Sunday, June 04, 2006

Could Syria's GDP Growth be 5.5%?!

Every quarter, we wait for Jihad Yazigi to come out with the new "Syria Report" to get a sense of what is happening with the Syrian economy. (See lead article copied below.) The economy is the single most important story in Syria. Its drama comes from the fact that the West, chiefly the United States, is trying to crash the Syrian economy as a means to get Syria to change its behavior - or regime - which ever comes first. Washington has very few political levers to achieve its goal - save for the UN Security Council, which has put few teeth behind its admonitions that Syria be nice to Lebanon and Israel.

If Syria has good economic figures, it means Damascus is winning. It can growl at Washington and UN resolutions. If it has bad figures, it means Washington is winning, and Damascus should consider shutting down a Palestinian organization or two, or, at the very least, scratch in the boarder with Lebanon more clearly on its UN map.

Although nerves are frayed in the run up to the Brammertz report to be published on June 15, some ex-Bush, defense department figures are saying that Syria has slipped the noose. Most important in this regard is David Schenker's article this week in the "Weekly Standard," entitled "Assad State of Affairs: Syria's dictatorship survives to fight another day," (06/12/2006, Volume 011, Issue 37).

Schenker, who is now a senior fellow at WINEP was the Syria, Lebanon, Jordan, and Palestinian affairs adviser in the office of the secretary of defense from 2002 to 2006, concludes:

Objectively, it would seem that Syria has run the U.S. table. Despite the administration's rhetorical campaign against Syria, Washington is in no rush to up the ante with Damascus. Which is just fine with the Assads, who have been playing for time for three decades. The sad reality is that with just over 900 days to go and attention focused on Iran, Iraq, and Hamas, the clock is running out for the Bush administration's Syria policy. Of course, this is how Assad planned it. Hunkered down in Damascus, the Baathist regime intends to wait out yet another president. Regrettably, if the past five years are any guide, it will succeed.

The economic news from Damascus suggests it may succeed. Oil proceeds are up, even if production is down. Tourism is up, even if the numbers have been exaggerated. Foreign investment is up, even if few projects have gotten under way. Dardari's announcements this week that Syria will build two major free-trade zones, underline the regime's determination to win the economic battle. Dardari said "Syria will open a free zone just like Dubai's Jebel Ali" in the Tartous region. As one reader pointed out to me: "Rami Makhlouf has already bought a huge amount of land there incidentally....Surprise surprise."

The other free trade zone will be on the border with Iraq. Syria has been improving its relations with the various Iraqi factions, which is made easier by the fact that Iraq's new PM lived in Syria for 20 years. There has been discussion of building an oil pipeline from Iran through Iraqi Kurdistan and Syria to Turkey. The US has dissuaded the Kurds from moving ahead with these plans, but it would be an ideal way for the Kurds to improve relations with its neighbors and lock in a certain amount of good will and security.

The biggest bit of bad news is that the last American oil company - Houston based Marathon - has sold off its interests in Syria to a Canadian firm. But rumors that French banks are joining US banks in their boycott of Syria's Commercial Bank are being denied by Syrian authorities/.

Syriatel, Rami Makhlouf's monopoly on cell phones, is making a fortune. Ehsani2 writes:
My good friend Rami Makhlouf announced yesterday that his Syriatel pays the Syrian Government 1.7% of the country's gdp in taxes.

With a gdp of $22 billion, this amounts to $374 million in taxes. Given a corporate tax rate of 30%, this means that the company makes an after tax profit of $534 million. This translates to $1.48 million a day.

Not bad! This is from just one business. Had the government opened this license to an open auction, hundreds of millions of dollars would have been paid to obtain the license. Instead, this license was given away for free.
Before publishing this news, Syriatel announced it is lowering cell phone fees by 3%. Syria's phone rates are considerably cheaper than Lebanon's. I don't know how they stack up to Jordan's, Turkey's or Israel's. I know Syria's over sea's costs are very high compared to most neighbors, but I am not sure about internal call costs.(Perhaps one of you does?)

Ehsani also writes: "Business has slowed down appreciably in Syria over the past month. Liquidity has tightened which has caused a lull in all economic activity." This economic slow-down is due to the Brammertz effect. People are nervous that there may be some surprises, yet.

