The Golden Runaway

Is the apparent defection of one of Bashar al-Assad's top generals (and close friend) the beginning of the end for the Syrian regime?

When Syrian general Manaf Tlass fled his house in Damascus last week, becoming the highest-profile defector from President Bashar al-Assad's regime, he sparked a flurry of questions about the course of Syria's 16-month revolt. Does this mark the beginning of the end for Bashar, whose grip on power has been increasingly threatened by the uprising?

Press reports have described Tlass as a member of Assad's "inner circle," but this overstates their relationship -- his defection does not suggest that a fracture in the top ranks of the regime is imminent. However, his flight to Turkey is symbolically important: The Tlass family -- a Sunni clan that emerged under Manaf's father, former Defense Minister Mustafa Tlass, to become one of the most powerful in the country -- is perhaps the second most recognizable family name in Syria, after Assad. And Tlass's abandonment of his erstwhile patrons will no doubt affect the perspective of other Sunni businessmen, religious figures, and military men who are deciding where their loyalties lie.

The Tlass family is associated, perhaps more than any other in Syria, with the Assads' rise. Mustafa Tlass played the role of kingmaker for both Hafez al-Assad and especially his son, Bashar, when they came to power in 1970 and 2000, respectively. With Hafez, he launched a long and productive relationship when both men were at the Homs Military Academy in the early 1950s, and later when they were stationed in Cairo during the ill-fated years of the United Arab Republic (1958-1961). Both were already members of the Baath Party, which had become a political force in Syria by the mid-1950s. When the Baath took power in 1963, the fortunes of the two friends rose higher. Assad promoted Mustafa to high-ranking positions in the military and the party, which Mustafa used to help secure the officer corps' loyalty to Hafez -- a crucial factor as the future president maneuvered through intra-Baath disputes to emerge as the country's new leader. For his unwavering support, Tlass was appointed as defense minister in 1972, a position he held for 30 years.

As the most prominent Sunni in a leadership structure dominated by Assad's Alawite sect, the elder Tlass helped Hafez establish important connections with certain sectors of Syria's Sunni population, which comprises about 75 percent of the country. This generated important alliances with the Sunni business class and Sunni military officers, helping to ensure their loyalty to a minority-ruled regime and forging the military-mercantile complex that was the foundation of Assad's rule. The Tlass family's power and wealth, meanwhile, grew proportionately to its position in the ruling hierarchy.

Mustafa Tlass's loyalty to Hafez al-Assad was never in question. And his devotion was most dramatically displayed when he sided with Hafez against the president's brother, Rifaat al-Assad, who in the early 1980s attempted to push Hafez aside amid the tumult following the Syrian Muslim Brotherhood's failed revolt, the Israeli invasion of Lebanon, and the president's ill health.

In a sign of the degree Hafez to which trusted Mustafa, the president relied heavily on him to help groom Bashar for the presidency after his brother, Basil, the putative heir, died in a car accident in 1994. Mustafa's support was absolutely crucial to Bashar's accession to the presidency upon his father's death in 2000 because other members of the so-called old guard -- such as Vice President Abd al-Halim Khaddam -- also had their eyes on the prize. As one high-level Syrian official described it to me, very soon after news emerged of Hafez's death, Tlass essentially gathered the generals together and steered them in favor of Bashar.

Loyalty was once again rewarded. Mustafa Tlass continued on as defense minister, and his son Manaf -- among other members of the family, which was already perched high in Syria's oligarchic society -- immediately assumed a position of power as a presumed insider. But Mustafa did not serve Bashar for long: He was replaced as defense minister in 2002. Some said he was nudged aside by Bashar and the younger generation of Syrian leaders, while others said that, having seen Bashar and Manaf secure power, he resigned voluntarily. Either option is plausible.

With Mustafa retired from public life, it has largely fallen to Manaf to protect his family's interests. Manaf, born in 1964 and therefore a year older than Bashar, has been variously described as "dashing," "handsome," and a (former) close friend of the Syrian president. A Syrian opposition figure told the New York Times that he was "one of the regime's main figures," saying that his defection amounted to "the strongest message yet to Bashar that he is no longer safe."

That's only part of the story: The sons of Syria's elite families are as often good friends as they are bitter rivals. Manaf, although he attended military school with Bashar, was actually first friends with Basil, whose more charismatic and flamboyant personality better matched his own. Manaf quickly rose through the ranks, as expected, becoming a general in the Republican Guard, commanding an important armored division that protected Damascus -- and the president.

