Thu 17 Jan 2019

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Syria: A Getaway for UAE to Face Economic Crisis  

Drilling works in Marota City conducted by Aman Dimashq Company – December 1, 2018 (Marota city)  

Drilling works in Marota City conducted by Aman Dimashq Company – December 1, 2018 (Marota city)  

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Based on the principle that politics and economy are intertwined and complementary to the point of being inseparable, as economists say, one can find a suitable explanation for the UAE’s return to Syria and the re-opening of the Emirati embassy in Damascus on December 27, after a diplomatic rupture with the Syrian regime, that lasted for years, following the outbreak of the revolution against al Assad in 2011.

Although the return of the UAE to Syria has been explicitly  justified on, by the Minister of State for Foreign Affairs, Anwar Gargash, as the re-activation of an urgently needed Arab role in Syria to face the growing interference of Iran and Turkey, ; it may implicitly carry economic objectives. Apparently, the Emirati companies are planning to secure a share in the coming reconstruction process promoted by the Syrian regime through official media and other pro- regime media outlets to attract investors.

 

Huge UAE investment already implemented in Syria

Prior to the reopening of the embassy, many Emirati companies came back to the Syrian investment market. A delegation from the Dubai based DAMAC Properties, one of the largest real estate companies in the Middle East and the Arab world, has held a meeting on December 20 with two Syrian companies, Tulsa Group and al-Diyar al-Damascia Company, in the Four Seasons Hotel in Damascus. The meeting revolved around discussing ways of cooperation in the field of real estate development during the post-revolution stage.

On June 26 last year, RT quoted allegedly well-informed sources who confirmed that a meeting was held between Majid al-Futtaim Group and employees of the Ministry of Tourism in the Syrian regime government to resume the funding process and the implementation of projects that have been agreed upon by both parties before the revolution.

The UAE had contributed with significant investments in Syria before the outbreak of the revolution. In fact, al-Assad’s regime succeeded in attracting Emirati investors, and several mega projects were agreed upon, including the Eighth Gate project in Damascus under the supervision of Emaar-IGO, with a development value of $500 million; in addition to “Khams Shamat” project which is considered to be the largest and first tourism project in Syria. As such, the implementation of this project was designated to be executed by Majid al-Futtaim Real Estate Company, in the area of​ Yafour, at a cost of one billion dollars.

Moreover, the tourism and real estate project, “Bonyan City”, in the area of ​​Jabal al-Shaykh near the city of Qatna in the countryside of Damascus, which belongs to Bonyan International Investment Group, was agreed upon in 2006. Thus, the contract included a 12-year implementation plan at a cost of $ 15 billion. Besides, “Ibn Hani Bay Resort” was another tourism project to be established in Syria, particularly in Latakia, by the real estate company, Qatari Diar, at a cost of $250 million.

According to Syrian national television, Emirati Minister of Economy, Sultan bin Saeed al-Mansoori, stated in January, 2008 that the total value of UAE investments in Syria amounted to $20 billion.

The Syrian regime has also attempted to attract foreign companies to invest in previous occasions through the issuance of laws that give great advantages to non-Syrian investments. The latest effort to lure external investors was to make a draft of a new investment law, which the government put forth last July. According to the draft law, which Enab Baladi managed to consult, this new regulation will grant foreign companies more tax and customs exemptions. It will equally provide foreign investors with land and real estate owned by the Syrian State free of charge or at reduced prices for strategic projects. Additionally, the new law will dismantle all kind of decisions, circulars, or communications issued by public bodies, which may hinder the execution of the project or the continuity of its work.

 

Economic crisis in the UAE

The UAE, especially Dubai, is suffering from an economic crisis due to several factors, including taxes on a number of goods and services, low rents in the real estate market and high inflation, which has led to the closure of some schools of foreigners in Dubai and the vacancy of apartments at a time when real estate companies create more apartments, according to the British The Economist magazine last November.

The magazine stated, according to Al-Jazeera’s translation, that “there are increasing signs that the emirate of Dubai will face many troubles due to a number of factors such as the decline in the Dubai stock market index and the decline in rental rates, as Dubai was the second worst-ranked global real estate market in 2017.”

An architect in the UAE, who owns a company in Al Ain, and asked not to be named, told Enab Baladi that “the UAE is suffering from a big crisis, especially for big companies, because the state did not provide financial support for projects because of the war in Yemen, while the small ones are affected by the crisis, but they are resilient because of the lack of financial burdens on them.” He pointed out in an interview with Enab Baladi that UAE investors are looking for a foreign market in order to invest in.

The UAE is equally suffering from high inflation, reflected in rising living and residence costs, and even indirect taxes because of its sufficiency. As a result, it is no longer an attractive destination for investors to invest in, so investors want to get out of it and look for an economically growing country rather than stay in a country that suffers from high inflation which destroys profits and revenues of companies, according to the economic analyst Younis al-Kareem, who said that Syria could be one of the countries to which investors are heading, especially since there is an international trend to reconstruct Syria because of its important position as a route of energy to international markets, which led  to the UAE’s attempt to be a partner in Syria and turn Damascus into a safe tax haven like Dubai.

The Economist magazine added in its report that the UAE’s foreign adventures could create opportunities for the country such as the UAE’s control of ports in Yemen that may open new lines of trade. In addition, relations between the UAE and the Syrian regime may bring contracts for reconstruction.

 

Relations between the Syrian regime and the UAE

According to al-Kareem, the UAE will strengthen its relations with the Syrian regime because of the huge financial relations between the two parties, as the Syrian funds used to be directed to the UAE before the revolution as a result of the huge investments of businessmen close to the regime.

Al-Kareem believed that the balance of trade was in favor of the UAE thanks to the Syrian funds in the country, but now the opposite will be the case. Correspondingly, the UAE businessmen, especially those close to the Iranian regime, will implement projects in Syria, whether to complete large old projects on the outskirts of Damascus and its countryside, or through their contribution to the transformation of Damascus into a safe haven and the creation of an advanced infrastructure because of their experience.

He pointed out that the Syrian regime will try to take advantage of developing its relations with the UAE this time in order to benefit from the experience of Dubai in the establishment of e-governance and infrastructure needed by the regime to make Damascus an investment interface and a safe haven, in addition to the regime’s need Dubai’s funds.

A safe haven is a country that imposes low taxes characterized with specific fiscal and tax policies, banking systems and laws. It deals with the principle of complete confidentiality regarding the identities of its registered companies, their owners or customer accounts, which makes them protected from any prosecutions.

The country, which is considered a tax haven, refuses to cooperate with international organizations interested in prosecuting people accused of tax offences. It also refuses to cooperate with judicial authorities in other countries, which makes this country attractive to rich people and businessmen.

The countries that are a tax haven are characterized by financial openness and lack of any legal restrictions on the entry and exit of money. Therefore, it is necessary to build a banking system that facilitates and expedites administrative procedures, and this is what the Syrian regime is working on, according to al-Kareem.

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