Syria\'s challenge: reform the private sector without privatizing
Syria has set itself the difficult goal of making public companies profitable without resorting to privatizations, which would imply major job lay-offs.
"The state sector plays an important social part in Syria, by soaking up unemployment and provided subsidized products to the population", financial consultant Samir Seifan says.
But public companies suffer from heavy "bureaucracy, disguized joblessness, rigid regulation, which hampers flexibility and competitivity, and from cash shortages", he adds.
The need for state companies to become profitable started making itself felt in 1991, when, in a bid to attract investors, the government allowed the private actors to invest in sectors that used to be exclusive to the state, such as the transformation industries.
The public sector then had to face competition from the private sector, and the pressure grew even heavier when Syria joined the pan-Arabic customs agreement, says Seifan.
But Hafez al-Assad had to die, in June, and his son to replace him as the Syrian president, for the issue of a reform to be brought up in governing circles.
Syria's Progressive National Front (PNF) coalition, headed by the ruling Baath party, called Saturday for state enterprises to be run in line with "economic norms," meaning they must be efficient.
But Syria wants a smooth change, to avoid the social tension that appeared in some of the former socialist countries.
The young president has already said Damascus will not follow the western model, and the government has ruled out privatizations, considered to be a direct threat to employment.
The unemployment rate is officially estimated at 9.5 percent, while private experts say it is as high as 20 percent.
"The problem of labor surpluses is a very difficult one to solve. The government asked its experts to find solutions", says Seifan.
The consultant says one of the scenarios is a recycling of labor, which could drive the excess workforce towards new jobs. Financial aid to help the reform take off has also been considered, together with some form of assistance for the unemployed to help them find new jobs or advise them on starting new businesses.
Once the issue of labor out of the way, the government could decide "to get rid of the companies that have no chance of succeeding", Seifan says.
State daily Teshrin published Monday, December 25, a list of six state import-export companies that have "hardly any work" because they are ill adapted to the interior and exterior markets. These companies are specialized in textiles, food products, tobacco and spirits, metals, automotive and pharmaceutical products.
However, the government could retain the "strategic industries", such as mining, and modernize them by granting them financial and management autonomy, Seifam says.
State companies contribution to Syria's $17 billion gross domestic product, swings between 35 and 50 percent. This variation depends on oil rates, oil exploitation being managed by the state, and on farming production, controlled mainly by the private sector.
Earlier in December, Baath okayed the creation of private banks, breaking the state monopoly on the banking sector instored by the 1963 nationalization.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)