VIII.  TRADE AND PROJECT FINANCING

Syria's government-controlled banking system consists of five banks, the
Commercial Bank of Syria, the Agricultural Cooperative Bank, the Industrial
Bank, the Real Estate Bank, and the People's Credit Bank.  The Central Bank of
Syria oversees banking operations and manages the money supply.  According to
Syrian bank regulations, only the Central Bank and the Commercial Bank may
engage in international transactions and hold foreign exchange deposits
outside Syria.  Within Syria, only the Commercial Bank may sell Syrian pounds
for foreign currencies, but with only a few exceptions, one cannot sell unused
Syrian pounds back to the Commercial Bank.  Moreover, Law 24 of 1986
criminalizes the private exchange of foreign currencies and Syrian pounds.

Besides monopolizing the exchange of foreign currencies, the Syrian government
maintains one of the last remaining fixed, multiple exchange rate systems in
the world.  At present the government exchanges money at six different rates,
ranging from the "official" rate of 11.2 SP/USD, to the neighboring country
rate of 42 SP/USD.  However, virtually all trade transactions occur at either
the neighboring country rate, or at the "offshore" rate, negotiated in the
free markets of Amman or Beirut.  That rate varies between 48 and 51 SP/USD.

In general, private Syrian traders finance imports from their own resources or
through their own credit.  Contracts with the private sector are negotiated on
an individual basis with little or no interference from the government.  All
documentary transactions for imports must be by a letter of credit opened at
the Commercial Bank of Syria.  Typically, the Bank requires the importer to
cover 100 percent of the transaction from his own resources offshore or from
funds generated by exports.  Syrian importers often require that one of the
following two clauses be added to the proforma invoices and bills of lading as
payment conditions:  "free of payment" or "180-day credit facilities."  In
this case the importer pays through his offshore bank, either cash in advance,
or via L/C, and the bill of lading is then sent to the Commercial Bank of
Syria.  In such instances, U.S. exporters are well advised to avoid delayed
payment or the "cash against documents" mechanism, since the U.S. exporter has
no protection under such a transaction and the Commercial Bank of Syria has no
authority to release funds under such a clause.  Moreover, the importer could
simply walk away from the contract even after the goods are shipped.

Alternatively, an importer may use foreign exchange earned from exports
(export dollars) and deposited in the Commercial Bank of Syria.  The foreign
exchange used to cover an L/C opened at the Commercial Bank may be his own, or
purchased in an informal secondary market.  In March 1994, the Syrian
government transferred several importable goods from the list of items that
can be financed from offshore accounts to the list of items that must be
purchased with export dollars.  Whatever the source of funding, it is strongly
recommended that U.S. exporters sell their goods to Syrians under "cash in
advance" or "confirmed irrevocable letters of credit" until a satisfactory
relationship with the Syrian importer has been established.

Because Syria remains on the list of state supporters of terrorism, Eximbank
financing and insurance is unavailable to U.S. exporters.  For the same
reason, USAID is not present in Syria.  Moreover, the World Bank will not fund
projects in Syria because of unpaid arrears on Syria's debt to that
institution.  However, Syria has received some project financing from Japan,
the EU, and various Arab national and
multinational institutions.  Projects financed include upgrading the national
telephone system, construction of several electricity power plants, and
purchase of tractors.

Banks with Correspondent U.S. Banking Arrangements:

-  Central Bank of Syria
-  Commercial Bank of Syria.