Militias and crony capitalism to hamper Syria reconstruction
Reconstruction is a main project of the regime and crony
capitalists, linked with a plan to consolidate their political and
economic power, while rewarding foreign allies for their assistance
with a share of the market.
A handout picture released by Syria’s opposition-run Shaam News Network shows Syrians looking for survivors amongst the rubble in the town of Qusayr, in the central Homs province – 21-5-2013 (AFP – HO/Fair use. All rights reserved to the author)
For the first time since 2011, the Damascus International Trade
Fair was organized and held for ten days in mid-August 2017 in a bid
to bring back foreign investors and promote an image of normalcy in
the country. Many companies from Russia, Iran, China, Iraq, India,
South Africa, and Lebanon participated among representatives of more
than 40 countries. Despite the small economic impact of the Fair and
a mortar
attack which resulted in several deaths and confirmed the
fragility of the security situation, the regime’s message through
the organization of Trade Fair to local, regional and international
actors was clear: Asad is here to stay and this is the beginning of
the Syria’s reconstruction period.
This is the culmination of the focus of the major international
and regional state actors on the “war on terror”, and consensus
around Bashar Al-Asad remaining in power, both of which have
strengthened the confidence of the dictator and the ruling class in
Damascus.
However, there remain several challenges for the regime in
reaching political and economic stability and securing funds for
reconstruction. Some of these challenges are rooted in the internal
contradictions and the nature of the regime as a patrimonial state
and its need to satisfy divergent interests of actors who played an
important role in supporting it, especially militias and crony
capitalists.
Lack of national and
foreign investments
Reconstruction is a main project of the regime and crony
capitalists, linked with a plan to consolidate their political and
economic power, while rewarding foreign allies for their assistance
with a share of the market. Reconstruction will also reinforce the
neo-liberal policies of the deeply indebted regime as it lacks the
capacity to fund the reconstruction.
In early January 2017, following its victory in Eastern Aleppo,
Damascus was planning to impose throughout the country Decree 66[i],
a law enacted in 2012 which had already dispossessed many Damascus
residents of their properties. The decree expropriated the residents
of two large informal regions on the southern edge of Damascus —
the first in the Mezzeh district and the other in a large area going
from Qadam to Daraya – and compensated them by distributing shares
in the developments that were programed to be built instead.
According to Syria Report editor Jihad Yazigi, “whenever there have
been these expropriation projects in Syria, compensation has been
extremely low. It’s a very clear dispossession of these people. […]
This is a transfer of public assets, tax-free, to private companies —
and it will be a big boost to regime cronies[ii].”
This plan will provide 12,000 housing units for an estimated
60,000 residents. There will be schools and restaurants, places of
worship, even a multi-story car park and a shopping mall[iii].
Officials in Damascus justified this decree by claiming that the
objective was to enhance the quality of the housing and that other
areas would follow to improve informal housing conditions throughout
the country[iv].
Another case was in the city of Homs, when the municipality in
September 2015 approved the plan for the reconstruction of the Baba
Amro neighborhood. In March 2017, the municipality established its
own holding company to handle real estate project[v]. The plan for
reconstruction included 465 plots, mainly for residential housing, in
addition to public spaces and services, such as schools and
hospitals. Similarly, accusations were leveled at the possible
demographic consequences.
By allowing the destruction and expropriation of large areas,
Decree 66 can be used as an efficient instrument for rapid and large
development projects that will benefit regime cronies, while at the
same time operating as a punitive force against populations opposed
to the regime. The development of the residential projects would be
carried by holding companies owned by governorates or municipalities,
but the construction and management of the projects would be
contracted to private sector companies owned by well-connected
investors. The implementation of this law in Syria would serve a
number of objectives, including a means to pressure populations
living outside regime control by threatening to expropriate their
properties in their absence; as a source of enrichment for crony
capitalists linked to the regime; and as a carrot to attract capital
from various countries that wish to profit from Syria’s
reconstruction drive[vi].
Aman
Group, owned by rising business figure Samer
Foz with close relations to the regime, announced in August 2017
its contribution to the reconstruction of Basateen Al-Razi area, in
the Mazzeh district of Damascus, in partnership with Damascus
Governorate and its Damascus Cham Private Joint Stock Company. Aman
Damascus, established by Aman group for this project, announced a
capital of USD 18.9 million, but there were no details on the
respective shares of the partners. Before the deal with the Aman
Group, Damascus Cham had established a similar joint-venture with
Zubaidi and Qalei LLC owned by Khaled Al-Zubaidi and Nader Qalei, two
powerful Damascene businessmen with connections to the regime and
whose company Castle Investment was awarded in 2017 a long-term
contract to manage the Ebla Hotel, in the outskirts of Damascus, a
five-star resort with a conference center[vii].
