Formality, Informality, and the Resilience of the Syrian Political Economy


Formality, Informality, and the Resilience of the Syrian Political Economy

By Omar Abdulaziz Hallaj, Co-founder and advisor, Syria Project at the Common Space Initiative

Executive Summary

  • An externally induced political transition in Syria is not likely to transform deeply engrained patterns of political economy or the social contract built on patron-client relationships.
  • The sanctions have only strengthened the top elites’ grip on power by shifting the burden to society and emptying the social realm – especially the middle classes – of any viable points of resistance.
  • The periodic purging of some powerful elites and their replacement with new ones is creating new and innovative extractive mechanisms to sustaining financial flows in the economy. This has further entrenched the political order and eliminated potential challengers.
  • State collapse would not lead to “regime collapse” but to the creation of very violent political marketplaces where powerful elites use transactional politics without any pretences to formality.
  • State failure would lead to social collapse; this outcome would not be favourable to anyone. This may be a last resort, however, it may become a reality should the top elites in Syria fail in their critical balancing act between the formal function of extraction and the informal distribution of political patronage.
  • State collapse has not yet happened. It could and should be prevented if the situation in Syria gradually shifts away from being an intractable conflict with severe repercussions on its neighbours.
  • Investment in local bottom-up funding is essential to offset the State’s central formal extractive powers and the reverse the drive to would informalize the local distribution system. This is a long-term process that needs to start now, before a political transition can take place.
  • Aid mechanisms should focus on gradually formalizing local governance as a way to distribute services away from the informal mechanisms used by the top elites to dispense patronage. There is a critical need and perhaps an opportunity to focus services-oriented aid on the interface between local councils and local community solidarity structures, enhancing local value chains and encouraging the creation of economic multipliers.
  • The UN’s main mission in Syria must gradually focus its attention away from humanitarian aid and toward more sustainable approaches in support of stability and local resilience, shifting the logic of aid from sector-based humanitarian silos to area-based approaches focused on leveraging community capital and resources.
  • Aid should move away from creating dependency among NGOs on external resources and focus instead on enhancing different civic actors’ ability to generate local economic multipliers and sustainable value chains. This may be the last opportunity to gradually offset dominant patterns of Syria’s political economy, reinvigorate civil society and support the social and political forces that may be the backbone of reform over the long run. Yet such move needs to be carefully considered as the looming food shortages and inflation are risking to make most Syrians food insecure.
  • To empower civic actors, they need to have access to formal financial transactional channels freeing them from dependency on the hawala system that has reinforced the grip of warlords and radical actors on informal financial instruments. The sanctions debate is not a black-and-white argument and should be nuanced with innovative solutions and considerations of the harmful impacts of bank de-risking strategies.
  • While everyone is talking about decentralization as the political starting point for gradually unlocking the Syrian deadlock, the key to decentralization is not to create economic islands with disrupted value chains. No part of Syria can survive by depending on its local resources alone. Such isolated governance outcomes are likely to remain forever dependent on large external patrons for basic survival. Instead, the key is to enable broader value creation and to allow local communities to harvest their value added rather than syphoning value off to Damascus. Fiscal decentralization should be the name of the game.
  • Top-down liberal peace-building formulas are likely to fail without lasting changes to both the political economy and the political process. There is little sense in waiting for a political deal that may not come any time soon.


The ideas expressed are those of the author not the publisher or the author’s affiliation

Published in June 2021

All rights reserved to GCSP

Part of the Syria Transition Challenges Project 

Omar Abdulaziz Hallaj is a consultant on urban planning, development and local governance. He is co-founder and advisor for the Syria Project at the Common Space Initiative in Beirut, where he is engaged in facilitating various dialogue and research projects for peace building and recovery planning in Syria. His professional and published research covers institutional, financial and political aspect of the urban built environment; housing, land and property (HLP); and the war economy. Formerly, he was the CEO of the Syria Trust for Development, and served on the boards of several NGO’s, and public commissions. In 2007, Mr. Hallaj was the recipient of the Aga Khan Award for Architecture as team leader of the Shibam Urban Development Project (GIZ).