Syria is preparing a bill to cut customs duties for raw materials, in an effort to modernize the country's industrial sector and in an unavowed attempt to counter Lebanese competition. The customs reform currently being studied by a Syrian inter-ministerial committee "is part of the modernization and development process as instructed by President Bashar Al-Assad, and has nothing to do with Lebanon", Finance Minister Mohammad Khaled Mahayni told the official daily Ath-Thawra.
But for business circles, there is no doubt that Syria's initiative was prompted by Lebanon's decision, in November, to substantially reduce customs duties on most imports. Syrian MP and textile manufacturer Riad Seif, who had launched an attack against Damascus's industrial policy last April, agreed that Lebanon's decision had hastened Syria's reform plans.
Lebanon's slashing of import duties is a problem for both Syrian traders and industrialists, said Seif, who is a representative for the industrial sector in parliament. "Products imported by Lebanon have become a lot cheaper than in Syria", he explained. "This causes the risk of these products being smuggled into Syria, which is quite possible considering the length of the border between the two countries", he added.
Syrian industry is likely to suffer from Beirut's competition because since December 1, Lebanon can import raw materials and semi-finished products tax-free, while Syria still imposes a 15 percent tax on the same products, Seif said.
Lebanese competition will be further increased next year, with customs duties between the two countries falling from 50 to 25 percent, in conformity with a Syrian-Lebanese agreement, which will gradually reduce tariffs on industrial goods, bringing them down to zero by 2002.
"If this situation goes on, Syrians will move their factories to Lebanon", Seif warned. The independent MP also stressed the urgent need for Syrian industry to modernize if it was to compete with its more dynamic neighbor.
Syrian industrialists are also disadvantaged by a complicated regulation of imports and the total absence of e-commerce. "In Lebanon, a manufacturer can order on the web and receive the goods within weeks," Seif said. "In Syria, it takes three months".
In financial consultant Samir Seifan's opinion, cuts on import duties are only the first in a series of measures the government will have to take if it wants to reform Syrian industry. The industrial sector contributes 18 percent of Syria's Gross Domestic Product, estimated at $17 billion in 1999.
"A true reform requires a reduction of the administration's bureaucracy, a modernization of the banking and transport sectors, technology transfers and better training", Seifan said. Syria has moved to modernize the banking sector, notably through allowing private banks to operate, but economists say much remains to be done. — (AFP, Damascus)
by Maher Chmaytelli
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com )