About the “New Investment Law”, and “the Culture of Investment”; A New Phase of Neo-Liberal Rot!

The “Syrian Investment Agency” lists 18 laws under the title “Laws of Investment in Syria”. Some laws in this list date back to the 70s and 80s, and it seems that the Web page has not been updated yet with the “New Investment Law”, which will be the 19th law in the list.

Most of these laws, as a general rule, are sectorial laws in their nature. Each of them is concerned with a particular economic sector, or even with a particular branch from the sector, for example: there is a law for licensing oil companies, another for bank secrecy, a third for agricultural investment, a fourth for health and health insurance, a fifth for industrial cities, and so on. Three legislations are excluded from this rule; Law No.10 of 1991, Decree No.8 of 2007, and Law No.18 of 2021, as they are general legislations, i.e., they are not concerned with a particular sector, rather they regulate investment in general in all economic sectors.

The Legal Position of Legislations (10, 8, 18)

It is known in the legal framework that private laws restrict public laws, i.e. when two fields of work, one of a public law and another of a private one, became incompatible with each other, the private law is the one applicable. For example: in the case of agricultural investment, the Agricultural Investment Law is the applicable one in case some compatibility occurred between it and the Investment Promotion Law No.10 of 1991. That is, the “New Investment Law” No.18 of this year, which replaces both Law No.10 of 1991 and Decree No.8 of 2007, will not reduce and abbreviate the various laws of investment as it can be misinterpreted from speech of the Minister of Economy and Trade during an interview with him last week by the Al-Ikhbariyah Syrian channel, and all other laws related to investment will remain activated and in place.

This same legal rule, i.e., (private restricts public), does not underestimate the value of public laws, but on the contrary, it clarifies them. The importance of the laws that are more public within the legal system as a whole is that it plainly and clearly shows the biggest public purposes and objectives envisaged by the legislator within the field concerned, in other words: it expresses the philosophy of the legislator in dealing with the field concerned. So, clearly: when it comes to laws related to economy, these public laws reveal the bias nature of the economic legislator, and the interests of those he/she defends.

For the Benefit of Whom?

In an article published in issue No.826 of Kassioun on September 3, 2017, under the title "Investment Laws in Syria", lawyer Milad Shawky explained the historical trend in the development of investment laws starting from Resolution No.186 of 1985 all the way to before the new law, and he briefly mentioned implicitly the notorious Participatory Law No.5 of 2016.

The legal reading of the development of legislations concerned with investment clarifies that the only consistent trend in all those legislations is; that the state is making concessions for the benefit of the “investors” (which is the code name of profiteers), and at the expense of wage owners.

Taking the aforementioned article’s information into consideration, we present a few key points of these concessions: Tax exemptions for 5 years from the beginning of investment, and full exemption from all fees and taxes for the first three years.

• Frequent and subsequent tax cuts.
• Significant leniency in the offshoring of investors’ money. 
• Significant leniency in favor of investors and against the interests of their employees. The most important example: exemption of projects from the provisions of Labour Law No. 49 of 1962 (industrial), and No. 137 of 1958 (agricultural), in addition to the introduction of the notorious Labour Law No.17 of 2010.
• Leniency in terms of investors retaining foreign exchange.
• Allowing the investor to own, expand and exclude land and real estate from the ownership limits determined in legislations in force.
• Expanding the sectors in which investors are allowed to work and which are included in the aforementioned exemptions and leniencies to include: transportation, tele-communications, environment, services, electricity, oil and any other projects that the Supreme Council for Investment decides to include.

So, if reading the historical development of legislations concerned with investment helps determine the general bias of these legislations in favor of “investors”, then the political economic reading shows who they are, what they are, how they are “developing”, and in what direction they are developing.

The Turn of the 90s.

The issuance of Law No.10 of 1991 came in response to two important developments at the time: external and internal.
The external: is the collapse of the Soviet Union, and the world’s shift towards the American unipolarity. This encourages the international “economic liberalism train” to break through a large number of countries and carry away their wealth during the decades that followed.

