Dear readers, Forgive me for my long absence. I have been swamped with other deadlines and off to conferences. Here is an interesting report by a New Delhi-based writer, who has spent the last several months in Damascus. It gives an up-beat review of reform initiatives under Bashar. Shanker takes the view that the "incremental change" being pursued in Syria will likely "produce fundamental change."
SYRIA'S REFORMS - AN OVERVIEW
Sadhna Shanker: ( ALL4SYRIA) 21/11/2004
Eclipsed under the glare of the headlines about US sanctions, UN resolutions and the Arab-Israeli conflict a quiet churning is taking place in Syria. It is a nation that has embarked on the road of reforms in an effort to integrate with the rest of the world. In 2000 Dr. Bashar al Assad, son of the late Hafez al Assad, came to power. He inherited a country that had been ruled for over 30 years by his late father following a model of state-led -albeit state capitalist rather than socialist-course of import substituting industrialization. The country was beset with all the consequent problems - widespread corruption, ageing state industries, rapidly depleting oil resources, an under -performing agricultural sector, an anachronistic educational system, capital flight and lack of foreign investment.
The first hint that a new wave of reforms was in the offing came in President Bashar's inaugural address where he stressed for reforms based on "accountability" "transparency" "administrative reforms", "rule of law" and "democraticthinking". Since coming to power his regime has set in motion a wave of reforms in a variety of sectors. The obstacles to reform in countries are many and varied. The chief amongst barriers to change are nearly always the powerful interest groups who stand to lose. Resistance is even stronger when the prospective losers are among the political leadership's core constituents. Syria apart from facing this kind of resistance is also situated in a very sensitive part of the globe. Regional developments and its relations with US and Israel have a dominant effect on its domestic policies and outlook. Caught between these forces, the regime has given primacy to economic reform at the moment.
The push for these came from two sources. Pressure from outside: Syria is in the final stage of negotiating an Association Agreement with the EU that necessitates structural changes. It is also aspiring to join the WTO and this would require considerable transformation of its archaic trade and investment regulations. With the passage of the Syrian Accountability Act by the US, Syria is under increased pressure. Economic crisis: In 2000, the economic problems of Syria had their origins in the past. A large and dysfunctional public sector, virtual lack of inflow of investments, outdated banking and currency systems and the like. However, the war in Iraq changed the economic equation for Syria. It had benefited economically from the isolation of Iraq first by aid from Iran in the 1980s and then the Gulf in 1990s. In both cases the aid was largely in appreciation of its role in countering Iraq. More recently it befitted through trade with Iraq in violation of the UN sanctions. The fall of Iraq,more than ever made economic reforms a necessity.
ECONOMIC REFORMS: When he came to power in 2000, Dr. Bashar al Assad started by abolishing four ministries including that of planning. The abolition of the Ministry of Planning indicated the abandoning of central planning with the market becoming the driving force. Thereafter, the Syrian Government finalized a draft Economic Reform Program (ERP). The program seeks to overhaul the economy and has set a number of objectives to be achieved within a period of five years. These include financial reforms like freeing interest rates, free transfer of funds, unification of exchange rates, full convertibility of the Syrian Pound, independence of Central Bank, revision of income tax, revision of trade laws, modification of custom tariffs, setting up of a Stock Exchange and reform of the judicial system.
Many of these have already begun. Reforms in the field of Monetary Policy and Banking: A Credit & Monetary Council (CMC) was set up in the year 2002 as the nodal body to regulate the monetary policy in the country. The CMC took its first significant decision by reducing interest rates on deposits and loans by 1% from 8 and 12% respectively in 2003. The interest rates in Syria had remained static for the last 22 years. A new Money laundering law was approved in 2003. It sets up an Agency for Combating Money Laundering, prescribes offences and punishments. By far the most significant development has been the opening of Private Banks in Syria. The state held banks provided loans to the private sector to the extent of only 21% of their credit, while the private sector contributes 87% of the GDP.
In 2003, the government gave its final approval for three international private banks to open in Syria. As per law the minimum capital of these private banks would be US$ 30 million out of which foreign partieswould own a maximum of 49% and a minimum of 51% would be held by Syrian investors. In January 2004, two institutions-the Bank of Syria and Overseas (BSO) and the Banque Bemo Saudi Fransi (BSF) opened their Damascus branches. Fiscal Policy and Tax reforms: A new Income Tax law was passed in December 2003. Along with it a bill was enacted for combating Tax evasion. The country's public sector contributed to the state budget an amount of Syrian Pound (SYP) 92 billion (50 SYP=1$) in taxes last year, while it contributed to 13 percent of the GDP only. Meanwhile, the private sector, which contributes to 87 percent of GDP and employs 60 percent of the workforce, remitted only SYP 10 billion in 2002. Official figures say that tax evasion in Syria was leading to annual losses of over SYP 200 billion (USD 3.846billion) or a bit less than half of the country's budget Among the most significant measures introduced by the law is the bringing down of maximum rate of corporate taxes to 35% from a high of 63%. For individuals annual income of 60000 SYP or below is exempt. The maximum rate of personal income tax has been pegged at 20%.The lower corporate tax rates, combined with the new law combating tax evasion, are expected to bring down the loss due to tax evasion.
