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ABSTRACT
The war that engulfed Syria in March 2011 is considered to be the most destructive event in its modern history. In addition to the massive human losses and millions displaced, physical capital stock and trade losses are comprehensive; by 2019, the United Nations estimated conflict-related damage to physical capital at US$442.2 billion (infrastructure destruction estimated at US$120 billion); and trade witnessed a collapse of about 100% in just a decade. The study focuses on the impact of the conflict on capital and trade and their specificity in a “multipolar” world to a small but “node” country like Syria. Using the error correction model, findings supported the view that (1) underdevelopment is linked to persistent and widespread international and regional intervention and economic sanctions; (2) political and geopolitical factors are highly associated with the state’s capacity to raise investment and trade volume. Further, the study pointed out the importance of both public capital and trade in growth in the pre-conflict phase, but not the private capital. Recovery and reconstruction are possible only with relative peace drawn by political settlement between the dominant and contending parties in the geopolitical context.
Disclosure Statement
No potential conflict of interest was reported by the author(s).
Notes
1 Total investment to GDP ratio witnessed a steady increase from 18.13% in 2000 to 22.79% in 2010. Private investment approvals reached US$9.2 billion (26% of GDP) in 2006; mainly in tourism and real estate sectors. The boom in the financial sector which grew by 200% in 2006 attributed to the boom in the private banks which captured 70% of deposits and contributed to more than 40% of the growth in loans and advances.
2 Syrian economy, for many decades, was dependent on oil revenue; transit oil revenues; Gulf Arab aid flows and Soviet Union aids; and remittances, and thus not on production factors or productive forces that will allow for steady and long-term growth.
3 It is worth noting that data for the crisis period (2011–present) is showing pervasive structural breaks and thus, it can be perilous to include it in the analysis, as the inferences will go astray, and thus, we include only pre-conflict time series data for policy recommendations for the next stage of Syria.
4 Degree No. 8 of 2007 is a property protection law, where it allowed investors to own and rent lands and real estate needed to establish or expand investment projects.
5 See the official data: Syrian Central Bureau of Statistics (CBS), http://cbssyr.sy/.
6 Due to their rapid utilization of the Syrian market’s thirst for new services, and the absence of real market economic institutions based on transparency, monopoly prevention, competition, efficiency and equal access to business.
7 The transition to the market economy had been on the account of progressive social agenda that had been previously provided, in which the 2000s registered a rise of the informal economy, poverty and unemployment increased: The Central Bank of Syria reported the unemployment rate registered 8.2% in 2009, and poverty rate stepped up from 30.1% in 2004 to 34.3% in 2010. According to UN Development Programme UNDP (2010), Social and economic inequalities became very visible as well in many aspects (for more details on Human Development Indicators, see https://hdr.undp.org/system/files/documents/human-development-report-2010-complete-english.human-development-report-2010-complete-english.
8 Many countries (Saudi Arabia, Israel, Turkey, Qatar and Jordan)—led by the US—quickly began to provide military and logistical support in the form of weapons and training to the different groups of rebels (extremist groups since 2001) united only under a slogan of “regime change” by their desire to convert Syria from the only remaining “secular” state in the region, a country has been always described as anti-Israeli power, into an Islamicist country similar to Qatar. The model would be an extension of al Qaeda (or the Islamic State) in Iraq, drawing on Syrian Muslim Brotherhood networks and the ever faithful, sectarian and vicious Saudis.
9 See the Syrian Central Bureau of Statistic, http://cbssyr.sy/.
10 Some of them are under the control of the Islamic State Organization “ISIS,” and others are under the so-called Syrian Kurdish Forces “PYD” which is supported by the US.
11 The two sectors’ direct losses amounted to more than US$64 million, according to data from the Ministry of Oil and Mineral resources in 2018, see http://mopmr.gov.sy/index.php/en/. Thus, the country witnessed a collapse in foreign trade, which is mainly oil and agricultural products (for more details, see Suliman and Khwanda Citation2020).
12 See the Syrian Central Bureau of Statistic, http://cbssyr.sy/.
13 Given the fact that the private sector’s response to an expansionary monetary policy through exchange rate channel is stronger and more persistent than interest rates or credit in the case of Syrian economy, we include the index of exchange rate in the private sector model (State Planning Commission & United Nation Development Programme, 2008, see https://info.undp.org/docs/pdc/Documents/SYR/00049469_implementing%20FYP.pdf).
14 In October 1980, Syria-Soviet relation was formalized in the “Treaty of Co-operation and Friendship” which covered bilateral trade relations, and armaments and defense materials supply, see https://roe.ru/eng/export/siriya/. The volume of trade between Syria and USSR continued to increase at a high pace; Syrian exports in 1989 and 1990 reached more than 1.4 billion Syrian Pounds. The main exports were textile materials like cotton, silk and woven fabrics, cotton yarns, curtains, and towels, and other raw and manufactured materials.
Additional information
Notes on contributors
Forat Suliman
Forat Suliman holds a PhD degree in economics from the University of Hyderabad in India. She is a lecturer at several universities in Syria. She published articles on Syrian political economy, sanctions, and development in the Third World. Her areas of expertise are mainly in trade, sanctions, development and macroeconomic analysis.
Homam Khwanda
Homam Khwanda is an assistant professor and the vice dean of the Higher Institute for Administrative Development, Damascus University, Damascus, Syria. He holds a PhD degree from the Damascus University in Syria. He has several diplomas in GAMS algorithm “Building the Model,” “General Equilibrium Modeling,” and “SAM’s tables practices” from Tokyo, Japan. He has published several articles on Syrian economy, organizational behaviour, and effectiveness.
R. V. Ramana Murthy
R. V. Ramana Murthy is a professor at the School of Economics, University of Hyderabad, India. He teaches political economy of development and has published several articles on this topic. His areas of expertise are mainly political economy of development, agrarian relations, and development economics. He was given the Award of Distinguished Contribution to the field of Political Economy by World Association of Political Economy in 2017.