Posted by Joshua on Sunday, November 7th, 2010
What is Behind the Uproar in Syria’s Labor Relations? The Reform Process and Jobs?
By Elie Elhadj
For Syria Comment
November 5, 2010
Syria’s Real Economic Growth Not 5%
Syriasteps quotes a study by the Planning Commission which finds that “economic growth in Syria dropped during 2008 and 2009 to 3% from 5.5% in 2007.” Growth was negative in what is termed “real economy.”
أن النمو في قطاعات الاقتصاد الحقيقي كان سالبا خلال تلك السنوات، وهو ما يضعف معدل النمو الاقتصادي بشكل عام
This is a far cry from the 5% to 6% growth that we have been quoted and which the World Bank and Economist have been repeating.
According to Syria-News.com on October 29, 2010, Mr. Dardari revealed that Syria needs to create 1.25 million jobs during the forthcoming Five-year Development Plan. 65,000 are to be created during the first year of the Plan. “Dardari on poverty and unemployment… in numbers.” However, the author of the Syria-News.com report estimates that the plan needs to produce not 1.25 million jobs but 2.1 million if Syria is merely to maintain its present unemployment rate of 11.8%.
The challenge of future economic growth in Syria
- Provide young men and women with work opportunities upon graduation from schools and universities
- Absorb the 600,000 already unemployed – out of Syria’s 5.44 million work force
- Absorb those who would become unemployed as a result of being laid off from privatized enterprises in the future
- Raise the country’s real per capita GDP
High unemployment rates have serious negative consequences in terms of lost economic contribution, prolonging poverty, and fomenting discontent; even possibly social unrest.
Evaluating Syria’s development plans is difficult because Syrian statistics are a mess. The assumptions behind the Eleventh Five-Year Plan are unknown and the accuracy of the available public data is in doubt. The IMF Country Report on Syria, No. 10/86, dated March 2010 states on page 30: “Government finance statistics suffer from major deficiencies with respect to definitions, coverage, classification, methodology, accuracy, reliability, and timeliness”.
The following headlines appeared in the Syrian Press during the second half of October 2010: (I am translating from the Arabic)
Shamlife: “Dardari: No industrial policy-maker knows What the Answers are to Industry’s needs. The Solution is not Easy.” October 17, 2010
ALL4SYRIA: “Labor unions will attack the government… by throwing tomatoes”. October 24, 2010
ALL4SYRIA: “’Asi: The high price of tomatoes is caused by Dardari”. October 28, 2010
Shamlife: “Dardari: We could not reduce poverty…” October 26, 2010, 26, 2010,
ALL4SYRIA: “Dardari inundates unionists with ‘misleading’ data”. October 26, 2010
Syriasteps: “A minister in Mr. Outri’s cabinet… I disagree… I disagree”, referring to the Minister of Industry’s reaction to a demand by union leaders that more workers be employed in a Jableh textile factory. October 26, 2010
Shamlife: “Sharp exchanges between the Minister of Labor and Damascus’ labor union leaders”. October 27, 2010
These headlines describe the tension between leaders of Syria’s labor unions and officials responsible for Syria’ economic affairs. In particular the acrimony stems from Deputy Prime Minister Abdullah Al-Dardari’s efforts to dismantle Syria’s “socialist” economy. In order to build a viable and lively private sector, the Syrian government will have to overcome serious opposition from labor, which is clinging to the thousands of public sector jobs that provided the backbone of the socialist economy and kept many Syrian families from sinking into poverty. Unfortunately, these industries are not viable and Syria can no longer afford to subsidize them. The government must redirect its limited resources toward building the infrastructure the will attract and sustain a competitive private sector. Unemployment in Syria is already through the roof.
In a “market” system, government investment will ideally be decided by rates of return, not rates of employment. Efficient allocation of scarce resources should produce optimal growth and benefit everyone. A rate of return approach will direct taxpayers’ money toward investments that create the most profit – not just for one segment of the population at the expense of others – but for the entire nation. Other approaches are inefficient because of the ideological, ethical, or emotional bias that typically influences decision makers.
As for those business enterprises that the government already owns and manages, a “market” economy should open Syria’s doors to competition. More competition from Turkish, Chinese, and Korean goods will will further undermine the market for the goods produced by Syria’s state sector. Eventually, the government will have little choice but to sell off the 250 or so firms it owns – almost all of which are bleeding red ink. EHSANI2 wrote convincingly about the need to privatize these companies on October 17, 2010 in his “The Sin in Syria is Low Wages.”
