The Syria Report Survives as Independent Publication

Published: December 19, 2012

20iht_m20_syria_report-articleInlineISTANBUL — Jihad Yazigi concedes that he owes a debt to Bashar al-Assad. Without the now-besieged Syrian president, there would have been no free-market reforms, no surge in foreign investment and no modern banks in Syria. As Mr. Yazigi acknowledges, there also would not have been The Syria Report, his weekly economic digest that is one of the country’s few successful independent publications.

“My business thrived because there was an opening and I have to give Bashar credit,” Mr. Yazigi said during a recent conference in Istanbul, when asked to reflect upon the changes that awakened the Syrian middle class even as they enriched the elite. “The problem is he didn’t go deep or fast enough to head off the unrest. He didn’t reform the judicial system or encourage a free press, for example. These were red lines that could not be crossed.”

Mr. Yazigi, the son of an exiled Syrian dissident, publicly called for democratic reform as early as 2004, most notably in a column headlined “The D Word.”

At the same time, he applauded the government for stimulating free trade and foreign investment, liberalizing its currency, reforming its financial sector and removing subsidies on everything from cooking oil to farm equipment.

Largely as a result, the country’s gross domestic product rose steadily; between 2005 and 2010 it achieved an annualized growth rate of about 5 percent, among the highest for developing countries at the time.

Syria was not the only Arab country that aggressively deregulated its economy. Egypt, Tunisia, Jordan and Saudi Arabia all embraced similar changes which, by the end of the decade, had produced impressive growth but also high inflation, stubborn unemployment and yawning rates of income disparity.

Was it free-market reforms that triggered the convulsions that continue to destabilize the region? Or regime kleptocrats who hijacked a badly needed reform process?

“It makes it a lot more difficult for people to sacrifice for the sake of change when elites are profiting,” Mr. Yazigi said. “That said, there were more problems than just corruption.”

In promoting service sectors like hotel construction and management over labor-intensive ones like manufacturing, Mr. Yazigi added, the government neglected a fertile source of jobs. It also exposed its industries to high quality, affordable imported goods when it signed a free trade deal with Turkey.

The government withdrew price supports on farm equipment and produce too quickly, he said, sparking an exodus of laborers from an agriculture sector that once accounted for a quarter of total employment.

“Many farmers ended up moving into urban slums,” Mr. Yazigi said, “and that led to a lot of stress and resentment in the cities.”

Mr. Yazigi, a French citizen and Greek Orthodox Christian, is, like Mr. Assad, an outsider whose destiny lured him back to Syria. Both men are sons of plotters — though unlike Mr. Assad’s father, Hafez, an air force general who ruled Syria from 1970 until his death in 2000, Raja Yazigi was on the losing end of a 1961 coup he helped lead in Lebanon.

After fleeing via Jordan, he settled in Ghana, where he established a carpentry business and started a family. At the age of eight, Mr. Yazigi was sent to France for his education. Like Bashar, who studied ophthalmology in Britain before he was fated by his elder brother’s death to lead the Assad ruling dynasty, Mr. Yazigi was obliged to interrupt his studies at the American University in Paris and run the family business when his father passed away in 1995.

The building trade could never compete with Mr. Yazigi’s love of politics, and with the arrival of Bashar as president he sensed an opportunity to indulge a passion inspired by his father, who sent his children to Damascus every summer to improve their Arabic and learn the city’s political terrain.

In October 2001, from Paris, Mr. Yazigi distributed an online translation of Syria’s then-fledgling financial press. He knew he was onto something just a few weeks later when The World Bank contacted him and asked for more.

“The Internet had just started,” he said. “I felt like this was something I could do that I really loved and give something back to the country.”

The Syria Report comes out each week with data and news gathered from a variety of sources, including Mr. Yazigi’s own reporting. Among his most precious resources is a database of hundreds of Syrian companies he compiled by soliciting such details as contact coordinates, names of board directors, financial returns and shareholder information.

Extracting proprietary information from Syria’s secretive, family-owned businesses was not easy. Over time the database would evolve into a coveted tool for foreign investors and traders converging on Syria. Subscriptions rose in tandem with liberalization and growth.

