Damascus to close struggling state firms

15 November 2007

Damascus could start shutting underperforming state-owned companies in 2008, after a cabinet committee approved the latest set of economic reforms for the country.

In the first week of November, the economic committee of the cabinet approved a proposal to reform state enterprises “including the possibility of liquidating companies which are loss-making,” according to Deputy Prime Minister for Economic Affairs Abdullah Dardari.

The plans are part of a five-year reform programme that began in 2006. Better-performing businesses could be listed on the stock market or sold to private sector firms.

The impact of the latest reform could be controversial in Syria, where 1.4 million people are employed by the state, out of a total population of 19 million. A full year of discussions were held before an agreement was reached, says Dardari. However, he adds: “We are not about to lay off thousands and thousands of people.”

The Syrian economy is also coming under pressure from the influx of Iraqi refugees. With oil production expected to decline sharply in future, the government is driving forward with wide-ranging reforms. Damascus is hoping to cut its budget deficit from 5.7 per cent of GDP in 2006 to 5 per cent in 2007, despite an expected decline in oil revenues of about 0.75 per cent of GDP.

Among other reforms being undertaken are a simplification of the tax system, including the forthcoming introduction of value-added tax (VAT).

The World Economic Forum ranked Syria 80 out of 131 countries in its latest Global Competitiveness Report, released in late October.

The only country in the region that fared worse was Algeria, at 81.

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