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Syria
Score Rank
Financial Standards Index 4.17 out of 100 93
Business Indicator Index 4.41 out of 12 87

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Overall Standards Summary

Syria achieves very low overall compliance with international standards and codes, with a score of 4.17 out of 100 in our Standards Compliance Index. Syria's regulatory environment and compliance with international standards remain extremely weak. Nine out of twelve standards are at an "insufficient information" level, indicating a serious lack of transparency. In two other areas - data dissemination and payment systems - Syria is non-compliant. Corruption is endemic. Although a written bankruptcy law exists, it is not applied fairly. The financial sector is very underdeveloped, with a small number of mostly state-controlled banks. There is a complete absence of capital markets, although a law was promulgated on February 8, 2006 to promote the establishment of the Damascus Securities Exchange (DSE). As of 2005, Syria had a law that criminalized money laundering. Syria has made numerous positive efforts to boost the compliance of its anti-money laundering regime. Nevertheless, there are some areas where Syria's AML/CFT regime could be enhanced.

Choose a standard for a detailed compliance report:
12 Key Standards for Sound Financial Systems

Compliance Level
Special Data Dissemination Standard
NC
Code of Good Practices on Transparency in Monetary Policy
II
Code of Good Practices on Transparency in Fiscal Policy
II
Effective Insolvency and Creditor Rights Systems
II
International Financial Reporting Standards
II
Principles of Corporate Governance
II
International Standards on Auditing
II
Anti-Money Laundering/Combating Terrorist Financing Standard
ID
Core Principles for Systemically Important Payment Systems
NC
Core Principles for Effective Banking Supervision
II
Objectives and Principles of Securities Regulation
II
Insurance Core Principles
II
II = Insufficient Information | NC = No Compliance | ID = Intent Declared | EN = Enacted | CP = Compliance in Process | FC = Full Compliance

Macroeconomic Policy and Data Transparency

NCSpecial Data Dissemination Standard

Syria is not a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard. On December 12, 2007 however, Syria began participating formally in the less prescriptive General Data Dissemination System (GDDS) making a major step forward in providing the framework for the development of the statistical system. According to the IMF's 2007 Article IV Consultation report, published in August of 2007, the macroeconomic statistics are affected by weaknesses in coverage, consistency, periodicity, and timeliness, which hamper the IMF's ability to conduct economic analysis and effective surveillance. Syrian representatives have expressed an intention to address the need for statistical improvement.

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IICode of Good Practices on Transparency in Monetary Policy

The IMF's 2007 Article IV Consultations commends Syria for making significant progress in strengthening the role of the Central Bank of Syria (CBS) in formulating and implementing monetary policy. However, there is no publicly available information as to Syria's adherence to the IMF's Code of Good Practices on Transparency in Monetary Policies. Regardless, the IMF observes that monetary statistics reporting in Syria suffers from significant deficiencies which undermine meaningful analysis of monetary developments, adding that the institutional coverage of monetary statistics is incomplete. The IMF recommends that Syria significantly improve the quality and timeliness of economic statistics, particularly balance of payments statistics to provide a sounder basis for macroeconomic management. In an attempt to address this problem, Syria began participating formally in the IMF's General Data Dissemination System (GDDS) on December 12, 2007 making a major step forward in providing the framework for the development of the statistical system. The CBS was established by Legislative Decree No. 87 of 1953, which also set-up the Basic Monetary System of Syria and clearly states the roles, responsibilities and objectives of the CBS. However, the IMF expressed serious doubts about the operational independence of the CBS in setting monetary policy, going so far as to recommend that Syria adopt a new central bank law, a reform that the IMF considers essential for Syria to strengthen its monetary policy framework, improve its bank supervision, and to modernize the CBS. Primarily, the IMF recommends that the new law make price stability the main objective of Syrian monetary policy and grant the CBS operational independence in monetary and exchange rate management.

