Economy of Syria

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Economy of Syria[1]
Currency	Syrian pound (SYP)
Fiscal year	Calendar year
Trade organisations	CAEU
Statistics
GDP	$96.53 billion (2008 est.)
GDP growth	2.4% (2008 est.)
GDP per capita	$4,900 (2008 est.)
GDP by sector	Agriculture (22.5%), Industry (27.9%), Services (49.6%) (2008 est.)
Inflation (CPI)	14.9% (2008 est.)
Population below poverty line	11.9% (2006 est.)
Labour force	5.547 million (2008 est.)
Labour force by occupation	Agriculture (19.2%), Industry (14.5%), Services (66.3%) (2006 est.)
Unemployment	9% (2008 est.)
Main industries	petroleum, textiles, food processing, beverages, tobacco, phosphate rock mining, cement, oil seeds crushing
External
Exports	$13.12 billion f.o.b. (2008 est.)
Export goods	crude oil, petroleum products, fruits and vegetables, cotton fiber, clothing, meat and live animals, wheat
Main export partners	Iraq 30%, Lebanon 10%, Germany 9.7%, Italy 8%, Egypt 5.5%, Saudi Arabia 5.2%, France 4.9% (2007 est.)
Imports	$14.32 billion f.o.b. (2008 est.)
Import goods	machinery and transport equipment, electric power machinery, food and livestock, metal and metal products, chemicals and chemical products, plastics, yarn, paper
Main import partners	Saudi Arabia 12%, China 8.7%, Egypt 6.2%, Italy 6%, United Arab Emirates 5.9%, Ukraine 4.8%, Russia 4.8%, Germany 4.7%, Iran 4.3% (2007)
Gross external debt	$6.72 billion (31 December 2008 est.)
Public finances
Public debt	41.2% of GDP (2008 est.)
Revenues	$10.9 billion (2008 est.)
Expenses	$13.77 billion (2008 est.)
Economic aid	recipient $180 million (2002 est.)
All values, unless otherwise stated, are in US dollars

Syria is a middle-income, developing country with a diversified economy based on agriculture, industry, and energy. Its current GDP per capita expanded 80% in the 1960s reaching a peak of 336% of total growth during the 1970s. But this proved unsustainable and it shrank by 33% during the 1980s. However current GDP per capita registered a very modest total growth of 12% (1,1% per year on average) during the Nineties due to successful diversification.

Foreign Aid to Syria In 1997, foreign aid totaled an estimated US$199 million. The World Bank reported that as of July 2004 it had committed a total of US$661 million for 20 operations in Syria. One investment project remained active at that time.

Contents 1 Macro-economic trend 2 External trade and investment 2.1 Foreign Debt 3 Opportunity Cost of Conflict 4 Industries 4.1 Agriculture and forestry 4.2 Mining and minerals 4.3 Industry and manufacturing 4.4 Energy 4.5 Services 4.5.1 Banking and finance 4.5.2 Tourism 5 Labor 6 See also 7 References 7.1 Notes 7.2 Works cited 8 External links

[edit] Macro-economic trend

This is a chart of trend of gross domestic product of Syria at market prices estimated by the International Monetary Fund with figures in millions of Syrian Pounds.

Year	Gross Domestic Product	US Dollar Exchange	Inflation Index (2000=100)	Per Capita Income (as % of USA)
1980	51,270	3.94 Syrian Pounds	8.10	12.17
1985	83,225	3.92 Syrian Pounds	14	11.64
1990	268,328	21.80 Syrian Pounds	57	4.37
1995	570,975	34.30 Syrian Pounds	98	4.18
2000	903,944	47.68 Syrian Pounds	100	3.49
2005	1,377,417	52.09 Syrian Pounds	122	3.70

Average wages in 2007 hover around $9-11 per day.

During the 1960s, citing its socialist ideology, the government nationalized most major enterprises and adopted economic policies designed to address regional and class disparities. This legacy of state intervention and price, trade, and foreign exchange controls still hampers economic growth, although the government has begun to revisit many of these policies, especially in the financial sector and the country's trade regime. Despite a number of significant reforms and ambitious development projects of the early 1990s, as well as more modest reform efforts currently underway, Syria's economy still is slowed by large numbers of poorly performing public sector firms, low investment levels, and relatively low industrial and agricultural productivity.