The new Tax Law brings in transparency and a minimization of the uncertainty and ambiguity that characterized the Syrian tax system. Trade Liberalization: A series of steps taken for loosening foreign exchange controls have been taken in the last few years by the Syrian government. In 2002, unification of the Foreign exchange rate that was applied to most Foreign exchange transactions was done at the neighboring country rate of SYP 46.5/1$. In 2003, the Central Bank stated offering direct money transfer through Western Union Money Transfer. In July 2003 a highly restrictive 17-year-old Foreign Exchange law was abolished. The law was considered as one of the major obstacles to foreign investment in the country. Soon thereafter the Export-Import foreign exchange link was ended. This makes imports cheaper and also considerably reduces the black market in foreign exchange.
The main law in Syria that governs investments is the Law no.10 of 1991. In 2003, certain amendments to the law have been proposed to make it more investor friendly.In another major step, The Syrian President issued on January 28, 2003, a new decree regulating investment in the country's free trade zones (FTZ). arlier only industrial and trading activities are allowed in Syria's FTZ. The new law makes it possible to invest in all types of services, including banking, tourism (hotels and restaurants), e-commerce, health (hospitals and other medical services), duty free shops, communication (media cities), economic consultancy services, transit services, etc. Secondly, the law authorizes the set-up of private FTZ and private Free Trade Points.
In February 2004, the dreaded Economic Security Courts (ESCs) were abolished. ESCs functioned under the Emergency Laws and looked into economic crimes. Preventive detention for economic crimes was also abolished. ATM services have begun in Syria. Credit cards made their appearance in the last year. An agreement was signed with Diners Club also. Till now, only the Commercial Bank of Syria could deal in foreign exchange. Now, the private banks can sell currency in the market on the same terms and conditions as the Commercial Bank of Syria.
OTHER CHANGES Apart from investor friendly reforms, the Syrian Government is trying to usher in change in a variety of other spheres: Justice system: A meeting of the Judiciary Higher council (JHC) was held in May 2003. This was a first meeting in decades. It is the highest judicial authority in the country and is headed by the President. The meeting stressed the importance of judicial authority in the "development" of the country, in particular its specific role, though application of the law, in encouraging investments.
Education: In the year 2002 the Syrian Virtual University opened. It is the first of its kind in the Middle East. It aims at providing Arab students, worldwide, with a world-class quality education, at home, through an integrated online learning environment based on the latest technological and educational developments. It offers online degrees from selected and accredited American, European and International universities It has opened centers in Lebanon, Jordan and Dubai also. In April 2003 the Ministry of Education dropped the 30 year old mandatory military uniform for students from kindergarten to high school and the "military training" module from the national curriculum. Information technology had been introduced in public education starting with basic education level.
Teaching of a foreign language from the fourth grade was started in the year 2002. A foreign language will be taught upwards from the first grade starting 2005. New concepts have been introduced in the curriculum such as urban education, child rights, woman's care, energy and environment. Currently, Syria has four public universities in Damascus, Aleppo, Lattakia and Homs. All of them offer a broad range of courses to around 200,000 students every year.
In October 2003, for the first time in the history of this country licenses were granted for the setting up of four private universities. The universities are all based away from Damascus, so that the underserved areas of the country, particularly the North East are covered. The universities are all owned by private groups and individuals and are profit-driven.
Growth of NGOs: Hitherto, NGO's have been in the form of the government backed Women's Union and the Youth Union. However, lately the NGO movement in the real sense has got an impetus with the launching of organizations like Fund for IntegratedRural Development of Syria (FIRDOS in 2001) and Modernizing and Activating Women's Role in Economic Development (MAWRED in 2003) These development NGOs work in the area of economic uplift. MAWRED in association with the SyrianEuropean Business Center has launched in 2004 Syria's first business incubator dedicated to Syrian businesswomen.
The most fervent advocate for social reforms in the country is the first lady Asma Assad. Promoting an active role for women has been a prime objective for her and she has made education and development the centerpiece of her activities. In April 2002, she hosted Syria's first ever seminar on the role of women in business administration and economic development. Participants were from a dozen Arab countries. Then in February 2003, she hosted a Woman's' day celebration in Damascus. Five first ladies from the Arab world joined her for the conference. She has been instrumental in forming the two NGOS working in the area of economic uplift.
