Investment


Investment Regulations

Steps to Establishing an Office
To open up a branch office in Syria, an application, accompanied by the following documents, must be filed at the Ministry of Economy and Foreign Trade:

  1. Document(s) of incorporation, registration of sole proprietorship, or a contract forming a partnership from the company's home country.

  2. Document(s) outlining the firm's internal regulations.
  3. Financial statement(s) that demonstrate the company's capital without reserves.
  4. Document(s) to verify commercial registration.
  5. Declaration from the foreign company that it is not shared or owned by any government or joint venture. (Requests to open up a branch office for a government company will be forwarded to the Prime Ministry for approval.)

  6. Document(s) announcing the company's management decision to open a branch office in Syria, along with a declaration that this branch will be directly affiliated with the company's headquarters.

  7. Power of attorney for the manager of the Syrian branch, giving him all managerial, financial, and technical authority in Syria. This manager can be of any nationality.

  8. Company trade balance sheets. All these documents must be certified by the following organizations:
  • The Chamber of Commerce in the company's national country.
  • The Ministry of Foreign Affairs of the company's country of nationality.
  • The Syrian Embassy in that country, and The Syrian Ministry of Foreign Affairs.

Furthermore, All documents must be translated into Arabic by a sworn translator.

Protection of Property Rights
Syria's legal system recognizes and facilitates the transfer of property rights, including intellectual property rights. Under its own law, the Syrian government has raided shops known to pirate computer software. In April 1995, the Syrian government announced its intention, in principle, to join the Paris Union for the International Protection of Industrial Property. The government also stated that it is considering joining the 1967 Stockholm Intellectual Property Rights Agreement.

The following information details the specific legal protections for patents, copyrights, and trademarks:

Patents: These are issued for fifteen year periods, provided the invention has been utilized within two years after the patent was granted.

Copyrights: Most books printed in Syria are in Arabic and by Arab authors. Despite government efforts, pirated computer software is also readily available.

Trademarks: These may be registered for ten-year periods. The first applicant is always entitled to registration.

Need for a Local Attorney
Because Syrian law and the Arabic language, hiring a local attorney is a sensible and often necessary action.

Specialties: While an attempt has been made to indicate the listed attorneys' specializations, most Syrian lawyers accept all types of cases.

Collection Agencies: No such firms operate in Syria, but most lawyers will handle collection cases.

 

Investment Climate

Openness to Foreign Investment
The Syrian government has adopted a positive attitude toward foreign investment in recent years. The government has passed three key pieces of legislation since 1985 to encourage foreign investment. In 1985, the SARG issued "Decision 186" to encourage investment in tourism. In 1986, the government issued "Decree 10" to encourage the establishment of joint-venture agricultural companies.

In June 1991, as part of its overall reform program to encourage the private sector, the government passed a new investment law --"Law Number 10"-- to promote investment in all sectors of the economy. The new law offers the same incentives to local and foreign investors. Specifically, companies that receive licenses under the new law are accorded duty free privileges for the import of capital goods and materials necessary for a project, including vehicles, and a tax holiday for the first five years of operation. Companies that export over 50 percent of their products enjoy a seven year tax holiday.

All applications for investment under the law must be screened and vetted through the Higher Council for Investment. The council meets at least once every two months. Membership includes the Prime Minister, and the Ministers of Economy, Agriculture, Transportation, Supply, Industry, Planning, Finance, and the Director of the Investment Bureau. No definitive criteria for approving investment is made explicit under the new law, but the council is more likely to approve a project if it:

  • Maximizes the use of local resources
  • Utilizes advanced technologies
  • Boosts exports
  • Creates jobs
  • Advances the government's development plans

Most foreign investment in Syria is in the energy sector. Beginning in the late 1980s, the government actively courted international oil companies to sign concession agreements to explore for oil. In 1990, twelve foreign firms had operations in Syria, but today, only three remain. Western firms departed because of disappointments over dry wells, rising costs, and friction with the Syrian government over contractual terms.

Right to Private Ownership and Establishment
All major private investment projects must be licensed. Over the past few years, the Syrian government has steadily opened sectors, formerly reserved to government monopolies, to private sector investment. Key sectors opened since 1994 included flour milling, sugar refining, and cement manufacturing. The Prime Minister has stated publicly that the Higher Council of Investment, which he chairs, is open to any and all proposals for investment, in any industry and on any scale. Nevertheless, state enterprises with a competing interest in a proposed project are routinely consulted by the Investment Council.

The standard of competitive equality is not applied to private enterprises competing with state enterprises in a number of important areas. For example, although a number of state banks, such as the Real Estate and Industrial Bank, are authorized to loan local currency to help finance private sector projects, state enterprises continue to have privileged access to local credit and exclusive access to official foreign exchange loans from the Commercial Bank of Syria. However, private companies can sometimes access offshore financing. Likewise, according to local business sources, state enterprises have priority in the allocations of commodities and material produced by other state enterprises. Public sector firms also appear to have greater access to public services, such as telecommunications and electricity.

The government has rejected "privatization" of state enterprises as a viable strategy because of the unmarketability of most state enterprises and the continued dependence of the national workforce on public sector employment.

Protecting Your Product From IPR Infringement
Syria's legal system recognizes and facilitates the transfer of property rights, including intellectual property rights. The Syrian government has raided shops known to pirate computer software. In April 1995, the Syrian government announced its intention, in principle, to join the Paris Union for the International Protection of Industrial Property. The government also stated that it is considering accession to the 1967 Stockholm Intellectual Property Rights Agreement.

The regulation and enforcement of intellectual property rights falls under the purview of the Office of Property Protection of the Ministry of Supply and Internal Trade. However, enforcement is inconsistent, requiring companies themselves to monitor the Syrian market for possible infringements.

