Rolling back the frontiers of reform

On March 18 the Syrian government announced it would set price controls for a whole set of key commodity items, and that all retailers will have to comply with the new restrictions. The decision is a response to the surge in prices witnessed recently in the local market. Indeed, while inflation remained relatively under control for most of last year, the last few weeks of 2011 saw a steep rise in the price of various consumer items, particularly food products; this trend has only accelerated since the beginning of this year.

The factors behind these price rises include the depreciation of the Syrian pound, the suspension of the free trade agreement with Turkey, the rising costs of banking and transport insurance due to economic sanctions, logistical and supply difficulties across the country and the increase in production costs due to growing power shortages. The prices of many food items such as sugar, rice, vegetable oil, tea, poultry, meat, eggs and butter have risen by double digit-figures in recent weeks; sometimes by up to 100 percent.

In effect, this dramatic move by the government marks a return to price control practices that had been abandoned long ago, when the Syrian government began to liberalize its economy in the mid-1980s. It is also a move to show the Syrian people that their government is doing something to relieve them from increasingly difficult living conditions. The Minister of Economy Mohammed Nedal al-Shaar said that “some greedy” traders were trying to benefit from the Syrian crisis, with local press accusing them of “sucking the blood of poor Syrians.”

This discourse on the responsibility of the business community is likely to be well received by large segments of the population. Four decades of socialist policies and anti-business discourses have, indeed, helped shape the mind of many Syrians. The Baath party’s rise to power, which promoted the country’s rural population and widened the size of country’s middle class, was largely made at the expense of the land-owning and urban elite that ruled the country since its independence from France in 1946. Putting the blame on capitalists, traders and the bourgeoisie was a regular part of the official speeches of Syrian leaders from most of the 1960s to the mid-1980s.

Obviously, the accusation was not to the liking of the business community and, in a statement, the head of the Damascus Chamber of Commerce asked the local media to stop blaming traders, who were “part of society and not imported!” The bad press for traders is, however, not solely to be blamed on ideology. It is also to a large extent the reflection of the severe market distortions present in the Syrian economy. Indeed, oligopolistic situations continue to prevail in a wide number of business sectors and although in recent years government officials used to acknowledge this more or less openly, nothing significant was made to curb these practices — doing so would, indeed, have endangered the interests of too many people closely tied with the government.

More significantly, the trade in accusations between government officials and traders reflects the dismal way in which the liberalization of the Syrian economy was conducted. Under the management of Abdallah Dardari, the key decision maker on economic policy in the Syrian government for almost a decade, large sectors were liberalized in the hope of attracting private investment. While in itself this opening was widely deemed necessary, it was conducted in a largely unregulated environment.

The retreat of the state coincided with the lack of a civil society and of its institutionalization (for instance consumer protection bodies) which enjoy little judicial oversight over enforcement. The large number of restrictions, which formally regulate business practices, helped give the impression that the State continued to cater to the general welfare. But in practice, a structurally corrupt administration acted more as a middleman for business actors than as an efficient body defending the interests of society.

The consequence of all this has been an increasing income gap and a gradual meltdown of state institutions. In a statement to the press, Shaar admitted to how empty-handed he felt. In reference to when the state still had a strong hand in regulating the economy he said: “We are no more in [the year] 2000.” It was also the year Bashar al-Assad became president.


Note: This article appeared first in the April 2012 edition of Executive Magazine