Posted by Joshua on Wednesday, December 2nd, 2009
By Brian Caplen | The Banker, 28 October 2009
Syria’s banking sector has made great strides in the past two decades, but is still dominated by small regional banks. Now the country’s government is looking to major global names to take its economy forward. Writer Brian Caplen
Syria has been steadily liberalising its economy for the past two decades, with much of this effort focused on the banking sector. The time when six state-owned banks dominated the economy is long gone and private banks have become a central feature of the banking scene. Now the government is hoping to attract a major international bank to its shores and is proposing to raise foreign ownership limits and capital requirements to catapult the economy into a new era.
“Syria used to be a state-controlled, Soviet command style economy,” says Adib Mayaleh, governor of Central Bank of Syria (CBS) in an interview at the IMF/World Bank annual meetings in Istanbul last month. “Twenty years ago the Syrian economy started opening up. In the banking sector as little as five years ago there were only state banks. From 2005 we started with private banks, allowing foreign investors 49% stakes.”
Now the plan is to raise the limit to 60% and raise the minimum capital requirements for all banks to $200m, more than double existing amounts, with a three-year grace period for banks to comply.
Big is beautiful
At the moment the banks with foreign participation have mainly regional shareholders from Bahrain, Kuwait, Jordan and Lebanon. “We want to attract the major international banks with large capital,” says Mr Mayaleh.
“Under the existing rules we cannot develop the economy as we would like. Our banks are fairly small and we need big international banks with more capacity to build up and support the economy.”
Such a move would give a big push to private banking as, even after the reforms, state-owned banks still account for more than 80% of assets and 75% of deposits.
Mr Mayaleh is an advocate of gradual liberalisation, which, he says, has served Syria well as an alternative to the ‘big bang’ treatment that was tried and proved contentious in formerly state-run economies in eastern Europe. He notes of the IMF’s recent conversion to gradual reform: “It’s [the IMF’s] new idea! I’m glad they joined me.”
He agrees that reforming the banking sector in Syria has been easier than in other sectors where there are labour issues and huge restructuring needs to take place. Private banking was “new” to Syria (private banks had been abolished in 1963) and could be started afresh.
Interest and exchange rates have also been liberalised. In the 10th five-year plan (2005-10), two of the targets listed were “developing the monetary sector and guaranteeing the full independence of the CBS; developing the banking and financial sector as well as financial policies and launching the securities market”. The Damascus Stock Exchange began operating in March with banks dominating in the initial stocks traded.
A simple structure
Mr Mayaleh says that in 2005 there were four pages of instructions concerning interest rates, this has now been reduced to four lines. At one stage Syria had 17 exchange rates but now it has a single rate and taking money in and out of the country has become much easier.
In a policy document called ‘Four Years of Reform in Monetary Policy’, issued by the CBS and covering the period from 2005 to the second quarter of 2009, it says: “CBS has come a long way concerning monetary policy reform, especially in relation to the exchange system and exchange rate policy; it has [used] the political stability in Syria as solid ground for the reform process and as a cornerstone of the stability of both the monetary and the banking sector.”
One negative development for the economy was when the country became a net oil importer in 2006. Revenue from oil used to account for 17% of gross domestic product but this is now down to 4%, with output dropping from a peak of 590,000 barrels a day in 1996 to 385,000 today.
Agriculture is an important sector but as Mr Mayaleh says it is highly dependent on climatic conditions. Tourism, by contrast, he describes as “the new oil” with visitors increasingly attracted to Syria’s historic sites. “In Syria you can see the history of the world, we have great treasures,” he says.
According to a Dow Jones newswire report, Syria plans to raise money on the international and local markets for infrastructure and energy projects. In conjunction with the European Investment Bank, $2bn will be raised externally, says the report.
Head to the Syrian city of Aleppo for exoticism, medieval shopping malls and deep-fried falafel, says Gail Simmons.
By Gail Simmons
01 Dec 2009
From the old Orient Express terminus to the Whirling Dervishes who perform in some of the city’s restaurants it’s still possible to recapture that oriental romance Photo: GETTY
An alluring mix of medieval and modern, Aleppo, in Syria, vies with the capital, Damascus, as the world’s oldest continuously inhabited city and is home to Arabs, Kurds, Albanians, Circassians and many others. Syria is officially a secular country and is tolerant of all religions – reflected in Aleppo’s ethnic and religious make-up, which includes a sizeable Christian population.
What do you miss most when you’re away?
The exoticism of the city, from the old Orient Express terminus to the Whirling Dervishes who perform in some of the city’s restaurants. Aleppo, like most cities, is surrounded by high-rise sprawl, but it’s still possible to recapture that oriental romance in the old town.
What’s the first thing you do when you return?
Take a hammam (Turkish bath) in the medieval Hammam Yalbouga, Syria’s grandest bathhouse, where you are stripped, steamed, pummelled and scrubbed by burly attendants.
Where is the best place to stay?
One of the converted Ottoman houses in the old city. I like the Mandaloun Hotel (00963 21 228 3008; www.mandalounhotel.com; doubles from £58), with simple yet comfortable rooms set around a covered courtyard. Or splash out at the exquisite Mansouriya Palace (363 2000; www.mansouriya.com; doubles from £208), tucked away in the old city. With nine individually themed suites, it’s Aleppo’s best boutique hotel.
Where would you meet you’re friends for a drink?
I like fresh mint blended with ice and lemonade at a pavement café beside the Citadel as the sun goes down. Or for a proper drink, the Baron Hotel (211 0880), an early 20th-century time warp in the European quarter, where Agatha Christie and T E Lawrence stayed (you can still see the latter’s bill).
Where is your favourite place for lunch?
Any of the old city’s falafel stalls. You can watch the falafel being mixed and deep-fried, then eat it warm served with hummus and salad and wrapped in pitta bread.
And for dinner?
The best restaurant in Aleppo, and one of the finest in Syria, is Sissi House (212 4362; www.sissihouse.com) The old, wood-beamed building is set around a covered courtyard in the Christian quarter and serves some of the best food – and wine – in Syria.
Where would you send a first-time visitor?
To the Citadel. On a hill surrounded by a now empty moat and reached by a huge arched ramp, this medieval Arab fortress dominates the city. Inside you can explore the streets, mosque, Ayyubid Palace, bath complex and terrifying dungeon. It’s a city within a city and, along with Krak des Chevaliers, one of the great castles of the Middle East.
What would you tell them to avoid?
Talking politics with locals.
Public transport or taxi?
The ubiquitous yellow taxis are cheap and plentiful, with meters so you can see how much your journey costs if your Arabic isn’t up to much.
Handbag or moneybelt?
Syria is one of the world’s safest countries, with virtually no petty crime, so a handbag is fine.
What should I take home?
Aleppo soap is world famous. It’s made from olive oil and bay leaf, its recipe virtually unchanged for two millennia, and still handmade in the city. It’s reputed to have medicinal properties, too.
And if I’ve only time for one shop?
Don’t think shop, think souk. Aleppo has the longest covered souk in the Middle East, a stone-vaulted labyrinth where you can get lost among the stalls selling Aleppo soap and everything else under the sun. It’s like a vast, medieval shopping mall.
* Gail Simmons is a journalist and travel writer specialising in the Middle East (www.travelscribe.co.uk)