Syria to Allow Foreign Ownership of Banks

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jan 13 2010

Syria to Allow Foreign Ownership of Banks

Written by Adam Gonn

Foreign investors set to be given the right to hold majority stakes in Syrian banks.

Syria has opened up its banking sector to foreign speculators in an effort to attract more investment in the country.

According to reports by local Syrian media, the government has moved to allow foreign investors to own more than 50% of Syrian banks sector in an attempt to revitalize the country’s economy.

his is part of the reformation of the banking sector which has been going since 2003," Justin Alexander, an editor and economist with Economist Intelligence Unit, told The Media Line. "Formerly, all of Syria’s banks were state run."

"Back in 2003 private banks could be established and foreign investment was allowed up to 49%," he said. "Ten conventional and Islamic private banks have opened over that period, and they now manage one fifth of the assets of the banking sector."

"They have grown quite quickly," Alexander added. "But most banks that started have been regional ones - either branches of Lebanese bank or other regional banks and local Syrian owned ones."

"Governments have been keen to increase the availability of credit to expand the private sector," he continued. "Syria needs to develop other sectors of the economy to make up for the losses in revenue from oil."

"[The government] is particularly interested in attracting international banks," Alexander said, suggesting names such as HSBC and Standard Chartered Bank.

"There is also a political element," he added. "Syria is increasingly challenging its international isolation and it made considerable progress over the last couple of years in terms of improving ties both in the region and with Europe and the U.S."

Referring to United States President Barack Obama’s plans to appoint a U.S. ambassador to Syria, Alexander said that the Syrian government’s plans to open up its banking sector were part of a broader foreign policy strategy.

"It is economic but nothing is just economic, particularly in Syria," he said. "There are political benefits to Syria if they can be seen to host major international companies in the banking sector or indeed in other sectors. There are plenty of good growth prospects, particularly if [Syria] signs an Association Agreement with the E.U. [European Union]."

An Association Agreement is a treaty between the E.U. and a non-member country to establish a framework to develop economic, political and cultural relations between the two parties.

"This could well happen in the next couple of months," Alexander said. "That would make Syria a more convenient base for exporting to Europe as well as the Middle East."

Syria has been on the U.S. State Department’s list of State Sponsors of Terrorism since 1979. The implication of the status includes prohibition on arms-related exports and sales, and reduced economic assistance.

Since American aircraft manufacturer Boeing was banned from selling spare parts to Syrian Air, the steady deterioration of its airplanes has often been cited as the most visible evidence of the embargo’s effects.

The Media Line