Elites, War Profiteers Take Aim at Syria’s Economic Future

DAMASCUS – According to the Syrian government, the worst of the war is over. New businesses are opening, domestic tourism is booming and investors are slowly trickling back into the country. From foreign governments to private companies and well-connected businessmen, everyone is vying for a slice of the reconstruction pie, and the government seems more than happy to accommodate allies and frenemies alike.

Yet while the front lines may have largely moved further afield and foreign governments formerly opposed to the regime warm to Damascus, little has changed for the average Syrian citizen in terms of economic and personal security, foreshadowing what life may be like in postwar Syria. The chaos of the war has exposed government-controlled areas to corruption, extortion, harassment and an ever-growing class of war profiteers – leading to an expanded shadow economy that contributes little or nothing to national wealth and operates at the expense of normal Syrians struggling to hold their lives together.

While the government’s focus on reconstruction has given some Syrians hope for stability in the near future, many remain anxious that this class of war profiteers will be given privileged access in postwar Syria.

Elites of the ‘Nail Polish Economy’

On most weekends, Range Rovers with tinted windows hold up traffic on the cobblestone streets near Bab Sharqi in the Old City of Damascus. Young clubbers with designer handbags and manicured hair piled high on their heads hobble in high heels to Mazzika, a new club that has quickly become home to the Damascene elite and where it is not unusual to find a patron dropping 200,000 Syrian pounds (SYP) (almost $400) in one night.

By July 2017, so many bars, clubs and pubs had popped up across the city over the previous year that the Damascus governorate looked to increase the number of permits for bars beyond the limit of 109 originally decreed in 1952.

Internal tourism is also on the rise, with most hotels along the coast at full capacity this summer: Reports claim 80 percent of internal tourism is on the coast, while Damascenes are starting to return to the summer resorts in Bloudan – next to Zabadani – following the “Four Towns Agreement” evacuation deal reached earlier this year that covered Zabadani alongside Madaya, Fou’a and Kafraya.

“This is what I call the nail polish economy,” said Alaa, a resident of Damascus. “People want to spend their money on the superficial stuff: going out, eating in restaurants, getting their hair done. Having endured these years of war, loss, destruction, people are not so focused on saving for the future and would rather spend what they have now and enjoy what they have.”

This flourishing service industry has translated into job opportunities for young Syrians struggling to make ends meet in the capital. Many tend to be students from outside Damascus – some from Aleppo, others from Sweida – working as bartenders, waitresses and sound and electronic engineers. The vast majority of them are young women as most young men have either been conscripted into the army, signed up with a local branch of the National Defense Forces or left the country to avoid military service.

Yet those who can afford to spend lavishly remain a select few.

“This is what I call the nail polish economy. People want to spend their money on the superficial stuff.”

“You’re either a member of one of the families of the upper class, or you’re struggling economically; the middle class is rapidly disappearing,” said one Damascene, a former government employee who subsidized his salary with family savings and asked to remain anonymous for security reasons.

The government has been largely consistent with salary payments to employees – even for those living in opposition-held areas – but inflation has risen by almost 700 percent over the last six years and salaries are stagnant.

Between 2011 and 2016, there was a 769 percent increase to the cost of food and nonalcoholic beverages, 649 percent for vegetables and legumes, 733 percent for clothing, 618 percent for electricity, gas and heating fuel and 481 percent for healthcare services, according to data from by the Syrian government’s Central Bureau of Statistics released in July 2017.

Government-subsidized products have also become more expensive: Subsidized bread, for example, used to cost 25 SYP (5 cents) per packet, and is now roughly 50 SYP. Subsidized heating fuel was around around 27 SYP per liter in 2011, and today it is 180 SYP (35 cents), residents of Damascus told Syria Deeply.

However, this increase pales in comparison to unsubsidized products, residents added. The price of a shawarma sandwich, for example, increased roughly 1,900 percent, from around 25 SYP in 2011 to 500 SYP today. A 200 gram-bunch of parsley used to cost 10 SYP, but the average price today is 400 SYP. When a certain item is in low supply, such as when Syria suffered water and fuel shortages, it can be found on the black market for more than double its price. The same applies to subsidized goods.

The cost of services have also seen a spike. A full set of blood tests in a private hospital or clinic jumped from 15,000 SYP ($30) to around 65,000 SYP ($125).

Today, the average monthly cost of living (including rent) in Damascus is around 311,000 SYP (just over $600) per month. Yet the average monthly salary of a government employee hovers around 40,000 SYP (less than $80). As a result, the vast majority of those living in government-controlled areas have been forced to take two or three jobs just to scrape by.

Other types of employment may offer higher salaries and regular bonuses, but making ends meet remains difficult.

“Now there are varying degrees of economic struggle, but even those who earn more than the average government employee cannot afford the extravagant lifestyle of the upper class. They do afford things like going out to restaurants and buying a smartphone,” he said.

Today the upper class can be split into two, albeit, intertwining factions: “old money” – traditional Damascene merchants, Aleppan industrialists, pre-2011 entrepreneurs who grew rich under the neoliberal economic policies introduced in the early 2000s; and a new class of war profiteers who emerged during the conflict and capitalized on the current state of instability.

“The activities of the upper economic class are not wholly illegal, some of it is on sound legal and economic basis, while others are just rent-seeking activities who drain rather create national wealth,” the anonymous Damascus resident said.

