But a Syrian minister said on Tuesday that it would not do so at the expense of health, education and jobs.

The development came after a number of Baath party members severely criticised the government's performance in the last few years at a party congress.

The Baath party began its first congress since 2000 this week with reform topping the agenda amid international pressure on Damascus to ease the tight grip it has kept on economic and political freedoms since the party seized power in 1963.

"The profitable public sector that is doing a good job we can keep but the part that is losing money we should privatise so it makes economic sense," Expatriates Minister Buthaina Shaaban said.

"But with the privatisation we want to make, we also want to ensure that people have good health and education. So it is with social care that we want to approach the economy."

Promises renewed

President Bashar al-Assad renewed promises of economic reform that he made when he took office in 2000 at the congress's opening ceremony.

In those five years, Syria has allowed privately owned banks to open in the country for the first time since the financial sector was nationalised in the 1960s.

"The profitable public sector that is doing a good job we can keep but the part that is losing money we should privatise so it makes economic sense"

Buthaina Shaaban,
Expatriates Minister

But diplomats say economic reforms are piecemeal and have moved at snail's pace.

The state remains the largest employer in the country of over 17 million, controlling key services and industries and strictly curtailing imports.

It has struggled to create enough jobs for a growing population but has long ruled out privatisation for fear of stirring social discontent.

International pressure

But for the first time, Syria appears to be searching for the middle ground.

Shaaban, who is also the spokeswoman for the congress, said: "There is a desire to create a balance between openness and market economy and between the government's social role in health and education ... ."

Al-Assad is under pressure to
liberalise the country

Syria, which was forced this year to bow to a UN demand and withdraw its troops from Lebanon, has also been under US and European pressure for economic and political liberalisation.

However, in his opening speech, al-Assad set out no far-reaching initiatives, focusing instead on the need to revitalise the stagnant economy and stamp out corruption.

Shaaban said delegates discussed the need to fight corruption and cut waste that analysts say cripples the public sector.

The congress is expected to restructure the party's command and allow some independent parties, but will not bring the sweeping democratic reform opposition figures have called for.

Emergency law

Hopes the party would consider lifting an emergency law in effect since 1963 faded early. The law allows arbitrary arrests and trials at a security court that rights activists want closed.

Shaaban said the congress had discussed pluralism but was leaning towards a solution that bars parties based on religion or ethnicity, in effect curtailing Islamist and Kurdish parties.

The Baath party now rules through the National Progressive Front, a coalition of lesser allied parties.

The reforms discussed at the congress will be summarised into a list of recommendations that about 1150 members will vote on in the closing session expected late on Thursday.