Syria

FDI in figures

Syria has thoroughly modified its legislative and legal base to attract foreign investors, set up seven free zones allowing different production and service activities in the industrial zones and developed the concept of industrial cities (4 new cities where an industrial complex is back to back with a residential area; centers intended to occupy the space between ancient  and traditional urban areas). It has abandoned the first investment decree n°10 of the 90s to the benefit of decree n°8 which is much more favorable to FDI (ownership of land, repatriation of profits...). Then, this law allowed to open the door of the Syrian Industrial estates (Adra in Damascus, Sheikh Najjar in Aleppo, Hissiya in Homs and the industrial estate in Deir-Ez-Zor) to private investors and FDI.

Why you should choose Syria

Strong points

Since it was decided to open up the country in 2000, the economic and financial situation has distinctly evolved even if the effective lift off is taking some time. Since 2004, growth has taken a favorable turn. The IMF estimates that growth will continue to rise in 2008 (+4.2%) after an increase of 3.9% in 2007. Growth should continue like this with 5.2% in 2009. It rests on domestic demand, exports of non-petroleum products and domestic investment.

It should be noted that the drop in petroleum production is being confirmed (a drop of 7.9% of petroleum GDP in 2008, following 7.3% in 2007 and 6.5% in 2006), but that growth in other sectors of activity remains on a rising trend. Growth is above all the consequence of a gradual opening up of the Syrian economy, which has allowed the mechanisms of a market economy and foreign confidence to be restored at least in part, and this in spite of a particularly difficult regional context. Other relevant points can be taken into account as workers are highly skilled in tradtional industries like textile and garment manufactory ; training, consultancy as well as knowledge transfer are more and more valorised.

The performance of the Syrian economy rests on structural reforms implemented since 2003 whose major objectives have been, globally, reached today, even if the modernization of the national economy is far from being finished. The updating of the legal and fiscal framework, the setting up of private banks and insurance companies (national or foreign), the opening up of the local market with the liberalization of imports (the progressive abolition of tariff barriers to market access and the reorganization of the Customs administration with the help of the European Union) are so many tangible results.

The complete restructuration of the banking and financial sector, with the return of the private sector after 40 years of nationalization, signalled change as early as 1 January 2004. Private and Islamic banks were authorized to operate in 2008, beside the existing six public banks. Private banks now have a dominating share in matters of flows; the exchange rate has been standardized; the Syrian Pound (SYP) is no longer pegged to the USD but to the SDR since July 2007. Because of this, the SYP has stabilized at a high administered rate - doubtless over-valued - but it remains non-convertible. Finally, the plan to create the Damascus Stock Exchange took shape: in spite of numerous postponements, due to technical constraints and delays in legal compliance, the Damascus Stock Exchange saw the light of day in March 2009, with 5 companies listed.

Weak points

Growth should exceed 4% in 2008 but, in the medium term, it remains sensitive to a slowing down or a turnaround of the economic situation at the international level.

The low complementarity of regional economies is also a curb to the development of intra-regional synergies and to the setting up of greater economic integration (Syria has been a partner of the GAFTA since 2005 and has benefitted from a free trade agreement with Turkey since 2007). This growth remains insufficient to face up to demographic pressure (+2.6% in 2007 with 36% of the population under 15, 50% under 21 and 250 000 new entries into the job market). As a result, there is a relatively high unemployment rate. Although it has officially dropped below 10%, the IMF estimates that the real rate is about 20%. Unemployment affects young people essentially (37% of the unemployed are between 20 and 25), women and poorly qualified people.

The low level of professional qualification of these categories has led the authorities to decide to launch a priority program in the 2008 budget. In addition, per capita income is rising very slowly (2 108 USD at the beginning of 2008) and 30% of the population live officially with less than 2 USD per day. The purchasing power of the great majority is dropping all the time because of the increase in consumer prices (estimated at +7% in 2008) and the differences in income get wider as the country commits itself to a market economy model. In the short and medium term, the main challenges to be taken up remain:

- the erosion of budgetary income and the degradation of the terms of the energy balance;
- the control of inflation, currently worrying and made worse by a year of particularly severe drought;
- the absence of any refinancing instrument for Syrian banks and the explosion of credit in the private sector (a boost resulting from inflation);
- the creation of a real estate bubble: rental and purchasing prices have almost doubled in Damascus since 2006 and even tripled in the top of the range);
- the maintaining of an unofficial economy - a sort of social safety net - and smuggling activities, to which is added tax evasion which is very difficult to repress and which undermines income and fiscal reforms;
- the lack of diversification in major investments, especially targeting the real estate sector (high quality residences, hotel complexes or shopping centers).

 

Government measures to motivate or restrict FDI

Syria has profoundly changed its legislative and legal base to attract foreign investment. The country has set up seven free zones and developed the concept of industrial cities (4 new towns where an industrial complex is back to back with a residential area). These centers are intended to occupy the space between ancient and traditional urban areas. Syria has abandoned the first investment decree n°10 of the nineties to the benefit of decree n°8 which is much more favorable to FDI (land ownership, repatriation of profits...).

Bilateral investment conventions signed by Syria

Syria has signed many bilateral agreements with the United States, Germany, Pakistan, China, Indonesia, Russia, Belarus, Iran, Libya, Tunisia and Lebanon. In addition, many dual nationality committees have been set up with European, Asian or Arab countries to improve bilateral trade and facilitate the creation of joint ventures.

Procedures relative to foreign investment

Obligation to declare

The Syrian Agency for investment provides information about the authorizations required to set up business in the country.

Competent organization for the declaration

Syrian Ministry of the Economy

Requests for specific authorizations

Air and rail transport, land line telephones, oil refineries, mineral waters and cereal marketing are among the rare sectors which are still exclusively in the hands of the public sector.

Finding assistance for further information

Investment aid agency

Syrian Investment Agency

Other useful resources

Syria Today
Syrian Enterprise and Business Centre