Syria: The wannabe China of the Middle East?

There are few articles in the Western mainstream press on single Middle Eastern economies, and this one by Damascus-based freelancer Gabriella Keller on the Syrian economy for the online edition of Der Spiegel is quite well researched and sharp. She argues that while the political leadership has realized the need to open up the economy, to substitute domestic energy sources and to build up a competitive private sector, the lower levels of the administration as well as certain clans are opposing any change.

Very much what can be observed in other Middle Eastern countries in their economic transition.

Some excerpts (own rough translation):

“At the highest level, we received a lot of support�, says Hanna [an investor that started a local production of La Vache qui rit]. “But the authorities on the lower levels have not yet made that about-turn. When we needed permissions, we had to get signatures at some 20 places. So everything took a lot of time and efforts.�

Last year, President Bashar Al Assad announced a move from socialism to free market economy. „The government has realized, that the old system doesn’t work“, says consultant and former WB economist Nabil Sukkar. “The economy stagnated, the call for change became imminent.“

But in daily life, encrustations resulting from 40 years of socialism are slowing down liberalisation – the more so, as abuses can’t be criticized openly, as those in power have in mind a future based on the Chinese model: reforms are not to touch the political setting. Not only the administration slows down. Also a handful of influential families close to the regime have little interest in change. Large tenders and licences go to these clans without competition.

Enormous amounts are disappearing in the administration. At the same time, the state keeps expenses low, subsidizing rice, sugar and fuel. Even at an average monthly income of €100, Syrians are able to satisfy their basic needs.

Until today, oil revenues financed this system, but that source is running dry. “The reserves are almost gone“, says Ali. „In four years from now, we will have to import.“ If until then no competitive economy has been built up, collapse is near.