Syrian Opportunity? Syria's only hope long-term in avoiding economic crisis is to improve its bilateral relationship with the United States.

• Author: Hale, David D.

The United States has recently begun to re-engage with Syria after a long period of virtually no contact. House Speaker Nancy Pelosi visited President Assad in early April. Secretary of State Condi Rice saw the Syrian foreign minister at a regional conference during May. Both Pelosi and Rice saw the Syrian officials because of their concern about America's problems in Iraq. There was little time to discuss the U.S. relationship with Syria itself. It is unfortunate that they did not discuss U.S.-Syrian relations because the Assad government has begun a program of cautious economic liberalization which can succeed only if Syria significantly improves its bilateral relationship with the United States. Washington therefore has more potential leverage over Syria than at any time since Mr. Assad's father seized power during the late 1960s.

Bashar Assad took power in 2000 after the death of his father, who had ruled the country with an iron fist for thirty years. He began a cautious program of political liberalization and appointed numerous European-educated technocrats to key positions of power in his regime. He soon married a Syrian woman who had grown up in the United Kingdom and worked as an investment banker at JPMorgan before being admitted to Harvard Business School. Assad then began a program of economic reform in order to reduce the country's longstanding economic isolation. He allowed private banks to reappear in 2004 for the first time since 1963. He significantly reduced tariffs and pursued a free trade agreement with other Arab countries as well as Turkey, and sought an economic partnership agreement with the European Union. In 2005, he traveled to China in order to seek trade and investment. China responded by investing in the Syrian oil industry and opening textile factories to exploit Syria's large cotton crop. Syria hopes to open a new stock exchange this year.

Syria needs to modernize its economy and engage with the global economy because it faces a potential crisis during the next ten years. Its oil production is now declining and the country could be forced to import oil by 2015. As oil is the country's leading export and provides significant revenue for the government, Syria will have to develop other sectors of the economy or face a major crisis in both her fiscal policy and the balance of payments. Syria's manufacturing exports are equal to only 3.1 percent of GDP compared to 24.5 percent for Jordan. Syria also needs to...