Performance Requirements/Incentives
Apart from specifying a minimum investment of ten million Syrian pounds, the new investment law has no formal performance requirements. For example, foreign investors are not required to employ a fixed proportion of local labor, although there are reports that informal guidelines are negotiated on a case-by-case basis during the licensing process. Investors' access to foreign exchange is limited as it is a function of the value of a company's exports. Proprietary information may also have to be disclosed for project approval. The Ministry of Supply has the authority to set prices and/or profit margins for products destined for the local market, but so far, foreign investors have not encountered problems as a result of this practice. Under Investment Law 10, there are additional incentives for investment in rural areas and for those companies that use local raw materials.

Transparency of the Regulatory System
Regulations enforced by the Ministry of Supply are aimed at promoting consumer protection by preventing hoarding and price gouging. Nevertheless, to foster competition, the government has put public sector enterprises on notice that they will no longer be permitted to monopolize whole sectors, particularly if private capital, whether foreign or domestic, can be attracted to finance needed projects. As for fiscal and welfare regulations, such as tax, labor, safety, and health laws, these appear to be enforced without discrimination.

The absence of organized capital, foreign exchange, and financial markets continues to be an important impediment to private investment, both domestic and foreign. In 1994, the parliament approved legislation authorizing the re-opening of the Damascus stock market; however, it still awaits final approval. The government continues to impose strict foreign exchange controls on private sector operations outside the specific concessions granted under the new investment law to operate self-funding foreign exchange accounts at the Commercial Bank of Syria.

Labor
The private sector has been able to recruit both skilled and professional labor. On the other hand, state enterprises have difficulty attracting qualified personnel, due to low salaries. To resign their positions, public sector employees must obtain permission, which is often difficult.

The government-controlled Syrian General Federation of Trade Unions (GFTU) oversees all aspects of union activity. The GFTU is affiliated with the International Confederation of Arab Trade Unions. In the public sector, unions do not normally bargain collectively on wage issues, but union representatives participate with the representatives of the employer and Ministry of Labor in establishing sectoral minimum wages. In a country whose major industries are state-owned, workers make up the majority of each board of directors and union representatives are always included on those boards. They also monitor and enforce compliance with the labor law. In the private sector, unions are active in monitoring compliance with the laws and ensuring workers' health and safety. The unions, under the law, can undertake negotiations for collective contracts with employers, but there is no information available on whether such contracts envision that unions can also sue and be represented in court.

Efficient Capital Markets and Portfolio Investment
Policies do not facilitate the free flow of financial resources. Capital can be brought into the country, but must be exchanged at the unfavorable exchange rate which is about 20% less than the free market rate. On the other hand, repatriation of capital remains a problem because foreign investors do not have access to foreign exchange. Investors wishing to repatriate their funds are expected to generate foreign currencies from their exports.

There are no foreign banks operating in Syria. Furthermore, all Syrian banks are government-owned and offer only basic banking services. Local and foreign investors may acquire small loans from local banks through very complicated and impractical procedures.

Legal, regulatory, and accounting systems are consistent with international norms in theory. In reality, however, local businesses do not comply with these regulations in order to avoid confiscatory tax rates.

There are no stock or bond markets in Syria.

Conversion and Transfer Policies
The new investment law sets no limits on the inflow of funds. Beneficiaries under the law are permitted to open foreign exchange accounts with the Commercial Bank of Syria. An investor must deposit 100 percent of all foreign exchange capital and hard currency loans secured by the project, and 75 percent of export earnings. Outward capital transfers and profit remittances are prohibited, unless approved by the Prime Minister or sanctioned under the new investment law or a specific arrangement, as in the case of production sharing agreements concluded with oil exploration companies. Under Law 10/1991, invested capital may be repatriated after five years from the project completion date (six months, if the project fails due to events beyond the control of the investor), and profits remitted on an annual basis. Expatriate employees are permitted to transfer abroad 50 percent of their salaries, and 100 percent of severance pay. In the case of foreign oil companies, "cost recovery" of exploration and development expenditures is governed by formulas specifically negotiated in the applicable concession agreement.

Foreign oil partners in production sharing joint-ventures with the state oil company report delays in the recognition of "cost recovery" claims, although such payments are eventually approved.

The private sector has had no access to official foreign reserves since 1984. Under the new investment law, all foreign exchange operations must be generated from company operations and transacted through the investor's foreign exchange account at the Commercial Bank of Syria. No mechanism exists in the parallel "gray" foreign exchange market, funded from permitted private sector retained export earnings, for the repatriation of capital and profits.

Strict foreign exchange restrictions are enforced outside the concessions granted under law 10/1991. The export of capital requires the approval of the Central Bank, as does overseas borrowing. Foreign companies operating outside the new investment law may transfer capital only in accordance with the special agreements, usually in the form of a presidential decree, which allow their operation in Syria.

Expropriation and Compensation
There have been no expropriations of private property for public use since the 1960s. Although protection against expropriation is not explicitly stated in the new investment law, older investment laws include such clauses, which presumably remain valid and applicable under the new investment law.

Dispute Settlement
Few investment disputes have occurred during the past several years. The few that have transpired have typically been settled (often with long delays) through negotiations or via arbitration clauses in contracts..

The government accepts binding international arbitration of investment disputes between foreign investors and the state in cases where the investment agreement or contract includes such a clause. Otherwise, local courts have jurisdiction. Syria is neither a member of the International Center for the Settlement of Investment Disputes nor of the New York Convention of 1958 on the recognition and enforcement of foreign arbitral awards.

General Procedures to open a branch or an office in Syria (Arabic PDF)