Syrians grumble at crackdown on smuggling
Damascus, Syria — The owner of the posh Damascus restaurant rolls his eyes skyward as he apologizes to a tableful of customers for not being able to serve coffee with their dessert.
''The government has stopped the smuggling from Lebanon,'' the owner explains.
''We cannot get many things any more that we have always had. But do not worry,'' he continues in a conspiratorial whisper, ''this crackdown has to end soon. It must - we produce nothing of our own.''
The restaurateur has captured the dilemma facing Syria's government as it struggles to restart an all-but-stagnant national economy: Just what can Syria produce?
Syria pays more than twice as much for imports as it earns from exports. Although government efforts to restrict imports in recent years have been fairly successful, Syria has been unable to increase exports. Its primary offerings to the world trade market are agricultural products and textiles.
One possible bright spot could be the recent discovery of a new oil field in Syria. Preliminary exploration revealed that the oil was of particularly high quality. No one knows yet how much oil might be produced from that field, but the Syrians hope it will be enough to boost significantly their refined oil exports.
For now, the government has not been able to stem an alarming outflow of foreign currency, forcing it to take what middle-class Syrians consider Draconian measures - including the unpopular move in June of cutting off the smuggling trade with Lebanon.
''This country had been living on smuggling,'' said a Western analyst who has spent five years following the Syrian economy. ''I was in a very prominent minister's office several months ago while he was giving intricate instructions to his driver on what sort of refrigerator to order from the smugglers. A few months ago, the smugglers would truck things in and distribute them from depots downtown. Now the smuggling is back to donkey loads again.''
Popular consumer goods such as American-manufactured appliances, Pepsi-Cola, and imported foods have become harder to find in Syria.
The smuggling trade was believed to have been overseen by Rifaat Assad, President Hafez Assad's brother. Rifaat fell out of favor last spring when the President was ill.
When it was unclear whether the President would recover, Rifaat's supporters pasted posters of him around Damascus and thousands of troops from his Defense Companies were deployed in and around Damascus.
The President did recover and sent his brother out of the country. Rifaat is now living in Switzerland. After Rifaat's departure, the President launched an anticorruption campaign that analysts say has cut the smuggling to 5 percent of what it once was.
Western diplomatic sources say Syrian inflation is running at about 15 percent to 18 percent a year, partly because the price of now-harder-to-get smuggled goods has risen. The government maintains inflation is only 10 percent a year. Though this is nothing compared to Israel's 925 percent inflation, Syrian workers' wages are not indexed to protect them from inflation, unlike their Israeli counterparts. Syrian public sector workers have not had pay raises in four years.
It is hard to tell how much Syria's economic woes affect the stability of Assad's 13-year-old regime, and how much domestic economic concerns might affect Syria's foreign policy. Assad's ruling Baath Party is worried enough about the economy that ministers now hold monthly economic meetings to discuss problems and chart courses of action.
The middle class is clearly unhappy with the currency and import restrictions. But Assad's power, one diplomat says, has always come from the rural areas of Syria outside Damascus and Aleppo.
''The urban, entrepreneurial middle class has never been in favor of the regime, so the President doesn't care if they are grumbling,'' says the Western analyst.
The regime has built schools, roads, hospitals, and other facilities in the rural areas. It sells bread at bargain-basement prices - a few cents per kilo.
''There are no really poor people here. The government will not commit errors like the Egyptian government did,'' says the analyst, referring to recent riots in Egypt over bread prices.
But the Syrians, the analyst says, will continue to protect the lower class from economic hardship.
''They'll curb more and more and more the level of imports, and the middle class, which can't get at the regime, will pay the price.''
Several diplomats interviewed in Damascus say that although the economic problems are serious, they are unlikely to bring down the government or spur any major reforms in the centrally planned, socialist economy.
''A Syrian president is not really judged by how he handles the economy,'' a Western diplomatic source says. ''He is judged by how much power he has and on his foreign policy stance. On those things Assad is on solid ground.''
On the front line of Arab confrontation with Israel, Syria has some 40,000 troops stationed in Lebanon and more facing Israel on the Golan Heights. An estimated 54 percent of the Syrian budget is spent on defense. Some analysts put that figure much higher. Official Syrian economic statistics do not say how much is spent on weapons.
Although most Syrian weapons comes at bargain-basement prices from its chief supporter, the USSR, defense spending has taken its toll on the Syrian economy.
''When you have that much money going into a nonproductive area like defense, it leaves that much less to put into other, more productive sectors of your economy,'' says another Western diplomatic source.
Despite a succession of five-year plans, the Syrians have had little success in expanding their industrial production.
''They invested in developing their production of phosphates, only to come on line when there was a glut in phosphates,'' a diplomatic source says. ''Now they are trying to barter the phosphates away.''
The Syrians also have tried to reduce government spending, have instituted strict controls on legitimate imports, and have insisted on bartering for some imports rather than paying cash.
In addition, the Syrians continue to rely heavily on outside funding. Aid from Saudi Arabia and Kuwait has dropped to less than $1 billion this year because the Arab states disapprove of Syria's support of Iran in the Iran-Iraq war.
But Syria has made up for its loss of Arab aid in increased aid from Iran. Iran provides Syria with high-grade oil, reportedly $1.2 billion worth annually, at cut-rate prices.