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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: 007 - (01/06/04)

Sanctions, Tensions and Uncertainty
Rather incredibly, despite the growing troubles for the United States in Iraq and an ever more vociferous public becoming weary of the unravelling military adventures of George W. Bush, the US continues to pursue an aggressive policy towards Syria. As the Israeli Defense Forces were raiding Palestinians homes in Gaza, the US insisted on singling out Syria demanding it expel Palestinian militants and withdraw its forces from Lebanon. This, of course follows on the imposition of sanctions against Syria in April. President Bashir al-Asad, for his part, could do nothing more than respond with the now rhetorical call that the US and Syria seek for ways to pursue peace in the Middle East and fight terrorism. U.S. officials acknowledge that Syria has provided important intelligence on terrorists. Al-Asad insisted that Bush has been accusing Syria of things it does not do. He admitted that Syria is unable to control the long border with Iraq noting, however, that the United States had not shared intelligence that might actually help Syria improve border security. He also responded to claims of harbouring Hamas militants that, the latter had not been invited to Syria; rather, they had been expelled from Israel. In a rare interview to members of the American press, Al-Asad took the opportunity to express his thoughts over the loss of American credibility in the region following the Abu Ghraib prison scandal in Iraq.
Syria is very concerned about the potential for Iraq to be split, as it would undermine its own security and stability. In March, there was evidence of this potential after a soccer match turned into a riot for the advancement of Kurdish interests. 
Surprisingly, during the interview Al-Asad conceded that Syria's emergency laws would not be repealed so long as a state of war existed between itself and Israel. He also confirmed human rights activists' longstanding complaints that Syria had used the law to suppress all forms of dissent saying, "In the past, on many occasions, this law was frequently and repeatedly used the wrong way". The young president also stressed that the reforms he started upon taking over from his father will be implemented going as far as to suggest that he was hoping one day to allow elections and step down from office democratically. The political reforms, however, would follow the economic ones.


US Sanctions and a European Free Trade Agreement
Nevertheless, the recent US imposed sanctions are going to make it more difficult to implement those reforms. Despite the opening to private banks and agreements to work increasingly within the Euro-Mediterranean sphere, the US sanctions are going to make it more difficult for foreign investors to consider Syria for fear of potential sanctions or repercussions of the Senator D'Amato bill variety. The Syrian Economy Minister Ghassan Rifai, in an interview published in the pan-Arab daily Al-Hayat, admitted the sanctions would have a "negative impact" on Syria's economy. The sanctions themselves ban most exports from the US to Syria with the exception of medicines. The US also has the power to freeze Syrian assets held in its territory. While noting that neither the agricultural sector, nor the economy as a whole would suffer, Rifai noted that the sanctions would act as an annoying shadow over efforts to reform and liberalize the economy through foreign investment. Rifai also expressed his hope that the US sanctions will not negatively affect his efforts to strengthen Syria's relationship with the European union, which is the overall largest importer of Syrian goods accounting for over 2/3 of all exports. Syria and Libya have yet to sign the Association Agreement with the EU, which is to serve as the stepping-stone to a Mediterranean free trade zone by 2010. Indeed, while the US has imposed sanctions, the European Union countries are ready to sign a stalled trade and aid deal with Syria. The EU ambassadors have moved to the current fashion of requiring the promise of renouncement of weapons of mass destruction and will clear the remaining obstacles to the trade arrangements once such a statement has been agreed to by Syria. European diplomats noted that the WMD clause was the only outstanding issue in the wording of the agreement. Damascus has so far refused to renegotiate the draft accord, as it maintains that Israel, which already has the free trade agreement, is widely believed to have real nuclear weapons. On the other hand, faced with US sanctions Syria has lost some bargaining strength and therefore might have to accept at least part of the wording. 
The banking sector reforms are expected to pave the way for the transition to allow for a greater extent of private sector involvement in the economy. In late May, the Syrian government organized a Banking conference to present ideas and projects designed to upgrade the financial sector. Some Syrian economists have complained that the banking sector itself can only develop as part of a wider array of economic reforms, which are still progressing very slowly. Recent financial reforms designed to stimulate the financial industry have been marked by the permission to hold foreign currency and perform interbank lending transactions, but there are still curbs in place to make the latter operation challenging. There are also caps on the amount of capital a bank may hold. The current limit is $30 million. In addition, banks are still inactive in areas of bonds and even the most basic financial instruments such as treasury bills making lending more difficult and therefore impeding private sector growth. Nonetheless, the political instability in the region and uncertainty over military threats will prevent the financial reforms to proceed any faster for the time being.

