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Ch 6. Economic Restructuring and Social Policy


Chapter 6.  Economic Restructuring and Social Policy.

6.1. Summary of Key Recommendations.

6.2. Goals, Objectives, and Resources.

6.3. Context

6.4. Challenges and Risks.

6.5. Detailed Strategies and Recommendations.

6.6. Selected Resources

Syria faces urgent humanitarian needs for emergency relief, the challenge of post-conflict reconstruction, and the imperative of restructuring a weakened economy that has been characterized by bad policy, mismanagement of resources, corruption, and nepotism. To meet these challenges, Syria will need to draw upon a full range of financial and human capital, including both domestic and foreign resources. Throughout the process, empowering local communities to make their own decisions will be paramount. This will help prevent aid dependence or distortions, facilitate both national reconstruction and reconciliation, and set Syria on a path of equitable and sustainable economic and social progress over the long term.

6.1. Summary of Key Recommendations

  • Immediately undertake a comprehensive study to identify and determine the social and economic challenges, including the need for relief assistance, with precision and specificity.
  • Convene a donors’ meeting (perhaps anchored in the Friends of Syria group), or some other mechanism to elicit and coordinate donor funds, establishing from the start the imperative of local involvement and decision-making so as to avoid the risks of dependency or distortion.
  • Meet urgent humanitarian needs through immediate emergency relief (medical care, food, shelter); restore basic services (sanitation, electricity, education), and begin to resettle refugees and internally displaced persons.
  • Rehabilitate physical infrastructure. Establish a bureau of reconstruction to coordinate the many agencies that will be involved in the reconstruction effort.
  • Empower local communities to make economic decisions so as to stimulate the economy and ensure sustainability.
  • Take measures to facilitate macroeconomic stability, jump-start the economy, and attract capital back to Syria.
  • Establish a National Economic and Emergency Relief Council to review economic policies and relief efforts, so as to ensure the appropriate balance between initiatives to jump-start the economy and programs for emergency relief and reconstruction.
  • Dismantle the legacies of corruption, nepotism, and discrimination left by the Ba’thist regime. Initiate new patterns of transparency, accountability, participation, and inclusion of all Syrians.

6.2. Goals, Objectives, and Resources

The economic and social well-being of Syrians entails three interrelated goals: consolidated peace, national reconciliation, and economic recovery. No one of these can be established and sustained without the other two. In moving toward these three goals, Syria has the chance to establish a framework for equitable and sustainable social and economic progress.

In developing objectives and recommendations in this area, The Day After project adhered to the same principles that have guided the entire endeavor, searching for approaches that embody inclusiveness, participation, accountability, and transparency. In the economic and social realm, this means that, from immediate emergency relief to medium-term reconstruction to long-term economic restructuring, the underlying concerns include providing broad-based opportunities, ending corruption, and fostering capacity and empowerment among all Syria’s diverse social components—its ethnic, sectarian, and religious groups; men, women, and youth; and all regions. A further abiding concern is the imperative of maintaining local ownership while working in conjunction with foreign donors and actors, so as to avoid the risks of dependence or economic distortion. Toward these goals, and with these underlying principles, The Day After project has identified six objectives:

Objective 1. Consolidate peace.

Peace is elemental. Syria requires security and stability for all. While the obvious initial focus is ending violence between the regime and all opposition forces, consolidating peace also involves ending any sectarian violence that may have been triggered during the revolution, as well as the protection of those made particularly vulnerable by the conflict (refugees, displaced persons, injured, and dispossessed), and those who may become victims of violence—either of revenge attacks or of the domestic violence that too often characterizes post-conflict societies as traumatized individuals are more apt to engage in acts of violence. Consolidating peace will mean peace and security for all Syrians, without exception. The basic steps toward this objective are covered in Chapters 1, 2, and 3 and will not be further elaborated here. It bears emphasizing, however, that consolidating peace is thoroughly entwined with meeting any other social, political, or economic goals.

Objective 2. Meet urgent humanitarian needs.

Urgent humanitarian needs must be met with immediate emergency relief in the form of medical care, food, and shelter in devastated areas; resettlement of refugees and internally displaced persons; and the restoration of basic services such as sanitation, electricity, and education as soon as possible. Due attention should be given not only to the physical needs of the Syrian people, but to their psychological needs as well. Because of the potential effects of post-traumatic stress disorder from prolonged conflict, addressing psychological and emotional needs will be critical to fostering healing in the transition period (see Chapter 2).

