Have There Been Reforms? Yes, Some.

"Six years into his administration, how significant are the reforms Bashar Assad put in place?"

This is the question asked at the Syrian Think Tank established by the inimitable Camill-Alexandre Otrakji. Five contributors have posted essays in response to this question. They are: Rime Allaf, Ammar Abdulhamid, Sami Moubayed, Murhaf Jouejati, and me. Please go to the Creative Syria to read and rank the essays.

By Joshua Landis
May 26, 2006

All of the authoritarian regimes of the Middle East have been resistant to structural reform. This explains why long term growth rates among the MENA countries have lagged behind all other regions of the globe save sub-Sahara Africa. All the same, Middle Eastern governments are plastic, within limits that do not threaten regime collapse, and have been evolving. The political structure of the Syrian regime has not undergone important change; any changes that have occurred are still percolating underground and have not found outward expression. In the economic field, however, Syria has been evolving. One cannot speak about whole-scale reform, but it is correct to speak about “modernization.” Curiously enough, many of the most meaningful changes have come about due to foreign pressure.

The financial sector has seen the most important changes. Private sector banks have proliferated; although they a minority share of the market, they are growing rapidly. The foreign currency regime has been liberalized. Private currency trading has been legalized and will help eliminate the black market. Central bank director, Mayaleh said recently that the foreign ownership ceiling on private banks will rise from 49% to 60-70% in months. Minimum capital requirements will more than double from $30mn. “Expanding foreign ownership will encourage more international banks,” he asserted. Building a new currency regime, despite being on the books for years, has be spurred forward by Washington’s recent efforts to forbid US banks to deal with the state-owned Commercial Bank of Syria, which dominates the local market. If foreign banks can provide a healthy alternative to the Commercial Bank, Syria will establish greater protection from US manipulation.

Evidently, the US has been trying to trump Syria’s move toward private banking by getting European and Gulf banks to join in the ban on providing lines of credit to Syria, in particular, its oil business. Two Swiss banks agreed to follow the US Treasury guidelines on proscribing dealings with Syria. I am told this maneuver was nearly accepted. Here is the quote from a European source: “After everybody said “we are not providing any lines of credit”, one bank refused to do it, Gulf International Bank. Initially they had said they would not continue to support Syrian oil business, in accordance with US Treasury guidelines.”

I do not have a second source for this information, but it is in line with Washington’s “successful” Palestine policy, and its parallel efforts to pressure banks dealing with Iran, as revealed in this May 22, N.Y. Times article, “U.S. Pressure Yields Curbs on Iran in Europe.” By diversifying away from the Stone Age Commercial Bank, Syria can help ensure that it will not go the way of the dinosaurs in facing Western pressure. Even the Assads are catching onto the lessons of Darwin as the cold winds of Washington blow down on Damascus.

Education is another sector that has undergone significant changes. By breaking the monopoly of state universities and high schools on the education system, Syria is moving once again toward developing elite educational institutions. In the long run, this may be more important than other reforms, because an important obstacle to change - whether economic, administrative, or political - is the abysmal state of Syrian education. The lack of skilled staff, both in the private sector (in particular at the managerial level) and in the higher echelons of the state is severe. The Syrian educational system is broken, and the state seems unable to fix it. Only by providing the competition of private institutions will state schools move forward and win the legal changes necessary to adapt to a globalizing world. I have spoken to a number of university administrators in Syria. All were smart and ambitious, but they admitted to being hamstrung by the existing legal system, which legislates educational guidelines and curriculum to the minutest detail. They all confessed that the growth of private schools is the main engine for change, even within the state system. Several pointed out to me that they have been able to raise salaries only because the private universities are buying away their professors.

Finance and Education are the two main sectors that have seen positive changes. They are a beginning. One should also add to this the change in language and thinking about reform. Beginning with the President and Abdullah Dardari, Syrian government officials are talking about modernization and reform in the right language. The shift to a “social market economy” from socialism is big, even if it will take years for Syrians to begin thinking in new ways. I have spoken to a few World Bank officials who were intimately involved in drawing up the present five-year plan; they all gave it a thumbs-up. Of course, it must be carried out. One of the most positive new developments that provide some hope that changes will be enacted is the emergence of new pressure groups within Syria. Samir Aita, in his most recent report for the Arab Reform Initiative, argues that important elements of the business community are beginning to demand the break-up of the stultifying system of crony capitalism that predominates in Syria. With the captive Lebanese market gone and trade with Iraq disrupted, rich Syrians are demanding a piece of the domestic pie and the relaxation of the old socialist rules of the game.