Military Threats
Meanwhile, the military threat from the US and Israel cannot be discounted. It has been repeatedly noted in these reports that military threats weaken the reformist elements in Syria and force Asad to proceed more cautiously and slowly with reforms while diverting funds to military expenditures. The threats are not exaggerated so long as the current neo-conservative thinking persists in Washington. In May new allegations by various lobby groups close to the administration hawks, or at least representative of their ideology, continued to press for an American led military intervention in Syria - as if the US does not have enough trouble to contend with in Iraq. The 'experts' at such organizations like the American Foreign Policy Council insist that if America is to have success in establishing a 'stable democracy in Iraq' it must also deal with outside influences that are being identified as part of the problem of the persisting anarchy in Iraq. Of course, the 'outside influences' term is a euphemism for Syria and Iran. 
The sanctions against Syria have been widely condemned throughout the Arab world even by 'US friendly' governments such as Egypt. An advisor to President Mubarak noted that the Egyptian government will consider any threat against Syria as a threat against itself. The message may be directed more toward Jerusalem than Washington. Mubarak and Al-Asad held a summit in Cairo to demonstrate their mutual support. Egypt let it be known that it considers the US accusations against Syria to be false and contrary to the cause of peaceful solutions for the Middle East stressing that Israel remains the one true danger in the region, not Syria. 
The Israeli Transport Minister Avigdor Lieberman, suggested that Israel should bomb "strategic targets" in Damascus to put an end to attacks by the Syrian-backed Hezbollah militia. The targets might be "the army headquarters, the central electricity board, the telephone exchange, the public broadcasting house or the presidential palace, even if this last site has a more symbolic character". He blamed Syria for every threat Israel faces from Lebanon, which he insisted controls Hizbollah. The comments came following another exchange of fire across the Israeli-Lebanese border. An Arab League team plans to visit Washington to find a solution between American-Syrian tensions. 

Oil
In other news, the Tanganyika Oil Company reported that it has made progress in its horizontal drilling program on the Oudeh Field in Syria. The OD #136 horizontal well reached its final drilled depth of 2,842 meters on May 24, 2004 and will now undergo an extensive testing program with results expected in mid-June. Drilling went smoothly and according to schedule. Horizontal drilling is expected to increase well productivity by increasing reservoir volume raising hopes that the Oudeh field will produce 30,000 bpd. The drilling phase is almost complete and the well will be tested throughout June.

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AGRICULTURE

Syria increases wheat export sales

A change in strategy by HOBOOB is leading to a reduction in stocks and an increase in exports of wheat, syria-report.com reported.
Due to ample rainfall during the growing season, Syria's 2003-2004 wheat crop was very good, according to the annual report of the Foreign Service of the US Department of Agriculture (FAS-USDA). 
The annual Grain and Feed report of the USDA draws its figures mainly from the Syrian Ministry of Agriculture. It puts total wheat production at around 4.5-4.7 million tonnes, stable from the last two years while planted area has also remained stable at 1.7 million hectares, from 1.6 last year.
Exports of wheat however are expected to increase this year to 1.3 million tonnes, following a change of policy by the General Establishment for Cereal Processing and Trade (HOBOOB). Already last year exports had grown to around 800,000 T from their traditional annual level of around 500,000 T. While HOBOOB used to avoid selling its stock at world prices, which are significantly lower the price it pays its farmers, it has now decided to reduce its stocks as a mean to reduce both post-harvest losses and storage costs. The country's main export markets are North Africa and Egypt, followed by Yemen, France, Germany, and Italy.
Stocks of wheat are now estimated at around 4 million T. They are expected to gradually decrease following the new export strategy of HOBOOB. Stocks are stored both in concrete and metal silos and in the open air. Storage capacity should increase by around 1 MT in the coming 5 years, says the report, and reduce losses due to insects, rodents, and fungi.
Barley, meanwhile, has seen its production increase to 1.1 million T from only 920,000 the previous year. Barley production in Syria is 97-99 percent rain fed and as a result production can widely fluctuate from one year to another. Sheep are the major consumers of barley.
Corn production has remained stable at 125,000 T continues the report. Total consumption of corn is estimated at 1.3 million T, meaning that the country is importing around 1.2 million T that goes essentially for animal feed. The US is Syria's main supplier of corn. According to the report, developing glucose and starch industry is leading to an increase in corn imports.
Rice meanwhile is not produced locally and imports are set to continue to rise as rural-urban migration is leading the population to switch from the consumption of burghul to that of rice. 

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FOREIGN ECONOMIC COOPERATION

Iran, Syria to Boost Academic Cooperation 

A visiting Iranian delegation discussed with Syrian Higher Education Minister, Hani Murtada, ways to boost academic cooperation between the two countries' universities in scientific and medical fields, said an official at the Iranian embassy, tehrantimes.com reported.
The 100-member delegation headed by Jamal Reza'i, advisor to minister of health, also discussed exchange of medical and health experiences between the two countries, said Hossein Kashani, a counsellor at the Iranian embassy.
The Iranian side to the meeting suggested that joint cultural weeks be held in Iran and Syria to further activate academic relations between universities of the two countries and to acquaint students of the two countries with each other.
The two sides also reviewed exchange of university instructors and students, conducting of joint research projects, and cooperation of academics of the two countries at international seminars and gatherings.

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