FDI in Syria

Overview by Globlatrade.net:

FDI in Figures

Syria is commited to gradually opening its economy, moving froma a closed and centralised economy to a model approximating market economy.

In a particularly difficult regional context, the country is trying to to set up the mechanism of a market economy in order to regain the trust of foreign investors.

The Syrian economico-legal corpus has undergone extensive changes over the past decade. Structural reforms such as the renovation of the Commercial Code (2007), the Maritime Code (2008), the Finance Act (2004) or the Banking Act of 2004 helped to phase out the model of planned economy, which has been in force over decades.

The establishment of a private banking system and private insurance companies (domestic or foreign), opening the local market with import liberalization (gradual removal of tariff barriers to market access and reorganization of the customs administration with the assistance of the European Union) are all tangible results
of the update of the country's legislative and fiscal framework. Syria has also established a number of industrial zones as an advantageous framework for foreign companies interested in relocating to the country.

Despite regional political instability (the proximity of Iraq, the role of Syria in Lebanon and tensions with Israel), inflationary trends (14.5% in 2008 but 5% in 2010) and a high unemployment rate ( about 20%), foreign investment has become more abundant.

According to UNCTAD, in 2009, Syria had an FDI stock of 5.6 billion euros, or 14.2% of its GDP. Syrian stock invested abroad amounted to 319 million euros or 8% of its GDP. Syria is therefore largely a creditor, with up to 5.3 billion euros. Seeking FDI is crucial for the government and its economic strategy of attracting FDI has made it essential to reform the banking system.

Foreign Direct Investment 200720082009
FDI Inward Flow (million USD) 1,2421,4671,434
FDI Stock (million USD) 4,4335,9007,334
Performance Index*, Ranking on 141 Economies 939262
Potential Index**, Ranking on 141 Economies 105104-
Number of Greenfield Investments*** 162919
FDI Inwards (in % of GFCF****) 14.812.04.2
FDI Stock (in % of GDP) 11.010.813.9

Source: UNCTAD

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

Form of Company Preferred By Foreign Investors
SNC (general partnership): Limited Partnership, Joint Venture.

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Why You Should Choose to Invest in Syria

Strong Points
Syria's main strong points are:
- The highly skilled workforce in traditional industries such as textiles and clothing manufacture;
- The appreciation of new activities, mainly in training, counseling and knowledge transfer;
- Its engagement for the liberalization of its economy;
- A low level of debt:
- A tourism sector in full development;
- The establishment of a system more favorable to trade: removal of exclusive rights to import agents, reduction of customs duties on raw materials and the establishment of a harmonized system of nomenclature (HSN);
- The advancement in the banking sector, through the authorization of accounts in foreign currencies.
Weak Points
 Syria's main weak points are:
- A strong demographic pressure (+ 2.6% in 2007 with 36% of the population under 15 years, 50% under 21 years and 250,000 new comers into the job market);
- A per capita income that progresses too slowly: 30% of the population still lives with less than USD 2 per day;
- The erosion of budgetary income and the degradation of the terms of the energy balance;
- A high rate of inflation, aggravated 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;
- The prices of real estate which have almost doubled in Damascus since 2006;
- A tax avoidance that is very difficult to repress and that undermines income and fiscal reforms;
- The lack of diversification in 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 in order to attract foreign investment. The country has set up seven free zones which allow different production activities and services in the industrial zones. The government has also favored the development of industrial cities. It has created four 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...). This law has allowed the access of private investors into the industry sector.

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