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Shades of Gray: An Interview with Syrian Deputy Prime Minister Abdullah al-Dardari as told by Arun Pillai-Essex

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Shades of Gray

An Interview with Syrian Deputy Prime Minister Abdullah al-Dardari as told by Arun Pillai-Essex

Syria, as recently described by Don Belt of National Geographic, is an evolving photograph, an image rendered to a thousand shades of gray “developing slowly before our eyes.”a The analogy is particularly apt. Once shunned as an international pariah for its support of militant groups like Hamas and Hezbollah, Syria has built bridges with some of the unlikeliest of characters, from regional rivals such as Saudi Arabia, to its former colonial master, France. A centrally planned economy previously marred by inefficiency and corruption is now making room for robust capitalist competition in important sectors like transportation, manufacturing, and telecommunications. New banking regulations have encouraged the development of a modern financial industry, and the easing of state intervention has tipped the economic equilibrium toward market forces.

Though the international financial crisis slowed growth temporarily, Syria’s economy is projected to grow at a stable 4.1% in 2010 whilst foreign direct investment and other broad economic agreements are expected to increase. The ongoing deliberations over the European Union’s Economic Association Agreement, a pact aimed at reducing protectionist barriers between Syria and the EU, offer a clear indication of this trend. The agreement will phase out tariffs and quotas on imports and exports between Syria and the EU, while providing Syria with financial aid to strengthen its indigenous industries and modernize its economy.b The negotiations reached an impasse this year after a five year delay by the EU over Syria’s foreign policy was dropped. While the Europeans moved hastily to sign off on a final deal, the Syrian government felt it had not been given enough time to fully analyze the agreement.  As one Syrian official explained to The Economist: “the Europeans were arrogant and patronizing towards us for five years and then they generously gave us 17 days to decide.”c Nevertheless, the agreement is expected to pass. It is but one example of Syria’s increasingly outward-oriented economic policy.

Another example of this change can be found in the burgeoning ties between Turkey and Syria, which have expanded past their traditional import-export relationship into a full-fledged strategic partnership.  During a recent meeting in Aleppo, Syrian ministers of foreign affairs, defense, economy and trade, oil electricity, and agriculture met their Turkish counterparts to discuss bilateral plans in their respective fields. They issued a joint statement explaining that the two parties had agreed to form a “long-term strategic partnership to bolster and expand their cooperation on a wide spectrum of issues of mutual benefit and interest.” Relations have strengthened in recent years since disputes concerning water resources and Syria’s support for the Kurdistan Workers Party (PKK) have subsided, and Turkey and Syria have moved towards bolstering their military and political linkages.d The two militaries carried out joint maneuvers outside Ankara, and Turkey continues to play an active role in the mediation of regional issues concerning Syria, particularly in the indirect talks with Israel over the Golan Heights.

In spite of the above developments, the timeless adage, ‘old habits die hard’, applies. Despite positive signs of increasing economic integration and political aperture, the Assad family’s iron grip on the country for nearly 40 years was not achieved by being soft. Syria has grown up in – and survived – a tough neighborhood. Bordered by Iraq, Israel, Jordan, Lebanon, and Turkey, Syria has maneuvered its way through this treacherous geopolitical terrain by ruthless guile and by attaching itself to more powerful countries, from the Soviet Union during the Cold War to Khamini’i-controlled Iran today. Though the flurry of diplomatic exchanges with Arab neighbors and with the West raised the hopes of many international observers that a disciplined and flexible Syrian leadership would lead the way towards a stabilized region, the recent series of crises – from Israel’s assault on Gaza to post-election instability in Iran – has exposed the deep fissures which preclude complete rapprochement between the “beating heart” of the Arab world and the West. President Barack Obama has continued his predecessor’s policy of economic sanctions, and Syria’s support of Hezbollah, Hamas, and Iran’s nuclear program remains unabated. The economy, while in the process of progressively liberalising, is still wrought with high unemployment, and in a country where the majority of the population is under the age of 25, the government’s inability to expand job opportunities raises the spectre of looming domestic instability. Syria’s Gross Domestic Product (GDP) still lies in the bottom tier of the region, behind places states such as Iraq, Libya, and Sudan.