Taken as a whole, Syrian economic reform thus far has been incremental and gradual. The government has begun to address structural deficiencies in the economy such as the lack of a modern financial sector through changes to the legal and regulatory environment. In 2001, Syria legalized private banking. In 2004, four private banks began operations. In August 2004, a committee was formed to supervise the establishment of a stock market. Beyond the financial sector, the Syrian Government has enacted major changes to rental and tax laws, and is reportedly considering similar changes to the commercial code and to other laws, which impact property rights.

Of Syria's 72,000 square miles (186,000 km²), roughly one-third is arable, with 80% of cultivated areas dependent on rainfall for water. In recent years, the agriculture sector has recovered from years of government inattentiveness and drought. Most farms are privately owned, but the government controls important elements of marketing and transportation.

The government has redirected its economic development priorities from industrial expansion into the agricultural sectors in order to achieve food self-sufficiency, enhance export earnings, and stem rural migration. Thanks to sustained capital investment, infrastructure development, subsidies of inputs, and price supports, Syria has gone from a net importer of many agricultural products to an exporter of cotton, fruits, vegetables, and other foodstuffs. One of the prime reasons for this turnaround has been the government's investment in huge irrigation systems in northern and northeastern Syria, part of a plan to increase irrigated farmland by 38% over the next decade.

Syria has produced heavy-grade oil from fields located in the northeast since the late 1960s. In the early 1980s, light-grade, low-sulphur oil was discovered near Dayr az Zawr in eastern Syria. This discovery relieved Syria of the need to import light oil to mix with domestic heavy crude in refineries. Recently, Syrian oil production has been about 530,000 barrels per day. Although its oil reserves are small compared to those of many other Arab states, Syria's petroleum industry accounts for a majority of the country's export income. The government has successfully begun to work with international energy companies to develop Syria's promising natural gas reserves, both for domestic use and export. U.S. energy firm, ConocoPhillips, completed a large natural gas gathering and production facility for Syria in late 2000, and will continue to serve as operator of the plant until December 2005. In 2003, Syria experienced some success in attracting U.S. Petroleum companies, signing an exploration deal with partners Devon Energy and Gulfsands and a seismic survey contract with Veritas.

Ad hoc economic liberalization continues to provide hope to Syria's private sector. In 1990, the government established an official parallel exchange rate (neighboring country rate) to provide incentives for remittances and exports through official channels. This action improved the supply of basic commodities and contained inflation by removing risk premiums on smuggled commodities.

[edit] External trade and investment

Despite the mitigation of the severe drought that plagued the region in the late 1990s and the recovery of energy export revenues, Syria's economy faces serious challenges. With almost 60% of its population under the age of 20, unemployment higher than the current estimated range of 20%-25% is a real possibility unless sustained and strong economic growth takes off. Oil production has levelled off, but recent agreements allowing increased foreign investment in the petroleum sector may boost production in two to three years.

Commerce has always been important to the Syrian economy, which benefited from the country's location along major east-west trade routes. Syrian cities boast both traditional industries such as weaving and dried-fruit packing and modern heavy industry. Given the policies adopted from the 1960s through the late 1980s, Syria failed to join an increasingly interconnected global economy. In late 2001, however, Syria submitted a request to the World Trade Organization to begin the accession process. Syria had been an original contracting party of the former General Agreement on Tariffs and Trade but withdrew in 1951 because of Israel's joining. Major elements of current Syrian trade rules would have to change in order to be consistent with the WTO. In March 2007, Syria signed an Association Agreement with the European Union that would encourage both sides to negotiate a free trade agreement before 2010. Nonetheless, EU member states have yet to ratify the Association Agreement.

The bulk of Syrian imports have been raw materials essential for industry, agriculture, equipment, and machinery. Major exports include crude oil, refined products, raw cotton, clothing, fruits, and cereal grains. Earnings from oil exports are one of the government's most important sources of foreign exchange.