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IICode of Good Practices on Transparency in Fiscal Policy

The 2006 and 2007 IMF Article IV Consultations state that Syria's collection and dissemination of Government Finance Statistics (GFS) is undermined by considerable deficiencies regarding definitions, coverage, classification, methodology, accuracy, reliability, and timeliness that create large inconsistencies with monetary and balance of payments statistics. These chronic deficiencies in the collection and supply of fiscal statistics (i.e. cumbersome institutional arrangements, inadequate resource availability and unresolved methodological problems) make the accurate assessment of overall fiscal developments in Syria and the timely availability of such information to the public difficult. For example, budget data are only available with very long lags (i.e. two years for final budget accounts). Consequently, the IMF recommends that Syria significantly improve the quality and timeliness of fiscal statistics, particularly data on financing and balance of payments (BOP) statistics. In an attempt to address this problem, Syria began participating formally in the IMF's General Data Dissemination System (GDDS) on December 12, 2007, making a major step forward in providing the framework for the development of the statistical system. According to the United Nations Development Program's Program on Governance in the Arab Region (POGAR) 2006 financial transparency report, Syria's draft budget is to be submitted two months before the beginning of the fiscal year to the People's Assembly (Majlis al-shaab), which subsequently votes on it by section. Article 80 of the Consitutiton of Syria stipulates that after the budget's approval, the Assembly votes on new expenditures and revenues. Overall, however, the information does not address Syria's compliance with the IMF's Code of Good Practices on Fiscal Transparency.

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Institutional and Market Infrastructure

IIEffective Insolvency and Creditor Rights Systems

There is insufficient publicly available information regarding Syria's compliance with the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. According to the 2004 World Bank report, Syria does not have either a rehabilitation procedure or a reorganization procedure. The 2007 U.S. Department of Commerce report indicates that Syria has a bankruptcy law; however, it is not applied in a fair manner as a creditor's ability to collect back any investment is dependent on the level of influence he/she can exercise on the authorities.

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IIInternational Financial Reporting Standards

There is insufficient publicly available information as to Syria's compliance with International Financial Reporting Standards promulgated by the International Accounting Standards Board.

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IIPrinciples of Corporate Governance

On February 8, 2006, the government of Syria issued the Stock Exchange Act No. 55, mandating that the members of the Syrian Commission on Financial Markets and Securities (SCFMS) promote the establishment of the Damascus Securities Exchange (DSE). According to an article issued by the Business Intelligence Middle East in August 2008, the SCFMS has published licensing regulations and a code of practice for financial intermediaries. In order to be listed on the DSE, per the same article, Syrian companies will have to change their legal structure from general partnerships to limited liability companies. Ultimately, companies will have to register as joint-stock companies. They will also be required to adopt standard accounting practices, and to publish accurate balance sheets. A draft of the SCFMS's proposed listing requirements has been issued for comment. The IMF's 2007 Article IV Consultation states that the DSE was expected to start operations early in 2008, with a total of 46 listed companies. Despite the information provided above, there is insufficient publicly available information regarding Syria's compliance with the Principles on Corporate Governance developed by the Organization for Economic Cooperation and Development.

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IIInternational Standards on Auditing

There is insufficient publicly available information as to Syria's compliance with the International Standards on Auditing promulgated by the International Federation of Accountants.

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IDAnti-Money Laundering/Combating Terrorist Financing Standard

The Middle East & North Africa Financial Action Task Force (MENAFATF) conducted a mutual evaluation of Syria's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime against the Financial Action Task Force's (FATF) 40+9 recommendations and special recommendations. The MENAFATF published its findings in a 2006 report, in which it concludes that Syria is compliant with 5 FATF recommendations and special recommendations; largely compliant with 8; partially compliant with 26; non compliant with 8; and two recommendations are not applicable to Syria. The report notes that, even though the Syrian AML/CFT regime is relatively young, Syria has made numerous positive efforts to boost the compliance of its regime with the FATF's recommendations. For example, in 2005, Syria adopted Legislative Decree No. 33, which criminalizes money laundering. This change came in response to international pressure for Syria to bring its AML/CFT regulations more in line with FATF recommendations. Syria also criminalized terrorist financing pursuant to Legislative Decree No. 33 of 2005, thus bringing Syria's terrorist financing offense definition in line with the 1999 United Nations International Convention for the Suppression of the Financing of Terrorism. Nevertheless, there are some areas where Syria's AML/CFT regime could be enhanced. Most importantly, the MENAFATF report notes that Syria's money laundering legal regime is hampered by the fact that the definition of illicit funds does not state that they represent directly or indirectly the proceeds of a crime. Also, Syrian Law does not cover all designated categories of offenses. For instance, it is not clear whether terrorist financing is a predicate offense for money laundering. In addition, Syria has no efficient laws or procedures to freeze the terrorists' funds or the assets of persons, in accordance with international norms. The customer due diligence requirements for insurance companies, exchange institutions and non-bank financial institutions are also lacking.

