Syria

敘利亞

Syrian Arab Republic: Market Profile

Picture: Syria factsheet
Picture: Syria factsheet

1. Overview

Now in its seventh year, the violent conflict in Syria continues to take a heavy toll on the Syrian economy and growth has slumped to levels last seen in the early 1990s. The UN estimates that more than 250,000 people have died. More than 6.3 million people are internally displaced and 4.9 million are registered as refugees.

Source: Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

July 2017    
Hezbollah and the Syrian army launched a military operation to dislodge jihadist groups from the Arsal area, near the Lebanese-Syrian border.

October 2017    
The Islamic State (IS) group was driven out from Raqqa.

November 2017    
The Syrian army took full control of Deir al-Zour from IS. Syrian and Iraqi forces put IS under pressure in the dwindling areas still under its control.

December 2017
Russian President Putin visited, declaring mission accomplished for his forces in the battle against IS.

January 2018    
Turkey launched an assault on northern Syria to oust Kurdish rebels controlling the area around Afrin. It seized the town in March.

February 2018    
The Syrian government launched attacks on Eastern Ghouta, the final rebel-held enclave near Damascus.

September 2018
Russia promised to send advanced missiles to Syria.

Source: BBC country profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: Syria real GDP and inflation
Date last reviewed: September 20, 2018
Graph: Syria real GDP and inflation
Date last reviewed: September 20, 2018
Graph: Syria GDP by sector (2005)
Date last reviewed: September 21, 2018
Graph: Syria GDP by sector (2005)
Date last reviewed: September 21, 2018
Graph: Syria unemployment rate
Date last reviewed: September 21, 2018
Graph: Syria unemployment rate
Date last reviewed: September 21, 2018
Graph: Syria current account balance
Date last reviewed: September 21, 2018
Graph: Syria current account balance
Date last reviewed: September 21, 2018

e = estimate
Source: IMF, World Bank, Fitch Solutions

4. External Trade

4.1 Merchandise Trade

Graph: Syria merchandise trade
Graph: Syria merchandise trade

e = estimate
Source: WTO
Date last reviewed: September 21, 2018

Graph: Syria major export commodities (2010)
Graph: Syria major export commodities (2010)
Graph: Syria major export markets (2010)
Graph: Syria major export markets (2010)
Graph: Syria major import commodities (2010)
Graph: Syria major import commodities (2010)
Graph: Syria major import markets (2010)
Graph: Syria major import markets (2010)

Source: Trade Map, Fitch Solutions
Date last reviewed: September 20, 2018

4.2 Trade in Services

Graph: Syria trade in services
Graph: Syria trade in services

Source: WTO
Date last reviewed: September 21, 2018

5. Trade Policies

  • The Syrian Arab Republic's Working Party for World Trade Organization (WTO) accession was established in May 2010. The Working Party has not yet met. Syria was open to international trade before the civil war began in 2011, and the government is still aiming to harmonise its import tariffs and custom duties to adapt them to WTO standards.

  • Syria experienced a few years of positive trade development, after which trading came to a standstill due to the start of the civil war and the consequent economic sanctions imposed by the country's trade partners.

  • Syria's average tariff rate is 14.2%, the second highest in the Middle East and North African region (out of 18 countries). Syria imposes a progressive tax rates system for partners that it does not have a trade agreement with. Customs duties range between 1% and 200%, where raw materials are taxed at 5-10%, equipment for industry 10-20%, foodstuffs 1-15%, and machines 30-60%. A surtax of between 6% and 35% is levied on products meant to be sold to military barracks, schools and local councils. Tourism vehicles weighing under one ton are taxed 150%.

  • In May 2009, Syria banned all imports of 'any meat or products or materials containing derivatives of pigs'. Furthermore, travellers flying to Syria are banned from bringing in pets (unless accompanied with health certificates), animal products or prepared foodstuffs that contain animal products regardless of their origin. Both measures apply to all of Syria's trading partners.

  • Even though this measure is likely to have been taken on the grounds of protecting the citizenry's health, it still discriminates against foreign producers of the affected products.

  • Customs duties are currently being lowered and reviewed in the context of an agreement of association between Syria and the European Union and Syria's eventual membership to the WTO. Customs formalities have therefore been simplified and the list of prohibited imports has been lowered.

