Hopeful Signs
Syria Today
November/2007

A conference on investment and business opportunities in Syria that was recently held in London highlighted the positive developments in Syria’s banking and financial sectors.

A conference organised by the British-Syrian Society (BSS) in London on November 7 showed how Syria’s reform process continues to positively impact its financial and banking sectors. Entitled “New Investment and Business Opportunities in a Transformed Market”, the conference provided a forum for networking and for a broad community to discuss their working experiences in Syria. In the last two years, the pace of change in the business environment has accelerated, and the BSS has actively encouraged dialogue between Syria and the UK. Two banking conferences organised by the BSS in Damascus in the last three years helped the Syrian Government formulate a new financial language, open up the banking sector and encourage investment.

Speakers at the conference included the former Lord Mayor of the City of London Sir Gavyn Arthur, BSS chairman Fawaz Akhras, Bank Audi Syria general manager Bassel Hamwi and Gordon Carrick of Petro-Canada, Syria. Among Syrian government figures there was Deputy Prime Minister for Economic Affairs Abdullah Dardari, Central Bank governor Adib Mayyaleh and Deputy Foreign Minister Faisal al-Miqdad.

The BSS aims to focus its short-term attention on Syria’s burgeoning banking and financial services sector, since it is this sector which should lead the way to further economic change. Without a modern and broad financial services sector, little can be achieved. Akhras pointed this out in his opening speech, highlighting the many fiscal and legal changes which are aimed at encouraging greater domestic and foreign investment.

Certain common themes emerged from the panel discussions. Several speakers remarked that Syria has taken a number of brave steps – some even braver than those taken in the formerly socialist economy of Egypt – such as more thorough reviews of commodity subsidies, which are a massive drain on the government’s limited resources. Panels also agreed that while several reforms have been implemented, much remains to be done to remedy the effects of a planned socialist state. Peter Young of the Adam Smith Institute said the government should focus on improving state enterprises – including state-owned banks – and commercialise them in preparation of full privatisation. He also pushed for a simplification of the tax structure and the implementation of VAT.

In an impassioned speech, Dardari said Syria has no choice but to follow a more liberal economic programme. As Syrian oil revenues are set to diminish, oil and commodity prices will continue to rise. He reminded the audience that Syria is undertaking its reform programme without a “sponsor”, unlike Central and Eastern European countries, which received significant aid from the European Union. He outlined government plans to cut unemployment and poverty levels across the country, boost exports (which rose from less than USD 1bn in 2004 to nearly USD 6bn in 2006) and further encourage fiscal reforms to attract greater domestic and foreign investment. The introduction of a flat corporate tax rate and major tariff cuts on imports are designed to encourage a larger manufacturing base. Dardari then highlighted the government’s focal points: the budget deficit; reform of state-owned enterprises; and reform of the civil service. He also appealed to the private sector and to existing and potential investors, and said the government was keen to hear how it could further improve the investment climate and encourage foreign direct investment.

The government is also placing an emphasis on the provision of quality education from an early age, to create a marketplace with a highly qualified workforce that can engage in the new economic environment. Dardari also stressed that his department wants to stimulate microfinance and the growth of small businesses. Microfinance banks will be established to undertake this, one with the help of the Aga Khan, while other schemes will give small loans to key sections of society to provide funding for retraining.

Underpinning Dardari’s position, Central Bank Governor Adib Mayyaleh highlighted the enormous changes in governance at the Central Bank, the regulation of the financial sector and the expansion of private banks and new financial instruments. It is still early in the process, but it is an exceptional start for this still relatively new governor. His speech implied greater dynamism from the financial sector over the next few years as new institutions are founded and new instruments are introduced to the market to deepen the financial sector.

Overall, the London conference was a great success. The next banking conference in Damascus is likely to attract a far greater range of participants, further contributing to the growth and integrity of Syria’s financial sector.