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Syrian head of state planning insists reform is 'unstoppable'

Economic and political change no longer taboo

Syrian Head of State Planning Abdallah Dardari is fond of describing himself as a mere technocrat. It is an accurate description on one level, but belies his position at the vanguard of the political and economic reform process that is currently under way in Syria.

Following the death of his father four years ago, President Bashar Assad came to office with a clear vision that the Syrian economy had to change and become part of the modern market led global economy.

Up to now the signals have been mixed, but last week, as Dardari puts it, the president made it clear, "the hesitation is over."

"We all know the economy has to be liberalized," explains Dardari. "But the first presidential-level statement to confirm the policy we need to adopt was made last week when the president made it clear we must implement policies geared toward a market economy. It was a decisive statement. Reform is unstoppable, and now we can now work out the transition."

The need for change is clear. The mainstay of Syria's economy has been oil. But output is in decline, down to around 535,000 barrels per day in 2003 from a peak of almost 600,000 in the mid 1990's. The official unemployment rate is 10 percent, although most economists say it is over 20 per cent. Around 300,000 young Syrians are entering the job market every year while the country's economy is expanding at less than 3 percent, effectively zero growth since it is nowhere near fast enough to keep pace with demographics.

"To keep up with new entrants to the job market Syria needs GDP growth of around 6-7 percent a year," concedes Dardari. "In crude terms we need investment in the region of $6 billion to $7 billion a year. The government can put in around $3.5 billion, so we need to attract the additional $3.5 billion from the private sector to achieve our growth employment targets. That is why reform is imperative."

Reform will also involve a long overdue rollback of the state's role in investment, which accounted for 51 percent of total government spending until 2003, and which, the GDP shows, has yielded little in terms of growth. "The return on public sector investment is practically nil, so we're reducing our funding of manufacturing and services which have been loss centers in our economy," says Dardari. "That money will now be refocused on education, health, transport and increased research and development spending. We are not going to waste money investing in shoe factories merely to cure unemployment anymore."

So far so good. But economic reform has a nasty habit of acting as a catalyst for other wide-reaching social changes. This has caused no end of unease in a certain circles within Syria's political system with the so called "old guard" of the Baath Party voicing concerns that Assad's reforms run contrary to Baath ideology.

Dardari has already said the country's judiciary needs to be more transparent to attract outside investment. But he now he goes further: "In terms of judicial reform; it's not just a recognition of the need for greater transparency in the legal system to attract investment. We recognize the changes in our economic structure will necessitate a restructuring of political life. But we think let's have the economic changes happening first, and keep our minds open to whatever political requirements follow. But the understanding that there is a need for political and judicial reform is there. It's not a taboo subject."

Warming to his theme, he continues: "I am not a Baath Party member, but if you look at what's happening in the party today there is a recognition of the need to develop the political system in Syria. I believe the next party conference in 2005 will mark a turning point for Syrian political life."

Dardari points to the government's new five-year economic plan, drawn up with the help of the private sector for the first time: "The old days of centralist five-year plans are over.

"I've been in this post for a year and I've never met anyone from the old guard who has complained that I'm against the ideology of the Baath Party. The prime minister is a member of the regional command of the party and is a reformist. The finance minister is a member and a reformist, so is the economy minister. The labor minister, who is currently introducing more flexible laws, is also a party member. These people are leading the reforms."

He adds: "The answer from the president was clear: give me the best economic options for Syria and the ideology will follow, not the other way around."

A central plank of the government's economic liberalization program is an overhaul of the country's archaic banking system with an eye to making investment easier. This includes letting private banks operate in Syria and increasing the role of the Central Bank as a regulator. The ultimate aim, says Dardari, is to move toward a fully independent Central Bank which will be responsible for monetary policy. But for the time being it will "interface" with government on monetary policy in much the same way as the Bank of England did with London in the mid-1990's until it finally got full independence in 1997.

All this sounds fine, but much of the economy will remain in a sort of half-way house, between state control and the free market. Syria has so far been reluctant to opt for a fully fledged privatization program. Turkey, and even Iran - albeit rather haphazardly, both see the sale of state assets as the best way to attract investment and off load loss-making enterprises. Why is Syria not following suit?

"For the time being a program that allows us to maintain ownership is suitable for us," explains Dardardi. "The unemployment consequences of a fully fledged privatization program would in the short term be too severe. So a sale of assets is not the way forward for us now.

"It's economic efficiency that counts, but we must provide a social safety net for surplus labor. But the social cannot be a burden on the economic sector. If there is a delay in strategy the government can also create employment through investment. We're not totally withdrawing from the economy, but we want to be a smart actor, not interventionist."

If that sounds a bit confusing it's probably because it is. But Dardari is keen not to appear to be avoiding the issue. "Look, we have a tough five years ahead of us and that is my immediate concern," he says. "Our current five-year plan is crucial and is aimed at ensuring that in the 2110-2115 period, when we will have liberalized trade with Europe, that we can stand on our own."

This brings us neatly Syria's trade accord with the European Union, which was initialed last month. From a purely economic viewpoint, Dardari says the agreement's importance is the investment and expert advice it will let Syria to tap into. But from a political perspective, against a backdrop of increasing international pressure, the treaty gives reformists within the Syrian government an important tool to continue to lever reform with in the face of increasing global isolation.

Dardari insists the international situation, most notably the U.S. Syria Accountability Act which can impose economic sanctions on Damascus, and UN Resolution 1559, will not impact on the reform program. "We will not allow the regional or international context to be used as an excuse to derail the reform process, political or economic," he insists. "We don't say sanctions won't hurt us; of course sanctions and 1559 will hurt us. If you are a Western investor you'll think twice. It will make our reform process harder, but it will not stop it. And I'm heartened by the role of the EU, which is supportive of our reforms. I don't want to overestimate the initialing of the EU accord, but we shouldn't underestimate it, either. At least Twenty-four states support it, so I think we can allow ourselves to be optimistic."

Beirut,11 09 2004
Mickael Glackin
The Daily Star
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