Legal Briefing- November 2019

Energy

  • Domestic oil production is forecasted to reach 90,000 barrels per day in 2020 compared with 24,000 barrels per day in 2019 following the return of government control over oil fields in northern Syria. Oil production is still far off from 350,000 barrels per day before the war. Prior to the conflict, Syria used to export around 250,000 barrels of oil per day to overseas markets, notably Europe before the imposition of EU sanctions. Syria requires between 100,000 and 136,000 barrels of oil per day to cover the demands of local consumption. Meanwhile, Syria’s total production of natural gas reached 17.8 million cubic meters in 2019 and is anticipated to grow considerably to 6.8 billion cubic meters in 2020.
  • The Syrian Army entered and took control of the oil-rich fields located in the Rumailan area northeast of Hassakeh, which remained outside state control for seven years.
  • An explosion occurred at the Banias refinery reportedly during maintenance operations. One worker was killed and an engineer was injured in the blast.
  • Public-private partnership agreements are being ratified in the People’s Assembly to incorporate joint stock companies involving the Ministry of Petroleum and Mineral Resources and a prominent private investor in the joint venture. They aim to establish two new oil refineries. Syria currently has two oil refineries, one in Homs and the other in Banias.
  • Syria and Iran signed a memorandum of understanding whereby Iran committed to help Syria rebuild its electricity grid and the possibility of connecting the two countries’ grids through Iraq.
  • The Investment Authority licensed a project for the establishment of granulated phosphate fertilizers of all kinds in accordance with the Investment Law, which provides for a variety of financial and taxation incentives.
  • As part of its 2030 renewable energy strategy, the Ministry of Electricity seeks the construction of photovoltaic power plants with a total capacity of 1,500 megawatts (MW), wind farms with a capacity of 900 MW and the installation of more than 1.2 million domestic solar heaters. The private sector will be encouraged to participate in these projects through incentives. They include the provision of land in exchange for a nominal fee amounting to one percent of the value of electricity produced coupled with a reduction in the transfer fee. The Ministry of Electricity will cover the costs of connecting the project with the electricity grid and will commit to purchase electricity at worthwhile prices for a period ranging from 20 to 25 years. The Ministry of Electricity will cooperate with the Ministries of Agriculture, Local Administration and the Environment, as well as the Regional Planning Commission to prepare a map for the distribution of sites for renewable energy projects included in the solar and wind strategy. A special fund backed by public and private banks will grant interest-free loans for the acquisition of solar water heaters or the installation of a photovoltaic system not exceeding five kilowatts. The loan will be redeemed through electricity bills for a period of five years.
  • The Syrian Investment Authority revealed that only four projects licensed in accordance with the Investment Law were implemented this year, with three involved in the generation of electricity from solar energy and one in the production of medicines.
  • The largest solar power plant was put into service in the province of Hama with a capacity of one megawatt. The project is being undertaken on the basis of a 25-year public-private partnership.
  • WDRVM, a renewable energy company, has succeeded in manufacturing, assembling, installing and operating a wind turbine with all of its components in Syria.

Transport

  • Discussions are underway involving the Ministry of Transport to assess the possibilities of linking the Iranian and Iraqi coasts with the Syrian coast on the Mediterranean Sea.
  • Minister of Transport Ali Hammoud revealed that the Russian company Stroytransgaz, which is undertaking an investment in Tartous Port, is also planning to implement a railway project linking Syria to the Gulf via Iraq.
  • A Russian MP in the Duma stressed that cooperation between the ports in Tartous and Sevastopol in Crimea could potentially turn the Syrian port into a Middle East regional trade hub especially if it becomes a special economic zone for importation, distribution and re-exportation.
  • Discussions are underway on a proposal to construct a new port on the Syrian coast between Lattakia and Jableh.
  • The General Establishment for the Hijaz Railway announced an investment offer to redevelop the Hijaz Railway Station in central Damascus on a build-operate-transfer (BOT) basis. The Nirvana Tourism Complex will be situated on 5,133 square meters of land. The project will be comprised of a mixed-use facility including a five-star hotel. The terms and conditions of the investment license include a 36-month construction duration and an operation period of 45 years. The assets revert back to the state upon expiry of the contract.
  • The Syrian Investment Authority has licensed a company with a share capital of SYP 2.8 billion to transport goods, which is owned by businessmen from a new prominent family.

