The Syrian economy has traditionally been heavily dependent on oil exports. However, the share of raw materials in the export volume dropped from 80% to 40% from 2000 to 2008, and the sector’s contribution to the national budget is steadily declining. In view of this, the government is seeking to tap new sources of income by promoting the private sector and reforming the tax and financial systems, and under President Dr. Bashar Al-Assad is pursuing a liberalization-oriented reform course.

The reform steps since 2002 include opening the banking, insurance, cement and electricity sectors to private initiative, liberalizing the import regime with sometimes drastic tariff reductions and introducing a harmonized customs system (NHS), lowering corporate income tax, unifying exchange rates, facilitating foreign investment, reforming corporate, investment, real estate and trademark law, enacting a competition law and establishing an investment authority. The new laws facilitate, among other things, the establishment of companies, the acquisition of land for foreigners for investment purposes and the repatriation of profits.

In addition, seven free trade zones (including Damascus, Damascus International Airport, Aleppo and the ports of Latakia and Tartous) have been established, which are intended to attract export-oriented investors in particular with special conditions. Foreign direct investment rose from US$600 million in 2006 to US$885 million in 2007. In addition to the reform of the financial sector, a dispute settlement center for economic issues, which was opened in Damascus in January 2010, should further increase Syria’s attractiveness for foreign investment.

Since 2005 Syria has been a member of the Greater Arab Free Trade Association (GAFTA), which grants duty-free access to 14 other Arab countries for products manufactured in Syria. A free trade agreement with Turkey has been in force since January 2007. In addition, Syria participates in programs within the framework of the European Neighborhood Policy and in the Barcelona Process of the European Union and the Union for the Mediterranean, and is striving to join the World Trade Organization (WTO). An association agreement with the European Union has already been initialled several times, but still needs to be signed.

Due to its low level of integration with the international financial markets, the international financial crisis has hardly affected Syria, but the country has not been spared the effects on the real economy. The real growth rate decreased from 6.3% in 2007 to 5.1% in 2008 and 2.2% in 2009. The fact that despite the decline in oil production and export revenues, a positive

The increase in the number of new jobs is due to the ongoing expansion of the private sector. A slight recovery is expected in 2010 with an estimated 3.7% growth. At the same time, the opening of the Damascus Securites Exchange (DSE) in March 2009 amid the global financial and economic crisis represents another visible step in the transformation process.

Syria’s main export goods are oil, which is currently being produced at a rate of around 350,000 barrels/day, as well as food, textiles and clothing. The main import goods are machinery and transport equipment, metals and metal products, motor vehicles, food and chemical products. In 2008, Germany exported goods worth 688 million euros to Syria and imported goods from Syria for more than 1239 million euros, with oil being the main import. Germany is Syria’s largest customer in the mineral oil sector, Syria is the seventh largest oil supplier for Germany. At the same time, Germany is one of the most important supplier countries for Syria for electrical engineering products, machinery, chemical products and motor vehicles.

Syrian-German relations are traditionally close and friendly. Germany enjoys a very good reputation and is a sought-after partner politically and economically. Following a debt rescheduling agreement in 2002, Syria is once again a partner country in German development cooperation, which focuses on the water sector. Germany is also active in the areas of economic reform, higher education, urban development and renewable energies. In February 2010, the Syrian Deputy Prime Minister and the State Secretary in the Federal Ministry of Economics and Technology opened the Syrian-German Economic Council, whose aim is to strengthen contacts between German and Syrian companies and to deepen economic relations between the two countries. This is supported by a double taxation agreement, which was also signed in February 2010.

In concrete terms, German companies have good investment opportunities in the following areas:

Following the opening of the financial sector, seven non-governmental banks have already established themselves, as well as the country’s first microcredit institution, which was founded with the participation of the Kreditanstalt für Wiederaufbau. Liberalization has led to competition among banks and the introduction of new services. A new law now authorizes private shares of up to 60 % (previously 49 %). The development of the banking sector has already exceeded expectations in the first two years and seems promising for the coming years as well. With only about 3,000 insured private households, the country is also an almost untapped market for the insurance industry. Since the sector was opened up in 2005, nine private insurance companies have been active.

Far-reaching measures are planned in transportation and logistics, including the modernization and expansion of airports, investments in the infrastructure of the regions in the east and the addition of express lines to the rail network. In addition, the commercial ports in Latakia and Tartous are to be modernized, with partial private concessions being awarded for the management of the terminals in the form of BOT (Build-Operate-Transfer) contracts. In order to benefit from its geographical location, Syria intends to double its freeway network to 2300 km and thus become a transit country between the Mediterranean and Iraq, between Turkey and the Gulf States. Here too, BOT contracts should attract private investors. In addition, other major projects are planned, such as the Hegschas Railway between Damascus and Jeddah and the Damascus Metro.

Since the first opening of the telecommunications industry in 1991, the state-owned monopoly company Syrian Telecommunications Establishment has gradually been allowing foreign investment in the fixed-line network sector. The telephone and Internet infrastructure is being overhauled; Siemens is already active here. The mobile phone sector is expanding rapidly and a third license is soon to be awarded to a private provider. The government supports the private purchase of computers with special credit programs and wants to increase the number of Internet users. New providers are to expand the range of services; in this context, the Internet certainly offers growth potential.

Due to demographic and economic developments, the demand for energy is increasing by 10 % annually. Planned initiatives in the energy sector include the modernization and new construction of oil refineries, the expansion of the oil and gas pipeline network and the construction of a power plant. Here, the necessary adaptation of the distribution network offers German companies commercial opportunities. In the wind and solar energy sector, natural conditions are good to very good. Although interest in renewable energies is only slowly beginning to emerge, legislative initiatives and support measures are being planned. In the medium to long term, interesting business perspectives for German companies could therefore arise.

As far as light industry is concerned, the gradual opening of the previously shielded markets in a number of areas makes it necessary to modernize production facilities. Provided that prices are competitive, German companies can benefit from the excellent reputation of the “Made in Germany” seal of quality, especially in the machine sector.

The tourism industry, which the government wants to develop into one of the most important oil-independent economic pillars, is one of the most dynamic economic sectors in Syria with double-digit growth rates. In the course of the first Tourism Investment Market Forum in 2005, for example, contracts were concluded for 13 of 33 projects tendered by the Ministry of Tourism and hotel management companies such as Intercontinental and Holiday Inn were admitted for the first time. Except for the luxury hotels, however, hotels have hardly any leisure facilities so far. The hotel infrastructure in the middle class is inadequate and definitely needs modernization to meet the demands of upscale and cultural tourism.

Further investment opportunities exist in the education and health sectors, in the textile industry and in the pharmaceutical sector.