Expanding Syria’s multilateral development bank engagement
Summary
Estimates of Syria’s post-civil war cost of rebuilding range from $250 billion to $400 billion. This sum is beyond what Syria’s internal resources can generate and will require mobilization of significant outside public and private investment. Syria must articulate a realistic but ambitious national strategy for economic reconstruction and development, and it must align donor and investor projects with that strategy. To help finance reconstruction and development, Syria’s transitional government should expand its partnerships with international financial institutions (IFIs) and multilateral development banks (MDBs), as these institutions can play a key role in mobilizing global capital. The presence of MDBs alone will not be determinative of the success of Syria’s development strategy; other factors such as internal political stability and external economic relations are more important. However, MDB operations in Syria can be a development force multiplier, increasing investment and expanding the technical capacity of both the public and private sectors. MDBs have a greater capacity for investment in high-risk countries, such as Syria as it emerges from civil war. Their presence as public institutions can help mitigate unobservable and unquantifiable risks (such as political risks) for other private-sector participants. Equally important, MDBs provide technical assistance to both the public and private sectors through funding of education, training, technology transfer, and broadening of external partnerships.
Syria currently has memberships with five IFIs and MDBs, including two global and three regional institutions: the World Bank Group, the International Monetary Fund (IMF), the Arab Monetary Fund (AMF), the Arab Fund for Economic and Social Development (AFESD), and the Islamic Development Bank (IDB). The European Investment Bank (EIB), the investment arm of the European Union (EU), was previously active in Syria and has recently indicated its intention to resume operations there in line with EU policy.
Syria is eligible to join three more MDB institutions: the European Bank for Reconstruction and Development (EBRD), the Asian Infrastructure Investment Bank (AIIB), and the New Development Bank (NDB). The transitional government of Syria (TGS) should immediately seek membership in the EBRD and the AIIB. Membership in the NDB is aligned to the expansion of the BRICS (Brazil, Russia, India, China, and South Africa) bloc of nations. Syria is not a member of the BRICS bloc and is unlikely to join in the foreseeable future.
Economic strategy
The TGS is trying to organize the physical reconstruction of the country while rebuilding state institutions that provide essential public services. Syria is emerging from six decades of dictatorship by the Assad family and a horrific fourteen-year civil war (2011–2024) that killed more than six hundred thousand Syrians and displaced about 13 million, more than half of the total population. Syria’s economy shrank by an estimated 85 percent from its pre-civil war levels, and the estimated cost of rebuilding ranges from $250 billion to $400 billion. Syria must build a dynamic, competitive economy to lift Syrians out of poverty. This will require significant investment, beyond what can be generated from internal resources.
The development of Syria’s economic strategy is the responsibility of the TGS and is beyond the scope of this analysis. However, some strategic issues need to be reviewed as we outline the role of MDBs in Syria’s reconstruction and development. Syria’s regional integration, particularly with the Gulf Cooperation Council (GCC) countries and Turkey, is just as important as Syria’s global integration. Syria has considerable economic potential, which differs from other countries in the region. It has an educated population, and its wage levels and exchange rates have not been artificially inflated by oil income (the so-called “Dutch disease”) because Syria is not an oil-exporting nation. Syria has significant potential to develop its agriculture and industrial base. Its ports on the Mediterranean are underdeveloped but well positioned to serve Syria’s development and, potentially, to integrate Syria economically with Iraq and the GCC countries.
Geography
Syria is located at the western terminus of Asia and is a central part of the land bridge between Europe, Asia, and Africa. Syria’s location has made it a target of external actors, notably Israel and Iran, seeking to dominate the country for their own destructive interests.