Telecommunications

  • The profits of MTN Syria, one of the country’s two mobile network operators, declined by 88% at the end of September compared to the same time period last year.
  • The Ministry of Finance issued a number of resolutions imposing provisional attachment orders against the assets of MTN Syria and members of its board of directors due to alleged customs violations amounting to SYP 20 million.
  • Minister of Communications and Technology Eyad Al-Khatib announced that the third mobile network operator would be announced in due time, that the state-owned Syrian Telecommunications Corporation will own 20% of it, and that it will provide 5G services by 2022 at the latest.

Finance

  • The People’s Assembly approved the national budget for 2020 estimated at SYP 4 trillion, with SYP 2.7 trillion allocated for expenditures and SYP 1.3 trillion for investments. President Bashar Al-Assad formally issued the national budget for 2020 by ratifying Law 25/2019.
  • The Damascus Securities Exchange is proposing to offer bonds and treasury bills for public subscription on the stock market in an effort to facilitate government borrowing and influence the exchange rate of the US Dollar in relation to the Syrian Pound.
  • Public and private banks are refusing to accept deposits from insurance companies as some banks have tightened their conditions for accepting deposits, such as shortening the deposit periods. Insurance companies are being advised to pursue investment options for their funds.
  • The state-owned Commercial Bank of Syria plans to offer loans to investors to finance up to 50% of the costs associated with building housing units with repayment obligations over a three-year period in monthly, quarterly or half yearly installments.
  • The profits of privately owned Cham Bank, one of the three Islamic banks in the country, increased by 362% at the end of the third quarter in September compared to the same time period last year.
  • The Syrian and Iranian governments signed a memorandum of understanding on behalf of their state-owned commercial banks stipulating for the resolution of problems affecting financial exchanges, the opening of new bank branches and the establishment of a common bank.
  • A joint Syrian-Iranian bank should be established in the next four months to facilitate trade exchanges between the two countries.
  • According to the estimates of global investment bank Credit Suisse, the total net worth of Syrian citizens is $21.1 billion (US) as of the end of June 2019 compared with $232.2 billion for Lebanese, $1.56 trillion for Saudis and $106 trillion for Americans.

Taxation

  • Minister of Public Works and Housing Souheil Abdel-Latif anticipates that the passage of the Real Estate Sales Bill will limit speculation in the real estate market. The Bill imposes one percent and one and a half percent taxes on the sales of residential and commercial properties respectively. The tax is on the actual market valuations of the properties as determined by specialized committees from the Ministry of Finance. The current taxes are based on outdated prescribed rates from the mid-1980s. Minister of Finance Maamoun Hamdan revealed that the Real Estate Sales Bill is almost ready after a nationwide appraisal was conducted.

Monetary

  • The Lebanese crisis is affecting the performance of the Lira Intervention Fund as Syrians and Lebanese with cash in Lebanon buy up US Dollars on the unofficial market in Syria. Moreover, trade between both countries, particularly Syrian exports to Lebanon, has been disrupted.
  • The obligation to deposit 10% of the value of imports in the Lira Intervention Fund could be further devaluing the Syrian Pound against the US Dollar because traders are resorting to the unofficial market to source the funds and potentially passing on the costs to consumers.
  • Some financial analysts believe that one important factor behind the imposition of capital controls by Lebanese banks is to prevent Syrians from repatriating their vast sums of deposits back to Syria, which would further erode liquidity in the Lebanese markets.
  • The unofficial rate of the Syrian Pound to the US Dollar crossed the SYP 700 threshold and climbed upwards towards the SYP 800 rate before hovering around the SYP 900 mark while its Lebanese counterpart tumbled to LB 2,200 to the US Dollar.
  • Sources revealed that the Central Bank will not adjust interest rates on deposits following speculation that they would be raised from seven percent to eight and a half percent.

