SYRIA: FACING THE ECONOMIC CONSTRAINTS OF THE 1990S

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90T00100R000500760001-5
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 35
• Document Creation Date: December 27, 2016
• Document Release Date: March 13, 2014
• Sequence Number: 1
• Publication Date: August 12, 1988
• Content Type: REPORT

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Central Intelligence Agency
Washington. D C.20505
DIRECTORATE OF INTELLIGENCE
12 August 1988
Syria: Facing the Economic Constraints of the 1990s
Summary
In the face of declining per capita output, the Syrian regime of President
Hafiz al-Assad in the 1990s cannot reinvigorate its drive for military parity with
Israel and simultaneously modernize capital plant and shore up sagging living
standards. It will probably opt for maintaining military spending at the expense
of investment and consumption. The major elements underlying this gloomy
assessment are:
Rapid Population Growth: The population growth rate of 3.8
percent, one of the highest in the world, will persist through the
year 2000 because of largely immutable fertility and mortality
trends.
Pressure on Land and Water Resources: Land and water
resources in some major cases have not merely peaked, they are
declining. Even though Syria retains considerable potential for
increasing its irrigated area, the amount and quality of untapped
land has been shrinking under the pressure of urbanization and
increased economic activity. New housing, factories, and roads
take up cultivated acreage, e.g., in the Damascus oasis area.
Drought and overgrazing are turning substantial tracts of
rangeland into desert, sometimes irreversibly. Underground water
tables are falling. The flow of the Euphrates across the Turkish
border is dawn an estimated 7 percent from the level at the end of
World War II, and a huge new Turkish dam/irrigation project now
underway will take away a further 15 percent by the end of the
1990s.
Massive Burden of Military Outlays: Since 1979, when Egypt
withdrew from the Arab confrontation front, Syria has increased
its substantial military allocations in a priority drive to achieve
"strategic parity" with Israel. Total military outlays amount to
This paper was prepared by a contractor with the Office of Near Eastern and South Asian
Analysis. It does not necessarily reflect the views of the Central Intelligence Agency.
Comments and queries are welcome and may be addressed to the Chief, Arab-Israeli Division,
NESA
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roughly one-fifth of national output. The USSR has helped
shoulder this burden by supplying more than $10 billion worth of
military equipment in the 1980s, without pressing Syria for
payment of its accumulated $15-billion military debt. Despite
Syria's priority efforts, the Israelis maintain a substantial
qualitative superiority in high-tech weaponry, tactics, organization,
and military leadership.
Foreign Exchange Shortage and Prospects of Less Foreign Help:
Exports will continue to fall short of imports by about $2 billion
annually. Industry, increasingly short of foreign exchange for vital
raw materials, equipment, and technology, will face the competing
needs of the populace for a growing volume of imported foodstuffs
and the needs of the armed forces for modern weapons and
technology. The USSR, with its stagnating economy and mounting
popular expectations, will be in no mood to raise its support level,
and Syria already is deeply in arrears to the World Bank and
Western creditors. Iran, which has been helping Syria with cut-
rate oil, is financially bled after eight years of war and has already
slashed its subsidy to Damascus. This leaves the oil-rich Arab
states, who will be holding their purses a little tighter unless and
until oil prices go up or another showdown with Israel occurs.
Hard currency remittances from Syrians working and investing
abroad have fallen off since the early 1980s. In brief, foreign
economic subsidies, which have permitted Syria to live 20 percent
beyond its national income in the late 1970s and early 1980s, will
likely permit it to live only 10 percent beyond in the 1990s.
Drawbacks of the Ba'th Party Political-Economic System: The
Ba'thist system of improvised socialism fosters inefficient state
ownership of major enterprises, rudimentary economic planning
on a shaky statistical foundation, endemic corruption of officials in
charge of licensing and procurement, shortages of industrial and
agricultural goods, and widespread expatriation of capital. The
result in the next decade will be continued frustration for the
planners, continued resort by the populace to non-official channels
of trade arid finance, and continued cloudy prospects for foreign
investment in Syria. Finally, the shortages of goods within the
system and the setting of numerous prices and subsidies by the
many-layered bureaucracy have combined to produce an on-going
inflation now officially estimated at more than 50 percent a year,
as well as a complex system of exchange rates between the Syrian
pound and major world currencies.
Oil as an Exception to Dark Picture: In this generally difficult
situation, the petroleum sector stands out as an important bright
spot. The discovery of substantial deposits of light, low-sulfur
crude has raised hopes of meeting increased domestic
consumption needs and generating a sizable export margin in the
petroleum sector. Oil output, which had remained steady at
170,000 barrels per day in 1981-85, has risen by mid-1988 to
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roughly 250,000 b/d, and should shortly expand to 300,000 b/d or
higher. While a substantial help, increased oil production is not a
panacea for the pressures on Syria's economic resources.
Estimated trends in gross domestic product and population indicate that
per capita output peaked during the early 1980s, dropped 15 percent since then,
and may well sink an additional 20 percent by the year 2000. These adverse
trends have led the government to take austerity measures in 1986-1988 that
included draconian restriction on import licenses, partial devaluation of the
Syrian pound, indirect cuts in business and consumer subsidies, holds on new
construction projects, and a slow-down in military modernization plans.
So far, President Hafiz al-Assad has managed the growing disparity
between objectives and resources with consummate political skill. Whereas
Syria had 17 different political regimes between the withdrawal of the French in
1946 and 1970, Assad has provided 18 years of stable authority. The way in
which his serious heart attack in late 1983 set off a fierce struggle for primacy
among his closest associates illustrates his unique personal status.
Outside observers do not know the degree to which Assad has
institutionalized Alawite/Balhist rule nor can they foresee the identity and
policies of his successors. Hence they cannot with confidence project the extent
of socioeconomic disarray in a post-Assad Syria. On the one hand, the loss of his
strong guiding hand in the 1990s could exacerbate Syria's deep-seated economic
difficulties and could even touch off a collapse of the present minority-
dominated political order. On the other hand, a more favorable economic
outcome could result from a post-Assad government that was closer to the old
mercantile interests and more open to change.
* * * * * * * *
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Table 1
SYRIA: GDP AND POPULATION, 1950-2000
Year
GDP
(bil 1987
($US)
GDP
Change Population
(percent) (mil midyear)
Population
Increase
(percent)
GDP
Per Capita
(1987 $US)
1950
2.962
3.495
2.3
847
1951
3.063
3.4
3.577
2.3
856
52
3.474
13.4
3.662
2.4
949
53
3.964
14.1
3.750
2.4
1,057
54
4.519
14.0
3.842
2.5
1,176
55
4.022
11.0
3.938
2.5
1,021
1956
4.625
15.0
4.041
2.6
1,145
57
4.907
6.1
4.150
2.7
1,182
58
4.740
-3.4
4.268
2.8
1,111
59
4.640
-2.1
4.395
3.0
1,056
60
4.654
0.3
4.533
3.1
1,027
1961
5.059
8.7
4.681
3.3
1,081
62
5.818
15.0
4.835
3.3
1,203
63
5.812
-0.1
4.993
3.3
1,164
64
6.353
9.3
5.157
3.3
1,232
65
6.499
2.3
5.326
3.3
1,220
1966
6.311
-2.9
5.500
3.3
1,147
67
6.646
5.3
5.681
3.3
1,170
68
6.347
4.5
5.867
3.3
1,082
69
7.299
15.0
6.059
3.3
1,205
70
6.868
-5.9
6.258
3.3
1,097
1971
7.623
11.0
6.473
3.4
1,178
72
8.767
15.0
6.689
3.3
1,311
73
8.504
-3.0
6.912
3.3
1,230
74
9.780
15.0
7.142
3.3
1,369
75
11.247
15.0
7.381
3.3
1,524
76
12.248
8.9
7.627
3.3
1,606
77
12.077
-1.4
7.881
3.3
1,532
78
13.031
7.9
8.142
3.3
1,600
79
13.578
4.2
8.412
3.3
1,614
80
14.719
8.4
8.692
3.3
1,693
1981
16.117
9.5
8.980
3.3
1,795
82
16.584
2.9
9.298
3.5
1,784
83
16.883
1.8
9.636
3.6
1,752
84
16.275
-3.6
9.989
3.7
1,629
85
16.763
3.0
10.358
3.7
1,618
1986e
17.266
3.0
10.744
3.7
1,607
87e
17.266
0.0
11.148
3.8
1,549
4
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88p 17.439 1.0
89p 17.788 2.0
90p 18.144 2.0
1995p 20.032 2.0
2000p 22.117 2.0
11.570
12.011
12.471
15.068
18.157
3.8
3.8
3.8
3.9
1,507
1,481
1,455
1,329
3.8 1,218
NOTE: For the assumptions, sources, methodology, and limitations
of Table 1, see Appendix A. The letter "e" stands for "estimated"
and the letter "p" stands for "projected."
