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After 30 years of strong State intervention, the Syrian economy has embarked on an opening movement in 1991 and especially since the early 2000s. A growing duality between public and private sectors is observable. On the one hand, the public sector, dominated by a few large companies created during the 60s, the 70s and the 80s, to lead strategic sectors such as metallurgical and materials, chemicals, textiles and agri-business, etc., is not performing well and would need a deep restructuring. On the other, the private sector is rapidly growing thanks to massive investment in services, trade and light industries. Between 2000 and 2007, its contribution to national production rose from 52.3% to 60.5%. To encourage this process, the government is increasingly considering companies’ concerns in the definition of its economic policy.

Significant progress has been made, especially with the liberalisation of banking and insurance, the concessioning and opening to the private sector of many non-strategic activities. This vision still faces a State culture which is rather bureaucratic and centralised as well as the absence of an environment suited to the needs of a modern business (access to high speed Internet, etc.). Nevertheless, the opening of the economy is largely an obligation for the country that is facing a high population growth (and hence to rising social needs) and an expected decline in oil (even though incomes have recently increased with the barrel price). Consequently it is facing the need to find new export resources to replace petroleum in the future (the trade balance has turned negative since 2007). Another priority is to modernise the largely obsolete industrial infrastructure because the State is no longer able to rescue the loss-making State-owned enterprises.

After a decade of sluggish growth, the Syrian economy has experienced a significant rebound since 2004, bolstered by the development of the private sector, increasing exports to other Arab countries and rising petroleum prices. The growth rate has reached 6% in 2007. Despite its decline, petroleum continues to generate most of the foreign exchange earnings of the country, supplemented by exports of other sectors, tourism receipts and transfers of Syrians living abroad. Agriculture, which covers approximately one third of the country and contributes with 25% of the production, retains a major role in the Syrian economy. The 1.5 million Iraqis who have sought refuge in Syria since 2003 have contributed to the rapid growth of domestic demand.

Recognising that economic diversification, broadening the tax base and restructuring the public industrial sector seem to be essential to ensure long-term growth (with a target of 5% per annum by 2010 and 7% over the 2011-2015 period) and create jobs for its youthful population that is rapidly increasing. The government adopted a 10th Five-Year Development Plan in 2006. Assuming that investment and private sector development are the key success factors for the economy, it sets a timetable of reforms and projects to be implemented by 2010. Gradually, the country is moving from a State-Planned economy to a market economy that remains relatively controlled and regulated.

First, the plan introduces a major programme of tax (introduction of VAT), budgetary, monetary, trade and labour market reforms. Then, it provides an extensive investment programme in infrastructure, to meet the needs of international companies in terms of establishment sites, networks and ICT services, etc. Other projects include the restructuring of public enterprises, the upgrading of private enterprises, especially SMEs, the enhancement of human resources and the development of promising sectors such as tourism, agriculture, agri-business, industry, construction and transport. The incentives granted to investment projects in these areas confirm the importance given to the private sector. In the long term, Syria wishes to orient its economy towards intellectually intensive activities.

In line with the opening of its economy, Syria is gradually putting in place measures to encourage investments, particularly foreign ones. In 2007, a new investment law has replaced the former one, dating from 1991, formalising the evolution of the country's position towards foreign investment. Among other things, it allows to create a business without a Syrian partner and to repatriate dividends and invested capital in case of disposal.

A National Investment Agency (Syrian Investment Agency, SIA) has been created and placed under the authority of the Prime Minister. It replaces the pre-existing Investment Board, under the leadership of the Ministry of Industry, and provides many advantages to foreign investors. The development of free zones and industrial cities should facilitate their establishment in Syria.

This move towards openness also manifest itself through the signing of trade agreements: establishment of the Greater Arab Free Trade Area (GAFTA) in 1998, entering into force of a bilateral free trade agreement with Turkey in 2005, beginning of negotiations with the European Union in 2004 in view of the signing of an association agreement, etc.

The efforts of the government have been rewarded by a sharp increase in FDI. During the 1991-2007 period, 226 projects were registered for a total amount of 442 billion Syrian pounds, equivalent to 29.6% of total investment. Emanating from 35 different countries, these FDI are dominated (in terms of number of registered projects) by Turkish, Iraqi, Lebanese, Saudi, Kuwaiti and Jordanian investment etc. In 2007, the 787 million dollars registered FDI accounted for 2.1% of GDP. From 2007 to 2008, total investment in the first half of the year rose from 2 to 3.5 billion dollars, denoting an increase of 70%. FDI have significantly contributed to reach these rates.

The banking sector reform, which took place in several stages, came with the policy of openness to FDI. Law No. 28 of April 2001 had allowed the opening of private banks. Law No. 23 of March 2002 had redefined the role and status of the Central Bank, a supervisory body of all private and public banks. Other recent measures such as the permission to open foreign currency bank accounts, the ability to transfer currency and the lowering of the money market interest rates, show the Syrian authorities’ willingness to change the monetary and financial policy of the country. The private sector has expanded since 2004, with new banks and branches of banks from neighbouring countries (especially Lebanon and Gulf) that have been working with the Syrian private sector for a long time. A Stock Exchange Commission was formed early 2006 to introduce a stock market legislation allowing the launch of the Damascus Stock Exchange.

The insurance industry, which was monopolised by the Syrian Insurance Company, was also opened to private investment with the enactment of Law No. 43 of June 2005 and 9 companies were allowed to exercise.

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