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Financial Times, July 26, 2019
Syria’s Assad puts pressure on business elite
Chloe Cornish and Asser Khattab in Beirut
Tarek’s bustling factory had escaped the worst ravages of Syria’s
eight-year civil war. He was hiring workers again, hoping the company
would secure decent contracts as the country’s reconstruction got under
way. But soon his manufacturing business found itself facing a new
opponent — Syria’s finance ministry.
“They descended on our offices, maybe 20 people, searching every
document for something they could fine us for,” said Tarek, who claimed
that the government’s accountants also overestimated the company’s
profitability to increase his tax bill. “They’re not professional. It’s
like a mafia.”
President Bashar al-Assad’s authoritarian regime is seeking to replenish
its depleted coffers, having recaptured the parts of Syria that were
held by opposition forces, thanks in part to Russian and Iranian help.
But Syrian industrialists say they have now become the prey for
predatory state bodies seeking funds.
Analysts warn that the grab for money is impeding economic recovery,
deterring investment needed for reconstruction, and could ultimately
undermine business support for the regime itself. “Yes, this will block
the reconstruction, but I think it will [also] put the regime in
jeopardy,” said Sami Nader, research director at the Levant Institute
for Strategic Affairs.
The Assads have traditionally drawn support from the minority Alawite
sect to which they belong. But when Mr Assad followed his father into
power in 2000, he increased his appeal among predominantly Sunni
industrialists — members of Syria’s majority sect — by promising to open
Syria’s economy to outside investment. Loss of their support, whether
tacit or vocal, would further erode Mr Assad’s power base. “[Mr Assad]
still needs the support of the Sunnis and the elite and I’m not seeing
them getting the incentive,” said Mr Nader.
The civil strife, which has seen an estimated half a million people
killed, has devastated Syria’s infrastructure. While the regime has
encouraged investment in reconstruction by its military allies Russia
and Iran, and welcomed business delegations from its political ally
China, there has been scant sign of foreign investment, and it is
unclear how reconstruction will be funded on any grand scale.
The regime is also under huge financial pressure. Renewed American
sanctions on Iran have intensified pressure on the regime’s finances by
disrupting Mr Assad’s credit line and oil supplies from Tehran. The
loans had allowed Syria to purchase $5bn worth of fuel and other goods
from Iran since 2013, Syrian officials have said. British marines this
month impounded an Iranian supertanker the UK said was headed to Syria;
Iran retaliated by seizing a UK-flagged tanker.
Mr Assad had funded his war effort in part by tapping rich loyalists for
cash, including metals magnates and businesspeople facilitating oil and
gas trade with Syria. But many of them have now been hit by US, EU and
UN sanctions for bolstering the regime.
The government’s annual budget has halved since war broke out, dropping
from $18bn in 2011 to $9bn in 2018. Actual expenditure is probably lower
— experts estimate only half of budget requirements have been met.
Rampant corruption among government employees seeking to boost meagre
salaries is widely reported.
As the squeezed government puts pressure on local businesses, heavy
industry and wholesalers are in its sights.
“It’s a methodical system, the government is chasing back every penny,”
said another Syrian business owner, who reported one friend received
demands to settle a fine incurred by his dead father’s company more than
15 years ago. Against this backdrop, as well as continuing instability,
lack of capital and international sanctions, “it’s unlikely that anyone
of any serious weight would consider investing in Syria,” he added.
“The state is trying to raise money for itself,” said a Syrian
businessman. “The customs patrols are shaking us down all the time.”
Abdulnasser Sheikh al Fotouh, chair of Homs’ chamber of commerce, said
businesses were slowly recovering thanks to improving security in many
places, but called on the government to do more. “We need a package of
brave laws that attract investments and help businesses grow rapidly.”
Hopes that the reopening of a key border crossing between Syria and
Jordan in late 2018 would boost trade and customs revenues were dashed.
One Syrian importer said fees levied on trucks entering Syria through
Nassib had rocketed from $100 to $800.
Careful not to criticise the regime, Mr Fotouh said business leaders
recently met with the prime minister’s office to demand new laws
regulating investment. He argued that business groups needed a bigger
say in how the economy was managed and help in shouldering the cost of
loans taken out before the war. “Those who never left the country
deserve to be prioritised,” he said. “After all, Syria can only be
rebuilt by Syrians.”
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