In order to tap the potential of the Non-resident Syrian, in 2001, the Network of Syrian Scientists, Technologists and Innovators abroad was set up. NOSSTIA is an NGO that is financed by donations from the private sector. It provides technical and consultancy services. It also organizes conferences in various sectors and invites experts from abroad to address the stakeholders of that sector.
The Syrian Young Entrepreneurs Association was launched in January 2004. An NGO it seeks to work with the young men and women in Syria. It strongly advocates the agenda of reforms and supports and promotes the entrepreneurial spirit. According to estimates, nearly 62% of the population of Syria is under 25 of age. They need to be involved in the process of nation building and their potential needs to be fully utilized.
Media: Since the wave of reforms started in Syria, there has been some loosening of the stranglehold of the government on the media. In 2002 "Abyad va Aswad" 'Black and white' the first ever private political magazine came into the market. Overtime many other private magazines have emerged. Syria Today and Rising Syria have come out in English. There has been a growth in private Arabic magazines also. The number of foreign periodicals permitted for distribution within the country has gone up from 180 to 397. In 2003 four private radio stations were licensed for the first time. These stations can broadcast only music, entertainment and advertisements. They are barred from broadcasting any news or other feature programs.
However, in 2002 dish antennae became legal in Syria on payment of certain fees. As a result a subscriber today has access to broadcasts from virtually all over the world. Today, even homes in remote areas have dish antenna, and the city skylines are dotted with them. The same goes for radio also. Mobile telephony that entered in 2000 has spread all over the country.In 2003, Syria ranked 155 out of 166 countries in a press freedom index published by Reporters without Borders, a French-based press freedom watch organization. Though profound media reform still remains in the future, the press' margin of freedom currently is greater than at any time in the past four decades.
Conclusion: There is no doubt that change is taking place in Syria. Many criticize the reforms as being piece-meal, incremental and with no comprehensive strategy or vision. Yet the changes witnessed in Syria are not inconsequential. Incremental change can and often does produce fundamental change.
The whole reform process raises two important inter-linked questions 1. Can the reform process move forward without any political reform? Just after Dr. Assad came to power there occurred the 'Damascus spring'. His inaugural speech, his youth and western education - all seemed to convey to the people an era of modernization. From within the country and through the relatively free press of Lebanon - artists, writers, academics started airing their views and aspirations for hitherto taboo subjects. Corruption, public freedom, and civil rights - all topics flowered in the Damascus spring. However soon enough in 2001, due to internal pressures the regime had to slowdown. The system of patronage and clientele that had thrived in the past proved a stumbling block.
Syria shares over 600 kms of common border with Iraq. The fall of Baghdad had a resounding impact on Syria. To many, the collapse of the might of Saddam's regime exposed the vulnerability of the regime at home too. The intellectual opposition in the country again started to speak out. Once again calls for political reform began to be heard. The government tolerated these renewed voices and some political reforms were set in motion. The Syrian Ba'ath Party took many measures to reform itself. Technocrats have been appointed in key ministries and administrative positions. They are not related to the Ba'ath Party. In June 2003, in a significant move the regional command of the Ba'ath Party issued a decree calling on 'the cadres and the party institutions to be entirely distinct from daily executive work".
However, till the Ba'ath Party has its role defined in Article 8 of the Syrian Constitution as " the leading party in the society and the state" it rules out the evolution of any real political processes. The state of emergency imposed in 1970 is yet to be withdrawn.Political reforms are resisted on the grounds of the threat of an Islamist fundamentalist takeover. In a situation where the ruling elite is from the Alawi sect (12% of the population) an understated fear of outbreak of sectarian violence is also expressed. Political reforms also threaten the status quo and the privileges of the incumbent elite.
In this backdrop, the meandering U.S.-led occupation of Iraq, the near-unconditional U.S. support for Israel's policies and Washington's new Syria Accountability Act, which authorizes sanctions against the Syrian government, have only strengthened hard-liners in the regime and brought many moderates to their fold. As a result, political reforms are on hold and economic reforms are touted as being a pre-requisite for future political reforms. 2. This leads to the next question.
Do the changes in Syria call for a re-think of the US-Syria equation? With a bit of positive re-enforcement, reforms will push forward in a more planned manner. Why has a regime, which is, by and large secular, less oppressive than others in the region, and is trying to reform, been chosen for economic sanctions while other more radical countries in the region have been spared? This when US and Syria have full-fledged diplomatic relations. Reforms bring many painful changes within a country that lead to domestic opposition. In order to bring stability to the region can the US help Syria in its path of reform rather than impede it?
References: 1. www.syria-report.com 2. Syria under Bashar (II): Domestic Policy challenges,International Crisis Group, Middle Eastern Report No. 243. The state in a changing world - World Development Report, 1997, World Bank.4. Country report: Syria 2004-05. The Economist Intelligence Unit, UK.