Confidence key to Syria’s infrastructure drive
Midani says judicial system must guarantee investor rights.
October 21, 2010 8:56 by Reuters
An executive running one of Syria’s biggest privately held companies predicted a boom in infrastructure development if the government assures investors of their rights in mega projects on offer.
Projects also need to be structured more carefully for investors to have confidence that they can secure the financing as international banks begin to show interest in Syria, Marwan Midani, managing director of Souria Holding, told the Reuters Middle East Investment Summit on Wednesday.
The state, which has been controlled by the Baath Party since it took power in 1963 and imposed emergency law still in force, is looking to the private sector for half of $85 billion it says is needed over the next five years to repair and expand the dilapidated transport, power, water and hospital networks.
“Investors need to have rights guaranteed by the judicial system in case of a dispute or anything of this nature. The guarantees have to be clear in the contracts,” Midani said.
“Once this is assured I am sure the rest of the projects will take off. The government has already hired international consulting firms and is working to have very clear private public partnership (PPP) contracts in terms of litigation,” the U.S.-educated engineer said in an interview.
Syrian businessmen set up Souria Holding in 2007 along with Cham Holding, which is controlled by Syrian tycoon Rami Makhlouf — a cousin of President Bashar al-Assad.
The move was part of government efforts to create private sector ‘champions’ after four decades of Soviet-style economic policies obliterated competitiveness and scared capital away.
Several of the businessmen are simultaneous shareholders in the two companies.
Assad has taken cautious steps toward economic liberalisation but investment still lags behind U.S.-backed Jordan and neighbouring Lebanon, where a tradition of laissez-faire has helped overcome political turmoil.
Midani said the central bank could help by studying the projects before they are offered and consult the privately owned banks on how they assess chances for financing them.
Syria’s privately owned banks, which entered the market only six years ago after the government relinquished its monopoly on the sector, also needed to develop project financing and “not just focus on classical loans”, he added.
“We have seen many projects offered only to turn out later that they are not bankable,” Midani said.
One of the first contracts under the new “PPP” policy, a concession to manage and improve the container terminal at the main Latakia port on the Mediterranean, went to a consortium that includes Souria Holding and French shipper CMA CGM.
Traffic at Latakia port fell slightly to 293,000 Twenty foot equivalent Units (TEU) in the first half this year from 299,000 TEUs in the corresponding 2009 period, but Midani said the port’s potential was huge as a hub for Iraq and as Syria streamlines its customs and port bureaucracy.
The government has also granted Souria Holding a concession to develop a 33,500 sq metre (360,600 sq feet) prime property in Damascus into a hotel, shopping centre, apartments and offices.
He said Souria Holding was making progress with a Western bank he did not name to secure private equity partners among the banks customers to help finance the $350 million property project, named Abraj, despite U.S sanctions imposed on Syria, which he said do not affect the company.
Construction on the two tower Abraj project is expected to begin in October 2011, with initial tenders for construction to be issued before the end of this year, he said.
U.S. sanctions, which were first imposed in 2004 for Syria’s support for militant groups, specifically targeted members of the ruling hierarchy and the state owned Commercial Bank of Syria, the country’s largest bank.
(Editing by Mike Nesbit)