 Following a slowdown in 2003, a mild recovery seems to have started since early 2004 and continues into 2005. Recent reforms are now showing results, but more is to be done to offset the impact of the reduced oil revenues that are expected in the future. The country's oil resources, which account for some 20% of GDP, are indeed likely to be exhausted within the next 20 years or sooner. This adds emergency up to implementing Syria's programme of economic reform, attracting investment and developing new industries with export and revenue generating potential.
The slowdown in 2003 reflected declining oil production and the impact of the regional situation on exports and investments. The recovery in 2004 has been aided by a strong rebound in exports, the development of the tourist industry and a surge in private investment reacting to the reform programme. A 20% increase in public sector wages together with a good harvest contributed to the upturn. Major reforms undertaken in the past two years include liberalization of trade and foreign exchange regimes, simplification of the tax system, improved efficiency of public services, better flexibility of public enterprises and the opening of the banking and insurance sectors to the private sector.
The medium[term prospects however are worrisome given that oil, which represents two-thirds of exports (about 14 of GDP) and half of government revenues, is likely to be exhausted in the late 2020s. Progress must thus be made in addressing key structural rigidities to boost growth and in strengthening the medium-term budgetary outlook to face the prospective decline in oil revenues.
If structural reforms are not accelerated , there is a risk that oil reserves will be exhausted before the ongoing reforms have had the time to generate new sources of growth and income. Syria should thus accelerate and broaden structural reforms aimed at furthering the transition to a market economy, strengthening the incentive system for domestic and foreign investors and improve competition, rules of governance and property rights.
The country is also to target a steady improvement in the non-oil budget balance, moderating distributive demands fuelled by higher oil prices.
The International Monetary Fund furthermore recommends the country to build on the progress and develop a comprehensive fiscal reform package aimed at further simplifying tax provisions and removing tax exemptions. Syria substantially reduced its top rate of income tax from 65% to 36% in 2003 and there are calls from some business circles for a further lowering of the top rate of income tax to 25%.
The European Union is traditionally the main commercial partner of Syria. In 2003, Syria exports towards the Union represented 57% of the total exports and its imports from the European countries represented a share of 19% of imports. Main Syrian exports to Belgian consist of textile products, minerals, plastics and mineral oils. Syrian imports from Belgium consist basically of foodstuffs, beverages, chemical products, machinery and pharmaceuticals.
The Arab Republic of Syria benefits from its highly developed natural and human resources coupled with a promising investment climate. The country's economy is diversified and comprises four main pillars: mining, industry, agriculture and tourism. Syria's geographical location and its financial management are other major trump cards.
Syria is a country offering numerous investment opportunities. In the field of agriculture, interesting projects can materialize to produce modern irrigation equipment, to transform milk and dairy products, to produce fish, and in the field of marketing of fruits and vegetables.
As far as oil and mineral resources are concerned, Syria needs to launch industrial projects to produce chemicals, to build new power generation plants using petroleum coke, to produce kerosene and petroleum derivatives and to construct a new oil refinery.
Major investment opportunities in the industrial sector concern the transformation of locally available raw materials, agri-food plants, the setting up of hi-tech companies and enterprises with high value added, export oriented activities such as foodstuffs, textiles, chemical and petrochemical products, mechanical and electronic industries.
Potential investors should also keep an eye on the opportunities available in the field of communication and information, electricity production and transport. In the latter field, possible projects include the setting up of a free zone and a related maritime port, the creation of the full range of air cargo services and the exploitation of free zones within the existing airports and the development of the railway system.
In the social services sector, many opportunities exist in the health care sector, including the production of pharmaceuticals and hospital equipment as well as the development of specialized centers for the treatment of cancer and hart diseases. Education and training is a promising opportunity for investment as well: private universities and foreign institutions specializing in all fields can benefit from the existing potential in the country.
Syria is also looking forward to develop the banking and financial sector through the establishment of private and mixed banks and the creation of investment funds, export guarantees and all other financial institutions which can serve the Syrian market.
The current reform and modernization process is also to integrate Syria's industrial sector into the world economy by stimulating trade and opening to the region.
Trade with several Arab countries is no longer submitted to tariffs and the Association Agreement with the European Union is likely to lead to a further opening of Syria for European markets. The government is currently also launching three industrial zones in Damascus, Homs and Aleppo. These parks, equipped with the appropriate infrastructure, are to be a solid base for incoming companies.
The Syrian tourism sector presents numerous and excellent investment opportunities. The country has a large number of archaeological and historical sites, a varied climate and is located nearby the vast European market. The main tourism development projects possible in the country include the building of hotels near the Assad Lake, in the region south and north of Latakieh and in Amrit. Investors should have on eye on the development and renovation of the archaeological sites, exploit the country's beaches and construct tourist centers and spas.
Basic Economic and Financial Indicators, 2000-2005
|
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
(Change in %) |
|
|
|
|
|
|
Real GDP |
0,6 |
3,6 |
4,1 |
1,3 |
3,1 |
3,8 |
(in % of GDP) |
|
|
|
|
|
|
Revenue |
27,2 |
32,1 |
29,8 |
30,4 |
27,9 |
28,2 |
Oil related revenue |
12,3 |
18,6 |
13,9 |
15,2 |
12,7 |
12,0 |
Non-oil revenue |
14,9 |
13,6 |
15,9 |
15,2 |
15,2 |
16,1 |
Expenditure |
28,7 |
29,7 |
31,4 |
33,1 |
33,2 |
33,0 |
Development expenditure |
10,5 |
11,6 |
13,4 |
14,4 |
14,1 |
13,0 |
Overall balance |
-1,4 |
2,4 |
-1,6 |
-2,7 |
-5,3 |
-4,8 |
(In billions of US $) |
|
|
|
|
|
|
Balance of goods & services |
0,3 |
0,4 |
1,0 |
0,1 |
-0,9 |
-1,2 |
Oil balance |
2,4 |
3,0 |
3,6 |
3,0 |
2,2 |
1,8 |
Non-oil balance |
2,9 |
3,0 |
3,6 |
3,2 |
4,2 |
4,9 |
Non-oil imports |
5,0 |
5,7 |
6,2 |
6,1 |
7,2 |
8,0 |
Current account |
1,0 |
1,2 |
1,8 |
1,3 |
0,5 |
0,0 |
Overall balance |
2,4 |
3,0 |
2,4 |
0,8 |
0,4 |
0,0 |
Sources.: Syrian authorities and International Monetary Fund
Basic Indicators
1997 2000 2001
Population (million) 15,0 16,2 16,6
Population growth (annual %) 2,5 2,5 2,4
In % of GDP
Value added in agriculture 25,8 22,8 22,5
Value added in industry 28,6 28,7 28,0
Value added in services 45,7 48,5 49,6
Exports 32,4 38,2 38,2
Imports 33,8 30,1 30,8
Gross capital formation 21,1 19,1 21,2
Foreign direct investment
(UD$ million) 80,0 270,0 205,0
Source.: General Union of Arab Chambers of Commerce |
