Economy

Dimension 5 of 17


We wanted to learn about the economy of Syria. We listened to a wide range of local, regional, and international actors influential in the life of Syria. The statements we heard told the same basic story: 

“Before the revolution, the economy was totally controlled by the Syrian government and a few holdings established by the Assad family. There is no economy now, but there is a trade market between regions. The regions have different laws. Cities, villages, and towns all have different laws. The Kurdish region has consistent law within itself. Most of the territory is black market. Oil from the IS area goes to the regime through brokers.” (231641)

“Syria is very dependent on other countries right now.... Before the revolution, Sunni businessmen were very rich. Assad started imposing restrictive conditions.” (238631)
“There was a recent water strike because of poor quality water. There is no established market in non-government controlled areas. There are stores, but the black market competes. There are no regulators. They do have competition.” (232631)
“There are local markets, but based on what we hear, the price of goods is volatile. There doesn't seem to be any way to control the market.” (233121)
“There is also the arms dealing that influences everything. That is the currency now.” (233081)
“Even the regime controlled areas have no strong regulatory mechanism.” (238341)
“When the government has money, it goes to the military. They couldn't even afford that without outside support. Much of the educated elite has left. Cats and dogs are gone from much of Syria because people ate them. Aid packages are the only source of food. It may be better in the Assad controlled areas.” (239312)

“Even in regime areas the economic rules are bypassed by bribery, corruption, nepotism. It makes enforcing contracts very hard.” (233911)

“There is a lot of black market economy. The previous economy has been erased.” (239311)

“The regime is a closed clan. Everything is allowed to them. They have a monopoly. They have a few people in every city." (230713)

What does the state of Syria's economy matter in your choice of partners, the design of initiatives, and the implementation of those initiatives? Read more to find out. Scroll to the bottom of the page for more statements. 


INCA DIMENSION #5: SYRIA'S ECONOMY


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Syria's Economy is the 5th of 17 dimensions of Syrian society that influential local, regional, and international actors assessed and discussed through 3 rounds of interviews and feedback, beginning in January, 2016. Taken together, the 17 dimensions of the x-axis offer a comprehensive, holistic view of Syria and its people. Interview participants assessed the capacity of each dimension, represented by the y-axis; higher levels indicate greater capacity within that dimension for Syrians to respond effectively to existential global threats.

Economy is important as a dimension because it reveals what elements of a functional economy exist in Syria at present. Based on the 8-level hierarchy described in the question below, participants from 27 influential organizations assessed the Syrian economy at different levels at this time in history, ranging from 1 to 3. (At the bottom of this page, you can read statements interview participants gave to support their assessments.)


The Question

When people trade freely with one another, they gain personally through the exchange, which helps them, and enables them to help others. Which of these levels of development is the dominant mode of the economy this country? (If two seem equal, name the lower level.)

1.     The economy is dominated by barter or black markets

2.     The economy is taxed and monitored; however, none of these four features exist at the national level: access to jobs and housing for all of the population, markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predicable rules and enforcement of contracts.

3.     One of these four features exists at the national level: access to jobs and housing for all of the population, markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predicable rules and enforcement of contracts.

4.     Two of these four features exist at the national level: access to jobs and housing for all of the population, markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predicable rules and enforcement of contracts.

5.     Three features exist at the national level: a well-regulated economy, with access to jobs and housing for all of the population, markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predicable rules and enforcement of contracts.

6.     The national economy is well-regulated, with all four of these features: access to jobs and housing for all of the population, markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predicable rules and enforcement of contracts.  

7.     Well-regulated locally, nationally, and regionally.

8.     Well-regulated locally, nationally, regionally, and internationally.

READ CLOSELY, IMAGINE, LEARN

Read each statement below closely. Assume the person who wrote this is sincere; they believe every word. Imagine what life experience or background might lead a person to have this belief. Whether true or false, this person’s perception is a fact. 



DEVELOPMENT IN SYRIA


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WORK WITHIN SYRIA’S ECONOMY

The thick brown line represents economy

The thick brown line represents the most conservative assessment of Syria’s economy, an economy dominated by barter and black markets. Any organization wanting to invest or operate in Syria should assume they are essentially operating in a black market.  


STRENGTHENING THE SYRIAN ECONOMY ONE STEP AT A TIME

Aim just right: build a formal economy

The green area of the chart, from levels 1 to 2, indicates where projects to strengthen the Syrian economy will be most likely to succeed. Two examples are projects recommended by the Cato Institute for the 1.4 million Syrian refugees living in Jordan, to grant work permits to all Syrian refugees, and to stop restricting Syrian entrepreneurship. This would enable the underground Syrian refugee economy to be formalized. Similar initiatives could be applied to the black markets that are endemic to refugee communities and camps. 

If you aim too high: destructive overreach

Projects and agreements in the red area of the chart are overly ambitious and, at best, will be a waste of time. More likely, they will drive confusion and corruption into the country. An example is of initiatives intended to enforce regulations on the banking system (level 3). If implemented in Syria, this attempted leap from an economy based on black markets and barter (level 1) to one with strong regulatory mechanisms (level 3) would be too much to do at once! Without first bringing the majority of the economy into the formal sector (level 2) already in place, efforts to strengthen regulatory mechanisms on the economy are doomed to failure. 

The economy in post-invasion Iraqi society was similarly devastated in the spring of 2003. The United States, however, failed to recognize the nature of the Iraqi economy and instead enacted many programs based on the faulty assumption that economic activity in Iraq, while unregulated, primarily occurred in the formal sector.  As a result of this overestimation, inappropriate practices and projects drove confusion and corruption into Iraqi society with disastrous results.

