Special: Oil and the Syrian economy
Syria, Economics, 6/4/1999

One alarming point in the Syrian economy is the higher share of oil and raw materials in the composition of Syrian exports, notwithstanding the advantages available for Syrian industrial commodities to enter European markets under the trade agreement signed in 1977 from which Syria has not as yet benefited, nor from the advantages made available under the generalized system of preferences.

This might be attributed to the weakness of products of totally Syrian origin, such as cotton products. The situation may seem even poorer in ten or fifteen years, a time when oil production may drop. Such a situation requires immediate and serious action to upgrade export-oriented industries, particularly textiles and food, improving their quality and reducing their costs, rendering them strongly competitive in world markets, and securing the requirements for economic growth in Syria.

From the outset, the government has realized the importance of energizing the sector of foreign trade which will have to play a more efficient role in attaining stability in Syria's economy.

The corrective measures taken in the late 1980s were effective and yielded good results. They were accompanied by a renewed policy of involving the private sector on a larger scale in the process of economic decision-making. In this context, the committee on rationalizing imports, exports and consumption and other higher committees have been created with the purpose of steering the foreign trade policy, studying the proposals and recommendations put forward by the Syrian Chambers of Commerce and Industry.

Orientations of the Syrian foreign trade policy are governed by a combination of conditions and measures that aim at supporting the economic process for comprehensive development. They continue to develop on new or renewed bases to cope with the requirements of each phase of the development process, seeking all the time to support the export sector and import what is needed for the development process.

After the very hard circumstances that engulfed Syria's economy in the 1980s, the government opted to link importation with exports, targeting easier pressure on the Syrian pound in the informal market, reducing foreign debts that had accumulated to reach $14.8 billion in 1992, according to figures of the World Bank, and improving the status of unpaid foreign commitments of the Commercial Bank of Syria that amounted to $563 million US in 1992, and above all putting constraints on an increasing rate of inflation resulting from the unbalanced supply of commodities and services with demand.

This import-export combination began in 1987 when the government issued decision no. 375 under which industrialists are permitted to retain 50% of the foreign currency accrued from the value of their exports in order to use this amount in paying for their imports of machinery, spare parts and raw materials.

This decision was followed by another, no. 279, issued in the same year (1987), allowing exporters to retain 75% of the revenues of their exports to finance their imports of materials needed for agricultural or industrial production or other materials specified in that decision, its appendices and amendments.

Other decisions and measures followed with the aim of amending the exchange rate of the currency accrued from exports. At any rate, this process can only be viewed as temporary or transitional dictated by circumstances and aimed at treating the discrepancies and reactivating investment and production after a period of recession. But the continuity of this method will produce some negative consequences which might aggravate day by day. Some of these consequences are:

1. The overlapping of two originally separate processes, import and export, whether with regard to procedure or financing;

2. This linkage has led to slowing down capital rotation, and to the consequent negative effects on a whole series of economic activities;

3. Additional burdens have been placed on imports because there has emerged an increasing demand for hard currency available from export revenues, whose prices have soared because of inadequacy to finance all the import operations;

4. The exchange rate adopted for changing hard currency and called the rate of neighboring countries, which remains stable, not going up or down, and which does not reflect the real rate, had led to a rise in the prices of exports, rendering them hardly competitive in world markets.

Previous Stories:
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  special: Syrian foreign trade sector   (5/28/1999)

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