Corporate

  • 65 companies were incorporated in Syria during the month of October by both local and foreign investors.
  • Cham Holding is auctioning the shares of a formerly prominent business personality in Syria after their failure to pay the fifth installment of their share capital contributions.

Construction

  • Al-Badia Cement Co., which recently listed on the Damascus Securities Exchange, realized profits of approximately SYP 11 billion during the period of nine months that previously passed.
  • The Syrian Investment Authority licensed a project for the production of prefabricated concrete blocks and slabs in accordance with the Investment Law, which provides a variety of financial incentives. 3.6 million blocks and 280,000 slabs are expected to be manufactured annually.
  • Prime Minister Imad Khamis issued a resolution obliging all new buildings to be installed with thermal insulation and solar heating systems.

Real Estate

  • The Governorate of Damascus revealed new details about the 15-year zoning plans for Yarmouk Camp on the southern edges of the capital which was populated mainly by residents of Palestinian origin before it became a conflict zone during this past decade. Following a resolution passed by Prime Minister Imad Khamis, the Governorate of Damascus took over zoning obligations concerning Yarmouk Camp, which was previously administered by a local committee in the Ministry of Local Administration and the Environment. The state-owned General Corporation for Engineering Studies is now tasked with drawing up plans for the development of Yarmouk Camp. It has devised three proposals to be chosen from for implementation. The land in Yarmouk Camp falls under the jurisdiction of the General Authority for Refugees and Arab Palestinians and therefore, most of the property ownership rights are effected by residential permits, notarized powers of attorney or court judgments. Furthermore, ownership is established by building on the land. Title is obtained only over built property and not the land itself. Therefore, the provisions of the Urban Renewal Law 10/2018 cannot be applied to Yarmouk Camp for these specific reasons. According to the Governorate, former residents of Yarmouk Camp will be allowed to return to their properties provided they can prove their ownership.
  • The Governorate of Damascus announced that it is months away from implementing alternative accommodation projects for former residents of what is now Marota City and officially granting share certificates to land owners in neighboring Basilia City.
  • A German parliamentary delegation visited Marota City to assess the progress of works.
  • The Ministry of Public Works and Housing approved a proposal submitted by Al-Toun Real Estate Development and Investment Co. to establish a real estate development zone in Rural Damascus.
  • Minister of Public Works and Housing Souheil Abdel-Latif asked the General Corporation for Engineering Studies to utilize drone technology in urban planning.The Council of Ministers is considering a bill that would mandate an annual loan of SYP 5 billion to the state-owned General Housing
  • Establishment without interest in order for it to undertake housing projects throughout the provinces.
  • Discussions are ongoing regarding the potential establishment of real estate finance companies to promote the residential sector.
  • The government is seeking to amend rental prices stipulated in contracts for the lease of state property to the private sector for investment. Property valuations have risen significantly during the war and the government wants to reflect them accordingly in the lease agreements.

International Trade

  • After the imposition of a set of reciprocal import controls on various products, the Jordanian authorities agreed to permit the importation of Syrian barley.
  • A source in the Customs Directorate confirmed that the first 10 trucks loaded with goods and materials crossed the Abou Kamal border into Iraq from Syria on route to the Baghdad International Fair.
  • Lebanon’s economic crisis is affecting Syrian foreign trade. Firstly, demand for US Dollars in the Syrian market by Syrians and Lebanese living in Lebanon is contributing to the appreciation of the US Dollar against the Syrian Pound, thus making imports into Syria more expensive. Secondly, internal controls imposed by Lebanese banks on outward cash transfers mean that it is difficult to pay for goods whose ultimate destination is the Syrian market since official and unofficial trade between Syria and Lebanon is quite strong.
  • Imports to Syria over the last few years which were transacted through Lebanon have allegedly added to pressures on the availability of US Dollars in the Lebanese foreign exchange markets.
  • The Central Bank of Syria is reportedly in the process of preparing a new mechanism for financing imports.
  • Minister of Economy and Foreign Trade Samer Al-Khalil issued Resolution 944/2019, which requires traders to deposit funds equivalent to up to 40% of the value of their import license with banks.
  • The Central Bank forwarded a circular to the banks containing the mechanisms to implement the recent resolution issued by the Ministry of Economy and Foreign Trade that mandates deposits of up to 40% of the value of imports before import licenses can be granted to traders. The amounts are divided between two types of deposits equaling 40% of the total value of the imports but deposited in the banks separately in tranches of 25% and 15%.
  • The Federation of Syrian Chambers of Commerce held talks with a German parliamentary delegation on the possibility of restoring economic and commercial relations between Syria and Germany to their former state and working to lift the sanctions imposed on Syria.
  • The Council of Ministers deliberated on a bill that provides for the ratification of an agreement establishing a trading house between Syria and South Ossetia.
  • There are expectations that the meeting of the Arab Chambers of Commerce in April 2020 will be held in Damascus.