Whenever this happens, a proportion of the workers currently employed by these establishments will be laid off, exposing them to the vagaries and humiliation of unemployment.
In addition to the government’s effort to attract foreign investors, factors that can accelerate Syria’s future rate of economic growth will be outlined next. Five factors are structural, which means that a long time is required to bring about the necessary changes. Three other factors are operational and can produce quick results. Hopefully, the government will muster the political will and wherewithal to implement both types of reforms.
The first structural factor is to reduce the rate of population growth significantly. With an annual rate of 2.7% growth, Syria needs to feed, keep healthy, and educate around a million new citizens every year. Such increases are too heavy a burden for a relatively poor country. Unless Syria’s population growth rate is reduced measurably, Syria will be caught in a poverty and high unemployment trap.
Syria should institute effective programs to encourage family planning and birth control. For those who are guided by God’s views on this matter, religious scholars have it in their power to tailor their interpretations of the Holy Scripture to suit their political benefactors. Syrians would do well to ignore the dictums of orthodox ulama and the Pope. The Lord wants the faithful to be healthy, educated, and prosperous, not poor and too numerous.
The second structural factor is to enact laws that would encourage Syrian women to participate fully in economic development. Women’s equality with men is a prerequisite for economic growth. Syria would never be able to attain its full economic potential while half of its population is mistreated like second-class citizens.
Equality for women with men before the law is an absolute right, not a favor. Equality would restore natural justice to fifty percent of the society, helping to enhance women’s contribution to Syria’s economic growth.
A modern secular family law that applies to all citizens regardless of religion, sect, and denomination should replace existing family laws, including Shari’a laws and courts. That a man can marry four wives, divorce any one of them without giving reason, that Syria’s two best known ladies for sophistication, intellect, and modernity; the First Lady and the Republic’s Vice President are equal to one man, who can be illiterate, in a Shari’a court of law in giving testimony, being a witness, or in inheritance brings into question the suitability of Shari’a law to Syria’s way of life in the twenty first century. Such an anomaly is all the more surprising in light of Syria’s keen interest to project itself as a modern “secular” society. Treating women like chattel leaves its scars on women’s personality, defining their view of themselves as lesser beings and inhibiting their contribution to the country’s development.
The third structural factor is to reform the educational curriculum in order to produce graduates with the skills needed in today’s competitive business world. The educational curriculum should aim at enhancing students’ analytical competence, inquisitiveness, creativity, and entrepreneurial drive. To this end, independent studies, term paper research, use of the school’s library and laboratory should become the order of the school day instead of attending lectures passively and memorizing textbooks. Teaching should emphasize student participation in the classroom and encourage debating taboo issues, especially religious dogma. Classroom size should be reduced from 40-50 students to 20-25 students. Large and sustained capital investment in school buildings, libraries, laboratories as well as expanding the size of the teaching staff need to become a priority.
The fourth structural factor is to fight corruption seriously. EHSANI2 addressed this issue at some length, here. Suffice it to say, that corruption is expensive; be it in the inflated prices the government pays for goods and services, the unqualified employees in city hall, or the petty bribes citizens need to pay to minor officials in order to facilitate dealing with government offices. All forms of corruption are robbery and deny taxpayers fair value for their taxes.
The World Bank Institute’s Worldwide Governance Indicators shows Syria’s poor score in corruption control. Of the 213 countries in the study, Syria ranked among the worst, scoring a negative (0.96) while Denmark, for example, achieved the high score of positive 2.42. Disturbingly, Syria’s score has been on a downward slide in recent years; in 2003, it was a negative (0.5) and in 2005, it slid to a negative (0.63) (http://info.worldbank.org/governance/wgi/index.asp).
The structures that have been nourishing corruption in a “socialist” Syria may well exacerbate the level of corruption in Syria’s new “social market economy”. A “market” economy could enlarge Syria’s business elites, adding ferocity to the culture of greed and exploitation that pervades the elite’s conduct. Today’s lawbreakers must be brought to justice so that would-be business offenders in the future are warned. Before the “market” economy gets underway in earnest, social welfare programs should be in place to protect the weaker members of society. Otherwise, “market” economy’s shortcomings, its focus on profit and efficiency, could scuttle the new experiment altogether, triggering even societal unrest.