Providing for basic needs will require careful coordination and management. At first, the transitional government will be leveraging aid to meet these needs rapidly and effectively, and partnering with relief organizations to bolster distributive capacity in the short term. Right from the start, it will also be important to map and collaborate with local civic and religious groups. Involving and relying on local groups will encourage a sense of community and build local capacity, strengthen the legitimacy of and trust in the transitional government, and help to prevent the dependence and distortions of a heavily aid-based or donor-directed recovery effort.

Objective 3. Rehabilitate physical infrastructure.

The conflict, and especially the regime’s use of heavy weapons, is resulting in the damage, destruction, and devastation of physical infrastructure in Syria’s cities and villages. Rebuilding, reconstructing, and restoring residential and commercial buildings, transportation infrastructure, and communications infrastructure is therefore a core objective. If undertaken properly, the process of reconstruction can itself create jobs and facilitate economic activity, becoming a critical step toward economic self-sufficiency and sustainability. The process of reconstruction can also be part of addressing the fundamental psychological and social needs of the Syrian people, as reconstruction projects provide a concrete and purposeful locus around which communities can interact, building mutual trust as well as optimism in Syria. If progress on infrastructure rehabilitation is promptly audited and effectively communicated, this will also help the transitional government attain legitimacy, both domestically and internationally.

Objective 4. Empower local communities.

Empowering local communities to make economic decisions while bolstering the economy overall will have myriad positive effects. A key to rebuilding the economy is job creation, to ensure the direct participation of Syrian citizens. Proven methods of local job creation include providing food for work, hiring local labor in reconstruction, elevating the technical skills and literacy of the workforce, and working with capable agencies to provide both inputs and credit to local businesses (with a particular focus on small- and medium-sized businesses). Local economic development will also entail community-based skills and training, the fostering of local competition, and the improvement of market access. Through locally controlled economic reconstruction efforts, Syria can create a variety of opportunities, especially for the reintegration of marginalized groups, and encourage community-building and a sense of unity. Giving greater weight to local decisions will also help shift the Syrian economy away from its past emphasis on the public sector, although a place will remain for the preservation of public institutions and public sector salaries. Further, an economy with more local control also has a greater potential of being sustainable and avoiding dependence on or distortions created by foreign aid. Across the economy, decentralization will prevent undue control of the development process by national officials or elites.

Objective 5. Ensure macroeconomic stability.

Stimulating the economy will involve fostering economic activity at the local level, reestablishing economic infrastructure (e.g., the banking and regulatory system), seeking an end to all sanctions, improving Syrian access to regional and international markets, and providing macroeconomic stability.

Macroeconomic stability is critical to economic reconstruction and requires careful attention to some systemic aspects of the Syrian economy. Macroeconomic stability provides predictability, allowing both investors and savers to make long-term decisions without fear of economic disruption and instilling confidence among domestic economic actors. Macroeconomic stability will assist Syria in becoming viable financially. It will also be crucial to generating fiscal responsibility, so the transitional government can enforce fiscal obligations that will make the government more sustainable. Macroeconomic stability will also help create an enabling environment for local economic activities. Other factors conducive to an enabling economic environment are the lifting of sanctions, improved access to international markets, low inflation, and the elimination of bottlenecks (such as the lack of foreign exchange). Finally, macroeconomic stability will be essential to manage inflows, as Syria receives external assistance.

Accomplishing macroeconomic stability in Syria is a complex task that will require both coordination and expertise. Among institutional reforms, macroeconomic stability will require a strong treasury and central bank capable of making effective policy. To use these institutions properly, Syria will need to augment its technical capacity for economic policy-making. This can be accomplished through training programs, as well as through a limited advisory role for international agencies and partners. The transitional government will need to balance the imperative of efficiency with a conflict-sensitive approach to economic reconstruction and economic programming more broadly. This will entail giving the transitional government leeway to spend what is required for success, as immediate post-conflict engagement is a high-expenditure process. The transitional government will also need flexibility in spending to ensure that other objectives listed above, as well as priorities identified in other chapters, have a realistic and supportive economic background.

Objective 6. Begin to dismantle legacies of the Ba’thist regime and establish new patterns.

The final objective is to begin to dismantle the economic and social legacies of the Ba’thist regime. These include decades of misguided and incoherent economic policies, widespread corruption, prevalent nepotism, and the utter lack of transparency and accountability which have characterized both business and government dealings in Syria. Overcoming these patterns will be a critical factor in rehabilitating the economic and social environment of Syria. By establishing new patterns of transparency and accountability, the transitional government will increase the impact of economic and social reforms, and ensure that gains are durable and sustainable.

