When a New Licensing Regime for Mobile Operators in Syria?

June 12, 2010

INTRODUCTION — It has been a long time since Syria should have had to unveil a very long-awaited new telecommunications law, aimed at creating an independent regulator and a new licensing regime for mobile operators in the country. In addition to this, it has been more than one year since the Syrian government outlined the idea of licensing a third mobile operator by the end of 2009 or the beginning of 2010. After all these months, nothing has happened, and at the moment of this writing (June 2010) there is not much updated information available through the Syrian media in relation to the development of a new telecoms law, which is instead of crucial importance for the future economic development of Syria. On the contrary, neighboring Jordan is very committed to the process of rewriting the country’s telecoms law and it has perfectly understood the importance of the I.C.T. sector for the economic growth of Jordan. In Syria, all the interested actors seem, at least publicly, to agree that the mentioned steps should be implemented as soon as possible, but in the end nothing ever happens. Probably, the reason for this standstill is mainly rooted with the government side, but this could really impede the future progress of Syria's telecoms sector.

BRIEF OVERVIEW OF THE SYRIAN FIXED TELECOMMUNICATIONS AND BROADBAND SECTORS — Syria has currently the most regulated telecoms sector in the Middle East, and it is also one of the least developed. It is true that year-over-year growth for 2009 was impressive, and that the overall mobile penetration stood at 42 percent in June 2009 (according to Mobile World Database, mobile penetration was lower at 38 percent in September 2009), but it's also true that the average for all the MENA countries was around 75.6 percent (Syria ranks 15th out of 20 countries surveyed).

This means that this country has an interesting potential growth also in light of the presence of a growing young population (2.4 percent annual growth rate and only 40 percent of the population above the age of 65). All this is true, but regulations have necessarily to be improved in order to attract possible investors. Currently, the state-owned Syrian Telecommunications Establishment (S.T.E., also known as Syrian Telecom) has the monopoly of the of the fixed-line service.

In 2002, the E.U. started to support the S.T.E. with a grant for the Telecom Sector Support Program (T.S.S.P.). The final goal was to support policies linked to economic development, reform of the public sector and improvement of the private sector with a specific attention given to telecom infrastructure and modern communications services. The T.S.S.P., whose duration was for four years, had a €10 billion budget and was specifically trying to activate:

• Improved framework conditions and internal reform of the S.T.E., the national telecom operator, and market regulations favourable to increased private participation in new telecom services;
• Technological and managerial modernization of the S.T.E., aiming at a competitive position in regional telecom markets;
• Strengthened institutional, managerial and financial autonomy and self-reliability of the S.T.E., aiming at a competitive position on the national market in conventional and new telecom services;
• Improved and differentiated services to the public, elimination of capacity constraints in a growing telecom market. For this purpose, a number of targets have been adopted for the program concerning technical, managerial and financial indicators of the S.T.E., in order to provide clear orientations for project activities and benchmarks for progress evaluation.

The Strategy Paper 2007-13 “Syrian Arab Republic” published under the European Neighborhood and Partnership Instrument (ENPI) explains that the T.S.S.P. has produced a restructuring plan for Syrian Telecom that “will pave the way for its corporatization and for the creation of an independent regulator in the telecommunications sector” and that “the E.I.B. (European Investment Bank) has provided €100 million to expand the telecom network in rural areas” (for more information about this point please  see: ec.europa.eu/world/enp/pdf/country/enpi_csp_nip_syria_en.pdf). Sadly, also from the E.U. side there is not much available information in relation to the T.S.S.P.

