Tuesday, June 20, 2006

A Word On The Syrian Economy And The IMF Report, By EHSANI2

A word on the Syrian Economy and the IMF report
June 20, 2006

(Also see addendum at bottom by Steven Heydemann)

Dr. Landis earlier posted a story entitled “Former Chancellor Schroeder puffs Syrian Economy: So does IMF”. One of commentators in the previous post (Nafdik) asked if I had a comment on the report. Even though this subject has been discussed repeatedly on this forum, I decided to post this comment at the expense of repeating myself.

First, I would encourage everyone to read the full IMF report rather than depending on Mr. Dardari’s summary of it.

These are some of the things that you will learn if you took the time to read the fine document:

Though non-oil growth was 5.5%, overall growth was limited to 3%, given the decline in oil production. The main reasons behind the economic growth are thought to be:

-Higher private investments from the Gulf region.
-Expansion of domestic credit as ceilings on maximum lending were raised
-Continued effects of the already announced public sector wage increases.
-Lower tariffs on imports, which has resulted in increased private sector investments.
-Low real interest rates because inflation has risen to 7%.

Not surprisingly, Mr. Dardari chose to highlight the 5.5% number out of the entire document as a proof that the country’s economy is on a strong path to growth and prosperity. He correctly assumed that most people will not read the report in its entirety. Those who do will notice that enormous challenges lie ahead. Indeed, the report opens up with this statement:

“The Syrian economy is facing daunting challenges”.

It ends with this:

“We wish the authorities success in pursuing the demanding agenda of reform ahead”.

My own observations follow:

Syria’s GDP is estimated to be $22 billion. 5.5% GDP growth translates into $ 1.2 billion in extra income/production per year. Dividing this increased income by the size of the population yields a per capita increased income of $61. In other words, if Syria’s per capita GDP started from a base of $1100, last year’s 5.5% growth has raised this number by $61 to $1161. In reality, the actual total GDP growth was 3% according to the report. This means that the actual increase in per capita GDP (income) was $33.

What the above numerical example highlights is that this economy needs a sustained and long period of above average growth before the low per capita GDP level is substantially affected. Mr. Dardari would like to see the economy create 1.2 million jobs in the next four years. This is going to be the minimum required to absorb the new entrants in the ever-expanding labor force. Without this level of job creation, the unemployment rate is likely to keep going higher. If you read between the lines of what Mr. Dardari says, you will conclude the following:

200,000 jobs were created as a result of 5.5% non-oil GDP growth rate. Since the country needs to create 300,000 jobs, it stands that the non-oil economy needs to grow by as much as 8.25% to achieve this goal (5.5*300)/(200)- not the 7% that Dardari targets in the five-year plan.

With all due respect, this is a monumental task.

While certain reforms are being implemented, the report makes it clear that the country continues to rank as one of the worst in the world for ease of doing business. Syria’s rank of 135 out of 155 countries in the world highlights the heavy burden imposed by outmoded or ill-conceived regulation. In enforcing contracts, the country ranked 149 out of 155. It takes 47 procedures and an average of 672 days to enforce contracts. On trading across borders, it ranked 146 in the world. In order to complete an export transaction, a business needs 12 documents and 19 signatures. Those who want to import goods must negotiate an even worse obstacle course - 18 different documents and 47 signatures are required from start to finish. In an OECD country, you need an average of 3 signatures by contrast.

This is shameful. After six years in office, there is no excuse for continuing to keep these outmoded regulatory burdens on businesses. The President’s economic team needs to reform these laws immediately and without hesitation.

As for foreign investments, there is no question that this has been part of a clear upward trend recently. With close to 20 million people and being the fifth most populated country in the region, Syria has tremendous potential. Gulf investors saw an opportunity to buy into that potential on the cheap, and they did. Buying real estate for the long haul in a country like Syria is a sound strategy. The Syrian coast boasts less than 850 beds in 5-star establishments (I personally would not rate them 5-star). This is amazingly low for a country of this size. It is inevitable that the country will need new residential buildings, hotels and resorts. In Beirut for example, one is hard pressed to find even a handful of empty lots suited for such developments. They have been bought already. Now, these same large investors and others see Syria as the next opportunity judging by the low price entry point. Such investors will likely enjoy handsome price appreciation on their investments.

