A Lebanese Abroad

Opinions from an opinionated Lebanese abroad about Lebanon's politics, business and the future of a United Lebanon.

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Monday, May 02, 2005

Lebanon and Syria: Same Past, Very Different Future (Part II)

We cannot dissociate Syria from Lebanon’s future, but we have to manage its intersection by first understanding its differences.

In the past 15 years, Syria tried to make Lebanon be like Syria. For the next 15 years, why not propose that Syria becomes like Lebanon, instead? Syria will stand to gain a lot more by being an open, democratic state, much like Lebanon is today. If that is the case, then both countries can benefit exponentially.

Going forward, Lebanon must become more assertive in what it wants from Syria- basically reversing the roles of the last 15 years. Of course, we know that an abrupt regime change in Syria will make Syria look like Iraq and invite anarchy, Islamic fundamentalism and Al-Qaeda operatives. So, the question for Syria is – what kind of future does Syria want? Can Assad reform Syria on his own? Will he be forced to do it, or will he prolong Syria’s agony by keeping the status-quo another 3 or 4 years and suffer the consequences of raising the pressure level on his oppressed people?

In order to make a more informed judgment on Syrian-Lebanese economic co-operation, we must look at the demographic and financial trends of the past 30 years.

In 2004, Lebanon had a population of 4.5 million, a GDP/capita of $4,300 and a GDP of $19.4 billion. Syria had a population of 18 million, a GDP/capita of $1,200 and an economy of $22 billion. But let’s examine the dynamics. In 1976, with a population of 3.1 million, Lebanon’s GDP/capita was $1,600 while Syria’s 7.6 million people had a GDP/capita of $980. So, in 28 years, despite 15 years of war and 14 years of Syrian’s presence, Lebanon managed to almost quadruple its GDP and GDP per capita while Syria only doubled its economy and almost its population, therefore shortchanging its people’s wealth which only grew by 25% on a per capita basis over the same period.

Assuming Lebanon’s economy continues to grow at 4% while Syria’s at 2%, Lebanon’s economy will surpass Syria’s in 2011. By 2015, Lebanon will have a $30 billion economy and $5,800 GPP/capita while Syria will have a $27 billion economy and $1240 GDP/capita. Syria’s then 22 million people will be shortchanged again.

The macro-economic numbers do not hold well for Syria if it wants to set itself on a better economic development course. More bad news: 71% of Syria’s $5.4 billion in exports are derived from oil revenues. It is predicted that these reserves will expire in about 5 years.

Here’s what the World Economic Forum’s Arab Business Council wrote in their report on Syria in November 2004:

The Case of Syria
- There are no reform plans on paper. Syria is in need of a clear vision.
- Within 5-7 years the Syrian economy shall be completely restructured. Given demographic developments, Syria’s macroeconomic stability could be in danger. Within the next 10 years, 500,000 job seekers will be added to the job markets each year. The window of opportunity to reform is limited given the demographic pressures.
- Syria needs growth of six to seven per cent to sustain itself – to achieve this, Syria needs high investment (public and private), but also drastic improvement of productivity.
- The past decade was a lost one for Syria. It was not conducive to private sector development, growth, or employment. In the past ten years, Syria witnessed a severe economic crisis. One out of four job seekers does not find a new job.
- Syria must embark on a path of reform that emphasizes manufacturing over resources (from oil to non-oil), from public sector- to private sector-driven growth, from import substitution to export-led growth.
- Syria, as any other country aiming to reform, must consider the deep interrelationships that exist between the issue areas to be reformed. Issue areas are inherently interrelated.

(From ARAB BUSINESS COUNCIL ANNUAL MEETING, MARRAKECH, 25 NOVEMBER 2004 http://www.weforum.org/pdf/ABC/marrakech.pdf )

This is why rushing into economic integration is a bad recipe for Lebanon and a good one for Syria. If the economic gap is too wide, the poorer country stands to gain more than the richer one. It’s pure mathematics. Look at the integration of East Germany and West Germany. West Germany had to pay a big price for this integration. They are barely recovering from it 15 years later. This is also why the European Union takes a stepped approach to accepting poorer countries into its membership, and more specifically why they are not rushing to bring Turkey in.

Let us hope that the next Lebanese government sees through the economic integration masquerade that the current government was leading us towards, blindly.

Of course we want to help Syria, but first, Syria must help itself.

For comments, I invite you to the new Open Lebanon Forum:
Please click here for Comments (Registration required)


Blogger Brian H said...

My understanding of Lebanon's success is that it derives from its citizens' energetic and flexible entrepreneurialism. That is very, very, difficult to transplant. It's almost a whole culture.

I.e., I think Syria is f**ked.

4:55 PM  
Anonymous Anonymous said...

Very interesting article. Figures always give you a good dose of reality. Syria is going to need massive international help to restructure its economy. While in the 90's the US were promising billion of dollars to Syria in case it signed a peace agreement, these incentives are absent from the current road map.

1:02 PM  
Blogger Joshua Landis said...

"Assuming Lebanon’s economy continues to grow at 4% while Syria’s at 2%, Lebanon’s economy will surpass Syria’s in 2011."

I am not sure this is a correct assumption. Syria's economy is growing at a rate close to 4% according to the World Bank. In 2003 growth fell to 2.5% because of the US invasion of Iraq. But to use 2003 as the benchmark growth rate is misleading. Of course Syria's population growth is one of the highest in the region and world. It has dipped below 3% today, but was well over 3% during the 1980s and 1990s. Those are the workers now coming into the market.

So per capita income will remain low in Syria, but GNP should rise much more quickly than you suggest. We don't know the population growth rate in Lebanon, but can assume it is considerably lower than in Syria.

Also, most economists use 300,000 as the number of new workers coming onto the market each year and not 700,000.

Although the numbers may be disputed, you're overall argument that the Lebanese economy is much more dynamic than Syria's is correct. All the same, the economic outlook for Syria is not as dire as some make it out to be.

Best, Joshua Landis

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