The Hard Part About Rebuilding Syria’s Economy — At Home And Abroad

ALEPPO — The Sheikh Najjar industrial zone on the outskirts of Aleppo is nothing but a field of ruins. Before the war, the region in northern Syria was one of the largest concentrations of commerce and industry in the Middle East.

In 2009, the French multinational Carrefour opened its first store there with the promise of a bright future in the country. Today, the hypermarket and the brand-new shopping mall that housed it have been reduced to concrete shells and piles of rubble. Everything has been destroyed, bombed and looted, and most of the factories have closed.

“Aleppo has always been Syria’s economic lung,” explains Philippe Kaady, managing director of a Lebanese company associated with the German group Henkel, which manufactures household cleaning products.

“To attract foreign investment, the Syrian government had created industrial zones offering major advantages such as free land, reduced taxes and tax exemptions,” Kaady explains. “My group invested $15 million to set up a factory in Aleppo in 1999. These advantages were such that our production costs were lower than in any other Henkel in the world. We were even producing at a lower cost than our factory in China, that’s saying something!”

But that was before 2011. Before Aleppo, the country’s second-largest city, became the tragic scene of a deadly and devastating conflict that began with a popular uprising, suppressed with an iron fist by the regime.

Syrian President Bashar Al-Assad did not hesitate to massacre his own people and destroy towns and their infrastructure with massive bombing. Half a million people are dead or missing in Syria. More than 5 million have fled the country, and 6.7 million are internally displaced — almost half the population.

Desolate landscapes

The humanitarian situation is catastrophic and the destruction immense. As far as the eye can see, on the main roads, in the villages, on the outskirts and in the centers of the big cities, one desolate landscape follows another, made up of concrete skeletons and buildings flattened on themselves. Nothing has been rebuilt since.

The country is worn out and its economy paralyzed to a large extent by the sanctions imposed by the European Union at the start of the war, and reinforced in 2020 by the American Caesar Act.

After closing down, either because their factory was destroyed, or because the Caesar Act made any entrepreneur in Syria an accomplice of the regime, many Syrian industrialists moved to Turkey, Dubai or Egypt, countries also offering tax breaks to foreign investors.

It is clear that the Syrians are living in deep poverty.

According to the Arab economic magazine Al-Majalla, 30,000 Syrian businessmen have invested over 0 million in Egypt since 2011, and the UNDP (United Nations Development Program) estimates that nearly billion has been invested in Turkey to create 10,000 SMEs, using fresh agents brought over from Syria.

While some left the war-torn, embargoed country, a number of foreign players continued their business, this time producing under local brands.

“To maintain our agri-food business in Syria, we manufactured our products in a local factory that we bought for a handful of dollars, and we marketed them under a local brand, barely modifying the name and packaging of the product so that it remained recognizable to consumers,” director of a European company established in Syria since the early 2000s told Les Echos on condition of anonymity.

Sourcing imports

The main difficulty for these foreign investors is obtaining supplies of raw materials.

“We couldn’t import them due to economic sanctions, so the Syrian government took care of them, against taxes and bribes at all levels. A complex and costly process that prevented us from making a profit on our products. But even if we sold at a loss, at least we kept our share of the local market,” added the director of this European company, who says he is ready to restart production, encouraged by the measures taken by the new government.

Payments are now authorized in U.S. dollars and Turkish lira, stable currencies unlike the Syrian pound, which has lost 140% of its value. A measure with immediate effect, but not enough on its own to raise the country from the ashes.

In the 2000s, Syria’s main revenue came from oil production, which accounted for 76% of the country’s total sales, and phosphate, 75% of which was extracted for export. Oil reserves, concentrated in northeastern Syria, are now exploited by the Kurds. Production has fallen from 386,000 barrels of oil per day in 2011 to less than 30,000, 10 years later.

As for phosphate, Moscow has monopolized the market. Russia, which came to Assad’s rescue in 2015 to help him stay in power, has thus claimed its due.