Following a five year plan (2008-13), the S.T.E. is now using $1.5 billion trying to cover with its improved network the whole country (universal fixed lines) by the end of 2013, adding 920,000 lines to its existing network. The target could be not very realistic and the plan seems now to be put on hold given the world economic turmoil of the last two years. This plan is based on contracts signed with multinational corporations (M.N.C.s), such as Ericsson and Siemens. It is certainly true that Syria in the last years has progressed consistently in extending the reach of its communication services and at the end of 2009, the state-owned fixed-line incumbent had 3.7 million of fixed lines. The persistent problem is that S.T.E. has a complete monopoly in relations to fixed-line services, i.e., there is no competition. This means that the S.T.E. financial results have improved steadily in the last years thanks to its increased subscriber base, which is linked not to the fact of quality improvements, but to the inexistence of competition. Moreover, customers still experience lengthy lags for the installation of landlines.

The S.T.E. is also the public body that is investing — although in a very limited manner — in connecting Syria internationally through the Ugarit submarine cable. This 239-kilometer cable infrastructure started to operate in 1995 with a defined capacity of 622 Mb/s. In November 2008, the S.T.E. together with the Cypriot Communications Authority signed a new document aimed at expanding the cable while increasing the internet capacity. At that time the two countries also decided to consider some feasibility studies to deploy a second cable in the sea. The Syrian government is also in talks with Jordan, Turkey, Cyprus and Iraq with reference to the possibility of running a submarine fiber optic cable among the five countries. In 2009, Minister of Communication and Technology Imad Sabouni of Syria said: ”one project underway is to try to find a link between operators in the Red Sea and those in the Mediterranean to benefit Syria and all the region.” Then, Mr. Sabouni added that the government would contribute with $2 billion of funds put aside for the country’s internet and phone network.

Internet penetration in Syria is very low and, obviously, broadband penetration is very reduced, with 50,000 broadband ports in H1 2009 (0.025 percent in 2008 according to I.T.U.). At the same time, the government applies a strict and enforced censorship in relation to many sites (like Facebook, YouTube, Amazon), blogs and websites critical of the Syrian government. These websites are all blocked. In some internet points (for instance, in the old city of Damascus, where the majority of users are tourists) it is possible that the manager unblocks the restrictions, but this is not something to take for granted. Also for Skype there are different policies in the various internet centers (no Skype at all, Skype to a specified landline or mobile number, and both Skype-to-Skype and Skype to a specified landline or mobile number). As a matter of fact, it is much easier to get information about Syria in English living outside of Syria than to rely on Syrian sources while living in the country. Broadband services are still expensive and it is not trouble-free to subscribe an ADSL line. Notwithstanding all these internet restrictions, there are no limitations at all on receiving DTH satellite TV channels. The majority of the population normally links the dishes to Arabsat and Nilesat. The third choice sometimes is Hotbird.

HISTORY OF TELECOM MOBILE SERVICES IN SYRIA  — Nine years ago, in 2001, the Syrian government decided to award the first 15-year build, operate and transfer (BOT) GSM license to two operators, which were already operating some existing pilot projects. The first operator was Syriatel, which at that time was a joint-venture. The Egyptian Orascom Telecom Holding (O.T.) held 25 percent of the company while different Syrian investors (Drex) held the remaining 75 percent. The second BOT license was awarded to a Lebanese-Syrian joint venture called Investcom, which competed against Telsim,a Turkish mobile operator. At that time, Investcom was a branch of the Mikati Group of Lebanon, but in 2006 it merged with M.T.N. South Africa and it created one of the largest telecom groups in the emerging markets of Africa and the Middle East. During the year before the awards (February 2001), both Investcom and Syriatel run some experimental mobile networks in Syria. The two companies poured in around $31 million for these networks, which were based in Damascus, Aleppo and Latakia. The pilot projects were due to be run for just one year. With some difficulties, mobile operations started in Syria in April 2001. In fact, given the high subscription costs, demand for mobile services was below expectations. The result was that after six months the authorities were forced to drop costs by two-thirds. The BOT license needed an initial payment of frequency fees of $20 million for the GSM 900 Mhz network with an additional $15 million to permit the operator to use the GSM 1800 Mhz frequency band. The BOT contracts were also defining a revenue sharing agreement according to which the companies were bound to pay royalties for 30 percent of revenues for the first three years, for 40 percent for the second three-year period and for 50 percent from the seventh year of the BTO contract onward. The companies also had to pay some protection fees.

