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Fouad al-Halabi: What hinders investment in Syria?

Fouad al-Halabi: What hinders investment in Syria?

These days, a conclusive solution to the Syrian crisis appears as a matter of time. It looks however like this “matter of time” is a bit too long for the local economy. At first sight, it seems that the local investors (businessmen) are waiting for an international rebuilding project, which is connected – by force – with the political factor. But in a closer look, it is obvious that there are local problems of all kinds, which is enough to make serious concerns that prevent local enthusiasm to invest. We will talk here about the main obstacles, problems that stand in the face of local investors.

According to the report of doing business published by World Bank in 2020, Syria was mentioned as one of the last three economies in the Middle east in the index of business ease which means that the Syrian business environment is unattractive to investment whether it is local or foreign.

However, the World bank issued lately an unusual and odd statement saying it will discontinue doing business reports and started an investigation on the 2018 and 2020 reports.

Nonetheless, in the case of Syria, we don’t have to rely only on official international agencies’ reports, because the reality says it clearly: the Syrian economy is suffering, and the status quo is alarming.

At the same time, however, when a country such as Syria is coming out of war, and its economy is in a mess, it is an open opportunity to work, under the condition of a correct diagnosis of problems and obstacles that prevents the startup, and clearing the way for a full strategy for investment.

So, what are actually the key problems and obstacles which make it hard for local investment?


The war ended. However, there is a state of confusion that sums up the situation on the ground; there still is a state of military disturbances in some regions, and the fate of some investment sectors is not clear yet, which creates some fears on the side of investors, and that could be described as a state of apathy towards long term projects.
In addition to that, all decision makers in Syria –and out– are giving the investors always mixed signals, .i.e., all good news considering any progress in terms of politics are always followed up with bad news which kills the spirit of all Syrians including investors. The key players are insisting on the –allegedly necessary– connection between the final political solution and the economic recovery, which contributes the –already–  blurred image.

Bureaucracy and the legal framework weakness

Local investors in Syria are always complaining about the complexity of management and organizational procedures to establish any project. The license issuance to start a project is time-consuming and takes direct personal efforts from the investor to follow up.

In addition to that, there is a weakness in the legislative structures to protect the projects in case of a stumble, in other words, we cannot find a clear regulatory action that could help reactivating stumbled projects.

In a similar vein, the new investment law didn’t erase all the legal obstacles which create concerns to investors such as the possibility of acquisition. The new investment law decreased this possibility to the lowest and made the acquisition procedure legally valid only with the condition of a fair price.

Here, we should mention that the new investment law tried to simplify the necessary procedures to establish a project by determining a maximum of 30 days to issue all the legal licenses needed for the project.

However, some investors are suggesting to establish consultant companies to follow transactions starting from the preparation of detailed studies of projects and finishing with the issuance of needed licenses to make efficient cooperation with the Syrian Investment Agency, and to save time and effort which could be an important reason for the reluctance of  investors.

The problem of cross-border trading:

The (im)possibility and the cost of importing raw material, and marketing products overseas are two of the most difficult obstacles that stand in front of investors. The sanctions applied on Syria made importing very costly, which means an increase of the final product price; thus, in turn, minimalization of the ability to compete whether in local, or global markets.

Here, we should mention that the Agency of Export Support gave a funding support of 10% to all industrial products that are to be exported and tried to find new markets through launching fairs in different countries bearing part of shipping costs.

Currency: fluctuations in exchange rates:

The USD / SYP exchange rate dynamics from 2011 until the end of 2021 show the Syrian poung in a sharper decline rather towards the end of this period, i.e. the “technical” end of the (“hot part” of the) war and the entering in force of the Caesar law. The related continuous fluctuations in the price of currency affect badly on investors’ decisions to establish their projects because such disturbances cause problems concerning final products pricing as a result of the changing costs of input materials especially if it is imported and involved in production processes. In turn, it affects the consumers’ purchasing power – a situation resulting into a recession.

Recently, the official monetary authority has succeeded in maintaining stability in exchange rates after applying some financial and monetary procedures such as determining the ceiling for the daily cash withdrawals which decreases speculative operations.

However, procedures of this kind are forced by temporary necessity and can’t be sustained for long because it has a major effect on commercial traffic, therefore, the official monetary authority has to find other methods to maintain a stable exchange rate, such as (among others):

  • liberalization of the exchange rate for remittances received from abroad,
  • encouragement of tourism, and (the most significant of it all)
  • support for the investment(s) in export-based industries.

Destroyed infrastructure

Syria suffers from a destroyed infrastructure which is crucially in need of investment, production, rebuilding, and transferring goods. There is a massive defect in transportation routes and severe weakness in logistic services, .i.e., the country lacks the required vehicles, also the ports and airports are unqualified enough, which makes it hard and  time  –  consuming for goods transportation.

Further on, there is no significant investment in the communication sector – a fact that impedes developing economic sectors based on new technologies.

However, every weak infrastructure sector represents a significant and highly profitable investment opportunity if it is implemented in its optimal form.

Financial and funding difficulties

Funding policy is an ultimate motivation for establishing new projects. Here, it is notable that the structure of the financial system in Syria is still weak and adopts traditional funding sources (a traditional system of loans). Similarly, it is complicated to extend credits that depend on real estate guarantees without considering the nature of the financed activity (for example; there is no difference between productive project or service enterprise).

Further to this, it is a widely known fact that sanctions imposed on the country prevent getting external funding (whether in form of loans or other direct funding ways). However, an opportunity is opening up before us that could be used to secure the funding needed for any project by

  • issuing bonds of the project itself for public rollout or
  • establishing investment funds with a determining role to invest in specific sectors and
  • activating crowd funding for emerging projects.

From what has been said, it is clear that the local investor is currently facing more than one obstacle – from external sanctions to internal slowdown which is a key feature of the official mindset. However, we at the same time wonder whether these problems are sufficient justification for the “apathy” towards working – as it is an objective fact that the country is coming out of war and the transitional status should not take so long.

This being the case, it is still more obvious that it may take forever if the local investors keep standing idly by, waiting for the “right” time. Perhaps they should know that the “right time” is (always only) right “now”: as the real opportunities should be made – and not only waited for.

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. 

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