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Middle East Economy
Cost of war put at $35bn for Middle East
From the Financial Times of Thu, 18 Dec 2014 18:52:38 GMT

The three-year war in Syria and the rise of the Islamic State of Syria and the Levant, also known as Isis, has cost the region $35bn, according to the World Bank.

The turmoil has caused devastation in a group of countries that were on their way toward successful economic integration, it said in a study.

Syria has lost 16 per cent of per capita welfare, Iraq 14 per cent and Lebanon almost 11 per cent to the impact of war and subsequent disintegration of the region’s economies and trade.

The area was brimming with cross-border commerce and investment just a few years ago, said the study, “Economic effects of the Syrian war and the spread of the Islamic state on the Levant”.

The complicated war engulfing much of Syria and Iraq and threatening to ensnare Lebanon has imposed a heavy economic burden on those living in the war zone, though it has also produced war profiteers and created opportunities for some merchants.

Regionally, the war and the subsequent rise of Isis “imposed enormous human, social, and economic costs and put a halt to the regional trade integration process, thus undermining development with serious implications for the future of the Levant,” says the report, by Elena Ianchovichina and Maros Ivanic, World Bank economists.

But the direct costs of the war, which the authors describe as a decline in the size and skills of labour force due to loss of life and migration, destruction of infrastructure, trade embargoes and corruption, pale in comparison to its overall economic pricetag.

Before the conflict, trade between Syria, Lebanon, Turkey, Jordan, Egypt and Iraq was steadily rising. Now, the economic potential of the countries of the region has been stifled.

“The conflict put a halt to the regional trade integration process considered essential for accelerating economic growth, diversification, and job creation in the region,” the report says. “Regional trade disintegration . . . drags down intra-Levant trade, services productivity, as well as the cost of producing and importing services within the Levant area with negative effects for output of services in all Levant economies”.

If the potential benefits of that integration were factored in, the total costs of the war would double, suggesting a 23 per cent loss in per capita welfare for Syria, 28 per cent for Iraq, 10 per cent for Egypt and 8 per cent for Jordan.

Taken together, the authors note in a blog, the losses for the six countries total about $35bn at 2007 prices.

“The cumulative economic size of these economies, measured by their gross domestic product, could have been US$35bn larger had the war not occurred,” the authors write.

The losses are spread unevenly. Though all Syrians have been hurt by the war, landowners have lost the most “as people abandon their homes and farms in search of security”. In Lebanon and Turkey, industrialists benefit while labourers lose out because refugee influxes drive down wages.

Because of Turkey’s size it suffers most from the collapse of regional trade, missing out on $1.6bn in potential trade to the Levant, while Egypt and Iraq both lost about $600m in potential exports.

The analysis does not include the costs of delivering services to refugees in Turkey, Lebanon and Jordan, which would represent further losses to the economies of the region.

The assessment could be bleaker, the authors note, if Isis were to capture Iraq’s southern oilfields and facilities, for example.

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