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When Bashar Al-Assad was made president in 2000, he inherited a leviathan state and neglected economy - which Hafez Ìý-Ìýforcing those with entrepreneurial impulses and profitable ideas to seek better opportunities abroad.

Baathist socialism had guaranteed a bounty of staples for the poor and a deficit in luxuries for the rest (bar the corrupt elite), creating a certain "equality in misery" as one Syrian put it to journalist Alan George.

Yet when the inefficient communist regimes of Eastern Europe collapsed in the 1990s, supplanted by prosperous capitalist ones, Syrians began to ask 'shouldn’t we expect more, too?’

Enter 34-year-old Bashar, an eye doctor by trade and technology enthusiast, who pledged to implement market reforms and ease political repression, words that chimed with the zeitgeist of the time, and many hoped Syria would become another capitalist success story.

Damascus Spring

After a false Damascus Spring and the 2011 uprising against Bashar, Syrian businesses - which did enjoy a boom period in the 2000s - were marshalled between a war economy and kleptocracy that saw the country's few profitable industries devoured by Assad’s inner circle.

With the Baath Party gone, Syrians are now hoping for a reset of the remnants of Hafez's statist economy and the crony capitalism of the Bashar era, with signs the new administration views the free market as part of Syria's future.

Success on this path will depend on instilling economic and political freedoms that are conducive to the return of exiled businesses and the emergence of domestic enterprise, says Bassam Al-Kuwatli, head of the Syrian Liberal Party.

"There needs to be an open market economy, simplification of procedures, and removing sanctions, but of course, this is conditional to having some level of democracy and freedom of expression," Kuwatli toldÌý°®Âþµº.

"Many business people want to restart their businesses, and many Syrians from the diaspora want to go back and participate."

The Hayat Tahrir Al-Sham (HTS)-linked Salvation Government has already implemented a brand of Islamic capitalism in Idlib which helped transform this relatively backwater province into one of Syria's most prosperous areas by the time Bashar Al-Assad was deposed, in some ways similar to the model pursued by President Recep Tayyip Erdogan, which saw an economic golden age for Turkey until recent financial woes.

The bright neon lights of Idlib City’s packed restaurants and bustling high streets stood in stark contrast with the collapsed economy, worthless lira, and rolling power cuts of regime areas, where even the middle class were thrust into poverty and the poor deeper into destitution.

Any pretences of Baathist socialism were undone by the unprecedented scenes in Damascus of children rootingÌýthrough garbage following mismanagement, sanctions, the Lebanese banking crisis, and corrupt regime figures swallowing up Syria’s limited capital.

Urgent reforms

With Syria’s economy now at its worst state in decades, Karam Shaar, director of Karam Shaar Advisory Limited and a Syria researcher, believes that market reforms and a dismantling of red tape must be done swiftly and decisively to put Syria on track.

"It reminds me of something Milton Freedman said: it’s better to chop the tail off a dog in one go rather than slice it away bit by bit," Shaar toldÌý°®Âþµº.

"In Syria, we need to do the same and take fundamental decisions relating to the economy. As it is in tatters right now, the cost is much lower."

The danger is that such actions could replicate some of the worst side-effects of Eastern Europe’s experience of 'shock therapy' in the 1990s when the economic growth of the Noughties was preceded by an explosion of oligarchic excesses and violent mafia cartels, as well as immense suffering for the poor.

Even with these fears in mind, Shaar said the new administration will have to eventually deal with a few fundamental issues, including liberalising the Syrian pound exchange rate and dismantling the assets of Assad's cronies, as a new economic and political regime emerges.

"To my mind, the Salvation Government needs to answer the question of what kind of economy they want; the Islamic economic model, in my opinion, is much closer to capitalism than communism, but with a strong social welfare system. That’s what we’ve seen in Idlib, and I think that is what they'll do moving forward," Shaar said.

Patronage

So far, Ahmed Al-Sharaa has not fully elaborated on whether Syria will be a pluralistic, liberal parliamentary democracy with free elections, or the role of the state in its likely economic transformation in the coming months.

There are signs that patronage, an ailment of the Assad dynasty, could remain in Syria according to the appointments made to the HTS-led transitional administration, including the commanders of former rival factions and other HTS associates in an apparent power play by Al-Sharaa.Ìý

The absolute destruction of the country, including key infrastructure, and an empty treasury, means the new government will have to work on reversing Syria's brain and capital drain, along with massively increasing productivity.

Luckily, now that Assad’s corrupt regime has ended, these are issues that can be resolved with openness, and shrewd and expert guidance, which keeps the concerns of the people in mind, analysts say.

"You need people to return to Syria, there is not only a shortage of skilled labour but also managers, and along with sanctions, these are some of the biggest challenges for the administration," Jihad Yazigi, editor-in-chief ofÌýThe Syria Report,Ìý³Ù´Ç±ô»åÌý°®Âþµº.Ìý

"The economy has contracted enormously, we're starting from a very low level, which at the same time means the economy can grow very quickly again but you will need a substantial amount of private and public funding including from donor countries, the World Bank, et cetera."

Rebuilding trust

Syria’s new rulers have been working hard to reach out to the international community, particularly on the issue of US and EU sanctions.

While most of theseÌýwere on regime figures due to their role in war crimes and human rights abuses, some HTS figures and state entities remain sanctioned, so the hope is that if the new administration remains moderate and maintains broad support, then Washington and other parties might lift them to allow for a flood of investment.

"You need a strong and vibrant private sector. Syria is a very entrepreneurial society, so obviously you will need access to finance and reducing red tape," said Yazigi. "This wouldn't be very easy to achieve, but a strong state that will lead reconstruction efforts, invest in important sectors that need support, and reduce the pressure on the private sector is key."

Yazigi said the role of the state will be particularly important in non-profitable sectors such as agriculture, which will have fundamental social, political, and economic consequences that have led to friction and suffering in recent years.

"Support for farming is important to reduce the cost of food in Syria but also to reduce rural-to-urban migration flows; there has been massive, unsustainable migration to the cities," said Yazigi.

"Syria is also massively affected by climate change so there needs to be massive investment in renewables. One of the main rivers, the Khabour, dried up over the past 10 years, while Turkey is blocking more water supplies. So this is a major issue and needs the involvement of the state."

Consensus

Domestic obstacles to a strong role for the state include the desires of Kurdish groups for a more decentralised system and suspicions among some Syrians about the incompetence, corruption, and domination of the government in the past, understandable, Yazigi said, given their experiences of the past.

The problem for the new administration is how much of these concerns can be accommodated and whether the economic successes in HTS's small fiefdom of northwest Syria can be projected onto a national level, particularly when Salvation Government officials are confronted with many domestic and regional pressures they have never had to face before.

"They have their ideas on liberal economies, which tend to be the view of Islamic groups in general, but what we can learn from the HTS experience in Idlib is that this was a consequence of the relative weakness of the [Salvation Government] infrastructure and their need for NGOs, which were effectively acting like non-profit businesses, filling the void where the state couldn't," Yazigi said.

"I know this is very fanciful for some Western analysts, but for me, when it comes to public services, when it comes to the public sector we need the state, and when it comes to the private sector we need businesses. Syrians, really, love their country... they enjoy their social life there, so a lot of entrepreneurs will want to return and have their stake in Syria."

Paul McLoughlin is the Head of News at °®ÂþµºÌý

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