A study on the Syrian economy
Syria, Economics, 1/20/1999

In the past, Syrian economic prosperity depended on natural products (e.g. wine, olive, vegetables, fruits and nuts), industry (e.g. purple, dyeing, glass-making, Linen, wool weaving and metal works), and on control and organization of trade passing by caravan from the East to the Mediterranean through such centers as Palmyra, Basra and Damascus, and Petra.

Today, Syria is gradually moving towards privatization and market forces. It has decided and committed itself to promoting private investment. It has taken serious steps to clear up problems with its international creditors. Recently well-informed sources have revealed that Syria has achieved much in this respect.

Of the big changes that have been made, the reforms in the exchange system and the passage of investment law no. 10, May 1991, offered substantial incentives to the private sector. Moreover, most hard currency is determined by market forces. Businesses are allowed to retain 75% of foreign exchange earnings, and importers are free to set up foreign exchange accounts from their assets held abroad.

Nevertheless, the lack of the private banks raises the costs of finance for Syrian business, and has driven Syria's banking experts abroad. However, recently sources indicated that a stock exchange law is under active consideration, which will further enhance the development process.

In another step to facilitate operation by private entrepreneurs under law no. 10, the commercial Bank of Syria opened two branches for investment banking in Aleppo and Damascus in 1992. During 1995, the Ministry of Economy and Foreign Trade issued a decree authorizing both residents and non-residents to use credit cards. The move is the latest in a policy of gradual liberalization of foreign exchange system. The regulations for the credit cards stipulate that possession of an international credit card upon leaving Syria will no longer be regarded as an attempt to smuggle hard currency out of the country.

In general, the economy in Syria is developing positively. The Syrian economy largely prospered during the previous years and some remarkable progress was registered. In this respect, many of the economic difficulties were successfully managed.

During the 1994, the electricity crisis of the previous year has been tackled and investment in the telephone system started to pay off. At the meantime, the private sector, which was called upon to take an active part in the Syrian economy, is looking ahead to more economic reforms to allow it to build on the growth achieved on the first seven years since private investment law no. 10 (May 1991) was passed.

The experts noted that to gear up the economic system, the following proposals have to be treated in a proper way:

-Raising public sector salaries to improve performance and reduce corruption, while cutting the state work force.

-Applying a proper commercial framework to the operations of public sector industries.

-Promoting non-oil exports by: removing taxes, commissions and foreign exchange controls, improving services at Syrian ports, and providing easy access to credit for industrial companies.

-Revamping the financial sector to allow a proper environment for joint stock companies to exist: allowing private banks to operate and foreign banks to open branches, unifying the exchange rates, rescinding law 24 which prohibits possession of foreign currency and opening access to savings in hard currency at national banks.

-Fiscal reforms, including cutting the top tax rate to 35 percent, allowing industries to freely reinvest profits, retraining tax administrators, levying corporation tax on profits rather than turnover and upgrading auditing procedures.

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