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SYRIA

 
  
   

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 21,900 19,500  17,896 64
         
GNI per capita
 US $ 1,130 1,040     950 131
Ranking is given out of 208 nations - (data from the World Bank)

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Area (sq.km)
185,180


Population
17,585,540

Capital
Damascus

Currency
 Syrian pound (SYP)

President 
Bashir al-Asad


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Background:
The Ba'ath Party and the rule of Hafez al-Asad
In many ways modern Syria has followed the familiar course of Arab nationalism during the 1950s inspired by the Egypt of Nasser and from 1958 to 1961 united with Egypt to form the United Arab Republic. Dispute over leadership dissolved that union quickly, and Syria would form the Syrian Arab Republic in 1961. In 1963 the Ba'ath Party seized power. The Ba'ath (renaissance or rebirth) party professed socialist inclinations and it was conceived by the two Syrian teachers the Christian Michel Aflaq and the Muslim Salah al-Din Bitar as an ideology to fight European colonialism in the 1930s. The Ba'ath is the same nominal party that has ruled Iraq from the same period in the 1960s until April 2003 when the rule of its most infamous exponent, Saddam Hussein was terminated by the Anglo-American invasion that began in March of that same year. It's important to recognize that, while the Ba'athist leaders described their seizure of power in 1963 as a revolution, it was in fact a coup carried out by a few military officers, and did not result, nor did it have the support of, a mass uprising of workers and peasants. 
The resulting regime was another military dictatorship. Bitar became the first president from 1963 to 1966 when a more radical faction seized power. A further coup in 1970 brought Hafiz al Asad to power. He ruled Syria until his death in 2000, when his son Bashir al Asad took over. The foundation of the party since the coup has rested with the Alawites, a Shi'i Muslim sect to which less than ten per cent of the Syrian population is affiliated. Asad therefore closed the circle of power to Alawites he could trust and co-opt letting few outsiders into the inner circle. The nominal use of the term 'revolution' to describe what was in fact a coup is crucial in understanding the importance the Syrian Ba'athist party under the Asad regime has placed on maintaining an extensive and repressive internal security apparatus and why reforms, economic and political, have been so difficult to implement. In a very similar approach to that of his neighbouring Ba'athist rival Saddam Hussein, Asad relied on a power group that was organized far more on a tribal or ethnic basis, rather than an ideological one. 

Regional Tensions: The Ottoman past, Israel and the USA
Internal problems have been compounded by the events of the region in which Syria has unavoidably become entangled even before the period of the European mandates in the 1920s and 30s that fuelled the rise of nationalist parties and ideologies. During the Ottoman Empire the area now occupied by Israel, Palestine, Jordan, Lebanon and the current Syria was part of the region known as Bilad-al-Sham. The repercussions of this legacy are still being felt. In 1860 there was a civil war that affected Damascus and the Lebanon involving Druze, Sunni Moslems, Maronite Christians and Jews - along with their European patrons engaged in bitter disputes that are still partially unresolved and that have contributed to fuelling inter-confessional tensions resulting in civil wars in Lebanon in the 1950s, 1970s and 1980s. At the end of World War I and the defeat of Ottoman Turkey, The British and the French divided the region of Sham and drew the boundaries of new states. The inter-confessional tensions acquired a trans-national nature and the region continues to endure a constant level of tension. While Syria has enjoyed generally good relations with Turkey, its neighbour to the north, it has engaged in wars against Israel four times on the battlefield maintaining a level of war readiness best described as a 'cold-war'. 18,000 Syrians still live in the territory of the Golan, a precious source of water and arable land, occupied by Israel in 1967. 
Moreover, Syria has had disputes with fellow Ba'athist Iraq to the east supporting Iran in the latter's costly war with Iraq from 1980 to 1988 and continues to occupy part of Lebanon in which it played an important military role. Syria's initial involvement in Lebanon was during the 1976 civil war when it supported the Christian Maronites. The 1982 Israeli invasion of Lebanon led by General, now Prime Minister, Ariel Sharon saw another round of military clashes between Syrian and Israeli forces. Meanwhile, as Iran's quiet ally in the war against Iraq, Syria also helped sustain the Shi'a faction represented by Hezbollah. In 1989, Syria endorsed the Charter of National Reconciliation, or "Taif Accord," a comprehensive plan for ending the Lebanese conflict negotiated under the auspices of Saudi Arabia, Algeria, and Morocco. More significantly, in May 1991, Lebanon and Syria signed the Treaty of Brotherhood, Cooperation, and Coordination outlined in the Ta'if Accord, which intended to establish the basis for Syrian-Lebanese relations. The Treaty's provisions have yet to be fulfilled. The Israeli occupation of south Lebanon until the spring of 2000, its frequent attacks on Hezbollah and other groups said to be operating in Lebanon and the second Intifada by Palestinians in the West Bank and Gaza territories have heightened Arab - Israeli tensions and precluded Syria's withdrawal from Lebanon. Syria also claims that the UN resolution 425, which called for Israel's withdrawal from Lebanon, also demanded its withdrawal from the Sheba farms in the Golan Heights. This territory is often used by Hezbollah to launch attacks against Israel and is at the heart of continued tensions between the three countries.