The fifth structural factor is in the nature of an administrative house keeping. Given that high quality statistics can help improve the quality of planning and investment decisions and instill a culture of transparency and accountability, implementation of the recommendations contained in the March 2010 IMF Country Report on Syria to provide comprehensive, accurate, and timely statistics in accordance with international standards should become a priority.
The challenge of Syria’s data may be summarized in: A) Annual national accounts “reported for publication in the International Financial Statistics (IFS) with about 2-years lag” (IMF report, p. 30). B) Government finance statistics that “suffer from major deficiencies”, with “the largest, most persistent and volatile discrepancies, are between the financing requirements of the budget, as reported by the MOF, and government financing as reported by the Central Bank of Syria” (IMF report, p. 31). C) Monetary and financial statistics “reported for publication in the IFS with about 10-month lags, falling short of recommended dissemination practices of 3-month lags” (IMF report, p. 31). D) External sector statistics presentation and compilation methodology being inconsistent with IMF standards.
On the other hand, the operational factors can provide rapid access to money to help fund the next development plan. Three sources can be worth billions:
First: Enforce tax collection vigorously. It is reprehensible that large family businesses pay an effective tax rate of something around 4% (EHSANI2: http://www.joshualandis.com/blog/?p=7598).
Second: Stop politically convenient allocation of national resources. “Market” investment decisions are based on rate of return criterion. Return on investment should decide the priorities of future government investments, including irrigation projects.
The financial return on Syria’s investment in irrigation over the past few decades has been poor, as have the non-financial returns. Migration from rural communities to urban centers continues unabated. Reliance on capricious rainfall has not been reduced. Over-extraction of groundwater has led to negative balances in five out of the seven water basins in Syria. In all, Syria’s precious water resources are being reduced in quantity and degraded in quality.
Food self-sufficiency in an arid/semi arid Syria is a mirage, notwithstanding the national appeal such a slogan evokes. Syria does not have sufficient groundwater and rain to feed more than 15 million people. New spending on irrigation schemes will be a waste of money and would exacerbate aquifers’ condition. Syria should divert investment in irrigation schemes to other fields, including rain-fed lands.
Third: Divert resources from the military to productive investment in infrastructure, education, health, and welfare. The military is not among Syria’s regional strategic strengths. In the regional balance of power, Syria’s armed forces are not a major factor. A well-educated healthy population makes for better soldiers and officers.
Nicholas Kristof writes:
“Mounting evidence suggests that losing a job or a home can rock our identity and savage our self-esteem. Forced moves wrench families from their schools and support networks. In short, inequality leaves people on the lower rungs feeling like hamsters on a wheel spinning ever faster, without hope or escape. Economic polarization also shatters our sense of national union and common purpose, fostering political polarization as well.”
DAMASCUS, Oct 30, 2010 (Xinhua via COMTEX) — China’s top political advisor Jia Qinglin on Saturday hailed China’s economic and trade cooperation with Syria, urging Chinese companies there to further contribute to local economic development. Jia, chairman of the Chinese People’s Political Consultative Conference (CPPCC) National Committee, made the remarks during his visit to a cement factory which is under construction by a Chinese company.
He described Syria as an “important trade and economic partner” of China in West Asia, saying the two countries have carried out friendly cooperation in an equal and mutually beneficial manner.
Jia applauded the soaring bilateral trade, the two-way investment and the contract of construction between China and Syria, saying it contributed to the economic progress of Syria and the friendship between the two peoples.
Chinese-Syrian trade surged from 220 million U.S. dollars in 2001 to 2.2 billion dollars last year, according to China’s Ministry of Commerce.
China also supports the just cause of Syria for safeguarding its national sovereignty and territorial integrity, and backs Syria in resuming the exercise of full sovereignty on the Golan Heights at an early date, Jia said.
Syrian Oil Output Rises in First Nine Months of 2010, SANA Says
By Nayla Razzouk
Oct. 31 (Bloomberg) — Syria, the largest oil producer in the Levant, produced slightly more crude in the first nine months of 2010 than in the same period a year earlier, state news agency SANA said. Production climbed to 105.749 million barrels in the period, averaging 387,000 barrels a day and marking an increase of 11,825 barrels a day from the same period of 2009, it said. The Syrian Petroleum Co. pumped 49.6 percent of the total and the rest came from producers affiliated with foreign companies, the agency said.