Thus, Syria is stepping forward with one foot while the other remains stuck in the old political and economic paradigms of the 20th century. Syria’s President Bashar al-Assad perhaps best encapsulated the character of his country when he remarked to National Geographic that ruling Syria was “never pure black or pure white, all bad or all good,” but “only shades of gray.”e

Syrian Deputy Prime Minister Abdullah al-Dardari, the leading architect behind Syria’s economic reform efforts was generous enough to grant MFAR some of his time to discuss the progress, hindrances, and implications of Syria’s program of liberalization, as well as the contemporary political issues facing his country.

MFAR: What have been some of the immediate positive effects of the reform process?

DARDARI: The most important thing that has happened in Syria over the past few years is the change in mindset and a change of framework for the Syrian economy. First of all, the mindset is moving away from a very strong statist, centrally-planned economy into a more open, integrated, and market-driven economy. It has not been an easy process, but I think we can see that it is already happening and that the economic sectors in Syria such as transportation, manufacturing, electricity, telecommunications, and energy are, in general, opening up to competition. Almost 1,000 laws and new regulations have been passed in the past four years to ensure that the Syrian economy is functioning on economic common sense. There is greater diversification, a stronger private sector, and a different role for the state. It is moving away from an interventionist to a regulatory role while at the same time preserving certain aspects of the social equilibrium through the provision of free health and education to all citizens.

What have been some of the obstacles to reform?

First, we should remember that such changes in mindset always face resistance from people who are not aware or familiar with the needs of the new economy, and of course there are vested interests in the old ways of doing things. However, I can see now that these vested interests are also adapting to the new economy. The second hindrance is a lack of human resources capable of managing the new economy since it requires different sets of skills and capabilities. The third hindrance has been a lack of institutions that can understand and manage our new economy, especially institutions related to the civil service. Therefore, the focus in the next few years will be on institutional reform.

Critics have described the lack of a modern financial sector as a factor curtailing the potential for economic growth. What action has the government actions taken to stimulate such a sector?

You are right in the sense that when we started this reform process it was clear that Syria lacked a financial sector that could be a driver of reform and a driver of growth. Therefore, a few years ago we started instituting new banking regulations that allowed private banks to open up. There is also now a much stronger independent central bank, and the Damascus stock exchange reopened after 50 years, at the height of the international financial crisis in February 2009. It has been growing in numbers and in volume; slowly but steadily we can finally see the intermediary role of the financial sector beginning to function as it should, so that access to finance in 2009 is better than it ever was before. There is tremendous growth in deposits and lending, but we still have a very long way to go before we reach the effective intermediary role that we want in our financial sector. So the focus now is on ensuring that access to finance, investment, and trade finance is easily available but well-regulated at the same time.

What is the status of the EU Economic Association Agreement and the overall trend of increasing economic ties between Syria and the EU?

Let me separate two things. There is cooperation with Europe, as Europe remains the largest trading partner for Syria and will continue to be so. And then there is the EU Association Agreement, the negotiations for which have been frozen for five years for  political reasons by the EU, who now say we should sign it.  But we are telling the EU we need some time to assess and evaluate the impact of the Association Agreement for different sectors of the Syrian economy, especially since the text that was initiated in 2004 reflected very different economic realities in Syria and in Europe compared to what we have today. In fact, the Syrian economy today has implemented over 95 percent of the reforms that were stipulated in the 2004 Association Agreement. The structure of the Syrian economy has changed dramatically since then.  So we are looking at the text now, and we have asked the EU to give us some time to review the actual impact of this agreement. Now, however, one should ever underestimate the importance of Syrian-European economic relations; the EU remains one of our major export markets and a major source of technology and investment in Syria.

On October 13th 2009, the first meeting of the Turkish Syrian Cooperation Council was held in Aleppo. What can we expect to see from this Council and how close is Syria to Turkey?

