“Syria: Return of the reformer ,” the Economist

Economy Tsar claims Syria’s growth will climb to 5% next year.  The Economist seems to be claiming that Syria is reforming – at least economically. We shall see.

In other news, Syrian authorities claim that the embassy bombers were home grown extremists. Three of the four were family members. “While not affiliated with known terrorist groups, the men had attended religious lessons in Saudi Arabia and were influenced by the United States’ role in the region and perceived bias for Israel, the ministry said.” Here is the Economist article, kindly sent by Atassi.

Syria: Return of the reformer
16 October 2006
Economist Intelligence Unit – Business Middle East

The Syrian president, Bashar al-Assad, has signed a slew of new decrees on the economy, including one that will pave the way for the creation of a stockmarket

Of the two principal aspects presented by Mr Assad, the one associated with liberal economic reform has for some time been overshadowed by that of the political spoiler, repressing dissent at home and exercising a malign influence in Lebanon and the Palestinian-Israeli arena. However, the start of October has seen a return of the economic reformer, with Mr Assad signing seven decrees approving legislation on the exchange rate system, taxation, the budget, the management of the public sector and the proposed stockmarket. The measures are all aimed at enabling Syria’s transition to a market economy and at equipping the country to deal with the financial implications of the rapid depletion of its oil reserves.

Lower taxes
The most elaborate of the new decrees was No 51, comprising 29 amendments to Law 24 of 2003, which brought the top marginal corporate tax rate down to 35% from 65%. The amendments include provision for a further cut in the top tax rate, to 28% on net profit exceeding S£3m (US$58,000). The tax on profit of between S£1m and S£3m has been set at 24%; the other rates are 20% on profit of S£500,000 to S£1m, 15% on earnings of S£200,000 to S£500,000 and 10% for profit up to S£200,000. Public-sector enterprises, including the state oil and gas companies, will be subject to a fixed 28% tax on their net earnings. Private companies that offer at least 50% of the share capital for public subscription will only have to pay 14% corporate tax, and will be exempt from paying local taxes. There is also a 22% rate applied to the profits of companies set up under investment incentive legislation (to which these firms are presumably liable after their tax holidays have elapsed). Hotels and restaurants will be required to pay a 2.5% turnover tax and a 0.5% salary tax in lieu of tax on their profits. The next two decrees are also aimed at stimulating investment, as they entail lowering tax rates on the sale and rental of real estate.

The new rates take effect from January 1st 2007. The IMF noted in its recent Article IV report that the total corporate tax take had not declined following the earlier cut in the top rate, suggesting buoyant profits and some success in combating evasion.

Mr Assad has also approved a new basic finance law, the main significance of which is that it separates the operations of the public enterprises from the state budget. As of 2008, state-owned firms will be granted autonomy from the Ministry of Finance, and will be entitled to retain profits for reinvestment. They will pay corporate tax and will have the discretion to award dividends to the state, but they will no longer have to submit all their profits to the Treasury and rely on the state budget for their investment needs. The law replaces legislation that has been in effect since 1967. Other elements in the new law include giving the finance ministry complete control over the drafting and operation of the budget, in respect of both current and capital operations, enabling the budget to be managed on an accrual rather than a cash basis, introducing double-entry book-keeping and arranging budget categories by economic activity rather than government department.

The government is also planning to introduce value-added tax (VAT) in 2008, and is reviewing its system of petroleum price subsidies, which the IMF has described as unsustainable.

Damascus bourse
Since assuming power in 2000 on the death of his father, among Mr Assad’s most notable achievements in economic policy has been the opening of the banking and insurance sectors for private investment. His pledge to deepen financial sector reform through the establishment of a stockmarket also now appears to be closer to being realised. The early-October decrees include Law 55 covering the creation, operation and regulation of the proposed Damascus Stock Exchange. The text was prepared by the Syrian Securities and Exchange Commission, which was established by a law passed in 2005 and is chaired by Mohammed al-Imady, a former economy minister. The passage of the law means that the market is likely to commence operations in 2007.

Invest Group Overseas (IGO), a finance company based in the UAE and headed by Mowaffaq al-Qaddah, an expatriate Syrian businessman, has signed a Memorandum of Understanding with SSEC for the construction of the stock exchange buildng in the Eighth Gate, an estimated US$500m development being carried out at Yafour, on the outskirts of the capital, by the Dubai-based Emaar Properties. Many Syrian companies, including the leading mobile-phone operator and all of the private banks, have raised equity through initial public offerings, and such firms are likely to be among the first to list on the new market.

Meanwhile, Abdullah al-Dardari, the deputy prime minister for economic affairs, has said that he expects real GDP growth to reach 5% in 2006, compared with 4.5% last year.