Most of Syria’s population and previous development are concentrated in the western corridor, north to south from the Turkish border to the Jordanian border through the cities of Aleppo, Hama, Homs, and Damascus. However, the development of Syria’s east-west corridors, from the Mediterranean coast through the cities of Aleppo, Raqqa, Hasaka, and Deir Ez-Zour, and onward to the Iraqi border, is of equal importance and represents an important economic opportunity. Syria’s Mediterranean ports—Latakia, Tartus, and Baniyas—can be further developed to service Syria’s needs, and Iraq’s as well. Syria’s best agricultural lands, and the majority of its water and oil resources, lay along this east-west corridor. Aleppo is the home of Syria’s textile industry and the northern plains stretching east of the city are the heart of its cotton production. The region accounts for a significant share of Syria’s production of agricultural output (wheat, pulses, olives, and livestock). The development of the east-west corridor regions is critical to Syria’s internal political reintegration and would complement regional economic projects such as Turkey’s links to Central Asia via the Caucasus and Iraq’s Development Road project linking Turkey to the Grand Faw Port project on the Arabian Gulf. Syria could be positioned as a western terminus for trade from and with other Asian countries, and Syrian exporters can certainly benefit from those transport links. MDBs can help Syria expand and modernize the transportation, energy, and technology infrastructure needed to take full advantage of its location.
Human capital
Syria has modest oil and gas resources and is currently a net importer of both. The TGS cannot rely upon oil export revenues to finance the country’s reconstruction and economic development. However, that means Syria does not suffer from the “natural resource curse” common in other regional economies that are reliant upon oil and gas exports. Oil and gas export revenues can lead to exchange rate appreciation—which, in turn, impairs the development of export-oriented manufacturing sectors.
Syria’s wealth is in its educated workforce. This is best reflected in its diaspora, which is globally successful in multiple industries across multiple continents and regions (the GCC, Europe, North America, South America, and West Africa). Syrians have long prized educational attainment, and the country has a large pool of skilled and semi-skilled labor that needs meaningful employment. Syria has been a net exporter of human capital for several generations, and this accelerated rapidly during the civil war as the country lost much of its middle class and intelligentsia. MDBs can play a useful role in addressing this by providing financing and technical assistance for the reconstruction and expansion of all levels of Syria’s educational infrastructure.
Building Syria as an economic hub
Foreign Minister Asaad al-Shaybani cited Singapore as an economic example for the new Syria at the Davos Summit in January 2025. This was an interesting choice because Singapore is an open economy that has developed into a regionally and globally significant trade, investment, and manufacturing hub. Syria has a favorable geographic location, spanning from the Mediterranean to Iraq and Jordan, and there are clear synergies Syria can achieve if it develops its transport and infrastructure links with its immediate neighbors. It has an educated population, with wages that are relatively low compared to those in the GCC or its immediate neighbors. The Syrian diaspora is globally successful and eager to invest, as are investors from the GCC. The country has agricultural and industrial potential that can be developed.
Other countries in the region, such as Jordan and Egypt, have similar—though not identical—resource endowments and similar levels of human capital development. However, for a variety of reasons beyond the scope of this analysis, they have not developed into globally competitive manufacturing or technology hubs. Because Syria must be rebuilt almost from the ground up after fourteen years of civil war and the overthrow of the Assad regime, there are fewer entrenched political and economic interests to block the country’s development. The Syrian people have a real opportunity to develop and implement the best available technologies, education, public administration practices, and infrastructure.
To exploit these advantages, Syria needs
- infrastructure investment in its ports, transportation, and energy production;
- reconstruction and expansion of its education system;
- building of public-sector capacity to deliver essential services and ensure transparency and rule of law;
- creation of a regulatory system that ensures competitive markets; and
- building of Syrian firms that can compete in regional and international markets.
MDBs can play an important part in developing Syria by mobilizing investment capital and providing the technical assistance needed by both the public and private sectors.
The potential role of MDBs
MDBs can assist Syria’s reconstruction and economic development through direct investment and provision of technical assistance to enhance local administrative capacity.
Direct investment: Private financial institutions will be reluctant to invest in high-risk countries, such as Syria as it emerges from civil war. MDBs have greater capacity than private financial institutions to mitigate these types of unobservable and unmeasurable risks. MDBs have an in-country presence and an ongoing relationship with host country authorities, providing them with an information advantage when it comes to assessing and mitigating country political and financial risks. MDBs provide public budget support and policy reform advice, as well as supporting government and corporate capacity building. Their presence in a project can provide a political umbrella to deter adverse events because MDBs are in a better position to influence a host government’s potentially adverse decisions. The presence of an MDB helps to reassure private investors and encourage their participation in project financing.
