The System of Justice in Syria: Current Organization and Future Challenges

March 31, 2010

INTRODUCTION — One of the most important and delicate reforms to be implemented in Syria is the one concerning the system of justice. In fact, Syria’s system of justice is quite often defined through four adjectives: corrupt, bureaucratic, slow and arbitrary. In year 2008, Transparency International’s Corruption Perceptions Index ranked Syria 147th out of 179 countries — Syria had receded for the second year in a row. According to the World Bank's “Ease of Doing Business 2009” report and the International Chamber of Commerce, Syria ranks 174th out of 181 countries with reference to the enforcement of contracts — it takes 872 days to conclude a legal dispute. Already people close to President Bashar al-Assad are alarmed by this level of corruption in the legislative, judicial and executive branches of the government. From the legal point of view, random and non-transparent changes in investment law, coupled with the lack of a real independent judiciary undermine investments, especially now that Syria is trying to attract foreign direct investments (F.D.I.s) in order to diversify its economy.  In the last years, some actions aiming toward — an at-least-partial reform of the judicial system — have been taken, like the well-publicized establishment of an institute for the training of judges, and the implementation of a commercial arbitration law. Modernization of the judicial administration was understood as a fundamental tool in order to achieve long-term economic and social development as was pointed out some years ago through Syria’s Five Year Plan 2006-10.

ROOTS OF THE SYRIAN LEGAL SYSTEM — The Syrian legal system was established for the first time during the Ottoman domination, but since then it has undergone several modifications, which  followed the important government changes of the twentieth century (Syrian Arab Kingdom of 1919-20, French Mandate, post-independence republican regime, United Arab Republic of 1958-61, post-secession republic and the current Syrian Arab Republic). Every one of the mentioned political systems thorough which Syria has undergone in the last century has profoundly affected the justice system of the country. The Syrian legal system is mainly based on civil law traditions, Islamic and Egyptian legal traditions.

Today's most important Syrian codifications are:

A) Civil Code of 1949

B) Penal Code of 1949

C) Criminal Procedure Code of 1950

D) Civil Procedure Code of 1953

E) Personal Status Code that is integral part of the Legislative Decree No. 59 of 1983, currently under review

F) Commercial Code 2008

ORGANIZATION OF THE SYRIAN JUSTICE SYSTEM — Both the Judicial Authority Law of 1961 and the Civil Code of 1949 are the basic documents governing the organization and functioning of the justice system. The Ministry of Justice has the role to oversee Syria’s civil and criminal courts. Defendants are entitled to nominate a lawyer who provides legal representation. In case defendants do not have the means to pay for a legal representative the courts will provide a lawyer. Except cases involving juveniles or sex offenders, trials are public. The Supreme Judicial Council is the highest judicial authority in Syria. It oversees the judiciary and has the power to appoint, dismiss and transfer Syrian judges. The Syrian president, Bashar al-Assad is the chairman of this authority, while the vice-chairman is the minister of justice. The other six members are five senior civil judges and the deputy to the minister of justice. Historically, Syria has had a dual judicial system with separated secular courts and religious courts. In fact, when in 1949 the Civil Code, the first Commercial Code (the new one dates back to 2008) and the Penal Code were promulgated, the basic idea was to modernize the legal system with the limitation of the applicability of customary law among Bedouin and religious minorities. In other words, Islamic religious courts continued to work in some parts of the country, but their jurisdiction was reduced and confined to issues of personal status (like for instance marriages, divorce, paternity, custody of children and inheritance).  Still on the same path, one additional step was done some years later, in 1955, when a personal code related to many aspects of personal status was accepted. This law is very relevant because it modernized sharia through the improvement of the condition of women in Syria and a better definition of inheritance law.

The Syrian court system is structured through five different types of courts:

• Civil and Criminal Courts (three-level jurisdiction: first-level court, court of appeal and Court of Cassation)
• Military Courts
• Security Courts
• Religious Courts (two-level jurisdiction: first-level court, and canonical and spiritual divisions of the Court of Cassation)
• Administrative Courts (two-level jurisdiction: administrative courts and Council of State)

With reference to the civil and criminal courts there are three levels of jurisdiction. These courts are organized under the Ministry of Justice and they can hear both civil and criminal matters. At the lowest level there are five different kinds of courts: the courts of conciliation (Mahakim Al-Sulh), the courts of first instance (Mahakim Al-Bidaya), the juvenile courts (Mahakim Al-Ahdath), the Customs Court (Al-Mahkama Al-Jumrukiyya) and the Court of Assize.

All the cases brought in front of the first four types of courts are heard by a single judge, who is assigned jurisdiction according to the nature of the case. The fifth first-level court is the Court of Assize, which hears cases where the punishment may exceed a three-year imprisonment time. Decision taken by the conciliation courts, courts of first instance and court of assize may be appealed to the second level, which means a court of appeal or sometimes the Court of Cassation. There are thirty courts of appeal in Syria and seven of them (three criminal and four civil) are located in Damascus, while one civil court and one criminal court are located in every Syrian district. It is true that appeals are difficult to win because the courts do not provide verbatim transcripts of the treated cases, but only summaries prepared by the involved judges. The Court of Cassation in Damascus is the unique third-level court of appeals and has the power to revolve judicial issues. In general, judgments made at a court of appeal are very difficult to be overturned. However, sometimes verdicts could be nullified by the Court of Cassation.  This court is subdivided in three-judge specialized panels according to four different areas of action: civil, criminal, canonical and military.   