The fact that Samer Foz and Nader Qalei are Sunnis has not
prevented them from having very close links to the regime, showing
once again the multiple strategies and tools of the regime to
constitute a diverse popular basis through clientelism, tribalism and
sectarianism.
Similarly to Homs and various suburbs of Damascus, Aleppo and
other areas could see the imposition of similar projects. In Aleppo,
more than 50 percent of the buildings and infrastructure have been
partially or totally destroyed, according to a preliminary assessment
of the municipality in January 2017[viii]. Meanwhile large sections
of Aleppo’s eastern neighborhoods have been forcefully displaced to
other areas or left as a result of the war.
Some inhabitants of Eastern Aleppo have started to come back, but
until now remain a minority. Indeed, it was estimated that more than
440,000 internally displaced people have returned to their homes in
Syria during the first six months of 2017. In parallel, UNHCR has
monitored over 31,000 Syrian refugees coming back from neighboring
countries so far in 2017. This is a very small amount considering
that more than 5 million refugees have fled Syria, and there are
another 7.6 million internally displaced Syrians. The Syrian
population has shrunk by an estimated 20 percent[ix].
The investments of private actors are however insufficient to
rebuild the country. In April 2017, the cost of reconstruction was
estimated at $350 billion[x]. In addition, there are problems of
funding, as Public–Private Partnership (PPP) schemes largely rely
on financing from banks, which is clearly unavailable as the total
assets of 14 private-sector commercial banks operating in the country
reached SYP 1.7 trillion at the end of 2016, equivalent to only
around USD 3.5 billion (based on the end of the year market exchange
rate). In 2010 they reached USD 13.8 billion. In terms of assets,
some of the six state-owned banks are actually larger than their
private sector counterparts, in particular the Commercial Bank of
Syria. However, these banks have large bad debt
portfolios[xi].
The reconstruction needs therefore massive foreign funding, which
would probably benefit the countries that most supported the Assad
regime, particularly Iran and Russia. In February 2017, the Syrian
Minister of Economy, Adib Mayaleh, declared that companies from Iran
and other allied countries will be rewarded while European and
American companies will first need to have their governments
apologize before benefitting[xii]. Following the recapture of Eastern
Aleppo, Aleppo Governor Hossein Diyab also stressed that Iran was
going to “play an important role in reconstruction efforts in
Syria, especially Aleppo”. The Iranian Reconstruction Authority
publicized in March 2017 the renovation of 55 schools across the
Aleppo province[xiii]. Iran also had the largest presence at the
International Trade Fair in Damascus with more than 40 Iranian
companies participating[xiv].
Meanwhile in in October 2015, a Russian delegation visited
Damascus and announced that Russian companies would lead Syria’s
postwar reconstruction. Deals worth at least €850m emerged from
these negotiations. A Russian parliamentary visit to Syria in
November 2016 resulted in Syrian Foreign Minister Walid Muallem
reportedly offering Russia firms priority in rebuilding Syria[xv].
The Chinese government, in early August of this year, hosted the
“First Trade Fair on Syrian Reconstruction Projects,” during
which a Chinese-Arab business group announced a $2 billion commitment
from the government for the construction of industrial parks in
Syria[xvi].
Nonetheless, the level of destruction raises questions if Iranian,
Russian and even Chinese capital would be enough. The current absence
of main actors such as Western states and Gulf monarchies as willing
to invest in Syria poses a series of problems.
However, the issue of reconstruction is also connected to the
capacities of the regime to provide stability in the regions under
its control and a business environment favorable to investments. This
is endangered by two main elements: militias and crony capitalists.
Reconstruction plan of the Baba Amro area in Homs – 25-8-2015 (Homs Governorate official website/Fair use. All rights reserved to the author)Militias,
spreading chaos
Grievances against militias have increasingly become public and
outspoken in regime-held areas throughout the country for a while
now. Militiamen have been involved in various criminal activities
such as robbery, looting, murder, infighting, and especially
checkpoint extortion, resulting in higher prices and further
humanitarian suffering.
Criticisms have become increasingly vocal in different areas,
especially in the Syrian coast, where residents have repeatedly
expressed anger at the silence of local police and security forces
toward the rise in crimes, kidnapping and looting by pro-regime
militias[xvii].
