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Syria: a decade of reform posting economic growth

Tuesday, 15 February 2011 11:50

Syria’s economy outperformed those of many other countries in 2010, posting growth of around 5%, according to initial estimates from the government. Despite the economic reforms that have been set in motion since President Bashar Al Assad came to power in 2000, Syria is still in the early stages of integrating into the global economy, which has served to a certain extent as protection against volatility in light of the global economic slowdown. However, the reform process has progressed to a stage where new opportunities have opened up for employment and imports, which has resulted in a significant increase in opportunities and demand in the retail sector. Over the past five years, GDP growth has averaged 5.4%, Global Arab Network reports according to OBG.

Nevertheless, the retail market in Syria remains relatively underdeveloped in comparison to many countries in Europe and North America, or even neighbouring countries such as Jordan or Lebanon. Small independent retailers, often family businesses operating in the grey economy, continue to dominate the market, which has relatively few modern retail outlets, such as shopping malls. The few developments that exist are mostly focused on the higher end of the market, with relatively few outlets catering to the middle segment.

Despite the current under-development, the scene is changing quickly. The first purpose-built shopping mall in Syria, the 35,000-sq-metre Town Centre on the main road to Jordan, opened in 2004, followed by the 80,000-sq-metre Cham City Centre in 2006 and the 24,000-sq-metre Damasquino Mall in 2009. In the wake of the world recession, Gulf money, looking for a relatively safe haven, has moved to Syria, and several larger mixed-use developments are in the pipeline that incorporate retail space. Gulf-backed projects include the 200,000-sq-metre Mall of Syria, which is being built by UAE-based Majid Al Futtaim Properties as part of a mixed-use development near Yaafour and is expected to be completed by 2014. Fellow UAE firm Emaar’s Eighth Gate, a mixed-use project offering housing, office space and 200,000 sq metres of retail space, is due to open in 2013. Closer to home, Syria’s own Cham Holding is planning a redevelopment of Damascus’s Hijaz railway station to include office towers and retail space, while Souria Holding is converting the Beramke transport terminal in Damascus into another office and retail complex, called Abraj Souria.

International chains are also eying the Syrian market. Spain’s Inditex, the owner of brands such as Massimo Dutti and Zara, opened its first stores in Syria in 2009, joining the likes of Benetton and Mango. Moreover, a number of regional brands, such as Beirut-based luxury clothing brand Aichti and various Turkish chains, have entered the Syrian market in recent years. Additionally, France’s Carrefour Group, a leading international hypermarket chains, opened its first store in Syria in Aleppo, anchoring the 130,000-sq-metre Shahba Mall, and plans to open another in Damascus in 2012.

This is not to say that the road ahead is entirely smooth. For one thing, the government intends to introduce a value-added tax (VAT) in 2011, though it has not yet specified a date or the rate at which the tax will be set. Initially, however, the tax is likely to have a greater impact on high-end retailers. The exemption threshold has been set at S£30m ($700,000) and items such as staple foodstuffs and pharmaceuticals are to be exempt. Given that many Syrians still make most of their purchases from small neighbourhood traders, often in the informal economy, the burden of the tax is likely to fall on the middle classes who shop in formal outlets. On the plus side, however, VAT may accelerate a move from high-end to mid-range retailing, which remains a relatively untapped market in Syria.

Lack of competition remains an issue. Although international brands and products are more available, they are sold at higher prices – and sometimes with lower quality standards – than in neighbouring countries. Turkey in particular has been a beneficiary of this situation, with Syrians from across the north of the country – particularly Aleppo, which is only 50 km from the border – crossing into Turkey to access a wider range of goods at lower costs. Reform of the customs, franchise and rental law regulations will be a key step in increasing competition, driving down prices and pushing up quality.

For Syria’s rising middle class, however, the ability to visit a shopping mall and buy foreign brands is becoming a status symbol. Syria is likely to see the emergence of a new style of shopping – visiting a retail centre as a destination in itself, but not necessarily making any purchases – as a form of leisure activity, which means the prospects are bright for new retail-focused developments.

Global Arab Network

This article is published in partnership with Oxford Business Group

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Last Updated on Tuesday, 15 February 2011 12:10

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