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Development Planning

Development planning began in 1947, when a British firm was hired to survey the Syrian economy and make suggestions for investments. Presumably, the report guided the government's limited development expenditures for several years. In 1955 an economic mission from the World Bank suggested a six-year, LS1.9 billion development program and formation of a planning agency. In the same year, a planning organization that immediately presented a seven-year, LS660-million development plan was established. Although this plan was adopted, it was discarded in 1956. In 1958 a ten-year plan was prepared, incorporating the results of the 1957 aid agreement with the Soviet Union. This plan was also discarded in order to mesh plans with Egypt.

After Syria's union with Egypt, Syria's First Five Year Plan (beginning in July 1960 and ending June 1965) within a broader ten-year program was adopted. As in the Egyptian plan, Syria's gross output of goods and services was to double in ten years, requiring a yearly increase of 7.2 percent. Total planned investment in the Five-Year Plan, including that by the private sector, was LS2.7 billion. Irrigation and agriculture were allocated 20 percent of the investments, transportation and communications 20 percent, and industry--particularly the oil and electric power industries--19 percent. Foreign aid was to supply nearly one-quarter of the financing (nearly 40 percent of public sector investments), supplemented by a small amount of internal borrowing. However, withdrawal from the union with Egypt, political instability, private investors' fear of nationalization, and inadequacies of the government structure combined to keep actual investment to less than 60 percent of the plan.

The Second Five-Year Plan (1966-70) maintained the same growth target (an annual average increase of 7.2 percent for GDP), but substantially increased planned public sector investments to achieve the socialist economy envisioned by Syria's leaders. Planned development expenditures were LS4.96 billion, of which the public sector was to contribute LS3.45 billion and the private sector LS1.5 billion. Dependence on foreign aid increased, amounting to a planned LS1.94 billion or 56 percent of public sector investments (39 percent of total investments). Planned allocations included LS1.39 billion to irrigation and agriculture (primarily the Euphrates Dam and other irrigation projects), LS612 million to fuel and electric power, LS894 million to transportation and communications, LS399 million to manufacturing and mining, and LS1.28 billion to housing, construction, and public works. More than two-thirds of private investments were to be in housing, construction, and agriculture.

Implementation of the second plan fell short of goals, partly because of the June 1967 War and the resources devoted to national security. Economic growth was about two-thirds of that projected under the plan and investments were about 70 percent. Public sector development expenditures lagged considerably during the first three years, and only large investment in 1969 and 1970 partially salvaged the situation. Private sector investment (largely in housing and construction) appeared to be closer to what was planned than public sector investment. Export growth exceeded the plan but was less than import growth, causing a deterioration in the balance of payments.

The Third Five-Year Plan (1971-75) aimed at an 8.2 percent growth rate for GDP (in constant prices) and investments totaling LS8 billion, of which LS6.4 billion was planned for the public sector and LS1.6 billion for the cooperative and private sectors. Public sector allocations were 25 percent for completion of the Euphrates Dam, 10 percent for agricultural and other irrigation projects, 18 percent for industry and mining, 16 percent for fuel and electric power, 12 percent for transportation and communications, 9 percent for housing, water, and other public works, and 10 percent for miscellaneous, including debt service. Private sector investments were scheduled primarily for housing and construction (LS903 million); much smaller amounts were scheduled in other sectors. Domestic savings were expected to increase sharply to finance investments. Surpluses of public enterprises alone were expected to finance over three-quarters of public investments.

Implementation of the third plan started slowly; development expenditures were far less than planned by the outbreak of the October 1973 War. The war damaged key industrial facilities, particularly power stations and the oil refinery at Homs. The plan was modified for necessary repairs and for additional projects because substantial new aid became available. Over 50 percent of investments were concentrated in the last two years of the plan.

