighed down the country for many years.
Sukkar criticized “alliances between the grossly rich and those in power at the expense of the general interest.”
