(THIS ARTICLE WAS ORIGINALLY COMMISSIONED BY A MAGAZINE IN 2012, BUT THEY FELT IT WAS OVERLY CRITICAL OF NEO-LIBERAL CAPITALISM AND DID NOT BELIEVE IT WAS A FACTOR IN THE UPRISING - IRONIC, GIVEN THE OPENING PARAGRAPH)
Economics
was a major factor behind the Arab uprisings, in Syria as much as in
North Africa, but the role of economics has been downplayed by
governments and the media alike. What is more, plans are underway to
replicate the same economic policies in post-conflict Syria that
helped trigger the uprising in the first place, writes Paul Cochrane
in Beirut.
In
the years immediately after the US-led invasion of Iraq in 2003,
there were often discussions in Syria and Lebanon about whether there
would one day be regime change in Damascus. Would the regime
eventually be overthrown – internally or via external intervention
– and Syria become a democracy? An often typical, if somewhat
cynical statement
was that Syrians did not want either. Syria
was stuck like the meat in a sandwich, with on one side a devastating
conflict in Iraq that had forced over 1.4 million Iraqis to seek
refuge in Syria, and on the other side laissez faire Lebanon, a
democracy in name but essentially a dysfunctional one due to a
political-confessional system that maintains a fragile status quo but
results in minimal development and a weak state.
The
choice of a painful, bloody transition from autocracy that could lead
to civil war and then perhaps be followed by a “demo-crazy”
Lebanese style government was not overly attractive for Syrians
compared to stability and security, and where minorities – which
account for around 26% of the country's population of 23 million -
were protected under a nominally secular regime.
So,
the argument went that while Syrians wanted change, such as greater
civil liberties, less corruption, and the reigning in of the
omnipresent mukhabarat
(the secret police), the trade off was questionable. In short it was
that pithy statement of “better the devil you know, than the devil
you don't.” Economics however barely figured into discussions.
Fast
forward to the beginning of 2011, and the same conversations were
being had: would the Syrians be the next citizens of an Arab
autocratic state to rise up following the Tunisians, Libyans and
Egyptians? In one such debate, a French embassy employee and a French
NGO worker, both working in Damascus, argued that the conditions were
different from North Africa, poverty was not as biting, and there was
little room for a mass uprising to take place. A year later, the same
French embassy employee – since evacuated from Syria – admitted
how wrong she was, having been sucked into a “Damascene bubble”
of the good life and not exposed to the rude reality of life in the
towns and smaller cities outside of the capital and the second
largest city, Aleppo.
Indeed,
under the economic reforms initiated in 2001 following the death of
President Bashar Al Assad's father, Hafez, the middle and upper
middle classes in Damascus and Aleppo were doing better from a
materialistic perspective, able to buy goods and services previously
unavailable during the period of a state-run economy, and greater
economic opportunities seemingly abounded. Tourism was also doing
well, with the number of visitors surging from 2 million in 2002, to
8.5 million in 2010, and revenues reaching $8 billion.
European tourists by Souk Hamidiyeh, Damascus in 2008
Decades
of rising unemployment
The
reforms, spearheaded by Assad and the Western-educated deputy prime
minister Abdallah Dardari, gradually liberalized the economy, in part
pushed by foreign banks – the bulk Lebanese – entering the market
from 2004 onwards, and in 2009 the opening of the Middle East's
newest stock market, the Damascus Securities Exchange (DSE).
Real
estate projects, shopping malls and boutique hotels also sprung up,
whether financed by expatriate Syrians returning home with an eye for
an investment, to Levantine and Gulf investors (US investment was
largely curtailed due to the Syria
Accountability
and Lebanese
Sovereignty Restoration Act
of 2003, while bilateral trade in 2010 was estimated at $928 million
or 2.4% of all trade).
However,
the economic reforms enabled the elite to further line their pockets
– like Rami Makhlouf's Cham Holding, whose board members and
investors read like a Who's Who of prominent Syrians – while
creating massive income disparities amid high inflation, leaving
ordinary Syrians with an average monthly salary of $234 but an
average monthly household expenditure of $638, according to figures
from the Syrian Central Bureau of Statistics in 2010.
The
shift from a centrally planned economy to a more open market model
still had too much of the cronyism and endemic corruption that had
plagued Syria for decades. Indeed, there was massive capital flight
between 2000-2009, with Global Financial Integrity estimating Syria
lost $23.6 billion from corruption, trade mispricing, bribery and
other illicit activity.