The Two 'Gulf' Wars, Intifada II and the War on Terror
Escalating regional tensions exacerbated by the continuing intractability of the stalled Arab Israeli 'peace-process' and the USA's war on Iraq suggest that the Syrian presence in Lebanon will be extended indefinitely. However, when dealing with the United States, Asad has often adopted more strategic and pragmatic policies rather than ideological ones, confirming the need to insulate the party from popular tensions. Indeed, Asad's participation on the side of the American coalition during the 1991 Gulf War was a calculated gamble that paid off handsomely in terms of regional politics and international prestige - in the West. Syria's support was rewarded by considerable financial aid upwards of $2 billion from the USA and Arab oil producing states of the Gulf - who had, ironically, ignored Syria in the 80s for supporting Iran in the Iraq-Iran war - while also receiving a virtual blessing to pursue its interests in Lebanon. The important element that eluded it was the return of the Golan Heights, which are still occupied by Israel. In the mid 90s Syria's international prestige was heightened as it became clear that Syria's participation was crucial in any comprehensive Arab-Israeli peace arrangement.
The collapse of the Soviet Union also facilitated Syria's position in foreign policy orientation and it succeeded in securing better relations with the West and America during the Bush sr. and Clinton administrations. But, even as Bashir al Asad has taken steps to relax some of the Ba'ath party control while gradually shifting to a more liberal economic system, Syria has been relegated merely one step below 'Axis of Evil' status by the Bush jr. administration after the September 11th attacks and the so called War on Terror. Syria had provided assistance to the US in its pursuit of militant Islamic groups, but was opposed to Gulf War II as Syrian - Iraqi relations improved considerably in the last decade leading to the war. Syria even received oil from Iraq after re-opening a pipeline leading to the Mediterranean Sea, which was shut down in the tense period of the 80s decade. Moreover, the failure of the Arab - Israeli peace process has also relegated Syria to a less favourable geo-political position in the Americans' view and heightened tensions in the region of Sham, particularly in terms of allegations by Israel and the US that Syria continues to back Hezbollah, which is now also a fully recognized political party with representation at the Lebanese parliament. It seems that little has changed since Ottoman times. The political risks that Syria faces now are high as tensions between itself and Israel continue to increase, but there are also internal issues related to Bashir al Asad's gradual efforts to liberalize the economy as well as the political system.

