Syria - Foreign investment

Although a government decree prohibits confiscation of foreign investments, there are no safeguards against nationalization of property. In principle the judicial system upholds the obligations of contracts but in practice decisions are subject to outside pressures. In addition, poor infrastructure, power outages, lack of financial services, and complex foreign exchange regulations have all contributed to Syria's failure to attract significant amounts of foreign investment. Four major pieces of legislation have been passed to encourage foreign investment. Decision 186 issued in 1985 was aimed at encouraging investment in tourism. Decree 10 in 1986 was designed to encourage joint-venture agricultural companies. In June 1991, in the wake of the Gulf War, the government issued Investment Law 10 aimed at promoting investment in all sectors of the economy by providing the same incentives to local and foreign investors. Qualifying investors are granted tax holidays and duty-free privileges for the import of capital goods. The law succeeded in attracting investments particularly in textiles, pharmaceuticals, food-processing, and other light industries. The primary investors have been from the Gulf states. In 1999 it was estimated that nearly 1,500 projects valued at $6.5 billion had been approved since the reforms of 1991. In May 2000, Decree 7 amended Law 10 of 1991 to make investment more attractive by extending tax holiday periods, increasing hard currency flexibility, reducing income taxes on shareholding companies, and offering sector and regional incentives. A tax holiday of five years is extended to seven years for enterprises that export over 51% of their output.

The most significant foreign investment in Syria had been in gas and oil. In 1990, twelve foreign oil firms had operations in Syria but as of mid-2002, only five remained—Shell, Total-Fina-Elf, Mol (Hungary), INA-Naftaplin (Croatia) and Conoco. Other foreign investors include Mitsubishi, Samsung, Mobil, Nestle, and Prince Walid Bin Talal of Saudi Arabia. Foreign investment is complicated by Syrian requirements of import and export licenses on every item imported and then reexported, no matter the value, and with US sanctions on supplying Syria any "dual" use items such as computers, oil exploration equipment. Despite a recent 20% increase, the average wage in the public sector remains below minimum subsistence levels, and provides a strong motivation for widespread corruption. In 2002, also, an increasingly strict enforcement of the Arab League's boycott of Israeli goods adds more complications to obtaining supplies and more layers of red tape. US government insurance programs for foreign investors, such as OPIC, are not available for investors in Syria, and the country is on the State Department's list of Sponsors of Terrorism. USAID ended assistance to Syria in 1983, and financing cannot be obtained through government agencies like the Export-Import Bank. There are six duty free zones in Syria: near the border town of Dar'a (a joint venture with Jordan), north of Damascus at Adra, in Damascus, at the Damascus Airport, and at the ports of Latakia and Tartus. According to official estimates, there were 350 foreign and joint-venture investment projects in the country as of 2002, with a total value of about $3 billion.