April 2000

Syria Master Report

There has not been any change regarding alternative networks in Syria. All important sectors such as telecommunications, electricity, water, television, and railways are still under state monopolies. Currently, there are no plans to liberalise any of these sectors. However, some companies (public and semi-public), such as the oil and electricity companies, have the potential to become telecommunications operators if the regulations are modified. In addition, there is a plan to license private Internet Service Providers through the Syrian Telecommunications Establishment (STE) during the last quarter of 2000, once the Internet backbone is implemented.

1. The interaction between business and regulatory constraints

1.1 The regulatory background

Major sectors of the Syrian economy, including heavy industry, banking, insurance, and utilities, remain firmly in the public sector. Some sectors, like food processing, pharmaceuticals, and transportation, have recently been opened to the private sector. There are also other sectors that have never been nationalised, such as retail sales and agricultural production. The Ministry of Industry is responsible for both the public and private sector industries, while the regional Chambers of Industry regulate 20 000 private sector companies.

Until recently, the government pursued policies that aimed at expanding the public sector, with tight controls on private sector activity. All large industries, including the banking and insurance sectors, were nationalised in the 1960s. Arab aid from the "boom years" of the 1970s was used to expand the state's industrial base with the creation of hundreds of public enterprises. Beginning in 1989, the government started to implement some economic reforms. It passed a new investment law in May 1991 (Investment Law #10) and has gradually lengthened the list of goods that the private sector can produce or import to include goods produced by the public sector. However, the public sector is still expanding, and the government continues to control all "strategic" sectors such as oil, electricity, banking and chemicals as well as some of the textile and food processing industries.

1.2 Business constraints and entry barriers

Numerous restrictive government policies create several business constraints. For instance, all major private investment projects must be licensed. Despite incremental efforts to move the "neighbouring country rate" towards the "free market rate," a cumbersome multiple exchange rate system remains in place. Tariffs remain relatively high, and import restrictions remain numerous despite an increase in the types of goods the private sector can import. Real interest rates are negative, and the private sector has very limited access to capital. Bank loans require collateral as well as a third-party sponsor.

However, in June 1991, as part of its overall reform program to encourage the private sector, the government passed a new investment law—"Law Number 10"—to promote investment in all sectors of the economy. The new law offers the same incentives to local and foreign investors. Specifically, companies that receive licenses under the new law are accorded duty-free privileges for the import of capital goods and materials necessary for a project, including vehicles, and a tax holiday for the first five years of operation. Companies that export over 50 percent of their products enjoy a seven-year tax holiday.

1.3 Attitude of the incumbent operator towards alternative network providers

Currently all network providers have state monopoly and would not consider any changes leading to competition. All their future strategies are still based on a lasting monopoly. Instead of trying to compete by reducing prices and/or providing needed or better services, they make use of existing laws to penalise the promoters or users of such services and/or technologies whenever there is a possibility for outside competition (e.g., in telecommunications or in using new services or technologies).

1.4 On-going regulatory developments concerning alternative networks

Spurred by economic reforms, the prospects for Syrian private sector investment and imports continue to improve slowly. Liberalisation actions over recent years permit private exporters to retain foreign exchange export earnings to finance permitted imports. Likewise, the government has continued to broaden both its list of permitted private sector imports and investments by private sector companies in areas such as power generation.

2. Inventory of the major "public" utilities with potential for use in IS applications

2.1 Types of companies offering networks

2.1.1 Oil and Gas Exploration Equipment, Piping, and Supplies: (OGM, OGS)

The Al-Furat Petroleum Company (which produces about 370,000 bpd of crude oil) plans to invest several hundred millions of dollars in oil and gas infrastructures during the next five years. In addition, the Deir-Ezzor Petroleum Company (producer of 60,000 bpd) will continue its own development and infrastructure investment program. Tullow Oil, an Irish company, discovered small oil reserves and has formed a joint venture called Khabur Company. However, because of difficulties in field development and production costs, it closed down its operations. The Syrian Petroleum Company (which produces 160,000 bpd) continues its own field development and infrastructure construction projects in Northeastern and Central Syria. Several companies are interested in gas recovery projects estimated at USD 300-400 million. The following table gives unofficial estimates for infrastructure construction projects in oil and gas exploration.

