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FY 1998 Country Commercial Guide: Syria

Report prepared by U.S. Embassy Damascus, released August 1997*.

I. EXECUTIVE SUMMARY

This Country Commercial Guide (CCG) presents a comprehensive look at Syria's commercial environment, using economic, political, and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. embassies through the combined efforts of several U.S. government agencies.

Syria is a country of some 15 million people with a GDP of $16 billion at the blended government exchange rate of 34.26 Syrian Pounds (SP)/USD and $11 billion at the free market rate of 50 SP/USD. By comparison, Saudi Arabia has a population of 18 million and a GDP of $120 billion, while Jordan has a population of 4 million and a GDP of $6.5 billion.

Major sectors of the Syrian economy, including heavy industry, banking, insurance, and utilities remain firmly in the public sector. Other sectors, including food processing, pharmaceuticals, and transportation, have recently been opened to the private sector. Still other sectors, such as retail sales and agricultural production, were never nationalized.

Syrian prosperity depends heavily on oil revenues, foreign aid, remittances from Syrian workers abroad, and the vagaries of agricultural production. In the early 90s, rising oil production, record harvests, and Gulf War-related aid flows spurred GDP growth of 7-8 percent.

More recently, oil production and foreign aid have begun to decline. An uncertain Middle East peace process has reduced investment confidence while the collapse of several informal private financial firms has reduced consumer purchasing power. Together these factors have brought GDP growth down to a range of 4-6 percent since 1994.

Rapid growth is also hindered by numerous restrictive government policies. A cumbersome and complex multiple exchange rate system remains in place, despite incremental efforts to move the "neighboring country rate" towards the "free market rate". Tariffs remain high. Import restrictions remain numerous despite an increase in the types of goods the private sector can import. Real interest rates are negative and the private sector has very limited access to capital. Bank loans require collateral as well as a third-party sponsor. The Government's poor repayment record has limited its access to international capital markets.

Industrial machinery and power generation equipment as well as oil field services and equipment remain the most important U.S. exports to Syria. In the near-term, expansion of the private sector may lead to rapid growth in demand for food-processing and textile machinery. Increased tourism also may provide new demand for U.S. products.

II. ECONOMIC TRENDS AND OUTLOOK

Major Trends and Outlook

After four consecutive years (1990-93) in which real GDP growth averaged 7-8 percent, real GDP growth in 1994, 1995, and 1996 averaged between 4 and 6 percent. Oil exploration and production, bumper agricultural harvests, increased private investment, and large post-Gulf War aid flows provided the impetus to Syria's growth spurt in the early 90s. While 1995/96 again saw record agriculture harvests, there was a decline in oil production, foreign aid, and investment levels. A liquidity problem originating with the collapse of several private financiers in Aleppo continues to stifle both consumer demand and private investment activity. Recent delays in the Middle East peace process have undermined investor confidence. An inflation rate of approximately 10 percent (caused by a reduction of government subsidies and rising international prices of key imported raw materials), has also hurt economic performance.

Looking ahead, the prognosis for 1997 remains uncertain. On the positive side, agricultural harvests look good, and summer payments to farmers of nearly $1 billion will spur consumer demand in the fall. Electricity supplies continue to improve, encouraging industrial productivity gains. The trade deficit, which has grown in recent years, may fall. According to trade sources, the number of import permits issued thus far in 1997 is significantly lower than the same period last year, while exports may improve if higher oil prices offset production declines.

Intrinsically, the Syrian economy has much to offer investors: A highly-educated, experienced managerial class, a productive and technically competent workforce, inexpensive raw materials, and a low to moderate cost of living. Moreover, in 1996, the government slightly devalued the currency and initiated bank reforms that expanded access to foreign currency accounts. However, the government still must enact major economic reforms, such as unifying exchange rates, resolving debt problems, opening the banking and insurance systems to the private sector, and reopening the Damascus stock exchange if Syria is to compete effectively in world markets.

Principal Growth Sectors

Should the Syrian government act on economic reform, several industrial subsectors would grow rapidly: Processing of agricultural products; textiles; and ready-made clothing. Syrian agriculture, highly productive in its own right, will

continue to provide inexpensive raw materials to these industries. High growth potential also exists for the fertilizer, insecticide, and chemical manufacturing industries. Another area to be exploited is the service sector, as Syrians seek corporate management and technical training.

Blessed by a rich cultural heritage and a Mediterranean coastline, Syria possesses considerable potential for tourism. In addition, the transportation sector will need to expand to meet increased industrial production. Finally, growth in financial services could be dramatic following liberalization of this stifled sector. However, this is not expected to happen in the near future.

Government Role in the Economy

Until recently, the government pursued policies aimed at expanding the public sector, with tight controls on private sector activity. All large industry, including the banking and insurance sectors, was nationalized in the 1960s. Arab aid from the "boom years" of the 1970s was used to expand the state's industrial base with the creation of hundreds of public enterprises. Beginning in 1989, the government started to implement some economic reforms. It passed a new investment law in May 1991 (Investment Law #10), and has gradually lengthened the list of goods that the private sector can either produce or import to include goods produced by the public sector. However, the public sector is still expanding and the government continues to control all "strategic" sectors such as oil, electricity, banking and chemicals as well as much of the textile and food processing industries.

Balance of Payments Situation

According to sources at the Central Bank of Syria, current account balance, which includes goods and services, income, and transfers, reached $444 million. Capital and financial account amounted to $554 million. The overall balance of payments is reported at $1,053 million. The 1995 trade deficit is reported at $358 million in 1995. Data for 1996 and 1997 are still not yet available.

Infrastructure

Syria enjoys a good road network between major Syrian cities and neighboring countries. The railroad system is good but is used mainly to ship commodities such as grains and rock phosphate in bulk. There are two international airports in Syria: Damascus and Aleppo. The country's two ports at Latakia and Tartus are presently sufficient for the country's current needs.

Modernization and expansion of the two existing ports also are under consideration. There are plans to construct a new port to accommodate larger vessels.

Syria is developing its telecommunications system rapidly. Internet is still not available but is expected to operate within six months. Cellular phones also are unavailable and likely will not be in service before 2-3 years.

In recent years, Syria's electricity generating capacity has caught up with demand, but problems in the distribution system still lead to periodic power outages.

Municipal water supply is presently adequate. Some water rationing is very common in the major cities in the summer months.

Finally, there are plans for the establishment of well-serviced industrial zones around major cities.

III. POLITICAL ENVIRONMENT

Nature of Political Relationship with the United States

Syria, a country which plays an important regional role, has a dichotomous relationship with the United States. On the one hand, Syria and the U.S. are intensively engaged at a high level in the Middle East peace process that began with the Madrid Conference in October 1991. On the other hand, Syria is included on the U.S. State Department's list of state sponsors of terrorism, and thus is subject to major bilateral economic sanctions. In addition, the USG's determination to "decertify" Syria for its insufficient cooperation in international counter-narcotics efforts (particularly in Lebanon, where Syria maintains over 30,000 troops) makes Syria ineligible for most forms of USG economic assistance. Although it has released several thousand political prisoners over the past few years and has lifted restrictions on the foreign travel of Syrian Jews, the protection of human rights continues to be a matter of concern in U.S.-Syrian relations. The USG continues to press the Syrian government to guarantee its citizens fundamental human rights. The U.S. also remains concerned about possible Syrian acquisition of weapons of mass destruction.

