A. FILONIK, Candidate of Economic Sciences
The author of the article below recently visited Syria. On the pages of the magazine, he presents his vision of the problems of socio-economic development of this state.
In sports, the words in the title mean that there is a long distance and heavy loads ahead. For the country, they mean that in the future it is necessary to rationally distribute forces and maintain the uniformity of movement, while maintaining the set pace. Syria now sees its goal as overcoming the sluggish economy and business anaemia and catching up. But to achieve this not immediately, but selectively, only where the conditions are ripe for this. With the arrival of the new president in 2000, a significant groundwork has already been created for future changes.
TWO VIEWS ON LIFE
The outward signs of the times were the heavily inflated city borders, modern and often expensive cars, and young women, mostly students, dressed, oddly enough for secular Syria, in accordance with strict Muslim canons. But life from the outside does not look ebullient. It seems to reproduce the realities that form the usual series of problems - the Middle East crisis, American attacks, economic difficulties, demographic growth.
Indeed, Syria is going through a very difficult stage of development, in which the drama of the expectation of big internal changes and the sense of a growing threat from the United States, the main "democratizer" of the era, which plunged the neighboring Iraqi people into the abyss of tragic events, are closely intertwined. Of course, there is no panic about this. But it is clear that the general situation is also developing under the influence of such an unpleasant factor.
Syria has experienced decades of antipathy from the United States and lives under unofficial sanctions, which constantly make themselves felt, whether it concerns access to high-tech products or high technologies. Back in the mid-80s, Syria could not buy high-precision instruments for its first space flight, and now it cannot buy spare parts for the national aircraft fleet. Americans with stakes in the European aircraft industry are blocking the sale of equipment to countries they don't like, trying to slow down their economic growth. But this is not the main thing.
How to carry out transformations and not too infringe on the interests of the population is a sore point for the Syrian leadership. Since 2000, the country has entered a transition period from a planned economy to a market economy, which in itself does not promise citizens a rapid improvement in the situation. Moreover, the accompanying events promise to be lengthy. After all, the Syrian reality is such that it will not be possible to quickly mobilize the necessary resources for this, and the local mentality does not tolerate quick decisions and always prefers the stability of everyday life to innovations that threaten to disrupt it.
It is absolutely necessary to get popular approval for measures to modernize the economy and the social structure of society. After all, the contradictions between the points of view of the upper and lower classes create a negative background for transformative activities and constantly challenge the authorities. Meanwhile, there are already many reasons for social discontent.
For example, in recent years, for the Syrian layman, they are,
First of all, they materialized in the growth of food and housing prices due to the influx of Iraqi refugees and increased demand for basic necessities. The money of immigrants, whose number is estimated at 2 million people (which is 10% of the total population of the country), significantly upset the situation in the consumer market, negatively affecting the family budgets of ordinary Syrians.
The current situation is full not only of surprises, but also of problems that require urgent solutions, as a rule, which are not very popular with the population. If the Syrians somehow put up with a several-fold increase in prices for potatoes or tomatoes, then a possible increase in prices, for example, for fuel oil - a mass fuel in the winter season - is perceived almost as a national catastrophe. Indeed, prices have not been revised for many years, and by now there is an intolerable situation in this market. The cost of one liter of fuel oil in Syria is the lowest in the Middle East, which provokes increased fuel smuggling to neighboring countries and deprives the treasury of hundreds of millions of Syrian pounds, thereby causing damage to social support programs for the population.
The Government faces a difficult choice. The country has declared a course towards a socially oriented market, but the reality is far from slogans, and this causes grumbling and threatens trouble that can spill out on the street. Moreover, Syrians are a socially active people, and their political enthusiasm in the 1950s is still legendary. In order for them to adequately perceive the inevitable, the state focuses on explanatory work that does not only convince them of the need for unpopular measures, but also demonstrates to people the authorities ' concern for their well-being and the desire to create conditions for improving their lives.
