Features of the Syrian economy during the period 1960-2010

Prof. Dr Moustafa El-abdallah Al Kafry
2022 / 9 / 17

During the period 1970-2010, Syria enjoyed undeniable stability, as a result of the consolidation of this stability, Syria proceeded on the path of openness, liberalization, diversification and development of the economy.
From the mid-sixties to the early nineties of the twentieth century, Syria followed an economic system based on central planning and characterized by extreme protection. The basis of economic policy in that period was the expansion of the public sector, leaving some sectors to private initiative (such as retail, the agricultural sector). The role of the private sector was very-limit-ed and was regulated by very strict laws.
With the beginning of the nineties, a number of measures were taken to attract private investment to work in sectors that were fully nationalized, to attract domestic, Arab and foreign -dir-ect investment, and to create an export-oriented economy.
Syria is a relatively low-income per capita country (with an average per capita income of US-$-1,130 in 2010), a population of 17 million, a population growth rate of 2.6 percent annually, and a labor force growing by 4 percent per year, according to World Bank estimates.
The Syrian economy, which has previously witnessed significant state intervention, relies on two sectors linked to external factors:
- The agricultural sector, which contributes 30 per cent of GDP, most of which is rain-dependent and provides jobs for one third of the working population-;-
- The oil sector, which is linked to world prices, covers 60 per cent of total exports and 50 per cent of budget resources.
The money that Syrians living abroad transfer home is another important source of state revenue.
To be able to cope with the structural development in its political and economic climate, Syria has gradually entered into a policy of structural adjustment in order to ensure the permanent development of its economy, and to be able to absorb the significant demographic growth it is witnessing (about 200,000 to 250,000 new job seekers each year) and solve the problem of structural unemployment that affects about 20 percent of the working population.
The promulgation of Law No. 10 of 1991, on the Promotion of Investments, was a demonstration of awareness of the need for change and the establishment of a legal framework that attracts Arab and foreign -dir-ect investment. This is because private investments, especially Arab and foreign -dir-ect investments, are able to diversify and develop the economy at the lowest cost, create jobs, and attract capital, technical expertise and technology. However, the flow of foreign -dir-ect investment can be achieved only in a climate of stability, liberalization and economic openness.
Since 1991, the Syrian Government has begun to develop a series of reforms related to the promulgation of Law No. 10 of 1991 and its amendment by Legislative Decree No. 7 of 13 May 2000, in order to make this law more attractive to private investment-;- It was the exclusive preserve of the state, including in particular the sectors of banking, tobacco, water, minerals, textiles and cotton, milk and its derivatives, and others.
The state is witnessing the establishment of private shelves and private insurance companies, for the first time since 1960, thanks to the amendment of financial laws, in the hope that small and medium enterprises will play an important role in the development of the economy, and Syria faced the challenge of signing the European Association Agreement, within the framework of the Euro-Mediterranean Free Trade Area and the efforts of the state to join the World Trade Organization. It is clear Syria’s budget policy since 2000 expresses its firm desire for transformation.
In general, the Syrian economy is heavily dependent on oil revenues, agricultural production, the textile sector, and remittances from Syrian expatriates. Much of the economy remained tightly controlled by the public sector, starting with the heavy industry sector. Private investment has invaded some other sectors such as banking, insurance, manufacturing, transportation, and pharmaceuticals.
This has led to the growing importance of the private sector despite the slow shifts that are still inadequate, for two reasons:
First, the results achieved in terms of FDI returns are simple when compared to the country s significant investment potential. According to the United Nations Conference on Trade and Development (UNCTAD), Syria annually receives about US-$-181.6 million. It ranks 88th out of a total of 196 countries. and
The amendments made in 2000 to the 1991 Act contained insufficient arrangements for FDI to enable the country to benefit from the positive results of FDI, including job creation, transfer of technology and know-how, economic development, access to world markets, etc. This is in addition to the slow pattern of structural transformations (banking and financial sector, tax transformation, development of institutions and improvement of their performance). Some fundamental adjustments in the field of FDI have also been excluded´-or-not focused on in the Government reform programme, which includes privatization, competition, reform of the judiciary and arbitration.
Thus, the investment climate in general lacks the most important international practices and lacks competitiveness when compared to neighboring countries, given that Syria suffers from a weakness in defining its investment potential and in communicating with the business community abroad. Perhaps that is why foreign investors often evaluate investment policy negatively. They see it as characterized by a number of shortcomings, including a lack of clarity of vision, a severe lack of information on FDI returns, both by sector and by country of origin of investment, slow administrative procedures, financial corruption and delayed infrastructure.
All of these obstacles would prevent the flow of,´-or-continue, foreign -dir-ect investment in Syria, slowing down the government s pattern of development since 2000 and delaying the solution to the problem of structural unemployment. The political instability of the region, given that Syria is a confrontational State, as well as its proximity to Iraq, would-limit- foreign investment and exacerbate these phenomena. Syria must therefore undergo a radical and profound shift to change trends and compensate for the delays it has suffered in various fields of foreign -dir-ect investment.
Analyze investment policy in Syria by presenting Syria s potential for foreign -dir-ect investment-;- and identify weaknesses in a way that makes Syria able to improve its ability to attract and benefit from foreign -dir-ect investment in the long run.
Prof. Dr. Moustafa El-Abdallah Al Kafry
Faculty of Economics – Damascus University

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