    

In addition to the secular courts there are other specialized courts that possess a specific jurisdiction to deal with particular subjects. Military courts have the authority to treat both civilian and military personnel. The problem with these courts is that the military prosecutor decides the venue for a civilian defendant and consequently there are continuously complains that the government utilizes military field courts in location outside established courtrooms. These military field courts do not observe all the normal procedures envisaged for the regular non-military courts.

There are two security courts: the Supreme State Security Court (S.S.S.C.) and the Economic Security Courts. The former tries political and national security cases and its judgments are not subject to appeal. This court does not use the same procedures as the courts of regular jurisdiction. In relations to the S.S.S.C., it is very important the role played by the Syrian president, who has to approve a verdict or who can also nullify it and ask for a second trial.  The economic security courts were abolished in 2004, but before they were the main judicial bodies in order to treat cases involving financial and economic crimes.

A specialized administrative system for disputes involving the state and its agencies exists in Syrian like in many other civil-law systems. During the existence of the United Arab Republic (1958-61, union between Egypt and Syria) the Syrian Council of State (the most important administrative judicial body) was remodeled following the Egyptian template and still today there are a lot of communalities with reference to the administrative council of state in both countries. In Syria there are two levels of administrative courts. The second level, which is the Council of State, has both advisory as well as judicial functions and it is totally independent from the other courts of general jurisdiction.

The High Constitutional Court is the highest judicial body in the Syrian Republic. Established under the 1973 Syrian Constitution, this court has three specific tasks: adjudicating electoral disputes, ruling on the constitutionality of a law or a decree challenged by the president or the People’s Council, and rendering opinions on the constitutionality of bills, decrees and regulations when asked by the president. The High Constitutional Court is not allowed to discuss about the validity of laws proposed by the president and then approved with popular referendums. The court is composed of the president of the court plus four ordinary judges, who serve for a renewable four-year term. The judges are appointed by the Syrian president.  

       

Special jurisdictional bodies are the Islamic courts, the doctrinal courts and the spiritual courts. The first ones are related to cases regarding personal status, family and inheritance disputes between Syrian Muslims and non-Syrian Muslims who accept Islamic personal status in their own countries. The second ones are formed by a judge belonging to the Druze sect. This judge has to decide whether the decisions taken by people belonging to the Druze community are clashing with the teaching of the religion. The spiritual courts are the judicial bodies in charge of subjects linked to personal status for Jewish, Christian and other non-Muslim groups. Decisions given by all the religious courts may be appealed to the canonical and spiritual divisions of the Court of Cassation. 

WHAT ARE THE REAL PROBLEMS OF THE JUSTICE SYSTEM IN SYRIA?  — The three major problems that the Syrian government has to overcome in the next year are:

1) The amount of time necessary to solve a dispute via the courts

2) The corruption of Syria’s legal system

3) The independence of judges  

1) The amount of time necessary to resolve a dispute via the courts — When talking with Syrian lawyers the first complain they have in relation to the justice system of their country is the amount of time that it takes to have a dispute solved by a court. Sometimes it happens that cases last more than ten years. Probably, one reason for the delays is that in Syria there is a shortage of judges. Today according to the Syrian Bar Association (S.B.A.) there are around 1,300 judges. Recent analyses by the S.B.A. calculate that there should be at least 3,000 judges and more court rooms in order to reduce disputes duration. Other reasons for the high number of cases per single judge is that many Syrians go to court for very silly reasons without any real consideration of collected evidence and the possibilities of getting a favorable sentence.

Probably, the existence of a proper supervision with reference to the judges’ activity — this point is emphasized by lawyers — could permit to save a lot of time. It is true that in Syria there are judicial inspectors, but the problem is still the same: They are few and with too many judges to be followed. The lawyers would like to have the number of these full-time inspectors — now no more than five — increased because, according to them, corruption is the main problem of the judicial system in Syria. After the corruption issue, it clearly emerges that too many judges work too slowly. It is a well-known fact that in Syria in some courts it is the notary that administers justice because the appointed judge is absent.  

2) The Corruption of Syria’s legal system — Corruption is evident and the same government acknowledges it. In October 2005, 81 judges, i.e., more than 6 percent of the total number of judges — were sacked for alleged corruption. The government has improved wages and insurance for the judges, while at the same time has reduced taxes with the aim of increasing their living standards. The idea is to attract capable people to the profession of judge. It is a huge task because the level of corruption is very high both on the judges’ side as well as on the lawyers’ side. In fact, Mohammed Walid al-Tesh, who is the president of the S.B.A., recalls that every year the S.B.A. investigates at least 400 claims of corruption among lawyers. In Syria there are today around 23,000 lawyers and 10 to 50 of them are expelled every year by the S.B.A. for professional misconduct. Syria should have better training for judges and lawyers. For this reason everyone who is able to pass the judge selection process is mandatorily send to teach for two years at the Judicial Institute before he may enter the real profession of judge.

3) The Independence of the Judges — Article 131 of the Syrian Constitution (Article 131 [Independence of the Judiciary] The judicial authority is independent.  The President of the Republic guarantees this independence with the assistance of the Higher Council of the Judiciary), dating back to 1973, does guarantee the independence of the judiciary. Instead, Article 133 (Article 133 [Independence of Judges] (1) Judges are independent.  They are subject to no authority except that of the law. (2) The honor, conscience, and impartiality of judges are guarantees of public rights and freedoms.) stipulates that judges shall be autonomous and subject only to the authority of law.