Syrians are rather reserved about calls to properly assess the government's actions and support the new course. In part, this wariness has historical roots, stemming from the despotic nature of the eastern state. It is not for nothing that a crude and paraphrased Arabic proverb here calls for "pinning down" the state, without showing exactly how, in order to avoid reprisals. In part, the skepticism stems from Syria's marked isolation in the international arena in the previous period, when the people endured, and still continue to endure, the hardships of confrontation with Israel, increased defense spending, and self-restraint in the name of preserving independence and national sovereignty.
People put up with it, but times are changing, and people want to live better, not thinking about politics and other high matters. The Syrians ' patriotism and ability to adapt to different circumstances help them resist difficulties. Ordinary people generally understand what kind of world they live in, although the daily struggle for existence is annoying, giving, as usual, a reason to express dissatisfaction with the actions of the authorities, and even suspect the machinations of a certain fifth column.
Some signs of rejection of reality can be seen in the Muslim outfits of local ladies, who especially do not favor the authorities. Knowing the Syrians, you can be sure that if they are forced to wear beards or blind dresses, then the current adherents of religiosity will rebel first.
In general, Syrians are conscientious and tolerant citizens. But they are also helped to live by the spirit of community that has developed over the centuries, and the national unity that has grown stronger in joint work and communication, cemented by tradition and rejecting individualism.
There are other ties that bind local society into a tight knot and ensure that people are aware of their place in life and their involvement in big events. This is best illustrated by the scenes I have observed more than once during Ramadan, when hundreds of people are gathered in a concentrated manner, frozen at long tables in restaurants, waiting for the Adhan.* and iftarah**. They clearly felt a sense of togetherness and community in the face of an important event. This left an impressive impression, which was enhanced by what was being done in public all over the country at the same time. Such moments demonstrate considerable spiritual power, capable of transcending the spiritual world.-
* Azan-a formula announced by the muezzin (mosque attendant), which calls Muslims to perform obligatory prayer (namaz).
** Iftar-prayer in connection with the end of fasting.
live a lot and wait for the best share. They keep people energized and encourage them to mobilize in the interests of a common cause. Moreover, the current course seems to be more in line with the natural inclination of the Syrians - an ancestral trading nation, enterprising and open to communication.
PRIVATE CAPITAL IS CHANGING ITS FACE
More than forty years ago, the state sector was created in Syria during nationalization, although private capital was still left with a sufficient field for activity. At the same time, the idea of social justice was brought to the fore, which a little later found a real reflection in Ba'athist practice. Therefore, it cannot be said that the country has inherited a heavy legacy from the bygone era of the elder Assad, although there are many problems left, and not all of them are objective in nature.
One of them, and probably the main one, is the public sector and the direct involvement of the state in production. They were the mainstay of the regime, at the same time a system-forming way of life, and a tribute to the centuries-old tradition of the Eastern economic model. The efficiency of reproduction mechanisms based on this approach was not very effective: productivity remained rather low, and enterprises served as a source of livelihood for speculators, intermediaries, small brokers, and suppliers. The economy was in short supply, and the problem of domestic savings was acute. Nevertheless, the country gained its own industry, turned into an agricultural and industrial producer, and took average positions in the region in the economic rating, despite the confrontation with Israel and a large defense budget.
In the current geopolitical situation, the situation was considered tolerable. However, the new century opened up other ways of development. At that time, the prevailing opinion in Western expertise was that the country was economically isolated and was pursuing an overly uncompromising foreign policy. According to Western experts, the rejection of these positions would be considered an application for Syria to join the club of civilized states.
Indeed, it was necessary to put the country on the path of wider participation in the international division of labor, remove technical barriers to trade, exchange of capital, information, etc. However, in Syria, where continuity is a strategy of state behavior, they decided that the method of consistent approach to the goal is more preferable. Especially when the ruling regime pursues a socially oriented policy, and the commitments made to protect the people of Palestine remain Syria's strict duty to the Arab world.
