The Local Economic Governance Gap in Syria
From De Facto Management to Building Sustainable Economic Capacity
Rami Sharrack | December 22, 2025
I. Executive Summary
The core challenge facing Syria’s local economy does not lie in the absence of economic activity, but rather in the absence of governance capable of organizing this activity and transforming it into sustainable economic capacity.
Despite more than a decade of conflict, sanctions, and the retreat of the central state, Syria’s local economy continues to function through markets, small and medium-sized enterprises, and short supply chains that have adapted to existing realities. This economic activity, however, reflects communities’ ability to cope rather than a structured economic recovery. The economy exists, but it operates within a highly fragile, weakly regulated environment with limited prospects for sustainability.
Over recent years, Syria has witnessed a de facto shift toward localized economies. Cities and towns have increasingly functioned as semi-autonomous economic units, each with its own markets, actors, and informal regulatory practices. Yet this economic localization has not been matched by a parallel transformation in economic governance. Decision-making processes, market regulation, and local resource management remain absent, fragmented, or driven by de facto arrangements rather than clear institutional frameworks and measurable accountability mechanisms.
To date, international engagement in economic recovery has largely been limited to assessment missions, official meetings, and strategic planning efforts, without transitioning into the implementation of concrete economic interventions on the ground. While this preparatory phase is important, its prolonged continuation without operational translation reinforces a state of waiting and leaves local economies trapped in de facto management, without addressing the governance structures that shape how markets function, are regulated, and evolve toward sustainability.
This policy brief defines the local economic governance gap as the disconnect between actual economic activity at the local level and the institutional and regulatory frameworks that should govern it. This gap manifests in the absence of clear local economic regulatory frameworks, the weakness or fragmentation of decision-making authorities, and the lack of systematic linkage between local markets, local authorities, and international programs. In practice, this results in unregulated markets, high investment risk, and donor-supported projects that fail to endure beyond the funding cycle.
The paper demonstrates that prevailing approaches are ill-equipped to address this gap. Their emphasis on projects rather than systems, the reduction of local economic development to livelihoods programming, the exclusion of governance from program design, and the frequent bypassing of local authorities and stakeholders all limit impact and sustainability.
Accordingly, the paper calls for a clear policy shift in Syria’s economic recovery approach—one that places local economic governance at the core rather than treating it as a secondary concern. Key recommendations include integrating governance as a mandatory component of recovery programs, financing local regulatory frameworks alongside projects, working with local authorities as partners in regulation and implementation, and building local capacities for market regulation, resource management, and simple, enforceable accountability mechanisms.
A transition from a coping economy governed by de facto arrangements to sustainable economic recovery in Syria is not possible without deliberate investment in local economic governance as the organizing framework for structured, cumulative, and durable growth.
II. Context and Why It Matters Now
Syria’s local economy today exhibits uneven activity. Despite years of conflict, sanctions, and the erosion of central state functions, local markets continue to operate, small and medium-sized enterprises remain active, and short supply chains have adapted to prevailing conditions. This activity reflects resilience and adaptation rather than genuine economic recovery. The economy persists, but within a highly fragile, weakly regulated environment with limited sustainability.
Over the past years, Syria’s economy has effectively localized. Cities and towns now function as distinct economic units with their own markets, actors, and informal governance arrangements. However, this economic shift has not been accompanied by a corresponding evolution in economic governance. Decision-making, market regulation, and local resource management remain absent, fragmented, or driven by ad hoc practices rather than clear institutional frameworks and accountable processes.
In this context, international engagement has thus far focused on assessment visits, official meetings, and initial efforts to understand local economic realities, without advancing to the implementation of concrete interventions—whether in livelihoods support or broader local economic development. These efforts have concentrated on diagnosis, data collection, and strategic planning rather than investment in operational tools or institutional frameworks. While necessary, this prolonged preparatory phase reinforces inertia and leaves local economies confined to de facto management, without addressing the governance structures that determine how markets operate and evolve.
Today, the local economic governance gap stands out as one of the principal structural obstacles to meaningful economic recovery. The absence of clear rules, weak local institutions, and the lack of structured partnership with the private sector undermine trust, increase investment costs, and constrain organized economic growth. As international discourse gradually shifts from humanitarian response toward recovery and stabilization, addressing this gap becomes an urgent priority—not merely as a technical issue, but as a prerequisite for building sustainable local economic capacity.
III. The Core Problem: The Local Economic Governance Gap
What Is the Local Economic Governance Gap?
In the Syrian context, the local economic governance gap refers to the disconnect between actual economic activity at the local level and the institutional and regulatory frameworks meant to govern it. While local economies operate daily through markets, traders, small enterprises, and supply chains, they lack a coherent governance system that defines rules, allocates roles, and connects economic actors.
First, this gap is evident in the absence of clear local economic regulatory frameworks. There are no articulated local economic policies, nor stable instruments for market management, commercial regulation, or investment promotion. Economic affairs are often managed through temporary measures, unwritten norms, or fragmented decisions lacking a comprehensive economic vision.
