"Economic co-operation between Israel and Syria is perceived as one
of the two main supporting pillars of the peace between the two
countries, the other being security". Globes heard this comment this
week from a governmental source involved in the preparatory talks for
next week's resumption of the negotiations with Syria.
It would seem that what had hitherto been thought of in terms of
theories and futuristic vision, is becoming, in the Syrian context, a
sine qua non. Until now, one could amuse oneself with notions of
economic cooperation as a means for consolidating the peace, and could
toss around such ideas at every international convention. But when
getting down to the brass tacks of a peace agreement with Syria, the
parameters of economic co-operation had better not be left to
chance.
Israel's dealings with Syria are characterized by an element of
uncertainty as to the desire of the leadership to make peace. The
vacuum created by this doubt must therefore be filled not only with a
security net, but also with economic co-operation. Strong economic bonds
may ensure the advance of the peace process, even if the commitment of
the Syrian leaders to peace is more apparent than real. Especially
important are economic ties in the Middle Eastern framework, meaning
Syrian engagements as regards projects involving a number of Middle
Eastern states alongside European, American or Japanese
partnerships.
In the two rounds of discussions due to commence next week, Israel
will propose the founding of a joint economic work group with Syria.
"The work group", the source added, "will discuss Israeli-Syrian
integration in all fields of common interest, as well as possibilities
for integrating their bi-lateral projects into regional projects, as
discussed at the Casablanca, Amman and Barcelona conferences".
Particular emphasis will be placed on infrastructure and tourism
projects as well as joint ventures. Israel ascribes to Syria a key role
in regional co-operation on the subject of water, in which Turkey too
will be included. Syria is also the key to the development of overland
axes from Israel to Europe. In the course of the preparatory contacts
for Israel's talks with the United States last month, these economic
issues have already been discussed.
Syria, for her part, has plainly stated in the past, without going
into detail, that she is prepared for normalization of relations with
Israel. Israel however has made it abundantly clear that, by
normalization, she understands regular commercial relations between the
parties; and the United States supports this position. The problem
being encountered by the Israelis is the Syrian fear, expressed also
over the media, of markets in Syria and the Arab world in general being
overrun by Israel. Israel must therefore try to reconcile two seemingly
mutually exclusive policy lines. She must somehow allay Syrian fears of
an economic "takeover" while at the same time finding a way to
accommodate the Israelis' wish for close economic co-operation with
Damascus.
In anticipation of a breakthrough in the talks with Syria, work
plans have been drawn up, not only in the Foreign Ministry, but also at
the Export Institute and the Chambers of Commerce Association. The two
last-named institutions have separately prepared "Doing Business With
Syria" handbooks. The Export Institute, for the present, is not
publishing its findings. The Chambers of Commerce Association has given
Globes permission to publish the following single chapter out of its
so far unpublished handbook:
"Business Methods" - from the "Doing Business with Syria" Handbook
of the Chambers of Commerce Association.
Baksheesh
Before proceeding to review generally accepted methods of doing
business in Syria, we would emphasise the very high prevalence in the
business sector of the "baksheesh" (or palm-greasing) method. A
gratuity of this kind, even where a public or governmental entity is
concerned, can help promote interests. Ever-eagerness, however, is
definitely not recommended, as being liable to deter certain
individuals.
Distribution and Sales Channels
In international terms, the Syrian market is deemed relatively small
and its distribution channels are accordingly simple. Distributors/
agents, representing foreign companies, supply distribution services
from their head offices. Recently, however, since private companies
began to be allowed a greater scope of manoeuvre, they have begun
operating branches and agencies in other towns. Also, the founding of
private transportation companies has been approved, speeding up
transportation and cutting costs.
Using agents/distributors and finding a partner
Syrian law does not require a foreign company wishing to operate in
Syria, to appoint an agent or a distributor. Syrian companies
accordingly order goods direct from foreign companies without forming
any established contact with an agent/distributor. Anyone proposing to
achieve a long-term presence in the Syrian market would, however, be
well advised to use an agent/distributor who can act continuously to
promote the product, respond promptly to government tenders and
propose services to customers.