The economy and economic liberalization efforts
Most analysts have conceded that during the 1950s Syria was one of the most rapidly developing countries in the Third World. Its economic growth was diversified and relied on one of the healthiest agricultural production systems in the entire Middle East that was even in the declining growth years of the 1980s, still capable of guaranteeing a high degree of self sufficiency in food supply. Few countries in the MENA (Middle East and North Africa) region can claim such an achievement. Syria was also industrializing at a better rate than Egypt and could also count on petroleum and natural gas resources. However, the frequent coups and political instability in the early decades of Syria's independence mismanaged the many advantages that it held over its neighbours, not least of which were a relatively strong supply of water and arable land. Ideological concerns led to the nationalization of most enterprises and the alienation of the business and economic establishment. Many of the Sunni capitalists fled to neighbouring Lebanon where they shifted their economic activity from capital intensive industry and agriculture to services and trade. 
The economy of Syria, then, has since the 1960s been characterized by varying degrees of state intervention designed to reduce regional and class disparities. This is crucial in understanding the Asad's regime's reluctance to adopt full liberalization measures and the ineffectiveness of reforms. As in any highly nationalized economy, reform presents severe economic as well as political challenges; Syria's situation is made all the more difficult as such reforms also have a delicate ethnic dimension. 

The Reforms and Their Political Risks
Economic reform in Syria has been a gradual process that was actually begun with the ascension of Hafez al Asad to power in 1970. He relaxed some of the nationalization measures of the 1960s and fostered the emergence of a new business class based on state officials who were allowed to amass fortunes in exacting transaction fees from foreign companies wishing to do business in Syria. He also took a risk by inviting some of the Sunni capitalists and landlords, who left Syria in the wake of its nationalization, back, inviting them to invest in the important industrial, tourism, construction and agricultural sectors along with the government officials - mostly from the Alawite minority - as they accumulated wealth. Industry is very important in the Syrian economy accounting for 15% of the labour force and even in the recession in the 80s, Syrian GNP was still made up 18% by industrial manufacturing, while oil exports only accounted for 4% in a pattern which is the very reverse of the Gulf States.
The 1980s saw the first important efforts to implement market reforms. The Iran - Iraq war caused shortages in foreign exchange, while subsidized oil from Iran and budget spending cuts of 5% were unable to sustain the subsidies on which the distributive socialist pretensions of the government rested. Its greatest concern was to prevent a rise of the unemployment rate, while also blocking the rise of the Sunni capitalist class that dominated politics prior to 1958. By 1988, the Syrian pound was devalued by 70% to invite inflows of hard currency and mixed private - public sector enterprises in agriculture (a precursor of Britain's Private Finance Initiatives) were formed with the aid of twelve entrepreneurs. The measures worked, but the government used the extra revenues to re-invest in public enterprises and was then faced by having to import food after a long drought severely reduced agricultural output. 
Nevertheless, while these reforms appear rather typical on paper, it must be appreciated that Asad had to play a skilful balancing act in managing the tensions in the all important ethnic element of the equation. Inviting Sunnis to resume a role at the commanding end of the economy, even if limited, was an affront to the Alawite elite that relied on Asad. The revolt of the Muslim Brotherhood in Hama, which ended with the ruthless extermination of 20,000 of its inhabitants in 1982 by the armed forces, was largely a revolt by the Sunnis against the Alawite minority and was supported by the Sunni business middle class of Damascus. It was this continued threat of reprisal against Sunnis that also gave the government some room for reform. Hama had sent a clear message of what just how much dissent would be tolerated. The Sunnis were allowed to take part in the economy but only so long as the Alawites dominated. The balance that is needed in managing the ethnic tensions is a continuing factor in slowing the rate of reform today. 
Bashir al-Asad cannot move too rapidly in order not damage his Alawite basis of support, which is the only real support he can count on, given the nature of his succession and the continued reliance on a repressive security apparatus to sustain him. Asad the younger, a British trained ophthalmologist, was a reluctant choice as successor and lacks the political determination to engage the kind of massive violent reprisals that his father, a military man, showed with Hama. In many ways, Bashir al Asad is a prisoner of the strong minority that relies on the perpetuation of the Asad legacy for its survival. Reforms will, therefore, inevitably be gradual as he faces both the internal threat of dissent, from his own Alawite sect as well as from the Sunni majority, as well as the external one posed by increasing tensions in the region and continued threats from the United States.