I think the relations between Syria and Turkey reflect the new dynamic of the region. Syria and Turkey are now moving to create what we call a single economic sphere where there is a lot of complementarity.  Both countries together represent an open corridor of trade, investment and energy sources between east and west. They represent together a center of gravity, stability, and economic growth in the region. For us this is very important; I don’t want to use the word axis, but I want to see this center of gravity, this corridor, expanding to other countries in the region. We think this would be extremely useful for stability and prosperity. We have already seen an increase in trade and tourism between the two countries as well as an increase in joint ventures and investment.

There have been some concrete signs of rapprochement between the United States and Syria since the inauguration of President Obama and his administration’s policy of re-engagement. Do you see this trend continuing at all?

Now, I can’t deny that there has been a very different approach by the Obama administration, an approach of engagement rather than confrontation. A language of dialogue, rather than a language of ‘if you are not my friend then you are my enemy,’ which had totally disastrous consequences for everybody. We no longer see any attempt by the administration to impose its will on Syria and others in the region. However, dialogue is the only change so far, we have not yet seen dramatic or even major changes in substance either on the question of the Palestinian-Israeli stalemate, or on the Golan Heights, or on other issues in the region. So yes it is a positive change, but I wouldn’t hold very high hopes at the moment until we see substantive changes in the administration’s policy vis-a-vis issues that concern Syria, especially full Israeli withdrawal from the Golan Heights.

In recent years, Syria’s oil production has declined substantially.  How has your government managed this decline?

The decline in crude oil production from the peak in 1996 of 600,000 barrels a day to almost 370,000 barrels a day now was one of the major drivers behind the reforms. The realization that we can no longer depend on crude oil as both the major source of our budget and the major source of the currency in the country provided the impetus for our efforts focused on economic diversification, finding diverse sources of budget revenue, and changing our GDP growth structure. Seventy percent of our exports are now manufactured and agricultural goods rather than crude oil. However, I must emphasize that the energy sector remains an important one in Syria, and in the past year we have managed to stabilize the decline in crude oil production. It is now stable at 380,000 barrels a dat and we project that this output will remain steady for the next 20 to 30 years. Natural gas production, on the other hand, has been increasing at a rate of almost ten percent annually and is projected to continue to grow like this in the next few years.  At the same time we are opening up new areas for exploration and development, offshore and onshore, for natural gas and crude oil. We are trying to develop Syria as a hub in the region for a gas pipeline and crude oil pipeline linking the Mediterranean to energy sources in the Gulf and in Iran.

How has the Syrian public reacted to the continued easing of fuel subsidies?

You have to understand the public is naturally not very happy about this. However, in Syria the reduction in subsidies in 2008 coincided with tremendous growth in worldwide inflation because of the food and energy crisis of 2007 and 2008. Today, we can see that inflation in Syria went down from 15 percent in 2008 to an average of 3.5 percent in 2009, so there has been an easing of price increases for the population. The other point is that people can see that there is now a new system of subsidies rather than a complete elimination of subsidies. We are providing cash transfers to vulnerable groups in society and, for the first time, we are providing support for expanded exports. Also, we see that in the 2010 budget there was a 19 percent increase in public investment, which will create more growth and more jobs for the Syrian people.  People have finally started to realize that this bleeding we have been suffering as a result of the old subsidy system has stopped and a new system of targeted support to different segments of the economy has been set up in its place. I hope that in 2010 the positive results of these developments will be seen and appreciated by ordinary people, which is the most difficult aspect in any reform process. n

This interview has been edited and consolidated.

Works Cited

a Belt, Don. “Shadowland,” National Geographic, November 2009.

b Country Report: Syria, Economist Intelligence Unit. November 2009.

c Ibid.

d News, Syria and Turkey Deepen Ties,” Syria Today, November 2009.

e Belt, Don.


Written by mcgillfar

February 2, 2010 at 7:11 pm

Posted in Uncategorized

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