Magazine article The Middle East

Slow but Steady Progress in Syria: Since Assuming Power in June Last Year, Syria's President Bashar Al Assad Has Gained the Reputation of Being a Forward Thinking Reformist. in Reality the Pace of Change Has Been Slow and Some Old Habits Are Proving More Difficult to Break Than Others. (Business & Finance)

Magazine article The Middle East

Slow but Steady Progress in Syria: Since Assuming Power in June Last Year, Syria's President Bashar Al Assad Has Gained the Reputation of Being a Forward Thinking Reformist. in Reality the Pace of Change Has Been Slow and Some Old Habits Are Proving More Difficult to Break Than Others. (Business & Finance)

Article excerpt

Syria is slowly prising open. Since the youthful Bashar Al Assad took over from his late father in June 2000, change has been the buzzword in the country, which has been under tight political control and a command economy since an army coup led by pan-Arab Baath Party officers in 1963.

In numerous areas of public life there are signs of a "Damascus Spring" in the air. New Syrian newspapers are being printed, more foreign publications are available, trendy Lebanese music stations fill the FM radiowaves, bars and restaurants are springing up, and foreign and local advertisers are fighting for newly freed-up billboard space on the nation's highways.

But opposition to the economic and political changes instituted by Bashar Assad during his one-and-a-half years in power is already emerging among the elite around him. Most Syrians say it's still too early to predict the outcome of Bashar's experiment.

The government is struggling to implement economic reforms, with most changes still mired in Syria's slow and complicated legislative process. Prominent has been a draft banking law, which allows private banks to establish offices in Syria. Lebanese banks are likely to be the first to move in. But more legal changes will be required in order to overhaul the State banking system before foreign banks are permitted to enter, and even then observers expect the draft laws to be watered down in cabinet or in the parliament before becoming law. The decision to allow the establishment of private banks was first approved by the Baath Party's Regional Command, the highest policy-making body of the party, at a December 2000 meeting chaired by President Assad.

The draft law, which went to parliament on 12 September, would give the central bank greater powers and flexibility to regulate the operations of the new private banks, which must have a capital of at least 1.5 billion Syrian pounds ($30 million) and should be at least 51 per cent owned by Syrian private investors. It also allows for joint-venture banks between the private sector and the State sector, as long as the State has a minimum 25 per cent stake. Economists estimate that $80 to $100 billion of Syrian money is invested abroad, with some $6 billion of that in neighbouring Lebanon. One of the main aims of this draft law, which will be matched by a law allowing Syria's first stock exchange, will be to entice that money back into Syria.

The plans may be over-ambitious. Government officials claim that 50 banks, largely from other Arab countries, have expressed interest in operating in Syria, but the banking system is still dependent on manual labour, with few computers available and Internet connection still problematic.

Syria has a low number of Internet lines, and the government maintains a heavy presence, attempting to police the cyberworld. Foreign money transfers are strictly controlled and foreign currency accounts do not exist, though the Commercial Bank of Syria announced in September that it would join the Visa International network and issue credit cards. The government took an important step towards setting up a credit card system earlier this year when it altered the official exchange rate to match the market rate, narrowing the scope for the black market.

There are still no audited balance sheets to allow an evaluation of the banks' assets. Although the draft law gives the Central Bank scope to regulate, supervise and monitor, observers think Syria will need outside help if it wants to truly overhaul the system. But the government has not yet approached any foreign institutions to assist in setting up a regulatory body, which is vital if foreign investors are to trust the system. Syria will have to push through wide ranging reforms to allow the country's economy to keep up with its fast-growing population, now over 17 million.

Teething problems in Syria's developing political life have recently been grabbing headlines abroad. …

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