Major Political Issues Affecting Business Climate

Individual Syrians are estimated to hold billions of dollars outside the country. In recent years, thanks to a series of economic reforms, some capital has been repatriated to establish businesses and industries. However, investor concerns over long-term political stability will prevent rapid return of a large portion of that capital. These concerns affect the business calculations of foreigners even more strongly. U.S. firms looking at business or investment opportunities must also consider a range of U.S. export controls and a lack of guaranteed trade financing that stems from Syria's presence on the U.S. list of state sponsors of terrorism.

Additionally, Syria's continued adherence to the Arab boycott of Israel conflicts with U.S. Anti-boycott legislation, complicating the conclusion of sales to the government. Given the widespread use of commercial agents in Syria and widespread commercial corruption, U.S. businesses must be particularly attentive to the impact of the Foreign Corrupt Practices Act.

Political System, Schedule for Elections, and Orientation of Major Political Parties

Although Syria displays some institutions of democratic government, such as a parliament, President Hafez al-Asad wields almost absolute authority. Key decisions regarding foreign policy, national security, international politics, and the economy are made by President Asad with counsel from his ministers, high ranking members of the ruling Ba'th party, and a relatively small circle of security advisers.

In the parliament, or People's Assembly, a limited number of legal political parties participate in a ruling coalition with the Ba'th party, known collectively as the National Progressive Front. Despite the appearance of a multiparty system, the Ba'th party is constitutionally guaranteed a majority in Parliament and primacy in state institutions. The other political parties exist primarily to voice approval for Ba'th party policies and in no way constitute a political opposition. The People's Assembly itself does not initiate legislation; it votes on and sometimes modifies laws proposed by the executive branch.

Elections for the presidency are held every seven years. Since he took power in 1970, President Asad has been the only presidential candidate. In 1992, President Asad began his fourth 7-year term in office. Elections for the 250-member Parliament are held every four years; the last election was in 1994. Since 1980, the government has allowed 80 seats in the Parliament to be held by independent (no political affiliation) candidates; the remainder of seats are guaranteed for the Ba'th-party-dominated National Progressive Front.

The security services play a powerful governmental role which extends beyond strictly security matters. A state of emergency law has been in place almost continuously since 1963, and grants broad powers to security services. The government justifies martial law because of the state of war with Israel and past threats from terrorist groups. The numerous branches of the security services operate independently of each other and outside the legal system. Their members often ignore the rights of suspects and detainees and commit serious human rights violations.

IV. MARKETING U.S. PRODUCTS AND SERVICES

Distribution and Sales 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. Many U.S. companies sell products via European distributors, resulting in high prices for the Syrian market.

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 a certain agency agreement format, prepared by the Ministry of Economy, be filled out, signed and legalized by the Syrian Embassy in Washington, D.C. For one-off deals, smaller Syrian businesses often order directly from U.S. firms without seeking to establish an agent/distributor relationship.

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 service. When a company has decided to enter the Syrian market, and wishes to obtain information on how to do business in Syria, the U.S. Embassy in Damascus strongly recommends that it contacts the nearest District Office of the U.S. Department of Commerce. These district offices offer a number of programs to assist American exporters find business partners in Syria. Some of the programs offered are: the A/DS (Agent/Distributor Service), which provides American exporters with a list of potential candidate agents chosen by the Embassy to help the U.S. Company market its products and/or services in Syria, and the ICP (International Company Profile), which provides background information on individual businesses in Syria.

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.

Franchising

Syrian regulations have made franchising difficult or impossible. There is at present only one branch of an American fast food franchiser in Syria and it is unclear to what extent this relationship is one of association rather than legally contracted franchise.

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 U.S. 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. (See Section VI).

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:

1. The Chamber of Commerce in the company's national country.
2. b. The Ministry of Foreign Affairs of the company's country of nationality.
3. c. The Syrian Embassy in that country. d. The Syrian Ministry of Foreign Affairs.

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

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. Government bureaucrats, who are somewhat less experienced with doing business globally, may actually be tougher negotiators. Many businessmen are multilingual (Arabic/English/French), while some of the more important government ministers only speak Arabic.

Negotiations for a sale, whether with a government agency or a private individual, will be extremely protracted, as Syrians haggle until the last possible second. Offering one's best price at the beginning, therefore, is ill-advised.

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.

Advertising and Trade Promotion

With the expansion of product availability following the government's relaxation of import restrictions on many consumer goods, the Syrian retail market has become increasingly competitive. Consequently, television and newspaper advertising has become more widespread. Responding to this increase in demand, some private advertising/public relations firms have opened. Employing desktop publishing techniques, they have considerably raised the quality of advertising standards. Newspapers charge foreigners steep rates, demanding about $712 for a 1/4-page newspaper ad, while the base rate for a 30 second TV spot ranges from $333 to $642 plus a 15-60 percent tax and timing mark-up.

For advertising purposes, the following local newspapers may be considered:

Tishrin
Midan Street, P.O. Box 5452
Damascus, Syria
fax: 963-11-223-1374
phone: 224-7359, 224-7049, 889-6902/3/4.

Al-Thawra
Kaffar-Souseh Square, P.O. Box 2448
Damascus, Syria
fax: 963-11-221-6851
phone: 222-2399, 221-0850, 222-2911.

Al-Baath
Mazzeh Street, P.O. Box 9389
Damascus, Syria
fax: 963-11-662-2099
phone: 662-2142, 661-7616, 661-7683.

Golan
(the daily bulletin of official tenders)
P.O. Box 2842
Damascus, Syria
fax: 963-11-222-0754
phone: 222-5219.

Syria Times
(an English language daily newspaper targeted at the Western audience)
Midan Street, P.O. Box 5452
Damascus, Syria
fax: 963-11-223-1374
phone: 224-7359, 224-7049, 889-6902/3/4.

In 1996, local promoters held a number of new trade shows in both Damascus and Aleppo. U.S. computer firms participated successfully in a number of these shows. Syrian promoters plan to hold trade shows in fields such as computers, medical equipment, tourism, agricultural and food-processing products and equipment, and construction equipment (see Appendix G). The Syrian government, likewise, annually hosts an International Fair of Damascus in August/September and a Book Fair in September.

In the last three years the privately sponsored SIFA fair has emerged as the most significant general trade show in Syria. It has attracted a growing number of U.S. and foreign firms. A list of Syrian trade events and trade show promoters can be found in Appendix E.

The Embassy actively promotes Syrian participation in U.S. trade shows.

Pricing Product

Syrian consumers are very price conscious. U.S. firms considering the Syrian market are advised to review every component in the pricing process. Syrian importers interested in buying U.S. products often complain about the high cost of transporting products from the U.S. to Syria relative to transportation costs from Europe.

Sales Service/Customer Support

In a country where technical skills are scarce, companies offering responsive, reliable, and competent customer service establish strong reputations which help to increase their sales.

Hiring a Syrian agent/distributor and/or training customer support staff in the U.S. also provides greater product credibility.

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 that are not attractive to U.S. suppliers. On the other hand, barter agreement is sometimes requested for certain commodities in exchange for Syrian rock-phosphate. Howerver, 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.

Faced with these difficulties, few U.S. firms have been able to compete successfully in public tenders in recent years. Those who have not need a clear understanding of the regulations, the offers evaluation process, and most important, a capable and well-connected "agent" or "middle man."

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. Early in 1995, a large U.S. firm detected a violation of one of its trademarks in Syria. Having registered its trademark previously, the U.S. firm filed suit in Syrian court against the responsible firm. The Damascus Chamber of Commerce successfully mediated a satisfactory settlement.

Had the case gone to court, it likely would have received a fair hearing, but any financial award would have been in Syrian pounds, as yet an unconvertible currency. Requests for payment in foreign exchange would probably be delayed indefinitely.