This anger has spread to other areas as well. In September 2016,
the local population in regime-controlled areas of western Aleppo
city expressed frustrations against government officials due to an
increase in the looting of homes by loyalist shabiha groups
after residents evacuated the area. Militiamen also looted hundreds
of factories and workshops in Ramouseh industrial neighborhood in
Aleppo. Fares Al-Shehabi, a member of parliament and head of Aleppo’s
Chamber of Industrialists, even complained
about the incident on his Facebook page.
The pro-regime Imam of Aleppo’s Al-Abara Mosque mentioned the
matter during a Friday sermon, explaining that trading
stolen products was banned under Islamic law. In reaction, Ibrahim
Ismael, a shabiha commander, stated that he considered the
stolen items as “war prizes” for people who defended
Aleppo[xviii].
In May 2017, the Syrian government was trying to cancel levies
extorted by regime checkpoints following growing protests from
merchants and transporters alike reflecting the exasperation of the
population in various areas. Businessmen in Aleppo were increasingly
critical of these levies, and lorry drivers outside the city of
Sweida closed the motorway linked to Damascus for two hours in
protest at the “fees” imposed by the various checkpoints along
the road. In mid-May, Zeid Ali Saleh, the head of the Military and
Security Committee in Aleppo which groups all regime security
branches and militias in the city, finally issued an order forbidding
the levying of “fees” by regime checkpoints on lorries
transporting goods within and outside the city[xix]. Several days
later, the Damascus Chamber of Industry also demanded a similar ban
in the capital[xx].
At the same time, in response to this growing unrest, Prime
Minister Imad Khamis declared
that he would ban these practices, but there was ongoing resistance
from militias. This situation reflects the fact that as the war is
ending in large sections of the country, the justification for these
checkpoints is increasingly less valid.
In mid-June 2017 in Aleppo, following a number of militia crimes
which were even reported in pro-regime media[xxi], a major crackdown
was launched. The presidential palace sent Lieutenant General
Mohammed Dib Zeitoun, head of State Security and one of Asad’s most
powerful intelligence chiefs, in order to put an end to the militias’
lawless behavior. State Security and Air Force Intelligence troops
started rounding up popular committee members in the Adhamiya,
Akramiya, and Seif Al-Dawla neighborhoods, which resulted in some
small skirmishes. In addition to this, the local head of the Baath
Party, Fadel al-Najjar, also issued a decree
tightening regulations on the Baath Battalions[xxii].
However, there were significant challenges to curb the power of
militias on a national scale. According to businessman Fares
Al-Shehabi, the intervention
of Bashar Al-Asad was necessary twice to issue orders to high
security officials[xxiii].
The main challenge is that militia leaders are generally linked to
powerful security agencies and prominent military officials, thus
preventing municipal authorities from acting against them without the
support of top-level decision makers.
On July 6, 2017, a large demonstration organized by industrialists
and businessmen took place in the industrial zone Sheikh Najjar,
denouncing the practices of militias in Aleppo. Demonstrators accused
them of killing civilians and deliberately disrupting the return of
water and electricity supplies by maintaining their control over
services and prices. The protestors also condemned the extortion of
money at military checkpoints by notably threatening workers with
going to the military service if they did not pay[xxiv]. Meanwhile,
on the road to Aleppo, truck drivers from the regime-controlled towns
of Nubl and Zahra organized another
demonstration against the checkpoint levies and the militiamen’s
violent behavior. They demanded the authorities to remove the
checkpoints.
Aleppo was a test for the rest of the country for the regime to
prove its capacity to guarantee “stability” for its population,
and for Damascus to prove to the international community its capacity
to control the areas under its control, and therefore to move forward
on the issue of foreign-funded reconstruction.
However, this is only the beginning of a long battle to discipline
the paramilitary forces in the country, including local militias such
as the National Defense Forces (NDF) and Iran-controlled ones. As
argued by a Syrian official in 2013 foreseeing the problem, “after
this crisis, there will be a 1,000 more crises — the militia
leaders. Two years ago they went from nobody to somebody with guns
and power. How can we tell these shabiha to go back to being
a nobody again[xxv]?”
In summer 2017, lawless and violent pro-regime militias were still
spreading chaos and creating insecurity in various regime-held
territories[xxvi]. By the end of August, according to
opposition activists, fighters from Nusur Homs, a paramilitary group,
refused to be inspected on their way into the city of Homs, instead
opening fire on the police patrol and brutally beating a police
officer[xxvii]. Furthermore, the number of checkpoints managed by
militiamen throughout the country generally did not decrease, with
some new ones popping up, leading to an increase in costs for
producers and consumers alike.