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NCCore Principles for Systemically Important Payment Systems

According to the IMF's 2006 Selected Issues report, Syria does not have a real time gross settlement (RTGS) system or an electronic or automated clearing check system. Consequently, major payment transactions are still conducted manually with large payments being sent and processed using checks and other paper-based payment orders without sufficient risk management processes or assurances. Most importantly, as a direct result of the aforementioned inadequacies, the IMF report states that Syria's payment system does not observe many of the Core Principles for Systemically Important Payment Systems. Nevertheless, the 2006 IMF report notes that a joint explorative mission on payment and security settlements involving the IMF and the Arab Monetary Fund (AMF) visited Syria. At the time, the report concluded that Syria was expected to acquire an RTGS system a few months after the mission's end. The website of the Central Bank of Syria (CBS) does state that the central bank is working to establish an infrastructure for an electronic payment and settlement system. However, as of August 2008, there is no publicly available information as to whether or not Syria has indeed acquired an RTGS system.

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Financial Regulation and Supervision

IICore Principles for Effective Banking Supervision

As highlighted in the U.S. Department of State 2008 International Narcotics Control Strategy Report, the banking system in Syria is dominated by state-owned banks. Pursuant to Law on Private Banks Establishment in Syria No. 28, Syria established its first private bank in January 2004. The IMF's 2007 Article IV Consultation notes that while private banks have made considerable progress in terms of market share, capitalization and management, the development of a competitive banking sector is constrained by the slow progress in the structural reform of state banks, which suffer from high non-performing loans, low profitability, undercapitalization, and liquidity problems. Banking regulation and supervision was also virtually non-existent in Syria at the beginning of the decade, according to the IMF's 2006 Selected Issues report. While the Central Bank of Syria (CBS) acts as the regulatory and supervisory authority for the banking sector, it has overlapping responsibilities with other regulatory agencies. Syrian authorities have agreed to prioritize restructuring the state banks and building supervisory capacity, as reported in the IMF's 2007 Article IV Consultation. The authorities have further requested a Financial Sector Assessment Program and technical assistance from the IMF and other donors to address capacity constraints, notably in the area of banking supervision. Syria is expected to adopt a draft Central Bank Law that will enhance the supervisory authority and independence of the CBS. Despite the above mentioned reports, there is insufficient information publicly available regarding Syria's compliance with the Basel Committee's Core Principles for Effective Banking Supervision.

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IIObjectives and Principles of Securities Regulation

Syria is not a member of the International Organization of Securities Commission (IOSCO), and there is no publicly available information as to Syria's compliance with the IOSCO Objectives and Principles of Effective Securities Regulation. In light of largely non-existent capital markets in Syria at the time of the IMF's 2006 Article IV Consultation, Syrian authorities were encouraged to undertake reforms to lower state intervention in the economy, improve corporate governance, and promote private-sector growth. On February 8, 2006, the government of Syria issued the Stock Exchange Act No. 55, mandating the members of the Syrian Commission on Financial Markets and Securities (SCFMS) to promote the establishment of the Damascus Securities Exchange (DSE). In addition, the Syrian Investment Agency was established in 2007 under Legislative Decree No. 9 to implement national investment policies and develop the investment environment in Syria. The IMF's 2007 Article IV Consultation states that the DSE was expected to start operations early in 2008, with a total of 46 listed companies. A draft of the SCFMS's proposed listing requirements has been issued for comment.

