Improving the Legal Framework for Investments in New Syria: A Roadmap Toward Sustainable Development

Introduction: From Crisis to Opportunity

For decades, foreign direct investments (FDI) in Syria faced structural challenges stemming from corruption, weak legal frameworks, and a lack of transparency in project management. This environment favored the interests of the political elite at the expense of inclusive growth and social justice. With the fall of the previous regime, a historic opportunity emerges for a new Syria to redesign its economy and establish a legal framework that balances attracting investments with safeguarding national interests.

The Importance of a New Legal Framework

A legal framework is not just a regulatory tool but a critical factor for attracting investments and promoting sustainable development. Global experiences demonstrate that countries with transparent and robust legal systems achieve a balance between attracting foreign capital and ensuring social and economic benefits.

Recommendations: Building the Ideal Legal Framework

1. Enhancing Transparency in Investment Contracts

• Why?

Transparency builds trust between the government and investors while curbing corruption. It also enables local communities to understand the benefits of investments.

• How?

• Create digital platforms to publish investment contracts transparently.

• Ensure civil society participation in discussions of major projects before approval.

• Example:

The European Investment Bank (EIB) adopts a transparency policy granting public access to project-related documents.

2. Establishing Binding Performance Requirements

• Why?

To ensure investments create local jobs and foster technology transfer, rather than merely depleting resources.

• How?

• Mandate foreign companies to hire a specific percentage of local labor.

• Require partnerships with local SMEs.

• Example:

Many developing nations implement similar conditions to ensure their economies benefit from FDI.

3. Creating Independent Oversight Bodies

• Why?

To ensure compliance with laws and prevent illegal exploitation of national resources.

• How?

• Establish a national body to monitor investment contracts.

• Empower this body to revoke licenses or impose fines for violations.

• Example:

The World Bank has independent complaint mechanisms to investigate unlawful projects and practices.

4. Protecting Strategic Sectors

• Why?

To prevent the depletion of strategic resources like oil and gas and ensure revenues remain within the local economy.

• How?

• Restrict foreign investment in critical sectors.

• Impose limits on foreign ownership in vital industries.

5. Reviewing and Renegotiating Old Agreements

• Why?

Many prior agreements fail to serve national interests.

• How?

• Form a specialized committee to renegotiate these agreements.

• Use best practices to balance investor rights and national sovereignty.

• Example:

South Africa renegotiated old agreements to align with its developmental priorities.

6. Promoting Sustainability and Social Responsibility

• Why?

To ensure investments do not harm the environment or exacerbate social inequalities.

• How?

• Include sustainability clauses in investment contracts.

• Require companies to adhere to strict environmental and social standards.

• Example:

Latin American countries adopted rigorous environmental and social standards to mitigate the negative impacts of projects.

7. Encouraging Economic and Commercial Arbitration

• Why?

Investment disputes require fast and effective mechanisms for resolution, avoiding the complexities of traditional courts. Arbitration fosters a stable business environment and investor confidence.

• How?

• Establish a national center for economic and commercial arbitration specializing in investment disputes.

• Learn from Kuwait’s successful arbitration model, which attracts international firms.

• Define clear laws for arbitration procedures ensuring transparency and fairness.

• Train qualified arbitrators for handling international investment cases.

• Include arbitration clauses in all major investment contracts.

• Example:

Kuwait’s arbitration centers have enhanced the country’s appeal as an investment destination by resolving disputes efficiently.

8. Launching Initiatives to Support Local Communities

• Why?

To ensure local communities benefit from investment projects.

• How?

• Require companies to support education, healthcare, and infrastructure in project areas.

9. Adopting Financial Reforms and Trade Incentives

• Why?

Improving the financial system facilitates access to local capital and boosts economic confidence.

• How?

• Improve foreign exchange management to reduce currency volatility.

• Lower trade barriers to promote free trade.

• Example:

Economic reforms in Chile attracted substantial foreign investments.

10. Improving Intellectual Property Protection

• Why?

Investors in tech sectors need guarantees for intellectual property rights.

• How?

• Update intellectual property protection laws.

• Strengthen enforcement against counterfeiting and piracy.

• Example:

India’s policies on intellectual property attracted global tech companies.

11. Focusing on Digital Infrastructure

• Why?

Investing in digital infrastructure attracts tech companies and creates a modern business environment.

• How?

• Establish digital free zones.

• Offer affordable high-speed internet.

• Example:

Malaysia’s “Cyberjaya City” serves as a digital infrastructure hub.

12. Strengthening Regional Policies

• Why?

Regional cooperation enhances economic stability and attracts investors through market integration.

• How?

• Sign free trade agreements with neighboring countries.

• Coordinate economic policies with regional nations.

• Example:

ASEAN countries successfully attracted investments by creating a common market.

13. Restricting Profit Repatriation

• Why?

To ensure a significant portion of profits remains within the national economy.

• How?

• Impose taxes on profits transferred abroad.

• Offer incentives for reinvesting profits in Syria.

14. Reforming Energy and Water Sectors

• Why?

To attract necessary investments for meeting rising local demand and improving efficiency.

• How?

• Open private sector investments in power generation and distribution.

• Offer public-private partnership contracts for water resource management.

• Example:

South Africa improved its electricity sector through public-private partnerships.

Vision for the Future: Responsible Investments to Build a New Syria

The new legal framework is not just a regulatory tool but the cornerstone of building a modern Syria. By implementing these recommendations, Syria can become an attractive and sustainable investment destination, fostering economic and social justice while protecting the rights of future generations.

References

1. Olivier De Schutter, Johan Swinnen, Jan Wouters - Foreign Direct Investment and Human Development.

2. James Gerber - A Great Deal of Ruin.

3. James Gerber - International Economics.

4. Glen Biglaiser and Karl DeRouen Jr. - Economic Reforms and Inflows of Foreign Direct Investment in Latin America.

5. Ashoka Mody - Foreign Direct Investment and the World Economy.