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Box A
SYRIA: BRIEF CHRONOLOGY, 1946-1988
April 1946 Departure of French forces from Syria
1946-1970 Era of 17 short-lived civilian and military
, governments
1948 First defeat in war with Israel
August 1957 Soviet agreement on Political/military/economic
support
1958-1961 Disappointing political union with Nasserite Egypt
March 1963 Accession to power of Ba'th Party
June 1967 Disastrous military defeat by Israel
November 1970 Rise to power of Ba'thist general Hafiz al-Assad
October 1973 Recapture of Arab "honor" in new war with Israel
June 1976 Movement of Syrian troops into Lebanon
February 1982 Suppression of Hamah insurrection, with 20,000 dead
November 1983 Assad's serious heart attack; subsequent recovery
1986-1988 Series of economic retrenchment measures
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CONTENTS
Summary.
Section I.
II.
III.
IV.
Economic
National
The Economic
Prospects
Text
Page
1
9
12
14
18
Resources
Objectives
System
in Major Economic Sectors
Tables
Table
1.
Syria:
GDP and Population, 1988-2000
4
2.
Syria:
Basic Economic Facts
7
3.
Syria:
Production of Major Products, 1982-1986
29
4.
Syria:
Petroleum Output, 1967-2000
29
Boxes
Box
A.
Syria:
Brief Chronology, 1946-1988
5
B.
Syria:
Economic Growth by Decades
7
C.
Syria:
Knowledge About the Economic Future
30
Appendix
Appendix
A.
Syria:
Notes on GNP and Other Statistics
31
Syria:
General Map
34
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Box B
SYRIA: ECONOMIC GROWTH BY DECADES
Syria's economic growth has fluctuated over the decades:
--Growth in the 1950s was at a rate of 7.5 percent (1951-57) as local urban-based
entrepreneurs seized the opportunities for investment in agriculture, industry,
and commerce, following the departure of the French.
--Growth in the 1960s fell off to 2.6 percent (1958-70) because of (a) the ill-fated
union with Egypt and its Nasserite socialism; (b) the disruptive socialist policies
of the extreme left-wing Ba'thist regime; and (c) the 1967 war with Israel.
--Growth in the 1970s at 8.1 percent (1971-81) reflected the sturdy benefits of
Assad's "corrections" to the excesses of socialism, the boom in Syria's oil output
and prices, substantial worker remittances, and the princely grants of oil-rich
Arab brethren.
--Growth in the 1980s so far suffers from the end of the oil boom and the chronic
shortage of foreign exchange; the lean years of 1982-87 posted an average gain
of only 1.2 percent in national output.
--Growth in the 1990s will be about 2 percent on average, according to the
projections in this report, almost certainly much less than the population growth
projection of 3.8 percent. The text describes the barriers to vigorous growth in
the 1990s.
Table 2
SYRIA: BASIC ECONOMIC FACTS
Area: 185,000 square kilometers (71,500 square miles, equal to
North Dakota); agricultural area: 30% of total area, of
which 10% irrigated.
Population: 11.6 million (1988); growth rate: 3.8%; one-half 15
years old or less; literacy: 47%.
Religion: 74% Sunni Muslim; 16% other Muslim (including 12%
Alawite and 3% Drize); 8% Christian; and 2% miscellaneous.
Largest cities: Damascus area, 2 million people; Aleppo area, 2
million people.
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Government: secularist, Alawite-dominated republic since 1963,
based on the military establishment and the monopoly Ba'thist
(Arab Socialist Resurrection) Party; dominant leader: Hafiz
al-Assad (b. 1930), president of the republic, commander-in-
chief of the armed forces, and general secretary of the
Ba'thist Party; in power since November 1970.
GDP: $17.4 billion (1988); $1,500 per capita.
Defense allocations: equal to 20% of national output.
Defense manpower: 400,000 men on active duty.
Currency: Syrian pound; considerable use of U.S. dollar; exchange
rates:
official rate of 11.20/11.25 SP to 1 U.S. dollar; promotion
rate for special uses that reflects the Beirut market rate for
the pound.
Inflation rate: 20-30% in recent years; currently above 50%.
Natural resources: agricultural land, oil, phosphate rock, marble.
Industrial output: petroleum products, chemicals, steel bars,
cement, small arms and ammunition, cotton, and wool textiles,
food products.
Agricultural output: cotton, wheat, barley, maize, millet,
chickpeas, sugar beets, melons, olives, fruits, vegetable,
nuts, tobacco; sheep and goat raising.
Exports: oil, cotton, textiles, phosphates.
Imports: oil, foodstuffs, machinery and technology, armaments.
Foreign aid: subsidies from oil-rich Arab nations, mainly Saudi
Arabia; arms from the USSR on a de facto grant basis; oil from
Iran, free or at concessionary prices.
International memberships: UN, Arab League, G-77, World Bank, IMF.
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?
Section I
ECONOMIC RESOURCES
A. Land. Water. and Mineral Resources
By the standards of the water-short
Middle East, Syria possesses an excellent
land endowment, with rainfed and irrigated
acreage suitable for a wide variety of crops
in (1) western coastal and valley areas; (2)
northern border areas; and (3) the basin of
the Euphrates and its tributaries. Together
these areas form a large portion of the
historic Fertile Crescent, which has served
as a major granary and trade corridor since
ancient days. At the same time, most of the
southern and eastern areas is desert or
semi-desert. Furthermore, much of the
cultivated acreage is subject to devastating
drought.
Population growth, private initiative,
and public investment have brought a sharp
rise in the agricultural land brought under
cultivation:
Year Hectares Cultivated
1953 1.75 million
1969 5.9 million
1980 6.2 million
The extension of cultivation into
successive acreage at the margin and the
simultaneous loss of some of the best
agricultural land to urbanization,
industrialization, and road-building (e.g., in
the Damascus oasis) have resulted in
declining and uncertain yields. Also, Syria
today has 12 million sheep compared with 2
million sheep before World War II; sheep
are notorious for nibbling grass closely and
thus destroying rangeland. In brief, a
combination of factors has led to a growing
over-exploitation of Syria's excellent land
resources--to a gradually deteriorating
environment of soil depletion, over-grazing,
deforestation, erosion, and desertification.
9
As for water, the government,
realizing the need for more irrigation to
back up the uncertain rainfall, started the
ambitious Euphrates Dam project in 1966.
So far, the dam and the huge Lake Assad
behind it have resulted in only a fraction of
the irrigated land and electric power
originally scheduled.
The Syrians opted to
follow Soviet advice
on the location of the
dam and to ignore
British-French advice.
