Rami Makhlouf (middle) is estimated to control 60% of Syria’s economy ©Balkis Press/ABACAPRESS.COM
Rami Makhlouf (middle) is estimated to control 60% of Syria’s economy ©Balkis Press/ABACAPRESS.COM

No end in sight for corruption in Syria

13 August 2018

You may have never heard of Rami Makhlouf. In Syria, he is known as Mr Five Percent – or Mr Ten Percent if that’s the size of the cut he needs to get the deal done.

A maternal cousin of President Bashar al-Assad – and, not entirely coincidentally, the wealthiest man the country, the 49-year-old businessman is estimated, by the Financial Times, to personally control 60% of Syria’s economy.

That means several things. For a start, Makhlouf is not nearly as wealthy as he used to be. Before war broke out in 2011, Syria’s GDP was around $60bn. Today, according to the Economist, it is worth just $12bn.

The cost of reconstructing the economy could exceed $250bn. The longer the war lasts, the higher that bill will be because, as the World Bank says, “effects of economic deterioration become more persistent over time”.

Depending on when the conflict ends, Syria would only recover between 28-41% of its GDP in the first four years of peace, the World Bank predicts. That means Makhlouf, who is still said to be worth around $5bn, has to play the long game to regain his wealth.

It also means that he has been instrumental in financing the country’s war economy. Like other Assad allies, he became involved in food distribution to raise funds. The Panama Papers revealed he also had a network of sanctions-busting offshore accounts in the Seychelles. Such schemes by Makhlouf and his cohorts even paid for the Syrian Air Force’s fuel at one point. As James Denselow, a research associate at the Foreign Policy Centre, put it: “Another way of looking at it is tax-dodging costs lives.”

The sanction busting didn’t stop there. In June this year, Makhlouf and his brother Hafez, who ran Syrian intelligence before allegedly emigrating to Belarus, were identified by the US Centre for Advanced Defence Studies as owning property in Dubai’s luxurious man-made archipelago Palm Jumeirah. The money laundering investigation also claims the brothers have links to two companies in the United Arab Emirates’ free economic zone.

The upshot of all this is that Makhlouf, more than anyone, will be presiding over the reconstruction of a country where three cities – the capital Damascus, Aleppo and Hom – have been left in a state of what CNN calls “apocalyptic devastation”. Millions of Syrians are maimed and traumatised and, this year alone, another 920,000 people have fled their homes.

Given his past track record, asking Makhlouf to rebuild Syria is unlikely to be good news for the country, its economy or its people.

The economic discontent that helped trigger civil war was sparked by Makhlouf’s corrupt business practices. When Bashar al-Assad became president in 200, after his father Hafez al-Assad’s death, he began to open up the economy to private capital. The initial welcome for these reforms began to wane when the public realised that the main beneficiaries of privatisation were Assad, his extended family, and other cronies.

Few benefitted as greatly as Makhlouf which is why, in March 2011, protesters in the border town of Deraa burned down the offices of the country’s mobile phone provider, Syriatel, one of his many businesses. The protesters chanted, “Rami Makhlouf is robbing us”.

Makhlouf won Syriatel after bidding with two Egyptian partners. In a pattern that would become terribly familiar, they soon sold out, leaving him in sole charge of a company that controls 55% of the country’s mobile phone market. As privatisation gathered momentum, he diversified into real estate, transport, banking, construction, oil and tourism. He is also said to be the real power behind Cham Holding, a company founded in 2007 with the task – a tragically ironic mission given subsequent events – of renovating the nation’s infrastructure.

“Everybody knows you can’t do anything without him,” Amr Al Azm, an academic at Ohio’s Shawnee State University, told the New York Times. “He has his fingers in so many pies. Anything you want to do you partner with him or share.” If you don’t share, as the US Treasury Department noted when it imposed sanctions on Makhlouf in 2008, you may find yourself falling foul of the judicial system or being paid a visit by Syrian intelligence.

In 2011, in an attempt to lower his profile, Makhlouf announced he was retiring from business to devote more time to charities. Few believed him. Sure enough, he has emerged as one of the leading players in Marota City, the country’s largest investment project, which plans to build high-rise housing for 60,000 people, shops and malls in a part of Damascus which supported the opposition and from where thousands of people were evicted by the regime. The former residents have been given no assurances about returning to their homes – or where else they might live.

A notorious law known as Decree 66, passed in 2012, gives the government the right to “redesign unauthorised or illegal housing areas” across the country. As half of the land in Syria was not officially registered before the war, this gives the government – and business partners, such as Makhlouf – carte blanche to do what they want.

The fear is that Decree 66 could be used to punish those – especially the Sunni majority – who rebelled against Assad. (The Assads belong to the Alawite sect, an offshoot of Shia Islam.)

Local government minister Hussein Makhlouf, who is believed to be a cousin of Rami, will have a big say in the rebuilding process.

Syria certainly needs housing – and lots of it – but will a strategy based on quick, lucrative wins in real estate benefit the rest of the economy?

Each deal comes with proclamations of new jobs – important in a country where unemployment is officially around 15%, but unofficially much higher – but many economists think the focus is too narrow. Manufacturing (which has shrunk by at least 70% during the war), agriculture (46% smaller) and energy are all in dire need of investment. Official figures show that oil production plummeted from 164,000 barrels per day in 2012 to 10,000 barrels per day in 2014.

Assad is starting to think about the future – the Aleppo to Damascus railway may run again this summer – but the present remains, from his point of view, unsatisfactory. Despite recent victories, he still only controls 60% of Syria. He seems, the Economist suggests, to be getting tired of his Iranian and Russian allies but needs them to finish the job.

Assad looks almost certain to win the war. Yet a business as usual approach to reconstruction, in which the likes of Makhlouf line their pockets and hundreds of thousands of Syrians are punished for their rebellion by being forced to live in camps, could yet see him lose the peace.

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