Although Manaf's image is that of someone more interested in his social activities than politics, I always found him to be serious and self-reflective. In my regular meetings with Bashar al-Assad -- first for a book I wrote on him and later as a kind of unofficial liaison between Syria and the West -- I had often requested interviews with leading military-security figures in the regime. Manaf was the only one I was formally allowed to meet, although I initially had met him through a mutual friend in Damascus. Bashar spoke fondly of Manaf, referring to him as a good friend on the couple of occasions the general's name came up. The same was true when I spoke with Manaf about Bashar. But they are quite different personalities, so I am not sure their friendship went too far beyond familiarity and long-established ties between their respective families.

Manaf -- and his wife Tala -- also seemed to be particularly committed to religious diversity in Syria, one of the oft-mentioned public mandates of the avowedly secular state. One evening back in 2007, Manaf and Tala hosted a few colleagues from the Abraham Path Initiative (API) and me for dinner at a well-known Damascene restaurant. The API is a Harvard-sponsored tourism project that attempts to promote intercultural and interfaith dialogue by establishing a walking trail throughout the Middle East, retracing the legendary steps of Abraham, the shared prophet of Judaism, Christianity, and Islam. As a senior advisor to the API, I discussed this issue with President Assad, who quietly supported the project. Powerful elements in Syria, however, particularly the mukhabarat (security forces), began to vigorously oppose it. The public dinner was Manaf's way of showing his strong support for the initiative despite the opposition it was encountering. Interfaith tolerance was something he really believed in, and wanted to see implemented in Syria.

Manaf's stand on this issue may shed some light on his reasons for breaking his family's decades-old ties with the Assads. As a Sunni and as someone who supported the ethos of diversity promoted by the state, Manaf most likely became quite disenchanted with the increasingly sectarian nature of the regime's response to the uprising. In contrast to portrayals of him as part of the president's "inner sanctum," he has been excluded from top decision making circles since the early stages of the uprising, when he reportedly wanted the regime to pursue negotiations with the opposition rather than initiate a harsh crackdown. The regime's brutal response in Homs -- including surrounding towns such as the Tlass family's home of Rastan -- may have been the last straw for Manaf and other members of the Tlass family. They broke with the regime silently at first (there were even reports that Manaf was under house arrest), and then publicly with the general's defection.

The machinery of the Assad regime is not about to stop turning on the basis of Manaf's defection. However, perception is often more important than reality. The fact that the Syrian family most often associated with propping up the Assads has jumped ship is significant in symbolic terms. Many Sunnis in the business and religious classes, as well as the military, have continued to support the regime primarily because there is no better alternative -- but may now think twice about their decision. No doubt they are having some very serious discussions with each other and with their families -- and maybe even with regime figures.

Manaf's defection -- though his current location remains a mystery -- also reinforces the impression that the uprising and regime response have grown more sectarian as time passes and the violence escalates. Within the state itself, it appears that the decision-making process has also become more sectarian -- that is, dominated by Alawites. As usually happens in a crisis situation, the inner circle has become ever smaller as the crisis has worn on -- and Manaf was stuck on the outside looking in from early on in the uprising.

Nevertheless, we still may not have the full story for why Manaf's relationship with the Assads reached a breaking point. Defections are often more complicated when one digs beneath the surface: Manaf's departure could have been spurred by a clash of personalities, estrangement from Bashar, or perhaps anger at not being appointed defense minister like his father, or to some other high-level position. What is clear is that he believed his ship was sinking, whether or not he believes the regime's is as well.

Manaf's public statements have so far been limited, but pointed. He was quoted by the BBC as saying that Bashar was "taking the country to hell." If he were Bashar, he added, he "would have done an Ataturk or resigned the second month the uprising began."

This was not a bad prescription at all at the time. Bashar should have implemented wide-ranging reforms and socio-political change early in response to the uprising, like Turkey's founding father Mustafa Kemal Ataturk after World War I -- or stepped aside. Both alternatives seem fanciful in retrospect, but either one might have saved Syria from so much death and destruction.