The dam site is in an
area with considerable
amounts of gypsum in
the soil. The gypsum
dissolves when wet,
leaving huge cavities
in the soil and
undermining irrigation
structures.
The supply of water in
the Euphrates is
gradually shrinking as
Turkey takes
increasing amounts for
irrigation and other
uses. At the end of
World War lithe flow
across the Turkish
border averaged 29
billion cubic meters a
year. Today the flow
is down by 2 billion
cubic meters, i.e., 7
percent less. The
Turks have under
construction the huge
new Ataturk dam
which will be
completed in the early
1990s. By the end of
the 1990s, another 4
billion cubic meters
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will have been lost to
irrigation and
evaporation.
With respect to minerals, the
discovery and exploitation of the newly
discovered light low-sulfur oil deposits near
Dayr az Zawr on the Euphrates will reduce
the need for Syria to import foreign crudes
to blend with its own heavy crudes.
(Section V below deals with prospects for
petroleum production in some detail.)
The other important Syrian mineral
is phosphates, mined in the desert south of
Tadmur, with annual capacity of about 5
million metric tons.
B. Population and Labor
Rapid population growth is
offsetting much of the value of Syria's
excellent agricultural potential, its existing
capital plant, and its well-regarded
commercial and artisan skills. Table 1 gives
the figures, which show an advance from 3
million people at the end of World War II,
to 6 million when Assad took over in 1970,
to 12 million today in 1988, and to an
anticipated 18 million in the year 2000.
Half the population is 15 years old or
younger. The population explosion brings
in its train the usual Third World
difficulties of poverty, unemployment,
urban overcrowding, budget-busting
government outlays for welfare and
infrastructure, and a brain drain.
About 1.5 million persons of Syrian
nationality currently live abroad, mainly in
the Gulf countries, other Arab nations,
Western Europe, and North America.
These include many of the most highly
educated and technically skilled Syrians.
Although the loss of scientific, engineering,
and technical skills needed at home
appears serious, the resulting inflow of
substantial amounts in hard currency
10
remittances, through both official and non-
official channels, is an important gain.
These sums reached their height during the
1970s and subsequently tapered off with the
decline in the oil boom.
Syria's labor force, estimated at one-
fourth of the population, is more than
adequate in absolute number, given Syria's
natural and industrial resources. In the
Middle East, it has enjoyed a good
reputation for competence, but lacks
sufficient motivation, technical skill, and
managerial direction under present
circumstances. Its approximate distribution
by sector:
Agriculture and forestry 25%
Industry and construction 33%
Trade, transport, finance 18%
Public services 24%
C. Capital Plant
Under Assad the government has
made major investments in heavy industry,
but this kind of investment has contracted
in the 1980s under the pressures for more
military allocations and more foodstuffs for
the expanding population.
Before Assad:
emphasis on
investment in textiles,
processed foods,
beverages, soaps,
matches, glass, and
cement.
During Assad:
emphasis on
investment in oil,
steel, chemicals,
electric power,
fertilizers, paper,
machinery, and
appliances.
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Like most other moderately
advanced Third World countries, Syria
possesses a certain amount of modern
capital equipment but continues to depend
on foreigner support for much of its
operation, maintenance, and repair and
cannot replicate or renovate this ca s aci
without extensive outside aid.
Syria continues to expand schools,
health clinics, roads, housing, utilities, and
other "infrastructure capital" in a never-
ending struggle to meet the growing needs
of government, industry, and households.
In the 1980s the infrastructure has been
slowly deteriorating in the face of heavier
demands on Syria's overextended resources;
it will need substantial maintenance, repair,
and replacement in the 1990s.
D. Social Capital
As an experienced British observer
points out, "In sharp contrast to Egypt, the
Syrians were a dispersed population,
individualistic to the point of anarchy...with
minorities to be conciliated, and a small
industrial proletariat but a large number of
peasant families, small retailers, and...petty
boureoisie." Another observer notes that
Syrian society rests on small groupings to
which the individual's primary loyalties
attach--family, ethnic group, religious body,
linguistic group, tribe. Localism,
particularism, heterogeneity, and
centrifugal force are words characterizing
Syrian society.
The present report deals elsewhere
with these matters from the economic point
of view, notably in the sections on the
economic system and future sectoral trends.
Specialists assessing the Syrian scene often
are agnostic on the question of whether:
(a) old localistic forces will stage a
comeback and dominate the economy and
society in the post-Assad era; or (b) Assad
and his top aides will have institutionalized
the Ba'thist revolution so deeply in one
11
generation that the Ba'thist economy and
society will survive him.
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Section II
NATIONAL OBJECTIVES
President Hafiz al-Assad establishes
and shapes Syria's national objectives in
consultation with a half dozen close
advisers. People below Assad in the
authority structure interpret, implement,
and even modify these objectives according
to their personal abilities and interests and
the resources available.
The most important objective is the
preservation of Alawite rule and internal
security. For the last quarter century,
government by the Ba'thist Party has
reflected and incorporated the
political/military dominance of the
minority Alawites, adherents of a variant of
Shia Islam, who make up 12 percent of the
population. One observer sums up the
essentials of Alawite/Ba'thist supremacy as:
the overturn of the old
Sunni urban
establishment and the
corresponding gain in
power by minority
peoples often of rural
or secularist origins.
the centralization of
administrative and
modernization
functions in Damascus
at the expense, of
Aleppo, Hims, and
Hamah.
the "utter dominance"
of the military in all
walks of Syrian life.
Important elements in maintaining
Ba'thist rule include the cooption of leading
Sunni figures, the suppression of the
12
fundamentalist Muslim Brotherhood, and
the maintenance of military perquisites.
The second priority objective is the
build-up of military power to achieve
"strategic parity" with Israel. Assad and his
top associates saw Egypt's withdrawal from
the anti-Israeli confrontation front in 1979
as a betrayal of Arab interests in general
and Syrian national interests in particular.
Syria set about to expand, train, and re-
equip its armed forces to create a modern
force of 400,000 men. The Soviet Union
made good Syria's loss of roughly $2 to 3
billion worth of equipment during Israel's
incursion into Lebanon in 1982, but
economic stagnation subsequently has
reduced the pace of the military build-up
and has left Israel in a superior position.
The third overarching objective is
the modernization of agriculture, industry,
and commerce through the state-directed
expansion of: irrigation and fertilization
programs in agriculture; oil and electric
power production, metallurgical, and
machine-building projects in industry; and
the parallel development of up-to-date
support facilities in transportation, finance,
and domestic and international trade.
Simultaneous efforts to improve
educational and training facilities are to
provide the skilled farm, factory, and
laboratory workers for this economic
refurbishment.
A fourth important national
objective is the maintenance of a
preeminent position of influence in
Lebanon. Since independence, the Syrian
government has regarded its neighbor
Lebanon as a crucial national security
question and a potential sphere of
influence, not necessarily a country whose
every major decision must conform to
Syrian wishes but certainly a country that
takes no major stance in opposition to
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Syria's national interests. Damascus sees
Lebanon's Bekaa Valley in particular as
critical to the security of the capital. After
the movement of substantial Syrian forces
into Lebanon in 1976, Syria's objectives in
Lebanon would seemingly have entailed
sizable commitments of economic
resources. Net costs attributable to
Lebanon per se, however, may be only
nominal, since the Soviets replaced Syrian
equipment losses after the 1982 Israel
invasion of Lebanon and since the 25-
30,000 men in Lebanon would draw rations
and supplies if on the other side of the
border.
A fifth objective is the maintenance
of a social safety net of minimum welfare
and the provision of steadily rising living
standards for the populace. Ba'thist
socialist doctrine envisions centrally
planned economic modernization as
resulting in a rising tide of output of food,
clothing, housing, health and educational
services, and other consumer items. Huge
military expenditures and an ineffective
economic system, however, have put
investment way behind schedule, and
available investment resources have
supported the expansion of military and
industrial capacity more than the
agricultural and consumer sectors.