Al-Furat Petroleum Company owns fibre optic telecommunications lines that extend from Damascus to Deir-Ezzor. These lines are used mainly for their own communications, as well as some microwave communications between its major locations. Similarly, the Syrian Petroleum Company and the oil distribution company SADCOP have microwave links between their various locations. These communications facilities, however, are restricted in use because the current legislation gives STE a monopoly over telecommunications and companies have to seek STE’s approval to construct new communications infrastructures.

The telecommunications system built by Al-Furat Petroleum Company is the most extensive. Installed are both fibre optic cables and gas pipelines that stretch from the oil and gas fields to the power stations all over Syria. The total length of fibre optic cable has reached 1000 km, thus permitting the establishment of a 2 Mbit/s telecommunications network which links all telephone exchanges pertaining to the company, whether in the fields or in offices in Damascus. Thus, a data communications network has been built with the possibility of video-conferencing, email and other computer based services using Unix servers and LANs.

2.1.2 Electricity (ELP)

The Public Establishment for Electricity Generation and Transportation (PEEGT) continued to pursue expansion projects in the electricity sector, which were started in 1996 and 1997. The most important development in the power sector is the regional project that will create an electricity grid between Syria, Jordan, Egypt, Iraq, and Turkey, as well as Lebanon which was added in 1998. The grid connection between the Syrian "Al-Fursan" and the Lebanese "Anjar" power stations has been completed in May 1998.

The tender for the grid connection with Jordan was awarded to the Indian K.E.C. company on a turnkey basis. The physical establishment of this link was completed in October 1999. So far, it has not been put into operation. The relevant substations are under construction by Siemens and would be completed by the end of the year 2000.

There has been some delay in awarding the tender for the grid connection with Turkey on the Syrian side, but now a contract has been concluded with Galcon, a Turkish company, to complete interconnection lines with Turkey over a distance of 353 km. Siemens will construct the relevant substations, and it is expected that the interconnection with Turkey will be operational by the beginning of 2000.

Lately, power stations have been built to cover the increasing demand for electricity in Syria, namely the 600 megawatt (MW) Jandar plant, the 300 MW Al-Nasrieh plant, the 300 MW Zeyzoun plant and the 200 MW Tishreen plant, all of which are gas turbine stations. There is also the 1000 MW Aleppo thermal power station. Moreover, the 600 MW Al-Zara thermal power plant and the 630 MW Tishreen hydro power plant are under construction.

A feasibility study is under preparation for extending Tishreen, Al-Nasrieh and Zeyzoun gas turbine stations to operate as combined cycle stations by adding gas steam turbines for a total capacity of 700 MW. Another feasibility study has been prepared for rehabilitating the 4x170 MW Banias power station. A contract has been signed with Mitsubishi to rehabilitate the third and fourth units, which would be completed by the end of 2000. The first and second units will be rehabilitated later on. Similar studies are to be prepared for Mehardeh and Kattineh steam power stations.

New transmission lines and substations are also under construction to improve the Syrian power network. During 2000 an international tender for the construction of substations (230/66 kV) will be launched. The European Investment Bank will finance such construction. An international call for tender has also been announced for the construction of an advanced National Control Centre (NCC) in order to meet the requirements for interconnection with neighbouring countries. The offers are currently under evaluation. Following are unofficial estimates of power generation and transmission equipment:

PEEGT has launched an international call for tender to computerise all its power generation plants and its central administration in Damascus. The tenders are now under evaluation, and contracting is expected to start in June 2000. Such computerisation will permit the central administration to have instant information about the situation in all power generation stations.

Although power generation capacity seems to be adequate, the country's power distribution network causes transmission losses as high as 25%. This is mainly due to the poor quality of wiring and old transformer stations. The Public Establishment for Electricity Distribution and Transmission (PEEDT), the sister company of PEEGT, is responsible for solving these transmission problems.

2.2 Types of operators using the networks

No legal alternative networks can exist because of STE’s monopoly on all telecommunications matters in Syria.

2.3 Types of services offered by the operators on the networks

Since no legal alternative networks can exist, there are no possible services other than those offered by STE. In telecommunications, and more specifically in telephony and Internet services, illegal competition exists (e.g., callback in telephony and Lebanese ISPs), but is repressed by STE. See Regulatory report for more information.