War Economy of Syrian Crisis

Syrian Center for Policy Research

WB/IMF Spring MeetingApril 21, 2017

Syria War Actors

Subjugating powers ( political tyranny, fanaticism, fundamentalism, conflict elite) vs civil powers

External

• Foreign governments

West: War on terror, Sanctions, humanitarian support, military support

East: Rising south, military support, and humanitarian support

Regional: military including personnel, identity politics, humanitarian and social support

• Transnational conflict elite

• UN

• Global civil society

Internal

• Regime

• Opposition

• ISIS

• YPG

• Conflict elites

• Civil society

• People

-

Global crisis

• Size of the Syrian economy and its resources are not enough incentives for the battle between global and

regional actors at this magnitude

• The size of loss is far beyond the Syrian economy capacity

• Direct involvement of various internal and external subjugating powers

• Shrinking role of global civil society

• Institutionalising of war economy

• Investment in identity politics

• Fragmentation of geography, economy

• High exposure to the external influence: Humanitarian aid, diaspora, governments

Economic Impact

Unbearable Economic losses

GDP crisis and accumulated GDP loss in constant 2000 prices in billion SYP (2010 – 2015)

2010 2011 2012 2013 2014

1385

512

4159

2015

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Bill

ions

SYP

GDP (crisis scenario)

Accumulated GDP loss

By 2015, the crisis total GDP loss reached USD 163.3 billion:• three times Syria’s

GDP in 2010 • seven times of the

projected GDP in 2015

4scpr-syria.org

Unbearable Economic losses

Real GDP accumulated loss by sector till the endof 2015 and real sector GDP in 2010 (in billion SYP)

GDP loss (till2015)/ GDP 2010:

o Utilities sector 3.65 timeso Manufacturing 3.51

timeso Finance 3.40 times o mining 3.39 times

GDP growth 2015:+ positive growth of

agriculture, internal trade, finance, and NGOs

-- recession for the rest

2010 GDP

Accumulated loss

Economic Impact

0

500

1000

Agr

icu

ltu

re

240

483

Min

ing

186

630

Inte

rnal

tra

de

297

967

Tran

spo

rt &

co

mm

mu

nic

atio

n

191

585

Go

vern

me

nt

Serv

ice

s

207

660

Uti

litie

s

37

136

Co

nst

ruct

ion

52

160

Fin

ance

&

real

est

ate

69

236

Soci

al

Serv

ice

s

59

167

Man

ufa

ctu

rin

g

44

154

5scpr-syria.org

By 2015, the crisis total GDPloss reached 254,7 USD billion:• 4,7 times Syria’s GDP in

2010 • 12,7 times of the

projected GDP in 2015• Military expenditure 26%

of GDP 205

Economic Impact

Unbearable Economic losses

0

1000

2000

3000

4000

5000

6000

7000

GDP loss Capital stockdamaged

Increase inmilitary

expenditure

Oil Loss Total economiclosses

GDP 2010 GDP 2015 Military exp 2015

Acumulated Economic Losses 2011-2015 and GDP 2010 in constant SYP

Loss/GDP4,7

Loss/GDP 12,7 26%

GDP2015

scpr-syria.org

Huge deficit and military expenditure

Economic Impact

The budget deficit decreased from 41.2 % in 2014 to 28.1 % in2015. This reflects the government strategy to increase publicrevenue based on “subsidies rationalization” policy thatreduced dramatically the subsidies.

However, this strategy has adversely impacted the economyand contributed to deeper recession as, it increased the cost ofdomestic production and the inflation pressures, and thus,devaluated the currency.

Revenue

Expenditure

Budget Balance

Deficit with Off Budget Subsidies

Plus

military

Fiscal policy and reduction of subsidies 2010-2015*

2010 2011 2012 2013 2014 2015

40.

0

20.

0

0.

