With a high population growth rate of 3.1 percent and an energetic private sector, Syrian markets are expanding. Agents/distributors representing international firms, who previously serviced their clientele throughout the country from central offices, now need to find new channels of distribution.
Agents/Distributors; Finding a Partner
To develop a long-term presence in the market, it is advisable to engage an agent/distributor who can actively promote the product, follow leads, respond quickly to government tenders, and offer customer services.
According to Syrian government regulations, public establishments and companies do not accept offers presented through non-registered agents, yet many Syrian businessmen try to avoid having their agency agreements registered, and ask that agency agreements not be disclosed to the government. If, at any stage during the execution period of the contract, the government discovers the existence of such an agreement, the agent's commission will be deducted from the contract value. The government will then pay the agent his commission at an exchange rate of 23 SP/USD instead of the more favorable 43.5 SP/USD neighboring country rate. Moreover, the agent is required to pay income taxes on the collected income, further reducing his commission.
In the pharmaceutical sector, more than one leading foreign firm has licensed its products for Syrian production as have several soft drink, fruit juice, fertilizer and pesticide firms.
The profitability of most licensing and joint venture projects is based on high tariff protection.
Aleppo, Syria's second largest city, with a population of over three million, is becoming Syria's main center for private sector industrial development, especially textiles, food processing, pharmaceuticals, glass, and metal production. According to the Aleppo Chamber of Industry, the city boasts over 38,000 industrial firms, over half of which are textile companies (two-thirds of Syria's textile industries are located in Aleppo). The northern secondary cities of Hama, Homs, Latakia, Tartus, and Dayr al-Zawr also offer significant marketing opportunities.
Many Syrian traders are experienced, international businessmen. Many businessmen are multilingual (Arabic/English/French). Government agencies follow a practice called "breaking the price." After financial tender envelopes are opened, bidders are invited to participate in a meeting in which the purchasing agency requests that each bidder revise his price. Such meetings can become an open auction, and sometimes the company with the lowest original bid does not win the contract.
Selling to the
Many public sector companies continue to favor barter arrangements. On the other hand, barter agreement is sometimes requested for certain commodities in exchange for Syrian rock-phosphate. However, this is not a serious problem. Offers accompanied by a bid bond of five percent of the offer value may be submitted either directly by the foreign company, or through the company's registered Syrian agent. Before a Letter of Credit (L/C) is opened, the supplier must submit a ten percent performance bond. The Commercial Bank of Syria requires that all bonds (bank guarantees) be issued according to the "Syrian official text." Since 1987, most government tenders have included a clause allowing the bidder to cancel his offer at six month intervals if a letter of credit is not issued, provided written notice is rendered in a timely manner. Furthermore, the same regulations allow proportional payment of performance bonds. Nevertheless, companies still experience difficulties in obtaining the prompt and complete return of their performance bonds.