Identifier
Created
Classification
Origin
06DAMASCUS1782
2006-04-19 14:00:00
CONFIDENTIAL
Embassy Damascus
Cable title:  

LIMITED ECONOMIC DEVELOPMENT OBSERVED IN SYRIA'S

Tags:  ECON ETRD ETTC SY 
pdf how-to read a cable
VZCZCXRO7862
OO RUEHAG RUEHBC RUEHDE RUEHKUK RUEHMOS
DE RUEHDM #1782/01 1091400
ZNY CCCCC ZZH
O 191400Z APR 06
FM AMEMBASSY DAMASCUS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8421
INFO RUEHEE/ARAB LEAGUE COLLECTIVE IMMEDIATE
RUCNMEM/EU MEMBER STATES COLLECTIVE IMMEDIATE
RUEHAK/AMEMBASSY ANKARA IMMEDIATE 4340
RUEHTV/AMEMBASSY TEL AVIV IMMEDIATE 0903
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RHMFISS/HQ USCENTCOM MACDILL AFB FL IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
C O N F I D E N T I A L SECTION 01 OF 03 DAMASCUS 001782 

SIPDIS

SIPDIS

ELA/NEA
TREASURY FOR GLASER/SZUBIN/LEBENSON
NSC FOR ABRAMS/DORAN/SINGH
EB/ESC/TFS FOR SALOOM

E.O. 12958: DECL: 04/19/2016
TAGS: ECON ETRD ETTC SY
SUBJECT: LIMITED ECONOMIC DEVELOPMENT OBSERVED IN SYRIA'S
NORTHEAST

REF: A. 05 DMS 5373


B. 05 DMS 6439

C. 05 DMS 5788

Classified By: CDA Stephen Seche, reasons 1.4 b/d.

C O N F I D E N T I A L SECTION 01 OF 03 DAMASCUS 001782

SIPDIS

SIPDIS

ELA/NEA
TREASURY FOR GLASER/SZUBIN/LEBENSON
NSC FOR ABRAMS/DORAN/SINGH
EB/ESC/TFS FOR SALOOM

E.O. 12958: DECL: 04/19/2016
TAGS: ECON ETRD ETTC SY
SUBJECT: LIMITED ECONOMIC DEVELOPMENT OBSERVED IN SYRIA'S
NORTHEAST

REF: A. 05 DMS 5373


B. 05 DMS 6439

C. 05 DMS 5788

Classified By: CDA Stephen Seche, reasons 1.4 b/d.


1. (C) Summary: In conjunction with export license checks,
econoffs visited Dayr ez Zawr (Dayr) and Qamishli, key cities
close to Syria's border with Iraq. Residents in these two
areas have historically maintained stronger cultural, ethnic,
familial, and economic ties to Iraq than to Syria's capital.
Contacts in both cities discussed the region's limited
infrastructure, lack of basic services, and isolation from
the political and economic centers of Damascus and Aleppo,
which all have contributed to lagging economic development.
Many contacts expressed a lack of faith in the SARG's
willingness or ability to positively influence private sector
development in the region, or to combat high unemployment and
low job creation rates. Though Qamishli, unlike Dayr, has
capitalized on remittances and tourism dollars, economic
development in both cities remains limited. Despite the lack
of development, contacts in both Dayr and Qamishli still
appear content with the economic status quo, in Dayr because
of low economic expectations, and in Qamishli because the
economic advancement of the growing Kurdish population has
not yet threatened the minority Christians' economic
dominance. As general economic conditions in Syria worsen,
however, the status quo in Dayr and Qamishli may become
increasingly untenable. End summary.

--------------
Plans to Develop the Northeast?
--------------


2. (C) Econoffs met with business contacts from the tourism,
foodstuff manufacturing, and agricultural sectors during a
four-day visit in early April to Dayr ez Zawr and Qamishli.
These areas in Syria's northeast are two of the poorest in
the country, and face significant development challenges -
extreme poverty, illiteracy, high infant mortality rates, and
above-average population growth - according to reports by the
United Nations Development Program and Food and Agricultural

Organization. Despite a highly publicized trip by Deputy PM
Abdullah Dardari to the northeast in October 2005 (ref A),as
well as the region's prominence in the pending Tenth
Five-Year Plan (ref B),contacts dismissed the SARG's plans
for economic reform and development. Private sector contacts
with whom we spoke claimed that Dardari did not meet with
them during his visit to Dayr, choosing instead to meet with
Ba'ath Party members and the heads of state-owned companies.
They therefore stated their belief that the upcoming Tenth
Five-Year Plan - with its emphasis on private sector
involvement - amounts to nothing more than rhetoric, and that
new spending in the region most probably would enrich the
same corrupt officials.

-------------- --------------
Dayr az Zawr: Lagging Development, Poor Prospects
-------------- --------------


3. (C) At the heart of Syria's oil-producing area, private
sector contacts were uniformly pessimistic about the short to
medium-term economic prospects for Dayr, estimating that its
economy presently is at least ten years behind that of
Damascus and Aleppo. All complained of a lack of basic
infrastructure, with almost daily electricity outages, poor
roads and inadequate sewage and water systems making Dayr a
difficult place to live and do business. The absence of
private banks and limited access to capital, the shortage of
an educated workforce, with the first university - a
satellite of Aleppo University - just opening this year, and
the deficit in adequate health care services further depress
the business climate, contacts opined. Additionally,
contacts stated that Dayr feels isolated from Damascus and
Aleppo, and cut off from historic trading partners in Iraq
with the border crossing of Al-Bukamal closed. Finally, with
production declining at the nearby Al-Furat oil fields at an
estimated rate of 30,000 bpd annually (ref C),there is
little evidence in the city of new oil company activity, and
contacts had few expectations that any new investments would

DAMASCUS 00001782 002 OF 003


be brought on line. As a result, contacts say, the private
sector is weak, comprised of only five companies that employ
more than 50 workers.


