A floundering Syrian economy, heavily dependent on foreign aid, is limiting President Hafez Assad's options in his struggle against the Camp David peace accords.
Assaad began a tour of Arab states Tuesday to encourage opposition to the agreements on behalf of the "Steadfastness and Confrontation Front," Arab hardiners who reject the Egyptian peace initiative. Besides Syria, they include Libya. Algeria and Souooth Yemen and the Palestine Liberation Organization.
But Syria's reliance on foreign aid, especially from staunchly anti-Communist Saudi Arabia, all but rules out such proposed moves as joining a Soviet-supported military pact with other members of the hardine group, renouncing the principle of negotiations with Israel or cooling relations with the United States and conservative Arab countries.
These measures were variously supported by the other conference participants, with the exception of the relatively moderate PLO leadership under Yasser Arafat. The PLO, influenced by Syria, also is heavily dependent on conservative Arab money.
A dispute over who would provide the needed funds if Syria and the PLO were to distance themselves from their Arab backers was the main reason the Damascus summit ended, for all practical purposes, in failure.
According to conference sources, the radical Libyan leader, Col. Muammar Qaddafi, and Algeria's hardline president. Houari Boumedienne, urged Arafat and Assad to break with "reactionary Arab states" and tighten links with the Soviet Union to "restore the strategic balance in the region."
Assad was quoted by conference sources as telling the Libyan leader, "If you want war, you must take the responsibility for your decision, and in that case Syria will be in the forefront. But we won't break our ties with the whole world for nothing. That would be unjustified and suicidal."
The exact amount of Saudi aid to Syria is a closely guarded secret in both countries. But total Arab aid comes to as much as $700 million a year, and roughly three quarters of that is estimated to be from Riyadh. Some of these funds are loans for development projects, but most are outright grants.
Contributions from other sources, including $90 million from the United States, bring the figure close to $1 billion a year, making foreign aid the second leading source of government income and accounting for nearly 20 percent of Syria's gross domestic product. The Soviet Union also supplies aid, plus military equipment.
Egypt and Jordan also are heavily indebted to Arab and U.S. aid, with Egypt receiving about $1.2 billion a year from Saudi Arabia in military aid alone and about $2 billion in economic aid from the United States over the last two years. Jordan depends on grants and loans for more than half its government income, with large portions coming from the United States and Saudi Arabia.
Arab aid started to flow into Syria in large amounts after the October 1973 war with Israel. It not only enabled Syria to recover from the damage of the war, but, with a relaxation of monetary restrictions, helped fuel an economic boom that pushed growth to a peak of 14 percent in 1975. After that, however, the growth rate fell to about 8 percent in 1976, less than 4 percent in 1977 and is projected to be zero or negative this year.
"In 1973, the Saudi aid was a godsend," a Western economist said. "In 1974 it financed a boom, and now the Syrians need it just to stay where they are."
Several factors are responsible for Syria's economic downturn: the failure of production to keep pace with increased consumer demand, the need to combat inflation that resulted from the massive aid, and the effects of the Lebanese civil war. During the height of the war. Syria had to cope with more than half a million Lebanese refugees.
In addition, some 30,000 Syrian troops have been tied down in Lebanon ever since, their presence funded through the Arab League, notably by Saudi Arabia and the Persian Gulf states.
However, according to economists and diplomats here, the most damage to the Syrian economy comes from its huge, inefficent and corrupt bureaucracy. Under the ruling Baath Party's "Arab socialism," this bureaucracy is a main pillar of the political and economic system.
"Syria is potentially a rich country," a diplomat said."It has water, arable land, industrial capacity and a very active merchant class." But whereas Syria was once the granary of the eastern Roman Empire, it is now a net importer of food and farm products, partly because of government inefficiency in meeting farmers' needs.
Syria also has the second-largest industrial capacity in the Arab world. But an estimated 60-70 percent of it is not used, mostly because of poor management and planning. The country's capable private sector is largely unwilling to make long-term investments because of fear that profitable new enterprises will be nationalized or otherwise suffer from government interference.
On the plus side, Syria has virtually no unemployment, largely because the government employs many unskilled people in low-paying and essentially meaningless jobs.
"For all practical purposes, the government has made the public sector a surrogate for unemployment compensation," an economist said.
For some observers, the reliance of the ruling Baath Party on this bureaucracy, despite its deficiencies, underscores the problems of peaceful transition of power in Syria, a concern of the moderate Arab states that support the essentially cautious Assad.
Although Assad has shown strong leadership and has brought Syria relative stability during the eight years since he took power in a military coup, he comes from a closely knit minority, the Alawite Moslems, who control the armed forces but make up only about 10 percent of country's largely Sunni Moslem population of some 8 million people.