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By Nick Lord
Damascus in Syria is the oldest continuously inhabited city in the world. It feels like it. Five hundred years ago you could write a check in the old souk which could be cashed in Beijing. Today it is hard to find an ATM that takes international cards.
Even so, it is much better than 10 years ago. After 40 years of Soviet-style central planning, the economy is opening up, investment is coming in and the private sector comprises a much greater portion of the economy. The Minister of Planning recently noted that until 2000, the public sector made up more than 80 percent of the economy. Today that figure is down to 30 percent, not because of a reduction in government activity, but rather an increase in the amount of private sector activity.
US investors are taking note. At the beginning of the year, famed investment strategist Barton Biggs came back from a week long fact-finding trip. In a heady rush after his visit he pronounced Syria one of the greatest investment opportunities in the world.
The key constituent group that is investing in the country is the 20 million-strong band of expatriate Syrians. I met two brothers, Ahmad and Bisher Hashem, who have returned to the country after decades living in the US. They are setting up the first western style private equity fund, Syria Rising, with the help of a senior US financier Peter Wodtke. Their simple premise is that the restructuring of the economy will create an unstoppable trajectory of growth. "We have reached the point of no return," says Bisher Hashem. "Too many people have invested and now the process is irreversible"
Ahmad Hashem gave up his job as head of Microsoft's healthcare division in Seattle, while his brother Bisher was a partner at investment company Capstone Partners in Boston. "Leaving the US and coming back was the hardest decision of my life," says Ahmad Hashem. "But the opportunity here is so good."
There are still challenges for companies seeking to do business in the country, not least the sanctions imposed by the Bush administration. Under these laws it is illegal for American companies to export certain goods and services to Syria, although it is perfectly legal to invest in the country and to import Syrian products into the US.
The sanctions regime makes financing these investments difficult. While it is technically legal to send money in and out of the country, companies still report difficulties. Since 2004, foreign invested banks have been allowed to open up. To date 12 have done so, mostly subsidiaries of Lebanese and Gulf banks.
Sending money into or out of the country through these banks is technically possible, although most businesses say they transfer overseas payments and receivables through the head offices in Lebanon and then do an internal transfer between those banks and the local subsidiaries in Syria.
Despite such hurdles, there is a compelling business case to be made for the country. It is not one based on cheap labor, as in China, or on abundant natural resources, as in Africa. Rather it is a case of restructuring an economy that had done everything the wrong way. The simple act of liberalization unleashes the entrepreneurial instincts of a business class that had been shackled for decades. In this it resembles Vietnam ten to fifteen years ago. Fortunes will be made.
And like most economies transitioning away from heavy state planning, the dead hand of bureaucracy still stifles. Contradictory laws and regulations are difficult to navigate and many companies have to get exemptions from these to operate in an efficient manner. (Not to mention the fact that I cannot get Internet access here to certain websites, including this one.) But Syria is coming back into the global mercantile fold. And those traders of 500 years ago would recognize the burgeoning business opportunities just as the Hashem brothers do today.
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