The Higher Council of the Judiciary is responsible for the administration of the judiciary. It has the authority of appointing, promoting and transferring judges. The president of this council is the Syrian president, while the deputy president is the minister of justice. A lot of criticism is related to the preponderant role played by the minister of justice. This role — although the minister has only one vote — could really limit judicial independence. For some analysts, the presence of the minister of justice can either intimidate or strongly influence the role of the other board members. The S.B.A. strongly denounces the lack of the judicial independence. Already five years ago at the Ba’ath Party Conference some ideas about a modification of the composition of the council had been proposed. Also the former prosecutor general, Ghada Murad (appointed as the Syrian prosecutor general in 1998, the first woman in the whole Arab word to held such a position) thinks that probably Article 65 of the Judicial Authority Law should be amended bringing inside the council the president of the Court of Cassation and sending out of the council the minister of justice.

Still in relations to the independence of judges, another interesting point is linked to the fact that when the investigation process is carried out there could be some heavy measures of offence against the judges. In fact, during the process judges are notified and questioned about all the complaints filed against them and a report is always written. In some cases, they have been referred to the High Judicial Council, a procedure that could last for some years. All these mechanisms are activated with the deliberated intention of delaying the arrival to sentence.     

ACTIONS TO REFORM THE JUDICIAL SYSTEM — Some steps have already been implemented, while others have been planned. Summing up, it could be important for Syria to:

A) Increase the standard of living of judges. — In this way capable people could be interested in the profession of judge. In this regard, positive steps such as the increase of wages, a better insurance and a reduction of taxes have already been implemented by the Syrian government. 

B) Improve the quality of legal training in relations to both judges and lawyers. — Currently, there are 11,500 students at the Faculty of Law of the Damascus University, thousands of other law students enrolled in one of the other six law schools across the country and few others students (given the high fees) who follow some law courses at the new Syrian private universities — for instance the Kalamoon University, which is well focused on international law. After the law degree, students have to start a two-year practical training under the guidance of a lawyer. On completion of these two years they are entitled to undertake a written and oral exam set by the S.B.A. in order to be admitted to the bar. Apart from the issues linked to overcrowding at the law faculties, becoming lawyer is indeed a tough and long process, but it is also true that — especially at the faculty of law — the curriculum is too much oriented towards abstract learning (theoretical and analytical matters with not a lot of attention given to practical cases). It is now time to offer courses in areas such as international private law, commercial law and arbitration law (especially in light of the partial opening of Syria’s economy to foreign companies) and to draw more attention toward practical cases since the university years.   

    

C) Fight with all the available means the problem of corruption. — It could be wise to establish in every governorate a committee (comprising the attorney general, the head of appeals and the oldest judicial inspector) in order to monitor court decisions no matter whether there is a complaint or not. The U.N.D.P. is now organizing a pilot project targeted at increasing both efficiency and transparency of judicial processes through the computerization of administrative procedures. Computerization could reduce significantly corruption. Estimates speak of an 80 percent reduction of unethical conduct. The difficulty here could be in finding the economic resources to bring in all this information and communication technology (I.C.T.). This pilot project, which is implemented in Dera’a, is part of a bigger project whose name is Modernization of the Justice Sector in Syria. This project is worth $815,000 and is co-funded by the Syrian Ministry of Justice, the U.N.D.P., the Swiss Development Agency and the Hollandaise embassy in Syria. The idea is to design a software program capable of simplifying and of permitting much faster administrative court procedures. In addition to this, around 200 judges and employees belonging to the courts of Dera’a Governorate have attended computer literacy courses. The goal is to extend this pilot project also to other governorates. Also the European Union is preparing a judicial modernization project.   

     

D) Judges Interrogation According to Specific Circumstances. — Interrogate judges only when an inspector “finds that a judge has deliberately wronged the complainer, or made a substantial professional mistake in implementing or interpreting the law. Only then should the judge be notified, interrogated and referred to the council for punishment” as the former general prosecutor, Ghada Murad pointed out last year in an interview to the magazine Syria Today.

E) Implement modern and state-of–the art laws. — As a good example, it could be considered the Commercial Arbitration Law (Law No. 4 of 2008), which well meets the requirement of the international business community. Probably, the issues behind the adoption of this law have been the necessity of boosting foreign and domestic investor confidence in the dispute resolution methods — given the faltering capacity of the regular Syrian justice system, the adoption of this law is not a surprise. This law was a long-awaited one in Syria. All this said, the process of drafting and then voting specific laws is only a partial solution to the real problems of the Syrian justice system. Undoubtedly, arbitration has positive features, like the reduced amount of time needed to get a decision. But it has also important drawbacks like the fact that it is final (unless cases of nullity) and that sometimes — especially when local companies are involved — the concerned parties do not want to implement what previously has been decided with the arbitration. If such a situation occurs, the concerned parties have no other solution than recurring to the regular justice system.  In other words, the introduction of arbitration law is very welcomed, but it could not be considered as a pure and simple substitute of a proper and streamlined justice system.    



 

Retail Market Changes in Syria

February 12, 2010

Quite recently Syria started to witness a very big increase in the number of its shopping malls. These are changing the country’s retail market, which until a few years ago was mainly based on the classic old souks (the Souk Al-Hamidiyyeh, which is located in the historical part of Damascus, is the oldest mall in the world). "Brands" and "malls" are two new words for Syria, but the country is catching up quite fast the shopping mall gap it has with the other Levant and Gulf countries. In 2008, there were in Damascus an estimated 55,000 square meters (sq. m.) volume of gross leasable area (G.L.A.) for retail space according to Retail International, a consultancy specialized in shopping centers.

After one year, the same consultancy now estimates the Damascene G.L.A. at 100,000 sq. m., which means in other words an increase of almost 100 percent in just twelve months. Syria is defined as an emerging market in comparison with Jordan or the Gulf countries but, considering that the country has a population of 20 million, although with very different purchasing power, with no doubt there is a great potential for the retail industry.
 