Source: WTO – Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Multinational Trade Agreements

Active

  • Syria is part of the Pan-Arab Free Trade Area (PAFTA), consisting of Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanese Republic, Libya, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syrian Arab Republic, Tunisia, United Arab Emirates and Yemen. The Agreement came into force in January 1998 and focusses on trade in goods.

  • EU-Syria: The FTA between the EU and Syria entered into force in July 1977, and it focusses on trade in goods.

  • Turkey-Syria: The bilateral FTA between Turkey and Syria entered into force in January 2007, and it focusses on trade in goods.

Source: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Syria FDI stock
Graph: Syria FDI stock
Graph: Syria FDI flow
Graph: Syria FDI flow

Source: UNCTAD
Date last reviewed: September 21, 2018

7.2 Foreign Direct Investment Policy

  1. Before the start of the conflict in 2011, Syria was gradually opening up its economy and moving toward a free market system.

  2. Before the start of the conflict, Syria introduced structural reforms, which included the renovation of the Commercial Code (2007), the Maritime Code (2008), the Finance Act (2004) and the Banking Act of 2004, which would allow the country to be able to move toward a free market economy. Further to this, the Investment Law also gave incentives to foreign investors, including ownership of companies, import of machinery, transport and raw material free from customs duties.

  3. No reliable international data has been published regarding foreign investment in Syria since 2012. This, largely due to the country’s ongoing conflict, makes it difficult for investors to gauge the opportunities present in the market.

Source: WTO – Trade Policy Review, Fitch Solutions

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Syria has seven free zones which allow for different production activities and services.

The government is also advocating for the development of industrial cities.
Even though various incentives exist, such as lower customs duties and administration, as well as tax breaks, investors will face challenges arising from the conflict.

Source: US Department of Commerce, Fitch Solutions

8. Taxation – 2018

  • Consumption Tax: 1.5-40%
  • Corporate Income Tax: 10-28% (progressive)

Source: Deloitte 2018

8.1 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax
– Specific rates: 22% on joint stock and limited liabilty companies; 14% for joint stock enterprises which issue more than 50% of their shares to the public; 15% for insurance companies which issue at least 51% of their shares to the public; 25% to banks and insurance companies

– Companies falling outside these categories are taxed at a progressive rate ranging between 10% and 28%
Dividends– 7.5% on dividends issued by a nonresident entity

– Dividends issued by Syria-based entities are not taxed on distribution to another company
Capital Gains Tax– Treated as taxable income and taxed at the standard Corporate Tax rate

– Gains on real property are subject to a tax rate ranging from 15-30% of the property's registered value
Consumption Tax1.5-40%
Surtax– 4-10% Administrative Tax, depending on region

– A temporary 5% is imposed on all direct and indirect taxes
Stamp DutyRanges between 0.3% and 0.7%
Interest7.5% on interest paid to non-residents
Payroll TaxEmployers must withhold 5-22% of salary payments
Royalties5% Withholding Tax
Social security contributions – payable by employer17.1% total: 14% equivalent of payroll costs to cover insurance relating to old age, disability and death; 3% equivalent to the payroll for work-injury benefits schemes; 0.1% to a lump sum for disability benfits fund

Source: Deloitte, Fitch Solutions
Date last reviewed: September 20, 2018

9. Foreign Worker Requirements

9.1 Security Situation

Employers will be obligated to pay exorbitant insurance premiums for foreign staff, and may also be required to offer substantial hardship and danger pay premiums.

9.2 Visa/Travel Restrictions

Citizens of all countries require a visa to travel to Syria. Before 2014, citizens of many Arab countries did not require a visa, and citizens of many former Soviet states were allowed to obtain visas on arrival.

