Legal Briefing – August 2021
Presidential Elections
President Bashar Al-Assad issued Presidential Decree 206/2021 reappointing Hussein Arnous as Prime Minister. The President is constitutionally obliged to name a new government following the start of a new term. Until then, the current cabinet operates in a caretaker capacity.
The President issued Presidential Decree 208/2021 appointing a new government headed by Prime Minister Hussein Arnous. With the exceptions of the Ministries of Internal Trade and Consumer Protection, Social Affairs and Labour, and Information, the cabinet remained mostly intact.
President Bashar Al-Assad oversaw the inauguration of the new Council of Ministers headed by Prime Minister Hussein Arnous. The President subsequently addressed the cabinet and laid out the strategy to be executed by the government as he is constitutionally required to do.
Al-Assad: Syria will not return to the point where it was at before the war but it must catch up to the point where it should be at the present time. The focus has thus been on automation of the public administration, digital transformation and electronic payments and services.
Al-Assad: The priority in the previous stage was to restore security but today it is production and job opportunities. The restoration of security was essential to restart production. Furthermore, production is necessary for national stability. The government must be transparent.
Al-Assad: The local councils know their regions and priorities better. The central government should not expend its time on such details but rather focus on formulating strategy with the assistance of local councils. Attention must be given to decentralisation and rural areas.
Al-Assad: Tax evasion is a major problem that creates gaps in the Syrian economy. Tax reform is necessary to finance better public services. The other side to fiscal reform will be combating smuggling which is responsible for the widespread sale of illicit goods in local markets.
Al-Assad: Subsidies to citizens are key features of Syrian policy and there is no plan to alter this position. Subsidy reform will rather focus on identifying who requires governmental support and who does not and the provision of subsidies will thus be organised accordingly.
International Trade
A new measure in the works is likely to link import licenses with proofs of transfer issued by either a bank or foreign exchange bureau so that importers can prove that they obtained the funds to pay for their goods from licensed institutions, not the illegal black market.
The Chairman of the Damascus Chamber of Agriculture warned that unless Syrian exports of fruits and vegetables conform to Saudi import specifications, such as proper certification, packaging and sanitary irrigation, there is a risk of losing access to the Gulf markets.
The Prime Minister approved the proposal of the Economic Committee affiliated to the Council of Ministers to temporarily suspend the export of olive oil in its eddy form or as packed in containers of more than five litres until 31-December-2021 to control domestic prices.
The Ministry of Economy and Foreign Trade reduced the validity period of import permits to three months from six months and temporarily barred the importation of 22 items for a period of six months, including minibuses, phones, air conditioners, ceramics, dates, nuts and so forth.
There were conflicting reports about the withdrawal of South Korea’s LG from Syria where it has been represented by a local agent since 1992 following a temporary import ban on items like the ones it produces though such allegations were dismissed as rumours.
Commerce
The Governorate of Damascus issued a resolution designating the opening and closing times of all establishments, including markets, in the capital with the assumption being that the measure is an attempt to conserve electricity supplies due to the ongoing power outages.
The Damascus Chamber of Commerce aired the grievances of merchants whose high street stores have to close earlier since consumers generally shop later in the evening during the summer to avoid the heat, and in doing so will opt for malls instead that may remain open until late.
Industry
The Ice Cream Association reported that eight out of 80 factories closed due to a lack of electricity after buyers refused to purchase due to their inability to cool the ice cream products. Factories receive only 25% of their diesel requirements, which reduced sales to 10%.
The high prices of locally manufactured clothes in Syria is reportedly due to expensive raw materials and freight rates caused by the pandemic, and the lack of electricity and labour, which has reduced production by more than 70% this year as factories operate at 20% capacity.
The Damascus Chamber of Commerce revealed that there is a problem in securing diesel for manufacturers and called on the government to permit industrialists to import their own requirements, which would cost SYP 1,700 per litre as opposed to the black market rate of SYP 2,500.
Energy
The increased power outages felt by residential and commercial premises coincided with governmental measures to support the industrial sector by providing more electricity to factories and rationing it accordingly in order to encourage greater output in manufacturing.
According to the Damascus Chamber of Tourism, electricity generators at their current capacity only provide 30% of air conditioning for hotels, at least those up to three stars, irrespective of whether diesel is available or not. Subsidised diesel only covers 10% of their needs. The rest is secured from the black market at SYP 2,500 to SYP 3,800 per litre, which is factored into room prices, making them affordable mainly for expatriates. The power cuts led many expatriates to cut short their visits to Syria, especially due to a lack of air conditioning.
