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Syria’s Shattered Economy On The Mend

March 24, 1991

DAMASCUS, Syria (AP) _ Visitors to Damascus these days no longer need to bring Syrian friends rolls of toilet paper as gifts.

The once-scarce commodity can now be found at most stores in the capital, one of the many signs that Syria’s economy, though still struggling, is improving day by day.

Syrian economists and Western diplomats say the change is due to the socialist government’s efforts to liberalize its centalized economy, increased oil production and more tolerance for smuggled goods.

But the fact that Syria sided with the winners in the Gulf War is also helping. International aid that was cut off for years because of President Hafez Assad’s repressive policies has been revived, and more is expected.

″The Syrians intend to exploit their new-found respectability to the hilt,″ analyst Charles Snow wrote recently in the respected Middle East Economic Survey.

Britain, which restored relations with Damascus in November after a four- year hiatus, has stopped blocking European Community aid and expects to begin talks soon on loans worth $200 million.

Syria has also recently received an estimated $3 to $5 billion in aid from Saudi Arabia, Kuwait, Japan and Western Europe.

Damascus restaurants now boast longer menus with items like chicken marsala and other dishes that were a rarity two years ago, when cooks could only get ingredients smuggled from neighboring Lebanon and even salt was a luxury.

Some grocery stores have run out of shelf space for new shipments of local, imported and smuggled goods.

″During my five years here I’ve never seen the stores so full,″ said a Westerner, who like others interviewed spoke on condition of anonymity.

The centralized control of the economy has hindered the Syrians’ deep- rooted entrepreneurial skills and left the country with a deficit estimated at $15 billion.

No official figure on foreign debt is available, but Damascus is believed to owe the West about $4 billion and its longtime backer, the Soviet Union, $11 billion, mostly from arms purchases to achieve ″strategic parity″ with Israel.

″Our aim is to open more and more doors ... to lift restrictions and give more economic freedom so that the individual would feel that he can practice all kinds of economic activity with the minimum of restrictions,″ said Mohammad Imady, the minister for economy and foreign trade.

But the U.S.-educated minister acknowledged in an interview that it was not easy to introduce change in a country that has been a Soviet client for more than three decades.

A Western diplomat said that Imady would like to speed up liberalization but ″that’s impossible for now. His approach is Western while most of his colleagues have graduated from Moscow.″

Still, Imady boasts that liberalization measures such as new incentives for exporters are paying off. He said the balance of payments registered a surplus of 20.6 billion Syrian pounds for 1990, compared with a deficit of 12.7 billion pounds in 1987.

The official exchange rate in Syria is 11.2 pounds to the dollar.

One Western diplomat, however, said the surplus existed on paper alone because the 1989-1990 balance of payments included exports to the Soviet Union for which Syria wasn’t paid, because it was paying off a Soviet debt.

Imady said private sector exports jumped from 3.37 billion pounds in 1987 to 21.1 billion pounds last year in response to new incentives for exporters and the industrial and agriculture sectors.

He said the private sector has been allowed to import subsidized items such as sugar, tea and coffee - which sell for up to seven times the subsidized price on the open market - and pay for the goods in hard currency from overseas bank accounts.

In addition, exporters can now keep 75 percent of the profit they make in hard currency and can use the money to import specific items or exchange it at the tourist rate of 40 pounds to the dollar.

Imady said that in addition to improving the economy, the new measures help Syria make up for losses related to the Gulf War, from less tourism and less income sent home from Syrians working abroad.

He estimated the war losses at $15.7 billion. But Western diplomats put the figure at closer to $2 billion.

One diplomat said the losses were offset by the rise in oil prices during the war and the infusion of aid for Syria’s aligning against Iraq, its main Arab rival.

There are no official published figures for Syria’s oil production, but diplomats estimate it at 400,000 barrels a day.

In recent years, the country has announced several important oil discoveries.

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