“Clients” in Syria and Egypt: how economic openness keeps authoritarian elites in power

2018-11-18

Yassin Swehat

"Al-Jumhuriya"


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© Hélène Aldeguer, 2018

This publication file is in the framework of the activities of the network of independant media on the Arab world. The regional cooperation is made by Al-Jumhuriya, Assafir Al Arabi, Mada Masr, Maghreb Emergent, Mashallah News, Nawaat, 7iber and Orient XXI.

Like many other Third World countries, Egypt and Syria have been confronted with neo-liberal economics in its most brutal form, which involves the dismantling of a planned economy and the “strategic” role of the public sector in order to achieve a certain autonomy. These countries came to regard a market economy tied in with the global market as a necessity and encouraged investments in the financial sector divorced from production and employment. Like other countries and in the absence of any transparently democratic political and judicial systems and of any means of oversight to guarantee political and parliamentary freedom and the independence of the media, economic liberalisation has, here as elsewhere, brought about an authentic social catastrophe. And here as elsewhere it has become a way of reproducing the ruling elites, which have expanded or contracted according to the needs of the power structure. Thus it has been possible to multiply the profits obtained from the “original looting” of the public treasury by the first generation of authoritarian rulers, funds which have been invested abroad, salted away in tax havens or used to create multinational firms, increasing personal fortunes tenfold.

However, because of the very nature of their regimes and elites, the process of “economic liberalisation” which began in the eighties and carried on until the 2011 revolutions, has not been exactly the same in these two countries.

Egypt: the legacy of “Infitah” (Openness) and privatisation

The rhetoric of Openness goes back to the days of Anwar el-Sadat, who quickly distanced himself from the political and ideological stances of Nasser. Following the war of October 1973, and at the same time as several Latin American countries experienced right-wing takeovers, Sadat espoused the school of thought which was becoming fashionable and undertook the economic transformation of his country, scrapping the credo on which the State had been built following independence and which had prioritized industrial development and ascribed key roles to the working class and to national self-suffiiciency, as a means of preserving Egyptian sovereignty. Sadat believed in the need for Egypt to integrate into the global market, encourage import-export, and develop windfall activities such as the Suez Canal (reopened in 1975), oil-processing, the tourist trade and real estate. The popular unrest that such policies could not fail to generate was met with police repression.

The rhetoric of infitah benefited a logic of economic expansion which developed during the seventies and reached its peak in the eighties and nineties. Keeping inflation under control and constant economic growth became absolute priorities, whatever the social impact of economic reforms implemented with no thought for their legitimacy in terms of the political and administrative context.

Economic liberalism, which must not be confused with political liberalism, is a system influenced by Milton Friedman’s Chicago School. As Naomi Klein shows in her famous book, “The Shock Doctrine”, it has generated terrible suffering in many Latin American, African and Asian countries.

It was in the nineties that the most radical changes took place in Egypt, with the implementation of a neo-liberalism which affected not only the economy and the labour laws, but also gave rise to nightmare situations which remain very vivid in the collective imagination, linked as they are to a negative image of “privatisation”. Beginning in 1991, the successive Premiers under President Moubarak (Atef Sedky, Gomal Ganzouri, Atef Ebeid, Ahmed Nazif) undertook the dismantling of many government economic services, shutting down agencies, doing away with jobs, as well as partial or total divestitures for the benefit of certain “investors”, Egyptian or foreign, primarily from the Gulf countries. This privatisation program peaked during the first five years of the new century, until the Administrative Policies Commission put an end to it in 2008.

Thus, available statistics show that some 400 state-owned companies were sold off and hundreds of thousands of public employees were dismissed or forced into early retirement. This privatisation program was carried out without any surveillance and the opacity of the transactions was complete. Thus the program became a new authoritarian tool for reproducing and enlarging the ruling elites which developed tighter financial and political bonds with the decision-makers. Whence the emergence of the cast of “clients”, as ordinary people named the businessmen who made their fortune thanks to economic policies adopted under their influence.

An article by Ibahim Hadibi posted last January on the website Mada Masr, conveys a sense of the weight of these “clients”. We learn that the percentage of “businessmen” in Parliament rose from 12% in 1995 to 22% in 2005 while between the first and second Nazif cabinets. their number doubled (2 to 4). But it is the Administrative Policies Commission of the National Democratic Party (NDP) – chaired by Gamal Moubarak - which is their preferred field of operations. There we find a slew of business people with a monopoly or majority of shares in the latest and most profitable industries: iron, cement and ceramics, all useful in the building trade which, since the eighties, has become one of the three most thriving sectors in the “liberalized” Egyptian economy, along with tourism and import-export.

Already benefiting from dubious divestments and export-import monopolies and concessions, these “clients” of Mubarak had the advantage of precious energy subsidies, granted to industrial sectors which are the greatest sources of pollution and create the least jobs. A document published in 2015 by the Egyptian Initiative for Personal Rights refers in this connection to “a dramatic accumulation of incompetence and the lack of any strategic vision together with corruption and clientelism on a grand scale.”

The “clients” also have access to bank reserves. According to statistics for the last five years of the last century, some thirty companies with well-connected owners had grabbed 40% of loan-dedicated funds. It was during that period that the scandal of the “little clients” involving the so-called “credit MPs” came to light: many members of the People’s Assembly took advantage of their position to obtain substantial credit facilities with no significant collateral.