4. (C) Contacts further expressed an overall lack of faith in
the SARG's ability to improve the business climate and
indicate that they do not intend to take on new investment
risk in Dayr or the region until the SARG takes tangible
steps to improve the investment climate. Although as much as
60 percent of the region's workforce is employed in
agriculture, 70 percent of the farmland is still rain-fed
despite previous SARG announcements that it is beginning
ambitious irrigation projects. Contacts complained that
there also has been no progress to date on a three-year old
project to upgrade the city's sewage system, and large cement
cylinders still line the roads obstructing traffic on the
major thoroughfares. Unemployment and underemployment are
chronic, contacts complained, and the number of new public
sector jobs created each year is not enough to satisfy demand
among new entrants or the currently employed who regularly
hold two or three additional jobs to supplement their income.
One private businessman who owns a construction tools
company laid the blame for the region's stunted development
squarely on the government, contending that official
corruption combined with a persistent shortage of resources
continuously undermines progress.

-------------- --------------
Qamishli: Sectarian Divisions, Support from Abroad
-------------- --------------


5. (C) Like contacts in Dayr, Assyrian and Armenian
businessmen in Qamishli stated that they feel removed from
Damascus, that the regime has little influence over Qamishli,
and that the area has naturally stronger economic ties to
Iraq than Damascus. (Comment: Evidence of this sentiment
could be witnessed in the streets of Qamishli, which
displayed considerably less regime-based propaganda than
those in Damascus. End comment.) Additionally, contacts say
that Qamishli has been neglected by the regime, citing
desperately needed agricultural irrigation projects as an
example. Nevertheless, contacts indicated that economic
development in the city is less contingent on regime
assistance or intervention, because remittances and
expatriate tourist dollars from Sweden, Germany, Canada, and
the U.S. have allowed several groups of ethnically-based
investors to pool their money to fund private investment
projects like tourism complexes and agricultural production
facilities.


6. (C) Agriculture and tourism are pillars of Qamishli's
economy. According to one contact, Hassake governorate (in
which Qamishli is located) ranks third in the country in
number of visitors each year, and one contact in Qamishli's
tourism sector said that approximately 50 percent of the
city's annual economic activity (about $188 million/year)
comes from expatriate tourism. Nevertheless, outside of
expatriate-funded initiatives, overall private sector growth
in Qamishli is limited to a few large enterprises - plastic
production, transportation, oxygen/nitrate facilities, and
agricultural processing - that employ no more than 250
people. According to contacts, salaries in Qamishli are
cyclical, unstable, and primarily dependent on summer tourism
and agricultural production. One source said that the
economy in Qamishli is consumer-based, with 30 percent of its
residents funding the consumption of the other 70 percent.
While one would expect that Qamishli's geographic proximity
to Iraq would strengthen cross-border trade ties, sources say
that for now trade is well below pre-war levels.


7. (C) The sectarian divisions among three groups )
Christians, Kurds, and Arabs - in the residential and
industrial areas of Qamishli are apparent. Furthermore,
contacts in Qamishli believe that a demographic shift in the
region is underway. As Christians (currently 20 percent of
Qamishli's population) continue to emigrate, the Kurdish
community is moving in and becoming increasingly influential.
Assyrian and Armenian business contacts contend that in the
past two years Kurdish demand for real estate (as well as
their willingness to pay significantly more than the asking

DAMASCUS 00001782 003 OF 003


price for property) has resulted in a spike in property
prices. One Assyrian business owner stated that in one year
his office in the commercial district of Qamishli has more
than doubled in value, while an Armenian contact shared a
rumor that money for Kurdish investment in Qamishli is coming
from Kurdish ties in Iraq. Our Assyrian and Armenian
business contacts implied that the Kurds, who have
traditionally filled low-skilled labor jobs in Qamishli, are
tolerated because they are perceived to have a strong work
ethic (unlike their Arab counterparts).


8. (C) Comment: Officers came away with three main
observations from the trip to Dayr and Qamishli. First, the
SARG's economic reforms - highly touted in the capital - have
had little impact in the Northeast and there is a general
lack of faith in the SARG's ability to develop the stagnant
economy and control the region's poverty, unemployment and
population growth. Second, historical, economic, and family
ties link the region more closely to Iraq and Turkey than to
Damascus. Third, the sectarian divide among Christians,
Kurds, and Arabs is palpable in Qamishli and deeping with
exponential growth in the Kurdish population. Contacts in
Dayr appeared frustrated yet resigned to this status quo due
generally to their low economic expectations. The Christians
in Qamishli, the most affluent of the ethnic/sectarian
groups, did not yet seem unduly threatened by the Kurdish
population explosion, possibly because their primacy has not
yet been impacted. However, as the economy continues to
worsen, the status quo in both cities will come under
increasing strain.
SECHE