0

-

20.0

-

40.0

% o

f

GD

P

7scpr-syria.org

Means of War Economy

Means of War Economy

- Destruction

- Weapons

- Pillage of wealth and resources

- Using fear and subordination of people

- Reallocation of resources towards conflict related activities

- Discrimination in services and basic goods

- Impoverishment Policies

- Economic elite privileges

- Inequality of subsidies and aids distribution

- Transnational conflict related networks

Means of identity politics

- Invest in rejection of the other

- Triggering hater through killing

- Media

- Education

- Discrimination policies

- Destroying the social capital networks and trust

-

Means of War Economy

- Destruction and dispersion

1.00

0.98

0.76

0.70

0.64

0.58

0.53

0.510.50

0.48

0.460.45

0.44 0.440.43

2010

2011

2012

2013Q

1

2013Q

2

2013Q

3

2013Q

4

2014Q

1

2014Q

2

2014Q

3

2014Q

4

2015Q

1

2015Q

2

2015Q

3

2015Q

4

Estimated level of Capital Stock, from 2010 to 2015-Q4 at constant prices (2010=1)

-2300-2291-2281-2272-2262-2253-2243-2234-2224-2215-2205-2196-2186-2177-2167-2158-2148-2139-2129-2120-2110-2101-2091-2082-2072-2063-2053-2044-2034-2025-2015-2006-1996-1987-1977-1968-1958-1949-1939-1930-1920-1911-1901-1892-1882-1873-1863-1854-1844-1835-1825-1816-1806-1797-1787-1778-1768-1759-1749-1740-1730-1721-1711-1702-1692-1683-1673-1664-1654-1645-1635-1626-1616-1607-1597-1588-1578-1569-1559-1550-1540-1531-1521-1512-1502-1493-1483-1474-1464-1455-1445-1436-1426-1417-1407-1398-1388-1379-1369-1360-1350-1341-1331-1322-1312-1303-1293-1284-1274-1265-1255-1246-1236-1227-1217-1208-1198-1189-1179-1170-1160-1151-1141-1132-1122-1113-1103-1094-1084-1075-1065-1056-1046-1037-1027-1018-1008-999-989-980-970-961-951-942-932-923-913-904-894-885-875-866-856-847-837-828-818-809-799-790-780-771-761-752-742-733-723-714-704-695-685-676-666-657-647-638-628-619-609-600-590-581-571-562-552-543-533-524-514-505-495-486-476-467-457-448-438-429-419-410-400-391-381-372-362-353-343-334-324-315-305-296-286-277-267-258-248-239-229-220-210-201-191-182-172-163-153-144-134-125-115-106-96-87-77-68-58-49-39-30-20-11-1 9182837475666758594104113123132142151161170180189199208218227237246256265275284294303313322332341351360370379389398408417427436446455465474484493503512522531541550560569579588598607617626636645655664674683693702712721731740750759769778788797807816826835845854864873883892902911921930940949959968978987997100 6101 6102 5103 5104 4105 4106 3107 3108 2109 2110 1111 1112 0113 0113 9114 9115 8116 8117 7118 7119 6120 6121 5122 5123 4124 4125 3126 3127 2128 2129 1130 1131 0132 0132 9133 9134 8135 8136 7137 7138 6139 6140 5141 5142 4143 4144 3145 3146 2147 2148 1149 1150 0151 0151 9152 9153 8154 8155 7156 7157 6158 6159 5160 5161 4162 4163 3164 3165 2166 2167 1168 1169 0170 0170 9171 9172 8173 8174 7175 7176 6177 6178 5179 5180 4181 4182 3183 3184 2185 2186 1187 1188 0189 0189 9190 9191 8192 8193 7194 7195 6196 6197 5198 5199 4200 4201 3202 3203 2204 2205 1206 1207 0208 0208 9209 9210 8211 8212 7213 7214 6215 6216 5217 5218 4219 4220 3221 3222 2223 2224 1225 1226 0227 0227 9228 9229 8230 8231 7232 7233 6234 6235 5236 5237 4238 4239 3240 3241 2242 2243 1244 1245 0

0 to 4

5 to 9

10 to 14

15 to 19

20 to 24

25 to 29

30 to 34

35 to 39

40 to 44

45 to 49

50 to 54

55 to 59

60 to 64

65 to 69

70 to 74

75 to 79

80+

F_16_crisis_withinSYR F_16 M_16_crisis_withinSYR M_16

Source: Population survey 2014 and SCPR’s calculations

The Syrian population pyramid by age and gender

(continuous and crisis scenarios 2016)

Reallocation of resources to conflict

Means of War Economy

Consumption GDP by its components in constant prices 2000, (SYP Billion)

Consumption GDP 2010 and accumulated loss till 2015 in constant prices of 2000, SYP billions

