Does Syria's President Have The Will Or ConvictionTo Reform? By EHSANI2

Does Syria’s President have the Will or conviction to reform?
By EHSANI2
May 26, 2006

Since the think tank members at Creative Syria have already tackled the issue of reforms, I was not sure whether there was any value added in writing further about this subject.

By coincidence, a friend had already asked me to comment about this subject last night. Having already written back to him, I decided to post my thoughts below:

Syrian political reforms are unlikely to take place anytime soon. The President has recently listed security as first on his agenda. Some people think that this is a direct result of the recent events in Iraq. To be sure, however, security has always been Syria’s top priority under this regime. Indeed, it is only when one fully understands how much this leadership is preoccupied with security that one can fully appreciate what Syria is all about. Against many odds, this regime has been able to stay in power for close to 40 years. The longer it has been able to stay in power, the more convinced it has become that its preoccupation with security in not only warranted but a prerequisite for survival. All calls for political reform is viewed with great suspicion. Pushing for such reforms is seen as a prelude to weakening the grip of regime, which will ultimately lead to its downfall. The regime is unlikely therefore to want to tinker with a survival formula that has served it very well over four decades. Since the Moslem Brothers attempted to overthrow it back in the early 1980’s this regime has been very wary about loosening its tight fisted control. Behind the scenes, it has adopted an “us against them attitude” which has implicitly recognized the fact that the majority Sunni population would choose to get rid of the regime at the first opportunity that gets presented.

Issues relating to the economy are also best understood with the above background in mind. The regime is convinced that the majority of its citizens would like them gone at the first opportunity. They also know that reaching the highest office in the land is a historic opportunity that may never get repeated again. So long as they are in power, they feel the need to stash as much money as they possibly can in their Swiss and Dubai accounts. Leaders of the Middle East know that they will never get their chance again. They feel the need to accumulate as much wealth as possible before their time is up. What is surprising is that they never feel that what they have accumulated is enough. Perhaps we would have done the same had we been in their shoes. Checks and balances are totally absent. Power is so absolute and greed is so hard to avoid that the regime leadership feels that it is just too easy to accumulate wealth and if they don’t do it, someone else will.

Some may argue that fixing the Syrian economy is a very hard exercise. I actually think that it is relatively straightforward. It does not take a genius to figure out what is wrong with the current system and therefore what is needed to fix it. The only question, however, is does the will exist to fix it?

The Syrian economy is in trouble for two reasons:

An overbearing public sector that acts as a tremendous burden on the country’s resources.

An incredibly complex set of laws and regulations that stifle the progress of the weak private sector and the entrepreneurship spirit.

There is no conceivable way for the Syrian economy to improve so long as the state share of the Gross Domestic Product is as high as it is. The Government has no business running businesses.

In Syria, the state is in involved in nearly every sector of the economy. It fills, bottles and distributes mineral water and beer to the exclusion of the private sector. It manufactures tires, glass, cement and sugar. It owns hotels. It has consistently provided the worst products and services to its own consumers. It has lost massive sums of money every year. It has created breeding grounds for corruption, mismanagement, fraud and outright theft. The misallocation of resources has been massive. The bleeding of the state treasury to keep these businesses afloat has been staggering. Year after year, promises have been made that mangers at these state enterprises will become more accountable and skilful. Year after year, the losses keep piling. All measures to fix this problem have failed and will continue to fail in the future. Only by completely getting out of the business of running businesses would the Syrian government help its people and economy. Wholesale dismantling and privatizing the state enterprises is the only solution. Pakistan suffered from the same problem. Their solution was direct and bold. They have successfully embarked on one of the most aggressive privatization efforts in the world. As the state gets out of business, the private sector will fill in the vacuum. Syrian officials have been very reluctant to follow suit. They have publicly raised their concerns about the social repercussions that may follow such privatization schemes. Where would the state employees go and who would hire them they ask. How can the country manage this transition they wonder. While it is true that there will be inevitable dislocations and losers, doing otherwise is postponing the inevitable.

