A Policy Approach to Reforming Syria’s Economic Legal Framework
Policy Paper – Progress Center for Policies
⸻
Introduction
Since 2025, Syria has entered a transitional phase that goes beyond the narrow notion of “economic recovery” toward a reconfiguration of the relationship between the state, the market, and society after a prolonged war that weakened state institutions, depleted human capital, deepened poverty, expanded the informal economy, and produced a profound trust gap between citizens and public administration. In this phase, economic policies are no longer merely financial or administrative tools for price control or investment promotion; rather, they become a direct determinant of political stability and social cohesion. They can either open a pathway to restoring the social contract and rebuilding trust, or—if implemented hastily and without proper safeguards—become a source of livelihood shocks, a reproduction of “crony capitalism,” widened regional disparities, and the eruption of latent tensions.
This paper starts from a central question: How can economic transition be transformed into a lever for social stability rather than an additional factor of fragmentation? From this follow several practical questions the paper seeks to address: What structural constraints shape Syria’s post-2025 economy, and what are the limits of state reform capacity amid resource gaps and expanding needs? What social and political risks accompany rapid liberalization, subsidy removal, and public-sector restructuring? How can Syria avoid shifting from a “war economy” to a “new crony economy” under the banners of privatization or partnerships? What framework can balance market-economy imperatives with effective social protection and equitable management of natural resources? Finally, what conditions of economic governance make reform socially acceptable and politically sustainable?
⸻
Analysis
Any realistic diagnosis of Syria’s post-2025 economy must begin with the recognition that the starting point is not an economy “in need of modernization,” but one that requires functional re-founding amid deep social fragility. Years of war have not only reduced real incomes; they have reshaped livelihoods: precarious work has expanded, the informal economy has swollen, wages have fallen far behind prices, and wide segments of society now depend on intermittent remittances, aid, or unstable daily labor. Consequently, any abrupt adjustment in energy, bread, transport, or basic-service prices is not perceived as a “corrective” measure but as a direct shock to subsistence—turning economic policy from a technical file into a daily test of legitimacy. In such environments, gradualism is not a theoretical luxury but a risk-management imperative.
This sensitivity is compounded by eroded institutional trust. A society long exposed to corruption and weak transparency under the previous system will read economic decisions through a lens of suspicion: Who bears the cost? Who benefits? Are resources managed as public property or as spoils? Hence, policies such as price liberalization, subsidy restructuring, or opening to large-scale investment will inevitably face questions of justice and governance before those of efficiency. Absent clear legal and procedural guarantees, such policies may be perceived as redistributing wealth and power toward select groups—even if framed in the language of “reform” and “the market economy.”
At the fiscal and structural levels, the state faces a dual gap: a resource gap and an implementation-capacity gap. Reconstruction, service delivery, and infrastructure needs far exceed available means, while the administrative apparatus—despite improvements—remains burdened by long-standing distortions, data scarcity, and conflicts of interest. Under these conditions, governments are often drawn to “quick-return” solutions such as one-off subsidy removal, poorly governed privatization/PPP schemes, or unbalanced trade liberalization to secure liquidity or reduce deficits. Comparative transition experiences show that when such paths are detached from governance, accountability, and social-protection mechanisms, they tend to produce three concurrent risks: livelihood shocks, new rent-seeking enrichment, and social/regional polarization.
First, livelihood shocks arise when price liberalization or subsidy removal proceeds without realistic, targeted alternatives, immediately eroding purchasing power and deepening poverty—leaving broad segments feeling that they alone bear the cost of reform. This does not imply that legacy subsidy systems are sustainable, but it does mean redefining—not abolishing—support: shifting from costly, generalized commodity subsidies to smart, targeted social protection, and linking any price adjustment to prior, announced mitigation measures to avoid collective punishment.
Second, there is the risk of reproducing a “crony economy” under the banner of the market. In low-transparency contexts, privatization or public-private partnerships may become mechanisms for transferring public assets to influential actors or granting long-term monopolistic privileges—creating the impression of replacing one rent-seeking elite with another. The essence of reform thus lies not only in who owns, but in how ownership or management is transferred, under what competition rules, disclosure standards, and oversight. Market economies do not function without a strong regulatory state; otherwise, they become markets of privilege rather than competition.
Third, liberalization tends to concentrate gains in sectors and regions better positioned to attract investment, trade, and services, while weaker peripheries—rural areas, margins, and heavily affected regions—are less able to benefit and more exposed to rising prices and declining services. Without an explicit regional-equity lens, economic policy risks reproducing a new map of tensions: “winning” and “losing” regions—threatening long-term stability even amid improved aggregate growth indicators.
