OBG: Syria: Befriending Beijing

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Syria: Befriending Beijing
2 July 2007
Syria is looking to further strengthen its ties with Beijing to open up new markets and to encourage even higher levels of investment from China.

On June 26, the final session of the Third Sino-Syrian Joint Committee in Damascus saw the signing of a series of agreements, which included a document setting out terms of co-operation for economic and trade efforts at the international level and the activating clauses of previous investment and economic agreements in the fields of higher education, transport and communications.

The agreements, signed by Syria's Deputy Minister of Economy and Trade Ghassan Habash and Assistant Minister of Commerce Chen Jian on behalf of China, also foresee the extending of the terms of earlier agreements and a further opening up of trade opportunities between the two countries.

Syria announced that it had officially recognised China's market economy status, a move that strengthens Beijing's hand in the international trade arena. By granting market economy status, Damascus accepts that China has minimised state funding, prohibits monopolies and met other criteria established by the World Trade Organisation. In particular, market economy status helps protect a country against anti-dumping claims, something China has often been accused of.

"The recognition indicated that both Syria and China would develop bilateral economic and trade relations in accordance with the World Trade Organisation standards, which is bound to have a positive impact on future economic cooperation between the two countries," Chen said.

Although the two have had diplomatic ties since 1949, following the Chinese revolution, Syria's trade relations with China really took off after President Bashar al-Assad visited Beijing in 2004. Since then, bilateral trade has skyrocketed to $1.5bn last year, with officials tipping this to double by 2011, a far cry from the $100m of 2000. China has also become Syria's biggest imports partner, with $691m worth of Chinese goods and services being exported to Syria in 2006.

One of the proposals put forward during Chen's visit was to establish a Syrian-Chinese bank, a step that would facilitate joint ventures and investments in Syria by Chinese firms.

Deputy Prime Minister for Economic Affairs Abdallah al-Dadari used the delegation's visit to call for more Chinese companies to invest in Syria. The areas of particular interest are the industrial, information technology, petrochemicals, agriculture, textiles and energy sectors.

It is a call that has already been heeded. Chinese firms have a strong presence in Syria, much of it in the energy sector. One of the most high profile investors is the China National Petroleum Corporation (CNPC), which, in late 2005, joined forces with its partner, the Oil and Natural Gas Corporation of India, to buy a stake in the Al-Furat oil and gas fields in a $573m deal. CNPC is also involved in developing the Kbeibe oil field in Syria's northeast.

China also has investments in Syria's cement, fabrics and agro-industries, giving it one of the more diverse spreads of foreign direct investment in the country. While Syria is a source of raw material, especially cotton that China needs for its increasingly dominant textiles industry, China has the technology that Syria has needed to upgrade and expand its industrial base.

The economies of the two countries have much in common, though not, of course, in terms of scale, Each is shifting from fully centralised control to a system of increased private enterprise, albeit still closely regulated. Both are also trying to modernise their economies and provide employment for rapidly growing populations. Lastly, Syria and China are both trying to reach out to the Middle East.

Chen made it clear that Syria played an important part in China's policy of raising its profile in the region.

"Syria is an important Arab country and the Chinese government attaches great importance to developing trade and economic cooperation with it," he said. "China and the Arab countries have formed sound economic and trade cooperation and established a mature operation mechanism."

This mechanism could see the opening of free trade zones and a greater diversification of Chinese investment in the region, said Chen.

While it's $1.5bn bilateral trade with Syria represents just a fraction of the $1.8trn worth of business China did with the world last year, it is expanding to the benefit of both countries. Though the recently concluded Sino-Syrian trade talks did not bring about any major developments, there were another step in the not-so-long march of rapprochement between Damascus and Beijing.