Dismantling remnants of the old regime in the economic sector will parallel similar efforts in the rule of law, security, and political sectors (see Chapters 1, 3, and 4). As in these sectors, there is a great need for mechanisms of monitoring and oversight, from local networks to international monitors. In the economic realm, oversight of the transition process will require a twofold effort. The first step will involve an audit to establish the resources at the disposal of the government, including funds and basic budget availability. The second step will be to practice transparency, evaluating reconstruction efforts, and updating the public on the progress of the transition. This will enhance the legitimacy of support for the transition. A further useful tool in combating corruption and establishing transparency will be to encourage the independent media to alert the public of any wrongdoing while also sharing news of accomplishments when reporting on transition activities.

Other initiatives will be required to overcome the negative legacies of the Ba’thist regime. These include revision of school curriculum, a health policy that is both accessible and affordable, and equitable division of economic gains to all Syrians. Empowering women in all sectors (including business and politics; see Chapter 4), abolishing discriminatory practices, and ensuring freedom of association to stimulate the formation of civil society organizations are other core elements that will allow Syria to make a distinctive break with its repressive past and avail itself of the unique opportunity provided by the transition. Each of these steps forms part of an overarching approach to address the challenges facing the country in a way that establishes equality and social justice for all Syrians.

Resources and means

To meet these objectives and achieve these goals, Syria will need great resources and diverse means. Some of these are already at hand; others will need to be acquired.

A first obvious resource is funds. Sources of funds for the transition include income from the resumption of exports, the collection of taxes, and donor funds from the international community. A further source may be the repatriation of the upwards of $50 billion in funds stolen from the Syrian people by figures in the Assad regime. Funds alone will not accomplish objectives without the capacities and skills to use them well. Syria already has some of this essential second resource, but will need further training and skill-transfer programs. A third essential means for achieving these entails a mechanism of monitoring and communication, to facilitate transparency, accountability, and participation. These elements have been underdeveloped in Syria, but plans to initiate them can be found throughout this document (see especially Chapters 1, 2 and 4). A fourth critical resource is the interoperability of all transition programs, which will enhance local engagement and the long-term success of the transition. A fifth core resource is the collaboration and coordination of many actors, from local civil society groups to the Syrian community abroad and donor organizations, working together to meet the needs of the Syrian population both rapidly and effectively.

6.3. Context

Over many years of Ba’thist rule, the regime institutionalized corruption, nepotism, and greed. It entrenched socioeconomic inequality and exacerbated the neglect of marginalized groups. Over the course of the revolution, economic activity has been reduced to a minimum. The business community has been driven to near bankruptcy, both by the constraints of doing business while under international sanctions and by being forced to bankroll the ongoing repression of the Syrian opposition. Average citizens, formerly of the middle or working class, have been reduced to a state of destitution. The regime’s violent response to the uprising, including the use of heavy weapons, has resulted in the devastation of villages and cities, the destruction of infrastructure, and the disruption of basic services. More than 1.5 million Syrians have been displaced or have fled to neighboring countries. Syria’s current economic distress is summarized in Figure 6-1.

Figure 6-1: Current State of the Syrian Economy

Current State Description
Economic Characteristics
A legacy of state predation Weak social contract, fragile institutions, resource capture and exclusionary economy
Protracted violence Reversed development, destroyed infrastructure, undermined real economy, enhanced aid dependency, and perverse war economy
Macroeconomic instability Dwindling international reserves (roughly $5-7B; equivalent to less than 3 months of imports)Multiple exchange rates (de jure pegged to basket, but growing divergence with parallel market)Increasing inflation (due to shortages, monetized financing of fiscal deficit, depreciating currency, and imported inflation)Mounting debt (domestic debt, cross-debts, and unquantifiable growth in external debt)
Employment Growing unemployment (roughly estimated at 40 to 50%; more pronounced among youth)Endemic underemployment (across the labor market)
Output Oil sector (declining output, exacerbated by outdated technology and techniques)Non-oil sector (agricultureweakened; tourism decimated; manufacturing weakened)
Economic/Financial Institutions “Policy” banking (e.g., directed credit—less than 5% to agriculture and construction; differentiated reserve requirements)Interventions (e.g., complex array of subsidiesand ‘incentives’)
Social Characteristics
Social Infrastructure Displacement and food insecurityHousehold dynamics (impacts of income loss and asset depletion)Household size (growth and increased dependency ratio)Vulnerable segments of the population (especially by gender)Sectarian strife
Essential Services Essential services destroyed/disruptedWater; Electricity; Transportation/fuel; Medical; Telecommunications
Infrastructure

destroyed/damaged

Government and commercial buildings; private residencesHospitals/clinics; cultural/community centersRoads and bridgesCommunications infrastructure