The
billionaire businessman and maternal cousin of Assad, Rami Makhlouf,
whose portfolio includes mobile phone operator Syriatel, was a
particular figure of hate for ordinary Syrians, with his heavy-handed
tactics of muscling in on business deals to get his cut, and judged
to have too much of a controlling stake in the economy.
Not
that the reforms were all negative. Syria sorely needed to overhaul
its economy given declining oil revenues, a burgeoning population –
reaching 3.5 percent growth a year in the early 2000s – and fiscal
woes (Moscow had to write off $10 billion of Syria's $13 billion
Soviet-era debt in 2005 in able to sell new weapons to Damascus).
“When
you look back, don't throw reforms in the dustbin,” said Jihad
Yazigi, editor of financial paper The Syria Report. “Average
Syrians were entitled to open a bank account, get loans and buy cars.
The problem was economic reform was in no way accompanied by a real
vision as to where to take the country to.”
On
top of a lack of vision, Syria arguably opened up too soon in terms
of trade liberalisation,
such as joining the Greater Arab Free Trade Agreement (GAFTA), and
inking a free trade agreement with Turkey, which did not give
adequate time for Syrian industry to get up to speed with
competitors.
“The
idea was to create jobs and exports, but it didn't work. The borders
opened, and the Turks and the Chinese flooded the market; thousands
of workshops closed,” said Yazigi. “People on the streets today
are farmers, plumbers, semi-skilled workers and those that lost jobs
over the past decade in the smaller cities and the suburb cities; not
from Damascus or Aleppo, which benefited from the reforms.”
With
topsy-turvey geographical economic development, the economy was not
growing fast enough to handle a rising population. “Over the last
three decades you've had low GDP growth and periods of high GDP
growth, but according to most economists Syria needed growth of 8%
per annum. Syria never grew more than 7%, some years by 5%, but most
years by 2-3%. In other words, there was 30 consecutive years of
rising unemployment every year,” said Yazigi.
The opening of the Four Seasons in 2005 was indicative of Syria's opening up to the world, and outside capital.
Downplaying
economics
Economics
played a key part in the uprisings in Tunisia and Egypt, both having
adopted neo-liberal economic models and applied International
Monetary Fund (IMF) recommendations. Both countries, like much of the
Middle East and North Africa, have burgeoning populations, 50% of the
populace under 30 years old, and unemployment rates among the highest
in the world. Such dissatisfaction with the status quo had been
growing for years, and in many senses the indicators were there for
all to see.
In
Egypt, there were 3,426 strikes, sit ins and protests by workers
between 1998 and 2010. It was a “decade of unprecedented strikes,”
said Joel
Beinin,
Professor of Middle East History at Stanford University, at a lecture
on “Arab Workers and the Popular Uprisings of 2011” at the
American University of Beirut. A
major demand of workers was a minimum wage. “The mobilization of
workers from the 1990s onwards is an ongoing story, and demands were
primarily economic,” said Beinin.
However,
the economic angle of the uprising in Egypt – and Tunisia – was
barely covered in the Western media, focusing instead on demands for
democracy and freedom, and downplaying the role of workers and
economics in the uprisings. For instance, a key move in the struggle
against the government of Hosni Mubarak came when tax collectors
stopped working. Furthermore, workers' strikes have continued in
Egypt even after Mubarak's fall, demonstrating the importance of the
need for economic change in the country, with 1,419 collective
actions by workers in 2011, with around 1 million participants in
each protest.
“If
you compare the Polish Solidarity movement (in the 1980s) to the
Egyptian uprising, it was championed by the West as it was
anti-Communist, but in Egypt it was anti neo-liberal, so it was
viewed as a “negative” phenomenon by the West,” said Beinin.
Regarding
Syria, Damascus did not have the same economic relations with the
West as Egypt and Tunisia had, nor had it IMF loans and stipulations
or major worker movements. “The dynamics of the struggle in Syria”
are different to that of Egypt, said Beinin. “It is hard to find a
class dimension, although political-economics definitely played a
part in what led to the uprising.”
The
geography of the uprising in Syria is testament to the role economics
played, starting in the southern town of Dera'a near the Jordanian
border in March 2011, and spreading to other periphery towns and
cities, with the last places affected the economic and political
centres of Aleppo and Damascus.
“There
is a link between the economy and the uprising,” said Yazigi.
“Early on in Dera'a, before the people said they wanted the fall of
the regime, they burned down Syriatel stores, which is a reflection
of their frustration with crony capitalism.”