Need for a Local Attorney

Because Syrian law and the Arabic language are vastly foreign to U.S. businesses, 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.

The American Embassy assumes no responsibility for the professional ability or integrity of the persons or firms whose names appear below. Nevertheless, care and selectivity have been exercised in the preparation of this list. Names are arranged alphabetically, and the order in which they appear has no other significance.

List of Attorneys in Syria (As of June 1, 1996)

Damascus

Mazhar Anbari: Sanjakdar Street, tel: 2217017. Citizen of the SAR. Born in Damascus 1923. Graduate of Damascus Law School 1948; practicing since 1948. Specializes in criminal and civil cases, insurance, and international arbitration. Former Minister of Justice. Former Vice-Speaker of the Parliament. Former President of the Syrian Bar Association. Languages: Arabic, English, and French.

Farid Arslanian: Balkis Street, telephone: 2218321 and 3331676. Citizen of the SAR. Born in Turkey in 1915. Graduate of Damascus Law School. Specializes in criminal, civil, and insurance cases. Secretary General of the Committee of Damascus Bar Association. Controller, 1960-1971. Elected Deputy in the Syrian Parliament. Legal consultant since 1964 for the United Nations Relief and Works Agency in the SAR. Languages: Arabic, French, English, Armenian, and Turkish.

Ghazi Al-Ghazzi: 69 Salhieh street, Tibi & Sulo Building, P.O. Box 4238, tel: 2224036 (office), fax: 2229798, 3327648 (home). Citizen of the SAR. Born in 1937. Graduate of Damascus Law School. Represents a number of foreign firms in Syria. Languages: Arabic, English, and French.

Jacques Hakim: Victoria Bridge, Mardam Building, P.O. Box 5788. Telex 412033 Sy (drobco); tel: 2223577 (office), 3710554 (home). Citizen of the SAR. Born in Damascus in 1931. Doctor of Law (France), graduate in economics (Economics Institute, Univ. of Colorado). Professor, Head of the Commercial Law Department, Damascus University. Practicing since 1952. Specializes in commercial, and finance cases along with international arbitration. Languages: Arabic, English, and French.

Hazem Jazzar: Salhieh Street, Cinema Amir's Building, Tel: 4421069 (home), 2225286 (office). Citizen of the SAR. Born in Damascus in 1948. Graduate of Damascus Law School 1971. Has practiced law since 1971. Specializes in commercial and criminal cases. Languages: Arabic and English.

Zouheir Al-Midany: Abou-Roumaneh Street, tel: 2213100 (office), 3332075, 3330650 (home). Citizen of the SAR. Born in Damascus in 1923. Graduate of Damascus Law School 1947. Has practiced law since 1947. Specializes in civil, commercial, and criminal cases. Former head of the Syrian Bar Association and former Vice-President of the International Bar Union. Languages: Arabic and French.

Mamdouh Rahaby: Salhieh, Dentists' Syndicate Building, 3rd floor, tel: 2221428 (office), 3332905 (home). Citizen of the SAR. Born in Damascus in 1932. Graduate of Damascus Law School 1966. Specializes in civil, real estate, and commercial cases. Languages: Arabic and English.

Souheil Sarkis: 7 Fountain Square, Adel Sharaf Building, 2nd floor, tel: 4428240, 4419999, telex 412464. Citizen of the SAR. Born in Damascus in 1934. Graduate of Damascus Law School 1960. Has practiced law since 1961. Specializes in civil and commercial cases. Languages: Arabic, English, and French.

Sami Wardeh: Marjeh Square, Kabbani building, P.O. Box 10355, tel: 2211767 (office), 3714892 (home). Citizen of the SAR. Born in Damascus in 1942. Graduate of Damascus Law School 1965. Has practiced law since 1965. Specializes in commercial and real estate cases. Languages: Arabic, French and English.

Aleppo

Miss Ghada Bismarji: Kostaki Homsi Street, Azizieh, telephone 219428. Citizen of the SAR, graduate of Damascus Law School

1962. Has practiced law since 1962. Sworn translator English-Arabic, and vice-versa. Handles all types of cases. Languages: English, Arabic, French, and some Armenian.

Ihsan Kayali: Baron Street, tel: office 215811, home 219403. Citizen of the SAR. Born in Aleppo in 1925. Graduate of Damascus Law School in 1949. Handles all cases with specialization in commercial and insurance cases. Languages: Arabic, English, and French.

Simon Bashkhamji: P.O. Box 67, Azizieh, tel: office 247074, home 217624. Citizen of the SAR. Graduate of the University of Aleppo 1969. General practice. Languages: Arabic, French, and some English.

Homs

Mouhammad Mounir Amoudi: P.O. Box 362, tel: 223115 (office), 222683 (home). Citizen of the SAR. Born in 1928. Graduate of Damascus Law School 1949. Has practiced law since 1949. Specializes in criminal, civil, banking, and insurance cases. Languages: Arabic, French, and English.

Antoun Trabulsi: tel: 224406 (office), 225286, 224655 (home). Citizen of the SAR. Born in 1919. Graduate of Damascus Law School 1940. Has practiced law since 1940. Lawyer of the Municipality of Homs. Head of Homs Bar Association. General practice. Languages: Arabic and French.

Hama

Fathallah Alloush: Al-Alamien Street, tel: 223206 (office). Citizen of the SAR. Born in Hama in 1932. Graduate of Damascus Law School in 1955, practicing law since 1955. Specializes in civil, banking, and criminal cases. Languages: Arabic and French.

Khaled Al-Keylani: Kowatly Street, tel: 222536, 221299. Citizen of the SAR. Born in Hama in 1929. Graduate of Damascus Law School in 1954. No specialization, handles all cases. Languages: Arabic, French, and some English.

Latakia

Hassan Makhlouf: P.O. Box 1025, tel: 338055 (office), 226089 (home). Citizen of the SAR. Born in 1930. Graduate of Damascus Law School 1960. Has practiced law since 1960. No

specialization, handles all cases. Languages: Arabic, French, and English.

V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT

Best Prospects for Non-Agricultural Goods and Services

1. Oil and Gas Exploration Equipment, Piping, and Supplies: (OGM, OGS): The Al-Furat Petroleum Company (which produces about 370,000 bpd of crude oil) plans to invest several hundred millions dollars in oil and gas infrastructure during the next five years. In addition, the Dayr al-Zur Petroleum company (producer of 60,000 bpd) will continue its own development and infrastructure investment program. Tullow Oil, an Irish company, discovered small oil reserves and has formed a joint-venture called Khabur Company. It will extract about 4,000 bpd beginning early 1997 with the consequent field development and production costs. Several companies are interested in gas recovery projects estimated at USD 300-400 million. Furthermore, the Syrian Petroleum Company (which produces 160,000 bpd) continues its own field development and infrastructure construction projects in Northeastern and Central Syria.

2. Electricity (ELP): The Public Establishment for Power Generation and Transportation (PEEGT) continued to pursue expansion projects in the electricity sector in 1996 and 1997. The most important development in the power sector is the regional project to create an electricity grid between Syria, Jordan, Egypt, Iraq, and Turkey. To achieve the grid link-up, PEEGT has announced international tenders for its grid connections with Jordan and Turkey. The tender for the connection with Jordan was awarded to the Indian "K.A.C." company on a turn-key basis. The tender for the connection with Turkey is currently under evaluation and results should be announced soon. In addition, current plans call for the construction of three new power stations namely: The 600 megawat (MW) Al-Zara plant, the 300 MW Zeizun Plant, and the 630 MW Tishrin hydro power plant. Furthermore, PEEGT plans to construct fifty 66 KV substations. The Establishment contracted for the import of 5 transformer stations. As for 1997, the government will announce a foreign tender for the import of a dispatching center as well as the import of gas turbines to be installed in 2-3 existing power plants so that they become combined cycle. Foreign donors are financing, or will finance, most of these projects, provided Syria can resolve some of its debt arrears problems. With three new power plants and fifty substations planned, there are numerous commercial opportunities for U.S. companies for the supply of equipment and technology.

