 Dr
Abdullah Dardadi, Vice Prime Minister for Economic Affairs and Head
of the State Planning Commission
Sunday 11th September 2006 - Can you tell us in what context
the Five Year Plan has been developed and what is the overall objective
of this plan?
The new political decision of the Baath Party to move toward a Social
Market Economy is reflected in the Five Year Plan. This decision
is based on a number of realisations: first of all the formal economic
system was no longer sustainable and, Syria would have entered a
deep economic crisis had it continued its heavy dependence on Public
Sector and Central Planning. Secondly, there is a great potential
for Syria in integration in the region and the global economy. If
we change the paradigm of Syrian Economy, potential for growth,
better environment, higher inflow of Foreign Direct Investment are
tremendous. Thirdly, this decision fits with an overall new political
approach regarding economic and political pluralism, democracy,
and human rights. These are the new inclinations defined after the
Baath Party congress.
The Five Year Plan falls under this new thinking and differs radically
from the previous FYPs; it does not define quantities of production
that the Public Sector has to achieve, anymore but sets an overall
framework and strategies; Ultimately, we want to see the GDP per
capita double by 2015. The Five Year Plan is about promoting growth
but without forgetting equity.
This plan is based on the idea of Decentralization and Deregulation
of a complex bureaucratic structure, with the aim of creating the
right environment for the innovative and entrepreneurial spirit
of Syrian people and private sector.
Can you explain us the five focuses of the Five Year Plan?
Public Finances:
We are reforming the Fiscal Policy and more particularly the taxation
side; these reforms implemented will be culminating with the introduction
of the V.A.T in 2008, a new income tax, and capital revenue tax.
The system to be implemented over the next 4 years will result in
a much more simple taxation system based on reduction of taxes and
widening of the collection base.
Another reform of the Public Finances will be the reform of the
Public Enterprises, which are currently a drain on the economy.
We are starting a program for the corporatisation of State Owned
Enterprises, giving them independence, and making them work like
Private Sector, turning them into Join Stock Companies which shares
will ultimately be traded to raise private capital. Our aim is to
eliminate Public Monopolies and create a Private-Public partnerships.
The government is becoming like a “Holding Company”.
We have just finished the draft of the new system of subsidies;
the new system will be implemented in 2007. The current system is
a costly and no longer sustainable: we are spending 2 billion USD
per year just on fuel subsidies. The system is not socially equitable
either (the richest segment of the population gets 52 times more
subsidies than the poorer part).
The ultimate objective of the Public Finance Reform is to keep
the Public Debt, and the budget deficit within 4% of the GDP by
2010; today it’s around 6% of GDP;
Financial and Banking system:
We are rapidly implementing deregulation of the banking and financial
sector started in 2004. We are quickly moving toward the independence
of the Central Bank, the development of a monetary policy, the unification
of the exchange rate, and a better management of the Syrian Pound
exchange rate. In a few months, we are cancelling 40 years of a
strict control of the hard currency.
The banking sector has opened up, larger banks and big names are
coming to invest in Syria as well as Islamic Banking. The 51%/49%
ratio about ownership will be soon eliminated and foreign control
will be allowed. All these reforms will change the face of the financial
sector.
A very important move is also the creating of a capital market
with a Stock Exchange. The Stock Exchange will allow the entry of
foreign capital, but will be designed on a conservatory basis to
avoid hot money and speculation. It will also allow the securisation
of public debt through Treasury bills and Treasury bonds. We are
setting the tools for an indirect monetary policy through financial
intermediaries. It is a great leap forward.
Industrial strategy and Exports
We believe that the industrial growth is critical; we are planning
a 15% annual growth in industrial output over the next 5 years.
The 3 industrial cities are booming, and we are creating 3 new cities
in Raqqa, Deir Ez Zor, Hama and Lattakia.
For the first time, Syria will produce a Competitiveness Report,
and will be listed in the Davos World Competitiveness Report.
In terms of Export and Foreign Trade, we are completely liberalizing
the system; by the end of the year 2006, Syrian foreign trade will
be completely liberalized, with easier custom procedures, and reduced
custom duties. Tariff barriers and non-tariff barriers are being
eliminated and all imports will be allowed with low custom tariffs.
We are also working on the automation of the custom department.
Social safety Net
With a liberalized system, social problems will appear: the law
that forbids firing employees is soon to be abolished. If we introduce
more flexibility, we also need to introduce more protection. In
this context, we are creating a Social Security System and an Employment
Funds, as well as a National Health Insurance Scheme.
In order to convince the people that the Government will no longer
be the number one employer, we need to provide them with long-term
security.
The New Civil Society will have two very important national programs:
The Women Empowerment and Poverty Alleviation Program, which covers
around 750 villages with microfinance programs. We also have created
the Social Welfare Fund through which the government will provide
a fixed income for the people who cannot afford to work. We are
trying to have a Keynesian approach to develop our reforms with
a view on the Norwegian Socio-Economic model.
The growth will affect positively the 70% of the population above
the poverty line, creating businesses, jobs and earning more; However,
the 30% of the population under the poverty line will not be positively
affected by growth alone and we need to create measures to protect
this “vulnerable group”. Adopting a “Social Market
Economy” has a cost, and that is why we have to create a “social
safety net”. We will not choose “more growth”
at the expense of “equity”; we have to move toward a
“pro-poor growth”, which guarantees for more equity
and better distribution of resources and income.
Health and education
The five year plan also prepares for the complete restructuring
of the Health and Education system. The current system has reached
its limits as requirements of the labor market are evolving very
rapidly in today’s global economy. Different type of labor
force is needed. Over the next two years, we will focus on institutionalising
the reform and plant the direction of this reform in order to start
implementation in the next 5 years.
Infrastructure
The infrastructure system needs a compete overall restructuring:
Telecommunications, electricity, railways, and highways will be
modernized. We estimate the cost of this investment to 15 billion
USD on 10 years. It is a challenge but also a business opportunity
as we are moving away from Government Finance; indeed the projects
will no longer be financed by the Government only; we will create
Special Purposes Vehicles, and attract international foreign investors.
How do you think the Syrian people will react to these
reforms?
We are undergoing a legislative revolution: the legal and financial
Framework is currently being re-designed: we are in the process
of creating new laws for competition, anti-trust law, companies
law, trademarks and intellectual properties laws; we are also in
the process of creating independent Energy and Telecom regulators.
Changing the laws is an easy process compared the challenge of
changing the mindset and mentalities of the people. I trust the
Syrian people to achieve growth. It will be a slow educational process.
How task now is to communicate well with the people and the stakeholders
to explain this process of reforms. si
Final Message to the eBizguide readers:
If there is only one place in the World that can serve as the
center of cultural exchange, and of coexistence of civilisations
it is Syria. Any businessman and who believe in the destiny humanity
and coexistence should visit or do business in Syria. There is currently
no other country in the Middle East that can serve this role, especially
in these troubled times. Syria is the model of coexistence. |
