Does Syria mean business? (page 1 of 3)

By GARETH SMYTH ALEPPO

In the souks of Aleppo, Syria's second largest city with a population of over 3 million, business is still conducted much as it has been for centuries. Porters wait with their donkeys, carpet sellers sigh, nut merchants weigh pistachios and fishmongers chase away the flies. From Roman times until the 19th century, Aleppo was a prosperous town on the Silk Road linking the Mediterranean with Persia and further east. The souks, which locals say contain 1,600 shops, are supposedly the largest in the world.
But the bulk of the Syrian economy is outside the souks. "The public sector used to be around 60 percent of the economy," says Nabil Sukkar, a leading economist. "Since the reforms of 1986-91, it has changed, but the state still accounts for around 40 percent."
The Ba'ath party has ruled Syria for 39 years. In a country where civilization is at least 4,000 years old, that is not long. Yet, so far at least, the Ba'ath's centralized, state-dominated political and economic system endures. It is 18 months since Bashar al-Assad succeeded his father, the late Hafez al-Assad, as president, and sketched a program of reform centered on reviving the private sector and encouraging "modern thinking." Since then, expectations of change have ebbed.
"It's difficult to pay the bills," said a man in his early 30s driving a taxi in Aleppo as a second job. "But they say things will improve in 2002, or 2003 or maybe 2004." Unemployment is currently at least nine percent: 54 percent of Syrians are under 20, meaning that 240,000 young people enter the workforce each year. With per capita gross domestic product at $1,000-1,200 a year, economic growth struggles to keep pace with population growth of around 2.5 percent.
Syria has expressed a desire to join the World Trade Organization and for several years has been in talks with the European Union (EU) about joining the Euro-Mediterranean agreement, which would expose it to greater competition from the EU. But Syria is ill placed to increase exports. "Even where the potential is high," says Alf Monaghan, a consultant advising the Syrian private sector through an EU scheme, "the goods are often poorly labelled and of variable quality."
Years of supplying mainly agricultural products to the Soviet Union were no preparation for today's competitive world market. "We sent them olive oil in tins," points out one businessman. "The international consumer of 2002 won't buy that." Syria has been fortunate in that a trade surplus has resulted from the growing importance of oil exports, which have risen to at least 60 percent of export earnings.
The new cabinet. In his inauguration speech in 2001, President Assad stressed the importance of activating the private sector as the motor of economic growth. The new cabinet appointed in December included Ghassan al-Rifai, a World Bank official for nearly 30 years, as the minister of economy and trade, and three of four ministers in the key economics portfolios are, significantly, not members of the Ba'ath party.
But many observers question whether reformist ministers will have the leeway they need. It is more than 18 months since Mustafa Miro, the prime minister, announced the government's intention to end the four-decade-old state monopoly on banking - but not one private bank has yet appeared.
"It was a mistake to introduce the law for private banks before amending the central bank legislation to create a new supervisory and regulatory system," says Nabil Sukkar, who nevertheless remains optimistic.