The above statistics are unofficial estimates of power generation and transmission equipment.

3. Telecommunications (TEL, TES): The Syrian Telecommunications Establishment (STE) has ambitious plans for the coming years. As part of its USD 500 million new 1.65 million telephone lines expansion plan, STE has announced six separate major tenders that involve the following: the supply and supervision for the installation of one million telephone lines; the supply of telephone networking material; the supply and installation of digital microwave links; the supply and supervision for the installation of inter-city fiber optic cross-connect links; the supply and supervision for the installation of the links between the rural centers and the matrix exchanges in two groups, the microwave link, and the fiber-optic link; and the supply and installation of computer hardware and software to establish three billing centers. STE also has a tender ready on its drawing board for a GSM cellular telephone system which will be presented as soon as the government approves it. The figures given below for 1996 and 1997 reflect minor imports of telecommunication products. 1998 figures are estimates based on the implementation of STE's expansion plan.

4. Cotton Yarn Spinning: Until recently, cotton yarn spinning was monopolized by the government. Under Investment Law Number 10, the government allowed private sector investors to establish integrated factories (spinning, weaving, finishing, and final garment manufacturing). As a result, some private investors obtained licenses from the Supreme Council of Investment for establishing such facilities. According to the best available information, only one manufacturer has to date started operation.

As part of the Syrian government's plan to increase the export of manufactured cotton rather than raw cotton, two cotton spinning facilities were constructed in Latakia and Idlib. A third plant in Jablah to be built by the Chinese will have a production capacity of 24,000 tons. Moreover, another plant in Latakia will expand production by 12,000 tons bringing Syria's cotton yarn production to 90,000 tons per year in 1998. If financing is secured, the SARG wants to expand its spinning capacity to 200,000 tons of lint per year. While the trade figures for 1995 and 1996 reflect minor imports of textile machinery and its accessories, 1997 figures reflect imports required for the new cotton spinning plants.

5. Fertilizer and chemical processing Plants (AGC, CHM): This sector continues to receive special attention from the Syrian government. Although raw materials (rock phosphate and energy in the form of natural gas) are available, the country still imports over 500,000 tons of fertilizers per year to meet agricultural sector demand. The Ministry of Industry plans to construct one triple superphosphate (TSP) plant in Palmyra, close to the phosphate mines and a urea plant in Al-Hasakah near the oil fields. The capacity of each plant will be 500,000 tons per year. Arab Development Funds have been earmarked for the partial funding of the TSP project.

6. Silo Storage for Grains: The Syrian government is progressing with its plan to increase silo storage capacity to meet the increasing demand. The General Establishment for Cereal Processing and Trade plans to construct 20-25 metal silos, 12,000 tons capacity each, per year over the next 4 years. The Establishment has contracted for the construction of 25 silos in 1996 and will most probably contract for similar numbers in 1997 and 1998. Concrete silos are being expanded by about 400,000 tons over the coming few years.

7. Irrigation Equipment (AGM): Syria's economy is highly dependent on agriculture, yet only 18 percent of the total planted acreage is irrigated. The Ministry of Irrigation has ambitious plans to install irrigation and drainage systems in northeast Syria to increase irrigated areas by about 350,000 hectares thus reaching 25 percent. At present, irrigation systems are being installed to cover approximately half this area. There are also plans to install high capacity pumps and systems along the Tigris river to irrigate about 150,000 hectares. Improving efficiency over the near-term will allow irrigation of a maximum area with diminishing water supplies. Utilizing more efficient irrigation systems such as sprinkler or drip irrigation may be the only viable solution.

8. The Pharmaceuticals and Medical Equipment Market (MED): In 1997, the total spending for the Ministry of Health (MOH) on pharmaceuticals and medical equipment will be about $140 million, a 2.5% increase over the 1996 budget. The Ministry of Health imports raw materials, medicines that are not manufactured locally, and medical equipment and supplies. The MOH is encouraging the private sector to invest in the pharmaceutical industry -- at present, about forty-five private pharmaceutical companies are contributing to Syria's pharmaceutical requirements. Market potential for pharmaceutical products is therefore favorable. MOH has set priorities for its import requirements -- emergency medicines, surgical supplies, cancer treatment products, and vaccines. Under the current development plan, the government is constructing twenty-one new hospitals. This will increase the total capacity of 13,632 beds by 25%. Equipment needed to equip these hospitals includes x-ray machines, CAT Scans, MRI scanners, equipment for heart-related illnesses, ICU equipment, operating tables/tools, emergency trolleys, surgical lights, coagulators, monitors, cardiac recorders, surgical instruments, and echographs.

9. Computers (CPT): Imports of computer equipment should reach about $22 million in 1997, for which European, Korean, Taiwanese, and U.S. firms will compete. In 1996, local computer shops learned how to assemble computer components and make a cost-effective personal computer to compete against imported brands. Some sophisticated U.S.-made components are being used for personal computers and are diverted from European and Gulf countries to the Syrian market. It is believed that the market share for U.S. personal computer brands declined from 30% to 25% of total market share last year. This is attributed to tougher export controls and higher competition from lower value brands.

10. Food Processing/ Grain Milling and Storage (FPP, AGM): Opportunities for private investment have greatly improved following enactment of Law 10/1991. Many companies plan to establish food processing facilities for grading and sorting, canning, dairy production, and deep freezing. Controlled atmosphere storage and oil seed crushing are two additional areas of growing interest. In the long run, prospects for the development of this sector are very good. In 1996, Syria's flour milling plants met all of Syria's needs, and with 5 new plants scheduled to open within the next 2 years, Syria will have excess flour milling capacity and will be able to renovate some of its old mills that have been operating continuously since the 1960s.

11. Port Facilities: The Syrian government is planning to construct a new high-capacity port to the south of Tartus to handle the increasing trade volume for Syria and the transit trade from the Gulf countries. This project may be approved within the next couple of years while construction will take 4-5 years.

Best Prospects for Agricultural Products

Corn, soybeans and soy products, rice, cigarettes, vegetable seeds, and almonds will continue to be the leading U.S. agricultural exports to Syria. The first soybean crushing facility started operation in October 1995 and has so far imported over 22,000 tons of soybeans from the U.S.

VI. TRADE REGULATIONS AND STANDARDS

Tariffs and Import Tax

All goods imported into Syria are subject to customs duty and unified tax. Duty rates are progressive and range from 1%-200%, depending on the government's view of the necessity of a product. Food and industrial raw materials carry relatively low rates, while rates between 150%-200% are imposed on luxury items such as automobiles. The unified tax is a surcharge on all imported goods and its proceeds are allocated to the military, schools, and municipalities. Unified tax rates range from 6%-35% and are collected by the Customs Department. Customs procedures are cumbersome, tedious, and time-consuming because of complex regulations.