Second, local economic governance suffers from the weakness or fragmentation of decision-making authorities. Where local authorities exist, they often lack mandates, capacity, or institutional clarity to play an effective economic role. This vacuum is filled by multiple actors with different reference points, resulting in overlapping roles, inconsistent decisions, and limited accountability.
Third, there is a clear lack of systematic linkage between local markets, local authorities, and international programs. Local private sector actors operate without supportive regulatory frameworks, while international interventions are frequently designed outside local institutional contexts, with limited integration of authorities or economic stakeholders in decision-making and implementation.
How Does the Gap Manifest in Practice?
On the ground, the governance gap results in unregulated markets characterized by uncertainty, weak competition, and limited capacity to manage prices, supply and demand, or local economic shocks. This reflects not market vitality, but fragility and reliance on individual coping strategies.
The gap also translates into elevated local investment risks. The absence of clear rules, regulatory instability, and weak legal protection increase costs and discourage expansion, confining economic actors to short-term, low-risk activities that limit sustainable job creation.
At the level of international interventions, the gap becomes evident in donor-supported projects that fail to survive beyond funding cycles. Despite their short-term contributions to income or resilience, these projects are rarely embedded within broader local economic systems or linked to institutions capable of sustaining them. The result is limited, non-cumulative impact that perpetuates dependence on repeated interventions rather than building long-term local economic capacity.
The problem of Syria’s local economy, therefore, is not the absence of activity or initiative, but the absence of governance that organizes this activity, connects it to institutions, and transforms it from a coping economy managed through de facto arrangements into a system capable of growth and sustainability.
IV. Why Do Current Approaches Fail?
Despite growing efforts to understand local economic realities in Syria, prevailing approaches suffer from structural shortcomings that constrain sustainable impact. These limitations stem less from weak intent or insufficient resources than from the conceptual and operational frameworks guiding intervention design.
First, current approaches continue to prioritize projects over systems, even at a stage that should mark a transition toward economic recovery. Economic intervention is often treated as a collection of discrete activities rather than a process of building integrated local economic systems encompassing regulation, decision-making, and partnership with local actors. As a result, impact remains confined to individual projects, with limited potential for scaling or accumulation.
Second, local economic development is frequently reduced to livelihoods programming, as though income generation were an end in itself. While livelihoods support is essential in fragile contexts, treating it as the sole entry point overlooks the reality that livelihoods function within markets, markets require rules, and economies require governance. Without this framework, livelihoods projects become temporary fixes that fail to address structural economic weaknesses.
Third, governance considerations are largely absent from program design. Elements such as market regulation, role definition, economic accountability, and institutional capacity-building are rarely integrated into intervention logic. These dimensions are often viewed as political sensitivities or operational risks and therefore excluded—despite being prerequisites for sustainable impact.
Fourth, many interventions operate in isolation from local authorities and stakeholders or bypass them altogether. Authorities may be perceived as weak or incapable, or as obstacles to rapid delivery. This approach undermines ownership, entrenches distrust, and leaves local economies dependent on external actors rather than strengthening their capacity for self-organization and management.
Collectively, these approaches yield a single outcome: economic interventions that are limited in impact, unsustainable, and incapable of transitioning from de facto management to structured local economic capacity. This underscores the need to rethink the logic of intervention and shift from activity-based support toward building local economic governance as the foundation of recovery.
V. What Needs to Be Done? Policy Recommendations
Addressing the local economic governance gap in Syria requires moving beyond fragmented, short-term interventions toward a policy approach that places governance at the center of economic recovery. The following recommendations are directed at key stakeholder groups:
1. Recommendations for Donors
- Integrate local economic governance as a mandatory component of recovery programsEconomic recovery initiatives should not be designed in isolation from governance considerations. Programs must incorporate explicit components related to market regulation, institutional role definition, and local coordination mechanisms as core elements rather than secondary outputs.
- Finance local regulatory frameworks, not only projectsDonors should reallocate part of their funding from individual projects toward developing local economic regulatory frameworks, including licensing systems, market management mechanisms, and local fee structures. While less visible in the short term, such investments generate more sustainable impact over time.
2. Recommendations for Implementing Agencies
- Work with local authorities, not around themImplementing actors should shift from bypassing local authorities to engaging them as partners, even in contexts of limited capacity. Institutional capacity cannot be built without meaningful involvement in planning, implementation, and accountability.
- Build capacities for market regulation, licensing, and local resource managementEconomic interventions should include practical components to strengthen local capacities in market organization, licensing, asset and resource management, and basic monitoring tools. These capacities are foundational to effective local economic governance.
3. Recommendations for Local Actors
- Develop local economic partnershipsStrengthening local economic governance requires structured partnerships among local authorities, private sector actors, and community stakeholders. Such partnerships improve coordination, clarify roles, and build trust.
- Adopt simple, enforceable economic accountability mechanismsEven in resource-constrained environments, local actors can implement basic accountability measures, such as transparent disclosure of local fees, involving market representatives in decision-making, or establishing regular communication channels with business owners. These steps enhance transparency and lay the groundwork for more stable governance.