Private Consumption:• Recession by 2.6% in 2015• Increase of poverty

Public consumption:- A substantial fall in by 33.1%, 2015- A decline to 31.6 % of GDP in 2015- It includes projected military

expenditure

“semi-public” consumption: Increasing share from 2.1 % in 2012 to

13.2 % in 2015

A shift in public economic policies

10

2010

2011

2012

2013

2014

2015

364

537

469

295

242

163 68 346

54 355

43037

21 555

6331

776Sectors

(SYP Billion)

Public

Semi public

Private

Public Semi public Private

Sectors

(SYP Billion)2010

2015Q4

776364

473 -182 2341

scpr-syria.org

Impoverishment Policies

Overall poverty incidence in Syria by governorate (2014, 2015, a map for each year)

Overall Poverty Syria 2014

Means of War Economy

Overall Poverty Syria 2015

11

0.772

0.798

0.820

0.824

0.824

0.831

0.843

0.855

0.862

0.869

0.869

0.901

0.905

0.916

scpr-syria.org

SCPR projections

0.747

0.769

0.804

0.805

0.806

0.807

0.814

0.837

0.846

0.853

0.856

0.884

0.895

0.896SCPR projections

Means of War Economy

HeRAMS Composite Index for health centers in Syria 2014 HeRAMS Composite Index for public hospitals in Syria 2014

Discrimination in services provision

Workers for violence

Means of War Economy

Employed Unemployed13

Number of employed and unemployed 2011 - 2015 (in thousand)

5175

3

987

3757

3536

3273

3025

2908

2

819

2749

2682

2

644

2636

2608

2589

9

05

2015

2

116

2

298

2

486

2688

2

778

2833

2882

2

929

2942

2923

2921

2908

2011

2012

2013Q

1

2013Q

2

2013Q

3

2013Q

4

2014Q

1

2014Q

2

2014Q

3

2014Q

4

2015Q

1

2015Q

2

2015Q

3

2015Q

4

military personnel (formal and informal)

Involved in illegal activities

Questions

What is the cost of the Syrian crisis on the global economy? including:

1- the military and intelligence costs by the main global actors who directly involved in the battle

2- The indirect cost related to the contested relation triggered by Syrian crisis:

• Russia vs Turkey

• Saudi vs Iran

• Eu, US vs Russia

3- The cost of refugees crisis

4- The cost of resurgence of political tyranny

5- The cost of resurgence of terrorism

Can we face the war economy in Syria on the national level?

Institutional dimension to create just and trustful governance

- Ceasing the killing

- Decomposing the institutional foundations and powers associated with the violence and oppression.

- Activating the role of de facto nonviolent institutions towards resolving the crisis

- Expanding the participation regardless political, social, cultural, and economic backgrounds.

- Raising the level of accountability and integrity.

- Developing national political tools to resolve the crisis through developing a shared vision at national

level.

- Constructing efficient institutions through strengthening the values of work, participation and

accountability.

- Achieving the political and developmental independency.

The war main message that oppression can repeatedly destroy any developmental achievements

Dismantiling War Economy

Economic dimension to create negative incentives to the war economy

- Decomposing the foundations of violence and rent-oriented economy.

- Supporting private sector development and increase the constraints on conflict elite

- Institutionalizing and activating of a civil society economy.

- Development role of the state is crucial to overcome the war economy

- Constructing a flexible, comprehensive, and participatory plan.

- Applying effective and accountable policies to alleviate poverty and inequality.

- Creating job opportunities through public and civil work programs.

- Supporting local production process in all sectors.

- Achieving an independent, efficient, and just economic policy.

- Increasing productivity by enhancing the role of knowledge and technology.

Conflict elite cannot be part of build sustainable development

Dismantiling War Economy

Social dimension to decompose the identity politics and polarisation

- Restoring social fabric and trust, and dismantling the tools of fragmentation and hatred.

- Respecting the right to life.

- Activating the role of NGOs and civil society organizations.

- Building a new social contract based on the culture of rights, equal citizenship, justice, and collective

national identity through open public dialogue.

- Empowered human capital, protecting fair opportunities, and safeguarding the environment of freedom of

speech and intellectual production.

- Investing in health and wellbeing for all, on individuals and society levels.

- Preserving natural resources and reducing pollution.

Reinvest in society and solidarity, and countering identity politics for peace and prosperity

Dismantiling War Economy

Thank You