Initially, Orascom was planning to have more than 850,000 users by 2016 when the BOT contract would have expired. Notwithstanding the commercial difficulties, it was a very conservative appraisal. Things changed abruptly for Orascom in the following months and then, in June 2003, Orascom completed a transaction aimed at getting rid of its stake in Syriatel. In fact, Orascom wanted to settle a legal dispute with its local shareholder Drex Technologies (the owner of 75 percent of Syriatel). The motive, according to Orascom allegations, was that Drex was using its strong political connections to take complete control of Syriatel at the expenses of Orascom. The settlement was able to solve all legal disputes at both the international and the Syrian level. In 2003, Orascom exited the ownership of Syriatel and, according to some unconfirmed sources, it was compensated for all the previously incurred expenses and loans. For some years after getting out of the investment Orascom continued to provide management expertise to Syriatel on an external contractual basis.

MOBILE SERVICES IN SYRIA TODAY  — Syria has in the MENA region among the highest tariffs and also one of the lowest mobile penetration rate. Mobile services are provided in Syria by two private operators — it is at the moment a duopoly — Syriatel (55 percent of the market) and M.T.N. Syria (45 percent of the market). The first one is a Syrian company, while the latter is a subsidiary of South Africa's M.T.N. The two companies operate through Build-Own-Transfer (BTO) contracts, normally used across different industries in the initial stages of development. Under these BTO contracts the two companies have to build the country’s GSM technology and provide mobile and internet services before transferring everything to the Syrian government after 15 years. The rigid BTO scheme has been in place in Syria since 2002, but both companies would like to convert these BOT contracts into regular mobile operator licenses. One reason is surely the fact that after some years, Syriatel and M.T.N. have to pay very high royalties to the Syrian government, i.e., royalties for 50 percent of the revenues together with a 20 percent charge to cover the cost of the infrastructure.

Another reason for changing the BTO license with a simple license is that although the companies enjoy a consolidated market, the BOT scheme is absolutely a big hurdle for the implementation of competitive marketing, especially in the area of tariff flexibility and promotions. Summing up, Syriatel and M.T.N. claim that, given all the cost and taxes they have, there are no resources for investments targeted at adding further capacity and service upgrades. The result is that the two companies charge the same amount for calls and messages as well, plus they provide exactly the identical services with a perfect coordination so that it does not exist also in the mobile sector (like for landlines) any kind of competition. The only difference with fixed-line services, where there is a monopoly (S.T.E.), is just on papers, because with mobile services there is a duopoly that acts as a monopoly.

Syria has a population of around 20 million and today two operators are considered inadequate. As it was pointed out above, the country has been taking into consideration to add an additional third mobile operator for some years. Foreign telecom companies like U.A.E.’s Etisalat, Kuwait’s Zain, Qatar’s Q-Tel and Turkey’s Turkcell have always been considered as potentially interested in joining the Syrian market. Among them, in particular, a strong attention has been expressed by Etisalat and Zain. According to Business Monitor International, a consultancy, Zain could be “interested in investing in Syria’s mobile market, either through the acquisition of a stake in an existing operator or by acquiring a new operating license”.

Acquiring a new operating license could be easier for Zain than investing in an existing operator. In fact, Syriatel was blacklisted by the U.S. Dept. of the Treasury in 2008. The reason was a presumed link of the telecom company with the Syrian government. This political hurdle was bypassed in April 2009 when Zain tried to buy a stake in Syriatel although it did not succeeded. Things could be easier now with M.T.N. Syria, whose 75 percent is owned by M.T.N. South Africa. In fact, before selling for $10.7 billion in the first days of June 2010 all its African assets (Zain Africa B.V., operating in 15 African countries) to Bharti Airtel Limited, an Indian telecom company, Zain was a business rival with M.T.N. in Africa. Before this sale, Zain's offer for buying a majority stake in M.T.N. Syria would have never been approved by the Syrian regulations. Now things could be different. After the deal was concluded, the Zain Group C.E.O., Nabeel Bin Salamah said "Zain stands at the threshold of a new era, one that will allow the company to focus on its highly cash generative Middle Eastern operations, investing in new growth opportunities in our existing markets." Also Mr. Anas al-Khani, corporate affairs manager at M.T.N. Syria, thinks that a regional company is best placed in order to take up the license, but he hints at the fact that also “companies such as Orange, which operates in Jordan, France’s Telecom and Vodafone have reason to be interested.” 

