Since 2000, Syria’s economy was being managed centrally. Supported by the IMF and the World Bank, the structural adjustment program was used by Syria. The five-year plan started in 2006 and ended in 2010. Changing the economic strategy to a liberal market led was the main purpose of the program.
The contents of the plan were based on five main purposes. 1. Respecting the human rights, 2. The rule of law, 3. Making sure the society participates in the political process, 4. Preparing the economy to a social market, 5. Making sure the government acts in the favor of development. The only objective that turned our practical was number four.
The GPD has increased from 1% in2003 to 5.2% in 2008 according to the World Bank. However, the Syrian GDP was $33,332,844,575, for 2006, $40,405,006,007 for 2007, and $52,581,913,978 for 2008. After the 5-year plan, GDP per capita has increased greatly from $1,773 to $2,066 and reached $2,743 in 2010.
The services sector, which accounts for more than half of the GDP and includes the banking system, tourism and trade, is the main contributor of GDP. After that, there is industrial sector with 33%. But the agricultural sector is responsible for less than 20% of GDP.
These numbers have been rising and falling have declined hugely in many sectors. The agricultural sector share has declined from 25% in 2000 to 19% in 2008. But the industrial and mining share has changed slightly has increased from 30% in 2000 to 34% in 2008.
The agricultural sector and the oil revenues have doubled the GDP. But the agricultural sector can be affected easily by weather conditions, which causes the deterioration of it and affects the labor force encountered. When there is drought, the situation worsens.
Whereas the mining and industrial sector is the main sector that contributes in the growth of the economy; however the value added of the manufacturing industries as a percentage of the GDP decreased from 7.9% to 5.8% from 2001 to 2008. On the other hand, during the same period, the value added of the extraction industry showed an increase from 18% to 25.5%.
Though the mining and industrial sector is the primary sector that helps the economy grow, the value added to manufacturing industries has decreased from 7.9% in 2001 to 5.8% in 2008. The value added to the extraction industry has declined too, from 18% to 25.5%.
According to the Arab industry and mining organization, after the creation of SAP program, the growth rate increased from 2.5% in 2005 to 3.2% in 2006 and finally to 5% in 2008. Despite this increase, there is significant increase in the inflation rate. It was 7.2% in 2005, but in 2006 and at the beginning of the program, it reached 5.6%. From 2006 to 2007 the inflation rate doubled and reached 10%. In 2008, it ranged from 17% to 20%. This shows that the increase in growth rate did not suit the Syrians’ standards of living
The economy has been moving toward free open led economy and it has had many characteristics that has affected Syria’s population. The poverty has increased due to this transformation. According to the World Bank, the rich benefited from this transition more than the poor did. The highest 10% of the population held 28.9% of the country’s wealth and 3.4% of the wealth belonged to the lowest 10%; which shows that the distribution of wealth is unequal in Syria.
There are many external factors that affected Syrians during these years, like the cut of subsides conducted by the government on fuel prices, causing the significant increase in food private and doubling the inflation in 2006-7. The other factor is the droughts, which lasted three years and finally the 2009 global financial crisis that decreased the amount of remittances coming from abroad. Thus, the middle and lower class did not benefit from the program; and the social dimensions of the economy which had negative effects were put into consideration.
One other factor relating to the Syria’s economic growth is the contribution of private sector. After Bashar Al Assad took power in 2000 and trued to change the economy into an ion market, the share of the public sector has declined to 42% in 2008 (having been 64% in 2000.) However, the share of the private sector has increased contributing 58% of the Syrian GDP in 2008.
Al Assad has engaged in many activities to encourage the private sector and increase the investment of foreigners. He did those acts to attract the Arab capital and national and foreign capital to invest in Syria. He not only conducted the 2006 act, creating the Syrian stock market, but also reformed the tax systems to be in favor of investors and taxpayers.
According to IMF, this liberalization has limited the economy in two aspects: the decline of the competitiveness of the domestic production and the liberalization of the economy, which raised from $1,045 in 2000 to $2,756 to 2008. This explains the reason behind the rise in growth rate alongside an increase in inflation. Though the economy was flourishing in terms of GDP and GDP per capita, the growth had no influences on the Syrians’ standards of living. In contrary to that, more than 40% of the Syrians lived in poverty.
Before the effectuation of the program, the government was hiring fresh graduates in the public sector. But these policies were being limited when the program started as the contribution to the public sector and shrank to give way to private sector to create better job opportunities. The level of skills of the Syrian labor force is also low, which limits the private sector in hiring people. Consequently, the public sector would not be able to hire people and the private sector cannot hire the large number of the unemployed who are not well educated.
