Syria opens up to foreign banking investors

Syria is offering foreign investors a majority stake in its private banks as the country pushes ahead with efforts to boost economic reforms.

The move also comes as Syria steadily sheds its image as a radical in the political arena, with ties warming up with United States, France and Saudi Arabia.

Central bank governor Adib Mayala told Agence France-Presse on Wednesday that under a Jan. 4 banking law the maximum capital stake for foreign investors was being raised to 60 percent from the current 49 percent.

"It is an important measure which will boost the capacity of Syrian banks," Mayala said.

Private banks were authorized in Syria under a law passed in 2001 - a year after Bashar al-Assad replaced his late father Hafez al-Assad at the head of the country - but with Syrian nationals holding the majority stakes.

That law was part of efforts by the younger Assad to push for reforms and a market economy in Syria. Over the past six years more than 10 private banks have been opened, including Banque Bemo Saudi Fransi which launched operations in January 2004, becoming the first private bank to operate in Syria.

Other private banks that have opened shop include the Jordan-based Arab Bank and Lebanese establishments such as Byblos Bank and Audi-Liban.

Raising capital:

The Jan. 4 law also allows private banks to raise their capital to $200 million, from a previous cap of $30 million, while the limit for private Islamic banks is being tripled to $300 million.

According to Mayala, this will inject some $2.2 billion into the private banking sector.

The legislation encourages European banks to enter the Syrian market, whereas holding a minority stake had "represented an obstacle" for foreign investors, Mayala said.

He said five more private banks have applied to open branches in Syria and are awaiting a green light.

Such measures have been adopted "in order to back up economic reforms in Syria as well as the development process," Mayala said.

The central bank has also eased restrictions on foreign monetary transactions for Syrian citizens who can now transfer "up to $10,000 in foreign currency each month," Mayala said.

The new regulation went into effect less than a month ago.

Syrian economist Samir Seifan said the drive to bolster economic reforms had attracted "a small increase in the number of foreign and local investment" in the country, but that this was not enough.

Damascus needs at least $12 billion in investments each year to guarantee 7 percent growth and tackle poverty and unemployment, officially estimated at 10 percent and twice as high by Western experts, Seifan said.