Damascus skyline, 2008
A
ravaged economy
The
uprising quickly became violent, initiated by the Syrian regime's
crackdown on what started as peaceful demonstrations and escalated as
an armed opposition took form – when external involvement in
training and arming rebels began is not clear, and may never be.
Unlike
how the US, Britain and France did not initially support the
uprisings in Tunisia and Egypt, or believe in the fall of their long
time leaders, the West was quick to denounce the Assad regime, and by
May the US imposed sanctions, followed by the European Union later in
2011, banning EU importation of Syrian oil and gas, which had
accounted for 93% of Syria's exports to the EU (22.5% of overall
exports).
As
the conflict spread throughout Syria and the sanctions started to
take hold, the economy was on a slippery downwards slope. According
to the Syrian Center for Policy Research, Syria's real GDP contracted
by 18.8% in 2012 following a contraction of 3.7% in 2011, with
economic losses estimated at $48.4 billion in both 2011 and 2012,
equivalent to 81.7% of its 2010 GDP. The Institute of International
Finance (IIF) on the other hand estimated contractions of 20% in
2012, and 6% in 2011, and that the economy will contract by 15% this
year, to $27 billion, from $30.9 billion in 2012, $46.7 billion in
2011 and $57.5 billion in 2010.
The
economic ramifications of the conflict have also spilled over into
Lebanon, with up to 375,000 Syrian refugees in the country, while in
Jordan – also hosting refugees – the IIF estimated output losses
to the economy from regional unrest at $1 billion in 2011 and $3
billion in 2012, equivalent to 3.4% of GDP in 2011 and 9.5% of GDP in
2012.
It
is like history repeating itself, as Iraqis had taken refuge in both
countries following the 2003 invasion, and now Iraqis are fleeing
back to their war ravaged country while Syrians are taking refuge
elsewhere. “What happened to Iraqis 10 year ago is now happening to
the Syrians,” said Yazigi.
The Citadel in Aleppo after a refit to encourage tourism, 2008
The
future?
The
outlook for the Syrian economy is pretty dire, while the government
is hemorrhaging money to retain allegiances, fund the military and
bolster public sector employment. How long Damascus will be able to
handle the situation without assistance from allies is now a pressing
question. The loss of government oil revenues due to the sanctions
was estimated at $4 billion in 2012, or 25% of the budget, and the
Syrian pound (SYP) has depreciated by 72% since 2010, now trading at
SYP 81 to the US dollar, while the black market rate is around SYP
100.
Official
foreign currency reserves are also in a precarious position, with the
IIF estimating they will decline to $2.1 billion at the end of this
year, equivalent to one
month
of import cover,
from
$5.6 billion in 2012.
The
next big question is
what will happen economically after the conflict is over, which may –
if a long drawn out civil war is prevented - involve the remnants of
the Assad regime, as some are predicting, with a transitional
government of sorts in place, to a government made up of the numerous
factions currently fighting Damascus. Whatever the outcome, tens of
billions of dollars will be needed to get Syria and its economy back
on its feet.
The
West and Gulf backed National Coalition for Syrian Revolutionary and
Opposition Forces announced in November, 2012, that it is seeking $60
billion for reconstruction efforts. However, the opposition does not
have a publicly announced economic plan for a post-uprising Syria.
“The Syrian opposition doesn't realize how important economics is
or how it important a role it played in the uprising,” said Yazigi.
What
is being discussed appears to be a return to the same economic
policies as before, yet with a weaker state role, such as ending
subsidies and pushing privatisation
programmes. At the forefront of such discussions is Abdallah Dardari,
the man that spearheaded Syria's economic reforms in the 2000s. He is
now in Beirut, working at the United Nations Development Programme
(UNDP) and advising the opposition. “Dardari is a neo-liberal, and
the West wants him to steer economic reconstruction, yet he was
responsible for how Syria's economic reforms were carried out,”
said Yazigi.
The
opposition is aiming for funding from Syrian businessmen, the West
and the Gulf states, which have common economic aims. As the UAE's
Minister of State for Foreign Affairs Anwar Gargash told the press in
Dubai in November: “What we want to do is involve the private
sector in what sort of economy emerges in a future Syria.”
Yet
while the private sector needs a role in the future Syria, other
voices need to be heard too. “If you want to talk about the economy
the business community matters, but it is not the whole economy. They
are working on cooking up a programme
that suits their interests,” said Yazigi.
While
the battle lines have been drawn in the current conflict, the next
part of the battle will involve economic policy and how it is
determined by local, regional and global players keen to exert their
influence.
Photos by Paul Cochrane
