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The Syrian Private Industrial and Commercial Sectors and the State

Published online by Cambridge University Press:  29 January 2009

Volker Perthes
Volker Perthes
Affiliation:
Department of Political Science, American University of Beirut, Lebanon
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Abstract

According to its constitution and the ideology of the ruling Ba?th party, Syria is a socialist people's republic with a planned socialist economy. This does not mean, however, that there is no place for a private economic sector: agriculture is almost entirely private,1 as is small-scale industry, almost 90 percent of internal trade, most road transport, tourism, construction, and up to one-third of Syria's foreign trade. There is also a Syrian bourgeoisie apparently flourishing under the auspices of Syrian socialism. Since independence, however, the specific development of Syria's private sector has to a large extent been determined by political decisions, i.e., by decisions of those running state affairs.

Type
Articles
Information
International Journal of Middle East Studies , Volume 24 , Issue 2 , May 1992 , pp. 207 - 230
Copyright
Copyright © Cambridge University Press 1992

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References

1 In 1987 only some 2 percent of all cultivated land belonged to state farms. The rest, although about 30 percent is regarded as belonging to cooperatives, is privately used. Cf. Syrian Arab Republic (SAR), Central Bureau of Statistics (CBS), Statistical Abstract (Stat. Abs.), 1988, p. 103.Google Scholar

2 In the mandate period (1920–45) only 22 commercial, agricultural and industrial joint-stock companies were established, but from 1946 to 1957, 173 were founded and from 1958 to 1961, another 52 (Fihris al-sharikāt [Company register], Ministry of Supply and Internal Trade, Damascus). The 1963 Stat. Abs. counts 19 joint-stock companies for 1946, 110 for 1957, and 165 for 1961 (p. 388). The foundation of joint-stock companies can to some extent serve as a mirror for general private economic activity, as it reflects the trust of businessmen towards the political and economic situation.

3 Cf., Badr al-Dīn al-Sibā?ī, Al-marḥala al-intiqāliyya fī Sūriyā 1850–1958 (Spotlights on foreign capital in Syria 1850–1958) (Damascus: Dār al-jamāhīr, 1967), pp. 376 if.Google Scholar; on the Lattakia Port Company and other infrastructural projects: Khālid, al-?Azm: Mudhakkirā al-?Azm (Memoirs) 3 vols. (Beirut: al-Dā al-mutt7ḥida li-l-nashr, 1972), vol. 2, pp. 117 if.Google Scholar

4 Cf., Badr al-Dīn al-Sibā?ī, Al-marḥala al-intiqāliyya fī Sūriyā E25;d al-waḥda 1958–1961 (The transformation period in Syria. The era of the union 1958–1961) (Beirut: Dār ibn khaldōn, 1975), pp. 327 if.Google Scholar

5 However dark circumstances leading to the 1961 coup will remain, there is no doubt in the description of the events by Badr al-Din Shallah, a member of the Damascus Chamber of Commerce since 1946 and its president since 1972: “The merchants were disappointed in the Union because of the nationalizations and so on. The new people [i.e., the seccessionist officers] were friendly to the merchants, and the merchants supported the seccessionist government” (author's interview, 12 December 1988).

6 The Khumassiyya employed some 3,000 persons before nationalization; other enterprises of the textile industry regarded as “large” employed between 100 and 250; only two or three employed up to 1,000. Munīr, al-Ḥamish (Taṭawwur al-iqtiṣād al-Sūfl at-ḥhadith [The development of the modern Syrian economy] [Damascus: Dār al-khalīl, 1983M], p. 209) informs us that the total capital of the 108 industrial companies that finally remained nationalized amounted to S £230 million, the forty-four smallest of them having a total capital of only S £27 million (approx. $7.1 million).Google Scholar

7 Difficulties and poor performance after nationalization were not just a question of mismanagement or corruption. We must not understate the difficulty of filling up managerial and technical positions in more than one hundred factories at one time; e.g., in 1965 Syria had no more than 804 registered civil engineers (Stat. Abs. 1969/1970, p. 430).Google Scholar

8 (Economic opening). See, e.g., Hafiz, al-Asad, speech on 8 03 1974.Google Scholar

9 Legislative Decree 2/19 January 1971.

10 Ministry of Economy and Foreign Trade, Decree no. 267/1971 on the system of exceptional imports (niẓām al-istīrād al-istithnā'ī). The so-called kūta (quota) was abolished in 1988. “Quotas” had also become an object of trade and speculation.

