Legal Briefing – July 2021
Presidential Elections
Bashar Al-Assad took the oath of office on July 17th as stipulated for in the Constitution of 2012 and began his fourth presidential term before MPs, Army officers, injured military personnel, the clergy, artists and other public and private officials in the People’s Palace in Damascus.
Al-Assad: The National Administrative Reform Program (NARP) is comprised of laws, executive regulations, decrees, circulars and other legislative instruments. Any misplaced term or text in any legislation can inadvertently alter its purpose causing unintended consequences.
Al-Assad: NARP is the basis on which the modernization of government services will be structured and provided to citizens. The corruption file is linked to NARP.
Al-Assad: The next phase will focus on industry and facilitating manufacturing to satisfy local demand and increase exports. Projects in industrial parks, especially by small enterprises, will be supported (via the new Investment Law) along with investments in renewable energy.
Al-Assad: One of the biggest obstacles now lies in the freezing of Syrian funds in Lebanese banks. The embargo did not prevent Syria from meeting basic needs but caused bottlenecks. The number of major industrial facilities now being built in Syria exceeds 3,300.
Following the start of his fourth term, President Bashar Al-Assad must appoint a new government. There is speculation that any ministerial reshuffle is likely to stall or terminate any ongoing projects within a respective ministry as the new appointee adjusts to their post.
International
In the first visit of its kind, the Chinese Foreign Minister arrived in Damascus to meet the Syrian President, hours after the latter took the presidential oath of office, to discuss economic and diplomatic issues, including six strategic economic and infrastructure projects.
The Syrian President and the Chinese Foreign Minister agreed to move towards a new stage in strengthening bilateral relations between both countries while touching on Syria’s participation in China’s “One Belt, One Road” initiative given its regional and strategic location.
Health
The Ministry of Health issued a directive exempting any person travelling to Syria from the need to submit a negative Covid PCR test to the authorities on the condition that they present a certificate evidencing that they have received two doses of a coronavirus vaccine.
A manufacturer confirmed that in practice, the Central Bank only finances 15% of the cost of importing pharmaceutical raw materials. The remainder constitutes expenses derived from sanctions, difficulties in transferring funds and higher fees, and a reluctance to deal with Syria.
The President issued Legislative Decree 25/2021 extending the provisions of Legislative Decree 14/2020 until 31-July-2022. The Law exempts the importation of raw materials utilized for the manufacture of pharmaceutical products from customs duties, taxes and other fees.
Commerce
Syrian markets are awash with locally produced consumer goods and those imported from countries such as China. However, prices remain relatively high compared to the purchasing power of the population in general, which is partly reliant on remittances from families abroad.
While the government promotes manufacturing, merchants and traders count the days to sell off their remaining goods and close up shop mainly due to a lack of import licenses and the imposition of customs duties on stock likely already declared, which is eating into their margins.
International Trade
Pending the issuance of the executive regulations by the competent committee in Iraq, the Iraqi government has reportedly approved a measure to permit Syrian trucks to transit to Saudi Arabia and Kuwait through its territory via the Arar and Safwan border crossings respectively.
Saudi Arabia reportedly refused entry to some Syrian trucks crossing via Jordan and carrying fruits and vegetables because they lacked the appropriate identification documentation for the goods while the Federation of Syrian Chambers of Commerce contacted its Saudi counterpart.
The Jordanian authorities reportedly cancelled the practice of Syrian goods bound for the Gulf region and Egypt being transferred from Syrian trucks to Jordanian trucks once they reach Jordanian territory as both Syria and Jordan seek to unify the fees payable at the border.
The Jordanian authorities have reportedly agreed to allow Syrian vehicles carrying passengers and goods to enter its territory without the need to transfer to Jordanian vehicles. Similar Jordanian vehicles will also be permitted to cross into Syrian territory.
A full liberalization of the transport of goods and persons between Syria and Jordan was reportedly underway with Syrians no longer required to obtain prior approval from the Jordanian embassy in Damascus to enter Jordan and Syrian trucks able to continue towards the Gulf region unhindered.
The Jordanian authorities subsequently reportedly temporarily closed the Jaber border crossing with Syria to persons and goods as a result of recent security developments in Daraa, which would be reopened as soon as the appropriate conditions permitted.
Jordan reportedly reopened the Jaber border crossing with Syria to goods only following the recent security developments in Daraa and will require goods to be offloaded from Syrian trucks and transported to Jordanian ones at the border to continue on route to their destination.
Industry
The Prime Minister approved the proposal of the Economic Committee affiliated to the Council of Ministers to include plastic wood in the import substitution program so that it is manufactured locally and not procured from overseas as is currently the case.
The state-owned water bottling company attributed product shortages and price increases to the extreme heat and power outages. Nestle water bottles from Lebanon began appearing in the local markets despite an import ban in place since 2011 due to hitherto local self-sufficiency. The import ban was also issued due to the inability to monitor the quality of imported water and because the latter is exempt from customs duties under the provisions of the Greater Arab Free Trade Agreement (GAFTA).
The international sanctions regime coupled with import controls to ease pressures off the Syrian Pound have obliged local factories in Syria to manufacture generic or alternative products that correspond or are similar more or less to commonly consumed goods in Western markets.
