Tag Archives: syria

The Need for Constitutional Protection of Private Enterprise

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Constitutions can play an important role in protecting economic liberties, in addition to political liberties. As the state’s foundational legal document, the constitution can provide the essential framework for establishing commercial freedom and promoting the development of the private sector. For example, CIPE partner the Syrian Economic Forum (SEF) is developing proposals for the constitutional protection of private enterprise during a future transition period in Syria.

Different countries have taken a variety of approaches in tailoring their constitutions accordingly, which should be examined in determining how Syria’s next constitution will promote and protect private enterprise.

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Beyond Cronyism, Beyond Violence: Reconstructing the Syrian Economy

This image from Aleppo Media Center, authenticated by the Associated Press, shows damaged buildings in Syria's former economic heartland.

This image from Aleppo Media Center, authenticated by the Associated Press, shows damaged buildings in Syria’s former economic heartland.

The stories coming out of Syria nowadays paint a picture of an economy taken over by violence, in which legitimate private-sector business activity has nearly ground to a halt. Rival groups raid a textile factory, promising protection in return for money; the factory is burned down when the two groups start fighting. The owner of a brake-lining plant does not know what happened to his machinery after it was looted—he only knows that his “entire wealth and life” have been dismantled. No longer able to rely on legal remedies, some businesspeople flee with their capital to countries such as Egypt, where they may remain even after the war has ended.

The statistics reported by the Syrian Center for Policy Research confirm this grim picture. Economic loss totals $103.1 billion. Almost half the population is unemployed, with 2.33 million job opportunities lost since the beginning of the conflict. The price of consumer goods has tripled. Energy prices continue to rise while private consumption and investment continue to fall. Sanctions have chopped oil exports in half, and the decreasing value of the Syrian pound has not led to an increase in non-oil exports. Manufacturing and mining barely contribute to GDP (just 4 percent), and textile factories—located largely in areas that have witnessed the most fighting—have closed by the hundreds, or possibly even thousands. A Byblos bank report estimates that 75 percent of production facilities in Aleppo are no longer operable.

It can be easy to lose sight of the importance of economic recovery amidst the urgent need to stop the fighting. But rebuilding the Syrian economy will be crucial to any long-term peace and reconstruction efforts, as will the manner in which it is rebuilt.

Before 2011, economic benefits mainly accrued to a small group of well-connected elites. Smaller enterprises could hardly expand, thwarted by contradictory laws, a weak financial system, corruption, and limited export capacity. Future reconstruction efforts should focus on rebuilding Syria’s economy in a way that replaces crony capitalism with a private sector in which all citizens have the opportunity to participate and thrive. Reforms that increase competition and bolster small- and medium-sized enterprises will stimulate economic growth and give more citizens a stake in the country’s economy and future.

The private sector should play an active role in reforming the Syrian economy once the conflict ends. To this end, the Syrian Economic Forum (SEF), a CIPE partner, has already begun taking steps to organize the private sector to advocate for necessary economic reforms.

In its First Annual Conference in Gaziantep, Turkey, SEF gathered Syrian businesspeople from inside the country and abroad to discuss recommendations for rehabilitating factories, amending investment laws, and improving educational opportunities for Syria’s youth. While it will certainly take a long time before the dire economic situation in Syria can even begin to improve, efforts such as SEF’s will help to ensure a future democratic Syria with an economy that offers all Syrian citizens the opportunity to achieve welfare and prosperity.

Peako Jenkins is a Public Service Initiative Fellow for the Middle East & North Africa at CIPE.

The Role of Information in Planning for Syria’s Post-War Economic Future

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As the world celebrates World Press Freedom Day, it is important to remember that access to information and free and unbiased reporting are vital elements for developing a democracy. According to the 2013 Press Freedom Index published by Reporters Without Borders, Syria is ranked 176th out of 179 countries. Since the beginning of the uprising in March 2011, Syrian authorities have restricted coverage of the unrest and continue to misreport the civil war on state-run TV stations.

My colleague Stephen Rosenlund wrote in his blog post A Bright Light on Syria’s Horizon about CIPE’s work with the Syrian Economic Forum (SEF), a think tank dedicated to building a free, pluralistic, and independent Syrian homeland that rests on a strong economy and ensures a life of freedom and dignity for all citizens. Despite the ongoing civil war and inability to establish a home office inside Syria, SEF has established a robust online presence through its website and social media pages allowing for the exchange of ideas and knowledge.

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A Global Voice for the Private Sector

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In 2013, the world faces many challenges, ranging from youth unemployment to the destruction of the environment to armed conflicts that continue to take lives and devastate countries. This week, more than 2,000 representatives of Chambers of Commerce from around the world gathered  to discuss these issues — and the role of the private sector in addressing them — at the 8th World Chambers Congress in Doha, Qatar.

