12 May 2016
Syrian Arab Republic: Market Profile
Major Economic Indicators
- Syria is a Middle East country at the eastern end of the Mediterranean Sea, bordered by Iraq, Israel, Jordan, Lebanon and Turkey. Damascus is the capital, while Aleppo is the largest city. Syria has a young population, with more than 50% of its citizens aged below 25.
- The Syrian economy has suffered substantial economic degradation since the outbreak of civil war in 2011 in the wake of the Arab Spring. Its infrastructure has been severely damaged with more than 10 million people internally displaced, a development aggravated by the emergence of Islamic State in 2013. Furthermore, an estimated five million Syrian refugees now reside in many external host countries – more than half are in Turkey, followed by Lebanon, Jordan, Iraq and Egypt. Slumps in consumption and tax revenues, along with escalating military costs, have caused a huge fiscal deficit. The United Nations (UN) estimates the total economic loss to the country, since the start of the conflict, to be more than US$200 billion.
- The pre-war Syrian economy was buoyed by the oil sector, which accounted for 25% of GDP and 35% of fiscal receipts. Agriculture was another pillar (nearly 20% of GDP) despite the droughts of 2007-10. Tourism (about 10% GDP) was once seen as an emerging driver. Market reforms, including the establishment of the Damascus Stock Exchange, subsidy reforms and consolidation of multiple exchange rates, were implemented and contributed to modest economic growth.
- Oil was Syria’s leading export prior to the war, followed by minerals and agricultural products. Its main exports markets were the EU, Iraq and Saudi Arabia. Imports were dominated by food and livestock, machinery and metals from Ukraine, Russia, Saudi Arabia and Turkey. Since 2011 – when sanctions were imposed by the EU, the Arab League, Turkey, the US and Canada – the country has traded heavily with Iraq. Syria has had free trade agreements (FTA) with Turkey and Iran and was reportedly discussing an FTA with the Eurasian Economic Union (EEU).
- The China Petrochemical Corporation and China National Petroleum Corporation had previously invested in Syria’s hydrocarbon sector. However, in 2013, most Chinese companies suspended their operations in Syria as the civil war intensified.
- On 15 November 2015, the US, Russia, China and 14 countries from the Middle East and Europe agreed on an 18-month plan to establish a new Syrian government in the wake of the Paris terrorist attack by Islamic State. Despite a nationwide ceasefire deal being brokered by the UN on 27 February 2016, renewed violence has erupted and stalled further negotiations to revitalise the UN deal. It remains dubious if UN administered free election could still be held as wished by May 2017.
- The Syrian Investment Agency (SIA) is the primary agency in promoting foreign investment. Licensed projects are offered with incentives such as tax deduction and customs duties exceptions in a range of industries including manufacturing, agriculture, transport, health and oil and minerals.
- Syria’s FDI stock stagnated at US$10.7 billion since 2011 based on UNCTAD statistics. According to China’s Ministry of Commerce, China’s cumulative FDI in the country declined from US$16.6 million in 2010 to US$14.6 million in 2014.
More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.