Cooperation and coordination between Syria and Lebanon

Dr. Kamal Hamdan

Abstract

Syria and Lebanon have always worked as a part of the same economic space. In 1950, the divergence between social groups who ruled the two countries led to the announcement of the customs scission. Syria was focusing on agriculture and relatively on (craft) industry. Meanwhile, Lebanon bourgeoisie was concentrating on commerce, services and external markets. This divergence accentuated the political and cultural gap (External influences played an important role).

Half a century later, both countries have interests in reestablishing economic cooperation and coordination (boosted by fewer choices to pursue independent tracks). Economic deficiency (weak productivity, low purchase power, inability of banking system to attract savings…) and the collapse of the eastern bloc pushed Syria to seek other alternatives. In the past, Lebanon (rental economy) had comparative advantages (particularly for the gulf countries). Currently, the changes in circumstances, increasing current account deficit, high public debt, weak competitiveness, in addition to the consequences of the civil war, spur Lebanon to seek other development models.

Consequently, the cooperation between both countries became a necessity (almost, a destiny). The success in this process necessitates transparency and accountability… This explains the importance of the treaty of fraternity, cooperation and coordination between the two countries. The subsequent bilateral protocols and agreements represent general principles. Their execution needs detailed organizational texts depending on the legislation harmony between both countries. The lack of this harmony and the shortage of statistical rules and technical human resources make it difficult to establish obvious and practical texts.

The results of these agreements and protocols still remain mediocre. Despite the agreement of free exchange in 1999, there was stagnation in changes. Furthermore, in that year, the exchange flaws have been regressed (-30.9% of Lebanese imports from Syria and -17.4% of its exports to Syria, during the first eight months of that year). Despite, the short period of assessment after the agreement, this indicates the limitation of legal goods exchange between these two countries.

The bureaucracy and the structural factors in both countries (similar external trade structure of goods excepting oil sector, same industrial logic of import substitution, divergence of banking systems and public sector roles) are responsible for the slowness in executing agreements.

This structural dysfunction necessitates a global treatment in each country begging by wide reforms in administration and public sector and ending by social and economic policies. These reforms must consider the essential role of public sector. They must elaborate a radical change in customs tariffs system considering the similarity in industries and external trade in both countries. A new customs system is primordial to face the prominent entry in the WTO and the Mediterranean European Partnership, and to reach a better allocation of available resources. The global reform means the coordination in the infrastructure, which has been organized within a local perspective ignoring the importance of coordination with the neighbor country.

The two countries must reorganize their structures and must optimize their mutual activities. Syria has a comparative advantage in agriculture and in several manufacturing industries based on high labor concentration. Comparative advantages of Lebanon are in banking, insurance, education… The specialization in some activities and the withdrawal from others considering the comparative advantages between both countries will lead to more welfare. This may contribute to the improvement of the standard level of living and to a better redistribution of income.

In his comment on the article, Mr. Ghassan ALKALLAA reminds the free trade between two countries before the scission in 1950s. He explained the story of the economic relationship between them stressing on the mutual benefits of cooperation. Little markets can not resist in front of challenges of globalization. The cooperation between Syria and Lebanon is an intermediary step on the way to build the Common Arab Market. Finally, in order to succeed in the common market between both countries, he listed some suggestions in commerce, industry, agriculture, money and banking, tourism, and cooperation between businessmen.