Without abandoning the political legacy of past years, Syria has set out to revise its economic model. The main goals here were to encourage foreign investment and establish new partnerships with the outside world. As part of this course, it was supposed to make the transition from a planned economy to an economy dominated by the private sector. At the same time, the state sector will not physically shrink, and private entrepreneurship will develop not at the expense of denationalization of enterprises, but on its own basis, using the state's incentive policy. Such a development strategy was adopted by the 10th National Congress of the Arab Socialist Renaissance Party (PASV) in June 2004 and was dubbed the "socially oriented market economy" in the spirit of the times, replacing the previous course of socio-economic recovery of the country, known as the "correctional movement". Thus, a change of priorities was formed, and preference was given to the private economic development model.
During the period of implementation of the new deal, a legal framework was created that ensures the reform of the foundations of the economic system without dismantling its main component - the public sector. In particular, the introduction of a new tax regime, the updating of labor legislation and regulations governing the activities of companies, the simplification of rules for conducting export-import operations, and the adoption of clearer rules on currency regulation were crucial. Another key point was the initiative of the private sector itself, which seeks in the new century to leave the framework of a vague and traditionally oriented family business and take the form of modern enterprises with clear functions and areas of business interests.
In a short period of time, private entrepreneurship was able to identify itself and began to stand out against the background of the amorphous public sector, which apparently played its historical role. Syria has developed its own major companies such as Hamsho Group International or Seif al-Sham. They have a multidisciplinary specialization, a large working capital and are involved in full-scale cooperation with foreign partners on major projects of national significance. Their owners have gone from concerned businessmen to respectable businessmen with a sense of self-esteem. It is they who compete with the public sector, and they are also able to occupy significant niches in the Syrian market of equipment, communications, construction, recreation, etc. Together with the multibillion-dollar Syrian private capital still remaining abroad, they and similar business structures will be able to fill vacant places in the country's economic space with fair competition and with a reduction in the level of corruption and significantly push back the public sector.
The only problem is that both the public and private sectors are still weak, although the future clearly belongs to the latter under the circumstances. And if an optimal balance of public and private interests is achieved, Syria will become the first country in the Middle East to prove that it can overcome the ideological misconceptions of the past and ensure the harmony of the main components of economic growth.
INCENTIVES FOR DEVELOPMENT
For a number of objective reasons, the insignificant capacity of the Syrian economy is not comparable to the resources available in the country. In addition, it is not sufficiently diversified to ensure sustainable growth. Moreover, the state of the oil industry is largely determined by the price situation on the world market, and the agricultural part of its economy - the second pillar of the budget-is significantly dependent on weather conditions. In this regard, it is absolutely necessary to increase industrial production, introduce industrial methods in agriculture, modernize the service sector, expand the development base through alternative activities, in particular, invest in tourism, which was not previously perceived as a full-fledged economic sector.
In principle, the recipes for resuscitating development processes are known, but there are barriers that make it difficult to move forward. First of all, this is an extremely bureaucratic state apparatus, a high degree of centralization of power, a conservative decision-making mechanism that has little to do with the needs of entrepreneurship, price control and state subsidies for essential goods. These barriers make up the IMF's list of standard requirements for low-level countries. In Syria, they are aware of this, but actively seek to avoid shock therapy, preferring some uncertainty of the economic situation in order to avoid a social explosion.
The economic brain of the state is looking for sparing ways to defuse the situation. The establishment of relations with the European Union, the liberalization of banking and financial activities and the creation of market mechanisms should be considered one of the most important steps on this path. In October 2004, a bilateral association agreement with the EU was initialed as part of the organization's efforts to create a European-Mediterranean free trade area by 2010. In the EU, Syria has a major trading partner: 66% of Syrian exports go to Europe.1 Removing barriers to cheap Syrian industrial and agricultural products can make a big difference to the country's long-term economic growth, and European investment in the service sector can equip businesses with modern communication tools, including the latest advances in information technology.
