From Kleptocracy to Islamic Neoliberalism: PeaceRep warns Syrian Transitional Government risks swapping one corrupt system for another

LONDON / AMMAN — A policy brief published by PeaceRep in February warned that the Syrian Transitional Government (STG) risks replacing one form of kleptocracy with another through a rapid shift toward ‘Islamic neoliberalism’. Authored by Joseph Daher and Zaki Mehchy, Syria’s Economic Transition: From Kleptocracy to Islamic Neoliberalism in a War-Torn Economy examines the Assad era’s economic distortions, traces the catastrophic collapse during wartime, and outlines the emerging neoliberal agenda of the STG, drawing insights from the economic policies of Hayat Tahrir al-Sham (HTS). The report also offers recommendations aimed at averting deeper socioeconomic decline. 

Daher is a visiting professor at Lausanne University in Switzerland and a former part-time affiliate professor at the European University Institute in Florence, Italy. He has contributed to projects on Syria’s wartime and post-conflict dynamics and peacebuilding opportunities. 

Mehchy is a policy fellow at LSE’s Conflict and Civicness Research Group and a researcher at the PeaceRep platform. His work focuses on development policies, including research on Syria’s socio-economic crisis, poverty, labor force, local governance, and community empowerment. 

Assad-Era Distortions 

According to the report, between 2001 and 2010, Syria’s GDP grew at an average annual rate of 4.5 percent, but this masked stark inequalities. Unemployment rose and labor‐force participation fell from 52 to 43 percent, while real wages stagnated. By 2007, one‐third of Syrians lived below the poverty line, particularly in rural areas. Crony capitalists, most notably Rami Makhlouf, controlled key industries and skewed public spending toward regime insiders. 

When conflict began in 2011, fiscal health deteriorated rapidly. By 2024, GDP fell to roughly 35 percent of its 2011 value, with the public budget shrinking 85 percent to 3.2 billion USD. Public‐sector salaries lost 75 percent of their real value and inflation surged. By November 2024, prices for basic goods were over 200 times higher than in 2011. Unable to fund wages or subsidies, the state saw illicit activities — checkpoint extortion, smuggling, arms trading, human trafficking, and Captagon production — become primary revenue streams for both the Assad regime and warlords. 

Syria’s Islamic Neoliberal Turn 

After Assad’s collapse in late 2024, HTS took control of northwest Syria and proclaimed a shift to a free‐market economy “respecting Islamic laws.” Now formerly dissolved and operating under the STG, they announced plans to move “from a socialist economy … to a free‐market economy”, raising alarms that austerity would outpace protections. Bread subsidies were eliminated, raising prices from 400 SYP to 4,000 SYP per 1.5 kg loaf despite nearly half the population facing food insecurity. Simultaneously, public‐sector layoffs placed hundreds of thousands on paid leave, prompting protests over arbitrary dismissals. 

A statement by Transitional Foreign Minister Asaad al‐Shaibani to the Financial Times revealed plans to privatize ports and factories and pursue public‐private infrastructure partnerships. However, according to PeaceRep, without transparent regulation, such moves could repeat Assad‐era cronyism. At the same time, the STG reactivated the 2005 Turkey-Syria Free Trade Agreement, slashing tariffs on 269 Turkish imports, including flour, milk, and eggs, threatening fragile domestic producers and risking higher unemployment where factories have closed. 

Deepening Humanitarian Crisis 

Even as neoliberal reforms unfold, Syria’s humanitarian crisis is acute. By February 2024, 16.7 million people (nearly 70 percent) required humanitarian aid, and 7.2 million remained internally displaced. Foreign currency reserves are depleted, domestic oil output is negligible, and electricity shortages persist, making the country heavily reliant on costly imports. The Syrian Pound, after an initial surge post‐Assad, remained volatile amid political uncertainty and sanctions, now soon to be lifted, deterring investment. 

Syria’s skilled workforce — engineers, doctors, teachers, etc — has largely fled, casting doubt on any swift recovery. With education, healthcare, and transport networks in ruins, rebuilding human capital and trust in institutions remains a formidable task. Many Syrians view the STG’s neoliberal agenda as catering to elites, deepening doubts about its legitimacy. 

Concluding Warning 

The PeaceRep report concluded with a stark warning: without recalibration, Syria risks entrenching a new kleptocracy under the banner of Islamic neoliberalism. “Rapid privatization and subsidy removals without transparent institutions or stakeholder engagement will only replicate cronyism,” the authors assert. They cautioned that such policies could exacerbate social injustices and prolong economic collapse. 

With reconstruction costs estimated between 250–400 billion USD, policymakers have a narrow window to avert catastrophe. The report stressed that international assistance must be conditioned on genuine commitment to inclusive economic dialogue, transparent institution‐building, and accountability for past economic crimes.