Damascus: Abdulkader Husrieh is one of the most prominent economists and financial analysts in Syria. He has been, for the past 10-years, a permanent candidate to become Minister of Economy.

He never got the job, however, being too independent and bold for hard-liners among the socialist Baathists. That eventually played out nicely to his favour, allowing the AUB-trained economist to lecture extensively and write about the ups and downs of the Syrian economy. 

Since mid-March, economists like him have been appalled by the amount of destruction inflicted on the Syrian economy. Sanctions on the banking and oil sectors, a scare-off of potential investors, a complete standstill in several cities, a drain on the Syrian treasury, and now, upcoming Arab sanctions, as suggested by the Arab League on November 2. 

Although last September, Finance Minister Mohammad Jleilati expected growth by 1 percent, most analysts took that with a grain of salt. The same doubt emerged when the government said it plans to spend 1.3 trillion SP ($27 billion) in 2012, an increase of 59% from the current one—being the highest budget yet in Syrian history. Husrieh spoke to Gulf News about the Syrian economy in general and what it means if and when the Arab League put its words into action. 

The Arab League has threatened to impose economic sanctions on Syria, which some analysts say, would be as painful—if not more—than those of the EU and US combined. Can you tell us more about what these sanctions would mean, and how they would affect commercial life in Syria? 

Definitely the Arab sanctions would be more painful than the US or European sanctions given the scope of economic and financial relations between Syria and the Arab world. The relations cover, for example, Foreign Direct Investment (FDI), bilateral trade, and labour, given that a significant number of expatriates seek employment in the Gulf. The sanctions will be bad not only for Syria, but for any Arab country which will apply them, given that the damage will be mutual. Lebanon and Jordan are already affected by what is happening in Syria and any economic sanctions will dampen the economic situation there as well. As for commercial life, prices of many commodities and other goods are expected to rise as Arab products are customs exempt and cost of transportation is low while substitutes from the Far East are subject to customs duties, high shipping cost and import licenses. 

Will the trade between Syria and all other Arab countries stop completely when sanctions come into force? 

That depends on the nature of the sanctions (which have been suggested but not yet decided upon by the League). However, any trade sanction will be a precedent in the Arab world and will have double effect and material for certain countries given the level of bilateral trade between Syrian and many countries in the Arab world. 

What will be the fate of Arab projects, either underway or in-progress, in Syria? This is especially true for UAE investment in Syria. UAE businessman Majid Al Futtaim, for example, has invested in an $817 million shopping mall in Syria only last March.

One has to differentiate between infrastructure projects with Arab funding and private investment projects in Syria. It is hard to imagine that projects of the later type will be targeted in the sanctions unless the funding is coming from a sovereign wealth fund. Major investment projects by sovereign funds such as the Qatari projects are already frozen. Private projects underway are expected to slow down.

 What will investors do? 

Investors with projects underway are expected to "slow down" while the majority of new investors are expected to refrain from investing new money in Syria. 

How much does Syria get from Arab organizations like the Arab Fund, and what would be the fate of such grants? Last April, Syria got $200 million from the Arab Fund for a power plant. The Saudi Fund for Development was to provide $100 million at a 2 percent interest rate (for 20-years), while the Arab Fund for Economic and Social Development would provide $108 million. 

Arab grants are quite limited and usually Arab funding is in form of soft loans in terms of interest rate of tenor from Arab development funds. Almost all infrastructure projects in Syria are financed with funds from Arab and European development funds and definitely these projects will be affected in case the sanctions target this funding. The Government is expected to substitute Arab funding in case it is affected by sanctions but it is expected to be on priority basis.