Bringing Globalization to Syria
Political risk is doubtless very high. Meanwhile, support from the Gulf States is declining and the unemployment rate, which Asad's father was so concerned in reducing, is now estimated at 25% to 30%. The political and likely military tensions in the region mean that military spending will be sustained and even increased in order deal with the multiple threats. This will free up even less money for social welfare support, which would in political terms allow Bashir al Asad to consider increasing the rate of market reform. A solution to this problem could come in the form of greater foreign involvement in the Syrian economy while increasing efforts to integrate it in the global economy. In other words bring Syria into globalization. Regional efforts promoted by the European Union such as the Mediterranean free trade zone which has been proposed for 2010 are welcome by Syria.
Indeed, Syria maintains very good relations with Italy and Spain, two countries that are sure to play a very significant role in a more open Syrian economy. Hoping to generate foreign investments, Bashir al Asad has announced the privatization of the banking sector in 2002 ending forty years of the exclusively government run financial system. The problem remains, nevertheless, that the legal system is not designed to protect the accumulation of capital; there being no mechanisms in place to protect it institutionally. Any serious effort to invite foreign investment will have to address this fundamental lack of financial structures, which is currently keeping Syria out of the fold of globalization. 
The current instability of the region may also play to Syria's advantage in terms of restructuring the financial system. Lebanon's advanced financial services and its long trading traditions have long played a role akin to what Hong Kong has done for China. In the eventuality that Lebanon became fully absorbed by Syria as part of a regional re-stabilization that also include a peace treaty between Israel and the Arabs, the economic prospects for Syria and the region would improve dramatically. The chances of this happening in the short term are extremely slim, barring a miracle - in a region long famed for this type of phenomenon - but for the time being such hopes merely reflect how many and how obstinate the obstacles are to balanced and sustainable economic growth. 

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Update No: 008 - (30/06/04)

Tit for Tat
June was the first full month of the renewed program of US sanctions on Syria. The effects of the sanctions have already been felt by some; however, not to be outdone, Syria has decided to contribute its own sanctions to this already saturated international policy instrument. The Syrian parliament is planning a law banning economic dealings with the United States to retaliate against the imposition of U.S. sanctions under the Syria Accountability Act. The move was backed by all parliament representatives resulting in a number of trade restrictions against the United States. Washington enforced the Syria Accountability and Lebanon Sovereignty Restoration acts because it believes that Damascus has been backing terrorist organizations and allowed Muslim fighters to cross its border into Iraq to fight U.S. forces, and refusing to withdraw from neighboring Lebanon. Nevertheless, The United States and Syria maintain diplomatic relationships and this may be an optimistic sign. Further optimism may be drawn from the fact that Syria has given much thought as to the man it would send to Washington to help mitigate the ever tense situation.
Impact of sanctions
Prior to the imposition of sanctions, 150 Syrian business people were invited to attend a briefing explaining the details of the measures which ban the import of American products other than food and medicines and freeze the assets of the Commercial Bank of Syria, the main state bank, in the United States. Some importers relying on technology from the United States were rather worried. While not especially huge, for a small country like Syria even a total figure for Syrian-US trade totalling $473 million in 2003 can have a strong impact. Some businessmen indicated that figures are misleading because of a tendency to deliberately price orders lower than the actual value. 
Other firms with foreign currency and dollar transaction concerns such as Syrian Arab Airlines are worried that the company's transactions in dollars could be affected because they will need endorsement from New York. This could affect the import of spares, which is still permitted under the Syria Accountability Act. Syrian businessmen urged their government to find alternative sources of trade in Southeast Asia and Turkey. The latter is even to set up a free-trade zone. The strong relationship between Turkey and the United States, however, might find some way of impeding certain goods from entering and/or leaving Syria. On a final consideration, the higher valued Euro was cited as being the reason that Syrian business men will avoid Europe is to avoid using the Euro currency, a full 20-25% higher than the US dollar and that much more expensive. 

