Context Over the past 6 months, Syria has witnessed an unprecedented wave of protests originally sparked by the arrest of a group of youth spray painting anti-government graffiti in the rural and impoverished town of Dera’a. The regime’s forceful crack-down of the first popular protest demanding the release of these youths quickly prompted renewed demonstrations. The Syrian security forces violently dispersed the protestors. In a self-perpetuating cycle, protests were met by more Government violence, the unrest quickly spreading to other cities throughout Syria. The demonstrators progressively increased their demands, from an initial request for meaningful political reforms to an end to the Baath party regime headed by President Bashar al Assad. According to UN figures, more than 2000 Syrians have been killed since the start of the crisis, with many more injured or held in custody. Hoping to quell the unrest, the Syrian government proposed reforms but have been deemed largely insufficient by the protestors. The economic impact of the crisis already appears to be significant, with the tourism, financial and trade sectors affected the most. There are also indications that foreign direct investment has dried up, forcing the Syrian authorities to take costly measures to defend the stability of the Syrian Pound and to prevent capital flight. Moreover, in a move to appease popular discontent, the Syrian Government has partially rolled back economic reforms enacted over the past years, re-introducing fiscally unsustainable agricultural and energy subsidies and raising public sector salaries. Prior to the recent crisis, Syria’s economic reform efforts had helped to strengthen its growth performance. However, external and domestic shocks, particularly the impact of the global financial crisis and prolonged drought, have adversely affected Syria’s macroeconomic performance. Syria’s GDP, however, remained dependent on the oil and agriculture sectors, which are subject to fluctuating oil prices and rainfall. The oil sector provides approximately 20% of the government’s revenues and around 40% of its export receipts. The agriculture sector contributes to 20% of the GDP and less than 20% to employment. Oil exports, exports of services and foreign transfers of income and remittances are the main sources of foreign earnings. Over the short and medium term, Syria’s recovery will ultimately depend on the outcome of the ongoing popular uprising and the scope of political reforms. Even with a successful political transition, Syria faces difficult challenges particularly: (1) Keeping strong growth and developing non-oil sectors to cope with the demographic pressures and decline in oil production and, (2) maintaining fiscal sustainability while providing social protection to a growing number of young unemployed and to climate affected areas. Syria will need to diversify its economy, apart from the oil sector and improve private sector development and exports. Structural reforms are needed to help sustain export diversification and to implement broad institutional reforms. In addition, Syria will need to increase its productivity by raising the skills of its labor force and improving its technological base. Other challenges include the quality of the education system currently unable to provide economically relevant skills to the young labor force. Syrian workers appear uncompetitive by regional standards. Major upgrading of the quality of the human resource base is required to take up the challenge of opening up the economy. This includes upgrading the quality of education in schools, professors at universities, vocational training systems and civil servants to manage the transition process. Lastly, in line with many countries in the region, Syria also faces major environmental and natural resources sustainability issues. Most water basins are under stress and water deficits are expected to worsen, due to large and unsustainable water usage in agriculture and increase in urban water demand. Climate change has also affected agriculture production, which has adversely affected the Government’s food security target.
StrategyÂ
Prior to the current crisis, the World Bank was providing support to Syria through technical assistance, advisory services and policy advice on private sector development, human development, social protection and environmental sustainability. Specific activity areas included: - Economic Governance and Transition Support:Â Trade policy reform; Public expenditure policies; Sources of non-oil growth (Country Economic Memorandum); Private sector development and business environment; Public Private Partnerships; Governance, Public Financial Management and Procurement Reform; Public Land Management Reform, Statistical capacity.Â
- Human Development and Social Protection: Labor market and employment; Enhancing policymaking and implementation capacity in social protection; Reform options for social insurance; Education sector strategy, Support to avian influenza preparedness.
- Sustainable Development: Electricity sector strategy; Agriculture and irrigation sector reform; Technical Assistance on Water Supply and Sanitation; Support for the establishment of the Syrian Telecommunications Regulatory Authority; Transport sector technical assistance; Support for the development of urban development, cultural heritage and tourism development strategies
In light of the progressive deterioration of the security situation in Syria, World Bank operational activity and missions to Syria have been halted as of March 2011.
The International Finance Corporation (IFC) made its first investment in Syria in 2001 with a $1 million equity stake in a drip irrigation systems manufacturer. Since then, IFC has made additional investments, including an equity position in Bank of Syria and Overseas (BSO), the first private sector bank in Syria. IFC's stake was sold on the Damascus Stock Exchange in 2010; however, BSO remains a partner bank under IFC's Global Trade Finance Program. In addition, IFC provided a loan to a chemicals company and contributed equity to the First Microfinance Institution Syria. The current committed portfolio is approximately $17 million. Prior to the crisis, IFC was assisting as transaction advisor the Syrian Government in developing the Al-Nassarieh Independent Power Producers (IPP) project.
Results
Over the years, the World Bank has developed a broad technical assistance and analytical advisory services program in Syria. This support has been instrumental in supporting critical reforms in the following areas: - Public Procurement System: Revision of the Public Procurement Law and establishment of a Public Procurement Office;
- Public Financial Management including capacity building on fiscal forecasting;
- Public-Private Partnerships: Development of the Public Private Partnership framework and law;
- Governance and Anti-Corruption: Preparation for the ratification of the UN Convention against Corruption, training of judges and prosecutors on financial crimes;
- Trade: Review of Syria’s trade regime;
- Business Environment: Reform advisory program on Doing Business Indicators; and
- Provision of analytical inputs to the 11th Five-Year Plan.
Partners
The World Bank has implemented its technical assistance program in close coordination with other bilateral and multilateral donors present in Syria, which include: the European Commission, Agence Française de Développement (AFD), Deutsche Gesellschaft für Internationale Zusammenarbeit (GTZ), Japan International Cooperation Agency (JICA), United Nations Development Program (UNDP) and the Government of Italy.                                 All dollar figures are in US dollar equivalents. Updated September 2011 For more information, please contact:
Mona Ziade, mziade@worldbank.org  |
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