Anyone who feels the urge to rush to the Syrian coast looking for land, however, is likely to be disappointed. The usual suspects have already snapped up most, if not all, of the land suited for such developments. Indeed, in the case of Syria, most new laws are usually drafted to custom fit investments that have already taken place. Happily for them, and sadly for the rest of us, this trend is likely to continue.

Addendum: Steven Heydemann of Georgetown University wrote me this important observation:

The link between comments promoting investment and comments noting what needs to be changed to improve the investment climate are clear, intentional, and important. They are not afterthoughts, as your column suggests. European incentives via negotiations over the association agreement (now shut down) are seen in Syria as having been a source of positive pressure for economic policy change. What these European leaders are trying to do is to maintain those incentives in the absence of the formal association agreement framework. So they do the old two-step: promote investment, but link it to the need for change.

No one imagines this as a major or powerful source of pressure, but the focus should be as much on what these politicians are saying needs to be changed as on their "puffs" for the economy.
Steven's remarks about my "Puff" post are important. European powers have been skeptical of Washington's "democratize-or-else" policy from the beginning. They have maintained that it is important not to cut off relations Syria, but to pursue a policy of positive engagement. This was centered on the Madrid process or association agreement, as Steven maintains.

Because that was taken off the table after the Hariri murder, European powers have been at sixes and sevens to preserve their policy of positive engagement without stepping on Washington's and France's toes.

With the publication of the lack-luster Brammertz report, which gives Syria a further reprieve and which holds out the distinct possibility that evidence of authorship of the Hariri murder may never be sufficient to convict, Europe is looking to ease its way back into its old policy of constructive engagement.

Recent pronouncements by the French foreign minister suggest France is reaching a hand out to Damascus much as Germany is by OK-ing Schroeder's recent visit to Syria to fluff the economy.

What we have here is a return to the established routine of Washington playing the bad cop and Europe playing the good cop, offering a fistful of carrots. Steven Heydemann wants people to understand this and suggests that Damascus take the carrots, move ahead with reforms, and patch up its relations with Europe. The promise - I guess - is that Washington can be brought around, if Damascus takes the right steps in correcting its relationship with Lebanon. France has made it crystal clear that the only agenda it has is Syria's relationship with Lebanon. There are real policy differences between Europe and the US. France and Germany are offering Syria a chance to move back into the comfort zone.

If not - Washington is sitting there with the hammer. Here is a bit of George Bush's most recent speech (Merchant Marine Academy June 19):
U.S. President George Bush has said that the United States and Europe will continue working for Lebanon's independence and stressed the need to spread democracy in the Middle East.

"We've worked with the United Nations to end the Syrian occupation of Lebanon and we will not rest until the Lebanese people enjoy full independence," Bush said Monday in a speech to the U.S. Merchant Marine Academy in Kings Point, New York.


At 6/20/2006 01:29:00 PM, Blogger Nafdik said...

First I want to thank Josh for the open way in which he is operating his Blog. Giving posting space to poeple of various opinions makes it much more informative and lively.

Ehsani, this is exactly as I suspected, but still we have to be grateful that the economic situation is not in 'collapse' mode.

As for real estate, my personal tip of the day (all readers can thank me later) is to buy real estate in Aleppo. If Turkey joins the EU Aleppo will become the door to Europe.

Of course we know of one outfit who will for sure want to buy real estate and mind space in that location.

At 6/20/2006 01:37:00 PM, Blogger EHSANI2 said...


Buying in Aleppo in a fine tip indeed.

Please make sure you leave some for the rest of us when you are finished buying!

At 6/20/2006 02:49:00 PM, Blogger Joshua Landis said...

Nafdik, Thanks for the kind comment. Your own comments have had me laughing for a week. Ehasani keeps me on the straight and narrow; he also knows much more than I do about the economy. This is an excellent summary of the IMF report and where Syria stands. I hope it gets the readership it deserves.

