Under privatization and partnership cover, Syrian regime sells rest of state’s resources
Enab Baladi – Yamen Moghrabi
The Syrian regime has signed dozens of contracts with Russia and Iran during the past few years as part of a system of privatization of a number of economic projects, which are owned by Syrian state institutions.
Contracts included leasing sea ports, phosphate extraction, and others, in addition to other contracts for companies owned by economic personalities that emerged after 2011, working directly with the regime or through local shell companies.
The most recent announcement of its privatization of new sectors within a participatory system was what was published by the ruling party newspaper, al-Baath on July 2, quoting sources in the Syrian Ministry of Transport as saying that a private company “whose name at the time was not disclosed” will invest in Damascus International Airport, with stakes that will be distributed between 51% for the Public Syrian Airlines Corporation and 49% for the partner investor (Eloma company), which is directly affiliated with people working with Bashar and Asma al-Assad.
The investment step in the airport through the partnership system between the public and private sectors (BOT) in Syria seems natural had it not been linked to other factors, most notably the reshaping of the Syrian economic sphere amidst a severe living crisis, and the diminishing state resources within the “war economy.”
“Selling state resources in legal formulas”
A new class of businessmen has formed in Syria during the past years, its emergence coincided with the expansion of military operations and the destruction of infrastructure and the migration of businessmen from Syria since 2011.
The new names were fully associated with the Assad regime and worked in several sectors officially and established private companies to work in the telecommunications sectors, such as EMMAtel and Wafa Telecom.
The same applies to the electricity and oil sectors, which are very vital sectors and are among the largest sources of funds for the regime on the one hand.
On the other hand, the regime signed long-term contracts with Russia and Iran to explore for oil and phosphate mines, to reclaim thousands of agricultural lands, in addition to investments in seaports.
All these moves, within the concept of privatization, are supposed to aim at improving quality, reducing the burden on state institutions, and obtaining greater financial resources.
However, the Syrian regime’s moves in this context are marred by a number of problems, on top of which is the quality of new companies that manage vital sectors and the shape of the relationship between the regime and its allies.
The economist, Firas Shaabo, told Enab Baladi that the Syrian regime does not believe in privatization in its scientific sense because it comes through two ways either “to comply with the requests of its allies, such as contracts for Syrian ports and phosphates,” or contracts for personalities close to it that form its economic facade.
Privatization as an economic concept seeks improvement, development, and access to new resources for the state.
This will not happen, according to Dr. Shaabo, because the companies formed by the regime are not specialized in the sectors they manage and have no real experience. Therefore, the regime only seeks legal exits to sell state resources.
Ayman al-Dassouky, a fellow at the Omran Center for Strategic Studies, told Enab Baladi that the Syrian regime had already resorted to privatization operations before 2011.
But this approach was reinforced by the losses that affected public sector institutions and companies, the desire to reduce economic burdens, and to collect quick financial returns to pay the bill for military and political support for the allies.
In addition to integrating warlord capital and the regime’s informal economic networks into the formal economy, to reshape the Syrian economic sphere, said al-Dassouky.
Privatization and public-private partnerships
Privatization means transferring the ownership, management, or organization of a government sector to the private sector within three levels, according to Shaabo, an economist.
The first level: A complete transformation of the government sector into the private sector, with government oversight.
The second level: Partial or participatory privatization, followed by the Syrian regime, which is the sale of part of the public sector only with the presence of government oversight.
The third level: Privatization is freed completely without any governmental oversight, with freedom for the private sector to set prices.
But the trade-off between privatization and public-private partnerships is due to political considerations, the nature of the economic sector, and the approach followed in the state, according to economic researcher Ayman al-Dassouky.
Privatization of vital sectors
Shaabo proves that the regime is seeking to privatize very important sectors, which are among the most important sources of income (telecommunications, aviation, and oil), which are already profitable sectors, instead of privatizing dilapidated and losing sectors, such as the electricity sector.
A study issued by the Omran Center for Strategic Studies in 2019 stated that the Syrian political economy was reshaped during the years of conflict, new economic elites emerged, and local and regional trade networks were reconfigured.