However, the importance of the Association Agreement with the EU is diminished for Syria by the fact that its exports to the EU countries are dominated by oil and cotton, while other products are much more modest. In addition, Syria faces political claims regarding weapons of mass destruction and support for terrorism. The agreement is related to its participation in the reduction of WMD threats, assistance in the fight against terrorism and the introduction of democratic principles in the internal life of the country. Such claims are not consistent with the economic content of the document, but they are a tribute to American negativism towards the Syrian leadership. Nevertheless, the agreement is signed and gives Syria a chance for additional growth incentives, since so far its economy, especially industry, has not acquired the qualities necessary for full-scale cooperation in the EU format. At the same time, such a step also marks an important stage in the reorientation of its economic relations, which focuses on developing ties with the West. The West is increasingly replacing the former Soviet Union, which has invested heavily in building production infrastructure in Syria and other capital-intensive projects. Russia is under pressure from European countries and even Ukraine and Belarus.
it is being actively pushed out of the process of trade and economic cooperation with a former, one might say, ally.
Another factor in creating a favorable climate for business activity is represented in Syria by the reform of the banking system. The liberalization of this sector, which was initiated in 2001, is designed to improve the economic situation, increase the circulation of capital and ensure easier access and functioning of investment flows in the national space. In addition, private banks have introduced previously scarce new banking products to Syria and are creating a competitive environment-an integral part of the market economy. So far, three foreign private banks have been given the opportunity to operate first in the country's free zones, and then open a branch in the capital.
Private banks are an integral part of market mechanisms that are gradually being woven into the economic fabric of the country. Currently, there are applications from 50 foreign private banks to open their branches. Their real entry into the country will help to redistribute money flows more fairly between the public and private sectors and institutionalize them, unlike the period when private capital could rely almost only on informal loans from Lebanon or on irregular borrowing from local moneylenders.
As the next step, it is planned to open a stock exchange, which will become the most important attribute of the market economy and will mark a certain completion in the formation of its institutions.
In essence, these measures represent a serious intention of the authorities to give a new quality to the development processes, but only if a careful and balanced approach to their implementation is taken. This is also important from the point of view of the economy itself, which needs a stable platform to start. With a population of 20 million people, GDP is only $ 22.5 billion, 2 and per capita income is $ 1,125 (excluding PPP), 3 but inflation does not exceed 2% per year, and the exchange rate of the Syrian pound to the dollar has remained unchanged for 15 years. This demonstrates the ability of Syrian financiers to use subtle combinations to maintain internal balance in the face of resource scarcity, which gives rise to hopes for the future.
Preserving the gains of the past years is part of the regime's strategic course, which does not intend to further expand the public sector, but also refuses to sharply reduce budget spending on education, health care and maintaining the price of bread and sugar. It is obvious that the Syrian mentality is more impressed by the Chinese model of transition to the market, rather than its Russian counterpart, although Syria previously borrowed a lot from the Soviet economic and party-political experience.
The measures outlined above are part of the national reform agenda, which has been gradually implemented in the country since recently. The reforms do not have clear boundaries, although their targeting is quite obvious. They began as a declaration of intent and were initially intended to address a narrow range of issues. And it was hard to imagine that a change of course through reforms could immediately take place on a broad front and involve many actors. It was only gradually that the idea of reforms was filled with concrete content and moved forward as real tasks were formulated in relation to other aspects of economic and political restructuring.
The Government has outlined changes in tax and administrative practices, regulation of property relations in the agricultural sector, and other measures as priority steps. In a sense, the reforms were of a catch-up nature, since they were partly aimed at bringing the situation in these areas to the actual state of affairs, and partly had to adjust the principles of activity to modern requirements and adapt them to the mechanisms that were supposed to be consistently introduced into economic circulation.