Over time, the government has increased the number of transactions to which the more favorable neighboring country exchange rate applies. The government also introduced a quasi-rate for non-commercial transactions in 2001 broadly in line with prevailing black market rates. Exchange-rate unification remains an elusive goal as pressure is building for Syria to harmonize its exchange rate system.

Given the poor development of its own capital markets and Syria's lack of access to international money and capital markets, monetary policy remains captive to the need to cover the fiscal deficit. Although in 2003 Syria lowered interest rates for the first time in 22 years and again in 2004, rates remain fixed by law. In a positive move in 2003, Syria canceled an old and draconian law governing foreign currency exchange (that law imposed a punishment of up to 15 years in prison and confiscation of property for engaging for buying or selling currecy other than with government banks); that -and other- regulatory changes allowed currency exchange shops to spring in Syrian cities; however, the fate of various aspects of the old regulatory system are still unclear, and detailed new regulations are still lacking.

Some basic commodities (such as wheat, fuel) continue to be heavily subsidized, although -in 2008- the government raisd the price of various perto products, effectively cancelling the subsidies for benzin and scaling it back for heating oil. Social services (most notably education, including at public universities) are provided for nominal charges.

[edit] Foreign Debt

Syria has made progress in easing its heavy foreign debt burden through bilateral rescheduling deals with virtually all of its key creditors in Europe.In December 2004, Syria and Poland reached an agreement by which Syria would pay $27 million out of the total $261.7 million debt. In January 2005, Russia and Syria signed a deal that wrote off nearly 80% of Syria's debt to Russia, approximately €10.5 billion ($13 billion). The agreement left Syria with less than €3 billion (just over $3.6 billion) owed to Moscow. Half of it would be repaid over the next 10 years, while the rest would be paid into Russian accounts in Syrian banks and could be used for Russian investment projects in Syria and for buying Syrian products. This agreement was part of a weapons deal between Russia and Syria. And later that year Syria reached an agreement with Slovakia, and the Czech Republic to settle debt estimated at $1.6 billion. Again Syria was forgiven the bulk of its debt, in exchange for a one time payment of $150 million. Syria has also settled its debt with Iran and the World Bank.^[2]

[edit] Opportunity Cost of Conflict

A report ^[3] by Strategic Foresight Group, a think tank in Asia has calculated the opportunity cost of conflict for the Middle East from 1991-2010 at a whopping $12 trillion (12,000,000,000). Syria’s share in this is over a $150 billion. In other words had there been peace since 1991, every Syrian citizen would be earning $2,896 instead of the $1,664 he or she will earn in 2010. The government also spends almost 7% of their GDP on the military, compared to the 2% that they spend on health care.

[edit] Industries

[edit] Agriculture and forestry

Agriculture is a high priority in Syria’s economic development plans, as the government seeks to achieve food self-sufficiency, increase export earnings, and halt rural out-migration. The agriculture sector generates more than 25 percent of the national income and employs about 30 percent of the labor force. Agriculture constituted 28.5 percent of GDP in 2003 and 25 percent of nominal output in 2002, of which livestock accounted for 16 percent and fruit and grains for more than 40 percent. Most land is privately owned, a crucial factor behind the sector’s success. About 28 percent of Syria’s land area is cultivated, and 21 percent of that total is irrigated. Most irrigated land is designated "strategic", meaning that it encounters significant state intervention in terms of pricing, subsidies, and marketing controls. "Strategic" products such as wheat, barley, and sugar beets, must be sold to state marketing boards at fixed prices, often above world prices in order to support farmers, but at a significant cost to the state budget. The most widely grown arable crop is wheat, but the most important cash crop is cotton; cotton was the largest single export before the development of the oil sector. Nevertheless, the total area planted with cotton has declined because of an increasing problem of water shortage coupled with old and inefficient irrigation techniques. The output of grains like wheat is often underutilized because of poor storage facilities.^[4]

