Distribution Channels

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.

Use of Agents/Distributors; Finding a Partner
Foreign firms doing business with the Syrian public sector must have a local address (domicile), but national law does not require foreign firms wishing to do business in Syria to have an agent or distributor. If they do, the law requires that certain agency agreements format, prepared by the Ministry of Economy, be filled out, signed and legalized by the Syrian Embassy in your country.

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.

Direct Marketing
At present, direct marketing does not exist in Syria. The Syrian government forbids the importation of many consumer items, such as toys and finished clothing, which are marketed directly in other parts of the world.

Joint Ventures/Licensing
There are few joint ventures between Syrian and foreign firms. The largest are in the government-controlled oil sector. They are the Al-Furat Petroleum Company (Syrian Petroleum Company, 50 percent, Deminex, 18.75 percent, Royal Dutch Shell, 31.25 percent) and the Dayr al-Zawr Petroleum Company (Syrian Petroleum Company, 50 percent, Elf Aquitaine, 50 percent). Mobil Oil has recently invested in a small joint venture lube oil blending facility while Nestle has invested in a food processing facility.

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.

Selling Factors/Techniques
For marketing purposes, Syria is best divided into two zones, Damascus and Aleppo. Approximately four million of Syria's 15 million people live in the vicinity of Damascus and the population is growing annually at a rate of five percent. As the center of government activity, Damascus is the major contact point for selling to the public sector. In addition, a significant portion of private sector trading and industrial activity is located in the capital as well.

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 Government
Government organizations procure goods and services through complex tendering procedures outlined in Decrees Number 195 (1974) and Number 349 (1980). The buyer must solicit bids by announcing his requirements through the "Daily Bulletin of Official Tenders." (Note: Announcement of tenders with deadlines of less than 45 days is not uncommon).

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.