In a televised address to the new cabinet charged with launching reforms, Assad also expressed his sorrow over the deaths of an estimated 200 people in a month of protests demanding greater freedoms.
"We are sad for all the people we have lost and all the people injured, and consider them all martyrs," he said in his address.
"The Syrian people are respectable. They love the regime and reject chaos," Assad said, and called for a national dialogue.
He also spoke of the gulf "between citizens and the institutions of the state, a gulf that must quickly be filled.
"Citizens need security and services, but also dignity. We want to engage in dialogue with everyone... the unions and national organisations."
Assad also addressed the broad spectrum of complaints that have sparked countrywide protests for more than a month, including joblessness, corruption and a crisis in agriculture.
"Corruption is a threat to morality and to the country's potential for development," he said.
On unemployment, which he acknowledged to be high even by Arab standards, he said: "When people feel the horizon is limited, they feel depression; and this depression can lead to despair."
Assad added that the world economic crisis had made the role of the state "more important", emphasising the need to support the "small entrepreneur and not large business".
He also focused on political reform, emphasising institution-building, legal reform and greater transparency.
"Real development will come through the reform of our laws," said Assad.
He cited a draft law on political parties, telling the new cabinet to "study it and make propositions, as it will have a critical impact on Syria's future, either reinforcing national unity or splitting society".
Assad indicated an updated press law was on the cards, as was new legislation governing municipal elections.
On demonstrations, he said these are "allowed by the Syrian constitution" although "there is no law in place to regulate them" and "police must first be trained and equipped to handle them.
"The role of police is to protect demonstrators as well as public and private goods from all acts of sabotage, for which there will be no tolerance because people reject anarchy," he added.
Assad encouraged the new ministers to act quickly and "take responsibility".
"Every minister is responsible to speak up, from time to time, to say what he is doing, what he is thinking, so there is the necessary background to understand the issues.
"Whenever there is an important decision taken, we must talk about it," he said. "And when there is a failure, the reason is not important, what is important is being transparent.
"We and the people are on the same side, we are not two separate sides."
British Foreign Secretary William Hague welcomed Assad's call for emergency law to be lifted, saying reforms were "necessary and urgent".
"I welcome President (Bashar) Assad's acknowledgement in his speech today that reform in Syria is necessary and urgent to address the legitimate aspirations of the Syrian people," Hague said in a statement.
"We call on the Syrian government to lift the state of emergency next week as proposed by President Assad and to ensure that those responsible for the deaths of civilians are held to account."
Thousands of people meanwhile attended the funeral of a man who died after being shot by regime agents in the northwestern coastal city of Banias, witnesses and activists said.
The mourners chanted slogans in favour of greater freedoms and against the ruling Baath party, with some also calling for an end to the regime, the sources told AFP.
About 2,000 women also rallied "in favour of liberty and in homage of the martyr," in the city centre, a human rights activist told AFP.
On Friday, tens of thousands of people rallied to demand greater freedoms, exactly one month after a rare protest was staged in Damascus calling for the release of political prisoners.
The protests stretched from the key southern town of Daraa, to the predominantly Kurdish north, via the central industrial city of Homs and the coastal cities of Latakia and Banias, activists said.
The official SANA news agency said a policeman was killed when violence flared during an anti-regime demonstration in Homs.
A global outcry over deadly crackdowns on month-old, anti-regime demonstrations widened on Friday with the United States and the United Nations renewing calls on Syria to halt the violence.
On Thursday, Syria announced an amnesty for scores of prisoners detained in a month of protests. But the Syrian League for Human Rights said on Saturday that "several activists", including a prominent pro-democracy writer and journalist, were still behind bars.