11 For a more detailed overview on Syria's economic strategies and developments in the 1970s and 1980s, see Volker, Perthes, Staat und Gesellschaft in Syrien, 1970–1989 (Hamburg: Schriften des Deutschen Orient-Instituts, 1990), pp. 82 if.Google Scholar; idem, “The Syrian Economy in the 1980s,” Middle East Journal, 46 (1992), 1–22.Google Scholar

12 “Clans militaires Ct pouvoir bacthiste en Syrie,” Orient, 20 (1979), 49–62, esp. p. 62.Google Scholar

13 There is no official wage index. On the basis of average wages in the industrial public sector and the official index of retail prices, however, we can estimate public-sector wages to have increased about 300 percent from 1980 through 1989, while retail prices rose about 600 percent in the same period.

14 A general 25 percent pay raise for public-sector employees in 1989 that barely covered inflation was accompanied by a substantial rise of prices for bread and fuel. For a public employee in the lowest income group, the pay raise meant an increase of S £270. At the same time bread prices gradually increased from S £2 to 4 kg, so that an average Damascene household of six with an estimated consumption of 15 kgs of bread per month per person would have extra costs of S £180 for bread only.

15 From S £1,031 million in 1970 to S £5,099 million in 1980.

16 The figures, in the fixed prices of 1980, are: S £5,099 million (1980) and S £5,143 million (1987) for the private, S £9,017 million (1980) and S £6,774 million (1987) for the public sector. According to different deflators, the percentages of the private and the public sector's contribution in gross investments differ in the currentlconstant value statistics.

17 Cf., ?Abd al-Mālik al-Akhras, “TaṬawwur al-intāj al-ijmāli fi al-quṭr al-?:Arabī al-Sūrī” (Gross output developments in the Syrian Arab region), al-Iqtiṣād, 302 (03, 1989), 3–8.Google Scholar

18 Cf. Stat. Abs.

19 Cf. Stat. Abs.

20 The share of the bourgeoisie and petite bourgeoisie in the total Syrian work force rose from about percent in 1970 to about 12 percent at the end of the 1980s. Cf., Perthes, Staar und Gesellschaft, p. 245.Google Scholar

21 For a more accurate picture, we have to take into account that registration becomes increasingly accurate over the years, and that it is most inaccurate in the case of the smallest establishments not employing paid labor. Based on this consideration, the 1970 and 1981 population census data, and sources from the Damascus Chamber of Industry, my own estimate is that in 1970 about half, and in 1988 about a third, of the smallest private industrial enterprises (without paid labor) were unregistered. The total number of private industrial establishments would thus amount to some 45,000 in 1970, 70,000 in 1981, and up to 100,000 in 1988. In the late 1980s, there is a considerable difference between the estimates of the CBS and the data of the Ministry of Industry (Directory for Private Industry and Industrial Artisanery). The latter counted 84,824 establishments of private industry and industrial artisanery in 1987; the CBS's industrial census study for 1987 and 1988 (“Natā?ij baḥthay al-istiqṣā?al-ṣina?ī lil-qitā?al-khāṣṣ li-amay 1987–1988,” unpublished, 1990) counted only 61,079 establishments in 1987 and 59,952 in 1988. In my account, the data of the Ministry of Industry, which are based on the records of the local authorities of industry, are more reliable. Here, and for larger establishments in particular, the registration of establishments and machinery is in the owner's own interest, as import licenses, etc., are tied to the registered capacity of an establishment. The working force registered is usually still below real figures, but owners have to register a number of workers that sounds reasonable for their production capacity. CBS figures are estimates based on interviews in a sample of establishments.

22 The salaried middle class increased from approximately 160,000 in 1970 to 370,000 in 1980 and 550,000 at the end of the 1980s; this represents about 10 percent of the economically active population in 1970 and 18 percent in the 1980s. Out of this number, some 85,000 in 1970, 255,000 in 1981, and 365,000 in 1987 are state employed. Cf., Perthes, Staat und Gesellschaft, pp. 224, 245.Google Scholar

23 Cf. e.g., the results of the 1974 and 1981 census of economic establishments, in Stat. Abs. 1975, pp. 864 f.; Stat. Abs. 1986, pp. 548 f.Google Scholar

24 Legislative Decree 73/14 October 1973.

25 Hannoyer and Seurat report that in several cases no one even knew who had actually ordered a certain project to be built (état et secteur public en Syrie [Beirut, 1979], p. 68).Google Scholar

26 In 1989, ?Aydi's company had a nominal capital of S £500 million. It holds a majority share in, and manages, almost all of Syria's first-class hotels and in 1987 even took over the management of the Ministry of Tourism's Training Institute for Tourism and Hotel Management. The Nahhas Holding Company, with Transtour (nominal capital: S £250 million) as its nucleus, virtually monopolizes the transportation of Iranian tourists in Syria and their accommodation in the Shi?ite worshiping center of Sitt Zaynab, the transport of well-paying European tourist groups, and all first-class taxis. It also has a monopoly on the rent-a-car business.

