Syria’s Wealth in the 21st Century: Corruption Leaves Most on the Outside Looking In
DEVELOPMENTS
Over the past five years, there has been a startling trend developing in Syria, and one need not spend more than a few hours in central Damascus to notice it. Syria is a poor country and has been so for decades. The average Syrian makes about $250 per month. Even relative to other Middle Eastern nations, Syria’s GDP per capita bests only that of Yemen, ranking 116th globally, at less than $2,900.
Throughout Syria, including most areas of Damascus, Syria’s economic standing is painfully obvious. Old Soviet block buildings dominate central Damascus while shanty towns pepper the surrounding mountain sides. The roads are congested with Saipas and other low-cost cars, many over a decade old and incapable of passing the most forgiving emissions tests. The dense smog resting over Damascus leaves little to dispute.
In the midst of this dismal scene is something rather unexpected: BMWs—a lot of them. They are not hard to spot. They bully their way through traffic, whizzing past traffic police with impunity, on their way to the Sham Center—the city’s western-style mall. Their owners emerge hours later sipping six-dollar lattes and toting newly purchased Cartier watches and Gucci shoes.
In 2010, BMW announced that its top-performing Middle East market in 2009 was Syria. This is shocking not only because Syria’s economy is dwarfed by those of its oil-rich neighbors (Qatar boasts the world’s highest GDP per capita at $145,000), but because cars are especially expensive in Syria. Given import tariffs and luxury taxes, the average price of a car in Syria is roughly three-times the cost of the same car sold in the U.S.—a top-end Range Rover retails at $300,000. Still, this has not stopped Syria’s growing class of ultra-rich elite from replacing their roadsters with newer models annually.
BACKGROUND
In the past decade, Syria has worked to transform its socialist economy into one more open to privatization and foreign investment. With this transformation has come substantial economic growth, as GDP has increased between 4 percent and 6 percent in each of the passed three years. But as most aspects of Syrian society fail to display signs of prosperity, one is forced to ask, who is bearing the fruit?
Western notions of a privatized economy conjure thoughts of a free market open to competition by all, but things are shaping up differently in Syria. Wealth from economic privatization has landed in the hands of a select few. These individuals are not innovators benefiting from an entrepreneurial spirit, but they are entrenched oligarchs exploiting a system rife with corruption. Rami Makhluf is perhaps the most well known example among Syrians. As President Bashar Al-Assad’s first cousin, Makhluf holds key cards in the telecommunications, commercial, oil, gas and banking markets. He runs Syriatel, a powerhouse cellular phone carrier, which in 2009 earned $1 billion in revenue. The U.S. Treasury Department characterizes Makhluf as one who has “manipulated the Syrian judicial system and used Syrian intelligence officials to intimidate his business rivals.” Analysts report that no foreign company can do business in Syria without going through Makhluf, who has amassed a wealth estimated in the billions.
This is the privatized economy of Syria. Rather than serving as a catalyst for widespread growth and increased opportunity for all Syrians, it has taken the already wealthy and made them wealthier. While the economy continues to grow, economists estimate that 70 percent of Syria’s $54 billion GDP remains in the hands of less than one-third of the population. Syria’s ultra-rich elite comprise even a smaller fraction. They are members of Al-Assad’s ruling Alawite family and those who have strategically aligned themselves with the Alawite clan. The rest of the population has been left to struggle with doubling inflation rates and the growing cost of commodities.
The cost of living in Syria is tracking the prosperity of the ultra-wealthy. Prices of retail goods, such as clothing, rival those of most western nations. Food costs are rising and real estate is among the most expensive in the world. These factors make life increasingly less affordable for Syrians and are threatening to deplete the ranks of an already narrow middle class. With one-third of Syrians living at or below the poverty level, it is difficult to understand how they get by.
ANALYSIS
Although many locals are quick to cite the influx of Iraqi refugees as a remarkable strain on an already frail Syrian economy, there are fundamental and systematic flaws in the government, which are far more culpable and pose a more significant barrier to widespread economic growth.
The World Bank ranks Syria 144th out of 183 nations, in terms of “ease of doing business.” The 2011 study examined nine aspects of conducting business, including getting credit, protecting investors and enforcing contracts. Syria ranked notoriously low in the categories of “getting credit” (168th in the world) and “enforcing contracts” (176th). These figures are not surprising when one considers that Syria scored a 2.5 on Transparency International’s 2010 Corruption Perceptions Index, ranking 127th out of 178 nations, tied with Nicaragua, Uganda and Timor-Leste.
Corruption infects every organ of Syrian government. Unless would-be market participants are willing to cut the likes of Rami Makhluf a slice of the pie, they must navigate a dense fog of bureaucracy with little hope of reaching their destination. Thus, few have been willing to venture into the Syrian market, while those that have feed a system that benefits the ultra-rich at the expense of the remaining population. As the elite’s ranks grow, and their wealth expands, they continue to drive the market further and further out of reach of ordinary Syrians.
Until just a few weeks ago, almost every Syrian would tell you that this is the future of Syria. The atmosphere was one of a people who had accepted their grim fate and could only make the best of it. A favorite joke amongst locals was that of a man who fell into a deep sleep, only to awaken decades later and ask, who is the president? Answer: Al-Assad the Sixteenth. That was Syria, and many thought it could never change.
Now we are seeing the potential for a new Syria. Although many doubted the Arab Spring would sweep into one of the region’s most hardened security states, Syrians have proved the world wrong. After a long and bitter winter of oppressive rule, they have awakened like a flower’s bloom. Although their demands for political freedom are at the forefront, Syrians are also demanding freedom from this economic tyranny which has besieged them.
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Feras Sadik is a graduate of Vanderbilt University Law School and currently practices law at Wilmer Cutler Pickering Hale and Dorr in Washington D.C. He spent 2010 studying Arabic at Damascus University in Syria.
