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CONTENTS Syria  Economic AnalysisLegal Information Info-Prod Country Guide

Principal Commercial and Political Characteristics


Syria's population is sixteen million with a 3.5 percent annual growth rate. This factor and Syria's relative domestic stability have made it an increasingly attractive destination for foreign investment from the years 1990 to 1995. During those years, the average GDP growth stood at 7 percent at constant prices, and per capita GDP grew by more than 3.7 percent per year. From 1994 to 1995, Syrian GDP grew by 19.2 percent, and industrial production increased by about 16 percent.

Since the break-up of the Soviet union, Syria has become increasingly oriented towards Western Europe, and, in particular, the EU. In 1995, exports to Europe were 63 percent of total exports versus 23 percent to other Arab countries. Imported goods from Europe accounted for 47 percent of total imports. Petroleum and related products accounted for 62 percent of exports in 1995. Other ranking items include clothes, fruit, vegetables and cotton. Roughly one-third of imports are machinery and transport equipment, and road vehicles make up more than 11 percent of the total. Iron and steel accounted for 13 percent of all imports in 1995, chemical and related products accounted for 10 percent.

The economic gains of recent years have not been widely distributed, and inflationary pressures are increasing. Unemployment is a growing concern as roughly 60 percent of the population is estimated to be under the age of twenty. Water is another problem as Syria may face a serious water shortage by the end of the decade given current water policies.

The key to Syria's future will be whether the Assad regime can first maintain internal stability and, then, reap real gains through the peace process.

Commercial Outlook

From the 1960s until recently, the Syrian government pursued policies aimed at expanding the public sector, with tight controls imposed on private sector activity. During the 1980s, the country suffered from a severe foreign exchange shortage, aggravated by a fall in remittances and aid flows from the Gulf and a severe drought in 1989-1990 that forced the government to sharply boost food imports.

As the government imposed draconian foreign exchange and trade controls, a parallel economy emerged, based on large scale smuggling to and from neighboring Lebanon. The Syrian government cracked down on smuggling in May 1993, and most of the previously smuggled commodities can now be imported via official channels. Smuggling has not, however, been completely eradicated.

Syria's economy has improved since the beginning of the 1990s due to a substantial increase in oil production, the recovery of the agriculture sector from drought and years of government neglect, renewed access to Arab Gulf states' aid due to its participation in the coalition against Iraq during the Gulf War and piecemeal economic reforms that have provided a boost to Syria's growing private sector.

Syria of the 1990s is an economy in slow and controlled transition to a market system. Since 1990, Syria has experienced real economic growth. Foreign exchange controls have eased due to a renewal of external foreign exchange flows, both official and private. Additionally, the government has taken liberalization measures to open up the economy. Until recently, the government pursued policies aimed at expanding the public sector, with tight controls imposed on private sector activity. All large industry, including the banking and insurance sectors, was nationalized in the 1960s and continued to grow with the help of Arab aid in the 1970s. With a liberalization of trade and foreign exchange controls, a greater proportion of economic activity is now within legal channels, but the parallel economy remains a key element of the economy.

Syria's participation in the Gulf war coalition ended years of isolation from the Arab Gulf states, gaining for the government access to substantial financial aid resources for a wide range of projects to rehabilitate the country's deteriorating infrastructure and public sector enterprises.

During the years 1991 to 1993, after years of stagnation, the economy registered average annual growth rates of between 7 to 8 percent. Growth was led by both the agricultural sector, which recovered from neglect and drought in the 1980s, and an expanding oil sector, where production nearly quadrupled from 150,000 barrels per day (bpd) in the mid-1980s to a current plateau of about 600,000 bpd, which may yet grow modestly and be sustainable for the next few years.

Since 1991, private sector investment also has picked up noticeably, as businessmen have taken advantage of incentives offered under a new investment law, Law No. 10. Liberalization measures implemented in recent years now permit private enterprise to retain foreign exchange from exports, 75 percent for industrial products and 100 percent for agricultural commodities, and to finance permitted imports for inputs and a number of basic commodities using foreign exchange gained from exports. Although it has retained a monopoly on wheat and flour imports, the government widened the list of imports permitted to the private sector, including items formerly reserved for public sector trading companies, such as rice, sugar and tea. In 1990, the government established an official parallel rate, known as the neighboring countries' rate, to provide further incentives for remittances and for trade through official channels. This rate and others more closely reflect the real value of the Syrian pound; Use of such rates continues to expand, a trend which should eventually lead to unification of the multiple rates presently used for different purposes.

Political Outlook

The last week of 1996 and the first days of 1997 have dramatically altered Syria's image as a secure and stable nation. December 19, 1996 saw a van full of Syrian workers strafed with machine-gun fire in a predominantly Christian area north of Beirut, Lebanon. The driver was killed, and several passengers were wounded. An explosion on a passenger bus in the heart of Damascus on January 1, 1997 killed thirteen people and wounded dozens more. Another explosion occurred in the northern port city of Tartus, but no damages or injuries have been reported.

The recent Damascus attacks were the deadliest such incidents to strike Syria in the last fifteen years and represent the growing ability of opposition forces to strike right at the heart of the Assad regime. Seven months ago, another series of explosions ripped through the country. These bombings, not nearly as damaging as the recent Damascus incidents, were attributed to Turkish intelligence and seen as a reaction to Syria's support for the PKK Kurdish opposition group.

Officially, Syria accuses Israel of backing the recent attacks, most likely because this draws attention away from the growing strength of opposition in Syria. A number of parties, however, have an interest in damaging the Assad regime; They include, the Lebanese Christian opposition, Syria's Islamic opposition, although it has not shown such force since the early 1980s, Turkish intelligence, possibly on direct military orders, for Turkish Prime Minister Erbekan has expressed his opposition to such activities against Syria, and Pro-Iranian forces.

Assad's reported health problems, although downplayed in the Syrian press, intensify questions of the Syrian president's hold on power and questions regarding who will be his heir apparent. Grooming his son, Bashar, for the job has become Assad's highest priority for 1997, more so than even a peace treaty with Israel.


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