Finally, there exist many other security challenges the regime is
hardly capable of dealing with. One of them is the probable change in
strategy of retreating jihadist groups, such as Hay’at Tahrir
Ash-Sham (HTS) and the Islamic State (IS). There will be a shift
towards suicide bombings in civilian areas which will also create
more instability.
Pro-regime demonstrators accuse loyalist militias of exacting levies from civilians at military checkpoints – Aleppo – 7-7-2017 (Al-Modon newspaper/Fair use. All rights reserved to the author)Crony capitalists, they
always want
more
The militias are certainly one of the biggest challenge for the
regime to restore “stability”, but they are not the only one. The
crony capitalists, empowered politically and economically throughout
the war, are also to some extent impeding the return of certain
bourgeoisie reinvestment in the country, and therefore the creation
of a business environment favorable for reconstruction. The regime’s
military victories and increasing re-control of large portions of the
Syrian territory encouraged Damascus to try to win back investors and
businessmen who had left the country because of the war. Damascus’
motivations are based on attracting investment and increasing
business activity, while manufacturers decrease the need for imports,
a crucial aspect as foreign currencies became very rare.
As a reminder, the closure of many workplaces since the beginning
of the uprising in March 2011 led to massive job loss. The economy
lost 2.1 million actual and potential jobs between 2010 and 2015.
Unemployment in 2016 reached 60 percent, while youth unemployment
increased from 69 percent in 2013 to 78 percent in 2015[xxviii].
Poverty is estimated to be 83 percent of the population, and 2.1
million homes have been destroyed[xxix]. The high level of
unemployment and higher cost of living encouraged sections of the
youth to get involved in the army or pro-regime militias, especially
when the salary of a militiaman could be four times higher than a
university teacher[xxx].
In February 2017, Finance Minister Maamoun Hamdan visited Egypt to
meet with the Syrian
Businessmen Group — Egypt (Tajammu‘ Rijal Al-A‘mal
As-Suri Bi-Masr)[xxxi], many of whom are manufacturers. He
offered them many incentives such as a reduction in customs duties on
production inputs, an exemption on all duties on machinery as well as
on the sales tax, in addition to a rescheduling of any debt owed to
state banks — a law passed in 2015 enables investors to reschedule
their debts at relatively attractive conditions[xxxii].
Mr Hamdan also announced that the government was providing funds
to establish an 8 MW power generating set for the Sheikh Najjar
Industrial City in Aleppo as well as completing works on the Aleppo
Airport. The investors answered with a list of requests, including a
grace period of two years for their debts. They also raised several
questions with regards to customs duties and other business
regulations. A week after, a delegation of Syrian investors based in
Egypt visited Damascus to meet with various government
officials[xxxiii].
Crony capitalists did not hesitate to criticize these government
measures. A week after the minister’s visit to Cairo, the newspaper
al-Watan, owned by Rami Makhlouf, published a commentary
piece (“The Egyptian Industrialists”, February 26, 2017) strongly
condemning the fact that the investors conditioned their return to
Syria to the incentives provided by the government, and that they
wished to return “only after the liberation of Aleppo[xxxiv].”
According to economic news website The Syria Report, this piece aimed
to pressure “those in the government that want them back. The
mention that they should pay back all their dues, i.e. debt arrears
and taxes, is a clear threat to the investors as to what they should
expect were they to come back[xxxv].”
Syrian investors who left Syria during the war were from very
diverse backgrounds and operated in a variety of business sectors,
but mostly had less powerful connections to the regime. Those located
in Egypt, for example, are mostly industrialists in the textile
sector; many of them came from Aleppo, meaning from an urban Sunni
background; and the origin of their wealth had little connection to
their relation with state institutions but was rather based on their
capital investment[xxxvi]. In a 2016 BIT report, the Syrian Center
for Policy Research (SCPR) stated that up to 90 percent of industrial
enterprises in the main conflict areas, such as Aleppo, have closed
down, while the remaining ones operate at only 30 percent
capacity[xxxvii]. Consequently, Syrian industrialists had
little options to stay.