Probably, there are three main reasons for this big change:

1) The arrival of international brands. In fact, until 2003 in Syria the imports of foreign goods were banned. Then, that year it happened the loosening of government controls on international brands and, in particular, Syria’s garment industry started to produce international clothing brands under license agreements. In addition to this, there is now the tendency for international brands to open their selling points in centers where there are good facilities (for instance, a large parking space). The decision of loosening government controls with reference to international brands was primarily linked to the fact that Syria has to diversify its economy. Probably, already in 2010, Syria will be a net importer of oil and the retail sector is still quite underdeveloped.  

 

2) Additional local spending by rich Syrians. It should be understood that shopping malls won’t change immediately the way Syrians shop. The very traditional souks, where bargaining is the most important activity, will continue to be the most essential trade centers. Instead, shopping malls target a wealthier clientele. In other words, the principal customers of the new commercial centers are the well-off Syrians who until recently have used (always and only) to going shopping to Lebanon if not to Dubai and the Gulf. According to Muhanned al-Mallah, general manager of Damasquino Mall in Damascus, “Since the withdrawal of Syrian troops from Lebanon, not a lot of people are going there. They are excited to find the kinds of brands that they once found in Lebanon right here!” In particular, customers in the 14-to-40 age range and belonging to the middle-to-upper class very rarely go to souks.    

3) Increased foreign investments. Thanks to high oil prices in the previous years, many Arab investors have decided to look for new investment opportunities in the pristine Syrian market while at the same time the Syrian government has progressively started to open up the economy. According to Simon Thompson, head of Retail Investment, “there were surplus funds from the wealthy Gulf states that enabled the major developers and retail franchises to look further afield to new markets, of which Syria was one”. The opening of the Syrian economy is connected with interest rates cut, licenses for private banks and the creation of the stocks exchange market. Syria still today is not a member of the W.T.O., although it submitted a request to start the accession process in 2001 (the country instead had been an original contracting party of the GATT, but it decided to withdraw in 1951 following Israel’s joining). But, a relevant step toward attracting foreign investments has been surely the development of regional free trade agreements, like, since January 1, 2005, the Greater Arab Free Trade Area (GAFTA), which eliminated customs duties between Syria and all the other members of GAFTA.   

At the same time still three main problems may partially affect and slow the growth of the Syrian retail sector:

1) Lack of diversification of brands in the shopping centers. In fact, the brands today present in Syria are not as many as in the other Middle East countries. And for this reason, wealthy Syrians or Syrians who have a member of the family living abroad still prefer going shopping abroad to Beirut or the Gulf where there is a bigger range of shops — although this phenomenon is occurring in a reduced percentage in comparison to what had happened until few years ago. Nowadays, in Damascus there are just 100,000 sq. m. of G.L.A. for a metropolitan area with a population of 4,5 million (Amman has a population of 2 million and 200,000 sq. m. of mall space). This reduced amount of G.L.A. does limit at least for now the possibility of new entrants (additional foreign brands) to the Syrian retail market. In fact, in Syria, the private sector does not own sufficient land in order to develop shopping malls and, in the future, government-owned land has to be freed in order to develop new shopping malls.    

2) Lack of retail management expertise in the local market. In Syria, manifestly there is little local expertise. It is sure that Syrian companies will be forced to invest in retail management courses if they want to compete with the much more sophisticated firms coming from the Gulf. Shopping malls staffs need to be trained principally with reference to two subjects: English language and computer literacy. This problem could be solved with the participation and affiliation of the shopping malls to the Middle East Council of Shopping Malls (M.E.C.S.C.), which is an invaluable tool for its members because it regularly provides workshops that offer certificate programs focusing on different topics related to the retail sector. The membership to this council permits to raise ostensibly the standards of the performed activity.  

3) Still a lot of high taxes and a myriad of regulations for international brands. A clear example of the difficulties to operate in Syria is exemplified by the dispute regarding whether the French supermarket Carrefour is allowed to trade using its own name (Carrefour) or it has to be named Shahba Mall Hypermarket (Shahba Mall is the name of the shopping mall where the Carrefour supermarket is located). In general, high tariffs are still levied on many imports, and for some items tariffs can reach as much as 50 percent of the value. It is evident that these high taxes naturally impede the development of high-end shopping. Given these high taxes, it is easier to find middle range brands in Syria than the high-end ones, which after the taxes would be extremely expensive. According to Mr. Muhanned al-Mallah “you have to know shopping centers and be Syrian to be successful here”. This, evidently, means that to deal well with complex regulations international brands are really advised to implement a partnership with a Syrian partner.

Currently Damascus has seven already opened city shopping malls (big and small). Town Center (2004, 35,000 sq. m.), which is located in the southern outskirts of the city was, was the first store of this kind. Ski-land (2007, 10,000 sq. m.) is located along Airport Road and is a shopping mall and entertainment place with Syria’s first ice-rink. Cham City Center (2006, 8,000 sq. m.) is in the new developed area of Kafarsuseh and it displays international brands like Stefanel, Diadora and Azzaro. Damascus Boulevard (2,500 sq. m.) is situated near the Four Seasons Hotel and is dedicated for extremely rich shoppers. Queen Center is a very small commercial center located in Mezzeh and last, but not least, Damasquino Mall (2009, 24,000 sq. m.) is still in Kafarsuseh and has more than 70 shops. Its structure is very close to those shopping malls found in the U.S. or in the Persian Gulf because customers are encouraged to walk past every shop. Damasquino Mall has introduced for the first time in Syria brands like Nike, Lacoste, Clarks, Springfield, Lina’s Café, Second Cup and Dr. Ocean for Seafood. In addition to this, Damasquino Mall has a 4-D movie theater and a 4,000 sq. m. family entertainment center (Damasquino Mall adjoins Cham City Center, but the two malls currently targets different types of customers both in relations to age and social class). Further out of the city of Damascus there is Trans Mall (2008, 45,000 sq. m.) , which is operated by Aswaq Syria, the same group that owns Damasquino Mall.