Corporate
New legislation seeks to encourage family businesses to convert their existing entities into joint stock companies with a minimum share capital of SYP 10 billion along with exemptions from or reductions in licensing fees to one percent in order to promote financial transparency.
The Prime Minister called on the Ministry of Internal Trade and Consumer Protection to simplify and shorten the process for incorporating joint stock and limited liability companies to one week by resorting to online procedures following the passage of the new Investment Law.
Construction
The General Housing Establishment has awarded a contract to the General Corporation for Construction and Development to undertake building and cladding works on Towers Nos. 724 and 725 in Basilia City for the purposes of alternative housing units for former settlers of the area.
Tourism
Cham Holding announced the resumption of construction works on the five-star Yasmeen Rotana Hotel in Damascus after the company was previously subjected to judicial custody last year. Work on the hotel project was launched in 2009 but suspended in 2012 as the conflict escalated.
Telecommunications
The judicial custodian of mobile network operator Syriatel discharged two board directors, including one occupying the chairman position, who were linked with businessman and prominent shareholder Rami Makhlouf while another affiliate of his resigned its posts on the board.
The shareholders of mobile network operator Syriatel voted in a new board of directors and authorized its CEO to borrow funds to settle the ongoing dispute worth SYP 134 billion with the Telecommunications Regulatory Authority and the Ministry of Communications and Technology.
Energy
The Ministry of Internal Trade and Consumer Protection raised the prices of a bundle of bread from SYP 100 to SYP 200 and a liter of diesel from SYP 180 to SYP 500 based on recommendations from the Ministry of Petroleum and Mineral Resources and the Economic Committee affiliated to the Council of Ministers.
As part of efforts to stimulate industrial production and output during the ongoing electricity rationing program, manufacturers may be able to apply for an exemption via the Ministry of Industry and the Ministry of Electricity in order to secure more power for their factories.
The Prime Minister expressed that the electricity crisis in Syria, which is the worst it has ever been, due to a lack of fuel supplies, maintenance works and high temperatures requires a move towards renewable energy to light up homes and factories by offering loan products.
The electricity rationing program which fixes a set number of hours daily for power supplies takes into account premium locations and areas where industrial and key infrastructure projects are stationed, thereby inadvertently leading to demand for real estate in these regions.
The National Energy Research Center confirmed that between 40% to 50% of solar panels currently in the Syrian market were not authorized by it as is legally required following their importation into the country to test and confirm the quality of their technical specifications.
According to data from the National Energy Research Center, there are presently 73 projects to generate electricity via renewable energy, with the private sector accounting for 60 of them and the remaining 13 being undertaken by the public sector.
With power outages affecting all corners of Syria, the local population is resorting to battery inverter generators to light up their homes, with the exception of air conditioning during the summer heat, and where practical, also solar panels to harness the power of the sun.
While the global economy was impacted by the spread of coronavirus cases, the pandemic amounted to no more than a momentary hiccup for Syria’s economy, whose business classes rank electricity outages as the biggest crisis, even when compared with the damages caused by the war.
The Ministry of Petroleum and Mineral Resources announced that the Syrian Petroleum Corporation had put the Sharifa 6 gas well back into production. Previously, 100,000 cubic meters of gas per day were reintroduced into the market after the Jahar 7 gas well was repaired. In late 2019, the Sharifa 2 and Sharifa 104 gas wells were brought back into service, adding 1 million cubic meters of gas per day to the network. Power stations require 18 million cubic meters of gas per day and 10,000 tons of fuel per day but only receive half in both cases. The Ministry of Petroleum and Mineral Resources also announced that the Deir Attieh 5 gas well north of Damascus has been put back into service.
Employment
Despite risks of further inflation, an MP demanded salary increases for workers as their limited purchasing power violates Article 40(2) of the Constitution. The Council of Ministers and its Economic Committee are responsible for increasing salaries, not the Ministry of Finance.
The President issued Legislative Decree 19/2021 raising the salaries of civilian and military personnel employed by the state by 50%. It also increases the minimum wage for employees in the public and private sectors to SYP 71,515 (~$22) per month.
The President also issued Legislative Decree 20/2021 granting civilian and military pensioners an increase of 40% in their retirement pensions. The measures follow an increase in bread and diesel prices a day earlier by the Ministry of Internal Trade and Consumer Protection.
Transport
After the price of a liter of diesel was raised to SYP 500 from SYP 180, the Ministry of Internal Trade and Consumer Protection set new rates for public transport services between the provinces, which amount to an increase ranging from 28.5% to 32% on the previous prices.
Finance
Al-Baraka Bank – Syria announced the launch of five Sharia-compliant microfinance institutions to commence operations in Aleppo, Damascus, Hama, Lattakia and Tartous in the second half of 2021, which will lend credit to small enterprises unable to access traditional bank financing.
Taxation
The Ministry of Finance drafted the new Income Tax and Sales Tax Bills, which were presented for a public consultation. The General Commission for Taxes and Fees is set to be reformed through a more structured mandate and the lowering of taxes will correspond to honest reporting.