Commerce

  • Proposed amendments to the Consumer Protection Law focus mainly on increased penalties for rogue traders trying to cut corners to increase their margins under tough economic conditions, including fines of up to SYP 5 million for fraudulent acts perpetrated against consumers.
  • Members of the Federation of Syrian Chambers of Commerce, the Federation of Syrian Chambers of Industry, major importers of basic foodstuffs and some business owners agreed with the Ministry of Internal Trade and Consumer Protection to issue a price bulletin every 15 days. The bulletin would set the prices of goods such as sugar, rice and others based on the prevailing exchange rate and the actual costs of the commodities.
  • Minister of Internal Trade and Consumer Protection Atef Naddaf agreed to review objections by merchants to the bill governing the Federation of Syrian Chambers of Commerce, especially provisions concerned with taxes and fees, social security and oversight by the Ministry.

Industry

  • According to the President of the Federation of Syrian Chambers of Industry, the Fourth Industrial Conference was postponed since the recommendations of the last one, which touched on financial and taxation reforms to help stimulate the industrial sector, were not adopted.

Crafts

  • The government is studying the provision of a package of facilities to the Goldsmiths Association in order to establish the so-called “City of Gold” district in the northern city of Aleppo where craftsmen can undertake their profession.
  • A piece of land in the Damascus district of Bab Sharqi will be allocated for a goldsmiths’ complex to centralize their location as opposed to having them dispersed around the capital.

Tourism

  • An Omani business delegation visiting Syria expressed an interest to undertake an investment in Lattakia due to the potential of the coastal province to cater to tourism projects.
  • Minister of Tourism Mohammed Rami Martini issued a resolution permitting the licensing of food carts.
  • Minister of Tourism Mohammed Rami Martini revealed that more than 60% of the major tourism projects that were being implemented according to build-operate-transfer (BOT) contracts but stalled during the war have been amended by annexes to overcome economic imbalances and resume execution.
  • The Lebanese restaurant chain Em Sherif formally opened its branch at the Four Seasons Hotel in Damascus.
  • The Supreme Tourism Council headed by Prime Minister Imad Khamis approved the project for the establishment of an environmental park on the lands of Kiwan in the Damascus district of Mezzeh in order to preserve the greenery in the area and encourage tourism.

Health

  • Minister of Health Nizar Yazigi formally opened the first medical facility for the production of cancer drugs in Syria in the Adra Industrial Park, which belongs to the company Main Pharmaceutical Industries and which will operate under the brand of ‘Main Pharma’. While Syria is accustomed to manufacturing most of its pharmaceutical products, it regularly has to resort to imports for drugs to treat cancer and diabetes. It will now be able to save on foreign exchange with reduced demands for imports and rather profit from exports.
  • The Syrian Investment Authority licensed a project for the production of cancer and hormonal drugs in line with the Investment Law, which provides for financial and taxation incentives. The facility will be built within three years in the Adra Industrial Park and will create 100 jobs.

Local Councils

  • While meeting with the governors of Syria’s 14 provinces, Prime Minister Imad Khamis shifted the burden of responsibility of realizing the government’s agenda onto them by utilizing all human and material resources at hand while disregarding the mechanisms used before the war.

