Posted by Joshua on Friday, October 17th, 2008
Are Syria’s Textile Manufacturers Headed for Failure?
The Collapse of Kouefati Industries.
By Ehsani, Syria Comment, October 17, 2008
Last Sunday, Syria’s second largest city was rocked by the collapse of one its larger businesses and the flight of a prominent industrialist and all his family members. The Kouefati group http://www.kouefati.com/about.html with a 25-year history of manufacturing Jeans, cosmetics and fashion accessories seems to have gone bankrupt under a heavy load of debt and other liabilities.
Aleppo’s business and especially Christian community is abuzz with the sensational news that has come out thus far. Here is what I have heard from sources in the know:
Camille Kouefati and his married children disappeared from sight in the early hours of Sunday.
After returning from dinner on Saturday night, they parked their cars and while the lights were still on simply vanished from sight. When no one showed up for work in the morning, many attempts were made to contact family members. It was soon obvious that they had all fled. When the news made its way to Aleppo’s business community, armed creditors tried to force entry into the factory. The Governor of Aleppo was called and police enforcements were immediately ordered. By the next morning, the extent of the financial ruin slowly came to light. One of the local new private banks is owed SYP 400 million. The Government owned Mortgage and Industrial Bank is also owed SYP 120 million. Many recently written checks by the company have bounced. Although it is impossible to know for sure, the company’s liabilities at the time of its collapse are reportedly close to SYP 1 billion.
Regrettably, it is hard to believe that the Kouefati Group is an isolated case. Syria’s textile and manufacturing base is under attack from many sources.
While local manufacturing enjoyed protection from overseas competition for decades, cracks in that protective shield have been opening up for the past few years, making Syria’s businesses vulnerable. Arab countries have agreed to eliminate import duties. This has meant that Syrian manufacturers have had to compete against their Saudi and Gulf based counterparts. This is not a competition that Syrian businesses can win. The recent political rapprochement with Turkey may have helped the country geopolitically. However, the rise in Turkish exports to Syria have made life very difficult for the local manufacturers who have now been asked to compete against much more efficient and powerful business groups to their north. Trade policy has exacerbated the problem. Chinese products have flooded the market. Many come through Dubai, where local labels are added that claim the products are “made in UAE.” They arrive in Syria duty-free. Local corruption is also at fault. It is no secret that Syrian importers often present false receipts low-balling the true prices of imported products to customs officials. Recently a law was passed to slow this trend, but there is little chance that it will be more successful than most other anti-corruption measures. This practice not only deprives the Government of import duties but it also ensures that local manufacturers face stiff and unfair competition from imported products which face little if any import duties.
In sum, the bankruptcy of the Kouefati Group is not surprising. Under heavy debt burden, facing high Syrian interest rates, an uncompetitive exchange rate (high value of SYP), competition from Gulf and Turkish manufacturers, Syrian manufacturers are sailing into a perfect storm. After decades of protection and “himaye wataniye”, local industry has been asked to compete and survive in a brutally efficient and competative global economy. Sadly, I don’t think that many Syrian industrialists are ready for the battle ahead. The Kouefati family, may not be the only business group that folds up its tents in the dead of night, leaves the lights on in their parlors for cover, and slips silently across Syria’s border in a hurried attempt to escape collapse.
DAMASCUS, Syria: A fire in a commercial building in northern Syria killed 10 people and injured 15 others Friday, said the country’s official news agency.
The fire broke out in a five-story building in the city of Aleppo, some 355 kilometers (220 miles) north of Damascus, said SANA. An initial investigation showed the fire was likely caused by an electrical short-circuit, said the report.