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Strategies to stengthen Northern Syria’s economy hindered by war

Kebab peddler in Idlib - November 3, 2019 (Enab Baladi)

Kebab peddler in Idlib - November 3, 2019 (Enab Baladi)

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Enab Baladi – Hebaa Shehadeh

Syrians are again circulating photos of IDPs on the Syrian-Turkish borders, with their faces recounting nine years of weariness, making the region the focus of global humanitarian relief appeals year after year.

Although the northwestern region of Syria came out with local experiences and “two alternative governments” to the government of the Syrian regime, and enjoyed semi-autonomous rule since 2014, along with the existence of reliable economic characteristics that can be relied on in development, the United Nations is repeatedly warning of the effects of starvation and poverty in the region known for its agricultural richness and the abundance of its industries. Where are the resources of Northern Syria, and how does this region become unable to feed its population?

 Agriculture is not enough

Since the north-western region of Syria came out of the control of the Syrian regime in 2014, along with the succession of the institutions and forces of the opposition factions in it, poverty rates have increased from 76 percent to 87 percent in 2019, according to estimates by the Response Coordinators team, which attributed this to the absence of institutional work in agriculture, industry, and trade.

As stated by Abdullah Hamadi, Deputy Minister of Economy in the “Syrian Interim Government”, to Enab Baladi, despite the region’s resources that allow it to reach “self-sufficiency”, the most important of which are foodstuffs such as grains, olives, and vegetables, the population is still unable to bear the burden of high prices and low income, as estimated by the Food and Agriculture Organization (FAO).

According to a study of the humanitarian situation in northwestern Syria, conducted by the Reach initiative in September, during which it surveyed 1051 “local communities” (villages and towns) within the region, most of the families have a monthly income of no more than 50,000 Syrian pounds (about $ 80, according to Syrian Pound Today website at the time), and 941 communities do not have enough income to secure their food needs.

80 percent of families relied on debt to secure their needs, 56 percent relied on sending their children to work, 22 percent reduced the size of their meals, 11 percent reduced the number of meals, while 10 percent sold their properties.

According to the study, the sources of families’ income in northwestern Syria ranged between 85 percent of families relying on unstable daily work, 84 percent relying on the agricultural lands they own, 60 percent relying on trade or industry, 14 percent relying on transfers from outside the country, while only 13 percent living on fixed salaries.

According to the Executive Director of the Assistance Coordination Unit (ACU) of the Syrian National Coalition (SNC), Mohamed Hassnu, the reason for the delay in the development response of the opposition institutions is due to the dominance of the humanitarian response, which remained urgent throughout the years of the conflict.

Hassnu told Enab Baladi that development first needs stabilization. He pointed out that the SNC has established through the “interim government” a Ministry of Economy since 2013, working to establish a “grain institution” that deals with the strategic stockpile of wheat. However, several factors have hindered the development of the Ministry’s plans and projects.

Despite the role that agriculture is playing in northwestern Syria, it is not the only source of economy, with the importance of the region’s strategic location as a transportation and trade exchange route, which was and still is an essential element of the Syrian economy.

An indispensable “artery” for the regime”

In an interview with Syrian News Channel, on October 31, the President of the Syrian regime, Bashar al-Assad, drew attention to the nature of the “complicated” relationship, as he put it, with those who he called “terrorists” to secure goods and foreign exchange for the Syrian state.

“Liberating a region may cancel the dollar that used to be transferred for the terrorists, who used to spend it to buy goods from one side, or pump it from another side. One of the state’s means was taking advantage of this dollar. Things are for sure not absolute. We cannot say that the terrorist was serving us in this regard, and not everything positive means that it will be positively reflected. So, I say that the issue is complicated,” al-Assad said.

Despite the military escalation against Idlib, which has been intensified since February, the economic movement through the crossings is not suspended; it rather moves to other regions or temporarily slows down, as stated by economic researcher Khaled al-Terkawi to Enab Baladi.

Hay’at Tahrir al-Sham (HTS), the largest faction in the region, has made sure to maintain its control over the crossings during its battles, and not to sever ties with the parties fighting it, as wrote al-Terkawi in a research entitled “Economics of War in Syria“, published in Jusoor center for studies in November 2018.

The revenues of these crossings represented an important source of financial resources in northwestern Syria. However, these revenues were not reflected in the economic growth of the region, according to the report of the Response Coordinators team, which indicated that 80 percent of travelers and goods pass through Bab al-Hawa Border Crossing with Turkey (managed by an independent civil administration coordinating with HTS), and 20 percent of the goods pass from Bab al-Salameh Border Crossing in the northern countryside of Aleppo, which is controlled by the “Interim Government.”

Abdullah Hamadi, Deputy Minister of Economy in the “Interim Government”, pointed out that the crossings with Turkey provide northwestern Syria’s needs of consumer and primary materials. Al-Terkawi wrote in his research that Tahrir al-Sham tended to control Bab al-Hawa Border Crossing to monopolize trade exchange carried out through the crossing via its own dealers.

