Syria’s
Economic Growth Requires Fundamental Reforms First
November 2010
Translating from
Arabic, the following headlines appeared in the
electronic media during the second half of October 2010:
On October 17,
2010 Shamlife headlined: “Dardari in
‘Industry’s’ stronghold: No industrial policy-maker knows industry’s needs”.
On October 24,
2010 ALL4SYRIA said: “Labor unions will
attack the government... by throwing tomatoes”.
On October 26,
2010, Shamlife: “Dardari: We could not
reduce poverty…”.
On October 26,
2010 ALL4SYRIA: “Dardari inundates
unionists with ‘misleading’ data”.
On October 26,
2010, Syriasteps: “A minister in Mr.
Outri’s cabinet… I disagree… I
disagree”, referring to Minister of Industry’s reaction to demand by union
leaders for more workers in Jableh textile factory.
On October 27,
2010, Shamlife: “Sharp exchanges between
the Minister of Labor and Damascus’ labor unions leader”.
On October 28,
2010, ALL4SYRIA: “Asi: The high price of
tomatoes is caused by Dardari”.
These headlines
suggest the existence of tension between labor union leaders and government
ministers responsible for labor, economic, and financial affairs, on one hand,
and among the ministers themselves, on the other.
The tension may be
attributed to government’s attempts, led by deputy prime minister for economic affairs, Mr. Abdullah
Al-Dardari, to transform Syria’s economy from a “socialist” economy to a
“social market economy” and the possible effects such transformation might have
on, among others, unemployment.
Although the
terminology “social market economy” is vague, the word “market” reveals a
fundamental nature of the new economy. Under a “market” system, future
government investment decisions would be made according to rate of return on
investment criterion.
Such an approach generally tends to allocate scarce resources rather
efficiently and help steer GDP on a path of optimal growth. A rate of return
approach invests taxpayers’ money and national wealth in the most rewarding investments
for the country as a whole, not to one segment of the population at the expense
of the others. Other approaches are inefficient because of the ideological,
ethical, or emotional bias that typically influences decision makers.
As for those business enterprises the
government already owns and manages, a “market” economy should open Syria’s
doors to competition. More competition from Turkish, Chinese, and Korean goods,
for example, would expose Syria’s loss making government owned enterprises to
greater losses. Eventually, the government will have little choice but to sell
off the 250, or so, loss making firms it owns. Ehsani wrote in Syriacomment.com convincingly about
the need to privatize these companies in his “The Sin in Syria is Low Wages” on October 17, 2010.
Whenever this happens, a proportion of
the workers currently employed by these establishments will be laid off,
exposing them to the vagaries of unemployment.
The Challenge
According to Syria-News.com on October
29, 2010, Mr. Dardari revealed that Syria needs to create over the coming few
years, presumably during the life of the forthcoming Five-year Development
Plan, 1.25 million jobs, of which 65,000 will be achieved during the first year
of the Plan“[Dardari on poverty and unemployment… in numbers”.
However, the author of the Syria-News.com
report estimates that the Plan needs to produce 2.1 million new jobs if Syria
were to maintain the unemployment rate at 11.8%, presumably the rate at
present.
Syriasteps, on November 2, 2010, quoting
a study by the Planning Commission found that, “economic growth in Syria dropped
during 2008 and 2009 to 3% from 5.5% in 2007” and that, “according to the
economic summary of the first national population report (2009), the rate of
growth in Syria’s important real economic sectors was negative during those
years.
It is clear that the path of future
economic growth in Syria is challenging, if only to: 1) provide young men and
women with work opportunities upon graduation from schools and universities, 2)
absorb the 600,000 already unemployed out of Syria’s 5.44 million work force, 3) absorb those who would become
unemployed as a result of being laid off from privatized enterprises in the
future, 4) raise the country’s real per capita GDP.
High unemployment rates have serious
negative consequences in terms of lost economic contribution, prolonging
poverty, and fomenting discontent; even possibly societal unrest.
Examining Syria’s development plans is
difficult. Wading in Syria’s numbers game is of little value. The assumptions
behind the Eleventh Five-Year Plan are unknown and the accuracy of the
available public data is in doubt. The IMF Country Report on
Syria, No. 10/86, dated March 2010 states on page 30: “Government finance
statistics suffer from major deficiencies with respect to definitions,
coverage, classification, methodology, accuracy, reliability, and timeliness”.
Possible solutions
In addition to government’s effort
already under way to attract foreign investors, factors that can accelerate Syria’s
future rates of economic growth will be outlined next. Five factors are structural,
requiring a long time to work their effects through. Three other factors are
operational and can produce quick results. Hopefully, the government will
muster the political will and wherewithal to implement both.
The first structural factor is to
reduce the rate of population growth significantly. With an annual rate of 2%,
possibly much higher, Syria needs to feed, keep healthy, and educate around
half a million citizens every year, more in the future. Such increases are too
heavy a burden for a relatively poor country. Unless Syria’s population growth
rate is reduced measurably, Syria will be caught in a poverty and high
unemployment trap.
Syria should institute effective programs
to encourage family planning and birth control. For those who are guided by
God’s views on this matter, religious scholars have it in their gift the skill
to tailor their interpretations of the Holy Scripture to suit their political
benefactors. Syrians would do well to ignore the dictums of orthodox ulama and
the Pope. The Lord wants the faithful to be healthy, educated, and prosperous.
The second structural factor is to
enact
laws that would encourage Syrian women to participate fully in economic
development. Women’s equality with men is a prerequisite for economic growth.
