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Syria: businessmen by nature.

Officially, there has been no about-turn in Syria's economic policy. But after visiting Damascus, Alan George reports that the so-called "refinements" to the ruling Baath party's state-controlled ideology in economic affairs amounts to a revolution. The heavy hand of state security remains all too visible on the streets, but the business sector is being allowed to come to terms with a rapidly changing regional environment.

THE TWO slightly battered, Peugeot estate cars, light brown and dusty, still sit in Omayyad Square, the main traffic hub in southern Damascus. Both are parked on the pavement. One is outside the radio and television station; the other on the opposite side of the roundabout. Both point to the centre of the square, ready for rapid acceleration.

Lounging on the front seats or on the bonnet, or standing nearby under the shade of trees, are the young men in plain clothes (white socks and slip-on black leather shoes have been in vogue for years) wearing ammunition belts and toting Kalashnikov AK-47 assault rifles. They would have looked just right on the barricades in the Lebanese civil war.

Visible security measures were always a feature of Damascus. These days, however, the mood is light. There is no comparison to the mid-1980s, when the fundamentalists of the Islamic brotherhood (Ikhwan al Muslimun) staged a rebellion culminating in the bloody uprising in the central Syrian town of Hama, suppressed with a ferocity that broke the Ikhwan's back.

Uphill from Omayyad Square, towards the towering Jebel Cassioun that forms the city's western limit, lie the upper middle class districts of Malki and Abu Rumani. Outside the homes of senior officials, the young, white-socked guards still lurk under the trees.

But, like the Peugeot men, they are relaxed and unthreatening. Usually, these days, they do not fix you with their eyes as you walk past. You do not feel that it might have been wider to have crossed the road.

The relaxed mood has been enhanced by the prospect of peace with Israel, but its causes lie elsewhere. The regime has rarely, possibly never, felt so secure. In the Gulf war, Assad joined the anti-Iraq coalition, ending at a stroke his estrangement from the Gulf states and from the West. In a not unrelated development, the civil war in Lebanon has ended on terms which confirmed Syria as the key arbiter of Lebanese affairs.

With loans and grants pouring in from a grateful Gulf, a host of major infrastructure projects shelved during the 1980s for lack of funds have been revived. At the same time, private sector confidence is soaring.

In the late 1980s the government started taking the first, tentative steps in reforming the chaotic and Kafkaesque state-run economy. Official exchange rates completely unconnected to the real value of the local currency have been amended. Price controls have been eased. Farmers no longer smuggle their crops abroad or feed them to their animals rather than sell them to the state marketing company.

Most significant of all has been the inauspiciously named Law No 10 of 1991, an investment law offering a range of incentives to private business. In isolation, Law 10 might not have worked. But it was part and parcel of a determined government drive to reactivate the moribund private sector.

"Syrians and Lebanese are well known to be businessmen by nature," said Dr Salin Yassin, deputy prime minister with responsibility for economic affairs. "All that is needed is to provide the required environment."

Officially, there has been no policy U-turn. Central to the ideology of the ruling Arab Baath party is state control of all key areas of the economy. Officially, all that has happened is a "development" of that policy. True, the private sector was never wiped out in Syria. But the reality is that the "refinements" of recent years have been tantamount to a revolution.

Hundreds of millions of dollars have invested under Law 10. Much of it has been directed to new transport companies, but agricultural projects and a wide range of light industrial schemes have also been formed, many of them as joint ventures with the state. "Now, only the cement, phosphate and oil sectors are reserved for the public sector," explains Dr Yassin.

Steps - not yet strikingly successful - have been taken to reform the byzantine bureaucracy. Dr Yassin claims that "we have tried, and we are still trying, to run the public sector according to economic principles".

The die is cast. The public sector will not be abolished, but it will be allowed, ever so gradually, to wither. There is no going back to the dark days of state socialism, which brought nothing but empty shelves and a grumbling, sullen populace.

Meanwhile, oil production - a crucial hard currency earner - has nearly quadrupled from 150,000 b/d in the mid-1980s to 580,000 b/d. Even the weather has conspired to help Assad. Good spring rains have produced a record harvest - crucial for a country where agriculture remains the backbone of the economy.

The only big shadow is being cast by serious power shortages. "Oh Assad, we gave you our loyalty. Now you much give us electricity," says the graffiti in villages in the Damascus area. The problem has the highest priority, and should be solved by the end of next year, says Dr Yassan.