Employment

  • President Bashar Al-Assad issued Legislative Decree 23/2019 to increase the salaries of civilian and military public sector employees by SYP 20,000.
  • President Bashar Al-Assad issued Legislative Decree 24/2019 to increase pensions for retired public sector personnel by SYP 16,000.
  • The People’s Assembly approved a bill pertaining to the pensions of military personnel.
  • Following the increase in the salaries and wages of public sector employees, there was a corollary rise in the prices of consumer items. As the money supply grows in the markets due to the circulation of more Syrian Pounds, it inevitably leads to higher inflation.
  • Some MPs in the People’s Assembly proposed to reduce income tax liabilities on employees or to amend the tax brackets for salaries while pointing out that payroll taxes rose following the increase in salaries and wages for the public sector.
  • The new Social Security Bill envisages a widening of the categories of insured individuals and the incorporation of a company wholly owned by the General Establishment for Social Security in accordance with the Companies Law to invest the surplus assets of the organization.
  • The Council of Ministers approved a plan to grant the General Establishment for Social Security an advance payment amounting to SYP 3.5 billion per month starting from the beginning of 2020 in order to finance the pensions of retirees.

Judiciary

  • The People’s Assembly approved the articles of the new Council of State Administrative Court Bill and submitted it to President Bashar Al-Assad for ratification. The Council of State is an administrative court that hears and resolves disputes involving the public sector. In an unprecedented move, President Al-Assad refrained from signing the Bill but rather referred it to the Supreme Constitutional Court to evaluate and determine whether its provisions are wholly in compliance with the Constitution.

Constitutional Reform

  • The deliberations in Geneva by the Syrian Constitutional Committee have apparently stalled during the second round of talks after the opposition reportedly refused to discuss the agenda with the delegations representing the government and civil society. The disagreements between the delegations with respect to the agenda appeared to hover around a lack of consensus regarding what should be deemed political issues and what should be categorized as constitutional matters for the purposes of the discourse about national principles.

Public Administration

  • A new bill governing the operations of the Artists Syndicate stirred controversy in the People’s Assembly for a number of reasons, one of which is the use of the term “may”. Some MPs believe it runs counter to the government’s declared intention of revoking exemptions in laws. The concern is that the use of the term ‘may’ in the bill would grant relevant officials the option to discriminate between persons by treating some differently from others.
  • President Bashar Al-Assad issued Decree 107/2019 appointing the new members of the Advisory Council which provides consultations to the Council of Ministers while increasing its membership from 14 to 17 advisors, including seven businessmen.

Crime

  • During an interview with Paris Match, President Bashar Al-Assad confirmed that ISIS prisoners and other terrorists apprehended in Syria are subject to Syrian law and fall under the jurisdiction of the Syrian courts, specifically the Terrorism Court.

International

  • There are expectations that the Hungarian Embassy in Damascus will reopen in early 2020.
  • Syria, represented by a delegation led by Minister of Education Imad Al-Azab, participated in the 40th conference of the United Nations Educational, Scientific and Cultural Organization (UNESCO) held in Paris.
  • Following the visit of the German parliamentary delegation to Syria, news is circulating that the German Parliament is proposing a cooperation project with the Syrian government while Switzerland is considering granting Syria €450 million for reconstruction.
  • The Chairman of the Joint Chiefs of Staff in the US General Mark Milley confirmed that the US will leave up to 600 troops in northeastern Syria. President Donald Trump’s countless flip-flops on withdrawing from Syria are possibly the most ever recorded on a foreign policy issue.
  • WikiLeaks released an e-mail from a whistleblower who accused the Organisation for the Prohibition of Chemical Weapons (OPCW) of a cover-up by altering the original findings of investigators to make evidence of a chemical attack in Douma in April 2018 seem more conclusive. The revelation from a member of the team that probed the incident further calls into question the supposed credibility and alleged neutrality of the OPCW’s conclusions on Syria and whether the world’s chemical watchdog is fit for purpose. Following the revelations by the whistleblower that the report by the OPCW on the alleged chemical attack in the Damascus suburb of Douma was manipulated to justify military aggression against Syria, there are calls for an inquiry.
  • According to a poll conducted by the Syrian Law Journal before the British parliamentary elections, only 49% of respondents thought that a British Prime Minister Jeremy Corbyn would re-engage politically and diplomatically with President Bashar Al-Assad’s government in Syria.