Shell Oil Company has been rewarded the contract to explore for oil and gas in two areas of Syria. Shell has produced two billion barrels of Syrian crude in the 25 years it has been operating in the country. A 20-year agreement was signed late on Wednesday at the oil ministry granting Shell the right to explore and share production in the Amouria bloc near city of Deir al-Zour and in the Buthaina bloc south of the ancient city of Palmyra. Under the contracts Shell will spend $42 million.

Comments (5)

t_desco said:

Bush personally involved in blocking peace negotiations between Israel and Syria?

Bush Opposed to Israeli Withdrawal from the Golan

According to a report in the Israeli newspaper Yediot Aharonot, U.S. President George W. Bush is opposed to an Israeli withdrawal from the Golan Heights and a resumption of negotiations with Syria.

The article states that during talks with EU leaders, Bush said, “There is no reason to talk to the Syrians right now. President Assad knows very well what he needs to do to fulfill a positive role.”
IsraelNN, Al-Manar

“I say, let’s talk with people we don’t agree with. We should right now, be talking with the government of Iran, the government of Syria, and I’m talking about face-to-face talks at senior levels of government. Not outsourcing it.

I’d like to tell you this administration was too cowardly to talk with people it doesn’t agree with. But of course, that’s not true. It’s not cowardice. What they still harbor is the intent to attack the governments of Syria and Iran and therefore they block any diplomatic dialog.”
Wesley Clark 9/30/06

October 6th, 2006, 7:51 am


ausamaa said:

Yeh, and that reform procces was attempted at a time when the mere existance of Syria as a state was in question by some, and at a time when Syria is in the Cross-hairs of the many forces, and while it has been under various sorts of sanctions since decades!

I am proud of, and excited, about such developments. The implementation would be a learning curve process of course, but things are moving along the right track. And do not forget, they coming from a totally opposite “Social/ Ideological” basis and orientation, and moving the counry into a “free market” domain. And the Ba’ath party is approving all this. Experimenting with new tools but with caution. But trying nevertheless. And a challenge it is. If companie’s restructuring and small scale busniess re-engineering excersises take year to complete, imagine how difficult it is for Syria to undergo such a process while not violently rocking the whole economic base it has lived with for decades. Slowely, for sure, but one step at a time. Steps that carry multiple messages: 1) Syria is determind to keep trying to reform, 2} poltical/military pressures and threats did not succeed in diverting us from our plans or make us forget , or delay, the need to reform, 3) we can do it despite the fact that the Saudi/Western tap has been turned off. I other words, Syria can still and try to do it on its own.

Imagine where Syria will be if a true effort to aid it economically would be undertaken by the cash flush states in the area. Not as a charity, or out of brotherly love, but in the hope of regaining the invested amounts times over in the near to mid future. But I am not worried here; Money has a very sensetive nose and will soon find its way there. Imagine the number of IPOs that are being planned now by people who have not even visited Syria in decades. The Regime is not only surviving but is also managing as it seems at all three fronts: the Economic, the political and even the military. Better formula than depending on Congress approved annual aid packages, or on someones unending-watch -or wish-for a regime change. Less bloody at least.

Now let us see how many expat reform-oriened supporters will liquidate thier holdings in forigne exchanges to support thier Beloved Syria in such a step.

Of course not the full answer to all of Syria’s problems, but a step in the right direction, at a time when “other” pressures could have been used as an execuse to delay such moves have they not been wanted and planned.

October 6th, 2006, 8:13 am


ausamaa said:

T-DESCO, sorry but this is a repeat of what I bosted on Thursday.. touches your remarks abut Bush wanting or not wanting to talk to Syria.

The Golan Hights have no strategic imortance to Isreal in military terms. This is a well known and an established fact even by Israeli military analysists. Not when Syrian rockests can reach Tel Aviv in 5 minutes, patriots deployed or not, and not when Syrians -government and people- are willing to bear the cost for such a confrontation which many belive is now being considered as a possible alternaitve which has been on the Syrian General Staff drawing board for a while now (according to Israeli Intelligence sources at least). And why not??? Remember 1973. Did any one expect what happend? And never mind the stuff we are bieng fed day-in-day-out that there could be no war without Egypt (one just took place last July with Syria’s approval and against Egyptian ans Saudi wishes to say the least). And always remember. Syria is the real culprit Lebanon, not Iran. Since the days of Fateh Land. Especially when it gets to Pan-Arab National Issues. THe decision is puerly Syrian in the end. With Iranian or other agreement, of course, but in the end its Syrian. Do not kid yourself. The Rockets, that landed in Israel, could not have come from anyother place, so does the rest of the stuff and training….etc, you can guess. The bulk effort I mean.

