Meed | Damascus counts the cost of reconstruction

Damascus counts the cost of reconstruction

21 June 2023

MEED's July 2023 report on Syria also includes:

> COMMENT: Syria comes in from the cold
> GOVERNMENT: Al-Assad edges closer to the mainstream

Away from the political uncertainty surrounding the rehabilitation of Damascus, the perennial question for Syria is where the funds for reconstruction are going to come from.

The cost of reconstruction in Syria has been estimated as ranging from $400bn to $1tn.

These are daunting figures for a country as economically debilitated as Syria. Where once this might have equalled several years’ worth of GDP, today it represents decades’ worth.

However, it is in the regional interest to get the Syrian economy running again. The neighbouring countries of Iraq, Lebanon and Jordan have all experienced reduced economic growth, stymied cross-border trade and refugee burdens as a result of the Syrian conflict.

Earthquake exacerbation

In 2023 so far, the situation has moved backwards, with major earthquakes centred on southern Turkiye having compounded the destruction caused by the 12-year conflict in Syria. The World Bank’s damage assessment suggests that the earthquakes could further contract Syria’s real GDP by 5.5 per cent in 2023 and complicate reconstruction efforts.

The physical damage caused by the earthquakes is estimated at $3.7bn, with indirect economic losses reaching $1.5bn. The destruction of infrastructure and disruptions to trade have caused further inflationary pressure due to the reduced availability of goods and increased transport costs.

The urgent near-term recovery and reconstruction requirement in Syria from the earthquakes alone is estimated at $7.9bn over three years.

Before the earthquakes, the affected areas were already home to almost 3 million internally displaced people. These vulnerable populations have now been subjected to additional pressures, with humanitarian agencies flagging the risk of disease due to damage to water and sanitation networks. Aleppo and its surrounding province have experienced the most significant damage.

While Syria’s readmittance to the Arab League could gradually restore financial flows into the country, any near-term funding is likely to be a trickle compared to the estimated $400bn-$1tn required for reconstruction.

Western nations are meanwhile maintaining their stance of not normalising relations with Syrian President Bashar al-Assad’s regime without significant progress towards a political solution, as outlined in UN Security Council resolution 2254. This includes the formation of a transitional governing body and the drafting of a new constitution.

Without a global rehabilitation of Al-Assad, the path to reconstruction is filled with obstacles.

International assistance

Regionally, countries are hoping to capitalise on Syria’s reintegration. Iran, as a longstanding supporter of Al-Assad’s government, is particularly keen to exploit emerging economic opportunities that would help it to bypass Western sanctions.

In May, Iran’s President Ebrahim Raisi flew to Syria – the first visit by an Iranian president in 13 years. During the trip, Raisi signed several agreements with Syria intending to position Iran as the primary provider of reconstruction projects in the country.

Additionally, plans are under way to establish a free trade zone between Iran, Iraq and Syria, with the possibility of further free zones at Latakia port and the Iraq-Syria border.

Al-Assad has emphasised the ongoing need for active Iranian involvement in Syria, both in ensuring the maintenance of security and in rebuilding war-affected areas.

The readmittance of Syria into the Arab League may in part be intended to ensure that Arab states have a place at the table in the rebuilding efforts and that Iran’s influence in Damascus is mediated.

Al-Assad also travelled to Moscow in March to meet Russian President Vladimir Putin to discuss the reconstruction of Syria. The leaders also discussed reconciliation with Turkiye – a necessity if Damascus is to secure the withdrawal of Turkish forces from Syrian territory.

Turkiye and Qatar have separately launched an initiative, without consultation with Damascus, to repatriate Syrian refugees to Turkish-occupied northern Syria by constructing housing. The project aims to provide homes for 1 million refugees over the next three years by building 240,000 houses in nine separate locations across the Idlib and Afrin regions.

The project is jointly backed by the Qatar Fund for Development and Turkiye’s Disaster & Emergency Management Authority.

Turkiye’s Interior Minister Suleyman Soylu said that the first phase of the project, which aims to deliver 5,000 units of the 28,681 homes within this year, was signed off in April 2023.

MEED's July 2023 report on the Levant region also includes:

JORDAN:
> COMMENT: Economic reform is Jordan’s priority
> ECONOMY: Jordan economy holds a steady course
> OIL & GAS: Jordan's oil and gas sector battles sluggish phase
> POWER & WATER: Jordan sustains utility infrastructure progress
> CONSTRUCTION: Hospital boost for Jordan construction