Agriculture accounts for 25 percent of the country’s GDP and 42 percent of the total work force. Of Syria’s 72,000 square miles, roughly one-third is arable land, with 80 percent of cultivated areas dependent on rainfall for water.
Since 1990 the government has redirected its economic development priorities from industrial expansion into the agricultural sectors in order to achieve food self-sufficiency, enhance exports, and curb rural migration. Thanks to sustained capital investment, infrastructure development, subsidies of inputs, and price supports, Syria has transformed itself from an importer of many agricultural products to an exporter of cotton, fruit and vegetables.
One of the major reasons for this turnaround has been the government’s investment in a huge irrigation systems in Northern and North Eastern Syria.
Today, the best farmland is located along the coast and in the Jabal al-Nusayriyah, around Aleppo, in the region between Hama and Homs, in the Damascus area, and in the land between the Euphrates and Khabur rivers, which is known as Al Jazira or The Island. The principal crops include wheat, barley, cotton, lentils, chickpeas, olives, and sugar beets. Large numbers of poultry, cattle, and sheep are raised, and dairy products are also important.
Most agricultural land is privately owned, a crucial factor behind the sector’s success. About 28 percent of Syria’s land area is cultivated, and 21 percent of that total is irrigated. Most irrigated land is designated ‘strategic’, meaning that it encounters significant state intervention in terms of pricing, subsidies, and marketing controls.
Strategic products such as wheat, barley, and sugar beets, must be sold to state marketing boards at fixed prices, often above world prices in order to support farmers, but at a significant cost to the state budget. The most widely grown arable crop is wheat, but the most important cash crop is cotton, which was the largest single export before the development of the oil sector.
As part of it’s ongoing strategy, the government’s aim is to increase irrigated farmland by 38 percent over the next decade.
Oil & gas
Syria has produced heavy-grade crude from fields in its North East region since the late 1960s. In the early 1980s, light-grade, low-sulphur oil was discovered near Dayr az Zawr in Eastern Syria. This discovery relieved Syria of the need to import light oil to mix with domestic heavy crude in refineries.
In 2005 Syria exported roughly 200,000 bbl/d (32,000 m3/d) and oil still accounts for a majority of the country’s export income. More recently, Syrian oil production has been about 530,000 barrels per day. Although its oil reserves are small compared to those of many other Arab states, Syria’s petroleum industry accounts for a majority of the country’s export income.
The government has successfully begun to work with international energy companies to develop Syria’s promising natural gas reserves, both for domestic use and export. US energy firm, ConocoPhillips, completed a large natural gas gathering and production facility for Syria in late 2000, and will continued to serve as operator of the plant until December 2005.
Syria has historically enjoyed some success in securing partnership agreements with overseas Petroleum companies. In 2003 it signed an exploration deal with partners Devon Energy and Gulf Sands and a seismic survey contract with Veritas.
In addition to oil, Syria also produces 22 million cubic metres of gas per day, with estimated reserves around 8.5 trillion cubic feet (240 km3). While the government has begun to work with international energy companies in the hopes of eventually becoming a gas exporter, all gas currently produced is consumed domestically.
Going forward the government is working to attract new investment in the tourism, natural gas, and service sectors to diversify its economy and reduce its dependence on these two key sectors.
Government and economy
During the 1960s, under its socialist ideology, the Syrian government nationalised most major enterprises and adopted economic policies designed to address regional and class disparities. This policy of state intervention and price, trade, and foreign exchange still hampers economic growth, although the government has begun to reconsider many of these policies, especially in the financial sector and the country’s trade regime.
Taken as a whole, Syrian economic reform thus far has been incremental and gradual. The government has begun to address structural deficiencies in the economy such as the lack of a modern financial sector through changes to the legal and regulatory environment. In 2001, Syria legalised private banking and accordingly, in the same year, four private banks began operations.
Hot on the heels of these developments, in August 2004, a committee was formed to supervise the establishment of a stock market. Beyond the financial sector, the Syrian government has implemented major changes to rental and tax laws and is considering similar changes to the commercial code and to other laws, which currently impact property rights.
Trade and commerce has always been important to the Syrian economy, which benefited from the country’s location along major East-West trade routes. Syrian cities boast both traditional industries such as weaving and dried-fruit packing and modern heavy industry. However, in light of the policies adopted from the 1960s through to the late 1980s, Syria was unable to join an increasingly interconnected global economy.
In late 2001, however, Syria submitted a request to the World Trade Organisation to begin the accession process. Syria had been an original contracting party of the former General Agreement on Tariffs and Trade but withdrew in 1951 because of Israel’s membership. Major elements of current Syrian trade rules would have to change in order to be consistent with the WTO. Syria also continues to discuss a possible Association Agreement with the European Union that would entail significant trade liberalisation.
Ongoing commercial liberalisation measures have filtered down to Syria’s private sector. In 1990, the government established an official parallel exchange rate (neighbouring country rate) to provide incentives for remittances and exports through official channels. This action improved the supply of basic commodities and contained inflation by removing risk premiums on smuggled commodities.
The bulk of Syrian imports have been raw materials essential for industry, agriculture, equipment, and machinery.
Major exports include crude oil, refined products, raw cotton, clothing, fruits, and grains. Earnings from oil exports are one of the government’s most important sources of foreign exchange.
Although economic reform measures have been implemented slowly, earlier reforms have stimulated the private sector. The simplification of trading procedures, the expansion of a wider range of industry projects available to private companies, the easing of foreign exchange dealings, and the reduction of state intervention has helped to encourage private sector development. In addition, investment law has enabled the new projects to be initiated, particularly in small-scale manufacturing and service sectors. The tourism sector holds great potential and many new joint ventures between the public and private sectors have become more common in recent years.
The Syrian private sector has much to offer that the public sector cannot, a higher degree of efficiency, work incentives, and better training and salaries. This may lead those in the public sector to transfer to the private sector, which in turn will help make public sector enterprises more efficient. In addition, due to a wide range of regional and international contacts, the private sector also has greater access to international capital markets in order to finance new projects.
Going forward, the return of the younger generation of foreign-educated Syrian nationals will help to improve Syria’s economic management. Many young Syrian businessmen are seeing new potential for economic growth as reform measures are initiated. Influenced by the experiences in market-oriented societies, this generation may change how business is conducted.
The Syrian economy is in the beginning stages of a transformation period. While still highly centralised, recent economic liberalisation measures have led to a revitalisation of entrepreneurial activities in the private sector.
This, built on a strong foundations of agriculture and oil, will galvanise the country and help it achieve success on a global stage.