Technical assistance: MDBs engage with local and national governmental authorities and provide key technical assistance that helps to enhance local administrative capacity. For example, the TGS faces an important political and national security challenge in the disarmament, demobilization, and reintegration (DDR) of fighters from the various armed groups that participated in the struggle against the Assad regime. MDBs, such as the World Bank, can play a useful role in advising and funding DDR programs. Another example would be the World Bank’s well-regarded technical assistance program (the Stolen Asset Recovery Initiative (StAR)), which works with partner countries that seek to recover stolen assets. This program could help the TGS recoup the billions stolen by the Assad family and Assad regime officials.
Diversification benefits
Syria will benefit from becoming a member country in more MDB institutions. Membership can insulate Syria from changes in resource availability or changes in political relationships with donor nations. The specific benefits include the following.
- More sources of financing: Syria’s overall borrowing capacity is constrained by its debt-carrying capacity, which is presently quite limited. Nonetheless, it is still useful for the TGS to have access to a greater number of sources for funding and technical assistance.
- Differing institutional expertise: Each MDB has its own areas of expertise that are unique to that institution. The EBRD has successful programs to help finance growth of small and medium enterprises (SMEs), private infrastructure, and municipal finance. The AIIB has executed successful projects in renewable energy, digital and information technology infrastructure, and transportation.
By becoming a member of more MDB institutions, the TGS can draw upon each of these institutional areas of expertise, as appropriate to Syria’s development needs.
Additional potential MDB partner institutions
EBRD
The EBRD was established in 1989 to address the transition needs of the nations of Central and Eastern Europe as they emerged from communist rule. Its headquarters are in London and, following the Arab Spring in 2010, it expanded its area of operations to encompass the countries of Western Asia and North Africa, supporting democratization and economic development in those regions. The EBRD is currently active in Turkey, Jordan, and Lebanon.
Accession to the EBRD as a member nation requires an affirmative vote by two-thirds of governors, representing at least three-quarters of members’ total voting power. The United States is the largest single shareholder, with 9.2 percent of shares, followed by the United Kingdom, France, Germany, and Japan, with 8.9 percent each.
The EBRD’s purpose, as reflected in its founding documents, is to support “multiparty democracy, pluralism and market economics.” EBRD operations focus on former Soviet bloc countries’ transition from a communist state-owned economic model toward market-based economics. That mission remains, even as the EBRD’s area of operations has expanded to include countries in Western Asia and North Africa that, like Syria, have a legacy of state ownership of key sectors of the economy. The EBRD’s mission differs from that of other development banks, such as the World Bank, in that it focuses less exclusively on poverty alleviation and more directly on economic transition and political governance.
Since its inception, the EBRD has invested more than €210 billion in more than 7,500 projects. It undertook 584 projects in 2024, investing €16.6 billion. EBRD investment in green economy projects accounted for 58 percent of the total financing provided in 2024.
The EBRD has a reputation for expertise in several areas directly relevant to Syria. It has programs for financing and advising SMEs, local financial institutions, agribusiness, sustainable energy, and municipal infrastructure. The TGS will need to reach out to ascertain the level of shareholder support for its membership. But Syria’s membership in the EBRD would dovetail with stated US, UK, and EU objectives of stabilizing Syria’s economy and promoting stable governance.
AIIB
The AIIB is the newest MDB, beginning operations from its headquarters in Beijing in 2016. Its mission is the financing of infrastructure on the Asian continent, with an emphasis on projects that are sustainable and technology enabled, and that promote regional connectivity. Sponsored by China (which holds the most shares), the AIIB has grown to 110 members. The United States and Japan have declined to seek membership, but many European nations have joined the institution. Several of Syria’s immediate neighbors (Iraq, Jordan, and Turkey) are already members of the AIIB, and Lebanon is a prospective member. Accession by new members must be approved by a special majority vote of the AIIB Board of Governors, which represents a majority of the institution’s voting power.
The AIIB emphasizes four thematic priorities, including
- green infrastructure;
- connectivity and regional cooperation;
- technology-enabled infrastructure; and
- private capital mobilization.
The AIIB financed 303 projects between 2016–2024, with a cumulative investment of $58.9 billion. The sector breakdown of the projects is summarized in the chart shown here.
