Encouraging Laws for Promoting Tourist Investment in Syria

Investment in the sector of tourism is one of the most profitable procedures for many economic sectors, particularly the sector of services. The importance of investment in tourism lies in the fact that it creates job opportunities for the local force of labor, with lesser costs, compared with other economic sectors. It is estimated that about 100 million persons all round the world work in tourist industries, the majority of which work in small and medium enterprises in the field of tourism. Studies have also proved that the growth of job opportunities in the field of tourism is quicker than in any other industrial field in about two folds and a half, add to that the effective contribution of tourism in developing the infrastructure, especially in the various transportation sectors and handcrafts related to tourism, not mentioning the revenues in foreign currencies and the positive reflections of these revenues on the balance of payment, on increasing contact with the outside world and on the introducing the civilized role of Syria. This brief preamble about the pioneer role of the industry of tourism encourages us to quicken the pace toward wider awareness of the main constituent of tourism in our country, namely investment. Syria, only very recently, realized the importance of tourism, long time after Lebanon, Egypt, Jordan and North African countries and other neighboring countries like Turkey and Cyprus. Very recently Syria issued a number of laws to regulate the governing rules of investment in tourism. The most important of these laws is:

Decree No.186 of 1985 and its annexes defined the exemptions and facilitating procedures granted to the sector of tourism. Article three of this decree gave the following benefits to the owners and investors of hotels and motels, restaurants, night clubs and other tourist services : -Exemption of all financial and municipal taxes and fees usually paid when facilities are constructed. -Permission of importing construction materials, tools, equipment, vehicles and furniture necessary for building, equipping and furnishing tourist facilities. The law exempted them also of all customs and financial taxes and fees of any type, provided they don‘t exceed 50% of the total costs.

-Permission of importing all requirements needed to renovate and refurbish machines, tools, furniture of these facilities in order to keep them in good order. These items should not benefit of the exemption subject of article two, provided that value of these imports do not exceed 3% of the revenues of the past year.

- All owners or investors of the hotels, motels and tourist establishments included in this article, and owners or investors of restaurants, night clubs, and complementary tourist services included in these facilities, are exempted of the financial taxes and fees, and their annexes of any type or nature , for a period of seven years as from the starting date of investment.

- Article four of the same decree gives the owners and investors of all hotels and accommodation facilities of the first and second degree, as well as the restaurants, night clubs and complementary services of the same degrees, the same exemptions subject of article three, provided that these imports don‘t exceed 30% of total investments. And at last we have to mention the exemption of the income taxes for 50% of the total annual profits usually, imposed on tourist facilities mentioned in this decree. Imports mentioned above are excluded from being banned, limited or confined after obtaining authorizations from the ministry of tourism. According to this law , the Higher Council of Tourism, upon a suggestion from the ministry of tourism, has the right to grant tax exemption and some promotional advantages to these exemptions concerning projects of the national plan of tourism and other projects related to tourism.

Decree 272, which came as a follow up of the decree 186, allowed Syrian investors who live in expatriation countries, and investors from Arab and foreign countries, the right to retransfer the value of their net shares of their projects in foreign currency, in addition to the possibility of transferring their profits and interests acquired by foreign investments in U.S Dollars according to the exchange prices of neighboring countries. These are some clarifications to the exemptions granted to tourist investments. As to the mechanism of investment, these are the main ways to start investment in the tourism sectors in Syria:

1- Establishing joint companies in which the ministry of tourism will be a first party and the investor the second party. The first party presents the real-estate on which the project will be established, as its contribution. The value of the real-estate will remain fixed whatever the total costs of the project reach. The second party pledges to complete the whole project at his own, including designs schemas of all types, and to finance all the necessary works, equipment, furniture and decorations, as well as the labor and materials, that is, all what is needed to execute the project and prepare it for investment (key in hand) in accordance with the plan and in a period of no more than three years. All these represent the investors share of the project. The second party will give an estimation of the value of the real estate presented by the first party to be agreed upon in a later time.

2- The BOT systems, that is, investment versus an annual investment charge for a limited period. This system means that the investor executes the whole project as shown in the last paragraph (1) within a period of not more than three years and investing the real estate, the facilities and activities he establishes on it ,for a period of twenty five years, during which the investor pays an agreed upon annual installment, provided that the whole project ( the land with all facilities and activities built on it including equipment) will belong, after the end of the period of investment, to the first party. The whole project should be handed in good conditions, able to be invested. At that point, every relation to the investor with the project is totally ended.

Investment in tourism is characterized by abundance and large capitals. All tourist investments are big , especially those related

to infrastructure and services. They are also characterized by great correlation between tourist activities and the need to services and production sectors. At the same time, tourist investments are sensitive to any recess in development, tourist incidents or natural disasters. The figures above indicate the large sums needed in tourism projects. The number of beds (all classes) in the three tourist sectors: public, joint and private sectors, in the period 1990-2000, reached a total of 7161 beds. The ninth quinequennial development plan 2001-2005 aimed at increasing the number of beds from 36530 in the year 2000 to 65187 in 2005, with a total amount of investment of U.S$1.250 billion divided into various percentages according to hotel categories and their locations. Add to that an additional investment of S.P.22496 millions to set 89000 new restaurant chairs, raising the required investments during the mentioned plan to U.S.D.450 millions realistically, affording such a large sum in five years time is far from being achieved in the light of what was done in the past quinequennial plan, particularly the years 1999-2000, taking into consideration that many proficient measures and daring steps were taken to liberate the financial and bank sectors from many limitations, and the ceaseless efforts to establish private banks specialized in financing tourist projects with attractive conditions, in addition to other encouraging procedures prepared for the same target: - Preparation of draft plans and cost-effectiveness studies of projects to be established on government-owned real estates along the Syrian coast, Barada valley, Syrian desert, the Euphrates valley and other tourist sites in Syria. - Offering incentives through shortening the cycle of obtaining licenses and facilitating governmental procedures such as the one window application. - reconsidering the higher council decree no.186 of 1985 in the light of the amendment of law No.10 of 1991, and adopting executive procedures that help encouraging tourist investment in general, and offer incentives for local investors in areas that lack tourist facilities. - Reactivation of local tourism through improving services, offering competitive prices and developing infrastructure, as well as adopting several auxiliary procedures that can support tourist services : encouraging package group trips, reducing prices of tourist programs marketed abroad, reactivating the roles of Syrian embassies in foreign countries, increasing the number of Syrian Air offices abroad, activating tourist agreements signed with other Arab and foreign countries, and at last assigning Arab Syrian communities abroad a more effective promotional role.

Haifaa Mafalani