The Syrian regime also sought to reshape the community of big businessmen and expand it by including new names, such as Wasim al-Qattan and the Qaterji family, according to the study entitled “Economic Recovery in Syria – Actors Map and Current Policies Assessment.”
The study also indicated that international sanctions and the need for capital prompted the regime to increasingly rely on the private sector, as it issued Law No. 5 of 2016 on partnerships between the public and private sectors.
The study showed that the Assad regime, with its low revenues, politicized decisions to distribute services such as electricity, health, and education and became aimed at strengthening its powers, and its powers were characterized by selectivity and politicization.
Public-Private Partnership Law No. 5
The law issued by al-Assad in 2016 aims, according to its text, to “enable the private sector to participate in one or more of the following activities: design, construction, building, implementation, maintenance, rehabilitation, development or management or operating public utilities, infrastructure, or projects owned by the public sector and encouraging it to invest in them.
Ensuring that the services provided through this partnership are based on sound economic foundations and high efficiency in performance, that they are provided in the most appropriate manner, and that they add value to local resources, provided that transparency, non-discrimination, equal opportunities, and competitiveness are ensured, and the integrity and legality of all procedures related to partnership contracts, to ensure the performance of services in a manner that seeks the public interest.
According to Shaabo, the Syrian regime’s moves indicate that uncontrolled privatization operations will not depend on the sectors announced until today but may gradually include the sectors of health, education, sports, basic services, and infrastructure by granting them to individual companies that control prices without any oversight. Thus, “the Syrian state shirks its responsibilities within the social contract with the citizen,” says the economist.
An investigation by Enab Baladi published on July 20 showed that the Syrian regime established a front company, Eloma, which is owned by people close to and working directly with al-Assad, to invest in the aviation sector, one of the the key vital sectors of the war-torn country.
Shaabo pointed out that the regime, considering it in a debilitated economic situation, decided to privatize these sectors for subsidiaries, to benefit directly from them without any transparency in the contracts, the method of monitoring and management, the number of employees, payment and laws, and what appears from the contracts are details within the minimum only.
Takeover of private sector
The regime’s endeavors within the privatization processes, whether complete or participatory, do not depend on paying the bills of military operations or easing the financial and administrative burdens on it but rather include other goals that affect the private sector itself and its independence.
Since 1963, the Syrian regime has sought to control the economy by completing the nationalization processes initiated by former Egyptian President Gamal Abdel Nasser during the United Arab State period between Syria and Egypt (1958-1961).
In 1971, Hafez al-Assad came to power in Syria and made alliances with the merchants of Damascus and Aleppo, the two largest Syrian cities. Damascus merchants specifically contributed to his protection during his struggle with the Muslim Brotherhood in the 1980s, according to the book “Asad of Syria: the struggle for the Middle East” by British writer Patrick Seale. Al-Assad also forged a special relationship with the head of the Damascus Chamber of Commerce and one of its largest merchants, Badr al-Din al-Shalah.
This information shows the extent of the relationship between Syrian businessmen and the Syrian regime, which lasted for decades, and the latter’s attempt to control them.
With the regime’s attempts to integrate new businessmen into the Syrian economy, it also seeks to prevent the emergence of any independent private sector in the future.
According to al-Dassouky, a researcher at the Omran Center for Strategic Studies, the Syrian regime “does not want a strong, independent private sector” because such a sector would constitute a direct threat to the regime.
A-Dassouky explained that precisely for this reason, investment opportunities in important economic sectors are restricted to the Syrian regime’s informal economic networks, or to its political allies, without being made available to an independent private sector, as is the case in the ports of Latakia and Tartus, and what was recently revealed about investment in the aviation sector.
Why do countries resort to privatization?
Countries decide to privatize some sectors to reduce the administrative burden of the government, integrate the private sector into the economy, and try to raise the quality of the targeted sectors and improve productivity and per capita income.
According to researcher Shaabo, countries seek to reduce public spending, create a competitive atmosphere, and obtain new revenues.
Meanwhile, al-Dassouky told Enab Baladi that countries resort to privatization when they want to develop specific economic sectors by attracting investments and managing them competitively.
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