Food insecurity

The textile industry, Syria’s flagship product and 63% of the industrial sector, has been devastated. Some 70% of cotton factories have been destroyed, workers displaced and export sales halved. While it is very difficult to obtain reliable figures on Syria’s economy, it is clear that the Syrians are living in deep poverty.

Known for its self-sufficiency in food production, Syria now ranks among the six most food-insecure countries in the world, according to the United Nations, which puts the reduction in wheat production at 75%. Syrians lack everything. Electricity is distributed for an average of one to two hours a day, and the bread shortage means endless queues in front of bakeries.

Another shortage is that of medicines. In 2010, according to the U.S. National Institute of Health (NIH), Syria’s pharmaceutical industry, supplied 90% of the country’s drug needs, and its exports to 52 countries earned 0 million a year. Some 63 factories, mainly in Aleppo and Damascus, produced almost 6,000 types of medicines, to the extent that the pharmaceutical sector had become a major pillar of Syria’s economic and social development, providing 17,000 jobs, 85% of which were held by women.

Brain drain

But the years of war and economic sanctions have also had a major impact. As a result of displacement and the mass exodus of the population, the country as a whole suffers from a shortage of skilled workers. As soon as he was appointed, the head of the new Syrian government, Mohammed Al-Bachir, called on Syrian refugees abroad to return home and help rebuild the country.

“All our young graduates who could afford it have left Syria to secure a better future. Not only are we short of qualified personnel, it’s a tragic loss of knowledge and know-how, but it’s also a loss of capital for the country’s future,” said Wissam, a 56-year-old French-Syrian who runs a pharmaceutical company in Damascus, and who insists on remaining discreet about his activities.

Many entrepreneurs in Syria are cautiously adopting a “wait and see” attitude.

As medicines are not subject to European economic sanctions, his company has been able to continue producing under license from a major European brand. However, as prices are set by the Syrian government, Wissam explains that he has been selling at a loss until now.

Traumatized by the dark years he lived through under the former Assad regime, Wissam doesn’t want to talk about his private life or about the assassination of his uncle in the 1980s by then President Hafez al-Assed’s men. And when asked about Captagon, Wissam laments the criticism of the Syrian pharmaceutical industry since the discovery of a huge traffic in this synthetic drug, nicknamed the poor man’s cocaine.

The Captagon question

This lucrative trade is said to generate billion a year for the Syrian regime. At its head is one of the people closest to Bashar al-Assad: his brother, Maher, a powerful military leader and war criminal turned drug baron.

Captagon is originally a drug in the psychostimulant family, commonly sold in the 1970s-1980s until it was banned. During the Syrian war, it was diverted for recreational use. All the regime had to do was convert pharmaceutical factories into laboratories to produce captagon, which was then shipped via Jordan or Lebanon, mainly to the Gulf States.

In Iraq, sanctions were lifted after 13 years.

The French-Syrian pharmaceutical manufacturer said that “only state-owned companies or those requisitioned by the regime are involved in captagon trafficking.” Private companies have to meet strict specifications that are subject to multiple controls.

“You’d have to be mad to get involved in such trafficking, which would at the very least cost these companies their operating license if they were caught,” said Wissam, who hopes to see state corruption disappear with the fall of the former regime.

Wait and see

As for the political stabilization of the country and the guarantee that his invested capital will be protected, Wissam, like many entrepreneurs in Syria, is cautiously adopting a “wait and see” attitude.

While some observers are banking on a rapid revival of the Syrian economy, thanks to the country’s traditionally strong production and trade potential, others consider the cost of the war to be so exorbitant that it is likely to hamper the chance of recovery. In 2018, the UN estimated the destruction at 0 billion, while the Arab League put the cost of reconstruction in 2021 at 0 billion.

For French-Syrian economist Samir Altaïr, “opening up the country through the economy,” as promised by Damascus’ new strongman Ahmed al-Sharaa, “is a good thing, provided that international sanctions officially come to an end.” He recalls that in Iraq “sanctions were lifted after 13 years.”

And he adds another condition: “international aid must be given to the whole country, and not to each of the communities that make it up, i.e. the Sunni, Alawite, Kurdish, Druze and Christian communities. Otherwise, the country is once again heading for disaster.”