Furthermore, available consumption goods-
-particularly choice imported goods--go first
to the privileged Party and military
members of the society, whose loyalty and
support count for much more than the
contentment of the lower orders of society.
Damascus is Syria's largest city, with over 2 -
million persons. Almost half of all Syrians
live in urban areas.
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Section III
THE ECONOMIC SYSTEM
A. Major Elements in the System
The Syrian economic system today
consists of a mixture of socialist, capitalist,
traditional, and international elements:
The socialist features
of state ownership and
operation of the main
factors of production,
central planning of
resource allocation
under a series of five-
year plans,
implementation of
economic decisions
through a complex
hierarchy of
government bureaus,
aspirations for
egalitarian
distribution of income,
and politico-economic
ties to the Soviet
Union.
The capitalist features
of private ownership
and operation of
medium- and small-
scale enterprises
across the whole
spectrum of economic
activity, and the
existence of a variety
of market
arrangements for
allocating a
substantial portion of
the society's resources
and output.
-- The traditional
features of
cooperative activity in
villages and urban
neighborhoods,
sometimes the result
of the extended
family, resources (such
as grazing land or
implements) owned in
common, or mosque-
sponsored provisions
for succoring the poor;
this current in Syrian
affairs reflects
fundamentalist
constraints on moving
too deeply into
socialist public
ownership or capitalist
Western ways.
The international
features of sizable
imports and exports,
joint ventures, the
activities and
remittances of the 1.5
million Syrians living
abroad, the billions of
dollars of expatriated
investment funds, and
extensive foreign
financial support.
B. Two Ba'thist Approaches
One observer of the Syrian economy
underscores the split within the Ba'th Party
that developed in 1966 over the speed and
scope of socialist economic development.
He identified two main groups:
14
Those favoring a
gradual moderate
approach, often
oldtimers with ties to
the established
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landlord-merchant-
industrial families.
Those favoring an
accelerated radical
approach, often rising
army officers or
firebrand intellectuals
with fewer ties to the
old interest groups.
The latter faction, dubbed neo-
Ba'thists, won out in 1966. They promptly
dislodged the oldtimers, lifted the ban on
the Communist movement, became heavily
dependent on the Soviet bloc, and took a
doctrinaire attitude toward "reactionary"
Arab states.
After coming to power in November
1970, Assad adopted a "correction program"
to curb the excesses of the neo-Ba'thists,
trying at one and the same time to allow
more leeway to private initiative and to
tighten up state economic planning and
administration.
C. Ownership of Productivity Resources
The Syrian government, with few
exceptions, owns and operates all
production facilities of any size in heavy
and defense industry, mining, and energy.
These include steel mills, cement plants, oil
fields and refineries, fertilizer plants,
electric power stations, and small arms
plants. Furthermore, the government owns
major enterprises in sugar-refining and
cotton and wool spinning and in
transportation, banking, foreign trade, and
domestic wholesale trade. The government
also operates the bulk of educational and
health facilities. In the agricultural sector,
the regime in its early more doctrinaire
phases stripped the large landholders of
their land, turning it over to private owners,
private tenants, state farms, or state forests
15
or grazing areas. The government largely
dictated what was to be planted and the
price received. Under Assad, the small
private farmer has benefited from lighter
controls and greater ownership rights;
private farmers now till three-fourths of the
arable land.
As is often the case in Third World
socialist economies, private individuals and
companies own and operate most of the
medium- and small-size firms, typically
dominating the various branches of light
industry, repair and other business services,
crafts, and retail trade. Private individuals
and firms do most of the construction work,
with many of the big jobs carried out under
government contract.
In backwater areas, often inhabited
by minority groups, many traditional,
communal patterns of ownership persist.
Education, urbanization, and technological
change are gradually reducing these
enclaves.
D. Locus of Decision-Making. Including
Key Role of Assad
An innovative and forceful yet
pragmatic and cautious leader, President
Assad normally directs his energies to
military and political affairs, such as policy
toward Israel and arrangements in
Lebanon. He retains veto power over
major economic initiatives but leaves the
detailed management of economic affairs
to others.
Below Assad is the Supreme
Planning Council of top economic
ministers, headed by the prime minister. In
theory, ministerial subordinates draw up
five-year economic plans, issue directives to
enterprises under the ministries, assess
results, and respond to crises. Planning in
Syria, however, suffers, even more than
planning in the Soviet Bloc from
bureaucratic delays, corruption, incomplete
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and fabricated information, endemic
shortages, and the pre-emption of financial
and material resources by the military.
Particular features in the Syrian
system are: (a) the ad hoc nature of many
major economic decisions; (b) the
unusually heavy burden of military outlays;
(c) the high level of smuggling (largely out
of Lebanon by army personnel); and, (d)
the conspicuous level of graft by military
and Party higher-ups, often in the form of
rake-offs on government contracts.
Syrian planners cannot hope to
produce the detailed material balances and
production breakdowns characteristic of
full-blown annual and five-year plans in the
centrally planned economies of the Soviet
Bloc. Rather, the government focuses on
plans for major construction projects--
dams, pipelines, industrial complexes,
irrigation systems, and weapons plants.
Plans typically call for much more
investment than available resources will
support, and major investment projects
almost always fall behind schedule.
In such an environment, detailed
decisions by planners on the volume,
acreage, costs, procurement prices, and
delivery dates of dozens of farm products
often have a perverse impact since planners
cannot know local cropping conditions,
fertilizer deliveries, the availability of
transport, and the volume of financial
support.
Indeed, the economy limps along
largely on the basis of ad hoc decisions
made by local plant managers, fixers,
private traders, individual farmers, and
ordinary people trying to keep afloat. This
is a multi-faceted public/private economy
with considerable quasi-legal and illegal
activity. The list of non-official decision-
makers, high and low, could go on: village
headmen, money changers, foreign
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capitalists and managers, smugglers, 25X1
military supply officers, master craftsmen.
E. Implementation of Decisions
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Internally, Syria's multi-faceted 25X1
economy employs a variety of bureaucratic
channels, political muscle, market
incentives, and traditional practices, and
patently illegal deals to turn economic
decisions into economic activity. The results
of this hybrid implementation often
frustrate the intentions of the decision- 25X1
maker. Furthermore, the rapid inflation
makes the construction, administration, and
evaluation of plans extremely difficult.
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Externally, the implementation of
plans depends largely on the workings of
international capitalist markets for
equipment, industrial raw materials,
technology, and financing. In some
instances, friendly Arab states and West
European governments are major players in
these markets. Also, Syria's decisions
sometimes depend on imports and credits
from the centrally planned economies of
the Soviet Bloc, with implementation
through government fiat. Syria's chronic
lack of foreign exchange hinders
implementation of decisions in external
channels.
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Despite industrialization efforts, many Syrians still concentrate on
traditional crafts.
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Section IV
PROSPECTS IN MAJOR ECONOMIC
SECTORS
A. Agricultural Sector: Distinct Leveling
Off
The potential for further sizable
gains in agricultural output will gradually
decline in the 1990s as the most promising
opportunities are taken up and as
urbanization preempts agricultural land.
The agricultural sector will fall still farther
behind in provisioning the exploding
population, supplying raw materials to
industry, and earning foreign exchange.