BP’s statistics suggest that Syria will exhaust its oil reserves in 18 years.
Syria: Economic Overviews, 2010-11-01
Nov. 1 (Economist Intelligence Unit) — POLITICAL STABILITY: The president, Bashar al-Assad, and his ruling Baath party are expected to retain their grip on the country, supported by key elements in the security services. …..
INTERNATIONAL RELATIONS: After a period of diplomatic isolation in 2005-07, Syria has developed steadily better relations with Western and regional states–notably Turkey, Saudi Arabia, Lebanon and Iraq. Consequently, the EU is now ready to sign a long-delayed Association Agreement and final negotiations are ongoing. Better relations are primarily due to perceptions that Syria is playing a more constructive role in Lebanon–there have been suggestions that Syrian officials may not be implicated in the UN inquiry into the killing of Rafiq Hariri, a former Lebanese prime minister. There is also a desire among Western and other Arab countries, particularly Saudi Arabia, to weaken Syria’s alliance with Iran. However, tensions could still emerge from issues relating to the UN inquiry, undermining the apparent improvement of relations with Saudi Arabia. Relations with the US have also improved, and although US sanctions on Syria were renewed in May, the US has withdrawn its objections to Syria’s accession to the World Trade Organisation.
POLICY TRENDS: The gradual liberalisation of Syria’s centrally planned economy is expected to continue under the leadership of the deputy prime minister for economic affairs, Abdullahal-Dardari. However, the economic debate remains highly charged. There are influential officials who oppose this process, and these conflicting interests will inhibit policy formulation and implementation. Recent press reports have highlighted concerns within the Baath party about the negative impact of reform on poverty. There are also powerful members of the business elite who benefit from the status quo and might resist changes that would threaten their incumbent advantages.
ECONOMIC GROWTH: We estimate real GDP growth at 4% in 2010 as strong government spending and private consumption have both supported growth. We forecast growth of 4.6% in 2011 dropping to 4.5% in 2012 owing to lower oil production. Growth will be driven by rising foreign investment into Syria as the economy is opened up and international relations improve. This, combined with a government focus on capital spending, will drive growth in fixed investment, although the rate of expansion in government consumption and capital expenditure will slow during 2011-12. Private consumption growth will pick up as the private sector expands and as an expected recovery in agriculture in 2011 boosts incomes. However, if there is a significant improvement in security in Iraq–not our core scenario–once the new government is formed, a sizeable number of the Iraqi refugees in Syria (estimated at between 500,000 and 1m) may return home, thereby depressing consumption. Growth in trade will also pick up in 2011-12 as Syria becomes more integrated into the global economy.
INFLATION: Consumer price inflation is expected to accelerate to 4.4% in 2011, as global commodity prices rise slightly and value-added tax (VAT) is finally introduced—although food, a major component of the consumer price index, may be exempted. Inflation will then drop to 4.2% in 2012, as inflationary pressures, particularly on rents, decline owing to a stabilisation or small decline in the number of Iraqi nationals in Syria and declining global commodity prices.
EXCHANGE RATES: The Syrian pound has been loosely pegged to the IMF’s special drawing rights since October 2007 and is tightly managed by the Central Bank of Syria. The authorities are unlikely to let the pound float freely, because they place a high importance on exchange-rate stability. Weakness in the euro zone (the euro is a component of the Central Bank’s currency basket) caused the pound to depreciate against the US dollar in the first half of 2010, although it has recovered since, resulting in an estimated average exchange rate of SP46.4:US$1 for 2010. Persistent worries about the euro in 2011 will lead to a slight depreciation of the pound against the dollar, and we forecast that it will average SP46.7:US$1 in 2011-12. The Central Bank had healthy foreign-exchange reserves–US$17.4bn (about 13 months of import cover) at end-2009–leaving it well placed to maintain control of the local currency.
EXTERNAL SECTOR: In 2011-12 we expect export earnings to build on a 2010 recovery to reach an average of US$14bn, although this is still below the oil-price-related peak in 2008 of US$15.3bn. In recent years, drought has seriously constrained production and therefore exports of cotton and textiles. The drought has now eased, but the 2010 wheat crop is expected to be disappointing and a boll weevil infestation may affect the cotton crop. Overall, the trade deficit will narrow slightly to an average of US$682m in 2011-12, and as a proportion of GDP it will fall to an average of 1%.