Law and Disorder

While the government focuses on portraying the country as open for business, little is being done to address the illicit activities of loyalist militias that contribute to the shadow economy – whether through the black market or the thousands of dollars’ worth of profit they make through checkpoints and looting. The Syrian army’s and allied forces’ gains on the various battlefields have emboldened some of these groups to abuse the law by harassing civilians, extorting taxes at checkpoints or looting.

“They drive their convoys like thugs, and push to the front of the queue to get fuel at the gas station, even though ordinary citizens have been queueing for hours,” said Hassan, a resident of the port city of Tartous.

For example, in the months following Aleppo’s return to government control, numerous reports emerged of loyalist militias attacking or harassing civilians. The militias also forced business owners and traders to pay extortionate fees just to cross militia-controlled checkpoints.

The relationship between the government and the militias is one based on balance. The government relies on the militias to operate as additional security forces in neighborhoods already under its control, freeing up the army and other allies to fight on the front line. In return, the government has largely turned a blind eye to the militias’ looting and corruption. However, today, as civilians and even officials complain loudly about their behavior, it is becoming harder for the government to ignore.

In an attempt to address this issue and instill a sense of law and order, President Bashar al-Assad in June admonished prominent political and military figures for their behavior, and called for the removal of access to the military road – on which those with certain I.D. cards were allowed to skip through stop and search checks at checkpoints; the removal of tinted windows; and tougher screenings at checkpoints. Yet in reality little has changed on the ground; the day after the speech, one minister closed down a street in Damascus with his convoy.

Today, Syrians circulate stories nearly every day that show the government’s attempts at maintaining order have been unsuccessful. In one instance, a week after the speech, in the town of Jableh in the coastal province of Latakia, a retired army officer whose son had been killed while fighting in the Syrian army was stopped at a militia checkpoint, robbed, beaten and had his car stolen.

No Country for Small Businesses

The government has swept these local security and economic concerns under the rug, preferring to focus on its military gains and warming ties with foreign governments. As a result, the talk today is of foreign investment and real estate projects, many of which blur the line between development and reconstruction and are designed to benefit only the upper class and foreign stakeholders.

Recently, developments on the ground have bolstered the state’s message that trade with Damascus is once again possible: The so-called Islamic State and al-Qaida-linked militants were pushed out of the border area between Lebanon and Syria and there was a southern de-escalation agreement between Russia, the US, Jordan and its allies.

These developments coincided with moves from Syria’s neighbors hoping to capitalize on future reconstruction projects. In July, Jordan held a Syria-focused reconstruction and redevelopment exhibition, and there have been talks of reopening Nassib crossing in the southern province of Daraa. The following month, Lebanon’s ministers of agriculture and industry visited Damascus to discuss restarting trade partnerships. There are also discussions in Lebanon to reopen the rail network that used to run from the northern Lebanese city of Tripoli to the western Syrian city of Homs.

This trend extends beyond Syria’s neighboring countries. Last month, the International Damascus Fair opened for the first time in six years. Some 23 countries officially participated, in addition to private companies from 20 other countries, including the UK, France and Germany. Many locals saw the fair as a positive sign that Syria is moving into the post-war era, with the promise of job creation, investment and redevelopment.

Despite years of calling for Assad’s removal from power, several European governments are now also looking to gain access to Damascus, diplomatically at least. Two sources close to the Syrian government told Syria Deeply that in the last few months some European states have opened channels with the Syrian government for talks on potentially reopening their embassies. At least one other EU state has had channels with Damascus open for roughly two years.

According to one European diplomat in neighboring Beirut, “the Germans, for example, have had a channel for intelligence-sharing and security with Damascus since at least 2015.”

But foreign involvement is not the only factor excluding average Syrians from the push to rebuild the economy. Since 2012, the government has passed legislation that largely favor deals with the ruling class – many of which are unrelated to rebuilding what was destroyed during the war.

In May 2015, Assad issued Presidential Decree 19 allowing all units within the state to form private investment companies. The following year, the government passed the Public Private Partnership (PPP) law, permitting private companies to make deals with the government to manage state assets.

“Reconstruction in Syria is going to breed a thousand Hariris.”

While this legislation has been promoted as part of a reconstruction strategy, wealthy local businessmen – many with ties to the regime – are already cutting deals with the government for billion-dollar real estate projects that are unrelated to rebuilding efforts. Many of these lucrative development projects are planned for land that the government has expropriated under Presidential Decree 66, passed in 2012, which allows the state to “redevelop areas of unauthorized housing and informal settlements [slums].”

“Reconstruction in Syria is going to breed a thousand Hariris,” said the former Syrian government employee, in reference to former Lebanese prime minister Rafik Hariri. After the Lebanese civil war, Hariri bought much of downtown Beirut though his company Solidere, forcing residents out to redevelop the land into high-rises and luxury apartment buildings.

“The concern is that they may rig the game in their favor, preventing small businesses and hardworking honest merchants and industrialists from also enjoying a share of the cake,” he said.

For example, the government expropriated land in the East Mezzeh district of Damascus – compensating owners very little – and is now selling it off to private companies to build luxury apartments, modern villas, public services and commercial space. The majority of the East Mezzeh project went to the Damascus Cham Private Joint Stock Company, a private company owned by the Damascus governorate, but wealthy businessmen have also recently been included. In August the Aman Group, led by Syrian businessman Samer Foz, announced that it had established Aman Damascus, with a capital of $18.9 million, to build several towers within the project.

This article originally appeared on Syria Deeply. You can find the original here. For important news about the war in Syria, you can sign up to the Syria Deeply email list. Screenshot courtesy of Al-Jazeera/YouTube. All rights reserved.