Economic News (April 4 2006)

On the economic front, the new issue of The Syria Report has come out. As usual it is excellent and well worth the small price. Here are a few small nuggets from the rich mother load that is Syrian Report. We have to thank Jihad Yaziji for this effort.

The Report explains that the Turkish Parliament has finally ratified the Free Trade Agreement with Syria which was initialed by the two states a year ago. The agreement will not enter into force until it is signed by the Turkish President. The ratification is, however, a significant step as it had been blocked for over a year, allegedly because of American pressure.

Bilateral trade between Turkey and Syria reached USD 820 million. Syrian exports represented USD 270 million of this total figure and Turkish exports USD 550 million. He added that total Turkish direct investment in Syria had reached a cumulative amount of USD 800 million.

Interestingly enough, Turks were the most numerous foreign investors in Syria. 36 percent of all investment projects licensed by the Investment Bureau (IB) in 2005 were proposed by foreign investors, according to a report published in Teshreen. Turkish investors topped the list with 33 investment projects licensed, followed by Saudi Arabia (26 projects), Kuwait (16), Jordan (13) and Lebanon (11).

Investments of USD 7.25 billion were licensed in 2005The total capital amount of all direct investment now stands at SYP 377 billion (USD 7.25 billion), which is an 88 percent surge from the 2004 figure (SYP 203.6 billion). The value of the projects approved by the IB has shown a continuous growth in the last 4 years. The Syria Report is careful to point out that many have not been implemented yet. Some analysts are skeptical that the bulk of these promises will materialize unless major economic changes take place in Syria.

Inflation: Although official estimates have put inflation at 3-5 percent in the last three years, it is clear that prices have been rising much more rapidly recently. The government has been discussing ways to intervene in the market to suppress prices. One measure has been to ban exporting livestock to keep meat prices depressed.

Another measure has been to draft a new Real Estate Law, designed to make it much easier to invest in office space and to reduce taxes on office space so it can be declared officially, rather than hidden as it presently is. "Real estate prices have sharply risen in the last three years due to a combination of factors. Boosting supply has been one of the priorities of the Government and a new Real Estate Investment Law to attract domestic and foreign capital into the market is being drafted."

Banks: A recent survey reported in al-thawra claims that there has been a "remarkable surge in the role of private sector banks as 40 percent of all credits to the 650 large and medium-sized Syrian corporations surveyed have been lent by these institutions, only two years after the first of them began operating."

A little over half of Syrian businessmen say they don't borrow money from banks for religious reasons, which is a good harbinger for the new Islamic banks being established in Syria. Perhaps they can profit from piety.