Syria: A decade on

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This month marks the tenth year of Bashar Al Assad's presidency of Syria, a decade of steady reform which has seen greater economic freedoms extended to several sectors - notably banking and financial services - as part of a transformation from a socialist to a "social market" economy.

Al Assad was sworn in on July 17, 2000 at the age of 34, just over a month after the death of his father, Hafez Al Assad. While the younger Al Assad has presided over a reform process that has delivered sustained growth, recent developments have created new national challenges and exposed older ones that still need to be addressed.

A three-year drought has strained the agricultural sector in the east, and major industries in the north such as textiles were hit hard by the global downturn. Longer-term issues hampering growth are a slow decline in oil production, a delayed reform of state enterprises and high levels of corruption.

Syria's measures to tackle graft, such as the high-profile arrest last year of Hassan Makhlouf, the former Customs chief, have improved the country's image, and it climbed 21 places to 126th of the 180 countries surveyed by Transparency International's 2010 Corruption Perceptions Index.

However, improving the overall competitiveness of the Syrian economy will take time, and it was ranked 94th out of 133 in the World Economic Forum's 2009-10 "Global Competitiveness Report", tying for last place among Arab states with Mauritania. Decades of underinvestment in infrastructure need to be addressed, as do outdated business practices and attitudes.

However, the Syrian government has been working hard over the past decade to attract foreign investment, particularly through major laws introduced in 2007 that dealt specifically with the rights and obligations of overseas companies. The laws provided assurances in repatriation of earnings and capital, as well as the import of capital goods, which are seen as prerequisites to attracting foreign direct investment (FDI).

Since the implementation of the laws Syria has jumped to the top of its regional list for FDI, according to a September 2009 report by the UN's Economic and Social Commission for Western Asia, with net flows rising by 43% in 2008 to $1.3bn.

The government has also worked to use Al Assad's growing international stature to attract investment from Syria's large expatriate community. A recent tour of Latin America saw the signing of a $100m trade and development fund agreement with Venezuela, which is home to a large Syrian diaspora. Al Assad's first tour of Latin America also included visits to Cuba, Argentina and Brazil, the latter of which is home to a population of Syrians numbering between 2m and 3m.

During Al Assad's two-day visit to the country in late June, five agreements and memos of understanding were signed between Syria and Brazil in various areas of cooperation. Brazil has also expressed its support in establishing a free trade zone between the Southern Common Market and Syria, which would help Latin American countries reach markets in the Middle East. Al Assad also made a stopover in Argentina, where the two countries traded support for Argentina's claim to the UK's Falkland Islands and Syria's claim to the Golan Heights.

In addition, Al Assad's government hopes to generate investments worth $77bn from the private sector over the next five years, and business practices in Syria have begun to evolve, partly due to support from international partners such as the EU and the UN. Firms have meanwhile benefitted from greater institutional support and backing. Civil society has also started to play an economic role, under the sponsorship of Asma Al Assad, the first lady, with Syria now a regional leader in areas such as microfinance.

© Oxford Business Group 2010