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Country Report Syria Syria at a glance: 2005-06 OVERVIEW Syria has responded to international pressure stimulated by the assassination of the former Lebanese premier, Rafiq al-Hariri, in February by withdrawing its troops and intelligence officers from Lebanon. This has ended in a matter of weeks a military presence that had lasted 30 years and underpinned Syria’s complete dominance of its neighbour for the past 15. Although the unexpectedly rapid withdrawal has reduced the threat of sanctions and other forms of direct action against it, Syria remains isolated and US-led pressure on it is likely to continue. There will be some forward movement with economic reform, but the hostile political environment makes far-reaching change unlikely. Economic growth will be slow, but the buoyant outlook for oil prices will ensure that government finances remain comfortable and the trade and current account return healthy surpluses. Key changes from last month Political outlook • It appears likely that a number of liberalisation measures will be revealed at the conference of the ruling Baath Party in June. However, it seems unlikely at this stage that the measures announced will lead to real changes in power, or introduce democratic curbs on the power of the regime. Economic policy outlook • The endorsement of a new five-year economic plan at the Baath Party congress will create additional momentum behind the cautious programme of economic reform pursued unevenly over the past few years. While the Economist Intelligence Unit continues to expect progress on some aspects of the agenda (such as the foreign-currency regime), the overall pace and scope of change is likely to be relatively limited, curtailed by technical challenges, institutional shortcomings and political concerns. Economic forecast • Our economic forecast is unchanged since our previous report. May 2005 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2005 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN 0269-7211 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. Syria 1 Contents Syria 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2005-06 7 Political outlook 9 Economic policy outlook 10 Economic forecast 13 The political scene 22 Economic policy 25 The domestic economy 25 Oil and gas 28 Financial and other services 29 Foreign trade and payments List of tables 10 International assumptions summary 12 Forecast summary List of figures 6 Oil production 6Money supply 13 Gross domestic product 13 Consumer price inflation Country Report May 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 Syria 3 Syria May 2005 Summary Outlook for 2005-06 Syria has responded to international pressure stimulated by the assassination of the former Lebanese premier, Rafiq al-Hariri, in February by withdrawing its troops and intelligence officers from Lebanon, ending in a matter of weeks a military presence that has lasted 30 years. Although the unexpectedly rapid withdrawal has reduced the threat of sanctions and other forms of direct action against it, Syria remains isolated and US-led pressure on it is likely to continue. There will be some forward movement with economic reform, but the hostile political environment makes far-reaching change unlikely. Economic growth will be slow, but the buoyant outlook for oil prices will ensure that government finances remain comfortable and the trade and current account return healthy surpluses. The political scene The regime has been pushed on to the defensive in the aftermath of Mr Hariri’s murder, for which it has been widely blamed (although only circumstantial evidence links it to the attack). The government has indicated that a series of political reforms will be announced at the June congress of the ruling Baath Party. This is likely to include the legalisation of currently proscribed parties as a first step toward multiparty elections, although it is unclear how much real power the regime will actually cede as a result of the promised measures. Economic policy A report prepared for the State Planning Commission ahead of the new five- year plan has condemned policy failings over the past “seven wasted years” and stressed the overwhelming importance of reform. The Central Bank of Syria has pledged to liberalise the foreign-exchange regime, but a leading advocate of reform in the president’s office has been forced from his post. The domestic economy International oil prices have continued to rise, offsetting for the time being at least the impact of falling production. The government is seeking partners to reverse the downturn in output, but interest has so far been relatively limited, impeded in part by concerns over US sanctions. More private banks are preparing to start operations in Syria, with the Central Bank undertaking to improve the operating environment by broadening the range of activities in which private banks can become involved. Foreign trade and payments No external account data have been released in recent months, but proxy indicators suggest the trade and current account remained comfortably in surplus. Although a number of Syrian workers left Lebanon as the political situation deteriorated, it is likely that they will return and that the country will remain an important source of employment and foreign-currency earnings. Editors: Simon Williams (editor); Hania Farhan (consulting editor) Editorial closing date: May 6th 2005 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report May 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005 4 Syria Political structure Official name Syrian Arab Republic Form of state Republic Legal system Based on the constitution of 1973 Legislature 250-member Majlis al-Shaab (People’s Assembly) directly elected for a four-year term Electoral system Universal adult suffrage National elections 2003 (legislative), 2000 (presidential); next elections due by 2007 (legislative) Head of state President, directly elected for a seven-year term. The president appoints the vice- presidents, the prime minister and the Council of Ministers. Bashar al-Assad, who was elected president unopposed in July 2000, also holds the posts of commander-in-chief of the armed forces and secretary-general of the Baath Party. The vice-presidents are Abdel- Halim Khaddam and Zuheir Masharka Executive The prime minister heads the Council of Ministers, a large number of which are drawn from the Baath Party and its partners; last reshuffle in October 2004 Main political parties Seven parties form the ruling National Progressive Front (NPF): Arab Socialist Baath Party; Arab Socialist Party; Arab Socialist Unionist Party; Communist Party; Syrian Arab Socialist Union Party; Unionist Socialist Democratic Party; Union Socialist Party Prime minister Mohammed Naji al-Otari Key ministers Agriculture & agrarian reform Adel Saffar Awqaf (Islamic endowments) Mohammed Ziyad al-Ayoubi Commerce Ghassan al-Rifai Communications & technology Mohammed Bashir al-Munajjid Culture Mahmoud al-Sayed Defence Hassan Turkomani Economy & foreign trade Amer Lutfi Education Ali Saad Electricity Munib Assad Sayeem al-Daher Finance Mohammed al-Hussein Foreign affairs Farouq al-Sharaa Health Maher Hussami Higher education Hani Murtada Housing &
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