Why not drop me a line. I would love to have you write something.

At 6/20/2006 05:36:00 PM, Blogger Philip I said...

From Philip I (viarecta.blogspot.com)

It is good to see some growth in the economy. It would have been a better story if this increase in income was accruing to productive and hard working men and women instead of rent seekers and the corrupt elite.

Look a little closer at the key sources of growth: Oil exports + Iraq + Lebanon. Since Iraqis have been permitted to own property in Syria, they have been busy investing in land and real estate. Liquidity, which used to flow out of the country through Lebanese-based banks and out into the wider world, has been trapped in Syria. Interest rates have come down both in nominal and real terms. So Syrians have also been buying land and real estate. Gulf investment in hotels and some processing industries is significant but neither a key growth factor nor sustainable.

There is no need to go over the arguments for real reforms and the routing out of institutionalised corruption. There are undoubtedly some good, honest and knowledgeable people working within the obsolete machinery of government. Sadly, they are whistling in the wind.

At 6/20/2006 08:29:00 PM, Blogger Nafdik said...

Thanks Josh for the kind words and the invitation, I am sure I will exploit it when you least want me to :)

At 6/20/2006 09:30:00 PM, Blogger Joseph ALi Mohammed said...

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At 6/20/2006 09:32:00 PM, Blogger Joseph ALi Mohammed said...

This post has been removed by a blog administrator.

At 6/20/2006 09:56:00 PM, Blogger Joseph ALi Mohammed said...

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At 6/20/2006 10:55:00 PM, Blogger souria el hora said...

I personaly think that the only way to get an improvement in our economy is by changing the regime.
This regime is not capable of doing any changes, and even if it does any sort of changes, it wouldn't be good enough for our beloved country. I don't even know why this is a subject of discussion, you people are wasting your time dreaming that this regime will think about its people.
We all need to help our country by helping the NSF and all other oppositions achieve their goals. It needs every syrian's support.
Long Live a Free Syria

At 6/20/2006 11:18:00 PM, Blogger Joseph ALi Mohammed said...

This post has been removed by a blog administrator.

At 6/20/2006 11:40:00 PM, Blogger Joseph ALi Mohammed said...

This post has been removed by a blog administrator.

At 6/21/2006 12:31:00 AM, Blogger mustapha said...

This post has been removed by a blog administrator.

At 6/21/2006 08:02:00 AM, Blogger t_desco said...


Feltman : Notre soutien à un Liban fort et souverain est indépendant de notre politique régionale
L'Orient-Le Jour

Calls from the Lebanese government for the U.N. Security Council to investigate alleged Israeli assassinations of Lebanon-based terrorists might complicate diplomatic efforts to assist the country in its quest for full independence from its neighbors, Turtle Bay diplomats said yesterday. ...

The American ambassador in Beirut, Jeffrey Feltman, played down the Lebanese findings, saying they were based on intelligence supplied by Hezbollah. ...

Mr. Feltman is pressuring the Lebanese government to drop any Israeli connection, the diplomat said.
NY Sun

At 6/21/2006 08:27:00 AM, Blogger Atassi said...

The joke of the week!!
Bouthina said .. the new party law will be discussed on the internet!! She exceed my expectations for sure now..


At 6/21/2006 09:26:00 AM, Blogger Joseph ALi Mohammed said...

This post has been removed by a blog administrator.

At 6/21/2006 09:37:00 AM, Blogger EHSANI2 said...


This lady never fails to amaze.

Note how she reminds us that the Baath party will remain the “leading” party however after all the Internet votes are in.

The Syrian Ambassador to the U.S., on the other hand, is trying to convince us that any country that faces the type of pressure that Syria was subjected to last year may have also similarly cracked down on its domestic opposition.

“Suddenly security becomes a priority” in this environment he later suggested.

Mr. Ambassador,

Hasn’t security “always” been the top priority?

It is very comforting to hear that Syria “still wants political reforms” and that it “has not turned away” from that objective. I wish the facts on the ground were more consistent with this expressed sentiment.

At 6/21/2006 10:22:00 AM, Blogger EHSANI2 said...