The city of Aleppo is also building up many shopping malls. The first one was the New Mall in the Mogambo district. In May 2009, with an investment of $10 million, the Addoumieh Group opened Al-Mounchieh (4,000 sq. m.), which is the city’s third mall. The country’s largest shopping mall Shahba Mall (80,000 sq. m.) is located along the highway heading to Turkey (to the Turkish city named Gaziantep) from Aleppo. It has been developed with an investment of $50 million by a joint-venture between the Aleppo-based Sabbagh Group and the Jordanian Al Kurdi Group. It includes shops, restaurants and coffee shops, a 4-star hotel with more than 200 rooms, a movie theater, the first Syrian Virgin Megastore and a French giant hypermarket Carrefour.     

  

Current projects yet to be completed include in Damascus a shopping center at the Eight Gate complex, which is a multiple-use development (in construction) under the aegis of the joint-venture between the Dubai-based firm Emaar Properties and the Investment Group Overseas owned by the Syrian expatriate Mouaffaq Al-Gaddah. This development will include a shopping mall (55,000 sq. m.), a 5-star and 15-story hotel, more than 200 tourist apartments and a 30-story office tower. Still in Damascus is on construction with the support of the Syrian-based Urban Development Group, the Yafour Gardens project, which is a 60,000 sq. m. complex located along the highway to Beirut. This project is more related to condominium buildings, but in the complex there will be integrated a commercial center and a supermarket. Before 2013 is due to open along the outskirts of Damascus — strategically positioned on the Beirut-Damascus Highway, which is a key economic growth corridor — the Sabboura project by the U.A.E. Majid Al Futtaim Group. This is a very ambitious project encompassing a mix of hotels, offices, homes, retail outlets and a shopping mall the size of the Mall of the Emirates in Dubai. The mixed-use project will have a built-up area of 1,500,000 sq. m. Sabboura Mall is set to be the largest in the Levant with a Carrefour hypermarket, a 14-screen movie theater and more than 350 leading retail shops. The Majid Al Futtaim Group is the group that in Dubai is behind two relevant projects: the Mall of the Emirates and Deira City Center. Sabboura should require, according to current projections, an investment valued around $ 2 billion. Instead, Qatar Investments Authority is involved with the investment in the construction of the QIA mixed-use areas in Damascus and Lattakia, while the Syrian-based conglomerate Toumeh International last year signed off for the Kafarsuseh tourism complex, which will include  a shopping mall (6,300 sq. m.) in Kafarsuseh, Damascus. Cham Holding is now finalizing the Damascus Hills project. This is a multi-use development that will cost more than $3 billion and cover more than 5,000,000 sq. m. with a big retail sector. It will be located in the northern outskirts of Damascus near to the highway heading to Homs. Concord Al-Sham International Investments Company, a consortium of Syrian investors who are bases in the U.A.E. is constructing the Dareyya development (150,000 sq. m.) with a nine-story mall and a 23-floor office block in Dareyya along the main Damascus-Jordan highway. Once completed, the project will include a hypermarket and more than 40 international and national brand outlets. The current price is around $80 million. Syria Holding is pushing the development of the Baramkeh area in central Damascus so as to create Abraj Syria, which is a mixed-use development. It will cost around $280 million and obviously it will include considerable retail space with a hypermarket. The same holding is also backing two other projects. The first one is Mezzeh Highway, a $70 million mixed-use development (49,000 sq. m.) with 17,400 sq. m. of retail space located along Mezzeh Highway in Damascus. The second is a build-operate-transfer contract (BOT) signed with the Aleppo’s City Council. The idea is to build and develop Aleppo’s Gate (300,000 sq. m.), a $60 development with included a shopping mall and a new transport hub for the city. In addition to all these projects, Syria Holding has finalized a deal with the Middle East hypermarket Spinneys in order to establish outlets in every of its retail developments.    

Sometimes things do not proceed very smoothly as it is happening now with the Hejaz Souks project. This development was targeted at modernizing the central district business of Damascus thanks to the construction of a five-story shopping mall and a rail link supposed to join the center of the city to the airport on an BOT basis. Since the beginning of the works for this project in 2004 little progress has been accomplished. Problems linked to urban management and opposition from heritage groups (N.G.O.s) have slowed the pace of the construction, which is supported by Syria’s largest holding company Cham Holding. But, this is one of very few delayed projects. In fact, the retail sector in Syria is profoundly changing and modernizing. On the one side, foreign and national retail companies are both more and more interested in the Syrian retail market, while on the other side the Syrian government authorities understand better the positive results that an improved retail sector may provide to the global Syrian economy. 

Summing up, it could be worth mentioning some data from the regional business publication Executive. According to this publication, Syria’s retail sector provide now jobs for 27 percent of the national workforce and produces 17 percent of Syrian G.D.P. In addition to this, another interesting indicator is that mainly for the presence of retail market space in Syria (retail space where there are low-end, middle-end and high-end products) nowadays 4.8 million day-visitors from neighboring countries (1.8 million from Lebanon) cross the border and enter Syria every year. These data exemplify one point very clearly: Syria’s retail sector is important and will in the next years continue to grow steadily.   



 

The Significant Demand for Microfinance in Syria

December 2009

DAMASCUS, Syria — Traditionally, banks do not provide financial services to clients without resources, meaning with the word resources little or no cash. Banks work for a profit and if a client does not guarantee them with an asset, it would be a very risky business for the banks to incur in some cost without a sort of insurance in relation to their activity. Microfinance can be defined as the provision of financial services to clients with very low income, including in this category also consumers and self-employed that normally do not have access to financial resources.