The Charming Ambassador
For starters the charming Imad Moustapha has been sent to Washington to both make progress in Syro-American relations, as well as warm to Jewish interests by re-assuring Israeli and other Jews that Syria is serious about wanting peace with Israel because it's in Syria's interest, the region's interest and Israel's interest. Neither one of the two goals is easily attainable. The Bush administration still considers Syria a rogue state, one degree less than a full member of the axis-of-evil club, and insists that it is a worldwide menace through its sponsoring of terrorism. In concert Israel claims as much and blames Syria for its control of the military arm of the Hizbollah and for the resulting strikes across its borders. In addition, although somewhat muted at present, many of President Bush's advisors on foreign affairs have urged him to strike Syria amid accusations that Syria has been allowing foreign fighters to move freely along its border with Iraq. Lately, Syria expected some relief from Europe, but European nations also have reprimanded, or ignored pleas from Syria. While, the European Union is considering extending free-trade status to Syria, but first wants guarantees that Syria will not try to develop weapons of mass destruction. Syria has agreed that it is both necessary and desirable to rid the region of weapons of mass destruction but that Israel, as the sole regional nuclear power should start first. More interesting is the fact that Imad Moustapha, within weeks of Bush's imposition of the sanctions, took an official U.S. Jewish delegation to Syria. Moustapha describes affectionate receptions in Damascus and Aleppo for the 15 visiting Jewish men, who came from American Jewish communities in Brooklyn, Long Island and New Jersey. He adds that he believes firmly in the principle and desire for peace. Accordingly, Ambassador Moustapha dismisses the Syria Accountability Act, which the U.S. Congress overwhelmingly passed last year and which led to Bush's sanctions, as the product of a cabal of 'neoconservatives and Israel's war camp'. 
Repeating the rhetoric that has thus far ensured hostility, Israeli and U.S. officials remain doubtful of Syria's intentions despite the efforts of the charming Ambassador Mustapha. The country they aver, seems to be synonymous with terrorism and weapons of mass destruction. The ambassador has rejected those allegations. Moustapha insists that Syria is meeting the provisions of the Syria Accountability Act and has shut down terrorist offices in Damascus. One major impediment to Israeli-Syrian negotiations is the Syrian demand that talks resume where they last left off in 2000. The challenge is more difficult than the last time Syria and Israel discussed peace with then Prime Minister Ehud Barak, who was prepared to give up all of the Golan Heights. Asad refused to compromise and abandoned the deal. It is almost inconceivable that Ariel Sharon will do anything along those lines, therefore Syria remains at risk from both sides.
The Kurdish Issue
While Syria is carefully dealing with the United States imposed sanctions it will likely have to face a renewed Kurdish problem. In March riots broke out between Kurdish and ethnic Arab supporters of respective soccer teams, dense with one or the other ethnicity. The continued instability in Iraq has in fact made it easier for Iraqi Kurdish rebels to inspire a parallel independence movement among Syrian Kurds. The clashes produced forty dead. As American forces have handed power to Iraqis, a potentially federalist government arrangement in Iraq will be highly problematic if we consider the Kurds. Indeed, in recent months there have been indications of an emerging, or resuscitated, Kurdish nationalist movement in Syria.
The Kurdish parties in Syria vowed to continue undeterred to practice politics despite the recent ban decision issued by the authorities concerning unlicensed parties. The 11 Syrian Kurdish parties said that the Kurdish parties derive their legitimacy and mandate from representing 2.5 million Kurds in Syria. Realizing the obvious fears of the Syrian leadership, the Kurdish parties denied any contacts with foreign sides or receiving foreign aid even after the acts of riots, which took place in March. While President Bashar Al-Asad had quelled the situation by noting the integral position the 2.5 million Kurds of Syria have in the Syrian nation, the Syrian authorities notified the leaderships of certain Kurdish parties by the beginning of this month that the political work of the parties they affiliate is banned and they have to halt this activity.
Giving China a Go - Contravening Sanctions
Seinng the doors shut from the United States, Bashar al-Asad became the first Syrian president to visit China since the two countries established relations in 1956. The visit was part of a desire to develop closer diplomatic and economic ties. The message from Damascus was that there are always alternatives to dealing with American sanctions. Syria is looking to China to find a strong partner during the coming period. China is the giant emerging on the international scene as an economic and political power. Even the US is trying to manage a kind of political and economic cooperation with Beijing in order to avoid clashes in the future or another cold war. 
Assad's visit was part of a drive to prevent possible isolation following the imposition of US sanctions. The China visit followed a previous one to Spain, where an anti-Iraq war and recently elected prime minister was sure to hear his case for de-linking the entry into the Euro-Mediterranean free market from the EU drive for a stronger commitment from Damascus over weapons of mass destruction. 

