“AGN International – West Asia & Africa Regional Meeting”

Overview on Syria Economics, Investments Opportunities and Regulations

Presented By: Miss Hanadi YASSIN Managing Partner ASAS Business Consultancy Ltd.

(AGN) - Syria

Damascus – Four Seasons Hotel Nov. 21 & 22, 2008 1

Economic Overview

The Government has decided to meet the dual challenge of economic efficiency through market development, and social equality through providing free health care and education with financial safety nets for vulnerable groups of society.

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Economic Overview

The five year Plan defines major economic objectives: • Acceleration of economic growth by reaching an average of 7 per cent of real GDP growth in the coming years.

• The reduction of unemployment by establishing job creation. The plan calls for a decline in the official rate from 12 per cent when the plan was enacted to 8 per cent by the year 2010.

• Fighting poverty, the Government is planning to reduce poverty drastically by 2010, from 11 per cent (In 2004) to 9 per cent of the total population.

Economic Overview

Syria ’s economic growth is even more favourable when the oil sector is excluded from the figures with rate of 8 per cent during 2004 and 2007. It is important to note that economic growth does not rely on a few special sectors or some isolated growth islands.

Economic Overview

Growth is across all economic sectors, i.e. agriculture, industry and the service sector. Among them trade, tourism, communications and banking and insurance are the most dynamic.

Acceleration of economic growth can be achieved without any additional external indebtedness. With an external debt ratio of below 10 per cent of GDP, Syria is one of the lowest indebted countries in the world.

Economic Overview

The growing momentum in economic development is mainly due to the fact the private sector has been given a much bigger role to play. Companies and investors from abroad are cordially invited to make investments in Syria. So are foreign banks and insurance companies.

However, FDI in manufacturing and industry are on the increase with state monopoly over these sectors disappearing rapidly. Syria is working hard to improve the conditions for all private sectors.

Economic Overview

Challenges facing economic development:  Number of young people entering the labour market  Poor education system, insufficiently prepare young people for working life.

 Depending on the revenue from oil. Therefore, the Syrian’s current account will depend on the capability to increase non-oil exports.

 Low Competitiveness of the economy, especially state owned companies.

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Economic Overview

In order to achieve the objectives set up in the five year plan, the Syrian Government count on increasing macroeconomic stability and accelerated implementation of structural reforms. This dual approach is expected to produce the desired results through a set of measures that focus on fiscal consolidation, modernisation of the monetary sector, trade liberalisation and a more friendly business climate.

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Investment Opportunities

Almost all sectors in Syria has great opportunities the regions in investments.

Syria All of has it opportunities in all sectors fabulous has a opportunities special for investments Companies and investors from abroad are cordially invited to make investments in Syria. So are foreign banks and insurance companies. Syria is working hard to improve the conditions for all private sectors.

Investment Opportunities

Investment Advantages • Syria’s strategic geographic location.

• Stable and secure political environment • Advances in economic reform.

• Reliable labour force.

• Equipped industrial zones • Tax incentives, exemptions and rebates • Several mutual agreements and treaties to encourage and protect investments.

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Investment Opportunities

Investment Options  Direct Investment: Fully funded by the investors in accordance with the investment law.

 Partnership Investment: Local Parties (Public or Private) with foreign investors in Project Finance methodology.

 B.O.T Type investments.

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Investment Opportunities

Investment Regions Damascus and it rural has many opportunities in the real estate, tourism, industrial. As well as Aleppo city in the north area.

The south area (Daraa and Sweida) have many opportunities to invest in Tourism, Agriculture and added value agricultural products.

The Eastern area (Deir Ezzor) and Middle area (Homs and Hama) has many industrial and tourism developments opportunities as well as the coast area (Lattakia and Tartous) 12

Investment Opportunities

Investment Sectors  Banking and Financial Services.  Stock Exchange.

 Insurance Companies.

 Real Estate.

 Manufacturing and Industry.

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Investment Opportunities

Industrial Cities The industrial cities are : Damascus Aleppo Homs Adra Industrial City Area: 75 million square meters.

Estimated cost : $ 420 Million.

Sheikh Najjar Industrial City Area: 44 million square meters.

Estimated cost : $ 274 Million.

Hasia Industrial City Area: 25 million square meters.

Estimated cost : $ 150 Million.

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Investment Opportunities

• Financial Services: Syrian Regulatory required Capitalization: Advisory Services = $ 0.4 M = 20 M SYP Brokerage Self = $ 0.7 M = 35 M SYP Brokerage Clients = $ 1.0 M = 50 M SYP IPO Underwriting without participation = $ 7.0 M = 350 M SYP without participation = $ 1.0 M = 50 M SYP Assets Management = $ 3.0 M = 150 M SYP Custodian Services = $ 2.0 M = 100 M SYP 15

Establishing a Business

Form of Companies In addition to the important partnership and commandite companies, other entities (Joint Stock, Limited Liability and Holding Companies), have been attracting new business in Syria during recent years.

In 2008 a new company law has issued as one of the most important developments to take place in Syria. It is concerning in regulate the different types of companies and their practices. structure of Companies in Syria 16

Regulations

• Besides Many other conversion like: Legislative Decree No.61 of 2007 which eases the transition from family ownership to limited liability form and a possible listing.

Investments decree No.8 of 2007: This new law allows all foreigners to own property but only for the purpose of projects that established according to Investment law.

- Commercial Law No.33: Takes into account all the changes that have taken place in commerce sector.

- Income tax law No.24 of 2003: It ’s very important law to correct the uncertainly and lack of transparency in the Syrian tax system. Also it addresses difficulties faced in the taxation of real estate transactions.

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Regulations

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TAX REFORM

In the past few years, the government has introduced laws, regulations and work mechanisms, to reform the tax regime. Some taxes and fees have been cancelled and other have been reduced. Moreover, the procedures have been streamlined to reduce cases of tax evasion.

Under the old system income tax reached about 90% and was then lowered to about 63% and then to 35% in Jan 2007. such high rates were the main cause for tax evasion in Syria.

• Actual collection of customs Governmental Fees ( SYP billions )

1990 1996 2000 2002 2004 2005 2007 Collection 49,277 130,315 170,872 221,583 238,242 251,509 297,000

Comparison of Tax Rates

Country Sweden Denmark France Germany USA Morocco Tunisia Jordan Egypt Syria Tax Rates on Companies

28% 28% 33.3% 25% 15-35% 35% 35% 15-35% 20% 0-28%

Tax Rates on Individuals

0-25% 5.5-30% 0-48% 0-42% 10-35% 0-42% 0-35% 5-25% 0-20% 0-28%

Regulations

• New Laws are prepared to be implemented very soon such as: • Value Added Tax: • Corporate taxation: • Double Taxation: • Customs:

Regulations and Tax

• Many developments happened in the past several years and are still continuing to encourage businesses, some of these are: - The preparation for the opening of the stock market in Syria.

- Deduction in the tax rates.

- Variable financing channels.

- Issuing shares to the public and the benefit of market financing and trading share.

THANK YOU

ASAS Business Consultancy Ltd.

WWW.ASAS-SYRIA.COM

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