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Future Development

The impact of Syrian businesses in Turkey

Omer M. Karasapan

In Turkey, as in other countries, refugees are often seen as an unmitigated burden, taking jobs from locals, straining public resources, and stoking fears of rising crime and terrorism. Clearly there are significant costs and risks shouldered by host countries, but there is another side to the story—the contributions made by refugees as they bring new businesses, markets, and skills to their host communities. To the extent that countries focus on an enabling business environment and a modicum of protection for refugees working illegally, the positive side of the ledger can only grow.

According to Oxford University’s Refugee Studies Center, the 2.5 million Syrian refugees in Turkey have encountered less hostility than in Jordan and Lebanon—not surprising given Turkey’s population of 77 million and much larger economy. Jordan and Lebanon face a significantly higher burden with over one million Syrian refugees in each country, representing an influx equal to, respectively, 20 and 25 percent of the native population.

It may also be that Turkey’s more open business environment has played a role in lowering tensions. Syrian firms, though few in the context of an economy with over 50,000 new firms opening each year, are now over a quarter of all new foreign-owned firms established annually. According to the latest figures from the Turkish Union of Chambers and Commodity Exchanges of Turkey (TOBB), the number of Syrian-partnered firms established annually in Turkey increased from 30 in 2010 to 81 in 2011, 165 in 2012, 489 in 2013, 1257 in 2014, and 1,599 in 2015; a further 227 were established in January 2016.

Over the last four years, about 4,000 formal tax-paying firms—employing thousands of workers, mostly Turkish—have emerged. And informal enterprises may multiply this number. While Syrian firms range widely, they tend to concentrate in the restaurant, construction, trade, textile, real estate, travel, transportation, and foodstuffs industries employing a portion of the 400,000 Syrians working informally. According to Hacettepe University and the ILO, many of these workers make less than minimum wage and have no social benefits. But in January 2016 Turkey’s official gazette announced the granting of work permits to refugees, though employment is capped at 10 percent of a firm’s workforce. 

The paid-in capital of the 4,000 or so Syrian firms in Turkey amounted to around $220 million in 2015. This amount excludes informal firms and funds invested directly into the economy via real estate deals, business transactions using front companies, etc. According to the Syria Trade Office, a consultancy in Mersin, at least $10 billion of Syrian money has flowed into Turkey since 2011, mostly to its southern provinces. This may seem small in the context of an $800 billion economy, but the impact in provinces nearer to Syria and on Syrian businesses in larger cities like Istanbul’s “Little Syria” is significant. 

According to an October 2015 study conducted by the Economic Research Foundation of Turkey (TEPAV), Istanbul and its Syrian population of nearly 400,000 constitutes the province with the single largest number of Syrian firms in Turkey, but the proportional impact of these firms is greatest in provinces near Syria. In Hatay, Syrian firms numbered less than 1 percent of newly established firms in 2010; that number was 10.4 percent in 2014. In Kilis, no firms had Syrian partners in 2010; by 2014, 34 percent of new firms in the city had Syrian partners. That number was 15.7 percent in Mersin. In Gaziantep, an economic hub in the southeast, the number of new Syrian firms rose from three in 2010 to 222 in 2014, which is about 17 percent of the total, and reached over 600 in 2015 with the Gaziantep Chamber of Commerce forming a Syria desk to ensure that these firms utilize the full range of services.

TEPAV also notes that the concentration of firms near the Syrian border, as well as the conflict in Syria, has dramatically altered Turkey’s trade with Syria, just as trade numbers have caught up with the 2010 figures of nearly $2 billion. However, both the composition of the trade and its provenance have changed. The shift has been from capital and durable consumer goods to basic goods ranging from foodstuff to construction and medical goods. In the meantime, while trade with Syria has declined by 80 percent in the province of Istanbul and even more in other industrialized provinces in the west of the country, trade with Syria in neighboring cities like Gaziantep, Mersin, Hatay, and others far exceeds their 2010 levels. This is largely due to the links that Syrian firms have with counterparts inside Syria. These links in many cases also extend beyond Syria to other Middle Eastern markets.

In his recent blog looking at the rapid growth of Syrian firms and the resilience they have exhibited, TEPAV’s Program Director Guven Sak asked, “What would the figures be if we facilitated things for Syrian entrepreneurs?” He optimistically pointed to the high concentration of foreign start-ups firms in the U.S., which is near 40 percent of all new firms in Silicon Valley.

It’s a good question for all countries hosting Syrians, from Egypt, Jordan to Lebanon and others. Providing support to the business environment in these countries as well as to Syrian entrepreneurs and workers was an important component of the February 4, 2016 London Supporting Syria conference. The conference also included support for educating Syrian children. This is clearly a win-win strategy. Syrian entrepreneurs in neighboring Middle East countries can invest profitably while employing host country nationals and refugees. And as a result, they are unlikely to make the dangerous journey by boat to Europe, risking their lives and families.

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This blog was first launched in September 2013 by the World Bank in an effort to hold governments more accountable to poor people and offer solutions to the most prominent development challenges. Continuing this goal, Future Development was re-launched in January 2015 at brookings.edu.

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