1. Decline in Unused Growth
Potential
In the first two decades of
independence following World War II,
well-to-do entrepreneurs (most of them
urban Sunni Muslims with substantial
industrial and commercial ties) pushed
agricultural investment, technology, and
output forward at a vigorous pace. Most of
the agricultural population consisted of
poor peasant farmers who worked as share-
croppers and survived through strong local
ties to families, villages, ethnic groups, and
religious sects. During the union with
Nasserite Egypt, 1958-61, and later under
the radical neo-Ba'thists, the dominance of
the old landowning group gave way to the
rising power of a new political and
bureaucratic elite. Under both capitalist
and socialist regimens the opening of new
acreage, the extension of irrigation systems,
and the sponsorship of more modern
production techniques brought substantial
gains in output, as Syria exploited more and
more of its strong agricultural potential.
The limits to this potential, however,
became more clearly apparent in the 1980s,
as noted in the population, land, and water
subsections of Section II above.
18
2. The Immutability of the
Population Factors
Syrian economic planners
recognize the desirability of a substantially
lower population growth rate, but the
government under Assad sees population
growth as a weapon against Israel. In any
event, the government as a practical matter
cannot appreciably affect the 3.8-percent
rate in prospect for 1988-2000. Education,
urbanization, secularization, and sheer
crowding no doubt will ultimately lower the
rate--and indeed the U.S. Census Bureau
analysts envision a rate of 2.0 percent by
the year 2050--but the extra 6 million
people listed in Table 1 for the year 2000
will arrive on schedule.
3. The Scarcity of Suitable Land
and Water at the Margin
According to British
geographer J. A. Allan, "It is an
uncomfortable political reality that the
leadership in countries such as Syria very
responsibly perceive the need to increase
food production but they have a limited
grasp of the extraordinary and
unprecedented pressures being exerted on
marginal lands in their countries.... In some
countries for example, including Syria,
irreversible changes are being imposed on
rangelands by over-stocking, and in others
[Syria here also] over-pumping of
groundwater to raise fodder for livestock is
having irreversible consequences on
groundwater resources."
The following figures, from a foreign
observer, purport to demonstrate the
disastrous effects on yields when the
peasants push production out to marginal
land. The tabulation shows the decline of
barley yields in four villages in Aleppo
Province in 100 kilograms per hectare:
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Yield Yield
Village in 1950s in 1980
1
15
3-7
2
20
2-9
3
8-20
2-10
4
10-30
2-14
4. Government Regulation of
Agriculture
Preoccupied with its military
build-up, the maintenance of influence in
Lebanon, and the bedrock requirement of
internal Alawite control, the Assad
government lacks the administrative energy
and discipline to make needed and timely
changes in agricultural policy, let alone
provide additional inputs. Farmers large
and small will continue to evade
government regulations on output and
prices as best they can and will fend for
themselves in an era of shortages, distorted
procurement prices, cornition, and
shrinking per capita resources. Those rural
dwellers of unusual talent and initiative will
continue to move to the cities, draining the
sector of its most productive people.
Rates
5. Outlook for Agricultural Growth
In the 1981s so far, problems
with inputs, incentives, and government
regulations have led to agricultural growth
of 1 to 2 percent a year. The problems will
not lessen in the 1990s, when the pressure
of other priority allocations will make
extremely difficult any large-scale infusion
of resources in agriculture. Concerning the
output mix, meat (which uses several times
the resources per unit as non-meat
products) will maintain its prominence, as
the ruling groups continuing to exploit their
position to support high living standards.
Finally, year-to-year changes in output will
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become even more volatile as Syria pushes
output to areas of scanty rainfall and as the
amount of available Euphrates water slowly
dwindles. These considerations suggest 25X1
that agricultural output will grow at about 2
percent on average in the 1990s.
B. Energy Sector: Investment Not
Forthcoming
In the past two decades Syria has
been exporting considerable quantities of
its heavy high-sulfur oil and simultaneously
importing light low-sulfur oils for blending
in its own refineries. Imports and exports
of oil and products have been offsetting in
the middle 1980s. The discovery of
deposits of light low-sulfur crude near Dar
az Zawr on the Euphrates has provided the
means for cutting oil imports and increasing
net exports, at least for the next few years.
Domestic oil production, which had
remained steady at about 170,000 barrels
per day in 1977-85, has risen to 250,000
b/d, and should reach 300,000 b/d in 1989-
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The jump in oil output, the sharp
drop in requirements for imported light
crude, the step-up in domestic output of
refined products, the gradual exploitation
of gas as a brake on rising domestic
consumption of petroleum--all these will
combine to create an oil export surplus,
perhaps in the neighborhood of half a
billion dollars annually. (At first, the
foreign oil companies will take a sizable
fraction of any additional output to cover
costs and profits.) While certainly a
welcome element in the otherwise gloomy
economic outlook, this oil surplus by no
means meets Syria's economic
requirements for the 1990s.
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As for electric power, in the spring
of 1987 the power supply was off 4 to 5
hours daily in some major Syrian cities, the
result of equipment problems, drought, and
rapidly rising demand; the eight 100-
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megawatt turbines at the Euphrates Dam
reportedly were operating at only one-third
of capacity because of technical difficulties
and the low level of water in Lake Assad
behind the dam. As of mid-1988, plentiful
rains and rising oil output have markedly
relieved the electric power situation.
According to the Economist
Intelligence Unit (EIU), Syria has nine new
power stations on the drawing board or
under construction, both thermal and
hydroelectric. These projects draw on
Japanese, European, and Soviet technology
and finance, as well as on funds from oil-
rich Arab sources. Despite the high priority
of electric power, these projects almost
certainly will be vulnerable to delays or
cancelation.
In addition, Damascus has asked
Moscow under a mid-1983 protocol to help
examine the feasibility of a nuclear power
station; little will come of this proposal over
the next several years. "The government,"
reports the EIU, "is also keen to exploit
solar energy."
Development of both old and new
sources of energy in the 1990s will require
advanced technology, heavy capital
investment, and skilled administrative
shepherding--all in short supply.
C. Industrial Sector: Foreign Exchange
and Electric Power Shortages
Most of the likely trends in
industrial policy in the 1990s will reflect
and accentuate well-defined patterns
established under Assad in his 18 years of
power.
the top priority given
to the manufacture
and procurement of
arms, munitions,
military spare parts,
20
and quartermaster
items
the emphasis on oil
exploration,
production, and
processing
the initiation of
extensive irrigation
and electric power
projects requiring
support by industry
the continued
prominence of ,
industrial branches
based on raw
materials from Syria's
versatile agricultural
sector
the ongoing attempts
to exploit Syria's
phosphate deposits.
Other continuing characteristics of
Syria's industrial sector almost certainly will
include:
the maintenance of a
two-tier system of
large-scale state-
owned industry and
medium- and small-
scale privately run
industry
the attempt to expand
domestic capacity for
producing industrial
equipment, industrial
raw materials, and
spare parts
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the stress on
education and
technical training for
industrial managers
and workers
the spreading of
industrial
development and
major construction
projects among a half
dozen major cities
rather than their
concentration in the
capital city as in many
Third World countries
an increase in ties to
the Western
industrial/techno-
logical system and a
corresponding decline
in ties with the Soviet
Bloc system.
Three enduring problems cast doubt
on the ability of the industrial sector to
keep up with Syria's needs and aspirations
in the 1990s: (1) government policies will
continue to discourage private firms from
making large capital investments and
raising their profile; (2) available foreign
exchange will fall far short of the amounts
required to meet short-run demand for
industrial raw materials and spare parts, let
alone the long-term demand for new
machinery and structures; and (3) operating
rates throughout industry will suffer from
the periodic shutdowns of electric power,
which probably will get worse rather than
better. As of mid-1988, Syria cannot come
up with the foreign exchange needed to
finance existing inflows of equipment and
raw materials to industry, let alone finance
an augmented level.
D. Military Sector: High Priority But
Rising Opportunity Cost
21
Syria's high priority military sector
embraces (a) domestic military production-
construction activity, employing perhaps
200,000 persons; (b) standing armed forces
of 400,000 men; and (c) a massive inflow of
foreign equipment and spare parts.