At the center of these challenges lies the management of natural resources, particularly oil and gas. These can be engines of recovery—or sources of local competition if distribution rules are absent or opaque. Turning rent into development requires institutional mechanisms for revenue management, transparency in collection and spending, development-oriented allocation attentive to geographic equity, and channeling revenues toward productive, job-creating sectors such as industry, agriculture, and renewable energy. Otherwise, rent-seeking will re-expand, inequalities will deepen, and economic decision-making will be captured by struggles over “who controls the rent.”
⸻
Legal and Legislative Reform: Investment as a Social Obligation, Not a Rent-Seeking Privilege
Reforming the legal and legislative framework is a decisive key to converting economic transition into a productive, socially stable path. A genuine balance between investment promotion and protection of vulnerable groups cannot be achieved without clear, enforceable laws that redefine the relationship between capital and society. In the current Syrian context—where vulnerable and low-income groups constitute a numerical majority—economic legislation becomes a political and social instrument as much as a regulatory one, with legal justice emerging as a condition of stability rather than an obstacle to growth.
Investment law should be grounded in balanced partnership, not unconditional privileges. Beyond tax incentives and procedural facilitation, a clear framework is needed that obliges investors—especially in large projects—to shoulder part of the associated social costs. This includes, for example, tying licenses or concessions to defined quotas for local employment, inclusion of persons with disabilities and women, contributions to infrastructure and services in host communities, and adherence to measurable, enforceable environmental and social standards. Embedding the “social dimension of investment” in the law itself—rather than relegating it to annexes or rhetoric—can transform investment from a potential source of inequality into a lever for local development and trust-building.
Tax reform is likewise central to economic justice and to preventing the weakest from bearing the burden of reform. Regressive or heavily indirect tax systems effectively shift the tax load onto low-income groups, undermining any social gains from growth. Hence the need for a progressive and fair tax law that broadens the base horizontally by integrating large-scale and rent-seeking activities, and respects vertical equity by protecting poor and low-income groups. The tax system should function as a partial redistributive tool, supporting social spending and public services—not merely as a short-term revenue extractor.
Banking-sector reform is another cornerstone of re-orienting the economy toward production. During the crisis years, the banking system devolved into a quasi-exchange structure focused on transfers, currency exchange, and short-term operations, with a marked retreat from real-investment finance. Overcoming this requires redefining banks’ functions legally and regulatorily so they move from passive intermediaries to leaders and catalysts of economic activity. This entails updating lending and investment frameworks, expanding financing tools for productive sectors—especially micro, small, and medium enterprises—and aligning credit policy with development and employment objectives, while providing credit guarantees that reduce risk without undermining financial discipline.
Here, legal reform is not treated as a technical response to market demands, but as part of rebuilding the economic social contract, in which investment becomes a reciprocal commitment between state, capital, and society. Without such a balanced legislative architecture, investment risks degenerating into an instrument of unjust accumulation, leaving vulnerable groups outside the circle of benefit and hollowing out any reform process of its social and stabilizing substance.
⸻
A Practical Framework
The paper proposes a practical framework for enabling economic transformation without undermining social stability, built on three interlinked pillars: governance, protection, and production.
• Governance entails transparent, announced rules for managing assets, contracts, and investments; open competition mechanisms; effective institutional oversight; and access to reliable economic data.
• Protection entails targeted social-safety nets, effective targeting mechanisms, linking price decisions to mitigation buffers, and integrating the social dimension into macro-planning rather than treating it as an add-on.
• Production entails prioritizing job-creating, value-adding investment over short-term rent-seeking, supporting SMEs, preventing monopolies, and building a business environment characterized by legal and judicial stability.
⸻
Conclusion
• Syria’s post-2025 economic transformation is not a technical option measurable solely by financial indicators, but a profoundly political-social process upon which prospects for stability and trust-rebuilding depend.
• Unregulated reform—particularly in prices, subsidies, public assets, and natural resources—carries high risks of livelihood shocks, recycling rent-seeking through new interest networks, and deepening regional disparities, thereby recreating conditions of instability.
• Conversely, adopting a gradual, transparent, and inclusive path that balances market logic with social protection and rebuilds governance as a condition of legitimacy opens a realistic window to transform economic transition into a lever for social stability and to launch a sustainable recovery that reintegrates society into the state rather than widening the distance between them.