Commentators affirm that if a third operator were to enter the market, this time it would be under a license agreement and not anymore according to a BOT contract. But such an occurrence would spark strong protests from the side of the current incumbents. On the one hand, it would not be possible to have a playing field where  one operator is working through a license and two with a BTO contract. On the other hand, it is not conceivable to have a new entrant — especially a foreign company — that easily accepts to be subject to the same price controls as its competitors For this reason, it is understandable that if the new Syrian telecoms law is ever released, it will necessarily change the whole telecoms panorama into a license-driven playing field. 

The fact that in Syria in the mobile arena there is no competition brings with it the fact that there are some of the highest tariffs in the whole region. Notwithstanding the introduction of prepaid cards in 2003, mobile services are disproportionately expensive. With the average Syrian salary around $200, mobile services are available up to now for just the Syrian elite. A 42 percent mobile penetration exactly one year ago (June 2009) is low and the comparison with some of Syria’s regional peers — using the two variables mobile penetration and current G.D.P. — well exemplifies the scarce mobile penetration (see the graph below). There are now in Syria at least four million of untapped potential new subscribers. In May 2009, mobile phone users in Syria staged a one-day boycott of mobile services. This protest was decided in order to complain with reference to the high tariffs charged by the two operators Syriatel and M.T.N. Syria.

Clearly, a one-day boycott was not a very powerful tool in order to have a significant dent in the profits of the two telecoms, but it was at least a signal of an existing problem. According to Mr. Josep Maria Moya of Delta Partners, a consultancy, mobile users were probably angry at — in addition to the high tariffs — the restrictive validity of top-up cards. In fact, until last year customers who bought the 150-Syrian-pound ($3.25) card had only seven days in order to use the credit before disconnection (expiration). In other words, this system forced customers to spend at least 600 Syrian pounds every month. These fares are with no doubt too high for Syrians. This restriction was partially lifted with an expiration time of two weeks instead of one, but it is still a powerful constraint.

In public declaration released in the last months both M.T.N. Syria and SyriaTel have expressed the point that they would welcome a new competitor for mobile services in the Syrian market and they have already partially prepared the transformation of their not well competitive companies into more efficient firms. They have understood that the present tariffs have already reached the so-called saturation point. In other words, with current prices a certain part of the Syrian population will never buy mobile services. For example: M.T.N.’s average revenue per user for the first quarter of 2009 was $17 while Kuwait’s Zain was $52 and Qatar’s Q-Tel was $44 — although in these countries per capita G.D.P. is much higher and the offered telecom services are of much better quality. Instead, should a license regime be implemented all the actors could have more flexibility, be more competitive and reduce the prices for consumers. According to Ismail Jaroudi, the C.E.O. of M.T.N., “While we have accomplished a lot over the past few years within the boundaries of the BOT, we have now reached a point where we are stuck, and growth is not what it should be without the ability to lower tariffs. Overall, a new telecoms law that can formalize the sector and define the scope of the operators will have a great impact on mobile growth and the company at large.” If the new telecoms law is not going to change the BOT contracts there is absolutely zero incentive for Syriatel and M.T.N. to invest resources in their networks or in their customer base when, given the BTO contracts, they can be obliged to hand over all their operations to the government. With no clear investment rules not many private companies are eager to invest in Syria.  