In case your comments get deleted again, I have this to tell you:

You seem to think that you are only a man if you do nothing but attack this regime. Anytime you write or talk about anything else makes you a softie, tool, collaborator, evil, and an idiot. Attacking the regime is a prerequisite to establishing personal credentials in your opinion.

With all due respects, your own attacks and comments are rather standard and highly repetitive in nature. Even my 4 year old knows by now the level and extent of the human rights abuse that takes place in Syria on a daily basis.

You apparently want us to do nothing but comment on this same topic 24/7. Why don’t you beef up and market your own site and take the entire readership away from this forum?

At 6/21/2006 10:25:00 AM, Blogger Joseph ALi Mohammed said...

This post has been removed by a blog administrator.

At 6/21/2006 10:46:00 AM, Blogger EHSANI2 said...

I think he asked Nafdik to post on the main site yesterday if he so wishes. Does this also make Nafdik the next innocent tool?

I post about the economy because the topic generated interest in the past. When it does not and when most people agree with you that what I write is nonsense, and then I gladly stop. I write on this topic because I enjoy the subject matter. You clearly don’t. Again, why don’t you go elsewhere?

As for whether I am an innocent tool or an idiot who is being used, you and others are entitled to their own opinions. I am comfortable with my own stand. You seem frustrated that I don’t see Josh the same way you do. The man’s views on politics and economics may well differ than those of mine. He may even be the regime’s premier supporter. This does not mean that I cannot be civil to him. It also does not mean that I agree with him if I acted on a civil basis with him.

My advice to you is to calm down. Treat people the way you want to be treated. Most importantly, stay civil and as my good friend Alex says, it is always about carrying a positive “attitude”.

At 6/21/2006 11:28:00 AM, Blogger Joseph ALi Mohammed said...

This post has been removed by a blog administrator.

At 6/21/2006 11:58:00 AM, Blogger EHSANI2 said...

If I wanted the attention, I would have used my real name rather than remaining anonymous.

Josh could be doing all the things you are accusing him of doing. I will let him defend himself. I don’t think he needs me. Whether he is an agent of Bashar or not is up to him.
I have my own views on the subject. You have yours. The same can be said for all others.

As to the economic discussions, I think that I have been consistent from day one. I have stuck to my theory that the situation is direr than we are led to believe. I also consistently argued that only through massive privatization and free market economics, could the country expect a better future. I also implicitly and explicitly stated that I am not holding my breath that my line of thinking will ever prevail.

Finally, to the Islam post that you referred to. I did indeed write an article expressing my fears that when the regime falls I fear that Islamists may win the race to the top at least initially. My theory was that they would most likely fail miserably as time went by. How long that phase lasts is the big question. It seems that you do not agree with my topic. To you, this is simply a well-orchestrated scare tactics to benefit the regime. While I agree that this regime always wanted us to believe that fanatic Islamists are their only alternative, I still consider the risks as real. Just because the topic may suit the regime does not mean that we ought not discuss it or that we ought to label those that do as regime sympathizers.

At 6/21/2006 12:04:00 PM, Blogger EHSANI2 said...

By the way, you can still apologize for calling me names in Arabic before your words were deleted. This was not exactly what I call civil

At 6/21/2006 12:54:00 PM, Blogger Innocent_Criminal said...

Ehsani, save your fingers the energy of typing, the guy has no life just IGNORE. He will continue to be banned.

At 6/21/2006 01:36:00 PM, Blogger sisco-side said...


I must agree with jam in some of the points he made. I think also that Joshua's smartness in choosing your posts to use in a wide way in this comment section is due primarly to your decalring yourself as "opposition" while your points agree totally with his points and more importantly with his aims. As Jam analyzed the situation, Joshua is smart enough to know what can help him and what can hurt him. No wonder he deletes posts that tell the truth in a direct way, and keep elevating your stand. No wonder also that you have 'Innocent Criminal' standing to defend you and becoming your dear friend.

