Syria’s Economy.

Picking up the pieces PREPARED BY:

ZIAD BADRI
MARIO CHAMOUN
ANTHONY JALKH
JOELLE KHARRAT
INSTRUCTOR: DR. DACUN LI ANTHONY ZGHEIB
Introduction

 The Syrian economy has been devastated by conflict to an extent that defies
comprehensive numerical analysis.

 It is shown that in the past four years the country’s economy was halved due to
acts of war like death and immigration of the population.

 Nevertheless, with all problems that the country is facing, Syria’s economy and its
administrative institutions have continued to function but are in great danger.
Principal points to be mentioned

 Syria’s interaction with and position in other regional economies.

 Syria’s economic development over the subsequent four years.

 Data that the Syrian government has continued to collect (exchange rate, inflation,
energy production and consumption, administered prices) and data that third
parties have provided.

 Corporate financial statements from banks and companies still reporting to the
Syrian Commission on Financial Markets and Securities.
Economy: one of the triggers of war

 The country’s economy was indeed an important factor in the uprising against
Assad’s regime:

 The economy had not been a policy priority during the three decades of the presidency
of Hafez al-Assad.

 Syria had a state-dominated system, with no private banks, no capital market and no
mobile phone operators.
Economical improvements under
Bashar Al Assad
 Operation of private banks, constituted as joint ventures between regional banks
(Lebanese, Jordanian and Gulf Arab).

 Mobile phone services started up via two holders of build-operate-transfer (BOT)

contracts.

 Fields like importing cars where private investors were prohibited to enter opened
up, which added new players and dealers to the scene.

 Pharmaceuticals, food processing and textiles (which were one of the most
popular fields in that time) found a new lucrative market in Iraq. Ever since, Iraq
became Syria’s largest single export destination.
 Principal sources of imports
• The EU accounted for more than 25% of total
imports of $17 billion in 2010.

• Turkey ranked top among individual country

suppliers, with sales of $1.8 billion.

• Imports from Ukraine and Russia consisted

mainly of fuel and wheat (military equipment is
not included in this trade data).

• Imports from Iran were about $300 million.

Growth, inflation and unemployment
• The overall performance of the economy
was marked by an annual GDP growth
averaging about 5%.

• Unemployment averaged just over 8%.

2008 was an exception, where the
unemployment rate exceeded 10%, mainly
as a result of a drought.

• At the same year also(2008) we see a spike

in inflation, due to a sudden rise in world
food and fuel prices.
 Impact on agriculture
• In 2001 30% of the total labor force (including
55% of female workers) was employed in
agriculture, compared to 23% in services. By
2010, these shares had shifted to 13.2% in
agriculture and 28% in services, with the latter
accounting for 68% of the female labor force.

• Based on a study that year, it was noted that

almost half the Syrian population could be
classed as rural dwellers, of whom 80%
derived their main income from agriculture.
Olive And Oil Production
 Olive production fell to 450,000 tons in 2014, which is about half the average during the pre-
conflict period, reflecting both poor rainfall and the impact of the conflict on the “Idleb”
governorate.

 Oil and gas played an important part in Syria’s economy before 2011, although the country
was only a modest producer by regional standards. Oil exports in 2010 reached a total of $5.5
billion, while imports of petroleum products were valued at $3 billion.

 The net income from oil exports was offset by royalties paid to international producing
companies, such as Shell and Total.

 Oil revenue typically accounted for about 20% of annual budget revenue during 2005 to
2010. The contribution was higher in the previous decade.
Oilfields under ISIS control

• The total output of oilfields under ISIS control in Syria in mid-2014 was estimated by the
government at 60%.

• The bulk of the oil output comes from fields that were operated by Shell and Total, with smaller
amounts coming from SPC fields in Raqqa and southern Hasakeh.

• Jabhat al-Nusra held on to the largest oil assets in the Euphrates valley until succumbing to ISIS.

• Operation of specific fields was now assigned to clans and tribes (within Syria) that had sworn
allegiance to ISIS, for its operations in Iraq since June 2014, following the shutdown of the Baiji
refinery.
Oilfields under ISIS control (cont’d)
 Many traders were accused of being involved
with ISIS. Haswani, the head of the oil and gas
contracting firm HESCO, is an example. He
was alleged to have been involved in
purchasing oil from ISIS on behalf of the
regime and was subject to sanctions.

 However, the pillar of Assad regime’s oil

economy in the middle of the country region
was now under ISIS control. That region
previously processed up to 125,000 barrels of
oil per day, which are imported by tankers
through a credit line provided by Iran. Hence
the decline showed in the following graph.
Effects of the conflict on oil refineries

 Interruption in supplies and security issues (Homs refinery barely operating).

 Sales fell tremendously (Oil became much cheaper: Syria purchased Iranian oil for1$ billion
in 2014 instead of 3.6$ billion in 2013).

 Private traders took on the market because sanctions were issued on the public sector accused
of alliances with ISIS (pressure on the exchange rate and increase in demand on foreign
currency).

 Solutions: gradually setting a unified price for various petroleum products, groups at a time.
 Effects of the conflict on natural gas
plants
 The effect of the conflict on natural gas plants was less
severe (they mainly remained under the control of the
public sector).

 Power generation dropped by 12.5% in 2012 and 30% in

2014 (in the plants that ISIS took over).

 The output of the east of Aleppo plant fell by 60% (it was
the most affected by the conflict).

 Three plants which accounted for 9.2% of Syria’s power

generation were now controlled by ISIS.
Effects of the conflict on the exchange
rate
 The Central Bank of Syria has continued to quote daily rates for the Syrian pound
against other currencies.

 The central bank brought in the special rates for banks and money-changers in
July 2013 after the black market rate briefly soared over S£300 = $1.

 In the four years since March 2011 the official rate has fallen by 78 per cent
overall, and the black market rate by 83 per cent.
Trade
 A significant proportion of imports from Turkey consisted of capital later used in export-oriented
Syrian industries.

 The trade relationship with Turkey is important since we have witnessed a displacement, or shift,
of Syrian business to the border region due to conflict in other areas.

Turkish exports to Syria

Corporate reporting

 The DSE has continued to operate, but at a very subdued level, with trade on the
stock exchange valued at only $18 million during 2014, and a market
capitalization of about $700 million –80% of which was accounted for by banks.
Clinging on to Institutional Integrity:
Current Realities and Possible Scenarios

 The Assad regime may only control about half the physical area of Syria, but the
government still has a presence of some sort across most of the country.

 The Syrian pound remains the principal currency for the purchase and sale of
goods and services; and infrastructure services still operate on a national basis
THANK
YOU!