27 An adverse opinion is held by Fred, Lawson, “Social Bases for the Hamah Revolt,” MERIP Reports, 12, 110 (12, 1982), 24–28, esp. p. 25Google Scholar and “Comment le régime du président El-Assad s'emploie a remodeler l'économie syrienne,” Le Monde diplomarique, 01 1984.Google Scholar

28 Arab Socialist Baʿth Party, Regional Command, Reports and resolutions of the 6th Regional Conference, Damascus 5–15 April 1975, Al-taqrir al-iqtiṣādi (Economic report) (Damascus, 1976), p. 122.Google Scholar

29 In 1975 the capital of new private industrial projects averaged S £89,000 (approx. $23,000); in1985 the average had not increased to more than S £139,000 ($35,000). Cf., Stat. Abs. 1976, p. 312; 1986, p. 208.Google Scholar

30 Cf., Elisabeth Longuenesse, “The Class Nature of the State in Syria. Contribution to an Analysis,” MERIP Reports, 77 (05, 1979), 3–11, esp. p. 5.Google Scholar

31 SAR, , CBS, , “Natā'ij baḥth al-istiqṣā?al-iṣinā fī al-qitā?al-khāṣṣ li-?ām 1983” (Results of the study of the investigation of the private industrial sector for 1983) (unpublished, ca. 1987), p. 2.Google Scholar

32 Some of these fears have a real basis, others might come from the fact that establishments employing more than four people have to pay higher social security payments for their employees. In order to remain small scale, some big establishments are broken apart; each of several brothers or relatives will formally own one small establishment with no or only a few paid employees, although these establishments in reality constitute one production unit.

33 Importers could also legally import outside the official Commercial Bank channel by importing “without transfer of value,” i.e., by paying for their goods from accounts abroad. The system was introduced in the early 1970s, abolished in 1982, and has gradually been reintroduced since 1984. Syrian economists are highly critical of this system, as it encourages foreign exchange black-marketeering. See e.g., ?ānf, Dalila, “Al-iṣlāh al-iqtiṣādī fī al-quṭr al-?Arabī al-Sūrl” (Economic reform in the Syrian Arab region), in The Arab Planning Institute of Kuwait, Al-siyāsāt al-taṣḥiḥiyya wa-al-tanmiya ft al-waṭan al-?Atrabī (Adjustment policies and development in the Arab homeland) (Beirut, Dar al-Razi, 1989), p. 413.Google Scholar

34 Cf. Damascus Chamber of Commerce, Al-ta qrir al-sanawi li-?ām 1983 (Yearly report for 1983) (Damascus, 1984), pp. 5 f.Google Scholar

35 Official private-sector imports were at their highest point in 1981, totaling S £4,200 million (appr. $1,040 million) out of Syria's total imports of S £19,800 million ($4,900 million), declining to £2,900 million out of S £15,800 million in 1982 to reach their lowest level with S £1,300 million out of £16,200 million in 1984, thereafter increasing again, while public-sector imports further declined. 1988 private imports totaled S £6,700 million (on the basis of the devaluated Syrian currency equaling approx. $600 million) out of a total of S £25,000 million ($2,200 million). Cf., Stat. Abs. various years.Google Scholar

36 Stat. Abs. various years.

37 Despite high inflation—the CBS annual index of retail prices in Damascus (1970 = 100) is 285 in 1980, 525 in 1985, and 1533 in 1988-bank interest rates have been ranging between 5 percent and 9 percent since 1981. Cf., Stat. Abs. 1988, pp. 493 if.Google Scholar

38 Libya reportedly made some cash payments on Syrian arms debts to the USSR.

39 The 1981–85 Syro–Soviet agreement on goods exchange listed the following Syrian goods: crude oil and derivatives, cotton, wool, leather, dried onions, peanuts, paints, fabrics, carpets, clothes, tobacco, bags, cosmetics, cleaners, toothpaste. Cf., Samīḥ al-Zayn, “Usus al-tabādul al-tijārī ma?a al-ittiḥād al-Sufyītī” (Bases of commercial exchange with the USSR), al-Iqtiṣād, 252 (01, 1985), 70–76.Google Scholar

40 According to the Syrian minister of economy, private exports to countries having payment agreements with Syria amounted to over 80 percent of all private exports in 1989 (cf. al-Iqtiḥād, 313 [02, 1990], 71 f.). Syrian trade statistics (CBS, Quarterly Summary of Foreign Trade) do not break up figures as to the private- and public-sector contribution. Our estimate is based on the kind of goods exported, and whether they were mainly produced by the private or the public sector. Exports to the USSR have been totaling around $200–300 million annually throughout the second half of the 1980s except in 1989, when they more than doubled three times until they reached about $1,000 million.Google Scholar

