SYRIAN BANKING & FINANCIAL SERVICES CONFERENCE SPEECHES

 

Panel Session 1: Economic and Investment Outlook for Syria

Presentation:
Samir Aita
General Manager
A Concept Mafhoum

 

A year ago, an analytical and recommendation effort, sponsored by the ERF and the EU, was presented to the Syrian Government. The Country Profile Syria. A collective work of Syrian experts that I had the honor to coordinate. In this presentation, I stated that "there is a time window of opportunities to make reforms. This window allows doing courageous steps, the necessary "leapfrog reforms", giving clear strong signs to cut with old practices. This window also allows acting with proper management, with margins minimizing negative social or economic impacts. This window should not be lost. Otherwise, the cost and difficulties could be much higher".

This recommendation still stands today. And one may add that the so-called "smooth and slow" reforms advocated by the authorities still in many aspects don’t give clear signs about the future, to allow the necessary predictability, and even in some cases it gives bad signs. Practical examples can be easily seen on the ground.

To explain, allow to get on some of the 6 major subjects, dealt with in the Country Profile, starting with the main subject of this conference: banking.

Banking
As early as the year 2000, a clear reform sign was given that private banks shall open in this country, maybe the only such clear sign. The results are today here with the rapid growth of the private banks and the introduction of a new competitive environment in this field. This growth shall continue and also in insurance as the market is eager for such services.

However, in order to insure healthy development in this sector, two clear signs are still missing. The first on the reform of the State-owned banks and the second on the Central Bank. To summarize, I will say that there is a need for a lot of political courage to "clean the dusty things hidden, with proper solutions", and there is still a need to understand how to act as a regulator, and not as the commander or only owner. Just an example to illustrate, the balance sheet of the Central Bank has not been approved by the state auditing, or other, since the 1970's.

Macro-economy
Here several clear strong signs are still lacking, even though that the slogan has changed towards "social market economy".

Two major signs are still missing here: The first is on the enforcement of property right and the rule of law, on old and new issues. And the second on the role of the State, enforcing again its role as a regulator and not as an owner, being an engine for development, and insuring equality of chance in business and social justice. The current practices encourage rent seeking and not the production of value.

One good news however, because of the large size of the informal sector, even the IMF acknowledges today that Syria GDP is underestimated. The reason?. The State has no precise idea about the activities of the private sector.

Budget and Fiscality:
One should acknowledge serious efforts made on the difficult ground of fiscal revenues, to move them from oil rent based towards citizens and companies based revenues.

However, the signs lacks on two major issues: the efficiency of the public service (salaries, know how, legitimacy and power to implement) and on the spending side (How to spend? Where to spend?).

The good news is the low debts of the Government, both Foreign and local, and its large foreign assets (higher than the GDP). How to do that is a crucial issue, to move the Syrian economy to be based jointly on local demand drive and fostering non-oil exports. The question is that of a mindset: "better state, defending public money instead of defending loosing public sector, legitimacy and accountability on spending".

Foreign Trade & Investment Environment:
Despite the recent free trade agreements, many signs are still lacking here to move out of the present situation: with deteriorated infrastructure (including per example in IT, even comparatively to the region), biased investment environment based on short term view and on deals.

The question is to answer where Syria will stand in the global rapidly moving environment? We are missing opportunities one after the other. I acknowledge that there is a lot of regional and international politics behind this issue; but good investment environment and good infrastructures are always good answers to contrary winds.

Labor and employment:
A major challenge. Unemployment (27%) is hardly hitting young people and women. You can not deal with that with old rigid laws which in addition are selectively enforced. Example, only 14% of the employees of the formal sector are registered effectively in the mandatory social security.

Changing these laws can not be without a constructive dialogue with social partners, recognizing that they are partners (the business community, unions, social organizations). I am not talking about welfare. I am talking on how to avoid that all youngs, especially the skilled, dream only about leaving the country. I am talking about my old professor here, who tought me everything, having a decent life. I am talking on that insuring social fairness will increase local demand, which will boost the economy.

Governance & the Rule of Law:
There is a lot to be said on this, where Syria is badly ranked in all world indexes. But let's summarize the recommendations of the country profile as follows: "Syria suffers from a strong pressures, especially from Western countries. Can the good answer to that not be more opening, more democratic behaviour inside, better rule of law?" I believe yes. It could be an excellent strong sign for those who love Syria. And I know that they are many.

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