In early January, the Four Seasons Hotel opened for business in Damascus city centre. The occasion could herald the start of a construction boom in the state-run economy’s tourism and real estate sectors.
The 23-storey, 300-room hotel was developed by the Syrian-Saudi Company for Touristic Investments, a joint venture of Saudi Prince Alwaleed bin Talal with international partners, the Tourism Ministry and the Damascus Governorate and is about to be followed by a raft of mega projects. Applications for major real estate and tourism investments across the country have been flooding into the Syrian Investment Office (SIO).
And the latest project on the table is enormous. “We are currently considering feasibility studies from Emirati and Saudi investors for a 12-year project looking at tourism, trade and sport,” says a senior SIO official. Estimated at around $15,000 million, the new long-term, multi-purpose real estate project in the Jabal al-Sheikh area, west of Damascus, will include business centres, hotels, entertainment parks, residential areas, sport clubs and a free trade zone over an estimated 70,000-square-metre-area.
“Construction projects driven by the private sector have seen a steady increase over the past few years, with large projects being linked to foreign investors who began entering the Syrian market in 2000,” says Omar Fouad Takla, managing partner at Fouad Takla Company, the main contractor for the Four Seasons development. Tourism and manufacturing are two favourite sectors.
UAE-based investors in particular appear unperturbed by the tense political climate. Tiger Real Estate, a subsidiary of Sharjah-based Tiger Contracting, leapt into Damascus in late August, announcing plans to invest up to $545 million in five projects across the capital. Then, in mid-October, Dubai-based Emaar Properties announced plans for two real estate developments, entailing total estimated investment of $3,900 million. The first scheme, worth $500 million, will be in the Yafour area of Damascus. Known as the Eighth Gate, it will comprise three zones: a commercial centre, a waterfront and a residential area. The project promises a Dubai-style makeover for Syria’s ancient capital, with plans for a piazza, a commercial tower, a plaza and a mall covering 41,806 square metres.
An agreement for a second, even larger, project is reported to be in the pipeline. Costing an estimated $3,400 million and called Hills of Damascus, it is expected to take 10 years to complete. The venture is a collaboration between the Dubai mega-developer and Invest Group Overseas (IGO) an expatriate team of investors, with a 60 per cent stake in the project. Both Tiger and Emaar are likely to be followed by Kuwait’s Aref Investment Group and Dubai-based Majid al-Futtaim (MAF) Investments.
“The Kuwaiti project is located in the suburbs north of Damascus and comprises a financial district, which will include the future Syrian stock market. It is estimated at around $3,000 million,” says Takla. MAF is also considering a $1,000 million mixed-use residential project, and a new law could lead to even more schemes. “It is worthwhile to mention that a new real estate investment law is about to be passed and a lot of other potential projects in this sector are expected to be announced as soon as that happens,” Takla says.
Investment has been encouraged by the establishment of a Syrian business council in Dubai, but the tense political climate has, unusually, played a part. As Takla points out: The menacing political events in the region have forced the government to open up more sectors of the economy to direct foreign investment to counterbalance the adverse effects of these political pressures. But one practical element that could hold back all these planned investments is a chronic shortage of cement. The local cement industry comprises five plants, all state-owned, which have a total capacity of 5 million tonnes a year (t/y).
However, with local consumption running at about 6.5 million t/y, it is left to producers in neighbouring Jordan, Lebanon, Egypt and Turkey to make up the shortfall. The government has eased restrictions on the import of cement recently and approved a number of greenfield licences. But even if cement capacity is substantially increased, will local companies be able to compete with the bigger regional contractors circling overhead?
As the country continues along a path of development, which has accelerated considerably in the past few years, it is very likely that local private construction companies will continue expanding at the expense of existing public sector companies whose government backing is being incrementally lifted, says Takla. “As the promised multi-billion dollars begin to materialise, we will start seeing more and more international contractors…entering the Syrian market. The local companies, depending on their resilience, will then either survive in the global market as main contractors, or will step down to be sub-contractors to the more aggressive newcomers.”