Lending deficit, corruption threaten small and medium enterprises in Syria

Asma al-Assad, the wife of the president of the Syrian regime, visits a clothing factory in the countryside of Tartus - August 6, 2023 (SANA)

Asma al-Assad, the wife of the president of the Syrian regime, visits a clothing factory in the countryside of Tartus - August 6, 2023 (SANA)

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Enab Baladi – Muhammed Fansa

With the regime’s Ministry of Economy specifying the capital for the micro commercial project at an amount of up to 60 million Syrian pounds, as part of its definition guide for 2023 projects, inquiries from citizens with startup ideas for projects whose cost ranges between 2 million and 50 million Syrian pounds are spreading on social media.

The amount of 60 million pounds is not considered large for the capital of a commercial project, as it is equivalent to about $4,285, according to the black market exchange rate, but it is difficult to obtain for the largest segment of the population, due to the deteriorating economic situation in Syria and its impact on purchasing power, as more than 90% of the population are below the poverty line, and 70% of them, or 12 million Syrians, do not know where their next meal of food will come from, according to UN data.

The US dollar is trading at 14,200 SYP according to the S-P Today website, which covers the trading rate of the Syrian pound to the dollar. At the start of the conflict in 2011, the dollar was trading at 47 pounds.

On the other hand, in light of this situation and with the narrowing of asylum options, some residents are seeking to sell their assets and property to secure an amount and open a business project that contributes to providing a stable income instead of spending the amount on migration routes.

“Small projects” capital

According to the guideline of the Ministry of Economy in the Syrian regime government for defining projects, the capital required to establish a project varies according to the sector to which the project belongs and according to its size.

Agricultural sector (except land):

  • The micro-project has a capital of 50 million pounds.
  • The small project’s capital ranges between 50 million and 750 million pounds.
  • The average project’s capital ranges between 750 million and 2.25 billion pounds.

Industrial sector:

  • The micro-project has a capital of 75 million pounds.
  • The small project has a capital of up to 1.5 billion pounds.
  • The average project’s capital ranges between 1.5 billion and 6.75 billion pounds.

Commercial sector:

  • The micro project is 60 million pounds.
  • The small project amounts to 600 million pounds.
  • The average ranges between 600 million and 2.25 billion pounds.

Service sector:

The capital in the service sector is greater than in other sectors.

  • The micro-project amounts to 150 million pounds.
  • The small project amounts to 2.25 billion pounds.
  • The average project may reach 7.5 billion pounds.

This classification is based on several indicators related to the project, including the number of workers, sales value, and invested capital.

Decisions contradict subsidy policy

The government promotes its support for small projects in the country and their importance to the local economy, while its decisions indicate the opposite of this promotion.

Since 2020, the head of the Syrian regime, Bashar al-Assad, said before the People’s Assembly, “We must support small investment, due to its greater ability to carry the national economy, because it is flexible, more able to withstand pressures and confront the siege, more diverse and geographically dispersed, more dependent on local resources, has lower costs, and is easier to finance.”

In 2022, the regime’s government’s support for small and medium enterprises was demonstrated through the implementation of the “Small and Medium Enterprises Development Authority” of a set of rehabilitation, training, capacity building, and business incubators programs, enhancing access opportunities for many workers in this sector to finance and work, or to establish their own projects. About 9,000 people benefited from these programs, according to what Prime Minister Hussein Arnous said last July.

Governmental and private banks grant loans to small and micro-enterprise owners with different ceilings but with difficult guarantee conditions, high-interest rates, and complex requests.

The economic advisor, Dr. Osama al-Qadi, told Enab Baladi that the Syrian regime is the last entity entitled to talk about micro, small, and medium enterprises after it closed the “Unemployment Control Commission” and attached it to the Ministry of Social Affairs and Labor in 2005, turning it into an employment authority and ceasing its work almost permanently.

According to al-Qadi, in 2004 this authority was creating tens of thousands or more jobs and employment opportunities, and there were between 14,000 and 15,000 projects funded by the commission.

After the authority was attached to the ministry, its budget allocated to lending, which was worth 50 billion pounds in 2004, was attached to it, and after that, all loans given to project owners stopped almost completely, according to al-Qadi, who pointed out that the funded projects were creating, at a minimum, three to four job opportunities between full time and part time.

The reality of the public sector in Syria, which is characterized by “rampant corruption, nepotism, and appointment based on military connections with key figures in the regime,” has made the budget allocated for lending vulnerable to “looting and massive waste,” according to the economic advisor.

Regarding the nature of the Syrian economy, al-Qadi believes that countries in the world that have a large and strong middle class depend on small and medium enterprises, as is the case in Germany, where its economy rose after relying more than 80% of it on small and medium enterprises, supporting large projects, and finding financing for private projects. This is not available in the Syrian economy, he said.

While there were about a million unemployed people at a rate of more than 20% in Syria in 2004, none of the 28 recommendations to solve the unemployment problem presented by Dr. al-Qadi to the Unemployment Control Commission affiliated with the Prime Minister and to al-Assad as well, were taken into account, but in contrast to the first recommendation, the commission was then attached to the Ministry of Social Affairs and Labor.

Suspended projects and the departure of merchants

The Director General of the Small and Medium Enterprises Development Commission, Ihab Ismandar, stated on November 23 that the state-run body carried out a census of the number of micro, small, and medium enterprises in cooperation with the Central Bureau of Statistics, as the number of these projects reached about 777,000 projects, of which approximately 461,000 projects are operating.

According to Ismandar, the Syrian economy is based mainly on small and micro-enterprises, while medium-sized enterprises do not constitute more than 4% of the Syrian economy.

He attributed this trend to the ease of establishing small and micro-enterprises, as they depend on human capital more than physical capital, in addition to the possibility of establishing them in a town or countryside and in residential areas, unlike medium-sized projects that need special places to start them and high costs for providing the infrastructure necessary for its establishment.

The Damascus Chamber of Commerce revealed that more than 100,000 merchants with a commercial register have left the Syrian market, citing the lack of government support for merchants.

A member of the Board of Directors of the Damascus Chamber of Commerce, Yasser Akreem, told the local newspaper Al-Watan on December 5 that the number of commercial records in the Ministry of Internal Trade and Consumer Protection is about 110,000, while the active records currently within the Damascus Chamber of Commerce are about 7,000 records.

Akreem criticized the decline in the number of merchants due to the loss it represents to the economy, pointing out the existence of laws that contributed to harming merchants, including the provision of punishing the merchant with imprisonment in Law No. 8 regarding consumer protection when a pricing violation is detected, in addition to restricting the movement of the merchant’s capital as a result of the presence of import financing platform.

Dr. al-Qadi believes that in the current state of the Syrian economy, no small or medium projects can succeed because the local currency is unstable and the population’s purchasing power is very low, in addition to “unfair laws, fees, and royalties.”

Regarding government support for these projects, al-Qadi believes that there are no real revenues in the state budget, which continues to increase the deficit every year, which prevents the opening of an agency to support these projects, as was the case before.

Dr. al-Qadi explained that if the regime’s government wanted to allocate the same value (50 billion pounds) to support small and medium enterprises as it was in 2004 through the Unemployment Control Commission, it would need 700 trillion pounds, while the 2024 budget is 35.5 trillion pounds.

The economic advisor believes that the spread of corruption in Syria is one of the most important reasons for the failure of any project, noting that Syria’s classification on the Transparency International list in 2011 was 144 out of a total of 180 countries, and it became 178 in 2022.

 

 

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