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SYRIA: Entrepreneurs chafe over slow pace of economic reforms

October 2, 2010 | 11:08 am

Syria-economy

Smart and ambitious young Syrians, Amer, Wasseym and Naser Abdulghani's animation company, Ox Animation, is in demand around the Arab world just a year after launching. But even after achieving moderate success in Syria, the three brothers say they are contemplating a move to business-friendly Jordan.

"It was impossible for us to get a bank loan as it is difficult to check people's backgrounds here," says Amer, 29. "We had to spend years approaching private investors to get the money."

The difficulty of getting credit is just one hurdle facing businesses in Syria. Bureaucracy, poor transport and power infrastructure, and the need for connections this year pushed Syria down the World Economic Forum's Global Competitiveness Rankings to 97 from 94 out of 139.

Wide-reaching economic reforms have been underway since the move towards economic liberalization started in 2005, and the government is pushing for investment and entrepreneurialism by creating industrial cities and cutting red tape.

Reforms have met with some success. International brands now line Damascus' once Soviet-looking streets, industrial city profits have steadily risen, and foreign direct investment jumped in 2008 by an astounding 70% to $2.1 billion, according to Syrian figures. Tourism -- and its revenues -- has also risen dramatically.

But with falling oil and gas revenues, a growing population, high unemployment and ailing infrastructure, Damascus will have to move faster to keep young entrepreneurs like the Abdulghani brothers.

One businessman, who asked not to be named, said it had taken him two years, numerous visits to government offices and several bribes to get permission to turn residential premises into commercial, and another six months to get connected to electricity.

Rana Shanawani, the head of BIDAYA, a non-governmental organization that gives money and support to business start-ups, is not surprised by the Abdulghani brothers' experience.

"Doing business in Syria is extremely difficult," she says. "Young entrepreneurs face exceptional obstacles."

It is not just Syrians who find the new landscape difficult. European and U.S. firms are slow to invest, with the majority of money flowing from the Gulf, according to the Syrian officials. Major business players complain of red tape, a lack of qualified staff, low levels of transparency in policy-making and insecure legal rights.

Although the Syrian Investment Agency says it licensed projects worth more than $5 billion last year, many have yet to get off the ground. There is some evidence that investment has dropped.

While domestic troubles are being solved, the key to future economic success may depend on Syria's attempt to position itself into a regional hub, analysts say.

President Bashar Assad "has worked hard to strengthen relations with regional countries and turn Syria into an energy and transportation center," says Joshua Landis, a Syria expert at Oklahoma University.

The eastern region bordering Iraq is subject to special attention as Syria eyes increased trade and transit opportunities with a future new Iraqi government -– which Damascus is helping to broker.

Iraq is already Syria's main trade partner and the countries agreed a deal last month for Iraqi gas to be piped through Syria to the coast. Eastern city Deir Ezzor will be the focus of investment projects with businesses are given financial incentives to locate there.

"Syria is at a real crossroads," Landis says. "They have done some good things but need to push ahead more rapidly if their economy is to cope with the growing population and the pressure that puts on the country."

-- Sarah Birke in Damascus

Photo: A Syrian taxi driver fills up a car with petrol at a station in Damascus. The Syrian government last month announced a 10% hike in gas prices following a spike in consumption and rising cost of subsidizing other fuels. Credit: Khaled al-Hariri / Reuters

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