Syria’s labor market is increasing alongside the unemployment rate, especially among the young. When the program was just beginning, the unemployment rate was 8.2% in 2006, with a slight increase in 2007 to 9%. It had another decline and reached 8.6% in 2008. This means that the program was not successful in decreasing the unemployment. Syria’s education system too was not sufficient to educate students with skills needed to meet the job opportunities. consequently, people have been less persuasive in demanding higher wages and have been forced to work for little money. The number of students has decreased consequently (Huitfeldt and Kabbani, 2007). .
Another critical aspect in growth and sustainability of the economic growth is the fiscal policy and the government budget. According to IMS, Syria’s public finance depends highly on oil revenues. The oil revenues contributes by 25% as percentage of GDP, according to the report. But this number was calculated to become 12% by 2015, leading to higher budget shortage and exports receipts.
According to IMF, by 2008, the oil sector contributed with 23% of the government consumption, 20% of Syrian exports are from oil product and 25% as percentage of the GDP.
The five-year plan project has thus enclosed two significant pillars to the government’s problems. 1. The government has to adjust oil prices to meet the international levels by 2007. 2. The government has to reform the tax system to strengthen the tax administration.
The financial sector has also gone through a major improvement, especially the banking system which one of the most influential sectors to make the Syrian economy grow. In 2000, the banking system of Syria only consisted of six state owned banks. After the 5-year plane was introduces, the banking system got stronger with a positive interest rate. It gave birth to private banks and the private sector increased by 15% as a result.
The 10th five-year plan unified the exchange rate regime with success. It also banned all the trade restriction. Private enterprises have rose as a result of increase in the private sector and the openness of all economic sectors.
The goal of the program is transforming the economy into an open market economy. In order to achieve this objective the Syrian trade system must be liberalized, especially after its main trade partner (The Soviet Union) is dissolved. The government had a lot to do in order to liberalize the trading system. One of these tasks was to unify the customer tariffs, by removing non-tariff trade barriers, decreasing the monopoly of the public sectors to import products, unifying the exchange rate system, and establishing the free trade zone. Syria had joined many trade agreements like GAFTA where all products imported to Syria from Arabian members are duty-free. Syria was a member in World Trade Organization (WTO) too.
In conclusion, After Bashar Al Assad took power in 2000 and the 10th five-year program was introduced, the economy of Syria has not improved significantly. The liberalization of economy can be harmful especially to middle and lower class people. Economic indicators asserted that the program was beneficial because it raised the GDP and GDP per capita. But in reality it did not favor the poor people, and the Syrians’ standards of living did not improve.
On the other side, the private sector and the financial sector achieved many successes as the program it succeeded in unifying the exchange rate regime, as well as all trade restrictions were banned. The increase in the private sector and the openness of all economic sectors to the private enterprises has rose where it contributed with 80% of the GDP.
The private sector and the financial sector were successful in unifying the exchange rate regime and banning trade restrictions. The increase in the private sector and the openness of all economic sectors to the private enterprises has rose where it contributed with 80% of the GDP.
One year before the revolution, the economic growth in Syria was significant, though it was affected by many external shocks like the financial crisis of 2009 and the droughts affecting the agriculture.
3. The Syrian economy after the civil war:
Many people opposing Assad’s regime were tired of the long period of unrest, so they started supporting the regime. The conflicts became more complicated and the revolution turned into a civil war between the armed citizens and the military forces.
Assad started to bomb many cities in 2012, claiming they are in real war and he is just following the rules. Those who were against the regime called themselves the Free Syrian Army and so the division in the army happened. A coalition was formed by the major opposition forces, but the Islamic groups like Nusra and Al Tawhid refused to join.
Many conflicts exist on Syrian borders, such as fire exchange with Turkey, Lebanon and Israel. The coalition was recognized by the U.S, France, Turkey and many Arabian countries as the representative of the country. Assad started using chemical weapons on his people in 2013. This led to the formation of many conferences in the Security Council.
In the period before 2011 revolution, Syria was experiencing a major economic growth; however, it did not last, because many economists believed that Syrian economy has no history with sustainable economic growth. The economy has been suffering since 2012. Severe international sanctions has led to this contraction in the economy.
The Syrian economy developing right now as it is relying on agriculture, industry, oil and tourism. The government is always supportive of the agricultural sector. Although the country was transforming into a capitalist economy yet it existed a large public sector.
After the conflict started, the economic infrastructure of agriculture sector was almost demolished. There was the fear of securing income for the people. The value of the Syrian currency was lowered significantly. There was no longer internal trades between the cities, and the International sanctions affected the Syrian international exports and imports.
