Top economists say it’s time to downsize

Some of Syria’s most respected economists have demanded a radical reform of government economic policies, a slimming down of the civil service and a major overhaul the state-controlled banking and social security systems. But Deputy Prime Minister Abdullah Dardari, the government’s economic supreme, quickly quashed hopes that the government would implement radical changes. He said in reply to those calling for rapid reform to improve Syria's economic efficiency that the authorities would move cautiously in order to protect public sector jobs and “social safety nets,” even if that meant putting the brakes on growth. The frank exchange of views took place at the annual meeting of the Cairo-based Economic Research Forum, held in Damascus at the end of August. Syrian economist Samir Aita told a packed hall of businessmen that Syria must lower its top rate of income tax further to 25 percent. The top rate of income tax was cut from 65 percent to 36 percent in 2003. Aita also urged the government to undertake a “comprehensive reform” of Syria’s state-owned banks, including a complete re-auditing of their “unclassified liabilities”. Aita, who heads the Concept Mafhoum private economic studies centre, also called for a shake-up of Syria’s social security system to make it more efficient. The state-owned Social Securities Establishment (SCE), founded in 1959, covers over 1.2m public sector workers, some 88 percent of all state employees. However it covers only 36 percent of private sector employees, some 1.6m workers. Aita quoted disturbing figures which showed the SCE had accumulated large surpluses as a result of its failure to pay out benefits owed to tens of thousands of its members. He said this had led to the organisation accumulating a total surplus of US $638 million in surpluses in 2004. “It is urgent to restructure and reform the SCE,” Aita wrote in his report to the Forum, “in particular, reforming procedures and methods of work in order to improve the ratio of subscribers in the private sector and the payment of due subscriptions in the state-owned sector.” Nabil Sukkar, the managing director of the Syrian Consulting Bureau for Development and Investment, criticised the government for failing to undertake economic reforms in previous decades when oil revenues could have buffered the social impact of measures that might now prove “risky”. He said the number of civil servants should be cut and the “unacceptably” low salaries of those remaining on the government pay roll should be improved. Employees at the bottom of the government pay scale currently earn around US $100 per month. But Sukkar said the civil service should be downsized gradually over a long period of time to cushion the “social repercussions” of such a move. The economists’ calls for radical reforms in the public sector received a cautious response from Deputy Prime Minister Dardari, who is also head of the influential State Planning Commission. Dardari told the Damascus meeting that under his vision of the “social market economy,” to which the government committed itself after a conference of the ruling Ba’ath Party in June, Syria would be willing to sacrifice economic growth in order to its protect civil servants. The government was determined to ensure the viability of “social safety nets” and would aim for “sustainable growth not vulnerable to social shocks,” he said. However, Dardari promised to make the public sector “a support for growth rather than a liability.” “We all know we’re on the right track,” he added, promising to give priority to producing a “clear, strong, flexible legislative framework” to encourage new investment in Syria. Official sources say President Bashar al-Assad has granted the Deputy Prime Minister increased powers to reform the economy. But Dardari’s speech failed to impress Frank Hesske, the representative of the European Commission in Damascus. He said the government appeared to lack a clear economic strategy. “Impressions prevail that measures are not guided by a global policy,” Hesske said. He called for “clear information” on Syria’s way forward.