Attracting Foreign Investments Overview

The importance of attracting foreign investment to any country, including Syria, is multifaceted. Foreign direct investment (FDI) increases the flow of foreign currency into the country, helping to strengthen foreign exchange reserves and reduce pressure on the trade balance. Foreign investment also helps create job opportunities, as foreign investment projects create new jobs, which contributes to reducing unemployment rates and increasing national income.
Foreign companies often bring with them modern technologies and advanced management expertise, which contributes to the development of local industries and raising productivity.
Foreign investment helps expand local markets by producing new goods and services or increasing the production capacity of existing goods and services.
Foreign companies often make significant investments in infrastructure development, such as roads, ports, and airports, which contributes to improving the overall investment environment.

Foreign investment also attracts the interest of other international investors, strengthening international partnerships and opening new horizons for economic cooperation.

However, it should be noted that attracting foreign investment requires providing an attractive investment environment, including:

1. Political and security stability, which are among the most important factors attracting foreign investors.
2. Sound economic policies must be clear, stable, and encourage investment.
3. Advanced infrastructure must be able to meet investor needs.
4. A qualified and trained workforce must be available.
5. Attractive investment incentives must be provided to foreign investors.

Foreign direct investment can be a powerful driver of economic growth in Syria even before a comprehensive solution is reached, but it requires an attractive investment environment and integrated efforts by the de facto authorities and the private sector.

Disadvantages and Harms:

Attracting foreign investment brings many benefits, but like any economic process, there are downsides that must be considered. The most significant potential drawbacks of attracting foreign investment include:

1. Heavy reliance on foreign investment can increase the dependence of the local economy on the decisions of foreign investors, making it vulnerable to changes in global economic policies or the decisions of investing companies.
2. Some foreign companies may exploit the host country’s natural and human resources unsustainably, leading to environmental degradation and exacerbating poverty and unemployment problems in the long term.
3. Intense competition from foreign companies can cause many local small and medium-sized enterprises to close, leading to job losses and reduced economic diversification.
4. Some large foreign companies may interfere in the political and social affairs of the host country, weakening the country’s sovereignty and negatively impacting its stability.
5. Disparity in the distribution of wealth: The focus on large investment projects widens the gap between the rich and the poor, with a small segment of workers and the middle class benefiting only marginally from these investments.
6. Profit outflow, where a large portion of the profits earned by foreign companies are transferred abroad, reducing the volume of domestic investment and weakening long-term economic growth.

To avoid these negatives, host countries must take a set of precautionary measures, such as:

1. Enacting strict laws and regulations that protect natural and human resources, ensuring the equitable distribution of wealth, and preventing foreign interference in internal affairs.
2. Supporting local industries and encouraging innovation and research and development to enhance the competitiveness of local companies.
3. Negotiating with foreign companies transparently and setting clear terms for investment contracts to ensure the interests of the host country are met.
4. Developing strategic plans for economic development that take into account the challenges and opportunities associated with foreign investment.
5. Foreign investment can be a powerful driver of economic growth, but it must be approached with caution to avoid potential negative impacts.

Challenges and Difficulties:
Foreign investments in Syria face significant challenges that hinder their entry and development. The most prominent of these challenges are:

• The security and political crisis. Syria has been experiencing an ongoing political and security crisis for years, creating an unstable and unsafe investment environment.
• Economic sanctions. Many countries have imposed economic sanctions on Syria, making it difficult and complicated for foreign investors to engage with it, even in liberated areas.
• Syrian infrastructure has been severely damaged as a result of the conflict, increasing investment costs and reducing its attractiveness.
• Syria suffers from a severe energy shortage, posing a major challenge to energy-intensive industries.
• The Syrian exchange rate experiences significant fluctuations, increasing the risks to foreign investments.
• The Syrian economy in general suffers from a severe liquidity shortage, making access to financing difficult.
• The prevalence of corruption and favoritism in public institutions increases business costs and reduces confidence in the authorities.
• The Syrian private sector suffers from a lack of the necessary skills to manage large investment projects.
• Syrian investment laws suffer from complexity and lack of clarity, making investment procedures lengthy and complicated.

In addition to these challenges, there are other challenges related to various economic sectors, such as:

• The agricultural sector suffers from water shortages and the deterioration of agricultural land.
• The industrial sector also suffers from a shortage of energy and raw materials, and the erosion of industrial infrastructure.
• The service sector also suffers from a lack of investment and a poor level of services.
• To overcome these challenges, the de facto authorities must take a series of measures, such as:

• Urgently ending the political and security crisis.
• Lifting the economic sanctions imposed on Syria.
• Reconstructing the destroyed infrastructure.
• Securing the energy sources necessary to operate industries.
• Stabilizing the exchange rate.
• Combating corruption.
• Developing the workforce and providing the necessary skills.
• Simplifying investment procedures and providing incentives for investors.

Steps and Mechanisms:
Attracting investment to northern Syria is a major challenge given the current circumstances, but it is not impossible. This process requires the combined efforts of several parties and the implementation of specific mechanisms. According to our vision at the Syrian Future Movement Economic Office, we see some proposed mechanisms, most notably:

1. Providing a safe and stable environment:By working to improve the security situation in the region and provide protection for investors and their property.
   Establishing effective and transparent governing institutions capable of providing basic services to citizens. Enacting clear and decisive laws that protect property rights and facilitate investment procedures.
   
2. Building an advanced infrastructure:By developing the road and transportation network to connect the region to regional and international markets.
   Securing the energy sources necessary to operate investment projects.
   Improving water and sanitation services to ensure the health and safety of workers and residents.
   
3. Providing investment incentives:Such as offering tax incentives to new investors.
   Facilitating import and export procedures.
   Providing equipped industrial land at reasonable prices.
   Providing loans with reduced interest rates or grants for investment projects.
   
4. Investment Marketing:This is achieved by organizing events to promote investment opportunities in the region.
   Organizing visits for potential investors to gain a closer understanding of the region.
   Using social media and the internet to promote investment opportunities
   .
5. Building International Partnerships:This is achieved by cooperating with international organizations to provide financial and technical support for investment projects.
   And encouraging foreign companies to invest in the region.
   
6. Developing Human Capital:By investing in education and training to provide a qualified workforce.
   And building the capacity of local institutions to manage investment projects.
   
7. Conflict Resolution:It is essential to establish effective mechanisms to resolve commercial and investment disputes.
   Attracting investment to northern Syria requires strenuous efforts and innovative solutions. All stakeholders must work together to create an attractive investment environment, provide the necessary incentives, and overcome the challenges facing the region.
   
   Among the recommendations we emphasize in the Economic Office of the Syrian Future Movement:

1. Any investment in northern Syria must be sustainable and take into account local interests.
2. Fair distribution of economic returns from investments.
3. There should be transparency in all investment-related procedures.

Enas Nasreddine
Economic Office
Research and Studies Department
Articles
Syrian Future Movement