Also, there is a new Syria Blog devoted to economic issues, which has been begun by a Houston based Syrian economist. Take a look, here.

Back to Yazigi's "Syria Report" feature article this month about the new growth figures announced by Deputy PM Dardari. The first question we all ask is: What do such figures mean? Can they be trusted? Like most everything in Syria, one never knows how much relation the economic statistics produced by the various ministries have to reality; are they fudged to promote the official story? Do the ministries have the expertise and data to be reliable even if they wanted to be? Yazigi, like all Syrians, struggles with these questions in his feature article. He is skeptical that GDP grew at 5.5% in non-oil sectors in 2005, and shows how the individual statistics put out by the various ministries do not jive with Dardari's; all the same, he concludes that the Syrian economy is growing faster than usual.

Economy shows signs of robust growth in spite of doubts over government statistics
Date : 03/06/2006
GDP grew by 5.5 percent in the non-oil component of the Syrian economy in 2005 according to Abdallah Dardari, deputy Prime Minister in charge of Economic Affairs.

Until now the official estimate for GDP growth, as stated by the Prime Minister and the head of the Central Bureau of Statistics, was 4.5 percent while in 2004, the Syrian economy grew by 3.2 percent.

Dardari’s announcement, in contradiction with all previous estimates by Syrian officials, was received with skepticism by many economic analysts. Besides the figure in itself, the components of this growth were not clear. In a conference held in Damascus, Dardari said that the main factors behind growth were non-oil exports, which grew according to him from USD 3.2 billion in 2004 to USD 3.6 billion in 2005, and tourism, which grew by 15 percent. Until now the official figure for 2004 exports, excluding oil, stood at USD 2 billion.

A few days later, before Parliament, Dardari said that the two main engines for last year’s growth were the tourism sector as well as agriculture. Tourism revenues make up around 8 percent of GDP while agriculture production represents around 25 percent of that aggregate.

A report published by the Teshreen daily on May 24th with preliminary figures on the balance of payments contradicts some of the statements made by Dardari. According to this report, non-oil exports grew by 10 percent last year from USD 2 billion to USD 2.3 billion, and not USD 3.6 billion. Oil exports meanwhile rose to USD 4.1 billion, an 18.7 percent annual rise, on the back of rising oil prices. Total exports reached USD 6.4 billion, a 15 percent annual rise.

Also, imports totaled USD 7.2 billion in 2005 from USD 5.9 billion the previous year, a 22 percent yearly increase.

The data also show that income from tourism reached USD 1.95 last year from USD 1.8 billion. This is an 8.3 percent growth in income. This is more or less in line with the figures of the Ministry of Tourism which estimated that the sector earned EUR 1.85 billion (USD 2.3 billion) in 2005, but well below Dardari’s estimates.

There has been wide skepticism recently in the Syrian business community over the statistics provided by Syrian officials. The Minister of Tourism was for instance strongly criticized by Members of Parliament last March when he presented before them the 2005 report of his ministry. MPs criticized what they estimated was the lack of reliability of the Ministry’s data, including the lack of clear differentiation between actual tourists and transit and business travelers.

The Investment Bureau is also regularly criticized because, 15 years after its inception, it still does not provide any figure on the investments taking place in the country. Rather, the Bureau merely provides figures on the number of projects that are licensed, disregarding the actual rate of enforcement of these investments.

Despite the doubts over the figures provided by the Government there is, however, a large agreement among economists in Syria over the fact that the economy is doing increasingly well.

Gulf investors are continuing to show strong interest in real estate and tourism, even if not many of the projects announced have really taken off the ground yet. Meanwhile other sectors such as banking and insurance are continuing to attract capital. Also, in various industrial sectors, new projects are announced almost on a daily basis, although here again, the time scale is too short to judge how many of these schemes will see the light of day.

It remains therefore very difficult to assess how much all this is having an effect on GDP growth and unemployment. In one of the many interventions he made this past month, Dardari said that in 2005 200 000 new job opportunities were created, that unemployment stopped growing for the first time in years and that the poverty rate fell from 14.7 percent to 11.4 percent!

Copyright © 2006 The Syria Report


At 6/05/2006 02:32:00 PM, Blogger Lebanese Pride said...




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