Syria’s Shadow Economy

Syrian Regime Entices Investors to Return

Oct. 2, 2018 photo, Chinese visitors arrive to the opening of the Syria rebuilding exhibition at the fairgrounds in Damascus, Syria. (AP)
Oct. 2, 2018 photo, Chinese visitors arrive to the opening of the Syria rebuilding exhibition at the fairgrounds in Damascus, Syria. (AP)

Syria’s Shadow Economy

The Syrian regime's government has recently increased its calls for investors from expatriate countries to return and invest in Syria, despite the fact that the international community has yet to agree to rebuilding the country with the participation of the regime's government. The European Union requires the Bashar al-Assad regime to comply with UN Resolution 2254 as a condition for reconstruction.

Earlier this week, Hussein Arnous, the regime's head of government, called on those who had fled the country to return to help rebuild it, including artists. This came just two days after Hazem Ajjan, director of the industrial city of Sheikh Najjar in northern Syria, invited investors to return after claiming that investment conditions had improved. Despite these calls, none of the investors have announced their intention to return to the country.

Syrian investment is being weighed down by the war, which has now entered its second decade, and has resulted in the emigration of investors and owners of factories, as has occurred in the country's economic capital province of Aleppo.

In this regard, a Syrian academic and economic expert living in exile stated that, "Syria is a repulsive environment for both domestic and foreign investors." Accordingly, the regime's government's calls for investors to return are likely to fall on deaf ears.

Khurshid Alika went on to say that, "the obstacles to the return of investors to the country have been strong so far, preventing their return." 

Here is the complete transcript of Majalla’s phone interview with Alika, who lives in Germany.

•​Why is the Syrian investors refusing to return to the country despite calls from the regime?

Many factories in Aleppo, the Damascus countryside, and many other Syrian regions were dismantled and transferred to Turkey, Egypt, and countries neighboring Syria at the start of the Syrian crisis. As a result, the Syrian economy has been fragmented among the conflicting parties, and the country has become a repulsive environment for both Syrian and foreign investors. So, there is no trust in the regime and its calls, to which no one will respond.

•​What are the obstacles to the return of expatriate investors?

Security, military, and political obstacles, as well as the lack of any sign of a political solution, the complexity of the political scene after Russia's war in Ukraine, a lack of confidence in the ruling regime, the difficulty of delivering raw materials for production, the difficulty of exporting, double taxation, exorbitant taxes and royalties levied on investors, and the absence of any real law to protect investors, are all obstacles.

•​What are the main issues plaguing the Syrian economy?

The Syrian economy is plagued by numerous economic issues, the most serious of which are hyperinflation, depreciation of the Syrian pound, a lack of foreign exchange and gold reserves, a deficit in the Syrian budget, a deficit in the Syrian trade balance, as well as the loss of the creditworthiness of the Syrian pound abroad, the economic sanctions on Syria, the decline in Syrian remittances from abroad, the decline in tourist activity in Syria, the flight of capital owners from the country, the Syrian regime’s loss of  control over all crossings in the north and north-east and consequently the decline in revenues and the division of the Syrian economy between parties to the conflict. Furthermore, Russia and Iran control the majority of domestic economic projects for their interests, increasing the Syrian regime's debt to its Russian, Iranian, and Chinese allies. In addition, the northwestern Syrian economy is connected to the Turkish economy.

•​What economic factors are preventing reconstruction?

According to UN Resolution 2254, the West has decided not to deal with or support the Syrian regime in the absence of a political solution. The Syrian regime, its institutions, entities, and officials are subject to "Western" sanctions imposed by the United States, Europe, and the United Kingdom. Because of their failure to respond to a political solution, the Syrian regime, Russia, and Iran are preventing reconstruction.

Additionally, the issue of reconstruction requires more than hundreds of billions of dollars in order to begin, and given the current complex global economic and political conditions caused by the Coronavirus pandemic, Russia's war against Ukraine, and global high levels of inflation, it would be extremely difficult to start any reconstruction. Furthermore, the flow of Syrians to Europe and other countries continues at a faster pace than before.

•​Isn't the "Shadow Economy" a problem for the Syrian economy as well?

Since the beginning of the Syrian crisis, the so-called shadow economy has been active in the country and has grown rapidly, to the point where there is a shadow economy among the three parties to the conflict, which controls the economic relations between them. As a result, traders of wars and crises, as well as trade mafias, control the economy and establish a kind of formal and informal relationship between opposing parties, and the shadow economy now accounts for more than 90% of economic activity.

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