In the past centuries, different movements have tried to provide low-income people with financial services. Among them it is worth to remember the Franciscan monks, who in the fifteenth century founded the community-oriented pawnshops; then the members of the European credit union movement in the nineteenth century and lastly the founders of the microcredit movement in the 1970s. One of the founders of the microcredit movement is today's well-known Dr. Muhammad Yunus (2006 Nobel Prize for Peace), a Bangladeshi economist turned into a banker who has developed the concept of microcredit.  In 1976, in Bangladesh, Dr. Yunus founded the Grameen Bank, a microfinance institution and community development bank that makes small loans to poor people without requiring collateral. In the last thirty years relevant progresses have been implemented in the field of microfinance but the big problem is how to help those who earn less than $1 per day, especially those living in remote rural areas.   

    

In the Syrian Arab Republic there is a huge demand for microfinance, but this demand is only partially satisfied. In fact, according to a 2008 report (http://www.cgap.org/gm/document-1.9.2923/Syria_Policy-Reg-Framework.pdf) by the Consultative Group to Assist the Poor (C.G.A.P.), a policy and research center based in Washington D.C., just 41,500 out one million of potential estimated microfinance clients in Syria are obtaining today microfinance services.

In February 2007 the Syrian government introduced the General Microfinance Decree (Syrian Legislative Decree No. 15), which is the first of this kind in the MENA region (Middle East and North Africa). This legislation is important because it mirrors an important opening of the financial markets. The aim of this decree related to microfinance is to help the large portion of the population who is poor and probably also part of the Syrian middle class in order to have greater access to financial services (in other words, to give financial access to low-income and unbanked people). The decree authorizes the Credit and Monetary Council (C.M.C.) of the Central Bank of Syria to license Social Financial Banking Institutions (S.F.B.I.s) with the target of providing microfinance services like micro-lending, deposit-taking, and micro-insurance to the poor people. In particular, the decree would try to regulate all the microfinance actors like banks, S.F.B.I.s and N.G.O.s, and all the different models of action like charities, relief-oriented microfinance and S.M.E.s lending in order to get a very inclusive approach, capable of really helping the unbanked population of Syria. Decree No. 15 is the first and unique Syrian law related only to microfinance. Previous laws were not specifically linked to the issue of microfinance. It is worth noting that Private Banking Law (No. 28 for the year 2001) and Islamic Banking Law (No. 35 for the year 2005) permit to private and Islamic banks to implement all of the kinds of banking activity including also microfinance. The S.F.B.I.s are all registered as commercial companies. And for this reason, article 13 of the Microfinance Decree requires that all of the S.F.B.I.s have to be governed by Commerce Law (Law No. 149), which dates back to 1949. In fact, in the eventuality of a legal contrast between the Microfinance Decree and Commerce Law, the former shall prevail. The S.F.B.I.s should follow reporting requirements very similar to those set for normal banks. In fact, an audited balance sheet and a profit and loss statement have to be submitted to the Central Bank of Syria following the international accounting standards.   

  

Until now the most important actors in the field of microfinance in Syria have been both the state and the N.G.O.s. But it should be clarified that the Aga Khan Development Network (A.K.D.N.) is the only real provider of microfinance in Syria and the only one big player. In addition to this, there are very limited microcredit lines thanks to the United Nations Development Program (U.N.D.P.) and the United Nations Relief and Works Agency (Unrwa), which both obtain funds through their parent institutions. The latter is serving Palestinian refugees in the cities of Damascus and Aleppo. Two local non-governmental organizations the Fund for Integrated Rural Development of Syria (Firdos) and Boosting and Inspiring Dynamic Youth Achievement (Bidaya) are also developing microcredit facilities. Firdos gets 60 percent of its funding from the European Union (E.U.) and the United Nations (U.N.), while the remaining 40 percent comes from local corporate social responsibility of Syrian institutions. Previously, the most important public microfinance provider was the Agency for Combating Unemployment (A.C.U.), but thanks to the Legislative Degree No. 39 of 2006, it has been transformed into the Development and Employment Commission (DEC) and will no longer provide credit. It will just service the agreed loans while its main task will be to provide job skills, training and employment opportunities. As it will be explained below, on the public side, today in the field of microfinance, the basic public institution is and will probably be Savings Bank. 

The A.K.D.N. started its operation in Syria in 2002 under a framework of cooperation agreement with the Syrian government. In fact, in 2003 the Aga Khan Agency for Microfinance (AKAM) — the specific agency within the A.K.D.N. that works with microcredit — began to grant the first loans. Now this agency has been denominated the First MicroFinance Institution (F.M.F.I.) and has seven branches in the country (located in: Damascus, Tartus, Lattakia, Aleppo, Hama, Suweida and Maysaf). This agency has been capable of handing out more than 60,000 loans for a total value of 3.76 billion of Syrian pounds($80 million). Since 2007 this has been the most important microfinance operator in Syria. Moreover, it is interested in broadening its actions implementing up to 20 branch offices. The maximum amount for loan that the agency may offer is 141,000 Syrian pounds ($3,000). It charges a flat rate of 1 percent a month. By the end of 2010, AKAM would like to have a lending portfolio of $43 million and to cover all the 14 provinces of Syria with more than one office in the two big cities of Damascus and Aleppo. 

