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In post-oil Syria, things are looking up

Reform is bringing benefits to the country — both in terms of economic growth and political openness.

Western tourists walk in Old Damascus, March 2009. With a host of unique sites drawing high end tourists and Arab capital pouring in to build hotels and resorts, Syria's tourism sector is shaking off decades of underinvestment. (Khaled al-Hariri/Reuters)

DAMASCUS, Syria — In the midst of a transition from a centrally planned economy to a “social market,” Syria’s economy is faring well.

The International Monetary Fund (IMF) reported that growth in GDP was strong at 4 percent last year despite the global financial crisis, and predicted to rise in 2010. The government’s push to attract investment from outside the country is showing signs of success, the target being $130 billion worth of investment by 2015. Foreign companies are circling, looking for opportunities to invest in what was viewed as an untouchable pariah state just a few years ago.

In Damascus, the capital, the new wealth stemming from the economic transition is evident. Sleek advertising billboards, private universities and new restaurants abound. Recommended by The New York Times as one of the top-10 travel destinations for 2010, tour groups these days swarm Syria’s souqs and mosques, providing revenue for the government and encouraging private entrepreneurs to found tourist services.

“We are effectively moving towards a market economy and enhancing the role of the private sector in the economy,” said Nabil Sukkar, a Syrian economic analyst, formerly of the World Bank.

“The focus so far has been on opening the financial and services sectors — banking, insurance and the stock exchange — and a liberalizing of foreign trade.”

The number one factor pushing economic reform in Syria has been the decline of oil revenue. The '90s were marked by complacency owing to funds coming from oil sales. When these began to deplete and revenues dropped, both foreign and fiscal, the urgency of economic reform returned, pushed along by President Bashar al-Assad’s government, which came to power in 2000.

While U.S. sanctions still apply to the country, rapprochement between Syria and European and Arab states has led to increased economic ties and investment. A slowly improving business environment — Syria ranks 143 out of 183 countries rated by the World Bank when it comes to ease of doing business — is an encouragement to those put off not by Syria’s political isolation but by its difficult investment atmosphere.

The reform is bringing benefits to the country — both in terms of economic growth and political openness. Goods and services not previously found are now readily available and there are more business opportunities for the population.

Read about how improvements in the Syrian economy have inspired an art market renaissance.

But not all in Syria are benefiting from the economic transition. Many Syrians are suffering from the wealth gap that existed under socialism but has been much widened by the liberalization.

“It’s a constant struggle to make ends meet,” said middle-class Syrian textiles businessman Housam Kotob. “Everything has become more expensive and because of deteriorating public services everyone is trying to save for private services, such as private schooling for their children.”

Those working in the public sector fare worse than Kotob. A teacher in a state school bemoans the low salary, saying she treats it as pocket money while working afternoons as a private Arabic tutor for foreigners. Many government workers have second and even third jobs to go to once public office hours end.

A recent annual survey of Middle East professionals confirmed the discontent on a larger scale. According to YouSiraj and this year the biggest disparity in the increase in living costs compared to salary rise was felt in Syria, where respondents said the living costs had risen by 28 percent compared to a wage increase of 9 percent.

Economic analysts say wealth gaps are a usual byproduct of economic opening.

“A wealth gap is one of the problems of economic liberalization and has happened in countries from Indonesia to Russia,” said Sukkar.

There are aggravating factors in Syria.