The reordering of the Syrian political economy

I will first briefly take us through the two economic strategies, then discuss the processes that have given rise to a new conflict elite whose central role emerged out of the need for distributive and financial intermediation. I conclude by bringing these discussions together.

I want to stress that when I talk about the Social Market Economy and the National Partnership, I am not taking them as a coherent set of policies but as a kind of political rationality; as a way of talking about and thinking about the economy.

The Social Market Economy was a strategy promulgated at the 10th al-Ba’ath Party Regional Conference in 2005. It gave a name to liberalising measures that had begun much earlier, in the 1986 and the 1990s, and were accelerated in the early 2000s. The Syrian approach to liberalisation and privatisation, however, was not premised on the transfer of assets from the public to the private sector, but, rather, throughthe expansion of markets to facilitate the entry of private capital into the economy. Thus, for example, banks were not sold off, but rules were relaxed so that private banks could operate in the country. The same could besaid in most areas of the economy, from insurance to higher education, that were effectively marketised rather than privatised. In theory, the public sector would continue to operate alongside an expanding private sector made up of diasporic and national Syrians as well as regional private actors. The strategy sought to link Syria to theflowing circuits of Gulf and Eastern capital that were being invested in growing numbers during the 2000s. The state was imagined as a protector of society from the negative costs of marketisation, hence the marshalling of the social label.

The policies of the 2000s created new elements within the business class and provided new opportunities for the expansion and wealth accumulation of the networks Dr Bassam Haddad talks about in Business Networks in Syria. Of interest are the developments in the latter part of the decade, when two holding companies were created, Cham and Souria. Like the Chambers, they represented an institutionalisation of a certain kind of business interest, an amalgamation of interests, assets and power. Many people believed that these companies were politically relevant but economically irrelevant; that is that they were small at that time and were not doing very much. Today, I believe that the situation has changed and that they are relevant in both ways.

Interestingly, when the holding companies were started they were limited in their activities but soon, prior to the outbreak of conflict, they were swallowing up major government contracts, including within large infrastructure projects. This led to the creation of a new PPP law to facilitate and legalise the procurement system and to privilege these new partnerships within an evolving economic strategy. Within a few short years, power plant projects, major national highways covering the entirety of Syrian territory, anurban metro network in Damascus, and new airports were all projects that were to be realised through PPPs. The passing of PPP laws coincided with laws passed throughout Syria’s various ministries eliminating public sector monopolies on major projects, including electricity and transportation, thus displacing the central role of the public sector in major national works. Within this framework, the role of the public sector was not merely as a partner to private capital but also as a facilitator of land transfer, tax exemptions, and so on.

Thus, there were many changes happening with the business networks and within the business community as a whole prior to the outbreak of conflict. There are three broad changes that have accelerated the transformation of the Syrian business community in the context of the conflict and the emergence of a conflict elite after 2011: economic contraction, international sanctions, and capital flight.

It is in this broader context that Syria’s war economies emerged, providing the conditions for the emergence of what I refer to as the “conflict elite”, specifically distinguishable from other profiteers and war beneficiaries. Generally speaking, the conflict elite are individuals or small networks that operated predominantly in regime areas and who have been central to the regime’s shifting modes of economic governance during the conflict, especially concerning attempts to evade sanctions. These elites are not necessarily linked to the regime through familial or social linkages but instead through a system of mutual benefit and interdependency in which the regime has been forced to cultivate and rely on them to stimulate economic activity. Their importance emerged in so far as they linked their activity – such as procurement from the outside or transportation – to the needs of the battlefield. In some cases, they have taken up leadership positions in various chambers (such as the Damascus Chambers of Commerce and the Damascus Chamber of Industry) and other bodies. To stress, as the conflict dragged on, the dual impact of sanctions and capital flight meant that many people on the boards of these Chambers either resigned or fled the country. In 2012, every single member of Cham Holding’s board was under US sanctions, so they resigned and were replaced by an entirely new crop of people outside of the sanctions regime. This the crux of what I am talking about – the process of how the sanctions created this need to have a new kind of elite. Years later, internal rules within the Chambers led to the dismissal of chamber members who had fled the country, and their replacement by some of these new elite.