With the Ikhwan subdued, victory in Lebanon and the economy enjoying a prolonged mini-boom, the authorities have felt able to loosen the political reins. Undoubtedly, the process has been encouraged by the collapse of the Soviet Union, Syria's former key sponsor, and the consequent need for Damascus to spruce up its image in the West.

Over the past two years literally thousands of political prisoners have been freed. Most were Islamists detained during the unrest of the early and mid-1980s although they have included several former senior government officials jailed when Hafez Assad seized power in December 1970.

Within the higher echelons of the regime, meanwhile, potentially explosive rivalries appear to have abated. In the early 1980s, when President Assad suffered a heart attack, his brother Rifaat brought tanks into the streets in a bid for power. He failed and, although given the nominal title of vice-president, was exiled to Paris.

Recently, following the death of Assad's mother, Rifaat was allowed back to Damascus. According to Western diplomats here, however, his influence is circumscribed. Rifaat and his diminished band of supporters keep a low profile, thrust to the fringes of power.

Apart from the Middle East peace process, there is only one big political question here: the succession to the presidency. Many informed Syrians are convinced the Assad's son, Basil, an officer in the Presidential Guards who is also a keen horseman who wins medals in international show-jumping events, is being groomed to step into his father's shoes.

Some clues are out in the open. For the past two years President Assad has been promoted in the official media as "Abu Basil" (father of Basil), despite his having three other sons, Maher, Majid and Bashar. Basil's picture is a frequent sight on posters adorning walls and especially vehicles in Damascus - something which could only have resulted from official encouragement.

According to some informed accounts, Basil, said to be a modest man untainted by corruption, is quietly gathering the reins of potential power, working with the support of General Adnan Makhlouf, the commander of the Presidential Guards.

Basil, it is claimed, already controls the units which guard senior political figures and government buildings, and the regular army units stationed around Damascus.

It is said that Ali Duba, the powerful chief of military intelligence who has often been tipped as a possible successor to Assad, has a co-operative relationship with Basil, and has not sought to block Basil's moves.

Earlier this year, Ali Duba was appointed deputy chief of staff, a post he holds concurrently with his old position. It is unclear whether this represented an extension or a dilution of his influence.

"If President Assad died within the next three years, there could be armed conflict as various factions jockeyed for his post," says one well-informed Syrian. "In three years, Basil will be in an unchallengeable position." For the moment, however, the most pressing issue is the peace process. After the Arafat-Rabin deal, journalists flocked to Damascus seeking the answer to just one question: would Assad or would he not now reach his own agreement with the Israelis?

The question was simplistic. The Syrians knew nothing of the secret, Norwegian-brokered talks between Israel and the PLO, and Damascus was genuinely upset at the split in Arab ranks which the talks represented. For Syria, which has always striven to be a key regional power-broker, finding itself suddenly cut out of the real action was profoundly disturbing.

President Assad has since played his cards with a consummate skill which has attracted much admiration from the Syrian populace at large.

He has neither supported nor condemned the Arafat-Rabin accord, although he has highlighted its shortcomings. He has stressed Syria's continued commitment to a comprehensive Arab-Israeli settlement, to be negotiated through the US and Russian-sponsored talks launched in Madrid in 1991.

He has emphasised that a settlement will be conditional on a total Israeli withdrawal from the Golan Heights and south Lebanon. Of course, outright condemnation of Arafat and the accord has been left to the hardline Palestinian factions based in Damascus, and to Hizbollah in Lebanon.

However, there is no attempt to silence Arafat's critics. In fact, quite the contrary. Assad's message to the Israelis and the wider world is loud and clear: we can disrupt any settlement of which we disapprove; you ignore Syria at your peril.

All Syria's options are open, and its centrality to the entire process has been reaffirmed. And Assad has stressed that movement on the Syrian and Lebanese tracks will depend on how the Gaza-Jericho accord actually works out on the ground.

"If we wanted to obstruct the accord, we could foil it," Assad told the Cairo daily Al Akhbar last month. "If we see that the accord has a big, negative impact, we will block it. Generally speaking, we shall (wait and) see whether or not there are major problems."

As usual, Assad is divulging nothing about his intentions.
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Title Annotation:Business & Finance
Author:George, Alan
Publication:The Middle East
Date:Nov 1, 1993
Words:1706
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