In addition to external actors, there is also the microfinance action built up by the Syrian government through the state-owned Savings Bank. In 1968, the Syrian banks, which had been previously nationalized after the Ba’ath Party came to power, were reorganized into six state banks. One of them was the Savings Bank (the smallest of the state banks), that up to 1999 had been just a postal savings bank (with an average deposit of $950). In 1999, this bank was converted into a full-fledged bank with lending operations starting the following year. The bank since then has been quite successful and has considerably expanded its reach in Syria. In particular, this bank has decided to incorporate in its services also microfinance tools.  The experimental project of this bank started this year in the cities of Lattakia, Tartous and Homs with loans for a total of 15 million Syrian pounds ($319,150). The aim of this project is to help people to be able to own a small store. The people covered by this initiative are those who do not have survival problems and who can think of starting a commercial activity. According to the general manager of the Savings Bank, Haifa Younes, his bank will be in a privileged position because Syrians still prefer to deal with governmental banks. Savings Bank would like in the next four years to get around 33,000 clients with an offer of different loans ranging from 9,000 Syrian pounds ($190) to 1.5m Syrian pounds ($ 31,915). The bank will also have the so-called “My Lady Loan” that is specifically implemented for housewives.

Apart from the successful results of AKAM and the other agencies (at the level of S.F.B.I.s, N.G.O.s and state institutions), other operators are interested in microfinance and are planning to develop additional microfinance operations in Syria. Among them there is the Arab Gulf Program for the United Nations Development Fund (Agfund). This is a Saudi-based non-profit organization that was established almost thirty years ago in 1980 by Prince Talal Bin Abdul Aziz al-Saud. It is interested in developing mainly rural areas, distributing in five years up to 360,000 loans through a net of around 40 branch offices in Syria. Dr. Muhammad Yunus is also a partner in this enterprise.

The road for Syrian microfinance is not easy. In fact, there are at least four big issues to be tackled in the near future. One of the biggest hurdles will be to convince clients looking for Islamic banking products that microfinance is sharia-compliant. At the moment sharia-compliant microfinance is almost inexistent totaling less than 1 percent of the global market. A possible solution could be to explain clearly what microcredit is. In this way it could be possible to point out that the microfinance institutions are not accepting interest rates, but that what they take are just collective service charges in order to have additional funds to distribute later to other eventual clients. Another problem is that there are more people that want a loan than the available loans, an issue that will only be partially deflated given the additional microfinance providers that are interested in entering the microfinance market in Syria. The third issue is that in Syria it exists a big black or shadow economy. This is a huge problem on both sides of a microfinance transaction, the one pertaining to the bank and the one related to the client. In fact, the bank if it does not have an official working transcript from the client cannot provide him/her any loan, while the latter many times does not want to produce any paperwork and in this way renounces to the possibility of obtaining a microfinance loan.  Last but not least, providing microfinance loans is a very time-consuming activity and it requires a very well trained staff. Nowadays, it is not easy to find this expertise in Syria as it is also recognized by all the most important bank managers operating in the country, both in relations to microfinance and to the other classic sectors of the banking activity.

In order to continue to develop the microfinance sector in Syria four additional activities could be implemented by the main actors:

• Training and awareness building. Through this it could be understandable for all the actors that it exists a commercial viability for microfinance in order to help the poor people and in the same time it could be built up locally the capacity to regulate and use microfinance tools in accordance to globally accepted good practice norms.
•  Networking. Linkages between local, regional and international bodies are of paramount importance in spreading good practices and general know-how, facilitating transparency and encouraging innovation based on local realities.
•  Alternative models for microfinance. Among them there are at least three main possibilities. The first one is to have greenfield microfinance banks. Given the potential size of the microfinance sector in Syria, there is room to grow the sector through greenfield investments. The second possibility is bank downscaling. The rationale for this is that downscaling could permit banks to really better interact with the local realities to which the microfinance loans are mainly addressed. The third possibility is instead the adoption of the bank servicing model as a very viable alternative to the N.G.O. approach. The bank servicing model will enable a private sector approach of managing microfinance portfolios, while in the same time capitalizing on the strengths of both the private and public sectors of the bank activity.
• Technological innovations. Technological innovations in the microfinance sector could be of basic importance with reference to increasing operational efficiencies and expanding it to very remote areas of Syria.

If well carried out, these four activities will strongly help improving the results of the microfinance sector in Syria with the final target of integrating the country into the global microfinance industry.   

               

This paper has been republished by C.G.A.P. Microfinance Gateway. 

Comment — Damascus' December 2009 Bus Explosion

 

December 7, 2009

DAMASCUS, Syria — On the morning of December 3, 2009, an explosion occurred to a bus parked at a gas station in the Syrian capital Damascus. According to Syrian officials three people died in the accident, which was due to the explosion of a probably damaged tire while it was being pumped. The Syrian interior minister, Said Sammour immediately ruled out the possibility of a terrorist attack ("There was no terrorism factor behind the bus incident", he said) and he explained that the three dead people were the bus driver plus two gas station workers who were inflating the tire. The minister added on the Syrian TV that the bus was carrying a group of Iranian tourists, but at the moment of the blast the pilgrims were not on-board. Damascus hosts the Sayyida Zeinab Mosque, which is dedicated to the granddaughter of Prophet Muhammad and is one of the most important worship places for the Shiites. In fact, in every season of the year this area of Damascus — around ten kilometers out of the central part of the city — is invaded by Iranian buses transporting thousands of Iranian pilgrims.

Source: AP

The bus explosion took place while Saeed Jalili, the chief nuclear negotiator of Iran, was visiting Damascus for meetings with Syrian officials. Syria is the most important regional partner of Iran and the two countries are linked by thirty years of good political relations. Immediately after the explosion and well before the declarations of the interior minister, the common idea was that what happened was probably the explosion of a bomb.