In order to provide legislative support for the reform process in Syria, all the necessary measures were taken.-
The national legal framework can now be considered fully equipped with relevant legal documents. However, this is still half the story. Everything implemented must be brought into line with the practical activities of State bodies. This is another aspect of the activity and probably the most difficult, if we proceed from the well-established traditions of the administrative apparatus.
If the lawmaking of the representative government has opened the door to reform, then only the executive power can expand it to its full extent. Meanwhile, it is known that the Syrian bureaucracy is not as reactive and perverse as the electoral structures, and moves in the declared direction at a much slower pace. In this regard, we can assume with a high degree of confidence that the entire reform program will depend crucially on how it will be consistent with the interests of the state bureaucracy and its vision of the usefulness and expediency of certain reformist actions.
The tax system was chosen as a priority object of reform for many reasons. Among them is the need to optimize the revenue side of the budget, redistribute the tax burden more fairly, increase tax collection and make the whole situation more transparent and accessible for control. The administrative reform was aimed at optimizing local governance, decentralizing and redistributing power in a certain way, achieving better execution of orders, and increasing the initiative and responsibility of local authorities. In other words, within the framework of this process, the prerogatives and functions of the state bureaucracy, which is considered almost the most important factor in the success of reforms, should be affected in one way or another.
Measures to regulate relations in the agricultural sector hardly make sense to refer to the category of purely reform actions, since they were mainly of a technical nature and were aimed at improving accounting and control in this area. However, they are also important. After all, the lack of proper order created difficulties in conducting economic activities, whether related to land, water or other resources. In general, the actual agrarian reform was completed in 1979. Some parties and trade unions at various times put forward the problem of carrying out additional agrarian reforms. But it is considered that the tasks of creating new social relations in the countryside were generally fulfilled at that time, and the goals of the subsequent stages are to improve relations related to land and water, to observe the principles that ensure the democratic nature of land ownership and land use systems.
In general, the reform field appears to be more extensive than what is formed by specific legislative acts. The intention to leave the public sector outside the reform framework, i.e. to leave it to its own devices, possibly with the expectation that losses in it will be compensated by growing private capital, may not be productive. Whether a successful businessman will be willing to consider such arrangements is a big question, given that mismanagement and abuse are a generic feature of the excessive presence of the state in the economy and management.
No one in Syria is calling for the abolition of the public sector "as a class", and the reasons for this are clear. But for narrowing its functions, it says a lot. In just one day, at the end of September 2007, the central newspaper published two articles about the attitude of State officials to the case. In particular, the state organization for grain trade and processing transferred 1.5 million tons of wheat (a third of the harvest in the most successful years) to third parties, which caused the treasury to lose 15 billion sire. f. and canceled contracts for grain supplies to 48 companies at 195 euros per ton in favor of one Lebanese company at a price of 185 euros. 4. In another case, the Damascus Customs administration, together with the Adra free trade Zone, failed to issue documents for the repair of a huge number of imported old trucks, which seriously disrupted the work of investors and entrepreneurs based in the zone, and deprived the state of almost 900 thousand dollars of net income. 5 At a minimum, it follows that if Syria manages to restore order at least in the field of administration, it will have a significant chance to realize its wildest expectations.
This country has sufficient potential. There is oil, other mineral raw materials, land and food resources, and investors can count on reasonable prices for electricity and on sufficiently trained and cheap labor. The adoption of a set of laws that guarantee a favorable investment climate, are quite flexible and even generally more liberal in terms of taxes and support for initiatives than in neighboring states, is taking place in conditions when Syria has created a modern insurance system and has become a member of the multilateral Investment Guarantee Agency of the World Bank. And this, of course, provides incomparably greater security of capital in any political risks.
In principle, if the tasks set are consistently implemented and the necessary political support of society for measures in the socio-economic sphere is provided, then Syria will be able to make a breakthrough at the stayer's distance without fear of losing its breath.
1 Syria Investment Report. 2005, p. 7.
2 Ibid., p. 9.
4 Tishrin. 29.09.07.
5 Al-Baath. 01.10.07.
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