A one-year membership costs $600. Mr. Yazigi is coy about the number of paying readers, though he allows that sales grew by 30 percent in 2010, a record year for foreign direct investment in Syria, then declined significantly in mid-2011, when peaceful demonstrations against Mr. Assad’s brutality grew into war.

Much of the sales he lost to a diminished foreign business community have been absorbed by interest among academics, journalists and aid workers.

The heart of The Syria Report’s content is provided by the Syrian government, which despite the war still faithfully posts official economic data and tender offers. Between the stories about corporate earnings and the depreciating Syrian pound one can find the occasional reporting that is usually absent Syria’s state-controlled press.

The government kicked out the country’s few accredited foreign correspondents not long after the violence began. Stories about multinationals quitting war-torn Syria, for example, or the simultaneous closings of several embassies, are rarely carried anywhere but in The Syria Report.

“Jihad has been very engaged and bold,” said Peter Harling, a Syria specialist for the Brussels-based International Crisis Group. “He’s taking principled but sophisticated positions just as other Syrians are becoming politically aware and acute in their analyses. This is what gives me hope for the future of Syria.”

Although Mr. Yazigi has blogged critically about the Assad government, his commentary in an English-language online economic bulletin is too esoteric to attract the attention of the state’s security apparatus. His recent decision to move to Beirut, he says, had more to do with the perils of war than government spies. He still maintains an office and a staffer in Damascus to assemble data.

In March 2011, when the regime responded to a first wave of protests by increasing public-servant pay, Mr. Yazigi scolded the government for political “gifts” that would impose “a severe drain on the Treasury and create serious inflationary risks.” In October that year, he disparaged as “nonsense” the government’s decision to ban imports to conserve foreign currency only to reverse its ruling in the face of opposition from the Aleppo business community.

The episode confirmed the government “had no clear economic policy,” Mr. Yazigi wrote, and signaled a reversal of its commitment to free-market reform.

One day, when peace is restored to Syria, Mr. Yazigi said, he would like to expand his existing consulting work. Before the war he applied for a license to host business conferences but was told, in effect, that others close to the government had a lock on the business. It was the kind of red line, he said, that ended up ensnaring the regime.


Note: A version of this article appeared in print on December 20, 2012, in The International Herald Tribune.

Entering subsistence

One of the main questions surrounding the Syrian uprising at the beginning of 2012 was if and when an economic collapse would occur. As the year draws to a close, the question has instead become whether one can still talk of “a” Syrian economy as such.

What remains of the country’s formal economy has seriously deteriorated throughout the year. Business activity significantly contracted and although the government has released no estimates, gross domestic product is believed to have fallen by at least 25 percent in the first nine months of 2012. Disintegrating distribution and supply networks, a government increase in energy prices and a hike in the cost of imported items all combined to gradually increase the inflation rate; the consumer price index was up by 40 percent on an annual basis by August.

The Syrian pound, after having resisted all forms of pressure relatively well in 2011, lost ground. From a rate of 60 to the dollar at the beginning of the year, the exchange rate fell to over 80 pounds by mid-November 2012.

An important development has been the expansion of the violence to Aleppo during the summer, a city that had largely remained outside the popular uprising until then. Aleppo is Syria’s largest city by population, but also the country’s main manufacturing hub as well as a major trading and distribution center for agricultural products. The unrest in the city led, among other things, to the closure of its industrial city with some 600 factories suspending production.

However, while observers continue to monitor most formal indicators — such as inflation and the currency rates — as a means to measure investor sentiments, in practice most of the country’s economy now falls outside these numbers.

The expansion of violence and the varying degrees of state control over large sways of Syria have profoundly transformed its economy to the extent that one can now talk of a war economy, the creation of new business networks and the development of various new forms of trade, including smuggling, looting and kidnapping.

Some areas of the country are still firmly under state control and as such continue to be provided by regular government services — these include the provinces of Latakia, Tartous and Suweida as well as the central parts of Damascus. In these parts of the country the supply of products continues at relatively normal levels, although prices have skyrocketed.