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Domestic military production
includes small arms and ammunition and
quantities of chemical weapons. Other
domestic uses of resources are the
contniction of military facilities and the
provisioning of the armed forces. The
stationing of 25-30,000 men in neighboring
Lebanon--when not on a war footing--
constitutes only a small net drain on
resources since these troops would need
nearly the same support if posted at home.
The Soviet Union provides Syria
with the lion's share of its equipment and
spare parts. Soviet military deliveries
averaged perhaps $2 billion in the early
1980s and have since fallen toward the $1
billion level or under. Syria retained as
many as 5-6,000 Soviet military trainers and
advisers in the early 1980s with a
subsequent cut to one-half this figure by
mid-1985. Moscow highly values its Syrian
entry point in Middle Eastern affairs even
though Damascus takes care to preserve
both the image and the actuality of
independence. In the absence of a new
outbreak of hostilities in the Arab-Israeli
conflict, the USSR almost certainly will
keep deliveries at the lower level. The
stagnation of the Soviet economy at a time
of rising popular expectations has raised the
cost to the Kremlin of supplying arms to
Syria. Even though the Soviets formally
expect Syria to service its accumulated $15
billion military debt, the debt stands at the
bottom of Syria's long list of debt
repayment obligations and as a practical
matter will not be repaid. In contrast, the
much smaller amounts of military-related
goods from Western sources often require
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hard cash outlays, and here the willingness
of Syria's Arab friends to pick up the tab
frequently governs the volume of
equipment imports. Syria itself must and
will allocate scarce foreign exchange for
Western military maintenance items.
If Syria is in fact able to maintain
the current absolute level of military
allocations of $3.4 billion through the year
2000, defense's share in GDP will fall off
from about 20 percent in 1985 to about 15
percent in the year 2000. (Allocations
include imports of military goods in this
calculation.) Under assumptions of 2
percent GDP growth, 3.8 percent
population growth, investment as a constant
share of GNP, and lessened foreign aid, this
constant absolute level of military spending
implies an average decline in per capita
availability of consumption goods of 2
percent per year.
Given the large size of young-age
groups and the considerable unemployment
and underemployment in the society, the
manpower base will not in itself be a
constraint on any contemplated military
expansion in the 1990s. The regime's
problems lie elsewhere, in overcoming the
supply constrictions and technological
shortcomings addressed at several points in
the present report. Israel will continue to
maintain a clear qualitative superiority in
military manpower, equipment, doctrine,
tactics, training, and leadership.
In the 1990s, as GDP grows by
roughly 2 percent a year and as per capita
GNP gradually falls, the cost of further
additions to military spending increases in
terms of the investment or consumption
goods sacrificed. Other things being equal,
Assad and his colleagues would be
confirming the continuing priority of
military allocations simply by resisting cuts
in defense outlays. We cannot know
whether they will decide to take the riskier
22
route of increasing military outlays at the
cost of further delays in industrial
modernization and an even more rapid
decline in living standards. We can only
speculate that they will not be able to find
the resources for greater military spending
and, that on the other hand, they will be
unwilling psychologically and unable
politically to cut the existing absolute levels
of military allocations. They thus will
stretch out military modernization plans,
avoid costly unplanned short-term
commitments where feasible, and seek cost-
effective ways of circumventing Israeli
superiority, e.g., by development of
chemical/biological warfare capacity or by
expanded reliance on terrorism.
E. Government Services: Per Capita
Slippage
The services provided through the
socialist government's bureaucracy
probably will slowly decline on a per capita
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1. Education: Larger Numbers But
Quality Deficiencies
The education program, one
of the major areas of accomplishment
under the Ba'thist regime, has increased the
literacy rate to an estimated 47 percent.
Syria can now boast four universities with
145,000 students and a primary and
secondary school system with more than 2.5
million students.
As detailed in a Christian
Science Monitor account, however, the
rapid expansion has taken its toll in the
quality of education. The universities, for
example, suffer from gigantic classes,
inadequate classrooms, rampant
absenteeism, rote learning, a focus on
passing grades rather than on
understanding of substance, outdated
engineering texts, absence of computers,
and party control. Well-to-do parents
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prefer to place their undergraduate
students in US universities. The state sends
6-9,000 students abroad, mostly graduate
students consigned to the USSR or Eastern
Europe. Students do not want to return to
two-year army service and perhaps three-
year service in a government-assigned post.
The economy thus suffers from a large
brain drain to oil-rich Arab countries and
Western Europe.
At a lower level in the social
structure, about 100,000 workers leave
temporarily each year for jobs in Arab Gulf
countries and elsewhere. Their earnings
constitute an important source of hard
currency for their families and the economy
as a whole. At the same time their absence
deprives Syrian industry and agriculture of
technically skilled labor in short supply.
2. Health: Basic Gains in Past
The egalitarian streak in
Ba'thist policy has helped spur the general
improvement in medical services and the
decline in mortality rates in post-
independence Syria. Among the gains have
been the provision of hospitals and clinics
and the improvement in water supply and
sanitation in rural as well as urban areas.
Syria has already made the easiest low-cost
gains. Further large gains are unlikely in
the next decade as the government will be
fortunate to avoid deterioration in public
health facilities, the water supply, the
supply of medicines, housing, and nutrition.
F. Money and Finance: Scourge of
Inflation
Like many other Third World
countries, Syria has been experiencing an
array of interacting financial problems,
including rampant inflation, ever-more-
costly government subsidies, multiple
foreign exchange rates, pervasive
23
government regulation of financial matters,
and unreliable financial statistics. A large
portion of the commercial skills and
entrepreneurial energies of the society go
to waste in dealing with these financial
aberrations. Despite regular consultations
with representatives of the International
Monetary Fund, the Syrian authorities can
do little more than keep these problems
within bounds.
Inflation, together with the regime's
hostility to private ownership and operation
of major enterprises, cripples domestic
private investment, notably in risky state-of-
the-art ventures. Rich Syrians hold perhaps
$1 billion in West European banks and
several billion elsewhere, including the
United States.
The pressure for subsidies, the
occurrence of shortages, and the reluctance
to invest at home will all persist over the
next decade. The attempts to control and
adjust to inflation will continue to eat up
resources in non-productive ways and to
complicate economic calculation at the
micro level and economic planning at the
macro level.
G. Living Standards: Deterioration in
Quality of Life
The quality of life in Syria has been
slowly deteriorating in the mid 1980s in
contrast to the substantial advances made
in the 1970s and early 1980s:
Cities are growing
even more rapidly
than the population as
a whole, with resulting
pressures on housing,
transport, water and
electric power, food
supplies, and
amenities.
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Shortages are steadily
widening as national
output falters, one
commentator citing
the growing lack of
"consumer necessities
ranging from bread,
sugar, butter, cheese,
to basic drugs such as
aspirin and cough
mixture and toilet
paper."
Inflation is eroding the
real wages of city
workers, and low
government
procurement prices
are holding down the
real incomes of rural
dwellers.
Unemployment and
underemployment are
creeping up as
shortages of spare
parts, raw materials,
and electric power
reduces the operation
of public sector
industry to 50 percent
or less of capacity.
Resentment seems to
be mounting at the
government's repeated
calls for sacrifice when
leaders ride around in
limousines and rake
off large sums on
government contracts.
These disabilities are spreading and
deepening at a time when, according to one
outside observer, consumerism within the
populace is overriding the post
24
independence thoughts of nation-building
and personal sacrifice. The 1990s almost
certainly will intensify the consumer
disappointments recent years rather than
witness a return to the consumer advances
of the earlier period.