41 Legislative Decree 10/1986.

42 A recent study on the Syrian agricompanies reports that most of the profits of Ghadaq, which payed a 7 percent dividend in 1989, did not result from its own agricultural production which had only started in 1988, but from “investments” in foreign banks, trade in imported goods, exports of other producers' agricultural products, and trade in import licenses. Cf., Hans Hopfinger, “Kapitalistisches AgroBusiness in einem sozialistischen Land? Syrien versucht neue Wege in der Landwirtschaft,” Die Erde, 121 (1990), 157–76, esp. p. 172.Google Scholar

43 Ministry of Economy and Foreign Trade, Decree no. 47/1984 and 365/1985.

44 Prime minister, Decree no. 1791/1983; 375/1987; 595/1987. Since 1989, the Syrian Ministry of Economy and Foreign Trade gradually began to replace different “official” rates of the Syrian £ in its dealings with exporters: exporters of certain products could choose either to keep their foreign currency for their own imports or to change it at the “neighboring countries' rate” for the Syrian £ i.e., the free market (or black-market) rate. Recently the same rate was also adapted for exporters of agricultural products who still have to sell 25 percent of export earnings to the Commercial Bank. Cf. Ministry of Economy and Foreign Trade, Decree no. 973/1990.

45 Ministry of Economy and Foreign Trade, Decree no. 158 and 160/1989.

46 Cf., “Hal tansajim ijrā?āt taḥḍir ṣādirāt al-qitā?al-khāṣṣ ma?a siyāsat tawḥid ṣarf al-qaṭ?: ajnabi?” (Do preparation measures for private exportation harmonize with the policies to unify foreign- exchange rates?), Tishrin, 26 06 1989.Google Scholar

47 Local pickles may be transported to the Turkish border, exported, and then dumped. Officially, they are / for a high price, proving legal possession of foreign exchange. In 1989 this practice was made easier, as exporters were no longer obliged to prove that their goods had actually arrived on foreign markets. Customs documents from the Syrian border are now sufficient. Ministry of Economy and Foreign Trade, Decree no. 165/1989, cf. Tishrin, 18 06 1989.Google Scholar

48 In 1985 Syrian exports covered only 41.5 percent of its imports. This ratio rose to 54.4 percent in 1987 and 60.0 percent in 1988. In 1990 the Syrian minister of economy announced a positive trade balance for 1989. According to his figures, private-sector exports had tripled and public-sector exports had almost doubled in comparison to 1988. Cf., Star. Abs. 1989; al-iqriṣād, 313 (02, 1990), 71 f.Google Scholar

49 The number of new private industrial investments increased from about 1,300 in 1982 to 2.000 in both 1986 and 1987 and 1,700 in 1988. The average capital invested in new private industrial projects increased from S £139,000 (approx. $35,000) in 1985 to S £796,000 ($71,000 after the devaluation of the Syrian currency in 1987) in 1988 (Stat. Abs. various years).

50 Records of the Industrial Authority of Damascus and Aleppo, interviews. After a new investment law had been passed in 1991 (Law 10/1991), two mixed (state–private) joint-stock industrial companies for the production of some basic chemical goods were established with an invested capital of S £200 million each; it will, however, take some time until they start production.

51 Ministry of Industry, Directory for Private Industry and Industrial Artisanery, Registration and Statistics Division. For late 1987 this ministry's internal statistics count a total work force of 214,000 in the private industrial sector.

52 For example, factories in Syria's free zones were encouraged at first, then forced to standstills by new regulations denying their products a certificate of origin.

53 Although the Syrian tax system theoretically is progressive, in practice it is regressive. Cf., ?lṣām Bashshtir, “Al-?adāla fi al-niẓām al-ḍarībī al-Sūrī” (Justice in the Syrian tax system), al-lqtiṣad, 191 (12, 1979), pp. 10–20, esp. p. II. Syrian businessmen who openly speak about their finances confirm that they actually do not pay more than an average 5 percent tax on their income.Google Scholar

54 See for greater detail, Volker, Perthes, “A Look at Syria's Upper Class: The Bourgeoisie and the Ba?th, Middle East Report, 21, 170, (05/06, 1991), 31–37.Google Scholar

55 “Al-qiṭā?al-?āmm wa-dawruh fī al-tanmiya” (The public sector and its role in development), Economic Sciences Association of the S.A.R.: 5th Economic Tuesday Forum, January 14 to April 29, 1986 (Damascus, 1986), p. 75.Google Scholar