Below are examples of custom duties applied to a selection of imported products:

a. Raw material inputs and medicines are taxed 1% at the rate of 11.2 SP/USD.

b. Equipment for local factories is taxed between 1-20% at the rate of 43.5-44 SP/USD.

c. Major food products such as rice, sugar, tea, and wheat are taxed between 1-7% at the rate of 11.2 SP/USD, while processed and canned food products are taxed between 30-50% at 43.5 SP/USD.

d. Small electronic equipment (such as radios and VCRs) are taxed between 30-50% at 43.5 SP/USD; medical equipment is taxed at 7% at the 11.2 SP/USD rate; computers at 15% at the rate of 43.5 SP/USD. Passenger vehicles under 1000 kg in weight are taxed at 150%, over 1000 kg passenger vehicles are taxed at 200%. Taxes and duties on vehicles are paid in hard currency.

Customs Valuation

Prior to December 1993, the Customs Service valued imported articles using the "official" rate of exchange, 11.2 SP/USD. However, recent laws have altered the rates on most goods, with duty charges of less than 75% valued at the 23 SP/USD rate. Goods dutiable between 75-200% are valued at the 43.5 SP/USD rate. Also, items which the government began allowing into the country, such as telephones, fax machines, and previously banned consumer electronic goods are now valued at the neighboring country rate of 43.5 SP/USD.

Import Licenses

Registered Syrian merchants and industrialists must obtain an import license issued by the Ministry of Economy and Foreign Trade (or its affiliated directorates) for any product they wish to import. In general, an importer may obtain a license for any product listed on the Ministry of Economy and Foreign Trade's list of importable items.

Export Controls

The exporting of Syrian goods requires no license. The exporter must prepare the following documentation:

1. An invoice certified by a local chamber of commerce.

2. Certificate of origin.

3. A customs document of description.

4. Except for fruit and vegetable exports, an exporter must produce a bank guarantee stating that hard currency earnings will be returned to Syria within four months (for goods exported to Arab countries), and within six months (for goods exported to other nations). The period for repatriating earnings may be extended up to nine months.

Exporters are taxed on their export earnings at rates between 1.5% and 3% of the value of the product(s) shipped.

Arab Boycott

Syrian public sector companies request in their tender announcements that bidders provide certificates stating that the bidders abide by the Arab boycott of Israel. However, in 1978, the Ministry of Economy and Foreign Trade issued a decision permitting U.S. companies to submit a "positive statement" stating that the goods are produced in the U.S. of 100 percent U.S. components to avoid the boycott language which is unacceptable under the U.S. Antiboycott Compliance Law. Other suppliers, however, do provide the boycott language.

Import/Export Documentation

Documents for goods exported to Syria must include:

1. Bill of lading.

2. Valid import license.

3. Commercial invoice in three copies describing the type of goods, price, basic specifications, and method of payment. The exporter should also include two statements on the invoice. The first concerns whether or not the exporter has an agent in Syria, and the second involves Israel boycott related language. Exporters should obtain competent advice regarding the antiboycott regulations before proceeding from the U.S. Department of Commerce, Office of Antiboycott Compliance, telephone: (202)- 482-2381; fax: (202)-482-0913.

4. Packing list in three copies.

5. Certificate of origin in three copies.

All documents should be certified by the Chamber of Commerce and the Syrian Embassy in the country of origin.

To export, a Syrian company must be registered with a Syrian Chamber of Commerce. Goods leaving the country must be accompanied by a commercial invoice certified by the Chamber of Commerce and a packing list.

Temporary Entry

The Syrian government grants temporary entry for the following reasons:

1. Large Projects: A foreign company executing a project in Syria is entitled to temporarily import any equipment necessary to finish the project. When the work is completed, the company must then re-export all equipment and vehicles. Several companies have experienced difficulties re-exporting equipment, especially computers and vehicles.

2. International Organizations: IO's are entitled to import vehicles, furniture, and necessary equipment.

3. Tourists: Tourists are entitled to travel around the country in personal vehicles.

4. Trade Shows: Trade show participants may import temporarily goods for display, but must re-export them at the conclusion of the event. Occasionally, the Syrian authorities permit the permanent importation of goods that are displayed for a trade show organized in Syria.

5. Exporting manufacturers: Local manufacturers are allowed to import raw material duty-free if the resulting manufactured products are destined strictly for export.

Labeling, Marking Requirements

Food, dairy products, and medicines must be labeled. The labeling should include: name of producer/exporter, ingredients, date of manufacturing, and date of expiration. Medications also require a batch number.

Prohibited Imports

Prohibited imports are narcotics, furniture, weapons, and products that compete with locally produced goods, including cheese and fruits (except for bananas).

Standards (ISO 9000 Usage)

The Syrian Arab Committee for Standards recognizes the ISO 9000 standards and regulations. Syrian authorities are exploring ways to implement the ISO 9000 instructions, which correspond to Syrian standards 1147, 1148, 1149, 1150, 1151.

Free Trade Zones/Warehouses

The General Organization of Free Zones (GOFZ) was established in 1972 to promote foreign investment in Syria and to exploit Syria's economic potential and historic trading role as a "bridge" between East and West. Foreign-owned firms share the same investment opportunities in these areas as indigenous entities.

Two free trade zones are located in the ports of Latakia and Tartus. In addition, there is one free zone each near the border town of Dar'a (a joint venture between Syria and Jordan); in Adra (north of Damascus); in Aleppo; at Damascus Airport; and in Damascus.

The government provides the following benefits to companies operating in the free zones:

a. No import licensing requirement for inputs and goods entering the zones. Importers need only present a manifest as documentation and for inspection purposes. Only military and other prohibited items are excluded.

b. No re-export regulations or restrictions are imposed except for military and internationally prohibited items.

c. All goods entering and stored in the zones are exempt from local taxes and duties.

d. All foreign exchange operations are free of applicable currency restrictions.

e. Any commodity permitted to be imported into Syria can be imported from free zone manufacturing facilities, but an import permit is required.

Special Import Provisions

Syria enforces the Arab Boycott of Israel. Goods of Israeli origin are prohibited for import into Syria. In addition, all imported goods must come directly from the country of origin, with some exceptions. These exempted items include: harvesters, spare car parts, commodities exchanged on the open markets (rice, sugar, coffee), refrigerated containers, and large construction equipment.

Membership in Free Trade Arrangements

Syria has free trade arrangements with Jordan, Lebanon, Egypt, and Saudi Arabia for selected animal products and manufactured goods that do not compete with the local industry. Syria also has trade agreements with many Arab and other countries around the world.

VII. INVESTMENT CLIMATE

Openness to Foreign Investment

The Syrian government has adopted a hesitantly positive attitude toward foreign investment in recent years. However, most representatives of foreign firms find Syria's business environment a difficult one.

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.

Foreign oil company representatives have mentioned several difficult aspects of doing business in Syria, citing both Syrian and U.S. government policies and restrictions.

• In past exploration and production contracts, the SARG required foreign oil companies to use the unfavourable official rate of 11.2 Syrian pounds (SP)/USD versus the neighboring country rate of 43.5 SP/USD and the offshore rate of 49-52 SP/USD for all business transactions with Syrian individuals and companies. Recently however, faced with the departure of most exploration companies, the SARG decided that all new contracts be at the neighboring country rate.
• The SARG requires that export and import licenses be obtained for every single item imported and then re-exported, regardless of value. Several company representatives recalled that documentation for even minor items, such as paint cans and used spark plugs, had to be kept to prove to customs officials that they had not been illegally re-exported or sold locally. Likewise, foreign companies must acquire temporary permits for each item of equipment intended for temporary use and subsequent re-export (i.e. drilling rigs) to avoid paying import duties. These permits can be difficult to extend if the company's service contract has expired, and if it wants to keep the equipment in-country for stand-by usage. Delays in the re-export of equipment after a temporary permit expires has drawn heavy fines.
• In the absence of an adequate infrastructure in Syria, such as telecommunications, maintaining contact with field crews became costly as companies leased expensive, dedicated lines from the Syrian Telecommunications Establishment at the official exchange rate. However, as of August 1, 1996, the government began to apply the neighboring country rate, thereby reducing costs.
• USG foreign policy sanctions and individual validated licensing requirements imposed on "dual use items" such as computer equipment and oil exploration technology, including global positioning indicators, make work difficult. Also mentioned was the "Grassley Amendment," another USG sanction on Syria, that prevents U.S. companies from taking advantage of foreign tax credits on royalties paid to the SARG.
• In April 1996, Congress enacted new Antiterrorism legislation affecting financial transactions with Syria.

