According to Article 13 of the Syrian Constitution, the state-based national economy seeks to “end all forms of exploitation.” The draft budget is to be submitted two months before the beginning of the fiscal year to the People’s Assembly (Majlis al-shaab), which votes on it by section. Article 80 stipulates that after the budget’s approval, the Assembly votes on new expenditures and revenues. Article 19 states that taxes “are imposed on an equitable and progressive basis which achieves the principles of equality and social justice.” The current tax system was adopted in 1991 to encourage private investment. Syria relies on oil revenues for almost half of the government’s revenues, but efforts are underway to expand the tax base, since oil production is diminishing, and major fiscal consolidation is needed. Decree 61 of October 2004 simplified the tax system by repealing various fees and introducing a single ad valorem consumption tax, and Decree 41 of May 2005 extended its scope.
The General Organization of Financial Control, established in the Syrian Arab Republic by the legislative ordinance No. 93 of 19 July 1967, is an independent Audit institution in the ministry of finance that audits executive administrative and economic establishments.
Decrees No. 195 of 1974 and No. 349, of 1980, regulate contracts and tenders for public establishments, companies and enterprises. Bids are supposed to be solicited transparently through the Daily Bulletin of Official Tenders, but deadlines of less than forty-five days are not unusual, implying a lack of transparency and predetermined outcomes.
The Central Bank of Syria controls monetary policy in the country, and the authorities are relieving the huge, state-owned Commercial Bank of Syria of fiscal and other public obligations so that it may better assume traditional commercial banking functions. With assistance from the International Monetary Fund the authorities are strengthening the regulatory functions of the Central Bank so as to bring commercial banking up to international standards. Since 2001 the Syrian government has also been gradually altering official exchange rate values to reflect the true value of the currency.
Syrian banks, first nationalized in 1963, are undergoing a process of modernization that may eventually attract foreign investment in the country. Plans have also been offered to bring Syria’s banking and trade laws more in line with the World Trade Organization (WTO) regulations and to designate Lebanon as a preferred point of entrée for goods into Syria. The Syrian government passed Law No. 28 of April 16, 2001 that allows the establishment of private commercial banks on condition that the share of Syrian citizens would not be less than 51% of shares. Three private banks took advantage of the new legislation to open for business in 2004, and three more were following in 2005. The government also on March 30, 2005, approved Law No. 35 permitting the establishment of Islamic banks. The law sets the minimum capital required from an Islamic bank at $100 million. Qatar Islamic Bank, Islam Development Bank and the Saudi Dallat Al-Baraka Group have applied for licenses to operate in Syria.
Following an International Monetary Fund mission in February-March, the government modified an Anti Money Laundering Law passed in 2004 with Decree No. 33 of May 2005. The government also aims to facilitate Syria’s entry into a free Arab economic zone and an agreement of association with the EU and Mediterranean states under the “Barcelona Process.”
The Syrian parliament approved a draft law on January 30, 2007 that amends Law No. 21 of 1958 concerning non-Syrian investors ownership and renting real estate property for establishing their enterprises in industrial cities. The amendment allows non-Syrian investors to own such property regardless of the ceiling set for property ownership by non-Syrians. There are 3 investment laws in Syria: Law No. 21/1958, Law No. 10 of 1991 and Law No. 8 of 2007. Laws No. 10 and 8 allow non-Syrian investors to own, rent and invest in any areas of land that meet their needs. The new amendment indicates that there a tendency to integrate all Syrian investment laws in one law. In 1989, the Syrian government had initiated a series of economic reforms designed to attract foreign investment. The capstone of these reforms was Law No. 10 of 1991, which exempted foreign investors from taxation for five years and provided for the repatriation of overseas profits. Significantly, under the terms of the act, Syrians were given the same rights as foreigners to invest hard currency in the country. The Syrian council of ministers approved on May 4, 2005, a draft law organizing the insurance sector and permitting the establishment of private Syrian insurance and re-insurance companies. The draft law stipulated that a company's shares should be nominal, exchangeable, and owned by citizens or those who have the status of citizens be they natural or corporate persons. The law permits an individual to own up to 5% of a company's capital, and corporations up to 40% of it. The insurance sector is supervised by a body chaired by the minister of finance.
President Bashar al-Asad promulgated Law 22 of June 5, 2005, establishing a Syrian Stocks and Financial Markets Authority with a mandate to set up a stock market in Syria. The ruling Baath party had given the green light in the year 2000 to establish the stock market as well as to permit private banks to operate in Syria.
Syria lacks significant independent financial institutions due to its focus on public sector as the engine of growth. Independent initiative is not strongly encouraged or supported, and thus remains limited. In March 2005, however, the government established a banking training and qualifying center for upgrading the technical and professional standard of bank employees. The center by law is to be supervised by the Central Bank rather than by the Ministry of Economy.
International Transparency Standards
Syria permitted the IMF’s annual Article IV report on the Syrian economy to be published in 2005 for the first time. Syria joined the International Monetary Fund's General Data Dissemination System on December 12, 2007.