The AIIB’s track record on infrastructure finance and its emphasis on regional connectivity are directly applicable to Syria. The AIIB’s priorities emphasize the importance of connectivity as a pathway to economic development. For example, the AIIB is co-financing $250-million expansion of rail links between eastern Turkey and the Caucasus. Regional economic powers in Western Asia (e.g., Turkey, Saudi Arabia, and Qatar) have proposed plans for the development of cross-border infrastructure and integration. Syria’s participation in these plans, through the development of its infrastructure, will in turn advance regional integration efforts. The AIIB can be a useful financing partner in these efforts.
Aligning assistance with development priorities
Since December 2024, there is considerable political and economic excitement about the potential of a stable, rapidly developing Syria. A large measure of this excitement was generated by the United States, which has pressed ahead with easing of sanctions to give Syria a chance to emerge from the catastrophic Assad era. European countries have similarly eased sanctions, and most regional powers—with the notable exceptions of Israel and Iran—have moved quickly to shore up Syria politically and economically. A rush of donors and investors have announced new projects and publicized the signing of investment memoranda. However, there is a risk that these initial projects will conflict with, or potentially undermine, progress on less glamorous but more pressing tasks such as unifying military control, establishing basic national security from internal and external threats (which are often interrelated), rebuilding public administration and essential services, and aiding returning Syrian refugees to start reconstruction.
The TGS must assert clear priorities in reconstruction and development and ensure that assistance and investment align with the country’s development priorities. The TGS can benefit from the various MDB institutions’ differing areas of expertise, aligning each one with specific development goals. For example, despite the easing of sanctions, Syrian banks face immediate challenges in reestablishing correspondent relationships with outside banks because of concerns about anti-money laundering and countering the financing of terrorism (AML/CFT) risks. Until Syrian banks can reestablish those correspondent relationships, it will be difficult for the country to secure the promised investment inflows.
In the immediate term, the IMF, World Bank, and Financial Action Task Force (FATF) via its regional body, the Middle East and North Africa Financial Action Task Force (MENAFATF), are the most logical partners to help address AML/CFT risks in the banking sector. FATF is the standard-setting body, and the IMF and World Bank both provide significant policy support to many countries to assess their compliance with relevant AML/CFT standards. The urgency of addressing AML/CFT risks is compounded by the fact that the TGS is attempting to suppress drug trafficking, much of which is linked to former regime officials. Blocking drug traffickers’ access to both Syrian and global financial institutions is an important step that the TGS can take on national security grounds, and is also crucial for rebuilding local and global confidence in the Syrian financial system.
In the medium term, the TGS can leverage the expertise of MDB institutions like the EBRD, which has significant experience in executing local currency credit facilities, using local banks as partner institutions. The EBRD has used such facilities to build the capacity of local financial institutions and to extend credit to underserved economic sectors, especially SMEs. That experience could be usefully replicated in Syria.
There are numerous other examples of how MDBs can be useful partners in executing Syria’s development priorities. Expanding relationships with these institutions would give the TGS more options for accomplishing those priorities.
Next steps
The TGS should seek membership in both the AIIB and the EBRD but might prioritize moving forward with membership in either of these MDBs, based on its assessment of reconstruction and development needs. The AIIB has an institutional focus on regional connectivity, which complements the heightened investor interest in various projects to reintegrate and reconnect the Syrian economy within the region. The EBRD has a demonstrated track record in local financial sector development, agribusiness, and municipal infrastructure finance, which are clear priorities in Syria’s reconstruction. Accession to the EBRD can be a lengthier process because of the requirement for shareholders representing three-quarters of the institution’s capital to approve, versus the majority approval required by the AIIB shareholders. The TGS should begin diplomatic outreach to the primary shareholders of these MDBs and inform them of its interest in accession to membership. The TGS should concurrently reach out directly to the EBRD and AIIB to notify these institutions of Syria’s desire to begin the process of accession to membership.
About the author
Basil Kiwan is a contributor with the Atlantic Council, and a former financial regulation specialist at the Federal Deposit Insurance Corporation. He previously served at the US Treasury Department on a variety of international economic policy issues.
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