According to the final regulations, all financial transactions between U.S. persons or entities and the Government of the Syrian Arab Republic are authorized unless the transaction constitutes a donation to the U.S. person or entity, or the U.S. person or entity recipient knows or has reasons to know that the transfer poses a risk of furthering terrorist acts in the United States. Additional information is available from the Department of Treasury's Office of Foreign Assets Control, at (202) 622-2520.

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.

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. However, instances of copyright infringement especially of Arabic translations of English texts, have occurred. Pirated records, cassettes, and videos are widely available.

Despite government efforts, pirated computer software is also readily available. The amount of lost revenue is probably minimal. In any event, enforcement and the associated litigation would be, if not impossible, extremely costly compared to any positive benefits that may result.

The motion picture industry estimates the home video market in Syria is 100 percent pirated, and is also concerned with unauthorized hotel video performances, which are said to be common. However, only a few hotels have internal video systems.

Additionally, 100 percent of both Arab and non-Arab commercial music products are pirated. Given the lack of technical sophistication of Syrian industry and strict government control of communications and data processing, infringements on new technologies are not a problem.

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

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.

Prior to coming to Syria, all U.S. citizens must obtain an entry visa which may be procured from the Syrian embassy in Washington. Although there are no discriminatory or excessive visa, residence, or work permit requirements, if an individual wishes to remain in Syria longer than 14 days, that person must register with the government and acquire a temporary residence permit (in addition to the entry visa). The Syrian government will not grant entry to persons with passports bearing an Israeli visa or entry/exit stamp, or to persons born in the Gaza region or of Gazan descent.

Transparency of the Regulatory System

The Syrian regulatory system is not oriented toward promoting competition either among private firms or between private and state enterprises. 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. Bureaucratic procedures for licensing and necessary documentation move slowly and require official approval from many levels within the government. In this regard, under-the-table payments are often required as corruption is endemic at nearly all levels of government.

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 the President's 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.

Corruption

Syrian laws prohibit corruption and accepting money donations. The Central Commission for Control and Inspection is responsible for criminalizing such actions. Both the briber and the recipient will be subject to imprisonment and/or confiscation of property. Occasionally, newspapers publish lists of government employees who were fired for "reasons related to integrity". However, incomes are so low in the public sector that some fringe benefits are unofficially accepted as means of direct compensation, especially in government procurement, investment licensing, and obtaining importation approval.

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 there is some evidence that 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. The government has continued to resist the abolition of the Minister of Labor's power over collective contracts. Organized unions do not seem to have a role in the receptivity of foreign investment.

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. While a number of U.S. suppliers have asserted claims against state enterprises for non-payment on goods and services delivered, the Syrian government, working closely with the Commercial Bank of Syria, has taken steps since early 1995 to settle some of these debts on a case by case basis.

Property and contractual rights are protected by the constitution and enforced by law. However, there is considerable government interference in the court system and judgments by foreign courts are generally accepted only if the verdict favors the Syrian government. Although a written bankruptcy law exists, it is not applied fairly and creditors may or may not salvage their investment. Monetary judgements in such cases are made in the local currency which can not be converted to a hard currency.

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.

Political Violence/Bilateral Investment Agreements/ Investment Insurance

Syria is a safe environment for personal security, and the country has enjoyed over 25 years of political stability. However, with the economy and progress in the Middle East peace process stalled, and uncertainty over succession of the aging President Asad, future stability is an area of concern.

Syria and the U.S. signed an investment guarantee agreement on August 9, 1976 that protects investments from nationalization and confiscation. Similar agreements were also signed with Germany, France, and Switzerland. In addition, since the Gulf War, a number of bi-national committees have been established with Gulf Arab countries to explore private and mixed joint-ventures.

U.S. investment is not eligible for OPIC and other types of insurance programs due to Syria's inclusion on the list of state supporters of terrorism. For the same reason EXIM Bank, small business administration, and commodity corporation financing is not available for U.S. exports to Syria. USAID assistance to Syria was terminated in 1983.

Foreign Direct Investment Statistics

Official foreign investment statistics by country are not available. According to press stories, some 1476 projects valued at about 326 billion Syrian pounds (approximately USD 6.5 billion at the offshore rate centered in Beirut) have been approved under the new investment law since its issuance in 1991 and through May 1996. However, only a small percentage of approved projects have even begun construction much less operation.

VIII. TRADE AND PROJECT FINANCING

Banking System

Syria's government-controlled banking system consists of five banks: The Commercial Bank of Syria, the Agricultural Cooperative Bank, the Industrial Bank, the Real Estate Bank, and the People's Credit Bank. The Central Bank of Syria oversees banking operations and manages the money supply. According to Syrian bank regulations, only the Central Bank and the Commercial Bank may engage in international transactions and hold foreign exchange deposits outside Syria. Within Syria, only the Commercial Bank may sell Syrian pounds for foreign currencies. Except for a few exemptions, unused Syrian pounds cannot be sold back to the Commercial Bank. Moreover, Law 24 of 1986 criminalizes the private exchange of foreign currencies and Syrian pounds.

Besides monopolizing the exchange of foreign currencies, the Syrian government maintains one of the last remaining fixed, multiple exchange rate systems in the world. At present the government exchanges money at four different rates, ranging from the "official" rate of 11.2 SP/USD, to the "neighboring country" rate of 43.5 SP/USD. However, virtually all transactions occur at either the "neighboring country" rate, the "offshore" rate, negotiated in the free markets of Amman or Beirut, which ranges between 49 and 52 SP/USD, or the "export dollar" rate, which ranges between 52 and 57 SP/USD.

How to Finance Exports/Methods of Payment

In general, private Syrian traders finance imports from their own resources or through their own credit. Contracts with the private sector are negotiated on an individual basis with little or no interference from the government. All documentary transactions for imports must be by a letter of credit opened at the Commercial Bank of Syria. Typically, the Bank requires the importer to cover 100 percent of the transaction from his own resources offshore or from funds generated by exports. Syrian importers often require that one of the following two clauses be added to the proforma invoices and bills of lading as payment conditions, "free of payment" or "180-day credit facilities." In this case, the importer pays through his offshore bank, either cash in advance, or via L/C, and the bill of lading is then sent to the Commercial Bank of Syria. In such instances, U.S. exporters are well advised to avoid delayed payment or the "cash against documents" mechanism, since the U.S. exporter has no protection under such a transaction and the Commercial Bank of Syria has no authority to release funds under such a clause. Moreover, the importer could simply walk away from the contract even after the goods are shipped.

Alternatively, an importer may use foreign exchange earned from exports (export dollars) and deposit it in the Commercial Bank of Syria. The foreign exchange used to cover an L/C opened at the Commercial Bank may be his own, or purchased in an informal secondary market. In March 1994, the Syrian government transferred several importable goods from the list of items that can be financed from offshore accounts to the list of items that must be purchased with export dollars. Whatever the source of funding, it is strongly recommended that U.S. exporters sell their goods to Syrians under "cash in advance" or "confirmed irrevocable letters of credit" until a satisfactory relationship with the Syrian importer has been established.