H. Foreign Trade and Aid: Weaker Prop
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Syria's foreign economic ties in
trade, aid, and technology, which had
permitted the country to live 20 percent
beyond its domestic output in the late 1970s
and early 1980s will likely permit it to live
only 10 percent beyond output in 1988-
2000. 25X1
The annual deficit in foreign trade
has been running at roughly $2 billion:
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Year
Imports of goods
and services
Export of goods
and services
Deficit
1981
$5.5
bil
$2.8
bil
$2.7 bil
1982
4.7
2.6
2.1
1983
5.3
2.7
2.6
1984
5.0
2.6
2.4
1985
4.8
2.5
2.3
1986
3.5
1.9
1.6
1987
3.6
2.0
1.6
Hydroelectricity accounts for about 30% of Syria's installed electrical capacity. Technical
problems make daily power cuts of 4-5 hours not uncommon.
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These figures are estimates and do
not include Soviet arms transfers and the
value of Iranian concessions on oil
delivered free or below market price.
As for export prospects, Syria could
readily market extra quantities of its oil,
cotton, phosphates, textiles, tobacco, fruits,
and vegetables if the prospective growth in
output were not swallowed up by rising
population. Earnings from tourism may
increase slowly as joint ventures in tourist
facilities take hold and as local
entrepreneurs respond to new
opportunities; tourism will continue to
suffer from Syria's branding as a "terrorist
state" and lack of foreign exchange for
equipment needed to expand tourist
facilities. Oil, the one bright prospect, will
both boost exports and lower import
requirements.
As to imports, the priority of
foodstuffs, pharmaceuticals, military goods,
and equipment for the oil and electric
power industries will no doubt continue.
This is a formidable priority list, and little
foreign exchange will be left over for other
uses.
Important elements that have
contributed to Syria's ability to live 20
percent above GDP in the oil boom era and
that have subsequently dropped to
considerably lower levels are:
The Arab states'
agreement of 1978 to
supply Syria with $1.85
billion annually in
funds for the
confrontation against
Israel is expiring in
1988; actual dollar
grants never did reach
the original plan level;
in recent years only
Saudi Arabia has lived
26
up to the
arrangement, and
even the superrich
Saudis have suffered a
major drain of their
accumulated assets;
this source of funds,
once more than $1
billion annually,
probably will yield no
more than $500
million in the next
decade; all bets will be
off, however, in the
event of a new
outbreak of Arab-
Israeli hostilities or a
major rise in oil
prices.
Iran has been bled
white financially after
eight years of war, with
Iraq and has s uffered
serious military
reversals in early 1988;
its lessened ability and
willingness to support
Syria have already
caused its aid to drop
to $100-200 million
from the previous $1
billion. Syria almost
certainly can never
repay the $2 billion
debt built up over the
years in its oil account
with Iran.
The USSR under
Gorbachev has
embarked on an
economic
restructuring program
that has raised Soviet
popular expectations
but not Soviet output;
since Moscow realizes
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the futility of ever
being repaid its $15
billion in military
shipments to Syria and
since the Kremlin
cupboard is bare,
Syria probably will
have to be content
with a level of aid
substantially below the
level of the early
1980s and perhaps
even lower than the
level of 1986-88. As
suggested in the
military subsection
above, the rough
numbers might have
been $2 billion
annually at the peak,
now cut to $1 billion
or less.
The World Bank
already has cut off the
disbursement of new
funds to Syria because
Damascus is so far in
arrears on older debt;
the International
Monetary Fund has
prescribed its usual
strong medicine as a
condition of help,
medicine that Assad
will find hard to
swallow because of
domestic political
constraints; the more
growth falls below the
projected pattern of
Table 1, the more
Assad will have to
consider this option.
The sums involved are
in the low hundreds of
millions of dollars
over a period of
several years.
27
Commercial creditors
will be wary of
extending credit for
goods; investors in
joint ventures have
already entered into
oil production
agreements but doubt
remains in other
possible areas.
Potential amounts are
in the tens or low
hundreds of millions
dollars.
These extremely rough numbers
suggest that Syria in 1980-1985 could live
about $4 billion beyond its own output and
in the late 1980s and the 1990s can live
perhaps $2 billion above. These sums
compare with a GNP somewhat under $20
billion.
I. National Economic Policy:
Retrenchment Measures
The interplay of the various
economic sectors adds up to a general
picture, confirmed by on-the-spot
observers, of slipping per capita output and
living standards. These adverse trends
have led the government to adopt austerity
measures in 1986-88 that include:
a. Draconian restrictions on import
licenses and foreign
exchange transfers
b. Partial devaluation of the Syrian
pound
c. New taxes and scaled-down
spending plans
d. Added controls over civil service
pay and benefits
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e. Indirect cuts in consumer and
business subsidies, e.g., through decreases
in quality and in quantities available of a
widening number of products
f. Holds on new construction
projects
g. Slow-downs in military
modernization plans
J. Post-Assad Economy: Conflicting
Assessments
Some observers think Assad's death
or resignation in the 1990s could trigger a
power struggle at the top, possible internal
war, a rapid diminution in Syria's power,
and, ultimately, "the breakup of Syria's
fragile political superstructure into its
ethnic and religious component parts."
An alternative view holds that the
cohesion and vested interests of those
thousands at the top of the Ba'thist-military
government structure will suffice to insure
an orderly transition. The longer the Assad
regime continues, the more firmly these
elements are in place, so goes this view.
One point in its favor is the youth of the
population, considerably more than one-
half of the people having being born after
Assad took office and even more having no
memory of the pre-Assad era.
As to whether the
institutionalization of Assad's rule has
proceeded to the point that the regime
would survive his leaving,* the evidence
remains incomplete and uncertain. We
must be agnostic. Under a calm and
28
orderly transition the economy conceivably
could benefit from a loosening of socialist
controls, an accomodating attitude toward
the old Sunni merchantile interests, and an
emphasis on economic rather than miitary
growth. Under a disjointed transition that
unloosed localist and sectarian forces,
major economic enterprises and projects
could grind to a halt while the majority
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on a local basis to meet the elementary
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Table 3
SYRIA: PRODUCTION OF MAJOR PRODUCTS,
1982-1986
1982
1983
1984
1985
1986
Index of agricultural production*
108
109
99
104
110
Wheat (000 MT)
1,556
1,612
1,068
1,714
1,969
Barley (000 MT)
661
1,043
304
740
1,116
Tomatoes (000 MT)
790
831
727
778
583
Potatoes (000 MT)
279
315
322
280
409
Cotton (000 MMT)
422
526
451
487
419
Sugar beet (000 MT)
860
1,158
1,268
412
440
Olives (000 MT)
471
152
311
185
414
Sheep slaughtered (000)
1,264
1,588
1,760
1,544
1,659
Index of industrial production*
na
139
139
136
140e
Iron bars (000 MT)
67
84
84
89
90
Phosphate (mil MT)
1.5
1.2
1.5
1.2
1.6
Electricity (bil kwh)
5.4
6.3
6.9
7.5
7.0
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equals 100
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Table 4
SYRIA: PETROLEUM OUTPUT, 1967-2000
(thousand of barrels per day)
Year
Output Year Output Year
Output
1967
1
1977
181
1987
232
68
21
78
178
88p
250
69
53
79
174
89p
275
1970
85
1980
165
1990p
300
71
105
81
170
72
117
82
170
1995p
300'
73
111
83
161
74
129
84
162
2000p
300
75
191
85
176
76
200
86
194
Note: For assumptions and sources, see Appendix A. The letter "p"
stands for "projected."
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Box C
SYRIA: KNOWLEDGE ABOUT THE
ECONOMIC FUTURE
A. What observers know with confidence
about the Syrian economy in the period
1988-2000:
1. An explosion of population, at an
estimated 3.8 percent a year, which will
mean 50 percent (6 million) more people
by the year 2000.