Syria would never be able to attain its full economic potential while half of
its population is mistreated like second-class citizens.
Equality for women with men
before the law is an absolute right, not a favor. Equality would restore
natural justice to fifty percent of the society, helping to enhance women’s
contribution to Syria’s economic growth.
A modern secular family law
that applies to all citizens regardless of religion, sect, and denomination
should replace existing family laws, including Shari’a laws and courts. That a
man can marry four wives, divorce any one of them without giving reason, that
Syria’s two best known ladies for sophistication, intellect, and modernity; the
First Lady and the Republic’s Vice President are equal to one man, who can be
illiterate, in a Shari’a court of law in giving testimony, being a witness, or
in inheritance bring into question the suitability of Shari’a law and courts to Syria’s
way of life in the Twenty-First Century. Such an anomaly is all the more
surprising in light of Syria’s keen interest to project itself as a modern
“secular” society. Treating women like chattel leaves its scars on women’s
personality, defining their view of themselves as lesser beings and inhibiting
their contribution to the country’s development.
The third structural factor is to reform the educational curriculum in order to
produce graduates with the skills needed in today’s competitive business world.
The educational curriculum should aim at enhancing students’ analytical competence,
inquisitiveness, creativity, and entrepreneurial drive. To this end,
independent studies, term paper research, use of the school’s library and
laboratory should become the order of the school day instead of attending
lectures passively and memorizing textbooks. Teaching should emphasize student
participation in the classroom and encourage debating taboo issues, especially
religious dogma. Classroom size should be reduced from 40-50 students to 20-25
students. Large and sustained capital investment in school buildings,
libraries, laboratories as well as expanding the size of the teaching staff
need to become a priority.
The fourth structural
factor is to fight corruption seriously. Corruption is expensive; be it in the inflated prices the government pays for goods
and services, the unqualified employees in city hall, or the petty bribes
citizens need to pay to minor officials in order to facilitate dealing with
government offices. All forms of corruption are robbery and deny taxpayers fair
value for their taxes.
The World Bank Institute’s
Worldwide Governance Indicators shows
Syria’s poor score in corruption control. Of the 213 countries in the study,
Syria ranked among the worst, scoring a negative (0.96) while Denmark, for
example, achieved the high score of positive 2.42. Disturbingly, Syria’s score
has been on a downward slide in recent years; in 2003, it was a negative (0.5)
and in 2005, it slid to a negative (0.63).
The structures
that have been nourishing corruption in a “socialist” Syria could exacerbate
the level of corruption that might emerge under a “social market economy”. A
“market” economy could enlarge Syria’s business elites, adding ferocity to the
culture of greed and exploitation that pervades the elite’s conduct. Today’s lawbreakers
must be brought to justice so that would-be business offenders in the future
are warned. Before the “market” economy gets underway in earnest, social
welfare programs should be in place to protect the weaker members of society. Otherwise,
“market” economy’s shortcomings, its focus on profit and efficiency, could
scuttle the new experiment altogether, triggering even societal unrest.
The fifth structural
factor is in the nature of an administrative house keeping. Given that high quality statistics can help improve the quality
of planning and investment decisions and instill a culture of transparency and
accountability, implementation of the recommendations contained in the March
2010 IMF Country Report on Syria to provide
comprehensive, accurate, and timely statistics in accordance with international
standards should become a priority.
The challenge of
Syria’s data may be summarized in: A) Annual national accounts “reported for publication in the International Financial
Statistics (IFS) with about 2-years lag” (IMF report, p. 30). B) Government
finance statistics that “suffer from major
deficiencies”, with “the largest, most persistent and volatile discrepancies,
are between the financing requirements of the budget, as reported by the MOF,
and government financing as reported by the Central Bank of Syria” (IMF report,
p. 31). C) Monetary and
financial statistics “reported for publication in
the IFS with about 10-month lags, falling short of recommended
dissemination practices of 3-month lags” (IMF report, p. 31). D) External
sector statistics presentation and compilation methodology being inconsistent
with IMF standards.
On the other hand, the operational
factors can provide rapid access to money to help fund the next development
plan. Three sources can be worth billions:
First: Enforce tax collection
vigorously. It is reprehensible that large family
businesses pay an effective tax rate of something around 4%, according to Ehsani of Syriacomment.com.
Second: Stop politically
convenient allocation of national resources. “Market” investment decisions are
based on rate of return criterion. Return on investment should decide the
priorities of future government investments, including
irrigation projects.
The financial return on Syria’s investment in irrigation over the
past few decades has been poor. The non-financial
returns have not been not brilliant either: Migration from rural communities to
urban centres continued, reliance on capricious rainfall was not reduced, and
over-extraction of groundwater beyond the volume of renewable water have led to
negative balances in five out the country's seven water basins; reducing the
quantity and degrading the quality of the remaining water.
Food
self-sufficiency in an arid/semi arid Syria is a mirage, notwithstanding the
national appeal such a slogan evokes. Syria does not have sufficient groundwater
and rain to feed more than 15 million people. New spending on irrigation
schemes will be a waste of money and would exacerbate aquifers’ condition.
Syria should divert investment in irrigation schemes to other fields, including
rain-fed lands.
Third: Divert resources from
the military to productive investment in infrastructure, education, health, and
welfare. The military is not among Syria’s regional strategic strengths. In the
regional balance of power, Syria’s armed forces are not a major factor. A well-educated
healthy population makes for better soldiers and officers.
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