For its contracts, the government will open an L/C only after the contractor has posted a ten percent performance bond to ensure that goods will be delivered within the stated time of delivery, free of defects, and identical to the offer in both quality and quantity. Posting these bank guarantees has been a constraint for U.S. firms wishing to do business in Syria because suppliers' banks often lack correspondence arrangements with the Commercial Bank of Syria. Again, U.S. commercial financing is not a practical way to do business with Syrian firms because foreign exchange impediments make it impossible to guarantee a loan or credit facility for a Syrian beneficiary.

Types of Available Financing and Insurance

Because Syria remains on the list of state supporters of terrorism, Eximbank financing and insurance is unavailable to U.S. exporters. For the same reason, USAID is not present in Syria. Moreover, the World Bank will not fund projects in Syria because of unpaid arrears on Syria's debt to that institution. However, Syria has received some project financing from Japan, the EU, and various Arab national and multinational institutions. Projects financed include upgrading the national telephone system, construction of several electrical power plants, and the purchase of earth moving equipment.

Syrian Banks with correspondent U.S. banking arrangements:

• Central Bank of Syria
• Commercial Bank of Syria

U.S. Banks in New York with known correspondent Syrian banking arrangements:

• Arab American Bank, New York
• Bank of New York, New York
• Morgan Guarantee Trust Company, New York
• Credit Lyonnais, New York
• Citibank, New York

IX. BUSINESS TRAVEL

Business Customs

Travel Advisory and Visas

1. Personal entry requirements

Passport: Required
Visa: Required
Health & Immunization: Certificates are required of all travelers arriving from infected areas. There are not currently any AIDS test requirements for short-term visitors to Syria. The Syrian government will not grant entry to persons with passports bearing an Israeli visa or entry/exit stamp, or to persons born in the Gaza region or of Gazan descent.

2. Embassy information

Syrian Embassy in the United States:
Address: Embassy of the Syrian Arab Republic,
2215 Wyoming Ave., Washington, D.C. 20008
Telephone: (202) 232-6313, Fax: (202)234-9548

U.S. Embassy in Syria:
Address: Abou Roumaneh, 2 Al-Mansour Street, P.O. Box 29,
Damascus, Syria
Telephone: 963-11-3332814/3330416/3330788, Fax: 963-11-2247938

Holidays

Syrians will observe the following holidays in 1997/1998:

July 15, 1997	(Prophet's Birthday)1/
October 6, 1997	(Tishrin War)
December 25, 1997	(Christmas Day)
January 1, 1998	(New Year's Day)
January 29-31, 1998	(Al-Fitr Holiday)1/
March 8, 1998	(Revolution Day)
March 21, 1998	(Mothers' Day)
April 7-10, 1998	(Al-Adha Holiday)1/
April 12, 1998	(Easter)
April 17, 1998	(Independence Day)
April 19, 1998	(Orthodox Easter)
April 29, 1998	(Muslim New Year)1/
May 1, 1998	(Labor Day)
May 6, 1998	(Martyr Day)
July 5, 1998	(Prophet's Birthday)1/
October 6, 1998	(Tishrin War)
December 25, 1998	(Christmas Day)

1/ Based on lunar calendar. Exact date to be confirmed.

X. APPENDICES

Appendix A

Country Data

Profile:

Population: 15.2 million

Population growth rate (percent): 3.4

Religions: Sunni Muslims (74 percent), Alawi Muslims (12 %), Christians (10 %), Druze (3 %), small numbers of Jews, Yazidis, and other Muslim sects.

Government system: Republic, under an authoritarian regime since 1963.

Languages: Arabic (official), English and French (somewhat understood), Kurdish, Armenian, Syriac, and Circassian.

Work week: Saturday through Thursday.

Appendix B

Domestic Economy

	1995	1996	1997
Real GDP (billion USD)*	16	17.6	19.4
Real GDP growth (percent)	10	10	10
GDP per capita (USD)	1003	1130	1243
Government spending as percent of GDP	29		34
Inflation (percent)	8	9	10
Unemployment (percent)	N/A	N/A	N/A
Foreign exchange reserves	N/A	N/A	N/A
Average exchange rate for USD 1.00	34.26	37	37
Debt service ratio (million USD)	N/A	N/A	N/A
U.S. economic/military assistance	0	0	0

*1995 figures were drawn from the Statistical abstract and converted at the blended government rate of 34.26 Syrian Pounds/USD. 1996 and 1997 figures are Embassy estimates.

Appendix C

Trade

(In millions of USD)

	1996	1997	1998
Total Exports	4,000	4,200	4,400
Total Imports	5,400	5,700	6,000
U.S. Exports	226.3	180	200
U.S. Imports	16.2	30	30

Principal U.S. Exports:

Industrial Equipment	82.0	60.0	65.0
Cereals	44.0	10.0	12.0
Tobacco & Cigarettes	32.0	15.0	15.0
Corn	26.0	36.0	40.0
Machinery Parts	28.0	25.0	24.0

Principal U.S. Imports:

Wearing Apparel	9.5	10.5	13.0
Spices	3.0	3.5	3.7
Works of art & Antiques	2.5	2.7	2.8

Note: U.S. trade figures are drawn from the U.S. Department of Commerce. According to the Syrian Central Bureau of Statistics, U.S. exports were USD 319 million in 1995 and U.S. imports amounted to only USD 38 million.

Appendix D

Investment Statistics

Investment statistics are available in previous sections of this document under specific sectors.

Appendix E

U.S. and Country Contacts

Syrian Contacts

Organization: Syrian Petroleum Company (SPC)
Contact Name: Dr. Muhammad Khaddour
Contact Title: Director General
Address: Fardos, Mutanabi St., P.O. Box 2849, Damascus, Syria
Telephone: 2227095, 2227007, 2226984, 2226245
Fax: 2225648
Telex: 411031 sypco SY

Al-Furat Petroleum Company (AFPC)
John Darley
General Manager
Mazzeh, Writers' Union Building, P.O. Box 7660, Damascus,
Telephone: 6183333
Fax: 2238104, 2244010
Tlx: 412088 SY or 412089 SY

Syrian Petroleum Transport Company
Mohammad Douba
Director General
P.O. Box 13, Banias, Syria/ P.O. Box 51, Homs, Syria/ P.O. Box 310, Damascus, Syria
Telephone: (43) 711300
Fax: (43) 710418
Tlx: 441012 scot SY

Public Establishment for Power Generation and Distribution
Zeki Odeh
Director General
P.O. Box 3386, Damascus, Syria
Telephone: 2227981, 2229654, 2223086, 2228334, 2246472
Fax: 2229062
Tlx: 411056 syrlec SY

General Organization for Engineering Industries
Issa Dawood
Director General
P.O. Box 3120, Damascus, Syria
Telephone: 2123438, 2121889, 2121824, 2121825
Fax: 2123375
Tlx: 411035 SY

Syrian Telecommunications Establishment (STE)
Makram Obeid
Director General
Mezzeh, Damascus, Syria
Telephone: 2240300, 6122210
Fax: 2242000
Tlx: 411015 gentel SY

General Organization for Cement and Building Material
Ahmad Al-Hamo
General Director
Mazzeh, Western Villas, P.O. Box 5265, Damascus, Syria
Telephone: 6117666, 6117444, 611333, 6118444, 6117503
Fax: 6117111
Tlx: 411369 SY

General Organization for Textile Industries
Hussein Al-Zu'bi
Director General
P.O. Box 620, Damascus, Syria
Telephone: 2216200, 2227158
Fax: 2216201
Tlx: 412036 nasige SY