Less than 3 percent of Syria's land area is forested, and only a portion of that is commercially useful. Limited forestry activity is centered in the higher elevations of the mountains just inland from the coast, where rainfall is more abundant.^[5]

[edit] Mining and minerals

Phosphates are the major minerals exploited in Syria. Production dropped sharply in the early 1990s when world demand and prices fell, but output has since increased to more than 2 million tons in 2001. Marble, gypsum, stone, salt, gravel, and sands are also produced but generally not for export.^[5]

[edit] Industry and manufacturing

The industrial sector, which includes mining, manufacturing, construction, and petroleum, accounted for 29.4 percent of gross domestic product (GDP) in 2003 and employed about 30 percent of the labor force. The main industrial products are petroleum, textiles, processed food, beverages, tobacco, and phosphates. Syria’s manufacturing sector was largely state dominated until the 1990s, when economic reforms allowed greater local and foreign private-sector participation. Private participation remains constrained, however, by the lack of investment funds, input/output pricing limits, cumbersome customs and foreign exchange regulations, and poor marketing.^[5]

Because land prices are not controlled by the state, real estate is one of the few domestic avenues for investment with realistic and safe returns. Activity in the construction sector tends to mirror changes in the economy. Investment Law No. 10 of 1991, which opened the country to foreign investment in some areas, marked the beginning of a strong revival, with growth in real terms increasing over 2001 and 2002.^[5]

[edit] Energy

In 2001 Syria reportedly produced 23.3 billion kilowatt hours (kWh) of electricity and consumed 21.6 billion kWh.^[5] As of January 2002, Syria's total installed electric generating capacity was 7.6 gigawatts (GW), with fuel oil and natural gas serving as the primary energy sources and 1.5 GW generated by hydroelectric power.^[5] A network totaling 45 GW linking the electric power grids of Syria, Egypt, and Jordan was completed in March 2001.^[5] Syria's electric supply capacity is an important national priority, and the government hopes to add 3,000 megawatts of power generating capacity by 2010 at a probable cost of US$2 billion, but progress has been slowed by a lack of investment capital.^{[dated info][5]} Power plants in Syria are undergoing intensive maintenance, and four new generating plants have been built.^[5] The power distribution network has serious problems, with transmission losses estimated as high as 25 percent of total generated capacity as a result of poor quality wires and transformer stations.^[5] A project for the expansion and upgrading of the power transmission network is scheduled for completion in 2005.^{[dated info][5]}

The first commercial oil field began production in 1968, but Syria did not begin exporting oil until the mid-1980s. Although Syria is not a major oil exporter by Middle Eastern standards, oil is a major pillar of the economy. Exact oil output levels are difficult to obtain, but according to one U.S. government estimate, Syria produced 522,700 barrels per day (bbl/d) in 2004 and consumed 265,000 bbl/d in 2001. The oil sector of the economy faces many challenges, such as a decline in output and production resulting from technological problems and a depletion of oil reserves. Reserves reportedly peaked at 590,000 bbl/d in 1996 and have fallen to 535,000 bbl/d in 2003 or a total of 2.4 billion barrels in 2004. Since older fields have reached maturity, oil production is expected to continue its decline. Meanwhile, consumption is rising, which means that Syria could become a net oil importer within a decade. To counteract this problem, Syria has intensified oil exploration efforts. Another option is switching electric power plants from oil-fired to natural gas-fired. Proven natural gas reserves, approximately three-quarters of which are owned by the Syrian Petroleum Company, were estimated at 240.7 billion cubic meters in 2004. The primary challenge for the natural gas industry is logistics: reserves are located mainly in northeastern Syria, whereas the population is concentrated in the west and south. In 2001 Syria reportedly both produced and consumed 5.8 million cubic meters of natural gas. Several projects are underway to increase natural gas production, including an onshore pipeline network connecting Egypt, Jordan, Lebanon, and Syria.^[6]

As of May 2009 it was reported that the Islamic Development Bank and the Syrian government signed an agreement stating that the bank would provide a €100 million loan for the expansion of Deir Ali power station in Syria^[7].