Power cuts are affecting consumer habits. Due to a lack of refrigeration caused by electricity shortages, people are forced to throw away spoiled food items and consequently, buy less goods that do not require lengthy refrigeration. As a result, vendors are selling less products.
Diesel vendors are informing citizens to register for their initial allocation of 50 litres of heating oil for winter. The distribution of fuel products is legally monopolised by the state-owned entity Mahroukat, which contracts with public and private sellers throughout Syria. Allocations of diesel are registered on a citizen’s smart card at a subsidised fixed price per supply. If citizens do not receive their allocation on time, they have to resort to the illegal black market outside of the smart card system for supplies at exorbitant prices.
Families waiting too long for their allocation of a subsidised cooking gas cylinder distributed via the smart card system are having to resort to purchases on the black market at more than 20 times the government price on average provided they can afford it.
The state-owned fuel distribution company Mahroukat supplies petrol to public and private gas stations who then send text messages to citizens informing them of their allocated slot via the smart card system to fill their cars with subsidised petrol but some are citing delays.
The first phase of construction of the photovoltaic plant in the Sheikh Najjar Industrial Park in Aleppo has been completed and the second phase is set to commence. The plant will be expanded to produce 100 megawatts of electricity on an area measuring 850,000 square meters.
Water Resources
While a committee was formed to evaluate the prospects of seawater desalination, the Ministry of Water Resources would need a commitment from an investor with substantial funding to consider such a project to help alleviate the effects of water rationing throughout the country.
The authorities in Damascus implement water rationing when the amount of water produced from the Fijeh and Barada springs and the wells of the pumping centres decrease and cancel it when there is a surplus. Syria has 166 dams with a storage volume of 18.9 billion cubic meters.
Bottled water is in short supply, particularly in Damascus, for a number of possible reasons, including increased demand due to power outages disabling water pumps, market manipulations by monopolists, and a plastic recycling process that cannot keep up with the required pace. The state-owned water bottling company affiliated to the Ministry of Industry replied that sales of its products will be exclusively restricted to the public entities Syrian Trading and the Military Social Establishment so as to prevent monopolistic practices and price surging.
Transport
The pollution on many of Syria’s streets, particularly the capital Damascus, is caused by old cars, which are prevalent due to an import ban on new vehicles that would expend valuable foreign exchange, and low quality fuel that emits unpleasant fumes into the air.
Tourism
Syrians who can are making the most of domestic holidays in the coastal region and elsewhere. Given that touristic visits between Syria and Lebanon are suspended due to the pandemic, hospitality providers in Syria are reportedly charging similar prices to their Lebanese counterparts.
Telecommunications
MTN Group confirmed that it will exit the Syrian market after its 75% shareholding was subjected to the judicial custody of its minority 25% partner TeleInvest as authorised by the Council of State Administrative Court, thereby rendering its control over the company null. The judicial custody order followed a dispute over license royalties owed to the Telecommunications Regulatory Authority. MTN Group CEO Ralph Mupita stated that the company may resort to international legal frameworks after failing to sell its 75% share to TeleInvest. The South African telecommunications giant first invested in Syria in 2001 but the judicial custody order imposed this past February affected the value of its shares in its Syrian subsidiary. Its operations in Syria amount to only 0.4% of the company’s total service revenue.
After a five-month suspension, mobile phone owners can resume registering their devices and pay the applicable customs duties if purchased from overseas rather than having to buy them locally. An abundance of mobile phones in the Syrian market prompted an import ban in March. Expatriates visiting Syria and intending to access the local cellular networks were given the option of registering their mobile phone devices at the border and using them for a period of 30 days.
The National Network Services Authority called on developers of electronic applications founded in Syria to obtain the regulatory licence within three months to validate their security credentials. There are applications for ordering food, shopping, taxi services and so forth. None of the applications are authorized to integrate an electronic payment system due to the processing of sensitive financial data, which requires clearance from the regulator. Electronic payment services are currently limited to utility bills and some public services.
Corporate
The Syrian Commission on Financial Markets approved the request of the newly incorporated National Islamic Bank to list 25% of its shares, which are equivalent to 62.5 million, on the Damascus Securities Exchange for public subscription with the aim of raising SYP 6.25 billion.