The results of the third plan were mixed. GDP (in constant prices) increased over the five years by 10.7 percent a year, considerably more than planned because of relatively good weather for crops, increasing production of and higher prices for crude oil, and the high level of construction, particularly after 1973. Some large projects were completed during the Second Five-Year Plan, such as the Euphrates Dam, a fertilizer plant, and the beginning of a steel industry that added to and diversified the industrial strength of the country. Public investments, however, reached only about 70 percent of the target in spite of heavy development expenditures in the final two years, and the pattern by sectors was irregular. Even with the large expenditures in the Euphrates basin, investment in agriculture and irrigation stagnated in real terms. Public savings and surpluses of public enterprises fell considerably short of goals. Without new and unplanned foreign aid, public investments would not have even approached targets as closely as they did. However, the high level of investment after 1973 contributed to shortages of goods and skilled workers plus serious inflation.

Aware of deficiencies,the government attempted to remedy problems in planning and implementation. In 1968 the planning structure was reorganized; as of 1986 it retained the same form. The Supreme Planning Council, consisting of the prime minister and the highest officials concerned with the economy, determined broad strategy and general objectives from which the State Planning Organization (SPO) drew up detailed guidelines. Planning units in ministries developed sectoral plans in collaboration with appropriate SPO officials. The process then was reversed-- the sectoral plans passing the SPO for final formulation, with subsequent approval by the Supreme Planning Council. SPO prepared the annual development budget for inclusion with the government's current budget expenditures and shared responsibilities with another organization under the prime minister's office in the follow up of the plan. The Central Statistical Bureau also supported the prime minister in providing data for planning and implementation. Statistical services had improved considerably by the mid-1980s, but collection and processing still needed improvement to meet the requirements of officials and planners.

The reforms made failed to raise the government's management of the economy to the level outlined in the Third Five-Year Plan. Deficiencies remained in project identification, preparation, implementation, and coordination. Management of public sector businesses was generally weak, reducing the profits available to the government for development expenditures and often leaving industrial capacity underutilized. In spite of efforts of the Ministry of Finance to reform the tax system and increase efficiency of domestic resource mobilization, deficiencies in labor, wage, and price policies hampered development. Corruption became so widespread that the government initiated a program against it. Some economists viewed the government's administrative problems as so complex that many years of serious reform would be required to achieve satisfactory efficiency.

Preparation of the Fourth Five-Year Plan (1976-80) required a reassessment by the country's economic leaders. In particular, the reduced availability of economic resources (caused in part by a slowing of foreign aid, loss of pipeline transit fees and concessionary crude oil supplies from Iraq, military expenditures for peacekeeping in Lebanon, and care for the large number of refugees from Lebanon) forced a program of austerity. The reassessment contributed to a cabinet change in August 1976, in which the new cabinet was charged with improving economic management and particularly with strengthening public sector performance.

The original draft of the fourth plan, completed by 1975, was overly optimistic. A drastically revised draft was finished in June 1976 but was further revised downward during the year. Because of the shortages of agricultural workers in the northeast and technicians and managers in industry, the new cabinet reportedly viewed the revised plan as still too optimistic about GDP growth, expansion of irrigation, and production increases from manufacturing and extractive industries. The revised plan was approved and became law in April 1977, although as a tentative plan subject to further revision.

The approved Fourth Five-Year Plan anticipated an increase in real terms of 12 percent a year in agricultural output, 15.4 percent a year in mining, manufacturing, and electric-power production, and 16 percent a year in construction. Total planned investments were LS54.2 billion, of which LS44.8 billion was to be generated by the public sector. Agriculture and irrigation received the largest allocation, LS12.9 billion, of which LS10.4 billion was by the public sector, including LS7.4 billion for irrigation in the Euphrates basin and LS1.1 billion for fifty- eight small dams and irrigation and drainage projects elsewhere. Mining and manufacturing were allocated LS11.3 billion, of which public sector investments were LS9.9 billion. Fuel and electric power, all in the public sector, received LS7.9 billion. Housing was allocated LS8.1 billion, almost evenly divided between public and private investments. The transportation and communication systems, primarily public sector, were allocated LS5.6 billion. Investments in public works, local government, trade, and other services (largely public sector) made up the remainder.