At 6/21/2006 02:13:00 PM, Blogger Atassi said...

calling Ehsani “opposition” because he cares about his county is not very smart move for sure.
Being a TRUE and SINCERE person, is the best thing you can do for your Syria,
Syria is tired, Syria is ill and Syria is full of filth. Syria is distressed and in agony form the blood suckers ass kissers and killers.

At 6/21/2006 02:36:00 PM, Blogger Alex said...

Dear JAM,

I argued with you few months ago at farid Ghadry's "Syria Comments Plus" and even though we started very far, after a day or two we managed to become more friendly, and even a bit closer in opinions (just a bit).

Please accept and be tolerant to different points of view. Without them you end up with no conversation. Look at Ghadry's syria comment plus ... zero comments. It becomes a totally useless monologue.

Sisco-side too, the reason this is the most popular blog on syria is that Joshua acceepts many points of view. Ehsani2 and Michael Young do not have te same opinions as Joshua (there maybe a 20% overlap like any two rational human beings) ... why do we spend a considerable amount of energy on trying to uncover conspiracies everywhere and by everyone?

What are we doing here any way? Why not try for a change to stick to the future, to attempting to provide solutions to our big problems.

And again, if Joshua or Ehsani get on your nerves too much, try to discuss things on Ammar's blog .... he is very good "host" too and he happens to be more opposed to the Syrian regime than joshua.

Innocent Criminal, would you consider easing the "sensorship" on JAM and SRP is they argue more politely and without conspiracy theories? They often make very good points that get polluted by the excessive not very good other points.

At 6/21/2006 02:59:00 PM, Blogger Alex said...

Dear atassi

"Syria is tired, Syria is ill and Syria is full of filth. Syria is distressed and in agony form the blood suckers ass kissers and killers."

You are partially right but please accept that not all Syrians feelt he same way you feel and to the same degree of distress.

The same way you correctly feel that the regime tends to impose its opinions and priorities on all syrians, you should accept that you may want to question your own generalizations. we all agree that there is a lot of "filth" and corruption. But generalizing our own version of things is not democratic.

I would feel more positive about the chances of having democracy in Syria "soon" if the opponents to the regime sounded more balanced in their assessments. Instead i am hearing mostly absolute dramatic generalizations.

Syria has too much variation to be summarized this way. Tehre are people who feel exactly as you do, there are others who share some of tyour feelings, and others who are much more opposed to your opinions.

The challenge is not to complain about the obvious filth, but to find that difficult place in the middle where enough Syrians can feel comfortable with the new, changed, upgraded, Syria.

At 6/21/2006 03:04:00 PM, Blogger sisco-side said...


I am not calling Ihsani "opposition". Ihsani defined himself that he is opposing the Assad Regime. In such a position, Joshua's reliance on his posts take meaning and his arguments get reinforced. Joshua is evidently a smart man.

At 6/21/2006 07:53:00 PM, Blogger Atassi said...

Unfortunately the Assad regime “I will stop saying The Syrian regime to be fairer and balanced”. Can’t exists in the middle, it strive on creating below the surface sectarian society, spreading fear and eroding greed. You are absolutely right, not all Syrians feel he same way I feel, about, again the situation in the ground is very challenging, most likely we will see rebellious and less loyalty to the regime

At 6/21/2006 10:51:00 PM, Blogger souria el hora said...

And if the assad regime stays in power, i fear that extremism will keep on increasing specially since people are getting poorer and more rebelious. I just don't want to see my lovely country turned into an afghanistan

At 6/24/2006 03:11:00 PM, Blogger Joe M said...

just to clarify, that is not the IMF report that Dardari was talking about. It is yet to be released. The report you linked to was more of a preliminary finding.

But too, if you notice in the report you linked, the IMF (generally conservative economically) does nothing but praise the reforms of Bashar. the only criticism is that it thinks that Bashar should used targeted price supports to protect the poor, rather then general ones. Other then that, it is absolutely positive on their progress.

That is not to say that they are positive on syria, the situation is bad in many ways and the IMF makes that clear. But they are happy with the progress that Syria is making and share syria's economic vision for the future.

I just wanted to point that out to you because i think your criticism of Syria is generally out of line. Hopefully you will begin to give them more credit for what they are doing.



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