[edit] Services

Services accounted for 42.1 percent of gross domestic product (GDP) in 2003 and employed 39.7 percent of the labor force (including government) in 2002.^[8]

As of May 2009 it was reported that Damascus office prices are skyrocketing ^[9].

[edit] Banking and finance

The financial services sector is nationalized.^[8] Six specialized state banks (the Central Bank of Syria, Commercial Bank of Syria, Agricultural Co-Operative Bank, Industrial Bank, Popular Credit Bank, and Real Estate Bank) each extend funds to, and take deposits from, a particular sector.^[8] The Central Bank of Syria controls all foreign exchange and trade transactions and gives priority to lending to the public sector.^[8] The Industrial Bank also is directed more toward the public sector and is undercapitalized.^[8] As a result, the private sector often is forced to bank abroad, a process that is more expensive and therefore a poor solution to industrial financing needs.^[8] Many businesspeople travel abroad to deposit or borrow funds. It is estimated that Syrians have deposited US$6 billion in Lebanese banks.^[8] The U.S. sanctions of May 2004 may increase the role of Lebanese and European banks because a ban on transactions between U.S. financial institutions and the Central Bank of Syria will create an increase in demand for intermediary sources for U.S. dollar transfers.^{[dated info][8]}

Syria has no investment banks, private insurance companies, or foreign banks, although five foreign banks were given licenses in December 2002, in compliance with Law 28 of March 2001, which allows the establishment of private and joint-venture banks.^[8] Foreigners are allowed up to 49 percent ownership of a bank, but may not hold a controlling stake.^[8] It is unclear what range of services private banks will be allowed to offer or what impact they may have on the demand for financial services.^{[8][dated info]} Syria has no equity or official currency markets.^[8] The Damascus Securities Exchange, the only stock exchange in Syria, was launched in March 2009.^[10]

[edit] Tourism

The number of non-Arab visitors to Syria has doubled since the 1990s to 1.1 million in 2002, but this figure includes all visitors to the country, not just tourists.^[8] The total number of Arab visitors in 2002 was 3.2 million, most coming from Lebanon, Jordan, Saudi Arabia, and Iraq.^[8] Many Iraqi businesspeople set up ventures in Syrian ports to run import operations for Iraq, causing an increased number of Iraqis visiting Syria in 2003–4.^[8] Tourism is a potentially large foreign exchange earner and a source of economic growth.^[8] Tourism generated more than 6 percent of Syria's gross domestic product in 2000, and more reforms are being discussed to increase tourism revenues.^[8] As a result of projects derived from Investment Law No. 10 of 1991, hotel bed numbers had increased 51 percent by 1999 and increased further in 2001.^[11] A plan was announced in 2002 to develop ecological tourism with visits to desert and nature preserves.^[12] Two new luxury hotels are scheduled to open in Damascus at the end of 2004.^[12]

[edit] Labor

In 2004 the Syrian labor force was estimated to total about 5 million. An estimated 39.7 percent worked in the services sector (including government), 30.3 percent in agriculture, and 30 percent in industry and commerce in 2002.^[12] About 70 percent of Syria’s workforce earns less than US$100 per month.^[12] Unemployment in Syria increased in the second half of the 1990s, and unofficial estimates put the figure at more than 20 percent in 2002.^[12] Anecdotal evidence suggests that many more Syrians are seeking work over the border in Lebanon than official numbers indicate.^[12] Each year more than 200,000 new job seekers enter the Syrian job market, but the economy has not been able to absorb them.^[12] In 2002 the Unemployment Commission (UC) was established, tasked with creating several hundred thousand jobs over a five-year period.^[12] As of June 2009 it was reported that some 700,000 households in Syria - about 3.5 million people - have no income^[13].

[edit] See also

• List of companies of Syria

[edit] References

[edit] Notes

[edit] Works cited

• Syria country study. Library of Congress Federal Research Division (April 2005). This article incorporates text from this source, which is in the public domain.

[edit] External links

• US Department of State
• Syria Economic Development at the Open Directory Project
• Syria Economy Review
• Strategic Foresight Group

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