Despite the infusion of funds from Arab oil-producing states, Syrian officials had concluded that the targets set for the Fourth Five-Year Plan were unrealistic and that the plan contained too many large and overly ambitious projects. Consequently, the Fifth Five Year-Plan (1981-1985) sought more modest goals than its predecessors. The plan, announced only in mid-1981 and published in 1982, called for few new major projects, indicating the return of realism to Syrian development planning. Although planners concentrated on completing projects begun under the fourth plan, emphasis shifted from industry to agriculture, with self-sufficiency in food the ultimate goal. The large increase in food imports since the late 1970s and the general neglect of the agricultural sector in that decade produced a renewed commitment to agricultural development. The Fifth Five-Year Plan sought a reduction in both public and private consumption while continuing to increase investment. In addition, the plan targeted a decrease in the trade deficit and a reduction in the growth of public spending. Under the Fifth Five- Year Plan, total planned investment was LS101.5 billion with LS9.4 billion derived from foreign loans and aid. The private sector was slated to provide LS23.3 billion. Agriculture received LS17.2 billion, and mining and manufacturing's allocation was LS27 billion, including LS4.6 billion for the extractive industries and LS10.1 billion for electricity, gas, and water. The transportation and communications sector received LS12.8 billion, the financial sector LS18.4 billion, and the service sector LS20.6 billion. Although the Fifth Five-Year Plan's goals were more realistic than goals of previous plans, targets proved unattainable. In fact, the fifth plan achieved only 50 percent of its goals in key areas. Factors largely beyond the control of the government contributed to this failure. The oil crisis of the 1980s, which lowered the price and demand for petroleum, reduced the value of Syria's crude oil exports. The crisis also produced depressed economic conditions in the Arab oil-producing states, leading to a marked decrease of workers' remittances and foreign aid and grants from the Gulf states in the mid-1980s. In addition, the 1983-84 drought damaged not only the production of key crops but also adversely affected agriculturally dependent sectors of the economy. Mounting defense expenditures and government policies, including price controls and marketing restrictions on agricultural production, also accounted for the failure to achieve the projected goals of the plan. In general, less than 70 percent of the amount allocated for investment budgets in the early 1980s actually was spent. The Fifth Five- Year Plan projected a 44.7 percent growth in real GDP (in 1980 prices), equivalent to an average annual increase of 7.7 percent, but real GDP fell from 1982 to 1985.

Individual sectors clearly failed to meet or even approach the targets. The value of agricultural production was slated to grow an average of 7.8 percent a year under the plan. Despite the state's renewed emphasis on agricultural development, production decreased in the early 1980s as a result of drought conditions. Increased production levels in 1985 occurred more as a response to good weather than as an emerging trend toward increased agricultural output. Structural changes in the economy and the movement of the labor force away from the agricultural sector weakened attempts to increase production. The mining and manufacturing sector, targeted to rise 42.7 percent over the five-year period, grew only about 8.5 percent in the early 1980s. The sector experienced an overall decrease in the real value of production from 1980 to 1985, despite increases in electric power generation and manufacturing output. The plan also anticipated an 8.9 percent per year rise in investment and a 6.4 percent per year increase in current expenditures. Allocated development expenditure actually declined in real terms from the 1980 to 1985 budgets. Gross domestic investment, both public and private, grew about 2.9 percent year. Current expenditure grew 9 percent per year in real terms during the period of the Fifth Five-Year Plan. The planned yearly increases for imports and exports were 3.4 and 6.5 percent, respectively, yet both actually fell. The trade deficit and food imports, however, continued to grow. In early 1987, the Sixth Five-Year Plan (1986-1990) had still not been published. However, Syrian government officials had revealed the general goals of the plan in statements to the international media. Like its immediate predecessor, the Sixth Five-Year Plan stressed completion of existing projects and increased productivity in ongoing ones, rather than the implementation of major new development projects in a period of economic retrenchment. Officials anticipated that total investment in the Sixth Five-Year Plan would barely exceed the LS101.5 billion allocated for the fifth plan. The government continued to emphasize agriculture, including land reclamation and water resource exploitation. Agriculture's share of investment was expected to increase from the 16.9 percent of the fifth plan to about 19 percent under the sixth plan. Industry's allocation was also slated to rise slightly from 12.2 percent in 1981-1985 to 13.7 percent in the 1986-1990 plan.

Data as of April 1987

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