There remains only a slim chance, however, that Manaf and the rest of his family will ever again be in a position to exert political influence in Syria. Despite positive noises from some Syrian opposition leaders about Manaf's future political role, I cannot believe that the hardcore opposition would want to have anything to do with a family that has been so identified with the Assads and the last 42 years of repression. Syrian opposition groups went through this experience once before, when Vice President Khaddam was forced out in 2005 and joined an anti-Assad coalition in exile. It was an utter disaster for the opposition -- the presence of a longtime loyalist to Hafez al-Assad in their ranks discredited the movement. I don't think they would want to travel down this road again, no matter how attractive a political and military figure Manaf may be.

A life in limbo may be what lies ahead for the Tlass family, even if Assad should fall. They might try to inch their way back into Syria economically and politically, as Rifaat al-Assad and Khaddam tried to do. Regardless of whether they are successful, it is an effort that will be undertaken from the comfort of their new environs, far from the country where they once wielded such extraordinary power.



The End of the Vietnamese Miracle

So much for the next Asian success story.

HO CHI MINH CITY – In what was once one of Asia's most exciting emerging markets, Nguyen Van Nguyen sees only gloom ahead. Since 2008, his business in southern Vietnam's economic capital has suffered through two volatile bouts of inflation, peaking in August 2011 at 23 percent -- at the time, Asia's highest inflation rate. Now he's only accepting small overseas orders for Binh Minh, his once-thriving bamboo-screen factory in Ho Chi Minh City, to hedge against price fluctuations. He says customers in Australia, Europe, and the United States have decreased their orders following weakening global demand. Production costs across the industry have risen approximately 30 percent while customers are only willing to pay about 10 percent more, says Dang Quoc Hung, vice president of Association for Handicraft and Wood Industry in Ho Chi Minh City. Nguyen's hiring fewer workers for the summer high season and cutting their pay to about $120 a month, down from $200. "We can only work at a slow speed, and things are hard now," he lamented in late June. 

The Communist Party of Vietnam would prefer that investors see cases like Nguyen's as simply one-off local effects of the global economic slowdown, not of a systemic weakening. In the two decades since the Communist Party instituted economic reforms in 1986, annual GDP growth averaged a remarkable 7.1 percent. Indeed, four years ago, Vietnam seemed like the next Asian success story. Before joining the World Trade Organization in 2007, the country's leaders pledged to do even better, speeding up a vast restructuring and privatization of their wasteful state-owned enterprises (SOEs), a process they euphemistically called "equitization." The International Monetary Fund predicted in 2007 that cheaper imports as a result of WTO accession could contain inflation, and that structural reforms could level the playing field between local and foreign competitors. But on Hillary Clinton's visit to the capitol Hanoi earlier this week, Prime Minister Nguyen Tan Dung was forced onto the defensive, promising favorable conditions for foreign investors as he tries to keep the "Vietnam miracle" alive.

Over the past decade, rising labor costs in China meant that its days as the factory of the world were numbered. Stable Vietnam, with its young, cheap workforce and serviceable infrastructure, seemed like the logical next choice. Foreign investment poured in throughout the mid-2000s, with net inflows more than tripling to $9.6 billion in 2008 from two years earlier. Vietnam was the "next Asian tiger in the making," said Goldman Sachs. "Foreign investors didn't care about governance or policy. They were driven by low labor costs," says Edmund Malesky, a political economist at the University of California at San Diego who focuses on Vietnam.

Ignoring the politics, it turned out, was a costly oversight. Few businesspeople predicted the Vietnam of 2012: a country struggling with a weak currency, inflation, red tape, and cronyism that has led to billions of dollars of waste -- and home to a government that makes decisions like building oddly placed ports or roads that serve little economic value.

Things started to turn south when Vietnam embarked on a $100 billion expansion in the domestic credit stock from 2007 to 2010, a program accelerated by the 2008 economic crisis. Instead of being directed towards private businesses, the government channeled the funds to politically connected SOEs, who used them to expand fervently into areas outside of their expertise, creating an increased demand for resources that fedinflation. Flush with cash, they were able to drive out smaller, more efficient competitors. The massive state-run shipbuilder Vinashin, which employed some 60,000 workers and oversaw 28 shipyards, diversified into almost 300 units, including motorbike manufacturing and hotels, after it raised an additional $1 billion from international investors in 2007. Officials hoped it would drive growth like South Korea's semi-public conglomerates.

