Syria has one of the highest population growth rates in the world. Most of the population lives in a strip of land running from Damascus in the south to Aleppo in the north. The level of urbanization, at around 55%, is relatively high. Although the rate of growth of urban centers has lessened in recent years as better infrastructure has encouraged the rural population to stay in the countryside, the pressure on urban centers, particularly Damascus and the coastal cities, continue to grow.

Syria has a well-educated population and a well-trained workforce, and most children of primary school age are enrolled in school. Health indicators, however, are less good: while there have been improvements in the medical sectors, they have not kept up with population growth and there are substantial regional variations. By the end of 1994, for example, the overall number of persons per doctor had fallen to an average of 970, but this varied from a figure of 700 for the Damascus area compared with over 2,000 in the town of Hassakah, in the center of the country. Deficiencies in the state health system have led to a proliferation of private hospitals, and the private sector now accounts fro almost half the total number of hospital beds.

Both the oil and agriculture sectors account for around 20% of GDP. Within agriculture, key areas of production include cereal crops for local consumption and export, cotton for export, and fruit and vegetables for the local processed food market and overseas sales. This sector overlaps with the retail and wholesale trade sector (nearly 20% of GDP), which markets agricultural produce. The manufacturing sector has made a greater contribution to GDP in recent years and accounts for nearly 10% of GDP. Over the past five years economic growth has been underpinned by high levels of fixed investment, both government and private.

Economic activity is concentrated in the cities of Damascus, Homs, Aleppo, Tartouis, Latakia and Deir el-Zor. The oil industry is concentrated around Deir el-Zor, whereas Damascus and Aleppo are largely home to light industry, such as textiles and ceramics. Heavier industries tend to be concentrated around Homs.

Syria’s economic problems resemble those in other traditionally agricultural economies which, having attempted to develop an industrial base on a East European model, are now trying to introduce a more market-oriented system. In 1991 the government introduced Law No 10 to encourage private sector investment under the pressure of the mounting economic problems and the collapse of the Soviet Union, but there has been little follow-up to this. An impetus from change may come from the depletion of the oil reserves. The development of Syria’s oil reserves over the past five years has sustained the good economic growth figures achieved over the period. However, the need for new exploration has encouraged reforms in the oil sector and the government has improved the terms it offers foreign oil companies. The government is currently in the process of negotiating an association agreement with the EU, which is conditional on economic reform.

While economic growth has been impressive in recent years and has exceeded 5% per year since 1991, inflation remains high. The economy has been helped by good harvests and increased oil production, which has risen steadily from an average 400,000 barrels/day in 1990 to some 600,000 b/d in 1996. The manufacturing sector has also grown fast over the past ten years, mainly through the expansion of private-sector activities. This has particularly affected the textile business, which, using local cotton for raw material, has boomed since 1991.

IFC has currently no investment programs in the Syrian Arab Republic. In the future, IFC could consider involvement in the financial sector which could encourage higher savings rates and the efficient channelling of savings into productive investment. Possible areas for IFC's consideration might be universal banks, which could contribute to the development of housing finance and the securities markets, and leasing companies, which could be an important source of finance for small and medium-sized companies.

In the industrial sectors, IFC could consider investments in the steel sector, in textiles and in pulp and paper. In the longer-term opportunities also exist in the tourism sector, which can have a significant effect on employment generation.

Poverty, Social, and Key Economic Indicators

Source: World Development Indicators, World Bank, February 1997