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IIInsurance Core Principles

There is insufficient information publicly available regarding Syria's compliance with the Insurance Core Principles (ICPs) issued by the International Association of Insurance Supervisors (IAIS). In July 2005, pursuant to the Insurance Regulatory Act No. 43 of 2005, the insurance sector opened up to private companies, ending the monopoly held by the state-owned Syrian Insurance Company. The IMF's 2007 Article IV Consultation underlines that the Insurance Regulatory Act does not explicitly set limits on foreign ownership in private insurance companies. Eight private insurance companies began operations in 2006, and one Islamic insurance company was licensed in 2007. On October 18, 2007, as stated on the Ministry of Finance (MoF) website, the Syrian Insurance Supervisory Commission (SISC) issued decision No. 127/100 that includes a regulation for institutional arbitration in the insurance and reinsurance companies. The regulation aims to establish a transparent and effective insurance market in Syria. The SISC was established within the MoF as the regulatory and supervisory authority for the insurance industry in Syria. The SISC is also a member of the IAIS.

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Business Indicators

With an overall score of 3.91/12, Syria is below standard on the economic, legal, and political indicators that make up our Business Index. Syria is a non-market based mixed economy where government spending equaled 36.4 percent of GDP in the most recent year for which data was available. Although the Syrian government claims to support foreign investment, its actions indicate otherwise. Foreign investment is permitted in almost all sectors of the economy, and foreign investors receive the same incentives as domestic investors. However, weak legal and regulatory frameworks and arbitrary enforcement of unclear laws inhibit foreign investment. The legal code includes property rights protection, but the courts do not uphold them. Political stability due to civil unrest and conflict with Israel is a deterrent to foreign investors. Corruption is extensive, as reflected by Syria's ranking of 147th out of 180 countries in Transparency International's 2008 Corruption Perceptions Index.

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Global Indices & Quick Facts

Syria ranks in the 4th or 5th quintile in almost all of the global indices that benchmark its political, economic, business, and human capital climates, as shown below. It ranks in the 3rd quintile in the UNDP Human Development Index. Syria scores poorly on all of the indices measuring political and economic freedom. The Bertelsmann Transformation Index, where Syria place in the 5th quintile, notes that ”since the 1980s GDP per capita (PPP in current U.S. dollars) has stagnated as average economic growth has barely kept up with population growth." The Assad regime has ruled Syria since 1970, and there is little prospect for a transition to democracy in the near future. The political and economic roadblocks can also be seen in the difficulty of doing business in Syria. The World Bank places Syria in the bottom of the 4th quintile in their Ease of Doing Business Index. Corruption is another obvious impediment to Syria's development. Syria ranks in the 4th quintile in the Transparency International Corruption Perceptions Index and the Heritage Foundation reports that corruption is "widespread."

Name Year Rank Score Quintile
Bertelsmann Transformation Status Index 2010 108/128 3.88/10 5
Heritage Foundation Economic Freedom Index 2010 145/179 49.4% 5
Economic Freedom of the World Index 2009 124/141 5.76/10 5
World Economic Forum Global Competitiveness Index 2009 94/133 3.76/7 4
Milken Institute Capital Access Index 2009 92/122 3.12/10 4
World Bank Ease of Doing Business Index 2009 143/183 N/A 4
UNDP Human Development Index 2009 107/177 0.74/1 3
Transparency International Corruption Perceptions Index 2009 126/180 2.6/12 4
Freedom House Index 2009 Not Free 6.5/7

Credit Ratings

Not rated Fitch

Not rated Moody's

Not rated Standard & Poor's

Macroeconomic Data

2009 GDP (Current Prices): 52.8 billion USD (IMF)

2009 GDP (Per Capita): 2,590 USD (IMF)

2010 GDP (Growth Forecast): 4.2% (IMF)


2009 Inflation (CPI): 7.5% (IMF)

2008 Unemployment: 8.6% (CIA)


2008 Foreign Direct Investment

FDI (Inward): 2.1 billion USD (UNCTAD)

FDI (Outward): 0.10 billion USD (UNCTAD)


2007 Official Development Assistance

ODA (Received): 75 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)

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