Bureaucratic Obstacles and Regulatory Constraints Impede Syrian Economic Recovery

Following extensive presentations on the emerging Syrian government's economic strategies, a visiting German businessman expressed considerable enthusiasm last week.

"I thought they'd be pitching us on rubble-clearing projects. Instead, we're hearing about the Damascus metro and 20-year housing plans," he remarked at a dinner gathering with foreign businesses, government officials, and local business leaders at the Four Seasons in Damascus.

However, illustrating the challenges confronting President Ahmed al-Sharaa's ambitious administration, the businessman remains hesitant to commit capital. "It is still too early," he stated, citing persistent sanctions, chronic instability, and inconsistent rule of law as deterrents.

Ambitious Vision Meets Complex Reality

Since overthrowing Bashar al-Assad's regime last December, Sharaa has prioritized economic recovery as fundamental to stabilizing the nation. Yet reversing the devastating effects of 14 years of civil conflict proves considerably more difficult in practice than principle.

Sharaa has adeptly cultivated international legitimacy, prompting the EU and US to remove most sanctions. He has shifted toward market-oriented policies, initiating the complicated dismantling of decades of Assad-era socialism. His government has executed memoranda of understanding valued at billions with foreign partners.

Nevertheless, progress has been inconsistent, particularly due to episodes of sectarian violence that have undermined the international community's confidence in Sharaa, who has struggled to establish authority across the entire country.

Lingering Constraints on Investment

The US Congress has not yet fully repealed sanctions, constraining foreign investment. Much of Assad's kleptocratic bureaucracy and byzantine legal framework remain operational, and the majority of Sharaa's MOUs have not yet materialized into concrete agreements.

The World Bank projects economic growth of just 1 percent this year—government officials privately suggest higher figures—with GDP currently at half of 2010 levels and two-thirds of Syrians still living below the poverty line.

Divergent Business Sentiment

The business community largely welcomed Assad's removal, freed from state-sponsored extortion and cronies who consumed industries. Current sentiments, however, are more nuanced.

Energized by prospects of free markets and foreign capital, some businesses that relocated operations abroad under Assad are now returning. Mazen Derawan, chair of processed meat and canning company Amana Foods, said he had repatriated some facilities from Jordan and Turkey, doubling the company's Syrian workforce to 400 employees.

Despite reservations about the new authorities, Derawan stated "the environment is a million times better. We feel safer now to invest and expand."

Manufacturing Sector Faces Competition Pressures

His enthusiasm for free markets is not universally shared within Syria's manufacturing sector. Previously shielded from foreign goods by Assad's trade barriers, companies now struggle to compete with less expensive Turkish and Chinese imports.

In certain instances, the government has accommodated manufacturers' requests to reinstate protectionist measures. However, it has been reluctant to implement broad actions against goods from key regional allies such as Turkey, some industrialists report.

Some are reducing investments in the sector, which once represented a cornerstone of Syria's economy. "As things stand, manufacturing is not a long-term, sustainable industry," said Mounzer Nazha, chair of family-run Nazha Investment Group, which encompasses 18 companies across multiple Syrian industries.

NIG, which operates two of only a handful of luxury hotels in Damascus, intends to concentrate on tourism and reconstruction. The hotel business "is up and down, depending on the security situation," Nazha explained, "but we anticipate a huge influx of tourism in the next few years."

Banking System Struggles

The country's banking system also faces crisis, strained by war, sanctions, and the collapse of neighboring Lebanon's financial sector—all factors that have eroded lending capacity.

Companies found loan acquisition nearly impossible, one banker indicated. "Businessmen are complaining this has been freezing trade, making them dependent on [informal] money exchangers," he said.

Companies encounter equal difficulty raising funds or purchasing equipment abroad due to overcompliance tied to persistent US sanctions.

Governance Transparency Concerns

Businesspeople complain about government opacity and corruption—their principal grievance under Assad—reappearing. Critical decisions regarding economic matters, public assets, and investment contracts are made by an opaque council administered by Sharaa's brother, Hazem, and a longtime Lebanese-Australian associate from the president's tenure leading the Hayat Tahrir al-Sham rebel group.

Companies attribute either lack of expertise or deliberate opacity to a pattern of companies and individuals connected to HTS securing public tenders and investment contracts. One prominent industrialist stated that under Assad, officials would extort his factories monthly. "Now, it's once a week and there's more of them."

Official Response

The Ministry of Information told the Financial Times it rejected opacity allegations, asserting there were "clear legal procedures for contracts, tenders and licensing," with investment opportunities available to all. It stated a committee responsible for reclaiming state assets had not yet finalized financial settlements with select "corrupt tycoons" linked to Assad.

Pragmatic Transition Period

Back at the Four Seasons, businesspeople who prospered under Assad sat alongside officials from the new government connected to HTS—a previously unimaginable tableau reflecting current pragmatism.

"In this room are industry heads who represent at least $12bn," one banker observed. "The government needs them and their businesses right now to grow the economy. But they probably shouldn't get too comfortable—there's new blood coming in."

Uncertain Path Forward

The Syrian economic recovery faces a complex interplay of factors: international sanctions that remain partially in place, institutional structures inherited from a kleptocratic regime, sectarian tensions that periodically erupt, and an emerging government attempting to balance market liberalization with political consolidation.

Foreign investors remain cautious, seeking clearer signals regarding legal frameworks, property rights, and political stability before committing substantial resources. Domestic businesses navigate competing pressures from import competition, limited access to credit, and governance structures that lack full transparency.

Whether Sharaa's administration can successfully navigate these challenges while maintaining both international support and domestic stability will determine Syria's economic trajectory in the coming years. The current moment represents a transitional period where old and new power structures coexist uneasily, with economic outcomes remaining highly uncertain.