6.4.  Challenges and Risks

Syria faces many challenges and risks as it seeks to reconstruct its economy and rebuild society. Many of the general challenges—and the means to mitigate them—have already been discussed in previous chapters, such as rampant crime and looting driven by desperation (see Chapters 1 and 3), or grave social mistrust (see Chapters 2 and 5). Some challenges are more specific to the economic sector, though they will affect all other initiatives during the transition. These include the lack of qualified personnel to head the economy or lead social change, the great cost of reconstruction and redevelopment, the need to jump-start a weakened and bankrupt economy, and the imperative of restoring jobs and providing skills-development programs.

Two other challenges merit further discussion. One is the risk of dependence on or distortion caused by foreign assistance. In some instances, relief aid can debilitate a local economy, as exemplified in Haiti or in the Congo, where some areas have remained on relief aid for over fifteen years. In other instances, donors with ideological, political, or religious agendas have imposed them on countries in need. Very often, procurement rules for donor assistance may require the purchase of foreign goods or services in ways that do not permit local decisions or enable local economic sustainability. International funds will clearly be needed for Syria’s reconstruction effort; international funds also come with risks.

A final challenge is posed by Syrians themselves. After years of repression, corruption, and government impunity, the expectations of Syrians during the transition will run very high. As Syria moves toward an open, democratic state, citizens will expect any new leadership to restructure the economy, institute social policy reforms, and establish a framework that is inclusive of all members of Syrian society. Moreover, the people of Syria will expect the transitional government to replace the repressive Assad regime with a system that embraces transparency and accountability. Managing these expectations while also earning the people’s trust and support will be a further challenge for the transitional government.

6.5. Detailed Strategies and Recommendations

The Day After project has developed a series of recommendations to address the immediate needs of the Syrian people (including food, shelter, and jobs) while establishing a framework to accelerate economic activities to position Syria for equitable, sustainable economic progress over the long term. The recommendations below include some suggestions for institutions or initiatives to guide the transition process at each phase, as well as specific recommendations of tasks.

Prior to Transition

  • Undertake a comprehensive study immediately to identify and determine the social and economic challenges, including the need for relief assistance, with precision and specificity. This will enable greater efficiency, equity, and fairness in designing economic assistance and recovery programs throughout Syria. The baseline needs assessment should be conducted both at the national level and at the level of local towns and councils. Various internal and local opposition groups (Local Coordinating Committees, Syrian Revolution General Commission, and others) should assist in this effort, identifying the principal networks and actors who will collaborate during the transition to begin implementing the national agenda.

Immediate Priorities

  • Conduct an audit to establish the financial resources of the transitional government, including funds and basic budget availability. Communicate the results of the audit so as to demonstrate transparency, facilitate accountability, and manage public expectations.
  • Establish a Bureau of Reconstruction to coordinate the many agencies that will be involved in the reconstruction effort. Its mandate will be to strengthen accountability and transparency, breaking the legacy of corruption and thwarting new incentives for corruption during reconstruction. The functions of the bureau should include setting clear priorities, revising procurement laws, monitoring building standards so that reconstruction is sustainable and efficient, and ensuring that contracts are assigned through a process of market-based competition.
  • Convene a donors’ meeting (perhaps anchored in the Friends of Syria group), or some other mechanism to elicit and coordinate donor funds, establishing from the start the imperative of local involvement and decision-making.
  • Establish a National Economic and Emergency Relief Council to review economic policies and relief efforts, so as to ensure the appropriate balance between initiatives to jump-start the economy and programs for emergency relief and reconstruction.

Specific priorities for the transitional government immediately after the collapse of the Assad regime should include:

  • Address refugee and internally displaced persons (IDP) resettlement.
  • Provide immediate emergency relief (e.g., medical, food, shelter) for the devastated areas.
  • Restore basic services throughout the country as soon as possible (e.g., education, sanitation).
  • Assess physical infrastructure throughout the country, and quickly undertake reconstruction activities in the hardest-hit areas.