But in 2010, Vinashin was found to be falsifying its financial reports, and it nearly collapsed under $4.4 billion worth of debt owed to both local and international creditors, a number equivalent to almost 5 percent of GDP. It eventually defaulted on a $400 million loan arranged by Credit Suisse. Prime Minister Nguyen Tan Dung -- who backed Vinashin as his pet project central to the state-run economy -- was forced to apologize before the National Assembly during a painful self-criticism session. Dung's rivals, seeking to protect their own corporate fiefdoms and political offices, had found their scapegoat: Authorities sentenced eight executives last March. But instead of speeding up its much promised and grindingly slow process of privatization initiated in the 1990s, authorities swept the debacle under the rug.

The government went into damage-control mode, refusing to back the $400 million Credit Suisse loan as the conglomerate remained uncommunicative with European creditors. Responding to the crisis, Moody's downgraded Vietnam's sovereign credit rating one notch to B1 from Ba3, signifying a "high credit risk" below investment grade.

Other Vinashin-like breakdowns were in the works, but secretive kickback networks allowed them to cover up their failing books for years, according to several state-employed newspaper editors interviewed in 2011. In May 2012, an ongoing government investigation revealed that the state-owned shipping company Vinalines had defaulted on five loans worth $1.1 billion, and accumulated debt of $2.1 billion, more than four times its equity. Since February, four executives have been arrested for mismanaging state resources; authorities, meanwhile, are on the hunt for its fugitive former chairman.

Foreign investors, facing higher costs of labor and materials, began to worry that Vietnam was losing its low-priced edge. Four foreign investors complained in interviews over the last 2 years that state-owned companies abused their position as government-connected industry gatekeepers. "They're a pain in the ass," said one American business lawyer in Ho Chi Minh City. "Nobody wants to deal with these guys."

While Vietnamese officials are now assuring investors that the worst is over, a government audit released in early July revealed that at least thirty other large SOEs carry worrisome debt burdens. The deeper problem is that in Vietnam, unlike in China, the Communist Party elite are paranoid about sharing the spoils with private, and especially foreign, businessmen. In China, the party has generally kept its markets competitive by bringing private businesspeople into the fold, improving governance, privatizing around 90,000 firms worth more than $1.4 trillion between 1998 and 2005, and more recently purging neo-Maoist gangsters like former Chongqing Party Secretary Bo Xilai. Vietnamese leaders still haven't figured out how to fix their economy without relinquishing some form of political control -- a step they're unwilling to take.

Instead of cleaning up the cobwebs between SOEs and their patron politicians, the power players have launched campaigns against a new generation of nouveau riche entrepreneurs-cum-lawmakers. In late May, the National Assembly voted 96 percent in favor of ousting deputy Dang Thi Hoang Yen, one of only a few non-Communist Party tycoons in the legislature on trumped up charges of lying on her resume.

Yen's real crime: repeatedly calling for fair treatment of private businesses, which comprise nearly half of the economy. "To clean the house is more than the system can handle," says David Brown, a former American diplomat in Hanoi.

In June, the government's tightening of credit helped bring down inflation from 23 percent last August to 6.9 percent. The problem now, complain small factory owners like Nguyen, is that the flood of easy credit has increased the chances of a banking crisis. After two devastating SOE collapses, the government is admitting that something might be fundamentally wrong with its financial system. The country's central bank head Nguyen Van Binh said in early June that about 10 percent of debt at Vietnamese banks is bad. Instead of reforming the economy, the government is suggesting more of the same: One plan is to create a national asset-management agency with $4.8 billion to deal with the debts. But that would mean setting up yet another bureaucracy caught within the patronage networks between the party elites, banks, and companies.

Investors already complain about being overburdened with red tape, and a lot of them are now thinking about moving to Indonesia, Bangladesh, and Myanmar, said Denny Cowger, a corporate lawyer at Duane Morris, an American law firm with offices in Hanoi and Ho Chi Minh City. In the World Economic Forum's Global Competitive Report for 2011 and 2012, Vietnam fell six places to number 65, due to  burdensome regulations, inflation, budget deficits, and strained infrastructure )it commended the country for a fairly efficient labor market and "innovation potential").

The state sector, meanwhile, continues to gobble up as much as 40 percent of GDP. "The bottom line is that Vietnam must undertake some fundamental domestic economic reforms to remain competitive," said Carl Thayer, an emeritus professor at the University of New South Wales. "It is more likely that Vietnam's leaders will use the global financial crisis as an excuse for more of the same."