The internal: the level of ostentation and inflation that the huge corruption has reached within the state apparatus (which various estimates agree that it has swallowed at least 20% of the annual GDP). Within more than two decades, this corruption has accumulated large fortunes in the form of plundered money, however, they are not invested within the economic cycle. It has become necessary for this huge corruption in order to maximize its profits and plundering, and maximize its general control over the state in all its aspects, to enter the market and control it little by little.

The market entry came through two large doors, on the one hand: through compatibility at times and competition at others with traditional major merchants, especially those import agents accredited to the West. On the other hand: at the expense of the public sector which has been broken little by little by plundering it, and by fabricated and criminal “book calculations” that have falsely shown many profitable institutions within the public sector as a “busted flush”, (one of the most famous ways in this is the way of calculating depreciations). Everyone remembers at that time the phenomenon that was called back then “fat cats”, which was represented in a limited number of people who entered the market with large capitals under the names “investors” and “business men”. They were not known before that, and it was not basically known from where they got their wealth, which can clearly explain that the same huge corruption within the state apparatus has created forefronts to it through the “fat cats”.

 “The Culture of Investment”

Since then, the “economic culture” as a whole has gradually begun to deviate. Before Investment Law No. 10, the main slogans of the economic process within what was called the “phase of socialist transition” – although it was by no means socialist – revolved around social justice, “creativity and self-reliance”, self-sufficiency, developing the public sector, developing agriculture and industry, etc.

With Law No. 10, talk of “investment” has begun to shift with time towards the center of economic culture as a whole. Investment has become the magic wand that will solve all economic problems such as poverty, unemployment, backwardness, corruption, etc. That is simply because “investors” themselves are the major corrupt that the economy and the whole country revolve around their selfish and greedy interests. How did this shift in economic culture happen? The talk about the economic process has been shortened to the talk about the figure of growth, and the claim that raising the figure of growth is the key to solving all problems, (this was crystallized by adopting slogans such as “tourism is the engine of growth” or “trade is the engine of growth”. Hence, (attention = investment) in these sectors should be concentrated on in order to distill and raise growth, and by raising the figure of growth the problems required to be solved will be solved).

“Wholesale” Mines

Within the “culture of investment” with its simplified form presented above, there is a huge number of mistakes and mines. First: it is not necessary for a high growth figure to solve the economic problems, as if most of the distribution of the national income goes for the benefit of a plundering small minority, then the increase in the figure will not help solve any problem, because “let the wealthy get rich as they are the locomotive of growth” is a big lie that all Syrians now know, and even before 2011, that its undeclared continuation is “let the poor get more miserable and poor”. As a reminder, distributing wealth – the national income in Syria in 2010 was as follows: (75% for profit owners, and 25% for wage owners). In the last calculation of Kassioun for the distribution of national income within regime-controlled regions (84% for profit owners, and 16% for wage owners)!

Second: the figure gets calculated by the liberal method on the basis of the difference between the GDP in two consecutive years, divided by the GDP of the first year, and taken as a percentage. This calculation can be adopted in case calculating the GDP in each year was a correct calculation. The deceptive liberal method lists repeated calculations by including the income of the non-productive service sectors as part of the output. Thus, the growth figure has inflated fictitiously and on paper, especially based on financial sectors (this inflation is not only a computational inflation to show fictitious achievements, rather it is a known mechanism in economy whose function is to contribute to price inflation, which in turn achieves additional plunder that profit owners take from wage owners. Generally, inflation is considered a secondary mechanism of income redistribution against the interest of wage owners).

Contrary to liberal manipulation, real growth expresses the increase in real production sectors, primarily in agriculture and in industry. If growth was real, it will actually constitute a solid basis to solve different problems, but on the condition of being real, and on the condition of being associated with a specific method for wealth distribution. That is because we have reached a point where it is no longer possible to achieve any real growth without a profound measure of social justice, i.e., without the redistribution of national income for the interest of wages.