According to the World Bank indicators, before the 2010 revolution the Syrian GDP was $110.1 billion. After the revolution it decreased to 107.6$ billion, making the country rank the 69th country compared to the world. The GDP growth of the country also decreased to -2.3% in 2011, having been 3.4% before the revolution. This decrease was seen in the GDP per capita, having been $5,300 in 2010 and reaching $5,100 in 2011. The country ranked the 156th country compared to the world’s countries.
Agricultural sector, industrial sector and the services sector compose the Syrian GDP. The Industrial sector contributed 22.8% and the service sector contributed 60.7%in 2011. According to SNAP, the costs of production in agriculture process affects the agricultural sector.
The extended insecurity led to the drop of supplies and production as workers feared to go to work. This is how the industrial sector was influenced by the civil war. The same thing happened in the agricultural sector. The prices went up and the middle/lower class people could not afford anymore. In 2012, the industrial sector production growth was calculated to be -32.8% in 2012.
The service sector was harmed too during the war. It relied on the tourists and trades with Arabs, which declined due to the political instability and oil exports.
When most of the economic sectors fell, there was a huge rise in unemployment. According to the most recent reports of Fact book in 2008, 5.327 million labor force existed in 2011, 17% in agriculture, 16% in industrial and 67% in services sectors. The government increased the wages of public sectors, but the public sector could not recover from the losses of the crisis.
After the international sanctions that limited economic, political and trade relations of Syria the public sectors became extremely poor. Foreign investors no longer brought money to the country, especially because most of the important cities were against Assad now. The investment in Syria decreased from 22% of GDP in 2010 to 20% of GDP in 2011.
The private sector was not as harmed as the public sector, because the government was supporting Assad’s regime and praising employees involved with it. It provided high salaries for workers. Assad commanded for a wage raise for the public sector, especially in the opposing cities, in order to show himself as a sufficient president. But the problems of banking systems and the shortage of ATMs made it difficult for the workers to get their money.
The public budget after the civil war was -11.4% in 2011. This was because the government’s money was almost dedicated to military forces. According to Fact Book, the government spent $12.59 billion in 2012, while its revenues were only $5.217 in that year.
The public income was mostly based on tax and oil exports before the civil war. These incomes constituted 80% of the budget. After the war, a significant drop was observed in oil exports due to sanctions. The taxes used to be indirect, and due to the overall decline of economy, the taxes revenues decreased from 23% to 8.1% in 2010 and 2012.
After the war, the public expenditure increased significantly. First, because of the increase in the public wage by 13%, and second, because of the huge amounts of money spent on military forces where 3.6% of the GDP is spent by the government.
The government investments like education are very insignificant and have decreased from 8.8% of GDP in 2011 in 4.5% in 2011.The government tried to increase the budget for investments but the losses were higher than it could afford.
The public debt is the result of the fiscal deficit after the revolution. According to the World Fact Book, the Syrian public debt was 34.5% of the GDP in 2010 (before the revolution) and it increased to 52.4% in 2012. 75% of this debt is internal debt such as national loans, while the external debts slightly increased from $8.269 billion in 2011 to $8.394 billion in 2012.
Before the revolution the banking system of Syria was very primitive. It consisted of six banks owned by the government. Some banks faced losses after the revolution and some others were shut down. They did not have electricity and internet access and were exposed to theft.
Until 2011, the inflation rate in Syria was 4.8% and harmless, but then it increases significantly reaching 36.9% in 2012. This was due to the depreciation of the Syrian currency, the monopoly of the local suppliers, and the increase of Fuel prices and food prices as a result of the sanctions.
The depreciation of the Syrian pound gave a major opportunity to the black currency markets. The government intervened with the introducing the dual system which trades foreign exchange rate different from the official rates. So an intervention price was created which was higher than black market price.
The overall performance of the economy has been impacted by the sanctions. They result in the decline of the whole trade sector. According to the World Fact Book 2012, the Syrian export at the beginning of the revolution was $10.29 billion in 2011. This number was decreased to $3.876 billion in 2012. This trio is because if the decrease of production sector of the economy and the severe international sector of trade partners
The imports were also decreased because of the political instability and lack of security. According to World Fact Book 2012, at the beginning of the revolution, Syrian imports accounted 17.6$ billion. This number decreased to $10.78 billion in 2012. Syria has not been able to import successfully recently due to the inability of the public sector to finance the imports as a result of international sanctions.
Lack of security, the instability of the country, low income levels and high price of the goods and services affected the economy in a negative way. Though many countries cut off relations with Syria, many others helped it. Russia helped Syria withe the fuel shipment, and Iran and Iraq has been exporting with Syria.
The civil war had a negative effect on the economy of Syria. Low levels of income, high levels of unemployment and high prices of goods and fuel harmed the economy. The level of foreign and national investment also decreased and there were no longer any tourists in the country.
