Published: June 24, 2009
Syria hopes to attract FDI into the country via privatisations and public-private partnerships, says a source at the IFC.
The IFC source, who was recently in Damascus for talks with the government, says: “The Syrian minister of transport, Dr Yarub Badr, wants to use PPP-style financing to build a new Damascus International Airport, and also to build two motorways running from north to south and from east to west.”
Syria has been economically isolated by US sanctions since 2005, over Syria’s alleged support for insurgents in Iraq. It was also suspected of playing a role in the assassination of Lebanese prime minister Rafik Hariri in 2005.
However, its relations with the west are slowly improving, as the US looks to it for help in resolving the Israel – Palestine conflict. While president Obama renewed the sanctions in May, a source at the IFC, who was recently in Damascus, says: “The word we’re hearing is that sanctions will be lifted soon.”
Economically, Syria has been on a slow path to economic liberalisation of its state-controlled economy. Oil exports have dwindled, and the country is now a net importer of oil, meaning it has to look increasingly to foreign direct investment for revenues.
FDI jumped from US$400mn in 2006 to US$2.1bn in 2008, with investment particularly strong from foreign banks. Syria allowed the existence of private banks in 2003, and foreign banks including Banque Bemo Saudi Fransi, Byblos Bank and Bank Audi say they have been growing rapidly and making annual profits of around US$15mn each in the country.
Foreign banks are limited to a 49% share in Syrian private banks. The central bank says another eight banking licenses will be auctioned to private banks.
The government also opened the Damascus Stock Exchange in April, although the exchange is only open three days a week, and trading is so far slow.
The government is trying to forge closer trade relations with Iraq, and the Syrian prime minister, Mohammad Naji al-Otri, made his first official visit to the country in April. Syrian Minister of Economy and Trade Amer Hosni Lutfi said during another recent trip to Iraq that he hopes to more than triple bilateral trade, now estimated at US$800mn, far behind Syria's biggest trade partners, China and Turkey, at US$2bn each.
The government is also looking to repair Kirkuk-Banias Pipeline, which links the Kirkuk oil filed in Iraq to the Syrian port of Banias and would earn Syria transit fees. The pipeline was opened in 1952 and has a capacity of 300,00 barrels per day.
During the 2003 invasion of Iraq the pipeline was damaged by US airstrikes and has been out of operation since then. However, until a higher level of political stability is restored in Iraq and the Hydrocarbons Law demarcating the status of oil reserves in Kirkuk is agreed, political risks associated with links to Iraq gas sector remain high.