But before one recommends the outright closing and selling of state enterprises, critical decisions have to be made on taxation and regulatory matters which is the second point highlighted above. The current laws and regulations are so complex that it is next to impossible to find a Syrian citizen who has never broken them. Indeed, some think that the government has refused to simplify or abandon these regulatory hurdles so that every citizen can be accused of having broken a law at some stage in their lives. Importing a product into the country forces you into a maze of bureaucracy and corruption that may involve scores of documents and some 47 signature that you will need to obtain before you have satisfied all the regulatory requirements. This forces the importers to bribe and the state employees to be corrupt. Such examples can be found in every facet of the Syrian business world. Corruption has become and will continue to be a way of life. It is inevitable in an economy that is overburdened with arcane set of laws and taxation. No foreign businesses will entertain thoughts of investing in a country like this. Niether would Syrian expatriates.

Syria’s only solution is to emulate Dubai. The ruler of that Emirate runs a one-man show. His signature is the only thing needed to advance the interests of the business sector and the economy as a whole. Whatever is needed to make it easier for international and domestic businesses to come and invest, the ruler is willing to do. It is this will to act that is missing in Syria. Bashar needs to tell Mr. Makhlouf and the rest of his family that enough is enough. He needs to encourage his family and others that the days of exclusive dealings have to stop. They now have to compete with the rest of the citizens for business in a fair, transparent and competitive manner.

Dubai has to import its labor resources from the Indian subcontinent. Syria does not. Just like Vietnam has recently positioned itself as the new low cost-manufacturing center in Asia, Syria must do the same in the Middle East. It must set up massive Free Zones similar to Dubai’s Jebel Ali. It must do everything it can to attract foreign investors to set up shop in these tax free zones. These companies will hire Syrian workers and help bring down the alarmingly high unemployment rate. Attracting these companies or the Syrian expatriates to come and invest needs to take the form of a Presidential decree. The country can start doing this through the free zones first and then the domestic economy later. There is no reason why Syria cannot become the new manufacturing low cost producer in the region. In the next 10 years, the country will border the EU when Turkey enters the union. The country should be working feverishly at making full use of this opportunity.

Syria’s leadership feels that tight and draconian security measures are a prerequisite for them to stay in power. The experience of the early 1980’s has convinced them that political reforms is nothing but a trap and a slippery slope that will ultimately be used by their opponents to topple the regime.

On the economic front, the government has been reluctant if not paranoid about the consequences that will follow if it were to privatize its economy and dismantle its state enterprises. The longer the state keeps the subsidies and the artificial employment of their labor force, the harder it will become to stop this vicious circle.

The President has to order his immediate family and others to stop the outlandish accumulation of wealth through patronage and corruption. Billions have been made. Enough is enough has to be Bashar’s new message.

Before a wholesale dismantling of the state sector takes place, a Presidential order has to take place to set up massive free zones for foreign investors and expatriate Syrians. This can then be followed by systematic domestic reforms of all the insane taxes and regulatory hurdles that have strangled the private business community. As these laws are amended and abolished and as corporate taxes are lowered and simplified, the private sector will start to participate in the economy. As this sector expands and invests, hiring will follow. But to do this, the President has to have the conviction and will to stay the course. He needs to articulate to his nation that socialism is dead. The private sector will from this point on carry the torch at the expense of the public sector that was never equipped to run a business in the first place. The losses that are currently incurred by every single state enterprise will save the state treasury billions. These funds can now be earmarked to revamp the education system and worker training to better prepare the national labor force for the global economy that has eluded Syria thus far.

On the surface, Syria’s problems seem insurmountable. In reality, Syria’s solutions are clear. What is missing, however, is a bold leadership that will admit the mistakes of the past and articulate the road for the future. Dubai’s massive success is an example to emulate. It has taken the mere signature of one man to turn that dream into reality. Bashar can do the same and turn this great nation around if he so wishes. His country sure needs it but does this President have the will or conviction to carry out these sorely needed changes?