ESIS extension / Syria / Regulatory Developments / Update Memo 5

The following report outlines new developments in the past three months and the state of on-going developments.

Despite the newly formed government during the last quarter, the telecommunications policy in Syria and its regulatory framework have not changed. However, some planned GSM stations are becoming functional, and the liberalisation of the Internet service is being implemented as decided by the Government about 6 months ago.

Computerisation of all government institutions and making the Internet available for these institutions and businesses in the first place and for the public at large in the second place are still the main pillars of the IS policies in Syria. The newly formed government has again stressed this policy in its first report.

More and more government establishments are becoming computerised or modernising their services through improved computerisation.

The Commercial Bank of Syria, the largest bank handling all commercial banking activities with international banks, has embarked on full computerisation with inter-branch links with a project entitled "Inter-Branch Transactional System for the Commercial Bank of Syria". This project will lead to on-line inter-branch transaction and to budget unification among branches as well as ATM and POS services.

Another bank, the Real Estate Bank, which was a pioneer in computerising its services has recently introduced, among others, telephone banking and bill payment services through a project entitled "Modernising Computing Services at the Real Estate Bank".

The Public Establishment for Electricity Generation and Transmission (PEEGT) has launched a comprehensive computerisation project entitled "Management Information System for PEEGT". The project aims to establish a distributed system covering all the administrative and managerial needs for PEEGT and its companies with modern application software.

Liberalisation is coming in small steps with Law No. 10 of 1991 and its amendments, which encourage investment of foreign capital guaranteeing security and tax exemption. One important amendment has been issued by Law No. 7 of this year (dated 13 May 2000). This new amendment on the Investment Law makes the telecommunications field more competitive against other investment laws in the region, thus playing a greater role in attracting foreign investors.

Among other things, the amendment allows non-Syrian investors to own the land necessary for the project and to re-export the amount of their net share in project capital in foreign currency on the basis of the actual project value on the date of relinquishing thereof. Also, it will not be possible to confiscate, expropriate or freeze the investor's money approved under this law whether directly or indirectly.

The new amendment grants two additional years of tax exemptions for the project established outside large cities and agglomerations (Damascus city, its countryside, Aleppo and Homs), as well as to those projects with great capital, investment in high technology, or employing large amount of manpower. Two additional years of tax exemption are also granted where the commodity products exported during the exemption years reach 50% of the company products. The investor is also permitted to transfer its profits and value of shares in the actual rates of foreign currencies at the rates in neighbouring countries.

With this latest amendment, the Higher Investment Council can increase the project implementation period by 3 to 5 years if the project requires so or where the investor has nothing to do with the project delay. The investor's share of export returns may also be increased from 75% to 100%.

Earlier this year, two private companies (InvestCom and SyriaTel) have completed the first GSM pilot project in Syria with a capacity of 60,000 lines under licence from the Syrian Telecommunications Establishment (STE). The relatively high rates keep the GSM telephony out of the reach of ordinary users, and business people who are in dire need for mobile telephony are expected to acquire most of the available lines. After 4 months, only about 8,000 lines out of 60,000 available have been acquired.

The subscription cost is still high (100 Euros), but the monthly charge has been reduced to about 20 Euros and the tariff per minute of connection time cut in half to 0.02 Euros.

The one time installation fee for the GSM subscription is still around 1200 Euros and each minute of communication will cost about 0.08 to 0.05 Euro. But the GSM subscribers get a credit of about 30 Euros per month until the end of this year.

Quality of service in the Internet has improved with the new expansion. The downtime in Internet services has also been reduced giving hope for an even better service in the near future.

The coverage of the GSM service is still very limited in space, and quality depends on the area in which communications are carried out. The two companies in charge of the service (InvestCom and SyriaTel) have expanded their services to Lattakia and have plans to widen the area of coverage to include a corridor between Damascus and Aleppo with the city of Homs. Roaming between the two companies has also become functional.

The technical evaluation of the tenders to provide a national Internet backbone, as well as the necessary equipment to allow STE to become an ISP has been completed. It is expected to sign the contract with the best bidder by the end of July or beginning of August 2000, with the implementation to be completed by December 2000 or January 2001.

The Higher Institute of Applied Sciences and Technologies (HIAST) is carrying out an important project for the National Syrian Seismology Centre entitled "Seismic Monitoring System". The project aims to allow online access to seismic data and the automatic monitoring of seismic activities. When completed, the project should improve the quality of monitoring, reduce the time to produce an alarm, reduce false alarms and eliminate as much as possible human intervention.

STE, so far the sole Internet Service Provider, has expanded its Internet capacity and opened the door for new subscribers who would be public or private establishments or businesses and some professionals (e.g., medical doctors, engineers and lawyers).

The technical evaluation of the bids to build a national Internet backbone has been completed, and contracting is expected in July 2000. This should allow private ISPs to get licences for establishing their services. Currently there are over 70 applications for private ISP that have been submitted to STE. When announced, stringent rules and financial burden and guaranties should reduce this number drastically. The Syrian Computer Society, which obtained a special licence to start an ISP for its membership, has received the needed equipment and is currently preparing for the opening of its services for members, which is expected by late July or early August. This will be the first private ISP to operate in the country.

3. Market: privatisations, foreign investment, mergers, acquisitions, call for tenders,...

The GSM pilot project that started four months ago still has difficulties in its marketing campaign. This campaign has not been successful so far since the installation fees are still high (about 1200 Euros), although the monthly fees of 20 Euros have been waived and a credit of about 30 Euros given to users. The tariff is still between 0.08 and 0.15 Euros per minute, but a night reduction of 50% has been introduced. After four months, only about 8,000 GSM lines have been purchased, with 60,000 available.

Please note that this report has been prepared under the sole responsibility of the ESIS II contractors.
It does not necessarily reflect the views of the Commission, nor does the Commission accept responsibility for the accuracy or completeness of information contained herein.
The ESIS Team of contractors welcomes any additional information or corrections.