The themes were as diverse as the participants, but one common thread emerged: the business community needs to be involved in helping to solve these pressing problems. And private sector voices are most effective in a democratic context.

Indeed, many of these issues are linked, often to issues of economic exclusion, which can incite violence and perpetuate cycles of conflict and poverty. “Enemy number one to economic development is armed conflict,” said Joost Hintermann of the International Crisis Group, quoting IMF Managing Director Christine Lagarde.

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The Role of the Private Sector in Syria’s Future

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In a previous blog post, I presented some of the harsh economic realities of today’s Syria and highlighted the work that the Syrian Economic Forum (SEF) is doing to create a better future. On April 18, CIPE hosted a panel discussion on the “Role of the Private Sector in Syria’s Future” at its Washington headquarters to explore the challenges of reconstructing and rehabilitating the country and the solutions the business community is uniquely placed to provide.

The event featured Ayman Tabbaa, Chairman of the Syrian Economic Forum (SEF); Dr. Samer Abboud, Assistant Professor of History and International Studies at Arcadia University; and Faysal Itani, Fellow at the Rafik Hariri Center for the Middle East at the Atlantic Council. CIPE Regional Director for the Middle East and North Africa Abdulwahab Alkebsi moderated the discussion.

Ayman Tabbaa, a businessman himself, emphasized that Syria’s economic woes are a product not only of the ongoing war which has ravaged the country over the last two years, but of failed social market policies over the last decade. Future economic policies must be grounded in the rule of law and encourage the growth of small and medium sized enterprises in order to bring prosperity to the country.

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A Bright Light on Syria’s Horizons

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Since 2011, CIPE has been working with a courageous group of Syrian business people to advance an economic vision for the future of their country. With CIPE’s support, these private sector leaders established a think tank in 2012 called the Syrian Economic Forum (SEF), which is helping formulate the economic policies for the country’s future.

Few countries in the world have as great a need for CIPE’s assistance as Syria. For the past two years, Syria has been wracked by civil war. Tragically, 70,000 people have lost their lives to the violence. The economy has imploded, contracting by 7.8% in 2012 and estimated to contract by another 3.4% this year.  Inflation is spectacular, with the Syrian pound’s value against the U.S. dollar falling by half since before the war began.  Bank profits fell by anywhere from 40 to 95 percent last year alone.

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Beyond the elites: Why Syrian businesspeople have a stake in democracy, not Assad

A small business in Syria. Photo: http://www.kfw-entwicklungsbank.de

In searching for an end to the bloody stalemate in Syria, many have identified the Syrian “business community” as one of the last pillars of support propping up Bashar al-Assad’s presidency.

In June, The Financial Times ran a story headlined “Business reluctant to cut loose from Assad.” In October, when The Christian Science Monitor attempted to answer the question “Who backs Syria’s Assad?” it pointed the finger first at “businessmen.” Most recently, Elliot Abrams identified “turning the business community” as one of the four tactics US policymakers can use to knock Assad from his perch and stanch the bloodshed.

The idea that the business community is complicit in the repression of Assad’s security forces stems from the idea that moral concerns of Syrian businesspeople are trumped by those of dollars and cents. As the idea goes, the Syrian business community, or at least sizeable pockets of it in Aleppo and Damascus, believes that the policies of the Assad government have allowed it to prosper, and that future prosperity relies on the guiding hand of Assad.

Recently, Radwan Ziadeh, Syrian activist and member of the Syrian National Council (SNC), spoke at Johns Hopkins School of Advanced International Studies and exposed this idea as myth. “There is no business community support for the Assad regime,” Ziadeh stated. On the contrary, he argued that many in the business community form a pillar of support for the opposition, funding many of its operations.

Indeed, The Guardian reported in May that one of the earliest opposition conferences was funded by prominent Syrian businessmen, such as Ali and Wassim Sanqar, sibling luxury car dealers, and Ammar Qurabi, chairman of Orient TV. Exploring their motives, the article reported that all three had been burned directly by the government’s preferential treatment of Syria’s most notorious crony capitalist Rami Makhlouf. These three businesspeople do not stand alone in their support for the protest movement. According to Ausama Monajed, a member of the SNC, “Millions of Syrian pounds are coming from these people. If a protesting community needs something, the money gets to them very quickly.”

In comparison, the segment of the business community supporting Assad seems to be small. At an event at USIP on October 13, Murhaf Jouejati, a member of the SNC, estimated that Assad’s support in the business community is limited to perhaps 10 to 15 elites who have long benefitted from his favor and now stand to lose much from his ouster. In a recent article in Foreign Policy, Randa Slim estimated that Assad’s nouveau riche “do not exceed 200.”

