Rebirth of the Damascus Bourse

Finance Minister Mohammad Hussein, head of the Economic Bureau in the Baath Party, rang the stock market bell signaling the opening of the Damascus Securities Exchange on March 9, 2009. The launch of the Damascus Securities Exchange (DSE) is deemed an important step, signaling that economic reforms are underway in Syria, coming, however, amidst a diminishing role for world financial markets, due to the international crisis that erupted in the final half of 2008. The DSE’s board has prepared itself for transparent conduct, and will be a tool to mobilize capital that is ready for investment and make use of Syrian money, under good supervision.

As of today, six companies have registered with the DSE: four banks, one media corporation, and one tourism company. That is out of a total of 65 public shareholding companies in the Syrian market, another 300 joint-stock companies, and 1,500 limited liability companies, with an approximated capital of 500 billion SP.

By the end of 2009, the Ministry of Finance expects the total number of registered companies to reach 12, ranging in scope from banking and insurance, to telecommunications and tourism. Usama Ansari, a veteran Syrian economist and board member of the DSE, pointed out that a stock market, in addition to being a necessity, will serve as an incubator for the national economy at large, ranging from monetary policies, to financial and tax regulations. “The DSE will mirror domestic economic developments, not international ones. It will create competition, which is a must,” Ansari explained. “The main objective behind creating the securities exchange market is attracting foreign direct investment, which will be transferred into liquid money, after fulfilling its investment purpose.”

Through a stock market, many hope investors will grow more confident in Syria, where they feel they can safely work in Syria for a specific period, then withdraw if they so wish, with all their rights guaranteed. The mechanism for a withdrawal would be the stock exchange, which would give investor projects a reasonable market price, reflecting its true value.

The DSE launch was seen as modest, however, with only three transactions taking place, with a total worth of $350, on the first day of operations. Analysts describe the Damascus Market as a “conservative” one, because of its sharp regulatory nature. When the DSE was established, the aim was to attract investment and create trust, rather than create a market for aggressive trading. A share cannot be bought and sold during the same day, for example; it freezes its market worth once it reaches 2%.

Small steps at phase one are preferred, however, followed by growth depending on market, investor, and corporate need. “This market was created to live for hundreds of years. It was not born by coincidence,” says Ansari. Fifty years ago, the first Damascus Bourse was launched in the Hamidiyah Market, opposite the famous icecream parlor Bakdash. It was a venue that welcomed customers, those wanting to buy or sell shares in any particular company, yet it lacked any written regulations or bylaws.

When Syria merged with Egypt to form the United Arab Republic (UAR) in 1958, a major change overcame the Syrian economy, marked with sharp socialist measures, nationalization then re-distribution of land, confiscation of banks and private enterprise. As a result, plenty of Syrian capital was transferred elsewhere to “safer” environments in the Arab world and Europe.

As a result, the public sector was heavily invested in during the 1960s, especially in the textile and food products industries, at the expense of the private one. Confidence diminished and dropped to nearly non-existent levels, and there were no Public-Private Partnership (PPP) projects from the 1960s until the 1980s, when the public and private sectors teamed up for tourism projects, setting up the Cham Palace chain of hotels. A socialist economy, lack of a Damascus Bourse, and nationalization, meant that there was no “official” way to channel Syrian capital money from abroad back into the Syrian market.

A sharp economic crisis in the 1980s led to a drawback in foreign currencies, which in turn led to a cutback in government importing. Although there remained a relatively strong purchasing power in Syria, basic commodities were no longer available, giving birth to the Syrian black market, and the art of smuggling. Certain opportunists, known as “money-collectors,” began to collect cash from average Syrians, ostensibly to “manage” them, in exchange for high interest rates that reached up to 30%.

The DSE comes to put an end to all of that, and re-build trust in the Syrian market. The DSE is further proof that Syria is on the right track, after fifty-years of a centralized and secluded economy that was unable to compete, neither regionally nor internationally. When ringing the bell, Hussein said, “we announce that the Syrian economy has entered a new stage.”