Certain [economic] principles cannot have Syrian characteristics

Alfred Steinherr, European Investment Bank

Oil has been the mainstay of the economy since Syria's main export market vanished with the break up of the Soviet Union.

But 15 years since the oil revenues began to flow, half of the country's known reserves have now been exhausted.

The loss-making state sector remains the country's biggest employer.

Some economists estimate that Syria needs to achieve a seven per cent growth rate - a huge increase on the current rate - to accommodate the army of young people entering the employment market each year.

President Bashar al-Assad's government recognises that the country badly needs foreign investment.

But Planning Minister Issam al-Zaim was upbeat when he addressed a recent investment conference in London.

"The economic environment has been considerably improved," he said.

The minister outlined a series of tax incentives the government is offering foreign investors and promised more changes when the government publishes its three-year development plan later this year.

Tourism potential

With a per capita income of only $1,000 and little or no public debt, there is no doubt that Syria has huge growth potential.

Tourism is one sector which has enormous potential. The country receives an annual 150,000 tourists from Europe every year, compared to 10,000,000 who visit neighbouring Turkey and the five and a half million who visit Egypt each year.

Syria has a rich cultural heritage

With some 3,000 sites of archaeological interest representing 33 civilisations, Syria has more of interest for the foreign tourist than many more popular tourist destinations.

But many are sceptical about the government's ability to effect real change in an economy that remains under the control of a single party and mired in red tape.

Red tape

The government has undertaken some tentative financial reforms, liberalising foreign exchange controls.

It has also announced plans to open the banking system to foreign ownership. But while this move has been welcomed by potential investors, it has yet to take effect, because the regulatory framework has not been completed.

And the government has made it clear that full liberalisation is not on the cards. The government is unwilling to privatise the loss-making state sector, which employs around a quarter of the workforce.

In addition, there is a formidable group in government, often referred to as the "old guard", who have profited from the current system and have no wish to see reforms flourish.

President Assad's government has attempted to steer a course somewhere between reform and continuity.

But Alfred Steinherr, of the European Investment Bank (EIB) believes this cannot succeed.

He says the EIB has no further plans to invest in the country until it sees more evidence of reform.

"It's not our wish to meddle, it's the conviction that certain [economic] principles cannot have Syrian characteristics", he says.