When things seem to be heating up, one should expect the unexpected. Wars are strategic surprises- remember! the Syrian Armed Forces, rusted or not, can once again slice into the Golan and reach Tibreis (as it did in 1973 before Israel switched its forces from Sinai in the second week of October 1973). That is why Sadat was depicted either as a military genius or as a “Kissinger collaberortor” who was “convinced” to slow down his Armies in Sini based on someone’s advice so that Isreal can divert the thrust of its forces to its Northern Front at a time when its positions in the Golan were undergoing the trumatic consequences and possible collapse at the hands of the determined Syrian attack. Mount Hermon was occupoied by Syrian and PLA Paratroopers in six hours ( incidently one can not lightly dismiss the amount of fire power direct at all strategic IDF Radar C4I installations like Hare Dove, Safad HQ, Mount Meron and others in both Isreal and the Golan during July) . Israeli planes falling like dead flies all over the battle field. Captured Isreali Soldiers and Commanders on Syrian TV. And no advanve warning despite King Hussien’s gallant attepmt to inform the Israelis about in an honest effort maybe to earm his pay. That is Strategic Surprise, and thst is as a Strategic Victory as they come. So, it has happened before, why exclude the option now…

Apart from that, militarily, regaining the Golan alone is not a Military issue. And clinging to it by Israel is a theatrical and bargaining move.Its an Israeli gambling card to squeeze the unsqeezable Syria on various regional Issues. Especially in this age, where simple Syrian one-stage conventional rockets can slice Isreal into two-halfs before Israel knows it. And Israel can shove its nuclear arsenal up its inner parts because it can afford to use it, and because, fearsay, tells us that Syrai has reched an advanced stage in the development of a detterent C&B capabilities. Let alone conventional missile power -even Katyshas- the effect of which on Isreali society you can ask both Sayed Hassan Nassrallah, or cthe IDF for details. Syria, on its part, can absorb the devastating human, economic and military casualities of such a confrontation while Isreal can not. And the staying power of the Syrian people, is much higher than that of the “spoiled” Isreaeli society should things take some times to reach an end. Hardships; Syria is more well placed to withstand those than Isreal. At least its citizens do not have as many dule nationalities as Israelies do. They have only Syria. To win or to loose. And such things make a difference.

So the question is not trully the Golan or the ten meteres alongside Tibreis lack. Its simply geoploitical “spheres of influence”. Its Damascuse insistance on Full Arab Rifhts. Bashar will reject agreeing to a 100% withdrawl from Golan uless the Palestinian, Jreuslaem, and the geoplopolitical balance of power is clearly defined. Including Jordan’s future status. Not Lebanon; that is a foregone conclusion, but Jordan. IF Assad was going after the Golan Hights only, he could have gotten it back years earlier with a salute and a welcomed peace treaty from Israel. Again, its the “spheres of influence” thing. They offered Assad the Golan less a 10 meters strip around the Tibries lack and he said NO. People tend to overlook this fact. THe issues are: Who controls what? What would happen to Jordan should Isreal decide to follow its policy of “Jordan ss the ultimate answer to the Palestinan problem”? What about Palestinan aspirations? Jeruslaim? The Refugees? etc…The National and Transininotial Issues in summary is what is at stake!

And to be fully transparent, the isuue goes much further!!!! Does Isreal consider the achievement of a real peace in the area as an added value to its existance. I do not think so; this reduces it to an “also ran” i the area which is not how it sees its dominant role. Then, and in geopolitical terms; what is the value of an invalide, costly and peacefull-loving Isreali ally to the US/WESTERN intersts in the area. ???????? So, to Isreal; without Wars, and Wars that can be won, where do is it fit in the globale geoplitical equation? Never mind the stuff about Isreal being a democratic state -which it is not- and never mind the exaggerated feelings of guilt by the west towards the Holocost victims. This is all a PR justification and cover up to the killings of millions in Japan and Germany (since when was Jewish blood so dear to Wesrten culture). The world “deals” are about realpolitic, not past favors, not gratitude for services rendered, after all the powers that might be are not a charitable get together congregation..
If in doubt, check how things snowballed for the US/The West in South Africa, Iran, and even the banana republics, and with Marcos in the Philippines if you wanna head east.. It is writing on the wall foe=r who can see and learn

So, is he gonna evetually talk to Syria or not? not???? Wanna bet???

October 6th, 2006, 8:46 am


Torstein (al-baluzi) said:

Interesting reading, Ausamaa.

The comment on Lake Tiberias/Tabarya made me think about Karfan’s rant on the topic:


No pun intended 🙂

October 6th, 2006, 11:07 am


Innocent_Criminal said:

Interesting article below, especially for t_desco who is following the Hariri murder closer than most of us here. i haven’t learned how to link words here (is it the same as blogger?)

Johnny Abdo: ‘Lebanese Party,’ Not Hizbullah, Involved in Bombings.


October 6th, 2006, 12:21 pm


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