Bab al-Hawa Border Crossing’s administration is working to alleviate the effects and restrictions of the conflicting forces on it, by allocating a part of the crossing’s revenues for medical and educational services and the rehabilitation of infrastructure. As for Bab al-Salameh Border Crossing’s revenues, they are deposited in a branch of a Turkish bank and are transferred to pay the salaries of the national army, according to the “Economics of War in Syria” study.

These economic and commercial transactions through the crossings from Turkey to the Syrian interior represented an “artery” for the regime, as described by economic analyst Younis al-Karim, who told Enab Baladi that the regime would not abandon them (the crossings) in order to obtain what it wants of reducing the pressure of losing the dollar in its regions. This is achieved by the military pressure on the opposition-controlled areas to reach an “economic settlement” forcing them to continue dealing in the local currency.

Alternatives to the Syrian pound.. pros and cons

However, the depreciation of the local currency and the exchange rate nearing to the barrier of one thousand Syrian Pounds against one dollar in November prompted some local councils to announce their withdrawal of the note of two thousand Syrian Pounds, and to stop its circulation, amid calls to completely replace the Turkish or American currency with the Syrian Pound in the open northern market, to be liberated from the yoke of “tyranny” and its economic problems at the same time.

According to the Deputy Minister of Economy in the “Interim Government”, Abdullah Hamadi, the region can cut its commercial relations with the Syrian regime, and escape the impact of the “plunging” value of the currency. It can also trade in US dollars, as is the case in the markets of al-Dana and Sarmada areas in northern Idlib Governorate.

Hamadi pointed out that trade can be carried out with and through Turkey in the Turkish Lira or the Dollar, to avoid the negative repercussions of the local market, and he said that “the regions do not need to deal with the regime regarding foodstuffs, while non-food items can be secured by trade with Turkey.”

However, economic analyst Younis al-Karim considered that the economic benefit of dealing with the regime’s regions is not limited to its own interest, as the price difference between cheap Syrian products and their Turkish counterparts is pushing opposition-controlled areas to continue trade, providing raw natural materials, especially agricultural, to the south, and importing manufactured materials in return.

The economic analyst also ruled out the possibility of the prompt implementation of calls to boycott the Syrian currency, without a study protecting the region from “being lost” due to the existence of several monetary and barter methods, including the Syrian Pound, the Turkish Lira, the US Dollar, the Euro and gold, which causes an “economic instability.”

Al-Karim described the proposition of the Turkish Lira as an “inappropriate” alternative, noting that Turkey is facing an ongoing American threat to direct a “blow” to its economy, so its currency is not a “preservative of value”, in addition to the price difference between Syrian materials manufactured in regime-controlled areas and those manufactured by the Turks, due to the lack of an effective tax system in northwestern Syria, which keeps citizens dependent on Syrian rather than Turkish goods.

The Turkish lira cannot be employed as a counting unit, according to the economic analyst, “as pricing commodities in a new currency necessitates adjustments in the economic cycle in order to integrate it in the market,” and therefore its use is limited to medium-value goods.

In case the opposition wanted to implement its threats to stop using the Syrian pound, it needs a plan, which can guarantee the success of this endeavor. Thus, despite the appropriateness of its initiative, it was not the right time or place to carry it out, according to al-Karim.

Al-Karim considered that the withdrawal of the Syrian pound randomly “raises alarm”, as applying this strategy needs to be discussed in a real conference held by research centers and economic analysts in order to study the issue accurately. Following this conference, analysts are required to publish articles aiming at educating citizens. Additionally, the new currency which must be chosen according to closely examined indicators should be integrated gradually in the market.

He pointed out that withdrawing the 2000 pounds category from the opposition areas (which was announced by local councils in the north of Aleppo), and relying on smaller categories like 1000, 500 and 200 pounds, which cannot be reprinted “because their printing presses are held by the European suppliers”, will lead to “confusing the system, ”as a result of the availability of a“ huge amount ”of local notes in the opposition-controlled regions in exchange for a decrease in goods’ quantities, due to imports’ halting. This equation will lead to increasing inflation and the disappearance of medium and small notes.

Al-Karim believed that the opposition-controlled areas should give up even the small currency categories gradually. On the other hand, the inhabitants of the area must rely on gold to preserve the value of their money, and avoid currency speculation because “the higher the profits are, the greater the risks will be.”

No economy without security

A report by the World Bank attributed the deteriorating economic situation in Syria, despite its resources, to the war, which caused the loss of Gross Domestic Product (GDP) by 226 billion dollars, between 2011 and the end of 2016.

The report considered the displacement and migration waves in the labor force and the destruction, which took place in Syria, as the most important reasons for its economic decline. International studies relied on by the World Bank report indicated that achieving economic development in countries, which have suffered from war is possible “after the establishment of a comprehensive peace”, with an estimate of a period of 15 to 20 years to return to pre-war growth.