Other areas have little left of the state, such as the rural parts of Aleppo, Idlib, Hama, Homs and Daraa. Meanwhile, the cities of Aleppo and Der-ez-Zour are under constant bombardment and have almost no business activity to speak of, while the northeast of the country is growing increasingly autonomous in the management of its day-to-day affairs. Looting is common in areas where inhabitants have fled; smuggling to and from neighboring countries has exploded as the government’s control over its borders weakened, customs tariffs increased and formal international banking transactions are at a standstill; kidnapping for ransom is widespread.

As the autumn pushed on, the government finally began to express more openly its concerns for the near future. In a well-publicized statement, the deputy prime minister in charge of economic affairs, Qadri Jamil, said in September that in the absence of a political solution to the crisis gripping the country, the economy was heading towards “a stroke” by the end of the year. Jamil was forced to retract his statement a few days later, but the damage was done.

Meanwhile, in early October, the Minister of Agriculture Subhi al-Abdallah encouraged his fellow citizens to “grow whatever they could grow and raise whatever animal or chicken they could raise.” Abdallah’s words echoed a prevailing sentiment in Syria: slowly but surely, the economy was moving towards subsistence mode.

The depth of distress in the economy, reflected in these statements, points to the major challenges ahead for Syria’s future decision makers. Syria may manage to rebuild relatively quickly its physical infrastructure, but it will require a very significant redefinition of economic policy, an overhaul of existing business and trade ties and a formalization of much of its economic activity before the country truly recovers from the devastation it is facing.

Note: This article appeared first in the December 2012 edition of Executive Magazine

La livre syrienne à bout de souffle

Monnaie-syrienne-et-dollarsLes pressions sur la livre syrienne s’accentuent en cette fin d’année 2012, le dollar américain atteignant la barre des 90 livres sur le marché noir à la mi-novembre, alors que la monnaie nationale syrienne avait réussi à se maintenir autour de 70 livres pour un dollar entre les mois de mars et septembre, contre un taux de change de 47 livres pour un dollar avant le début de la contestation du régime de Bachar el-Assad en mars 2011.
La récente envolée du billet vert reflète à la fois l’accélération des pressions politiques sur les autorités syriennes, mais aussi une situation fiscale et monétaire de plus en plus critique.
Le gouverneur de la Banque centrale, Adib Mayaleh, a réagi en annonçant le 18 novembre que son institution envisageait d’autoriser les banques locales à vendre des devises au taux du marché pour toutes les opérations non commerciales. La Banque centrale espère de la sorte entraîner un alignement des taux officiel et du marché noir alors qu’en excluant les transactions d’ordre commercial de cette nouvelle mesure, c’est-à-dire en permettant aux importateurs de se financer au taux officiel, les autorités espèrent ralentir la hausse de l’inflation.
Si cette mesure devait être adoptée, elle marquerait un changement de cap significatif pour les autorités monétaires syriennes qui depuis des décennies fixent en effet le taux de leur monnaie. La décennie de libéralisation économique et monétaire avait amené à un adoucissement des restrictions sur les transactions financières mais ni à la convertibilité ni à la fin de l’imposition de ses prix sur le marché local des changes.
Il n’est pas clair, cependant, si la mesure aura un impact significatif sur le marché des devises qui subit un décalage de plus en plus important entre la demande – tirée par une inquiétude croissante sur l’avenir politique du pays – et l’offre, qui subit le contrecoup de la baisse substantielle des rentrées de devises depuis le début du soulèvement populaire en mars 2011.
La santé de la monnaie nationale est suivie avec beaucoup d’attention, son taux de change par rapport à la devise américaine étant censé agir comme un indicateur de la perception des investisseurs de la situation politique dans le pays.
Alors qu’une chute rapide de la monnaie était attendue, celle-ci a d’abord surpris par sa relative solidité, puisqu’elle n’avait perdu que 10 pour cent de sa valeur six mois après le début du soulèvement, avant de décliner de manière plus substantielle à partir du dernier trimestre 2011. Le déclin s’est poursuivi en 2012 avec des soubresauts ponctuels qui ont correspondu soit à la perception d’un changement de stratégie par les autorités monétaires, soit à des pics de violence ou des événements politiques majeurs.
À partir du mois de mars, après une dégringolade rapide mais de courte durée qui a vu le dollar atteindre le taux de 107 livres, la monnaie se stabilisait autour de 70 livres.
Cette relative solidité de la monnaie syrienne se justifie par plusieurs facteurs.
Bien que les sanctions imposées par l’Union européenne, les États-Unis et d’autres pays occidentaux sur les exportations pétrolières ont entraîné une forte chute des réserves en devises – les exportations pétrolières représentaient en 2010 quarante-six pour cent de tous les revenus d’exportations syriennes et une part nettement plus importante des revenus en devises du gouvernement –, elles n’ont en pratique pas été appliquées par l’Union européenne, le principal acheteur de brut syrien, avant le mois de novembre 2011, c’est-à-dire plus de huit mois après le début du soulèvement.
La livre syrienne a aussi été aidée par la baisse des importations qui a ralenti la demande de devises. Ce recul est dû : 1) à la suspension de l’accord de libre-échange établi avec la Turquie depuis 2007 qui a renchéri le coût des produits turcs ; 2) à l’augmentation des tarifs douaniers décidée début 2012 sur de nombreux biens de consommation, certaines taxes étant portées à 80 % ; 3) à la baisse initiale de la livre qui a entraîné de manière automatique un renchérissement des importations ; 4) à la baisse significative de la consommation et des investissements sur le marché local, à la fois de la part des secteurs privé et public.
Les autorités ont aussi actionné le levier de l’augmentation des taux d’intérêt, même si la montée de l’inflation a rapidement montré les limites de cet exercice en rendant ces taux négatifs, et celui des restrictions à l’achat et à la sortie de devises.

