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Dec 7, 2000 | 06:00 GMT

6 mins read

Reforms Reveal a Determined Assad

Summary

Over the past month, Syrian President Bashar al-Assad has begun to relax the stringent economic and social controls enforced by his late father. Under Bashar Assad's direction, the Ba'ath Party this week gave its approval in principle to three measures aimed at allocating capital more efficiently. The party endorsed the creation of a stock market, the legalization of private banking and an eventual free float for the Syrian pound. Tentative as they are, Assad's initial reforms show a determination to challenge powerful forces in Syrian politics.

Analysis

In the past three weeks, Syrian President Bashar al-Assad has begun to relax the stringent economic and social controls enforced by his father, Hafez. His initial steps have been cautious, but they indicate he considers his power base far more solid than anyone would have predicted a few months ago.

Thanks in part to his father's ruthless suppression of political opponents, Assad inherited a Syria at relative peace. But although there is little open dissent, the regime faces enormous discontent over its economic performance. As with other Arab states, rapid population growth is putting pressure on the state to provide jobs and is undermining the state's ability to provide subsidies. Meanwhile, the strength of Israel's technology-based economy will reinforce its military dominance over the region - the worst possible outcome for Syria's strategic interests.

Hafez al-Assad was aware of these risks, but his cautious governing style brought only marginal liberalization during the past decade. On the economic front, his major initiative was the passage in May 1991 of “Law Number 10,” which opened much of the economy to private activity, but failed to attract much foreign capital. Agriculture reforms led to a sharp spike in GDP growth, reaching nearly 10 percent in 1992, but prospects for further gains are limited. The U.S. State Department estimates that Syria's economy actually contracted in 1997 and 1998, due in part to lower oil prices.

Moreover, Syria's narrow industrial base makes it vulnerable to changes in the world economy. More than half the country's agricultural production consists of cotton, supplying the raw material for textile mills that account for about a third of total industrial output. Over the next five years, as international textile trade is liberalized and China enters the World Trade Organization, the Syrian apparel industry will face stiff competition from Chinese firms paying some of the world's lowest factory wages. Both cotton farmers and textile workers may soon face declining incomes and job prospects, underscoring the need to diversify Syria's economy.


Syrian President Bashar al-Assad

Syria's five state-owned domestic banks are so poorly managed that even simple fund transfers can be slow and hard to execute. With no domestic stock market, private business owners depend on state banks for credit and can find themselves passed over unless they have strong political connections. This has encouraged many local investors to focus their attention on making money in neighboring Lebanon, which boasts an efficient private banking system and far less red tape, as well as a near-colonial status that gives Syrian business relatively free rein.

Before succeeding his father, Bashar al-Assad supervised Syrian policy in Lebanon. That country's speedy recovery from civil war may have given him some appreciation for the advantages of a free market. Assad has also retained his father's economy and trade minister, Muhammad al-'Imadi, who is seen as the strongest supporter of economic reform within the regime's inner circle.

Under Bashar Assad's direction, the Ba'ath Party this week approved in principle three measures aimed at allocating capital more efficiently. The party endorsed the creation of a stock market, the legalization of private banking and an eventual free float for the Syrian pound.

Banking reform is the most promising of the three initiatives, and possibly the riskiest. Syria's official news agency claims that new private lenders will be allowed to compete freely with the existing state banks - a move that could quickly drain the latter's deposit base if established foreign banks open branches in Syria and offer superior service. Without careful monitoring, the government could end up undermining its own lenders, which may be heavily exposed to politically driven business projects and the vulnerable textile sector. At the same time, the growth of private banking will eliminate patronage opportunities for managers of the state-owned banks, creating resentment within the ruling party.

Assad has also offered liberalization in the political sphere. Although Syria's government has long been one of the Middle East's most repressive, the last years of Hafez al-Assad's rule saw glimmers of leniency. Human rights groups believe the number of political prisoners in Syria has been falling since the early 1980s, when the political situation was far more volatile and thousands of suspected opponents of the regime were killed or jailed.

The first of several recent amnesties, granted in May 1998, freed a handful of dissidents - including some held since 1980 - when a range of social organizations were banned for their alleged communist or Islamist leanings. A second amnesty in July 1999 led to hundreds of additional releases, largely of economic offenders such as unauthorized dealers in foreign exchange. However, it also saw the release of a handful of members of the Muslim Brotherhood, the banned Islamist group that Damascus has traditionally seen as its greatest internal security threat.

In mid-November 2000, Assad took a more dramatic step than any his father had taken, announcing the release of roughly 600 political detainees. The ideological background of the freed prisoners is still unknown, but Amnesty International estimates that of at least 1,500 political detainees held in Syria when Assad took office, the majority were Muslim Brothers.

Tentative as they are, Bashar Assad's initial reforms show a determination to challenge powerful forces in Syrian politics. Further opening of the economy will require much more. Damascus will have to lower barriers to international trade, reducing the profitability of imports smuggled from Lebanon. And since corrupt Syrian officers protect much of the Lebanese smuggling trade, as well as the trade in narcotics concealed in shipments of other goods, that will pose a direct threat to the military establishment.

On the political front, human rights groups and Syrian intellectuals hope for more dramatic changes, including an end to the state of emergency in force since the Ba'ath assumed power in 1963. Such a move would do far more than sporadic prisoner releases to undermine the power of Syria's mukhabarat, or state security services, which enjoy almost unlimited powers under emergency rule. Assad is clearly willing to confront these power centers, and, for now at least, he seems to believe he can do so successfully.

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