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Laying the new groundwork

March 2007
As Syria gets ready to finally launch its stock exchange, recent events are shaking up the economy. In just four months, Syria hosted the launch of four holding firms with big budgets and big plans. Nadim Issa reports.

The corporate structure of Syrian companies entered a new era in 2006, with the launch of four new holding entities all with large capital.

The first of these companies is Souria Holding , with a capital of $75 million; followed by Cham Holding, which boosts the largest capital, $350 million; while another, Construction Production Holding Company (CPC) opened with a capital of $170 million.

The fourth holding company is a joint Bahraini-Syrian venture, which was established after the signing of a memorandum of understanding in early January 2007, between Bahrain-based Global House Company and Syria's state-owned Establishment of Social Insurance, or Taminat. The percentage stake of each partner has not yet been announced. Both Cham and Souria are purely Syrian investments.

Cham Holding was formed by over 70 Syrian investors, (including prominent Syrian figure Rami Makhlouf, chairman of Syriatel Mobile Telecom ), and Souria by around 30, along with Saudi-based Bin Laden Group. CPC was established by the Saudi-based Bin Laden Group, as well as Syrian and Gulf investors, and the Bahraini-Syrian firm will be launched officially this April by both private Bahraini and Syrian investors along with the state-owned Taminat firm.

"The establishment of these companies is a great step since all the big investors who own groups and businesses in Syria are grouping themselves together to form these holding firms. This will help in boosting developmental projects and accelerating the execution of their strategies and projects," Executive Director at Phoenix Consulting, a unit of Damascus-based Phoenix Group, Tarek Nizameddine, told Jordan Business.

The ventures have the backing of Syrian President Bashar Al Assad, who on January 9, met with representatives from Souria and Cham Holding.

"The meeting of President Al Assad with the shareholders of Cham and Souria holdings is clear evidence that these projects will not face bureaucratic problems and will not be delayed," Mr. Nizameddine said.

Mr. Nizameddine added that there has been speculation of plans for another large holding firm in the works, revolutionizing the way business is done in Syria. Moustafa Al Kafry, director of the Investment Office in Syria, said that the appetite for launching new firms and raising capital has succeeded in attracting Syrian investors into injecting more money into their country due to the new Corporations Law that will be issued in the coming weeks, and which is trying to provide tax reductions on investments launched by Syrian or foreign firms. "Any project ratified by the Investment Office will benefit from tax reductions according to each case, from 28% to as little as 14% if companies want to offer their shares to the public," Mr. Kafry explained.

Managing Director at Bell Consulting House, Louay Al Naddaf, said that the Corporations Law will help in regulating the work of all firms operating in Syria.

Big projects, big plans
Cham Holding, which was launched in December 2006, announced plans in February that it will start work on three major projects, with a total cost of $506 million, in the first half of 2007. Tarek Erfan, project manager at V-Consultants, a unit of Cham Holding, told Jordan Business that the company has another 13 projects in the pipeline.

Mr. Erfan said that the first project is a $137 million tourism resort in Aleppo called the Tarek Bin Ziad Project. Built on 186,000 square meters of land, it includes three- and five-star hotels, as well as commercial and residential facilities.

The second project will be to develop commercial services at the Hijaz Railway Station in Damascus for $119 million under a B.O.T (Build-Operate-Transfer) contract. The Hijaz project will be developed as the rail transportation hub in central Damascus in connection with a mega-sized project to recreate the historic Hijaz railroad line between Syria and Saudi Arabia. At the station, Cham Holding will construct and operate commercial and office spaces, along with parking facilities for 1,100 vehicles in a total built-up area of 133,000 square meters.

The third project will be located in Yaafour, west of Damascus. It will comprise building villas and residential buildings at a cost of $250 million. The project is adjacent to the Eighth Gate project that is being built by Dubai-based Emaar Properties. Mr. Erfan added that Cham Holding will invest $1.3 billion in developing several projects in the tourism, housing, banking, energy, industry, and health and transport sectors.

Souria Holding was first launched in November 2006 and is chaired by Syria-based Joud Group's Haytham Joud. The company will invest in services, tourism, industry, finance and real estate sectors. Total assets of the founding members, in terms of plants and projects that currently exist in Syria, total $800 million to be developed over the coming five years.

CPC is the first joint venture between the Bin Laden Group and Syrian individual investors in Syria. It was set up in mid-January and will focus on industrial and residential projects. It will build several industrial plants in the aluminum, steel, glass, and cement sectors in the Adra area of Syria.

Chairman of the Bahrain-based firm, Ahmad Al Dosari, told Jordan Business that Global House Company and several private and public Bahraini and Syrian companies will create a holding firm that will act as an umbrella for the three companies. Under its umbrella will be an Islamic bank for $500 million, a $100 million Takaful insurance company, and a brokerage firm. "We will own a 51% stake in the holding firm, for which we did not specify a name yet, while Taminat and other Syrian and Bahraini investors will own the rest," Mr. Dosari said. Mr. Dosari declined to disclose the capital of the holding firm, but said that it will incorporate several new companies other than the three firms that were announced. "We are very confident of the country's capability of hosting several holding companies even though there are now three new holding firms in Syria," he said.

Brighter outlook
The launch of these firms will undoubtedly give a boost to the launch of the Damascus Stock Exchange in late 2007. Additionally, it will attract more Gulf investors into injecting money to set up firms and projects under the umbrella of these four Syrian firms.

"This will certainly help the existing companies to expand their activities in order to compete with the new holding firms and this will in no way marginalize the small- and medium-sized firms that are present in the Syrian market," Bell Consulting House's Mr. Naddaf said. Mr. Dosari said that Global House's entry into the Syrian market at this stage, when the Syrian economy is opening up to other countries, will give Global House an edge in the country and help it benefit from the new regulations that Syria is constantly issuing. One of the latest regulations that the Syrian Cabinet ratified in late January is the allowance of real estate ownership by foreign investors.

International players like Dubai-based Emaar Properties and Kuwait-based Aref Group have already started developing multi-billion dollar projects in the real estate sector, while others, such as Qatar International Islamic Bank and Bahrain-based Al Baraka Bank, have started gaining a foothold in the banking sector.

With more foreign investment flowing into the country, a much-needed revival of the Syrian economy looks certain, moving it into a liberalized and more open one.

© Jordan Business 2007