Of course, as my colleague Abdulwahab Alkebsi argued recently, the idea of a monolithic business community unanimously supporting or opposing anything is a myth. The term business community, even more than the term private sector, encompasses a range of firms of various sizes, operating in a range of different sectors. This diverse part of society comprises a dizzying array of conflicting agendas. Thus, it’s not surprising that some support Assad and some oppose him. Yet, the question remains whether the average businessperson has a stake in supporting the continued rule of Assad.

Recent Syrian economic history does not seem to merit significant support among businesspeople. Indeed, under Assad, the Syrian economy has underperformed for many. Between 2006 and 2010, due to some limited economic reform, Syria’s per capita GDP rose from just over $1700 to just under $2900. That rise put the average Syrian on par with the average citizen of Guatemala or Egypt. While Syria’s 6 percent growth in 2009 was relatively impressive, its 3.2 percent growth in 2010 lagged behind the world average. This growth has benefitted very few, many of whom selected by Assad rather than the markets.

The story of Rami Makhlouf is telling. While Bashar inherited the political power of his father Hafez, Makhlouf inherited the economic power that had been granted to his family when Makhlouf’s aunt married Hafez. Initially operating in the telecommunications industry, Makhlouf scooped up businesses throughout the economy during Assad’s period of “reform.” With his connections in the halls of power and in the security forces, Makhlouf’s participation in a business deal was thought to be crucial to its success. An oft cited figure characterizes Makhlouf as controlling 60 percent of the Syrian economy. Some, like Makhlouf, have prospered due to their connections. Others have prospered because they have operated in a sector that Assad and Makhlouf chose to support. For the majority, however, business has been difficult.

Even before the uprising, Syria’s economy offered extremely barren soil for business. The recently released Arab World Competitiveness Report sheds light on this troubled business climate. The report ranks the Syrian economy 98th in the world in competitiveness, putting it ahead of only Yemen in the Arab world. Beyond the ranking, the report describes a Syrian economy in which it was difficult to secure capital, difficult to compete with the country’s few mega-firms, difficult to hire and fire workers, and difficult to participate in trade or attract foreign investment. If the average businessperson supported Assad heading into the uprising, it was not because Assad had made conducting business easy.

Assad’s effect on business since then has only made things more difficult. His brutal crackdown on unrest has disrupted commerce, crushed the country’s growing tourism industry, and attracted economic sanctions that have put the country’s annual $2.5 billion in oil revenue in serious jeopardy. While the IMF recently forecast that the Syrian economy would shrink by 2 percent this year, some economists estimate that the damage is actually far worse. The governor of the country’s central bank recently admitted that the government has spent $3 billion to stave off the collapse of its currency. With access to Euros limited by international sanctions, government officials recently “threatened” to conduct transactions in rubles.

With the country’s economy in disarray, Assad’s hand has been anything but firm. Last month, Assad’s government announced an import ban. After days of spiraling prices, the government quickly retracted the ban. With its economy collapsing, Assad’s government announced that rather than tightening the belt during tough times, it would increase next year’s budget by 59 percent to provide social support, a decision that would make even Keynes stir in his grave. In August, a Syrian businessperson told The Financial Times, “The regime has sacrificed the economy for its own survival.” Indeed, if Assad’s years of economic mismanagement had failed to alienate the Syrian private sector, the past few months may have done the trick.

The remaining justification for Syrian businesspeople to stand behind Assad would be a combination of confidence that the current government can right the ship, and fear that in the absence of Assad, there will be no stability in Syria. In a country in which sectarian identity seems to matter, it is concerning to some that the opposition has been slow to unite and present a positive vision of a better future for all Syrians. The increasing militarization of the Syrian uprising has blurred moral lines to some. The difficult transition in Egypt is also affecting the attitudes.

At the same time, Assad’s supporters sing a bizarrely confident tune. A Syrian official recently predicted, “In a few months the protests will stop and the situation will be getting back to normal. This is a problem we will overcome.” One Syrian analyst stated, “Economic reforms will continue and if waste is cut and corruption cut back, the economy will emerge from this period stronger than it was at the start.”

These rosy predictions, like much of the administration’s message, seem largely divorced from reality. The Syrian economy has far greater problems now than waste and corruption. Even if Assad is to gain the upper hand in this conflict, life in Syria is unlikely to return to its previous normal. The sanctions will likely remain. The tourists will be slow to return. The economic dislocation is likely to persist. Resentment will fester. Another uprising will likely always lurk around the corner. While the opposition’s road is difficult, Assad’s road seems more so.

In February, when Hosni Mubarak clung to power despite the widespread calls for his resignation, I attended an event at the Carnegie Endowment titled “Egypt on the Brink.” At the event, Neil Hicks, advisor for Human Rights First, observed that Mubarak had a choice: he could hand over power or he could remain as the Robert Mugabe of North Africa. Today, Bashar al-Assad is presented with a similar choice: he can leave, or he can preside over a collapsed economy and perhaps a civil war. While he may be able to choose the second option, I doubt there will be many in the business community excited to stand behind him.