Source: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
N/AN/A
Standard & Poor'sN/AN/A
Fitch RatingsN/AN/A

Source: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
172/189173/190174/190
Ease of Paying Taxes Index
119/18981/19081/190
Logistics Performance Index
160/160N/A138/160
Corruption Perception Index
173/176178/180N/A
IMD World CompetitivenessN/AN/AN/A

Source: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World Ranking
201620172018
Economic Risk Index Rank199/202
Short-Term Economic Risk Score2424.227.1
Long-Term Economic Risk Score23.627.629.1
Political Risk Index Rank198/202
Short-Term Political Risk Score22.922.927.9
Long-Term Political Risk Score22.421.721.7
Operational Risk Index Rank188/201
Operational Risk Score29.327.128.0

Source: Fitch Solutions
Date last reviewed: September 20, 2018

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK

Given the prolonged period of unrest in Syria, along with the displacement of millions of Syrians, we expect continued economic decline over the coming quarters. The Syrian economy has contracted to the size it was in the early 1990s. While regions held by the regime of Syrian President Bashar al-Assad will remain better off than those occupied by the rebels, business activity and state investment will remain stagnant, and living standards will continue to decline as the Syrian currency loses value.

OPERATIONAL RISK

Damascus undertook some key reforms to improve the country's business environment before the beginning of the civil war, such as allowing greater private investment in specific sectors through public-private partnerships. However, as long as the civil war continues, foreign investment will remain virtually non-existent, with only a few Iranian and Russian companies investing in government-controlled territory. Russia's entry into the Syrian civil war in September 2015 has reshaped the conflict, allowing the Syrian regime of President Bashar al-Assad to make its most sweeping territorial gains in years.

Source: Fitch Solutions
Date last reviewed: September 24, 2018

10.5 Fitch Solutions Political & Economic Risk Indices 

Graph: Syria short term political risk index
Graph: Syria short term political risk index
Graph: Syria long term political risk index
Graph: Syria long term political risk index
Graph: Syria short term economic risk index
Graph: Syria short term economic risk index
Graph: Syria long term economic risk index
Graph: Syria long term economic risk index

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: September 21, 2018

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Syria Score28.042.930.026.412.7
MENA Average48.550.548.949.545.0
MENA Position (out of 19)1716161818
MENA Average48.550.548.949.545.0
MENA Position (out of 19)1716161818
Global Average49.749.850.049.349.9
Global Position (out of 201)188146175185196

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Syria vs global and regional averages
Graph: Syria vs global and regional averages
Country
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Secruity Risk Index
UAE73.8
67.8
79.672.5
75.3
Qatar65.3
63.9
63.1
67.8
66.5
Bahrain64.5
 58.4 68.571.1
 60.1
Oman 63.3 51.0 59.8 66.4 76.0
Saudi Arabia 61.7 63.0 61.8 63.2 58.6
Jordan 58.4 54.9 59.1 59.7 60.0
Kuwait 54.8 52.3 51.7 51.1 64.1
Morocco
 52.9 39.8 62.0 55.2 54.6
Tunisia 47.8 46.0 46.4 53.5 45.3
Egypt 46.1 42.3 52.4 46.9 42.8
Lebanon 43.3 48.7 38.3 51.2 35.1
Iran 42.7 47.9 50.0 40.6 32.4
Algeria
 40.9 44.0 31.7 39.8 47.9
West Bank and Gaza 33.7 46.4 36.8 30.221.2
Libya
 28.3 44.4 26.0 29.313.4
Syria 28.0 42.9 30.0 26.412.7
Iraq
 27.2 43.7 25.2 28.8 11.3
Yemen 21.7 30.6 23.017.3
16.1
Regional Averages
47.5
49.3
48.1
48.4
44.1
Emerging Markets Averages46.8
48.0
47.5
45.8
46.0
Global Markets Averages49.7
49.8
50.0
49.3
49.9

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: September 21, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Syria

Graph: Major export commodities to Syria (2017)
Graph: Major export commodities to Syria (2017)
Graph: Major import commodities from Syria (2017)
Graph: Major import commodities from Syria (2017)
Graph: Merchandise exports to Syria
Graph: Merchandise exports to Syria
Graph: Merchandise imports from Syria
Graph: Merchandise imports from Syria

Official Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Source: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: September 21, 2018


2017
Growth rate (%)
Number of Syrian residents visiting Hong Kong297-11.1

Source: Hong Kong Tourism Board


2017Growth rate (%)
Number of Middle East residents visiting Hong Kong129,816-2.5

Source: Hong Kong Tourism Board
Date last reviewed: September 21, 2018

11.2 Commercial Presence in Hong Kong


2016
Growth rate (%)
Number of Syrian companies in Hong KongN/AN/A
- Regional headquarters
- Regional offices
- Local offices

Source: Hong Kong Census & Statistics Department