First few months

  • Foster macroeconomic stability by strengthening institutions, such as the treasury and Central Bank, so they can make effective policy.
  • Take steps to establish transparency and accountability in the economy and fight corruption and nepotism. Revise and enforce relevant legislation against corruption. Adopt international standards such as the Extractive Industries Transparency Initiative (EITI) and Publish What You Pay; these international standards can be especially useful in establishing oversight for the oil industry. Improve access to the judicial system, ensuring that court rulings are enforced in a transparent fashion.

Specific tasks for the first few months of the transition should include:

  • Assess any additional refugee and IDP requirements.
  • Provide additional relief for devastated areas not fully recovered.
  • Assess the state of basic services throughout the country and determine how to upgrade them.
  • Establish needed economic institutions (e.g. banking and regulatory systems) to foster economic activity.
  • Assess key physical infrastructure (e.g., roads, hospitals) throughout the country, and quickly undertake reconstruction activities in the hardest-hit areas.

Figure 9 provides a more detailed list of recommendations, justifications, and a timeline for implementation. The Day After project proposes a “cluster approach” that would create collectively reinforcing growth in priority areas across the economy. Each region will build on its competitive advantages.

Figure 6-2: Summary and Timeline for Economic Recommendations

Recommendation Justification Timeline to Implement
Drive macroeconomic stability
  • Address drivers of inflation
  • Review currency arrangements
  • Quantify debt (domestic / external)
  • Augment technical/management competencies
First 6 months
  • Introduce indirect fiscal deficit financing mechanisms
  • Rebuild reserves gradually
  • Initiate customized debt restructuring
  • Evaluate new currency options
6 months to
2 years
Stimulate Employment
  • Focus on reducing unemployment (introduce quick wins)
  • Quantify and map underemployment
  • Retain public sector employees and preserve current institutions
First 6 months
  • Transition focus to sustained employment opportunities
  • Develop strategy to address underemployment (training + placements)
  • Develop strategy for SMEs and microenterprises
  • Assess requirements to revive non-oil employment
  • Introduce reconstruction zones
6 months to
2 years
Real Sector Output
  • Improve opportunity and access for all Syrians
  • Integrate local economy in reconstruction efforts and service provision
  • Identify barriers to private sector development
  • Map non-formal sector
First 6 months
  • Provide incentives to SMEs and microenterprises
  • Restructure public enterprises
  • Initiate steps to improve competitiveness
  • Develop strategy to improve market access for producers (domestic, regional and global)
6 months to
2 years
Restructure Economic and Financial Institutions
  • Ensure functioning payment system in major towns
  • Strengthen management of public-sector institutions
  • Enforce accountability
  • Improve domestic coordination (ministries, banks, treasury)
  • Establish rules for coordination with external institutions
  • Improve central bank monitoring and supervision of private institutions
First 6 months
  • Appoint independent oversight and regulatory institutions
  • Expand functioning payments system
  • Rationalize financial regulations (e.g., tiered reserve requirements)
  • Create a regulatory and institutional support framework for non-formal sector
6 months to
2 years
Address immediate social needs and challenges
  • Develop community-based and generated approaches to social development
  • Provide basic human needs: food, medicine, water, shelter
  • Restore basic services and infrastructure: electricity, schools, hospitals/clinics, transportation, fuel, and social services.
First 6 months
Address societal issues
  • Assess sectarian and ethnic divides and develop the framework for national dialogue and healing
  • Develop a comprehensive reintegration plan (e.g., political detainees, members of the security forces, displaced populations, returning refugees)
  • Account for the forcibly disappeared
First 6 months
Create sustainable programs
  • Deepen and broaden scope of social and economic dialogue
  • Gradually reduce dependency on humanitarian aid
  • Develop long-term educational programs
6 months to
2 years

6.6. Selected Resources

Del Castillo, Graciana. Rebuilding War-Torn States: The Challenge of Post-Conflict Economic Reconstruction. Oxford: Oxford University Press, 2008. Abstract available at http://www.oxfordscholarship.com/view/10.1093/acprof:oso/9780199237739.001.0001/acprof-9780199237739 [July 2012]

UN Development Programme. Crisis Prevention and Recovery Report 2008 “Post-Conflict Economic Recovery: Enabling Local Ingenuity.” Available at http://www.undp.org/content/dam/undp/library/crisis%20prevention/undp-cpr-post-conflict-economic-recovery-enable-local-ingenuity-report-2008.pdf [July 2012]

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