4. What if Bashar Al Assad remains in power and what if the regime changes:
The most controversial issue in the last two years in Syria has been: What if Bashar Al Assad remains in power and what if the regime changes? Some people believe that the only way to regain security and stability is to trust Al Assad while others are suspicious to him, being able to make any difference.
If Assad remains in power, the economic state will remain the same. The government would try to change some rules and indicators to pretend the economy is healthy. People would be devastated of dictatorship but they will no longer protest, due to the fear of being killed. The sanctions would never seize and no foreigners would invest in the country.
People would suffer from poor education and health care equipment. These are government’s duties, but the governments is just busy financing the military forces to protect itself from protestors.
The value of the Syrian currency becomes lower and as the government faces more debts, its value decreases more. Inflation rates remain high as a result. The political stability will be achieved if Assad defeats the oppositions but the dictatorship and fear will always remain.
What if Bashar resigns? the new regime will have great limitations that are difficult to overcome. It will have to solve infrastructure problem, the educational and human development problems. Meanwhile, the armed militias might take power, which would be dangerous.
The economy will need huge budgets and loans to recover the economy. IMF and the World Bank could provide these loans but with strict conditions. Arab countries would also help financing the public budget, in case of the new regime’s loyalty.
Neither the government nor the opposition have the effective economic plan to help the economy. The only way to improve it is to adopt the right economic mechanisms.
Syria is located in the western side of Asia, with a middle income. This country has one of the most ancient civilizations in history, like the Phoenicians and the Pharos of Egypt. Religions and ethnic groups are so diverse and variable in Syria. Since Hafez Al Assad was in power, there was political riots and protests in Aleppo against his reign. So he killed many of people and defeated them in a horrible massacre. In July 2000, Hafez Al Assad’s son - Bashar Al Assad - took his place with a public referendum. He is still the president of Syria.
The economy was improving during Bashar Al Assad’s first phase of ruling; in terms of economic indicators. Assad aimed to change the economy from a centrally managed one to a market one, thus transforming it from the social stream to a new capitalist economy. He achieved this aim in the tenth five year plan which was implemented in 2006. In terms of economic indicators, the plan was successful. But the citizens of Syria did not consider it to be beneficial to them or the country’s economy.
After the tenth five year plan was applied, there was the Arab Spring Revolutions in Arabian countries. This triggered Syrians to start riots to protest agains Bashar’s regime and demanding the abolishment of the emergency law. The riots caused the Syrian civil war which has not ceased to this day. The civil war destroyed the political and economic forces of Syria. The economic indicators became degenerated and people started being classified into numerous sects and political views. This exasperated the conflicts and the situation got worse.
Many leaders, presidents and rule makers agree that there is no possible solution for the Syrian crisis. Some of them believe Al Assad has better remain in power and defeat all people who oppose him. In this case, the citizens would be deprived of their freedom but they would not riot, as they are afraid of getting imprisoned or killed. As long as Assad is in power, the sanctions will not be abandoned, so there is no way for the economy to improve. Some other authorities believe that if Bashar is not in power, the future of Syria will rely on the efficiency of the new president and government. The new government would have to survive from the destroyed economy and come up with an effective plan to improve the economy.
- Henrik Huitfeldt and Nader Kabbani. 2007. “Returns to Education and the Transition from School to Work in Syria,” Institution of Financial Economics Working Paper Series, No. 2007-1, American University of Beirut, Lebanon.
- Jihad Yagizi, (2012, May 29). Syria beyond conflicts: Economic test. Open Demcrocy , p. 1. http://www.opendemocracy.net/jihad-yazigi/syria-beyond-conflict-economic-test.
- International Monetary Fund, 2005, Syrian Arab Republic: 2005 ArticleIV Consultation Staff Report.” Available via the Internet: http://www.imf.org/external/pubs/cat/longres.cfm?sk=18601.0.
- European Investment Bank, 2006, Feasibility study to develop new options for private sector investment financing in the Syrian Arab Republic (Luxembourg).
- Central Intelligence Agency, The World Factbook: https://www.cia.gov/library/publications/the-world-factbook/geos/sy.htm
- Bassam Haddad, Business Networks in Syria: The Political Economy of Authoritarian Resilience Standford niversity Press, 2011
- United Nations Development Programme Evaluation Office, ‘Country Evaluation: Assessment of Development Results – Syria, 200
- Zeina al Azem, ‘Clash of Visions’, Syria Today, November 2011, accessed from http://www.syria-today.com/index.php/focus/17031-clash-of-visions
- The World Bank. (n.d). Retrieved on (2013. October 24). Retrieved From: http://www.worldbank.org/
- CIA, World FactBook, 2012. syrian republic: Country Overview. From: www.cia.gov.
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