In general, many times new entrant strategies in the telecommunications — sector especially in developing countries — at the beginning rely on price competition that could be achieved either through direct reductions in tariffs or other indirect measures such as per-second billing or increased pre-paid expiry periods. In a country like Syria, where at the moment there is no real competition, a new entrant is mandatorily obliged to act at a different level. There, a mobile network operator (M.N.O.) will look for different key factors in order to differentiate itself from its competitors. These key factors could be a strong existing brand or an increased range of service provisions. Among the latter, one of these could be mobile broadband that could reap the benefit from the fact that Syria does not have relevant fixed broadband services.  

The S.T.E. general manager, Nazim Bahsas, in 2009 said that "fulfilling the regulatory role is not our core business and consumes more than 30 percent of our management time, detracting from our ability to focus on and dedicate resources to the operational side of our business". And then he added that "Looking at global trends, in nearly every market where a separate regulator was established, tremendous progress was achieved for the sector as a whole, so the new telecoms law is a must for the country."  

Last but not least, the third eventual mobile license, Mr. Sabouni pointed out last year "is one of the last mobile licenses to be auctioned in the region" and the Syrian government is counting on this in order to raise a critical amount of money. 

A NEW TELECOMMINICATIONS LAW? — In February 2010, a press release from Syrian Telecom and Sofrecom, a consultancy, explained that the partnership S.T.E./Sofrecom would modernize the network of Syrian Telecom transforming it into a “Next Generation Network”. In addition to this, it was said that the objectives of the new telecoms law, under study, were to open the market, to augment the penetration of telecoms services and to propose to Syrians quality telecommunications services with reference to broadband and mobile communications. In other words, this press release was in particular giving information in relation to the steps necessary to build up a network infrastructure able to deliver broadband, data and multimedia services in Syria. To reach this target was identified Sofrecom as an important consulting body, advising Syrian Telecom with reference to the main steps of the project for the following two years (Step 1: Audit & Description of the Current Network; Step 2: Demand Analysis & Definition of S.T.E.’s Target Network; Step 3 Proposition of Different Migration Scenarios & Recommendation of the Optimum Scenario to Migrate to N.G.N.; Step 4: Follow up of the Migration Program) and were identified positive benefits for S.T.E. such as lower Opex and Capex and the creation of a revenue stream in a much more competitive environment. Mr. Bahsas was enthusiastically affirming that “the migration of our network to N.G.N. is a must of our strategy. Indeed, the N.G.N. network will enable Syrian Telecom to deliver compelling services such as video on demand, broadband internet, and voice over a single line. Our customers are hungry for broadband internet and value added services and Syrian Telecom shall meet their expectations. Sofrecom will help us to deliver enhanced services supported on a cost-effective and efficient N.G.N. network.”  In other words, all the actors — the S.T.E., Syriatel, M.T.N. Syria, the Syrian government, the foreign telecom companies and the Syrian consumers — agree on the fact that a new telecoms law should be developed and that, thanks to this law, the mobile sector should be reformed with the transformation of the two BTO licenses into normal licenses and the auction of a third  mobile license. All these actors and stakeholders agree, but nothing is really happening. Once in a while there are some announcements and some press releases, then no concrete decision is ever taken and this could have very bad comebacks for the future economic development of Syria.

CONCLUSION — With no doubt Syria has experienced a strong decline in its oil revenues over the last few years. This decline could push the Syrian government to invest in different business activities  like the I.C.T., which could be useful in order to improve the economic progress of Syria transversally through other economic sectors. Improving the competition in mobile telecommunications, providing one additional license and reframing the telecoms law, loosening the related regulations, could have very beneficial effects for the economic advancement of Syria. All the interested actors seem — at least publicly — to agree that the mentioned steps should be implemented as soon as possible, but then nothing ever happens. Probably, the reason for this standstill is mainly rooted with the government side, but this behaviour could really impede the future progress of Syria's telecoms sector. And Syria is a country already with a relevant development gap in comparison to bordering countries like Lebanon and Jordan, countries that are fully aware of the importance of the overall I.C.T. sector and that have already implemented important actions.    



 

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.