2. A leveling off of the supply of
good agricultural land and water, and the
beginning of a gradual decline in amounts
available.
3. A continuing sizable allocation of
resources to the military sector, with the
political ambition to make the allocation
even greater but with the economic
requirement to curtail new military
programs.
4. A steady lowering of the
government's social safety net, marked by
increased shortages of housing and
consumer goods, quality deterioration, and
inflation.
5. An on-going burden of foreign
financial obligations.
6. A strict rationing of foreign
exchange, with priority going to imports of
military-related goods, foodstuffs, and
pharmaceuticals.
B. What observers know imperfectly:
1. The magnitude of the expansion
of oil output and the size of the resulting
net oil exports.
30
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2. The magnitude of year-to-year
swings in national output and in sectoral
output, e.g., in agriculture, industry, trade,
and services.
3. The level, composition, and
course of inflation.
4. The degree of success in
government efforts to encourage joint
ventures with foreign firms.
5. The future course of remittances
from Syrians living and working abroad.
C. What observers do not know:
1. The extent to which the Assad
regime has institutionalized nationalist,
socialistic, and secularist attitudes.
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2. The timing of Assad's departure
from the scene, and the ability of the
successor regime to hold the society and the
economy together.
3. The likelihood of widespread
economic reform under Assad or his
successors, to lessen the weight of
bureaucratic restrictions, soften the
influence of extreme socialist economic
doctrine, and even reduce the burden of
military outlays.
4. The chances for an Arab-Israeli
peace settlement which would affect Syria's
military requirements.
5. The Middle East policy of the
USSR, including its willingness to furnish
military and economic support to Syria in
the face of its own economic stagnation.
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Appendix A
SYRIA: NOTES ON GDP AND OTHER
STATISTICS
1. General Difficulties with Syrian
Economic Statistics
Official statistics on the Syrian
economy require a great deal of scrutiny
and warrant a considerably amount of
skepticism.
Many series show
incredibly fast
percentage rates of
growth which if
worked back to the
immediate postwar
years would imply an
unbelievably low rate
of activity in the early
years.
Some series show wide
year-to-year
fluctuations that often
are not believable
even in times of war
or extreme drought.
Revisions in published
series sometimes
swing the figures so
far as to cat doubt on
the whole statistical
procedure; one
observer cites the case
of the series
purporting to show
real rates of growth in
GDP; the original
series with a 1963
price base and the first
revised series with a
1975 base showed real
GDP in 1968 as rising
by 4-6 percent, but the
31
second revised series
with a 1980 base
showed it falling by 4.5
percent.
The Central Bureau of
Statistics must deal
with a rapidly
changing tape
measure, the Syrian
pound (SP), which in
recent years has
shrunk in value by 20-
30 percent and more
in recent years;
furthermore, the
statisticians must
contend with two
different price
systems: the official
prices for centrally
subsidized and
allocated goods and
the semi-controlled
quasi-market prices of
goods in non-official
channels; as one
indication of the
difficulties, the official
consumer price index
does not track with the
implicit price index for
national output
derived by comparing
the official GDP
figures in current SPs
with the GDP series in
constant SPs.
The existence of
several widely
different foreign
exchange rates further
complicates the
measurement of
trends in prices and
output.
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Syria suffers from the
well-known statistical
difficulties common in
centrally planned
economies,
compounded by the
inadequacies of base-
level reporting
characteristic of Third
World economies;
sectarian divisions
within the society and
widespread corruption
are additional barriers
to an accurate and
timely flow of data.
2. Calculation of GDP and GDP/Capita in
Table 1
a. This report adopts the estimate of
an international economist of $1,560 as
Syria's per capita GDP in 1986. This
number, the starting point for the GDP
series in Table 1, was multiplied by 1.03 to
put it in terms of 1987 U.S. dollars. In
perspective, the resulting $1,607 figure is
somewhat more than twice Egypt's per
capita GDP and roughly one-fourth Israel's.
b. The $1,607 was multiplied by
10.744, Syria's population in millions of
mid-year 1986, giving a GDP figure of
$17.266 billion for 1986.
c. Estimates of year-to-year
percentage changes in real GDP in 1950-85
are based on official Syrian figures in
Syrian pounds, as given in the original
government sources and as linked and
reconciled in two secondary sources: for
1950-57, from Eliyahu Kanovsky. Economic
Development of Syria (1977); for 1958-75,
from IMF International Financial Statistics,
1986; and for 1976-85, from the 1987
Statistical Abstract of Syria's Central
Bureau of Statistics. All rates of growth
32
above 15.0 percent were cut back to 15.0
percent. (The original official rates for the
six years cut back were: for 1956, 18.6%;
for 1962, 23.7%; for 1969, 20.0%; for 1972,
21.6%, for 1974, 19.3%; and for 1975,
23.6%.) This arbitrary procedure reduced
the undoubtedly inflated official growth
figures and resulted in believable per capita
figures for early years in the series. The
wide swings in the year-to-year official
figures cannot be taken literally; the
general trends over time are much more
believable, once the high figures have been
trimmed.
e. The 1987 Statistical Abstract
reports growth of GDP in 1986 in constant
Syrian pounds as 11.8 percent. This figure
clearly is way out of line with reality; for
instance other tables in the Abstract give
the growth in agricultural production as 6
percent and list output in important
manufacturing sectors as going up slightly
in some instances and down slightly in
others. The present report adopts 3.0
percent as the likely increase in GDP in
1986. A combination of difficulties with
agricultural weather, foreign exchange
shortages, and longer interruptions of
electric power supplies suggests zero
growth in 1987; no official claim is
available. Similarly, growth in 1988 is likely
to be around 1 percent.
f. The 2.0-percent projected rate of
real GNP growth for 1989-2000 is a
"guesstimate" based on general economic
considerations discussed in the text, in
particular:
The thesis that the
1990s will reflect, not
the exhuberant growth
of the 1970s supported
by sizable oil revenues
from domestic and
friendly Arab sources,
but the subdued
growth of the 1980s
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when the limits of land
and water supplies
became increasingly
apparent.
The likelihood that
Syria will exploit a
portion of its unused
production potential
in agriculture and
industry, but will be
blocked from major
gains by serious
foreign exchange
shortages and basic
inefficiencies in the
Ba'thist economic
system. (The level of
oil production,
domestic oil
consumption, and
international oil prices
will constitute an
important variable
capable of affecting
the projected 2
percent up or down
by, say, 1 or 2
percentage points.)
The assumption that,
while military outlays
are not likely to
expand substantially,
they are nol likely to
fall and hence will
continue to prevent
needed modernization
of capital plant.
The assumption that if
Assad does not remain
as the indisputable
leader, the post-Assad
era will not see major
changes that would
greatly affect
economic results in
33
the 1990s.
g. The population figures come
from the U.S. Bureau of the Census; rates
of growth are on a mid-year to mid-year
basis.
3. Sources of Output Data in Table 3 and 4
The data for agricultural and
industrial production in Table 3 come from
the Statistical Abstract, for 1987. The
figures for production of petroleum in
Table 4, for the period 1967-1987 come
from OAPEC (Organization of Arab
Petroleum Exporting Countries). The
figures for 1988-1990 assume that output
from newly discovered fields will continue
to expand rapidly and more than offset the
decline in the output of older fields. In the
1990s, production will level off if the
expansion from new wells just balances the
decline in old fields. In general, observers
feel that the new fields in Syria will have
short lifespans. Of course, the discovery of
a giant new field in the next year or so
would alter the outlook entirely. Likewise,
a collapse of arrangements with
international oil companies as to
exploration and exploitation of Syria's oil
resources could change prospects in the
other direction.
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