Vente massive de devises

Cependant la clé du maintien de la livre pendant de nombreux mois à un taux relativement élevé a été la politique agressive de la Banque centrale qui a continué de vendre de manière soutenue des devises sur le marché. Pour ce faire, la banque a puisé dans les vastes réserves de change que le gouvernement avait accumulées durant la courte période de boom pétrolier syrien dans les années 1990. Au début de l’année 2011, ces réserves se chiffraient à environ 17 milliards de dollars.
Alors que le niveau réel de son implication a été longtemps formellement nié par le gouverneur de la Banque centrale – mais reconnu par les acteurs du marché –, l’importance du rôle de la banque dans la défense de la monnaie s’est confirmée au début de cette année.
Dans une entrevue télévisée en janvier, le ministre de l’Économie annonçait formellement qu’entre la défense continue et au prix fort de la livre et la préservation des réserves de change, les autorités syriennes avaient décidé de penser à l’avenir et donc de préserver leurs devises.
Le changement de cap n’a pas tardé à produire ses effets. En l’espace de quelques semaines, le dollar voyait sa valeur monter de 63 à 107 livres. Il a fallu que la Banque centrale annonce un nouveau revirement de politique et une reprise de la vente de devises sur le marché pour que la livre reprenne des couleurs et se stabilise autour de 70 livres.
Il apparaît maintenant que la Banque centrale est arrivée au bout de cette politique. Ces dernières semaines de nombreux indices révélaient l’inquiétude des décideurs syriens, telle cette annonce par le vice-Premier ministre qui a prédit un « arrêt cardiaque » de l’économie d’ici à la fin de l’année, à défaut de solution politique à la crise. Le ministre de l’Agriculture a, quant à lui, conseillé à ses compatriotes d’élever des poules et de faire pousser des légumes dans leurs jardins en prévision des jours difficiles à venir.
Après avoir atteint 90 livres pour un dollar le 15 novembre, la monnaie nationale syrienne reprenait un peu de couleur et s’échangeait le 20 novembre sur le marché noir à environ 83,5 livres. Il est probable que ce répit ne soit que de courte durée. Tous les indicateurs syriens, qu’ils soient économiques ou politiques, tournent en effet au rouge en cette fin d’année 2012.