11 November 2008
Reforms to the Syrian economy, in particular the opening up of its financial sector, have led to an expansion of the base of local and foreign investments, the prime minister told a conference in Damascus.
Prime Minister Mohammad Naji Al Otari told the Syrian Banking and Investment Conference, held from October 31-November 2, that economic, legislative, financial and administrative reforms have opened up the banking sector, making it one of the primary forces for development in the Syrian economy.
While much progress has been made, further reforms are continuing, including more autonomy for the Central Bank of Syria, strengthening the regulatory and monitoring controls for the country's banking system and providing the necessary infrastructure for the financial sector, the prime minister said.
It is important that the effects of the current global financial crisis be discussed and measures found to assist banks with their role in the investment and development process, said Al Otari.
Similarly, Syrian Minister of Finance Mohammed Al Hussein told the conference that the effects of the current global financial crisis on Syria are limited and that the government is working to reduce them further.
Syria has already made strong progress in enacting reforms to its financial sector in the past few years, including allowing the entry of private banks to the marketplace, easing foreign investment regulations and promoting the development of the insurance industry.
Al Hussein said that a factor that will help Syria weather the current crisis is its low levels of foreign debt stock, which have been reduced from $20bn in 2000 to $5.3bn as of the end of last year. Foreign debt as a ratio of Gross Domestic Product (GDP) is now below 13%.
The finance minister went on to say that Syria has also reformed many of its taxation regulations to encourage investment and the development of the private sector. These reforms included lowering the upper rate of tax for companies and individuals from 63% to 28%, and to 22% for those firms operating under investment incentive legislation, he said. Customs duties have also been slashed to encourage imports and exports, with the highest rates of tariffs reduced from 255% to 60%.
Another measure in the works, according to Al Hussein, is a plan by the government to begin offering treasury bonds, a move that would give banks and investors a further vehicle for their funds as well as provide the state with access to capital.
"We are enthusiastic about it, and it will happen," the minister said. "The timing is very important. Together with the central bank we have implemented training for auction."
Additionally, the government intends to increase spending in the coming year, with total outlays set to rise by 14% and investment funding to go up by 19.5%, according to Al Hussein.
This planned increase in state spending could offset some of the effects of a downturn in the private sector and keep the economy ticking over.
But Mahmoud Al Nouri, chairman of the board of the Syrian-Kuwaiti Holding Company and a former finance minister for Kuwait, offered the conference a more sobering point of view.
The global financial crisis will pose major problems for developing countries, as they are highly dependant on exports for their livelihood, he said. There will be elevated competition for exports in the region, with Asian nations increasingly competing with Syrian products, said Al Nouri.
Additionally, he told the conference that the crisis will have a significant negative impact on growth rates and that direct investment in Syria will decline, with commercial banks worldwide becoming more conservative in their disbursement of loans. This could lead to a drop in foreign and other direct investment in developing countries, such as Syria.
While Syrian officials have stated that the country's economy is relatively insulated from the worst of the global crisis due to the more isolated nature of its financial system and the absence of a stock market, there are still concerns about the impact of the slowdown.
Dr Taisir Al Raddawi, chairman of the State Planning Commission, warned on October 18 that the weakening global economy could result in inflationary pressures.
According to the IMF, Syria's year-end inflation rate will be 8% in 2008, falling back to 7% next year.
It is important that the social effects of the crisis be monitored and that there be cooperation and a coordinated response in order to reduce the effect on the Syrian economy, Al Raddawi told a commission meeting, according to the state news agency.
Reforms to the Syrian economy, in particular the opening up of its financial sector, have led to an expansion of the base of local and foreign investments, the prime minister told a conference in Damascus.
Prime Minister Mohammad Naji Al Otari told the Syrian Banking and Investment Conference, held from October 31-November 2, that economic, legislative, financial and administrative reforms have opened up the banking sector, making it one of the primary forces for development in the Syrian economy.
While much progress has been made, further reforms are continuing, including more autonomy for the Central Bank of Syria, strengthening the regulatory and monitoring controls for the country's banking system and providing the necessary infrastructure for the financial sector, the prime minister said.
It is important that the effects of the current global financial crisis be discussed and measures found to assist banks with their role in the investment and development process, said Al Otari.
Similarly, Syrian Minister of Finance Mohammed Al Hussein told the conference that the effects of the current global financial crisis on Syria are limited and that the government is working to reduce them further.
Syria has already made strong progress in enacting reforms to its financial sector in the past few years, including allowing the entry of private banks to the marketplace, easing foreign investment regulations and promoting the development of the insurance industry.
Al Hussein said that a factor that will help Syria weather the current crisis is its low levels of foreign debt stock, which have been reduced from $20bn in 2000 to $5.3bn as of the end of last year. Foreign debt as a ratio of Gross Domestic Product (GDP) is now below 13%.
The finance minister went on to say that Syria has also reformed many of its taxation regulations to encourage investment and the development of the private sector. These reforms included lowering the upper rate of tax for companies and individuals from 63% to 28%, and to 22% for those firms operating under investment incentive legislation, he said. Customs duties have also been slashed to encourage imports and exports, with the highest rates of tariffs reduced from 255% to 60%.
Another measure in the works, according to Al Hussein, is a plan by the government to begin offering treasury bonds, a move that would give banks and investors a further vehicle for their funds as well as provide the state with access to capital.
"We are enthusiastic about it, and it will happen," the minister said. "The timing is very important. Together with the central bank we have implemented training for auction."
Additionally, the government intends to increase spending in the coming year, with total outlays set to rise by 14% and investment funding to go up by 19.5%, according to Al Hussein.
This planned increase in state spending could offset some of the effects of a downturn in the private sector and keep the economy ticking over.
But Mahmoud Al Nouri, chairman of the board of the Syrian-Kuwaiti Holding Company and a former finance minister for Kuwait, offered the conference a more sobering point of view.
The global financial crisis will pose major problems for developing countries, as they are highly dependant on exports for their livelihood, he said. There will be elevated competition for exports in the region, with Asian nations increasingly competing with Syrian products, said Al Nouri.
Additionally, he told the conference that the crisis will have a significant negative impact on growth rates and that direct investment in Syria will decline, with commercial banks worldwide becoming more conservative in their disbursement of loans. This could lead to a drop in foreign and other direct investment in developing countries, such as Syria.
While Syrian officials have stated that the country's economy is relatively insulated from the worst of the global crisis due to the more isolated nature of its financial system and the absence of a stock market, there are still concerns about the impact of the slowdown.
Dr Taisir Al Raddawi, chairman of the State Planning Commission, warned on October 18 that the weakening global economy could result in inflationary pressures.
According to the IMF, Syria's year-end inflation rate will be 8% in 2008, falling back to 7% next year.
It is important that the social effects of the crisis be monitored and that there be cooperation and a coordinated response in order to reduce the effect on the Syrian economy, Al Raddawi told a commission meeting, according to the state news agency.
© Oxford Business Group 2008