Thus “privatisation” has not kept the promises it seemed to hold in the eighties and nineties, quite the contrary. Instead of improving the condition of ordinary people, the catastrophic implementation of these structural reforms has caused corruption to run riot and destroyed hundreds of thousands of jobs. “Economic openness” and “privatisation” having acquired in the public mind an extremely negative connotation, the PND’s Commission on Administrative Policies decided to call a halt to the operation. But aside from a few lawsuits dealing with some of the most publicized scandals, there has been neither critical evaluation nor calling to account and the basic implications of the experiment will not be challenged.

Syria: the father was a general, the son a businessman

Like Egypt, Syria too experienced, from the end of the eighties, the growing impact of that rhetoric vaunting the superior efficacy of the private sector. “No more waste”, “rationalisation of public spending”, “liquidation of insolvent economic sectors”, these were some of the watchwords. The government set about withdrawing from the “strategic sectors” of agriculture and industry without the slightest concern for the fate of the poor. Thus, between 2006 and 2010, North-Eastern Syria fell prey to a terrible economic catastrophe: in the midst of one of the worst draughts of the last decade, the power-structure decided to do away totally with the fuel and fertilizer subsidies to farmers. The consequences of this decision were dramatic, bringing about the collapse of agriculture in the governorates of Hassake, Deir ez Zor and Raqqa. By thus depriving hundreds of thousands of their income, it caused a massive exodus towards the impoverished suburbs of the major cities.

At the same time the government conducted spectacular campaigns favouring other sectors: private banks, insurance companies, real estate, construction and import-export. This tendency was confirmed with the advent of Bachar el-Assad who succeeded his father in the summer of 2000, and subsequently with the implementation of the “social market economy” half-way through the previous decade. A vast operation of “liberalisation” conducted by the Vice-Premier for Economic Affairs, Abdallah Dardari, thus enabled investors to increase their profits and enlarge their offices in down-town Damascus and Aleppo.

The Syrian model of “privatisation” is slightly different from the Egyptian model. On the one hand, the public sector withdrew from the various economic domains to make room for the regime’s “clients” who, starting in the eighties, entered certain branches of agriculture and livestock, while at the same time appropriating activities which did not exist during the period of planned economy: import-export, private banking, private insurance, private universities, private air and ground transports) while a system of tenders and adjudications made it possible to entrust the implementation of public programs to private companies. As these operations were planned with an utter lack of transparency and no controls whatsoever, many projects which existed on paper were never actually carried out at all, a scheme which under the Assads has been one of the main methods of systematic looting.

This situation can be explained by the nature of the power-structure in Syria where the circle of political decision is especially narrow and concentrates all the economic power.

In the absence of any counterweight, the ostensible government – Ministries and other institutions – merely execute the decisions taken by those who actually wield the power in political, financial and security matters. An extreme example of the total misappropriation of the State, the government and its institutions, Syria has seen this circle of power shrink even more over the last decade.

Rami Makhlouf, the President’s nephew, is the epitome of the “client” under the el-Assad regime. Either personally or through minority partners in his company Cham Holding as well as other members of the Damascene and Aleppine elites, he holds the whip hand over huge swaths of the national economy: mobile phones, air transport, dealerships for most brands of cars and other machines, free trade zones in airports, harbours and border crossings and he also holds large shares in private banks, mutual insurance companies and real estate firms and has majority holdings in the oil and mining industries. A mandatory partner of any national or foreign investor desirous of doing business in Syria, he uses the legislative and judiciary powers as he sees fit. This was evinced in the outcome of his dispute with the Orascom company, his partner in the creation of Synatel at the end of the nineties. Or again when the government banned the import of Mercedes spare parts after the German manufacturer refused to withdraw its dealership from the Sankar family and hand it over to him.

Rami Makhlouf is an extreme instance but one which illustrates perfectly the way the regime’s “client” system works: businessmen of the generation of Bachar el-Assad, had fathers who, as officers or former officials of the regime, had carried out a “primary accumulation” by dipping into the state coffers, trusting procurements, appropriating bankrupt public companies in the seventies and eighties and taking over various traffics. In the eighties and nineties their businessman sons kept up the good work. Thus we find occupying prominent places families such as the Makhloufs (nephews of Bachar el-Assad), or the Tlass (sons of former Defence Minister Mustapha Tlass). Among these is Firas Tlass, founder of the MAS Company and local partner of the French cement firm Lafarge in Northern Syria. Since his father’s retirement in the middle of the last decade, his influence has declined in favour of the regime’s “clients” before their dispute became acrimonious with the advent of the revolution. There are also the Souleimanes (the sons of Bahjat Souleimane, one of the principal officers of the security forces under Hafez el-Assad). The list of clans where the pattern “father-VIP-police official-bureaucrat, son-businessman” applies is long indeed.

Associated with small businessmen in Damascus and Aleppo, the “clients” of the Syrian regime – like their Egyptian counterparts – also do business with investors in Lebanon and the Gulf. Through these go-betweens, they have access to the global markets and manage to circumvent the international sanctions aimed at most of them. They have complete control of the Syrian economy and are not driven to privatise. Their utter contempt for all the principles of political democracy does not prevent them from adhering to the direst theories of “economic reform”, presented as the sine qua non condition of democracy. Neo-liberalism, which in this case is nothing more than a way for the powerful to propagate and join the ranks of the global elites is therefore not only harmful for the economy but laden with contempt for the local population. A trait held in common by all these “clients” of the State in Third World countries.

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Yassin Swehat
Spanish-Syrian Journalist, co-founder and edito-in-chief of Al-Jumhuriya.

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