 Photograph: AFP/Getty Images

The images of the blast showed a bus badly damaged in its rear part with clear signs of fire. In addition to this, several witnesses suggested that it was not a tire explosion, but the explosion of a bomb that killed at least six people and caused some damages to the nearby buildings. One report from the Al-Manar TV (managed by Hezbollah) claimed that the blast was caused by a gas canister in a passenger's luggage. Reuters was told by one of the witnesses that body parts were scattered around the bus. A member of one of the Western embassies, speaking under condition of anonymity, had the opportunity to see the damaged bus and explained that according to him a tire explosion would have never being capable of damaging so badly the rear part of a bus. So it is quite possible that, instead of an exploded tire, the accident occurred because of a rudimentary bomb.  What is interesting to point out is that the images broadcast on TV were all related to the body of the bus with no general view of the areas around.

Sayyidah Zaynab Mosque: Exterior  (A. BACCI, 2009)

After a few days, here in Damascus, no one talks — at least publicly — anymore of the accident, which in the news it is not mentioned anymore. In general, Syria is a very safe country with very tight security controls; a place where bomb explosions are a rare event. All this said, it's true that in the last years something started to change for the worse with reference to acts of terrorism — regarding normal criminal actions Syria is still today a very safe country. As the British newspaper The Guardian says “until recently Syrians were used to seeing such blasts on their television screens rather than on the streets of their own cities, which they considered a rare stable point in the Middle East”. In fact, Syria in recent years started to be hit by bomb attacks. As a simple remainder, in 2008 three important terrorist attacks happened in Syria.  In January, General Mohammed Suleiman, a high-ranking aide to President Bashar Assad was killed in the city of Tartus, in February happened the assassination of Imad Mughnyah, a high-ranking military commander with Hezbollah (some said that it had been the Mossad to kill him), while in September a car-bomb attack on a security complex close to the Damascus airport killed 17 people and injured 14. The latter attack was attributed to a Sunni Lebanon-based Islamist group linked to al-Qaeda. In addition to these main events, both the U.S. and Israel have completed in the last years some raids against targets in the Syrian territory. For instance, three explosions alongside the Israeli raid on a suspected nuclear facility in 2007 and the late 2008 U.S. attack on the eastern border of Iraq.

Sayyidah Zaynab Mosque: Internal Decoration (A. BACCI, 2009)

All these accidents with no doubt risk derailing the process of escaping international isolation, a position in which Syria has been confined for the last decades.       

Assuming that the bus the explosion was not accidental and was due to a bomb, it is not easy to identify the possible culprits. In fact, there are at least four hypotheses, all having a certain degree of probability.  They are:

1) Internal or external Sunni extremists linked or sympathizing with al-Qaeda. They hate Shiites, they hit in the past and they always try to create problems to the Syrian government.

2) Israeli Mossad. In this case the Israeli intelligence service wanted to send a signal to the Syrian authorities. In fact, the explosion happened in the same moment when in Damascus there was Said Jalili, who is the Iranian chief nuclear negotiator.

3) Palestinian factions separated from the Syrian intelligence services.

4) A possible fight between different members of the Syrian security services.   

Of these four hypotheses, probably the first one is the most plausible. The Syrian authorities are really scared by the dangers of Sunni extremism. The father of Bashar Assad destroyed Sunni extremists in the 1980s. In particular, on February 2, 1982, the day of the Hama Massacre, the Syrian Army bombarded the city of Hama, which was at that time a stronghold of the Muslim Brotherhood, which had started to wage an armed rebellion against President Hafez al-Hassad. Between 7,000 people to 40,000 people died and large areas of the old city were destroyed. After the Hama uprising, the Islamist insurrection was defeated, and since then the Muslim Brotherhood has operated in exile while other factions surrendered or slipped into hiding. Now, there are signs that the movement is rising one more time. At the same time, Shiite power increased in Syria thanks to the Iranian influence and Hezbollah, although it needs to be underlined that Syria’s Shia population is very small, i.e., around 13 percent, of whom many are the not very religious Alawites.

A good possibility is that the bus explosion may be linked still in relation to hypothesis A, to locally based militants who operate independently of external militants or powers. This possibility is well supported by the fact that the explosion was very rudimentary. Syria in the last years has facilitated the passage into Iraq through its borders of Sunni combatants desiring to fight in favor of the Iraqi insurgence. These people going back and forth from Syria to Iraq now strongly criticize two points: Syria's alliance with Iran (a Shia country) and the rapprochement with the West that President Bashar Assad is trying to implement. Within hypothesis A, the involvement of external forces is less credible because Syria has recently obtained positive successes in international politics and has partially escaped its decades-long international isolationism. Not long ago, Syria has implemented a détente with Saudi Arabia (with which the relation were quite strained only in 2008) and in addition to this, in Lebanon the newly formed government now includes pro-Syrian elements. In other words, the possible involvement of external backers for terrorist attacks in Syria has decreased during the last year.    

All this said, it is true that following the bloodshed events of the last two years, it's understandable the fears that President Assad and the government have in relation to the future Syrian political development. In the short term the Syrian regime may use the explosions of the last two years to bring about two actions. First, Syria could portray itself as a victim of Sunni extremism and, thanks to this stance, it could continue to march through the international political rehabilitation path. Second, it could control, in an even stricter way, its own Syrian population. Instead, the problem may linger in the long term, when it will be completely understood that this tough and harsh way of governing Syria is providing good results with reference to petty crime but no positive results at all in dealing with terrorism. In fact, Syria is becoming more and more like a chessboard where different radical groups risk fighting one another. A good idea could be for President Assad and for the government not to rule by force but to develop a political strategy involving all the different Syrian groups. With no doubt a very daunting challenge.