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Published October 28, 2011, Christian Science Monitor

Reese Erlich, Damascus, Syria

Rana Issa, the owner of an advertising and marketing business in Damascus is struggling. She’s had to lay off five of her 20 employees in the seven months of political and economic upheaval since Syria’s antigovernment uprising began.

But unlike the street demonstrators, Ms. Issa doesn’t blame President Bashar al-Assad’s government for her woes. As a Palestinian, Issa expresses strong support for his government, which she says has afforded more rights to Palestinian refugees and their children than either Israel or other Arab countries.

“We feel secure with Dr. Bashar al-Assad as president,” she says. “He has achieved a lot of reforms. The opposition hasn’t given him enough time.”

Some Syrian cities have been persistently roiled by protests; today, at least 30 protesters were reported killed across the country – the highest toll in weeks – with the unrest focused in Homs and Hama. But the two biggest cities, Damascus and Aleppo, have seen much smaller demonstrations because the cities’ business communities continue to favor the government, says Nabil Sukkar, a former World Bank economist who now heads an economic consulting firm in Damascus.

Drastic drops in tourism revenue and biting sanctions have taken a toll on the Syrian economy. While Syria’s gross domestic product grew by 3 percent last year, the IMF predicts a negative 2 percent this year. However, large- and medium-sized businesses, which the West hopes to turn against the regime with its sanctions, remain largely supportive of the Assad regime.

Syria’s big business elite is closely intertwined with the ruling Baath Party through financial and family ties. Disloyalty to the government can mean not only loss of lucrative government contracts, but political isolation and even jail.

Mr. Sukkar says big business leaders are pragmatic. “They expect the unrest to end sooner or later. The regime is well entrenched. The Army is certainly loyal to the government.”

Decline in tourists hurts business, however

However, some small businessmen, suffering financially because of the tourism decline and sanctions spurred by the regime’s crackdown, have shifted to the opposition.

The owner of a clothing business in Damascus’ main souk, or marketplace, says he used to be a strong supporter of Assad, but he blames the government for the collapse in tourism and the general decline in business activity. The business owner, who asked to remain anonymous, says he has had only one foreign customer in the last three months. They’re usually the mainstay of his business.

“The souk is like a graveyard,” he says.

He now supports the Muslim Brotherhood, an Islamist political party that has been active in the street demonstrations against Mr. Assad. The government accuses the Brotherhood of being an extremist group seeking to impose an Islamic state on Syria, but the shopkeeper considers them moderates, likening them to the elected Islamist government in Turkey.

The Muslim Brotherhood “wants an end to corruption,” he says. “Young people are fighting for their rights.”

Why businessmen are loyal to Assad

Conflicting attitudes towards the Assad government date back to economic changes that began in 2004, when Syria shifted from a centrally managed economy to a more privatized one. The business elite benefited as the government allowed creation of private banks, insurance companies, and an airline.

The growth of large corporations in turn spurred creation of small- and medium-sized companies such as the marketing firm owned by Rana Issa. Government policies created economic growth and loyalty among business leaders.

But the new liberalization policy also amplified Syria’s system of crony capitalism, leading to charges of widespread corruption.

Demonstrators have singled out Rami Makhlouf, for example, a cousin of President Assad and owner of the country’s largest cell phone company. Critics say he’s made tens of millions of dollars due to family connections.

Bouthaina Shaaban, a top adviser to the president, admits that corruption remains a serious problem in Syria. “Rami Makhlouf isn’t the only one who made money in the past period,” she says in an interview at the presidential palace. “There are many people, big capitalists, who made a lot of money.”

But, she argues, the government has taken steps to reform. “This crisis has made us 1,000 more times more aware,” Ms. Shaaban says.

Detrimental effect of sanctions

The crisis has been made worse by economic sanctions imposed by the US and Europe, says Shaaban. The US prohibits the export of most American products to Syria and has levied sanctions against some Syrian leaders. In May, the EU imposed an arms embargo on Syria, and a travel ban and assets freeze on selected Syrian leaders. In September the EU severely restricted crude oil imports.

So far, the sanctions haven’t shaken support for the government, according to Nabil Toumeh, CEO of Toumeh Orient Group, a large Syrian conglomerate. Business people are angry at the West because the sanctions are being widely applied, not just against Syrian political leaders.

Mr. Toumeh’s long-time Austrian supplier of magazine printing paper recently stopped shipments because of the sanctions. Sanctions are also hurting his construction company because he can no longer import construction material from Switzerland, and buying the same material from another country is quite expensive, he says. He’s had to lay off workers.

Although sanctions are likely to make life more difficult for business people by driving up costs, they won’t bring down a government that has popular support, according to Toumeh. Instead, businesses will find ways around the sanctions, Toumeh says. “Merchants say if the door is closed, you open another.”

Seventy percent of the Syrian economy is controlled by the private sector, giving the business elite tremendous political clout as well. Economist Sukkar says if big business shifts sides, it could spell an end to the government, but that’s not likely in the short run.

“If there are any strikes or serious opposition on the part of the business community, they could paralyze the economy,” he says. “If that happened here, it would be disastrous. But frankly I don’t see that happening.”