Third: the "culture of investment" includes another central myth concerning growth. "Investment" is presented as a generator of growth, as if there is a linear equation that connects them together: the more investment increases, the more growth will increase. However, the truth is, especially in Syria, is a completely different thing. The general equation from which growth is calculated is the outcome of accumulation by the return of capital. "The culture of investment" works on misleading people through matching accumulation and investment. The reality is that accumulation is a particular type of investment: exclusively productive investment, i.e. investment in real production sectors, which is mainly: industry, agriculture and part of (transportation, construction, internal trade) which serves industry and agriculture.

The danger of other non-productive investment types does not only maximize inflation, rather they contribute to distorting the structure of economy and to a decline in growth. They can also cause negative growth; that is: contraction, loss and destruction which the state’s economic structures undergo, which is exactly what these types did throughout the last three decades.

One form of non-productive “investment”, practiced by the big-name thieves, is no more than a façade for hoarding the resources. For instance, they move around some of their assets to attack the real estate sector; they take possession of massive spaces at negligible cost and with huge leniencies on the pretext of investment; and they launch empty projects which result in enlarging the real estate bubble, expanding the general inflation, and raising house prices without contributing in reality to enhancing the housing capabilities; rather, owning a house becomes a dream for the majority of the Syrian people.

Fourth: there is a certain claim—sometimes implicit, other times explicit—within the prevalent “investment culture”; it is the suggestion that investment stems only from the private sector; the state and the public sector are helpless! This is not only a result of the years during the crisis, as it started when the vibe that the public sector is a loser and should be buried became relevant. However, the origin of the issue is that the aggregation is the part of the national income (produced by the public, private and parapublic sectors) which is being extracted to be run as a productive investment.

With this claim, the “investor” is viewed as a philanthropist, especially during current conditions, and the state and the society have to provide them with all leniencies, because they are the lifeline! The savior!

What Is New in the “New” Law?

Many people, rightfully, wonder: are there any more concessions undone for the “investors” so that the release of a new law whose purpose is to afford these concessions is required!?

The content of the law states that it solidifies all prior leniencies and concessions. Furthermore, it says that there are indeed new concessions that could be given. We can at the minimum consider Paragraph B of Article 3 that is concerned with determining the scope of the new law. This paragraph states that the rules apply to “any project based on public authorities presenting their private properties for investment with the private sector. The Participatory Law is not applied to such a project.”

In other words, this law, through this public formula, completes what the Participatory Law could not manage to do and opens the door wide for a semi-public denationalizing of what remains of the public authorities.

Amongst the new concessions is what the law dubs “private economic areas”. It defines them as “an investment area located within the customs territory in the Syrian Arab Republic made for the purpose of establishing a certain economic activity.”

The law also determines three kinds for such an area: developmental, specialized, and private. In short, these areas can turn into asylums for tax evasion in the country. For example, the law defines the developmental areas as “an administrative area considered an investment area for developmental purposes, for real estate development, or for reconstruction in case the area was damaged in the war.” The investor is afforded a tax cut of 75% for 10 years!

Hence, the big-name thieves and warmongers who have enough money and power to undertake such investments will make these investments almost for free and without any insurance regarding the prices for the real estate which they will build for those people whose houses were destroyed!

Realistically speaking, the bitter experience of the economic situation entails, for instance, that the state apparatus allows big-name merchants—till this moment—to appraise their commodities against a dollar value of around 4800 Syrian pounds, although the dollar value declined to about 3200 a few months back. It even offers them the leniencies with regards to importing and exporting, exemptions, tax cuts, etcetera.

To sum up, the new law represents a continuation of the Neoliberal rot the country has been witnessing. The culmination of this rot is that doors of non-productive “investment”, whose main theme could be hoarding, will be opened to the war-rich—including all the illegal-activity rich!

النسخة العربية