"Syria's next 5-year Plan," by Oxford Business Group

Syria: Making Plans
Oxford Business Group
13 July 2005

Dominating debate in Damascus this week has been the country's 10th 5-year plan, which is being finalised in the face of mounting challenges.

Looking ahead to the 2006-2010 period, state planners have been trying to fresh a new approach to boost the reform process, integrate local businesses and sharpen their competitive edges.

Yet, as holistic as the new approach hopes to be, critics of the plan range from those concerned about injecting more efficiency and flexibility into the system to those labelling the whole process as outmoded.

The government line is, however, somewhat different - and stresses the usefulness of the plan to conducting reform.

Recently interviewed by the local press, Abdullah Dardari, minister of state for planning affairs and head of the State Planning Committee (SPC), said that the rationale behind the plan was to co-ordinate the various strategies currently developed at ministerial levels with the ultimate goal of establishing a market economy. These include strategies in economic reform, export promotion, investment, agriculture and industry - as well as in social policy.

Also called the National Indicative Plan (NIP), the 5-year scheme is the result of 15 months of negotiations. The inclusion of the private and public sectors, as well as civil society, in the drafting of the plan this time also constitutes a major novelty.

To co-ordinate these efforts, 14 different sectoral workshops are to be set up, each of them with a clear and specified programme. These channels will hopefully maintain dialogue and ensure synergies.

The private-sector's role in developing the plan stands as a testimony to its growing influence over the economy. Private business now accounts for 60% of total GDP, and there is no doubt it has become the major driving force of the economy. In society at large too, some 1m Syrians are widely believed to fully depend on private charitable institutions for their living, making them partners to be reckoned with.

Also boosting the private sector's importance has been the shift in government revenue streams over the last five years. In the past, oil revenues meant taxation was only rarely enforced. But with Syria likely to start importing major quantities of crude oil in the next few years, government revenues will have to come more from taxes.

Reform of the tax system has therefore been a recent priority. But many argue that one issue the government must also concentrate on is its outdated productive assets.

Bearing in mind that privatisation is still off the agenda, the government wants to bring private investment and management into loss-making firms - mainly food-processing industries - through build-operate-transfer (BOT) contracts. This process, also named corporatisation, might actually mean little more than applying trade laws to these companies, making them private only in form, but not in substance. Yet as none of the country's many loss-making industries have actually gone through this process, it is hard to predict how successful it might be.

For the small number of textile, engineering and chemical firms which do break even, however, the government seems resolute to pump in extra cash and modernise them. But in case of failure, there would be little other option than to call for external help. As far as the few profitable businesses are concerned, the state has made it clear it will remove any protectionist measures assisting them within two years. They would then have to compete on an equal basis with other companies.

Elsewhere, the government has committed to applying the principles set by the Euromed Charter for Enterprises endorsed in October 2004. The charter aims to facilitate access to both financing and new markets, streamline administrative procedures, upgrade the education and training for entrepreneurship and improve quality control and transparency.

To boost awareness of the charter, on July 13, the second Industrial Forum session, organised by the Syrian-European Business Centre (SEBC), will be held in Damascus. Dardari will be there, along with a wide spectrum of public officials and EU delegation Ambassador Frank Hesske.

Promoting this charter is also another way to support small- and medium-sized enterprises (SMEs), whose contribution to the economy is increasing.

Part of the reason for this heightened role is the dominance of SMEs in rapidly developing sectors such as IT. These businesses are taking on more outsourcing, a niche market in which some local IT firms, such as Inana Group or Syriacomm, have already secured a place. As Syria is lagging behind in technology, the government has significantly deregulated the framework in which service companies operate.

The Syrian economic landscape appears therefore to be becoming more polarised. On one side, IT firms are becoming models to emulate by setting new demanding operating standards at all levels. But on the other, the state is engaged in a race to dismantle and/or upgrade its inefficient assets. Attempting to bridge these two extremes has become the difficult task entrusted to the hands of the SPC.