During the visit to China, President Asad agreed to provide China with some of its 550,000 barrels per day of oil. Meanwhile it is also with oil that Syria can put pressure against a prolonged imposition of the Syrian Accountability Act, was willing to provide China with oil but lacks "a sufficient output". The oil sector is important for American companies, which tried to penetrate the Syrian market as a part of a global strategy aimed at getting the biggest share of the world oil fields. Syrian Oil Minister Ibrahim Haddad said earlier this month that despite the embargo, Damascus continues to sell oil to American companies and encourages US investment in its energy sector. Nevertheless the Bush white house exclude energy investment, although the White House has said they could be tightened in the future. Stepping up its economic diplomacy in the Middle East, China will also provide a low-interest loan to Syria. For its part, Damascus has tried to persuade Chinese investors to consider Syria-based ventures, and he was met by 70 Syrian businessmen in Shanghai, China's commercial capital to discuss prospects for such ventures. 

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FOREIGN COOPERATION

Damascus urges Ankara for more investments


Syria's premier recently reiterated his country's eagerness for greater investment on the part of Turkey. Muhammad Naji al-Utri, delivering an opening speech at the Turkey-Syria Business Partnership seminar, said that his country deemed it necessary to continue the development of bilateral relations, which were initiated with Syrian president Bashar al-Asad's earlier visit to Ankara.
Utri said there were language, religion, culture and relative ties between turkey and Syria. He added that they would provide every type of facility to Turkish businessmen in their investments to Syria. He said that now there were many Turkish businessmen in Aleppo and Damascus who made investments in Syria and they were increasing their investments each day, Anadolu News Agency reported recently.
The Syrian premier stressed that economic and political developments between turkey and Syria were pleasing. He said that he believed the recent visit of Turkish State Minister, Kursad Tuzmen, to Aleppo with 400 businessmen, 33 deputies, six governors and many press members contributed to the further development of the relations between two countries.
Noting that trade volume between Turkey and Syria has reached nearby US$1bn, but this figure was not enough. Utri said that they wanted to increase this figure to UD$2bn until the end of this year. He underlined that new business draft provided foreign investments to be made in Syria under a more flexible environment.
Utri said that Syria could easily provide transfer of Turkish products to the Gulf and African countries and especially in the last two years Syria has made important legal changes to draw foreign capital, adding that they observed a significant increase in coming of foreign capital following those legal arrangements.

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FREE TRADE ZONE

GCC, Syria close to free trade deal


The Gulf Cooperation Council (GCC) and Syria are preparing to finalise a free trade accord, the regional bloc's headquarters announced recently, syriadaily.com reported.
The accord's GCC negotiator, Yussif Al Saadun, held a meeting with a Syrian delegation, headed by assistant minister of economy and commerce, Mohammed Habash, in Riyadh, said a GCC statement carried by the Saudi Press.
The agreement, which must be approved by all the six GCC states and Syria before coming into effect, stipulates in its 19 clauses the exemption of customs duties for goods produced by the concerned countries.
The GCC groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Negotiations will gradually be held on lifting customs duties for services to be exchanged by both sides.
In May, the GCC signed a free trade agreement with Lebanon. 
Inter-Arab trade, which forms only eight per cent of Arab countries' total commerce, should be free of all customs tariffs from 2005 with the planned establishment of a free trade zone for the entire region. - AFP

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