The displaced population in north-western Syria constitutes 49 percent of the total population, estimated at 4.3 million, according to a report issued by the Response Coordination team, on December 27, who monitored the guardianship imposed by the Syrian regime and its Russian ally on a sixth of the opposition-controlled area during the ongoing attack since the beginning of the year on the northern countryside of Hama and the southern countryside of Idlib.

United Nations Office for the Coordination of Humanitarian Affairs (OCHA) estimated that 1.3 million people have been displaced in north-western Syria since the start of the year, 180.000 of whom have left their areas during December, as a result of the latest military escalation launched since the middle of this month, compared to 70.000 others who were forced to leave during last November.

The displaced persons are forced to leave behind their jobs and properties and face difficulties in carrying out their activities in the areas they have been displaced in or moved to because of the need for financial resources, which they lack, or have not been provided with, according to a United Nations study issued earlier this year.

North-western Syria was one of the first areas to be targeted by military bombardment since the start of the conflict, which caused widespread damage to its infrastructure. During 2019 alone, more than 300 health and educational facilities, water and electricity stations, ovens and service centers were targeted, according to estimates made by the Response Coordination team.

According to the UN study, massive destruction and intensive bombardment have led to shutting down, completely or partially, more production and service establishments and infrastructure. The study highlighted the continuous rise in the costs of restoration of those facilities as a result of the rise in the exchange rate needed, as officials need to replace damaged machines and equipment.

During an interview with Enab Baladi, the Minister of Economy in the Interim Government, Abdul Hakim al Masri, considered that the absence of a “safe environment” deprived the region of carrying out large investment projects, due to the fact that investors were pushed away, and plans, projects and economic laws were hindered.

Economic strategies remain on papers

The Syrian Salvation Government has dominated Idlib Governorate, since it was controlled by Hay’at Ahrar Al-Sham in 2017, when the interim government was expelled to the northern and eastern countryside of Aleppo.

The proliferation of contestants, who fought to manage these areas, did not serve the interest of the Syrian people, according to Hassnu, who pointed out to the necessity of having an institution that monopolizes money and decisions in order to be able to put in place appropriate economic policies and not be subject to the interference of factions or organizations.

Hassnu argued that the Interim Government’s lack of legal recognition and the international community’s loose position towards maintaining a political solution stood as a major obstacle for the economic sector. This has led to prolonging conflict and the persistence of military options, violence, displacement, migration, and the absence of stability and economic security.

He added that when the Interim Government lost control of important financial resources, which is used to collect from the crossings and taxes, the economic bodies continued to carry out its activities thanks to a form of “initiatives” launched by the local councils. Thus, the economic offices formed by the local councils, and which lacked organizations and deliberate selection of qualified staff, clashed with the military factions’ jurisdictions in the area.

A source in the SNC, who spoke on condition of anonymity, explained to Enab Baladi that some people and the heads of the SNC had put in place economic strategies, “regardless of their conformity with reality”. Nonetheless, the methods through which resources are distributed and shared inside the Syrian territory, in addition to the parties controlling these resources, have blocked the implementation of those strategies on the ground.”

The same source talked about another reason behind obstructing the implementation of the aforementioned strategies, which is the absence of the international will to turn the Syrian revolution into an organized institutional system, noting that such a will should first stem from Turkey.

The economic researcher, Manaf Quman, attributed the absence of any effort to propose economic plans or projects and study economic laws from the opposition’s part to three reasons. The first reason is related to legitimacy, which is limited to the government of the Syrian regime, its institutions, and designations made by the United Nations, and the second is due to the continuous bombing of the opposition-controlled areas, which creates an unstable environment.

As for the third reason, Quman referred to the fragmentation of the opposition and its failure to unite the institutions in one government, especially the local councils and institutions in the Syrian lands, which are independent and implement its strategies. Those factors hindered the opposition’s attempt to realize any designated economic plan, which led the locals to rely on themselves in order to survive poverty and hunger. The local councils’ reliance on organizations and financial grants has led them to become excessively and unreasonably dependent on such an aid system, which caused multiple crises and problems amid the delay or absence of financial support.

As for Al-Karim, he attributed the issue to the opposition’s lack of real economic expertise, in addition to the absence of economists, who are willing to work in an atmosphere of corruption and chaos within the opposition institutions. Nonetheless, the opposition political bodies have also refused to work with all the economists, who expressed a sense of independence and impartiality, and hired unqualified personnel to manage the economic file.

According to the 2019 Humanitarian Response Plan, established by the United Nations last March, 4.17 million people need assistance in Aleppo and Idlib, 1.92 million of whom are in urgent need; with a decrease in the size of the workforce to 51 percent compared to pre-2011, as a result of  high death toll, injury, and disability.

The plan allocated $ 173.6 million for the early recovery and livelihood support of 8.7 million Syrians, including 2.8 million in Aleppo and Idlib. However, only 13.2 percent of the funding was transferred as of 18 December.

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