AYN AL-ARAB, Syria (Reuters) - Only the old Berlin to Baghdad railway separates the Syrian town of Ayn al-Arab from Turkey’s Mursitpinar, but the contrast between the two sides of the track is so stark they could be on different planets.
Potholes the size of craters mark Ayn al-Arab. Side roads are not paved. Sewage runs on the streets and power cuts are common. The land is parched, with farmers draining the water table and worsening the damage from droughts.
Across the border in the Turkish town houses are neat, the clean streets are well-lit and the land is lush. Syrians from Ayn al-Arab even use Turkish mobile networks as the service there is regarded as cheaper and better.
The gulf between the two towns highlights how far Syria has fallen behind its northern neighbour -- which it sees as a development model to emulate -- and the scale of the challenge it faces to provide basic services such as road networks, electricity and water to its population.
Dilapidated infrastructure and underdevelopment is common across Syria, from the capital Damascus to the eastern region which has been reduced to a dust bowl by four years of drought that ravaged agriculture and displaced 600,000 people, according to a United Nations report.
Oil rigs tower above shanty towns in the eastern province of Deir al-Zor, but life in nearby villages along the Euphrates appears little changed for centuries, except for the addition of plastic bags littering the environment.
Electricity generation barely covers 70 percent of Syria’s total demand. Even Aleppo, the once great cosmopolitan hub of Anatolia, sinks in darkness as authorities are forced to turn off street lights. Industrialists have pleaded with them to regulate the power cuts instead of randomly interrupting supply.
Apart from real estate and the oil sector, which produces a modest 375,000 barrels per day, substantial foreign investment remains virtually unheard of in Syria.
A highway project to link Aleppo to the port of Latakia has been delayed, partly by disputes between the state and Kuwaiti contractor Kharafi. A deal with Kuwaiti firm Noor to build a network of petrol stations to solve massive queues went nowhere.
Offers to the private sector to finance and build two highways, capitalising on Syria’s location as a link between Turkey and the rest of the Middle East and between the Mediterranean and Iraq, have drawn little interest.
Syria, which has been under U.S. sanctions since 2004 for the government’s support of militant groups, does not fare well in international indices measuring corruption and ease of trade and doing business.
In the World Economic Forum Global Competitiveness Report 2010-2011, it ranked 109th out of 139 countries in the quality of the education system. Arab neighbours Lebanon and Jordan came 16th and 55th respectively.
Syria’s infrastructure was assessed 95th, compared with 35 for Jordan and 132 for Lebanon, where roads and power stations have been frequently bombed by Israel during the past 30 years.
The newest power plants were built in the mid-1990s and refineries dating back three to four decades cannot cope with demand, costing the state billions of dollars in fuel imports.
Acknowledging the problem, Prime Minister Naji al-Otari said infrastructure will be overhauled “in partnership” with the private sector through Build, Operate and Transfer projects and other arrangements that ease the financing burden on the state.
Otari said the Syrian government’s economic achievements so far were “a miracle” and he expected investment to pour in to support the infrastructure projects.
But after the woeful inefficiency of state construction companies and criticism of projects given to private firms in the past decades, attracting investment to these new mega infrastructure deals could be a challenge.
“You need good quality legal and regulatory framework, which is a weakness in Syria. These kind of projects need lots of guarantees from the government,” said Jihad Yazigi, publisher of the Syria Report online economic newsletter.
”They will eventually happen. There is very serious commitment and a sense that the government is willing to private investment requirements,“ he added.”
Electricity generation alone would need investment of $760 million (25.8 million pounds) a year just to keep up with increases in demand, Otari said, adding that the government would be able to cope better if it was not for Syria’s rapid population growth of 2.4 percent.
There have been improvements. Two international companies, French Lafarge LAFP.PA and Italcementi ITAI.MI, are building two cement factories that could help solve shortages after the government gave up its monopoly on the sector.
It no longer takes years to obtain a land line in Damascus, and 3G service by private mobile companies have helped improve connection to the Internet. And in Ayn al-Arab, the road leading to the Euphrates river has been upgraded.
But the U.N. report this month cautioned that economic liberalisation of the past 10 years -- restrictions on private capital into banking, industry and real estate have been lifted -- may not necessarily translate into human development.
The number of people living in extreme poverty -- deprived of food, clean drinking water, sanitation, health, proper shelter, education and information -- has increased to as much as 3 million from 2 million six years ago, it said.
The lack of basic services is a sensitive issue in Syria. Independent figures who criticised corruption and the government’s economic policy have faced long jail terms.
Earlier this year investigative journalist Maan Aqel, who challenged government assertions that there was no African level poverty in Syria and that corruption was under control, was arrested and spent three months in prison.
The U.N. report linked economic development with the need to improve rights in the country, which has been ruled by the Baath Party since it took power in 1963, imposing emergency law and banning opposition.
In Ayn al-Arab, a Kurdish town of 70,000, the more enterprising inhabitants have escaped poverty by making a dangerous but lucrative business out of illegal ground water drilling.
Workshops fill the central street, producing big rigs several stories high and a compact “garden” model designed to slip more easily under the eye of authorities.
“Ayn al-Arab’s digging specialists have spread from Morocco to Iraq. But as you can imagine, safety specs are not great, and it’s common for operators to get maimed,” said Mahmoud al-Ghazal.
“This is what people are driven to when there is no development.”
Editing by Dominic Evans and Samia Nakhoul