"The Economy is Worse Today" by an Aleppine Businessman

I recently wrote a dear friend - a businessman in Aleppo - to find out how the economy is fairing in Syria. I had recently written a short post about government efforts to liberalize economic regulations, relying heavily on government news announcements. It was an optimistic appraisal. A number of friends wrote to warn me not to be optimistic. "Government plans do not translate into action," they reminded me. "The economy is in the dumps." So I wrote my Aleppine friend to get a bird's eye view. Here is his response. (I hope others doing business in Syria will give their appraisals of the situation.)I have one reservation about some of these observations (see end of post).

K., writing from Aleppo
February 27, 2006
for "Syria Comment"

The economy is worst than it was a few months ago. Prices have gone up due to the falling price of the Syrian pound and do not come down when the price of the dollar moderates. The increase in fuel and cement costs have hit people hard and increased the sense of pessimism among the residents of Aleppo. The paltry rise in government employee salaries came as a real blow. Everyone expected more. Private sector employees cannot ask for an equivalent 5% rise in their salaries due to the high unemployment rate, which always seems to be increasing.

The government is never short of plans and declarations about the improving economy. But they never seem to materialize. People are, as always, distrustful of the government. To give you one example, the chamber of industry finally managed, after years of lobbying, to cancel import permits for good necessary to local industries. As soon as this law was implemented, however, goods arriving at the ports were denied entry on the pretext that they were banned from import (at least the import permit listed the conditions for such imports). Bribes became more substantial because goods sat at port with increasing demurrage charges and holding costs. In recognition of the increased damage to industrialists and businessmen, the same chamber of Industry recently succeeded in re-installing the old system of import permits, which it had so assiduously struggled to abolish. Ultimately, well-intentioned reform only succeeded in opening up new and unexpected avenues for bribery and graft. The wolves are many and shepherds few and unarmed.

In short, the intricate details are never dealt with on the ministerial level. Technocrats are frequently brought from the outside to reform a system of governance that, ultimately, can only be repaired by determined leadership from the inside and by fixing the judicial system, which is broken. The results so far are very discouraging. The general attitude is that the government is so confused and does not know what it is doing.

Another example is the story of a UNDP program praised by the UN as the most successful program in the world (and being implemented as a model in other countries) to develop rural areas in Jabal el-Hoss south of Aleppo. The director, who was appointed by both the government and the UN, was an honest man who constructed the program from scratch. He organized the community and gave its leaders responsibility to issue micro loans to small farmers. It became a real success because the director of the program was a very honest man. (I know the director because he has been a consultant at my farms for 10 years.) Recently, he was fired because he would not give out concessions to people higher up at the Minister's level. Outraged by his temerity and refusal to honor them, they accused him of corruption and impugned his professional integrity even though an independent auditing commission from the UN had reviewed his program only 2 months prior to his being fired. The Saudis are now courting him to implement a similar program for them. The UNDP was furious; it threatened to pull out of Syria because the minister acted on his own initiative in firing the project director without consulting the UNDP representative, as he was required to do. Despite this lamentable travesty of justice, the Minister of Agriculture was renamed to the new government. Things are not changing.

Food Items are 20% higher than last year. Real Estate prices are taking a hike due to the 150% rise in cement prices. Imported raw materials are much higher due to global inflation and rising fuel costs. Salaries are stagnant. Unemployment is growing. As for this "5 year plan," how can we be optimistic. We have never heard how much of the previous 5 year plan was implemented, and presume the worst. Once more, a plan from the top does not deal with the obstacles at the bottom. You ask anyone about the 5-year plan and his first reaction will be a smile bitterly.

As for corruption, I have not heard or seen any effective steps taken from the government to fight corruption. Business goes on as usual. Work on the road junctions from Aleppo airport to town has halted. The money allocated for the project and contractors ran out, and the project is incomplete. The budget allocated did not cover much. No one seems interested or courageous enough to demand an accounting of how the money was spent.

Aleppo was recently chosen as the Capital of Islamic Culture. A committee was appointed by the government in early 2005 to organize and oversee the cultural events. The committee consisted of two priests, two communists and a bunch of artists from the actors union. No one from the religious community was even informed that the committee was being formed. For the whole year, this committee did nothing. They did not even advertise their existence to the public. At the end of 2005, the news broke and banners were raised throughout the city, declaring its new status as the capital of Islamic culture. At this time, a few Muslim scholars started to organize and joined the committee. They are now rushing to organizing some events. According to SyriaNews, the budget allocated by the government is a mere 35 Million SP or 650,000 USD. The governor of the city decides where to spend this insignificant amount and he is spending most of it to repave the streets and clean the building. The scholars are trying to raise additional funds. It is a mess. Last year’s work is being hastily done now. This cultural event has turned into a mockery of the people, but only a very few can find humor in it.

People continue to ask why Abdul Halim Khaddam was left to steal and steal and now is being condemned while many others like him today continue to steal without being stopped by anyone. Why is Miro not investigated for corruption when his dealings are common knowledge among the masses?

The Minister of Finance is very active at reforming the tax system so taxes are on the rise. What is certain is that last year we paid less tax than this year. This is further complicating the stagnant economic conditions of the country.

The Government has now been busy for three years, organizing committees to assess and repay landowners who had their lands confiscated in the land reform acts of 1958, 1963, 1965, 1971 ..etc. The act stipulates that full payment should actualize within 40 years (can you believe the injustice). Even though it has been now 48 years and still no payments have been made. It does not look like these committees are doing anything. Courts are refusing to hear cases in this regard pending the results of these committees. We don't even know if they are going to appraise the lands at 1958 prices when 1 USD equaled 3 SP or if prices will be assessed according to the worth of the land today.

Most important is the Justice system. It is as corrupt as ever, and verdicts are handed to the highest bidder. The system is very slow. If you have all the necessary proof that someone owes you money, the case will take no less than 3 to 4 years before you get your money returned, and only then so long as you are prepared to devote up to 50% of the total for buying your rights.

You asked me for some observations about the economy, so here they are – just a few of in a never-ending list. Use what you see is fit on “Syria Comment” without using my name since it is not yet the time to air dirty laundry. Let me know if you need more details. I don't want to use the government server, so please use this new email address in talking about "sensitive issues."

Very best, K

Addendum: My sister-in-law, who worked for the UN's World Food Program until recently, is visiting. She read K.'s remarks about the UNDP project at Jabal al-Hoss and doubted that his account captures the full story. She said that there have been a number of UNDP and WFP programs in Jabal al-Hoss over the years and "there has always been a question mark over them. The region is very poor. A great deal of money has been spent on Jabal al-Hoss over the past decade, but the results are ambiguous," she insisted. "There have been very poor follow up studies so we really don't know how effective the projects have been." She doesn't know about the particular program described by K. however.

She also doubted K's assessment of the Agriculture Minister. She said he had a good reputation and suggested there may have been other complications K. may be unaware of. On the whole, she said, the top officials at the wazara al-ziraa have been responsive to UN demands, cooperative, and genuinely interested in local development. She said that usually issues of corruption involve government project managers who are directors of a nahiyya or Qada, not the top administrators in the ministry.