After ten years of war, and a (slow) accumulation of partial solutions, the official authorities announced a new investment law under a devastated economic situation. This law comes after a couple of years of discussions, more than 14 years since the last legal encouragement to invest, and some local noise surrounding its announcement.
The main causes of delaying the official announcement are connected with the quest
- to achieve a level of military stability; as well as given by the need
- to work on a legal framework that suites the economic transition at the end of the war.
The significance of the new law is not confined to regulating investment alone, however a peek into it could give us a better idea about the basic line that the authorities are adopting to cross over the current stage in the foreseeable future.
This said, let’s now have a look at what can be considered as the key points of the new law:
Simplifying management and organizational procedures
The new law approved the opening of service points for investors in all provincial centers, where the investor can register his/her request of investment project permission which includes supportive documents – such as the feasibility study of the project, timeline, equipment and/or machines required, legal documents concerning the land of the project. Regarding such details, Syrian Investment Agency (SIA) published the “investor’ guide” which describes all the required legal operational procedures in the service points step by step and for every investment sector.
In addition, the Syrian Investment Agency puts between the hands of investors an investment map, which represents the available investment opportunities with geographic data and conditions.
Moreover, the law determines the time limit to give the legal approval at a maximum of 30 days considering the type of project.
We have tried to find out whether or not this 30-day deadline has been really applied (either by searching in official statements and announcements, asking businessmen, possible investors etc.) we however weren’t able to find clear information. Here we may say that this fact is due to several reasons;
- lack of official statistical data which is – by the way – a familiar problem in Syria concerning many sectors; as well as the
- fact that the law is still new, and with the economic slowdown it takes more time to observe its effects in fact.
Lands and infrastructure
The new law allowed local/foreign investors to own or rent lands for projects, and decreased the earlier fears considering investment license cancellation and the possibility of property acquisition with the following guarantees:
- the investment license cancellation is only legally valid under a juridical decision and after giving the investor a warning with 90 days deadline to remove infringements.
- property acquisition is only legally valid under a juridical decision and for a fair compensation that equals the exact value.
- the investor has the right to retransfer the amount of compensation out of country in the form of convertible currency.
Further on, the law encourages general quarters (public sector institutions, companies, and establishments) to put their inactive properties (lands, buildings, establishments, etc.) which form available investment on the “investment map”, considering the type and conditions of the investment.
In addition to that, the law created a specific legal mechanism that helps the investor to allocate lands, real estate, properties etc., to establish the project through the investor service center.
We should bear in mind that the new law has been announced in hard economic circumstances especially concerning the large deficit of raw material whether it is foodstuffs or fuel, i.e., energy in general. Therefore, we find that most of the projects that the law targets are agriculture and animal production which have been exempted from income tax permanently (with a 100% exemption).
In a related vein, the law targets projects which contribute to supply treasury with the foreign exchange –export industry projects which export 50% of its production are given a tax decrease of 75% for 10 years. Also, the law decreased the taxes on tourist and entertainment projects – here the goal is to attract tourists and the Syrians who live abroad; thus, increasing the income of foreign exchange.
The law exempted industrial equipment as well as production lines, machines, and construction materials from custom clearance (duties). It also facilitated granting residents for experts and technicians. Moreover, the law decreased the customs on building materials to build touristic projects.
The operational instructions of the new law give major importance to the exchange rate dynamics – a phenomenon directly connected to establishing and operating the projects. The ruling of the new law protects investors’ right to extract his/her investment in the form of hard currency in the event of withdrawal or selling the shares or even transferring parts of profits out of the country if the project made profits.
Development regions and specialized economic areas
The law came with new approach considering the management of economic zones which have common features. The basic purpose of creating development regions is to open the space to establish integrated projects; establishing agriculture production projects and agricultural industry projects in the same region of development. However, the specialized economic areas include medical, healthcare, tourist, and technical areas, which supports civil life reconstruction projects.
These are the main new positive points in the new law, and it seems promising that the new law talks in a comfortable tone with a clear intention of shaking the rigid situation up. Despite the undoubtedly positive changes and modification, one still cannot help being prompted to ask: are the so-far taken steps enough? Or does the law lack more essential changes and additions?
The other side of the law: the lacks and the problems
Clearly, most of the advantages and motivations in the law are limited to tax and customs exemptions. As such, the law doesn’t address fully other kinds of investors’ motivations– such as, for example, facilitation of funding which is a key point to any investor who is intending to start any production or service-oriented activity .In its current shape, the law only facilitates opening bank accounts in active banks in Syria.
Further on, although the law presents articles considering development regions and specialized economic areas, it doesn’t mention (or: the law’s creators were not able to effectively “point out” all) the advantages given to the projects under this or that category.
It is for sure a significant event to usher in such a law at (such) a time when Syria is about to (finally) enter the stage of rebuilding. Nonetheless, the law is relatively brief and it is far too clear that it primarily
- focuses on supporting agricultural and animal production projects
- to meet the needs and requirements of food security which is in danger.
- the importance of developing local industry (and the immediate need to support the energy sector and the industries which depend on it – mainly petrochemical industries, in addition to the governments’ repetition of the importance of renewable energy projects –) is obvious,
- the law didn’t explain how such projects could benefit from it, or what are the advantages given for it to work on.
- Many articles in the law lacks clarity, for example, the law opened the possibility to build development regions and specialized economic areas. However, such regions and areas are not realized even at the level of the official news, .i.e., we only hear “rumors” around that it could be Damascus country side, especially small cities on the road to Beirut, but there is no official or clear news considering such areas. In addition to that, the texts’ description of the mentioned areas and regions is vague, so we can’t make a clear conception of its specifics.
Moreover, the law lacks a clear strategy to ensure
- attracting local and foreign capitals towards projects needed to develop infrastructure including communication, technology, and transportation, while
- such sectors are the leading locomotive of the future rebuilding stage.
The new law in context: what basic line does the law follow?
After a careful reflection into the articles of the law, we can feel the temporary legal approach in Syrian legislative mentality concerning the current economic transitional phase: i.e.
- one switching from the (feeling of a) state of war
- to (the state of) relative stability (which is the situation de facto).
Further on, we should bear in mind that the mentioned transition is
- not only at the level of the economy, but also
- on the level of society and general vision towards the future.
Last but not least, it should be added that the socio-economic transition the Syrians are going through this time is too sensitive. Therefore, the basic mission of the new law is to fill the vulnerable / “post-traumatic” time between the end of war and the inception of the Syria reconstruction project(s).
In this quality, the law is basically functioning, and should be also looked at, as a “caretaker” legal framework more or less fittingly “cut out” (rather than “exactly tailored”) for the current situation.
However, it has a promising side if we consider it as an interim stepping stone towardsa more comprehensive legal framework. Similarly, it can be useful for
- making a solid ground for the future by developing services and continuously expanding the investment map to include more categories and various types of projects, as well as for
- possibly opening the space for more legal additional facilitation for local and foreign investors.
Fouad al-Halabi is an independent analyst and commentator. He contributes with intermittent inputs of various kinds, occasionally commenting on selected topics, mostly related to Syria and its reconstruction as well as Near East´s and global challenges, news and events.