The most blatant overestimation of Iraq’s economy was evidenced by Order #49 of the Coalition Provisional Authority (CPA), the US-backed body in charge of the early stages of reconstructing Iraq. Assuming that most economic activity occurred in formal transactional markets with regulatory mechanisms and predictable contract enforcement (level 4), CPA Order #49 lowered the corporate income tax considerably in the hope of generating greater corporate investment, which was intended to then spark economic growth across all levels of Iraqi society (a level 5 goal). As our INCA platform reveals, however, this assumption was misguided and led to program overreach. The dominance of the informal sector and the lack of regulatory enforcement in the Iraqi economy undermined the efficacy of this program. Rather than leading to inclusive economic growth, which was the intention behind the order, CPA Order #49 in fact had little effect on the formal economy, and only served to deprive the already cash-strapped Iraqi government of another source of revenue.

Background Reading

For more information on the shortcomings of CPA Order #49, see: Bathsheba Crocker (2004) Reconstructing Iraq's economy, The Washington Quarterly, 27:4, 73-93

For more information on INCA for Iraq, read our retroactive case study here: http://sovereigntyfirst.com/iraq/report


Round 3 Statements (Nov 2016 - Jul 2017)

The Range

Lowest Score: 1

Highest Score: 3

1.     Dominated by barter or black markets

“Before the revolution, the economy was totally controlled by the Syrian government and a few holdings established by the Assad family. There is no economy now, but there is a trade market between regions. The regions have different laws. Cities/villages/towns all have different laws. The Kurdish region has consistent law within itself. Most of the territory is black market. Oil from the IS area goes to the regime through brokers.” (231641)
“Syria is very dependent on other countries right now.... Before the revolution, Sunni businessmen were very rich. Assad started imposing restrictive conditions.” (238631)
“There was a recent water strike because of poor quality water. There is no established market in non-government controlled areas. There are stores, but the black market competes. There are no regulators. They do have competition.” (232631)
“There are local markets, but based on what we hear, the price of goods is volatile. There doesn't seem to be any way to control the market.” (233121)
“Iran has been involved in the Syria economy for the past few years.” (231211)
“There is also the arms dealing that influences everything. That is the currency now.” (233081)
“Even the regime controlled areas have no strong regulatory mechanism.” (238341)
“This is the case both in and out of regime controlled areas.” (236592)
“When the government has money, it goes to the military. They couldn't even afford that without outside support. Much of the educated elite has left. Cats and dogs are gone from much of Syria because people ate them. Aid packages are the only source of food. It may be better in the Assad controlled areas.” (239312)

2.      None of these three features exist at the national level: Markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predictable rules and enforcement of contracts.

“There are some elements of a functioning economy, but not the ones listed. Even in regime areas the economic rules are bypassed by bribery, corruption, nepotism. It makes enforcing contracts very hard.” (233911)
“The economy is reflective of levels 1 and 2. There is a lot of black market economy. The previous economy has been erased.” (239311)

3.     One of these four features exists at the national level: access to jobs and housing for all of the population, markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predicable rules and enforcement of contracts.

“The regime is a closed clan. Everything is allowed to them. They have a monopoly. They have a few people in every city." (230713)


Round 2 Statements (Aug 2016 - Oct 2016)

The Range

Lowest Score: 1

Highest Score: 2

1.     Economy dominated by barter or black markets

"Most businessmen were Sunni and were rich. Assad started to shut down imports. People started importing through Lebanon via animal caravans, selling in Syria at double price. As they were caught they were jailed. Assad started preventing money from leaving the country. A black market was forced to develop, but business people were jailed for long sentences, so another level of business was eliminated. The Alawi started partnering with the other Syrian business people. They learned how the market worked, the undercut the Syrian partners with international providers, offering better deals as brokers. Mercedes, Peugot, and Renault were all stopped or directed through Alawi brokers." (221211)

2.     The economy is taxed and monitored; however, none of these four features exist at the national level: access to jobs and housing for all of the population, markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predicable rules and enforcement of contracts.

"There are no regulations. Each does whatever they want. They are implementing a market economy, but in a wrong way. There is no regulation or consequence." (220291)
"The features could exist where the regime is in control, but they may not exist in opposition-controlled areas. Enforcement there is not possible." (228631)


Round 1 Statements (Jan 2016 - May 2016)

Note: These statements were given by participants as rationale for their decision to gauge Syrian capacity at the level they did for this dimension. 

The Range

Lowest Score: 1

Highest Score: 3

1. The economy is dominated by barter or black markets

"For now there is no economy in Syria. It never had any foundation. The GDP etc. were always on the minus side. A few families controlled trade. A lot of people were unemployed and outside investors were not interested. The economy was never good. Pressure from the European Union forced Assad to impose a series of rules on Syria. 40% of the population went to below the poverty level…. That contributed to the revolution.” (223881)
"Even the regime-controlled areas have no working economy." (225662)

2.     The economy is taxed and monitored; however, none of these four features exist at the national level: access to jobs and housing for all of the population, markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predicable rules and enforcement of contracts.

  "A groups of Assad relatives control all of the economy and trade." (21388111)

3.     One of these four features exists at the national level: access to jobs and housing for all of the population, markets that are generated to incentivize inclusive growth, a strong regulatory mechanism, and predicable rules and enforcement of contracts.