Direct marketing
Syria has, correct to the present, no direct market; nor have any
direct marketing companies so far been formed in Syria.
Joint ventures
Syrian attitudes towards foreign investment have been changing in
recent years, and there is now more open-mindedness towards joint
ventures with foreign companies for executing projects or participating
in tenders.
Selling technique factors
For marketing purposes, Syria may be divided into two areas - the
Damascus area and the northern area, with Aleppo as its centre.
Damascus - close on 30% of the Syrian population lives in and around
Damascus; and the population of this area has a high growth rate.
Damascus, moreover, as a governmental centre, constitutes an important
selling market for the public sector. Furthermore, a significant chunk
of the private sector's commercial and industrial activity centres on
the capital and its environs.
Aleppo and the north - Aleppo is Syria's second biggest town, with a
population of more than 2 million. Aleppo is in the process of
consolidating its status as a centre for the industrial development of
the private sector, especially in the field of textiles, food processing
pharmaceutics, glass and metallurgy. Other northern towns too, such
as Hamat, Homs, Lattaqiya, Tartus and (in eastern Syria) Dir Al-Zur,
also offer marketing opportunities in various fields.
It is the practise of government agencies to operate by what is known
as the "price-breaking" method. This is a method whereby, after bids are
tendered and the envelopes opened, all bidders are invited to take part
in a meeting, attended by representatives of the relevant government
agency. Those bidding in the frame of the tender are expected, at this
meeting, to lower their price offer. These meetings are regarded as a
kind of public auction; and the company making the lowest offer before
the "price-breaking" session, is not necessarily awarded the
contract in the end.
Advertising and sales promotion
Advertising channels in Syria include the press, the cinema,
television and outdoor advertising. Advertising of cigarettes and
alcoholic beverages is banned.
In recent years, the Syrian government has eased restrictions on the
import of various consumer goods, and the local retail market has
accordingly become more competitive. This being so, advertising by means
of TV, the press and other vehicles, has become more extensive, even
though, in international terms, the Syrian advertising market is very
small. Be that as it may, as advertising has increased in scope,
various private advertising and public relations agencies have sprung
up.
Advertising prices in Syria are quite high. In one of the country's
three most widely circulated newspapers (Tashrin, Al Thawra and Al
Baath), a quarter page costs 1,500 dollars. Half a minute of television
time costs around 1,000 dollars.
Trade exhibitions will be staged primarily in the two principal towns
of Aleppo and Damascus.
Customary methods and terms of payment
By and large, Syria's foreign currency exchange policy is both
complicated and cumbersome. There are two foreign currency exchange
rates. The official exchange rate is US $ 1 = 11.2 Syrian pounds, while
the "neighbouring states" exchange rate reaches as much as US $ 1 = 42
Syrian pounds. Almost all commercial transactions are concluded at the
neighbouring states rate, or at the "offshore" rate, where one US dollar
is worth 48 to 51 Syrian pounds. Most of the business activity of the
private sector is conducted at the unofficial market rate at which the
dollar can also reach about fifty Syrian pounds.
Generally speaking, due to the foreign currency shortage, Syrian
merchants will finance their import deals out of their own private
resources or through personal credit. Every import transactions is
concluded on the basis of a letter of credit, opened by a Syrian
merchant bank. The bank expects the importer to cover 100% of the
transaction, by means of his overseas "offshore" sources, or through
export revenues.
A minimal condition for transacting a deal with a Syrian importer is
that a letter of credit be opened by a Syrian commercial bank (usually
for 60 - 120 days); but we would recommend demanding also an irrevocable
letter of credit. Fairly frequent phenomena are the insertion of a fine
clause in letters of credit, and the non-implementation of
transactions.