At the time of the writing, there were no signs of massive return
from Syrian industrialists, while the Egyptian regime announced in
March 2017 its intention to establish an integrated industrial zone
and other facilities for Syrian industrialists in Egypt as a counter
initiative against attempts by Damascus to re-attract Syrian
industrialists based in Egypt[xxxviii]. Many elements certainly
prevented the mass-scale return of Syrian businessmen in Summer 2017,
but the behavior of crony-capitalists did not contribute to any
willingness to come back.
As such, the recent call
by Foreign Minister Walid Muallem for an “active economic diplomacy
for preparing the right groundwork for the reconstruction phase in
service of national interests” and “the importance of
prioritizing expatriate contributions in the reconstruction process
through enhancing communication and constructive interaction with the
Syrian communities abroad” is rather difficult to materialize. This
is in fact unachievable without collaboration with crony capitalists
and other regime officials.
The Syrian Businessmen Group — Egypt logo (Syrian Businessmen Group — Egypt Facebook page/Fair use. All rights reserved to the author)Conclusion
Economist Osama Qadi argued that “recovery might takes 20 years,
assuming Syria post conflict starts in 2018 at 4.5% growth[xxxix].”
In the current conditions, this seems rather optimist.
The possible end of the war in the near future does not mean the
end of the problems for the regime, quite on the contrary. The regime
will have to deal with a series of contradictions and challenges: on
one side, satisfying the interests of crony capitalists and militias,
on the other, accumulating capital through economic and political
stability, while granting its foreign allies the major shares in the
reconstruction business. Today, these objectives are rarely
overlapping.
The resilience of the regime in its war against any kind of
dissent has come at a very high cost, above all in terms of human
lives and destruction, but also politically. In addition to the
growing dependence on foreign states and actors, some features of the
patrimonial regime have been strengthened, while its authority has
diminished. Crony capitalists and militias have increased
considerably their power, while the clientelist, sectarian, tribal
features of the regime have been reinforced. Therefore, the
absence of democracy and social justice, which were at the roots of
the uprising, are still very much present and were even deepened.
However, the absence of an inclusive and structured Syrian
political opposition appealing to all popular classes, and of social
actors, such as independent trade unions or peasant associations,
that could capitalize on the internal contractions of the regime
renders the transformation of various struggles into connected and
organized political battles on a national scale, very difficult.
[iv] The estimates of what proportion of the population lived in
informal housing before the uprising varies, usually fluctuating
between 30 to 40 percent, but it might have been as high as 50
percent. Robert Goulden, “Housing, Inequality, and Economic Change
in Syria,” British Journal of Middle Eastern Studies, Volume
38, Issue 2 (2011): 188.
[v] T. Rollins, “Decree 66: The Blueprint for Al-Assad’s
Reconstruction of Syria?”
[xx] “As Anger Grows Government Tries to Rein in Extortion by
Regime Militias,” The Syria Report, 2017; “Sina‘iu
Dimashq Yutalibuna bi-Ilgha’ “at-Tarfiîq” wa Iqaf at-Tahrib
min Turkiya,” (in Arabic), Enab Baladi, 2017. Accessed 30
June 2017, https://www.enabbaladi.net/archives/150953.
[xxi] “Tafasil Qatl at-Tifl “Ahmad Jawish” fi Halab,” (in
Arabic), Syria Scope, 2017. Accessed 30 July 2017,
http://www.syria-scope.com/political-news/75289;
“Ahali Halab Yutalibuna bi-Dabt al-Ta‘addiyat,” (in Arabic),
Al-Watan, 2017. Accessed on 4 September 2017,
http://alwatan.sy/archives/107730;
“Haqiqah Ma Hadatha ma‘a al-I‘lami Badr Jad‘an bi-Hayy
Al-Jamiliyyah,” (in Arabic), Akhbar Halab, 2017. Accessed
4 September 2017, https://www.nfac-sy.net/news/12493.
[xxxi] “Syrians’ Investments Abroad Would Not Prevent
Industrialists from Return Home,” SANA, 2015. Accessed on
4 September 2017, http://sana.sy/en/?p=61368.
[xxxiii] “Finance Minister Meets Delegation of Syrian
Industrials Residing in Egypt,” SANA, 2017. Accessed 21
February 2017, http://sana.sy/en/?p=100509.
[xxxiv] Ali Hashem, “As-Sina‘iun al-Masriyyun,” (in Arabic),
Al-Watan, 2017. >, Accessed 25 May 2017,
http://alwatan.sy/archives/93130.
[xxxviii] “Ministry of trade studies launching Syrian industrial
zone in Egypt,” Al-Bawaba Egypt, 2017. Accessed 4
September 2017, http://www.albawabaeg.com/91831.
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