The Ministry of Internal Trade and Consumer Protection ratified the articles of association of a new Talal Abu-Ghazaleh company to provide flexible office services in Damascus with a capital of SYP 100 million.
Investment
The Supreme Investment Council headed by the Prime Minister made decisions regarding Investment Law 18/2021, including the issuance of its executive regulations by 15-September-2021 and the registration of applications by potential investors to the Syrian Investment Authority.
The Supreme Investment Council authorised the Syrian Investment Authority to grant an investment license to potential projects within 15 days after their respective application is submitted to the Supreme Investment Council for consideration and approval.
The Supreme Investment Council authorised the Syrian Investment Authority to license five projects pursuant to the new Investment Law 18/2021, including three solar energy projects, an agricultural and organic fertilisers investment, and a health-related industrial enterprise.
Finance
The decision of the Central Bank to set withdrawal limits by depositors from their banks at a maximum of SYP 2 million (~$625) per day reportedly confused merchants and kept them from depositing their money in banks, thereby leading to a decline in banking deposits overall.
While businesses criticise the formula employed by the Ministry of Finance to calculate income taxes, including for those based in former conflict zones, and the lack of improvement in public services, the counter argument is that the state paid a hefty price to restore security.
In a bid to increase the state’s coffers since around 2019, government bodies including the General Commission for Taxes and Fees, the Customs Directorate and the Central Bank have reportedly been pressuring businesses to pay dues on narrow, technical and at times disputable grounds.
Since early 2020, the government’s main objective has been to stabilise the value of the Syrian Pound. As a result, any persons caught dealing in US Dollars without authorisation have been arrested. The prospects of doing business in Syria have thus become even more challenging.
Monetary
Common complaints from consumers point to the fact that the prices of goods in the markets at the present time when the US Dollar is valued at approximately SYP 3,200 are either the same or exceed the rates prevalent at the time when the US Dollar reached almost SYP 5,000.
Taxation
Al-Badia Cement clarified that the provisional attachment order imposed against the company by the Ministry of Finance was wrongfully authorized as the third party supplier had failed to pay the applicable customs duties on the imported material ultimately purchased by Al-Badia Cement.
Real Estate
Real estate sellers are complaining that the governmental committees tasked with appraising properties for the purposes of real estate sales tax charges are overvaluing them so they have to pay more in tax based on the official valuation, which surpasses the prices of the sales.
The appraisals are based on zoned regions and the properties located in the province of Rural Damascus are considered significantly overvalued by the committees, especially since real estate prices in these specific areas have declined substantially following the conflict.
Construction
The Mayor of the City of Aleppo revealed that the City Council continues to carry out two demolition campaigns per week of urban structures that violate the applicable Building Code in accordance with Legislative Decree 40/2012 and to rectify dangers pursuant to safety protocols.
Health
While some analysts suggest that herd immunity may have been reached in Syria despite cases increasing on a daily basis during summer and the spread of the Delta variant, unaffordable PCR tests and disregard for face masks make it challenging to assess the current situation.
Medical experts suggested that the coronavirus pandemic in Syria appeared to be on a flattening trend as cases were at a low point but caution should nevertheless be exercised as the Delta variant was circulating due to summer arrivals from abroad and hardly any use of face masks.
A leading Covid specialist in Syria warned against the rapid spread of the Delta variant, calling for restrictive measures to be imposed and blaming rising cases on a lack of precautions and travellers from abroad while stating that the Ministry of Health numbers are distorted.
The Ministry of Health is to begin issuing international vaccination certificates to those individuals who have been completely inoculated against Covid. Applicants have to register online and then visit a branch of the Commercial Bank of Syria to pay the fee of SYP 20,000.
Officials suggest that Syria’s decision to provide Lebanon with pharmaceutical products will not lead to local price increases due to surpluses in the markets, though those medicines in short supply will not be exported. Syria exported medicines to 30 countries before the war.
Pharmaceutical manufacturers at times are faced with export control measures in order to ensure the flow of supplies to the Syrian market. However, they note that such measures allow foreign competitors to take their place and limit their ability to earn hard currencies.
Social Affairs
The President ratified the Children’s Rights Law 21/2021 to empower the state to provide services in the best interests of children, including in their upbringing, education, psychological wellbeing and so forth.
Immigration
The Ministry of Interior announced an agreement with its Jordanian counterpart to allow Syrian nationals who are validly resident in Saudi Arabia or any other Gulf state to pass through the Nassib-Jaber crossing on the Syrian-Jordanian border to continue onto their destination.