Law No. 10's impact on foreign direct investment

A total of 226 foreign projects were licensed to operate under investment law No. 10 of 1991 and LD No. 8 of 2007 during 1991-2007. The total cost of these licensed projects was S? 442,795 million (SIA, 2007), constituting only 13 per cent of total GFCF for the period 1991-2007 (see Table 6.5). However, the value of executed FDI projects accounted for 3 per cent of total GFCF during 1991-2007 (see Table 6.5). The oil and gas and tourism sectors were the largest recipients of foreign investment. During 2004-08, the highest average shares of total FDI inflows were recorded in the oil and gas and tourism sectors - attracting 29 and 34 per cent respectively (see Table 6.6). Foreign investors, especially US firms, had been investing in the Syrian oil sector since the 1970s. This kind of foreign investment into the primary sector - commonly known as resource-seeking investment - is non-employment generating and non-developmental.¹³

Against this backdrop, the bulk of investment activities during the Hafiz and Bashar regimes were non-manufacturing types. In contrast to the state-led investment that remained mainly within the purview of the state during the 1960s and 1970s, the process of capital accumulation during the Assad regimes shifted into a path of dependency

Table 6.5 Licensed and executed local and foreign projects under Law No. 10 of 1991 and LD No. 8 of 2007, 1991-2007

	No. of projects		Investment Costs in million of Syrian pounds
Licensed Projects	Local investment FDI	3,762 226	1,494,800 442,795	Execution %
Executed Projects	Local investment FDI	2,556 117	not available 93,489	68% 52%
Total GFCF for period 1991-2007 in millioi of Syrian pounds	1		3,272,663

Source: Computations based on data from SIA, Annual Investment Report 2007 and Central Bureauof Statistics, Syrian Statistical Abstract, 2008.

Table 6.6 FDI inflows by economic sectors in millions of USD, 2004-08

	2004	2005	2006	2007	2008	Average 2004-08	Average share
Oil and gas	157	100	111	282	600	250	29%
Tourism	60	300	225	385	490	292	34%
Licensed by investment law No. 10 and decree No. 8	13	55	92	110	250	104	12%
Insurance	0	0	93	40	23	31.2	4%
Private banks	45	45	64	130	28	62.4	7%
Capital increase of banks	0	0	15	30	22	13.4	2%
Others	45	83	59	265	54	101.2	12%
Total	320	583	659	1,242	1,467	854.2	100%

Source: SIA, Annual Investment Report, 2009.

on money-money circulation (M- C-M') rather than commodity-money circulation (C- M- C'), precipitating a crisis in capital accumulation. Industrial investment needed to build the economy's productive capacity and absorb the new entrants into the labour market was left to face its ill-fated deterioration. All investment liberalisation laws and amendments ratified during the Assad regimes were premeditated measures to consolidate the wealth and power of the ruling minorities. They enabled the new agent of investment to secure more private ownership and to promote ephemeral, mercantile-type investment activities for quick returns.