General Organization for Chemical Industries
Zaid Al-Hariri
Director General
Baramkeh, P.O. Box 5447, Damascus, Syria
Telephone: 2127654, 2123363, 2122743, 2122917, 2122362
Fax: 2128289
Tlx: 419145 SY

General Organization for Food Industries
Ali Kamel Salman
Director General
P.O. Box 105, Damascus, Syria
Telephone: 2225290, 2225291
Fax: 2245374
Tlx: 419154 SY

Ministry of Health
Dr. Iyad Chatti
Minister of Health
Najmeh Square, Parliament Street, Damascus, Syria
Telephone: 3339602, 3333801, 3311020/1/2/3
Fax: 3311114

Foreign Trade Organization for Machinery and Equipment (SAYARAT)
Muhammad Salim Dalloul
General Director
P.O. Box 3130, Damascus, Syria
Telephone: 2218223, 2218156, 2232190, 2232199
Fax: 2211118
Tlx: 411036 SY

Country Trade Associations/ Chambers of Commerce

The Federation of Syrian Chambers of Commerce and Industry:
President: Dr. Rateb Shallah
P.O. Box 5909
Damascus, Syria
Telephone: 3337344, 3311504
Fax: 963-11-3331127

Damascus Chamber of Commerce
President: Dr. Rateb Shallah
P.O. Box 1040
Damascus, Syria
Telephone: 223-2348, 223-2360, 2211339, 2218339
Fax: 963-11-222-5874

Damascus Chamber of Industry
President: Dr. Yahya Hindi
P.O. Box 1305
Damascus, Syria
Telephone: 222-2205, 221-3475, 221-5042, 221-3475
Fax: 963-11-224-5981

Aleppo Chamber of Commerce
President: Mr. Mohammad Saleh Al-Mallah
P.O. Box 1261
Aleppo, Syria
Telephone: 963-21-238-236, 238-237
Fax: 963-21-213-493

Aleppo Chamber of Industry
President: Mr. Muhammad Oubari
P.O. Box 1859,
Aleppo, Syria
Telephone: 963-21-620-600/1/2, 639-700
Fax: 963-21-620-040

Homs Chamber of Commerce and Industry
President: Mr. M. Walid Tuleimat
P.O. Box 440
Homs, Syria
Telephone: 963-31-228-605, 231-000
Fax: 963-31-224-247

Hama Chamber of Commerce and Industry
President: Mr. Abd Al-Salam Al-Sabe'
P.O. Box 147
Hama, Syria
Telephone: 963-33-233-304, 517-700
Fax: 963-33-517701

Latakia Chamber of Commerce and Industry
President: Mr. Kamal Ismail Al-Assad
P.O. Box 124
Latakia, Syria
Telephone: 963-41-239-530
Fax: 963-41-238-526

Country Market Research Firms

The Syrian Consulting Bureau
Dr. Nabil Succar
P.O. Box 12574, Damascus, Syria
Tel: 2225946
Fax: 2231603

Commerce and Engineering Consultants
Mr. Ramez Raslan
Malki, P.O. Box 6136, Damascus, Syria
Tel: 3733956, 3730771
Fax: 3733955

Consulting, Management, and Contracting Company
Mr. Hani Sawaf
P.O. Box 3858, Damascus, Syria
Tel: 3331226
Fax: 3333031

Financial, Economic, & Consulting Services
Dr. M. Ayman Midani
P.O. Box 7825, Damascus, Syria
Tel: 3316075
Tlx: 411044 Midani SY

Commercial Banks

Commercial Bank of Syria: Director General: Mr. Riad Hakim, Yousef Al-Azmah Square, P.O. Box 933, Damascus, Syria; Telephone: 221-4508; Fax: 221-6975, 222-8524

U.S. Embassy Trade Personnel: Telephone: (963)(11) 333-3232

Anne Bodine: Economic/Commercial Attache
Donna Vandenbroucke: Economic/Commercial Officer
Jamal Aliah: Economic/Commercial Officer
Jonathan Rice: Economic/Commercial Officer

Washington-Based USG Contacts

Office of Syrian Affairs
E. Candace Putnam
U.S. Department of State
Washington, D.C. 20520
Telephone: (202)647-7216
Fax: (202)647-0989

Office of Syrian Affairs
Thomas A. Sams
U.S. Department of Commerce
Washington, D.C.
Telephone: (202)482-1860
Fax: (202)482-0878

Appendix F

Market Research

USDA/FAS/Commodity Reports and Market Briefs:

• Grain and Feed Annual Report
• Cotton Annual Report
• Tree Nuts (pistachios) Annual Report
• Annual Agricultural Situation Report

USFS Reports and Market Briefs:

• The Country Commercial Guide Report (CCG)
• Investment Climate Statement (ICS)
• The Trade Act Report
• American Firms Operating in Syria and Their Representatives
• Translation of Law Number 195 (Tender Regulations)

Appendix G

Trade Event Schedule

The 3rd International Agricultural Fair
June 22-25, 1997

The 2nd International Communication & Computer Exhibition
July 2-5, 1997
Organized by SEIC.

The Intl. Exhibition for Food, Filling, and Packaging Industries
July 13-18, 1997
Organized by SEIC.

International Fair of Damascus
August/September 1997

The Book Fair
September 1997

Watches Exhibition
September 1997

The International Production Technology, Factory Equipment, Machine Tools, Packaging, Printing and Plastic Machinery Exhibition
September 21-25, 1997

The Fifth International Syrian Healthcare Exhibition
October 8-12, 1997

Hotel Equipment Show
November 17-20, 1997

The International Refrigeration, Ventilation, Air Conditioning & Heating Exhibition (HEVAC)
November 23-27, 1997
Organized by the International Group.

The International Electricity, Electronic & Lighting Exhibition (Electrotech)
November 23-27, 1997
Organized by the International Group.

The International Advertising & Marketing Industry, Public Relations & Media Services Exhibition
December 6-10, 1997

Media 97
December 6-10, 1997
Organized by the International Group.

Al-Basel Exhibition for Medical Equipment and Health Related Books and Pharmaceutical Industry
March 23-26, 1998
Organized by United.

Buildex 98
1st week of May 1998
Organized by Arabian Group.

Hitec 98
1st week of May 1998
Organized by Arabian Group.

The Flower Fair
June 1998.

The 3rd International Construction Fair
June 10-13, 1998
Organized by SEIC.

The 2nd International Fair for Industrial Equipment
June 10-13, 1998
Organized by SEIC.

The 4th International Agricultural Fair
June 19-22, 1998
Organized by SEIC.

The 1st International Medical Fair
June 28 - July 1, 1998
Organized by SEIC.

The 3rd International Communications & Computer Fair
July 7-10, 1998
Organized by SEIC.

The 4th International Fair for Food, Filling & Packaging Industries
July 16-21, 1998
Organized by SEIC.

Contact information for trade show organizers

The Syrian for Exhibitions & International Conferences (SEIC)
P.O. Box 16046
Damascus, Syria
Tel. 963-11-613-3295
Fax: 963-11-613-3296.

United for Exhibitions and Media Services:
P.O. Box 6454, Damascus, Syria.
Tel. 963-11-331-2123
Fax: 963-11-331-2423.

The Arabian Group:
P.O. Box 2683, Damascus, Syria
Tel. 963-11-3737444/8/9
Fax: 963-11-3737446.

The International Group:
P.O. Box 35222, Damascus, Syria
Tel: 963-11-4428217
Fax: 963-11-4454510

*International Copyright, United States Government, 1997 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U. S. Copyright Law, Title17, United States Code.

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