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IN SYRIA, SIGNS OF MODERN RETAIL LIFE APPEAR

By Curt Hazlett

Luxury malls are sprouting like desert wildflowers in Saudi Arabia and the United Arab Emirates. Retail developments are springing up like oases in Bahrain, Kuwait, Oman and Qatar. In fact, nearly every oil-rich Middle East country is virtually awash in Armani.

Yet this does not hold true absolutely everywhere in the region. Consider Syria, a North Dakota-size country in one of the most geopolitically contentious areas of the world, and which shares borders with Iraq, Israel, Jordan, Lebanon and Turkey. Syria’s 18 million residents have access to only two small malls, and thus far the hypermarket giants have given Syria a wide berth. “Syria is still quite undeveloped in Western retail terms when compared with the leading Gulf States or even Jordan and Lebanon, despite the current economic downturn in the latter following the fallout from the Israeli bombing last year,” said Simon Thomson, whose U.K.-based Retail International consults in the region.

But signs of modern retail life are beginning to appear. Damasquino Mall, a hypermarket-anchored, 240,000-square-foot enclosed mall is being built in an upper-middle-class neighborhood of Damascus, the Syrian capital. And Dubai, United Arab Emirates-based Emaar Properties has broken ground on a $500 million, mixed-use project it says will contain a 450,000-square-foot mall “inspired by the souks of old Damascus.” On the city’s outskirts yet another huge, mixed-use project is planned, a project of Dubai-based Majid Al Futtaim Group.

Times clearly are changing in Damascus, considered to be the oldest continuously inhabited city in the world. “There are some major projects in the pipeline for Syria, mostly with development expertise and finance from the Gulf and as joint ventures with Syrian government bodies,” said Thomson. How many? “Around 10 malls should be coming in the next two to three years,” said Muhannad Al Mallah, general manager of Damasquino Mall. A few kinks must be worked out, though. A resurgence in Syria’s economy, caused in part by higher oil prices and increased foreign investment, has caused a construction boom and thus a shortage of concrete. A former Syrian economics minister pointed out still another problem at a conference on Middle Eastern economies in March. “Horrible bureaucracy and rampant corruption,” he said, is holding Syria back.

Indeed, few would describe conditions in Syria as easy. President Bashar al-Assad, a British-trained ophthalmologist who took power after the death of his father, Hafez al-Assad, in 2000, is head of Syria’s only legal political party, the Baath Party. He was at first considered a reformer — he allowed Syrians to access the Internet for the first time in 2000 — but has since toughened his stance on political matters.

Adding to the country’s problems is the Iraq war, which has flooded Syria with an estimated 1 million refugees. The state-controlled economy, a leftover from Syria’s close ties with the former Soviet Union, has been straining to accommodate them. The economy managed to grow 2.9 percent last year, largely on higher oil prices, since oil generates about 70 percent of the country’s export revenues. But oil production is falling fast, and Syria is expected to be an importer of energy within a decade. Then there is the American ban on exports to Syria, which the Bush administration imposed in 2004 because of Syria’s long occupation of Lebanon and alleged efforts to produce weapons of mass destruction. The sanctions have forced the withdrawal of U.S. oil companies, though Asian and Russian companies have replaced them.

Despite these problems, new investment is arriving. The government has cut interest rates, approved the imports of foreign goods (though with high tariffs) and allowed private banks to open. Among the results has been the mini-boom in retail development. At Damasquino Mall, which is scheduled to open next April, about 60 percent of the space will be devoted to neighborhood services and entertainment and the remainder to fashion and accessories, says Mallah. The developers are holding discussions with possible hypermarket anchors, including French giant Carrefour, which has no stores yet in Syria.

The year-ago change in Syrian trade law has improved the new Damasquino Mall’s prospects. “Before that, we could not import anything,” Mallah said. “Now we are allowed to import any brand from anywhere in the world.” But there’s a downside: The tariff is 50 percent on most items. “That’s why we are trying to choose middle-range brands, because the high-end would be too high with the tax,” he said.

The city’s first shopping center, the 90,000-square-foot City Mall, opened five years ago; the next, targeting lower- and middle-income consumers, opened in a neighborhood about nine miles (15 kilometers) outside the city. Both centers offer largely local brands.

Mallah says he senses excitement among consumers at the prospect of a new, larger, more upscale shopping center featuring more international brands. There’s a reason for their interest, and it involves the politics of the region.“Before, the closest market was in Lebanon,” he said. (Beirut is less than 50 miles from Damascus.) But since the withdrawal of Syrian troops from Lebanon two years ago, “not a lot of people are going there. Either they fly to a Gulf country or to Europe. They are excited to find the kinds of brands that they once found in Lebanon right here.”

The Emaar Properties shopping center is part of a huge project called The Eighth Gate, in the Yafour area, some 15 minutes from downtown, and is being designed along the same lines as the company’s Dubai projects. In December Majid Al Futtaim Group, one of Dubai’s biggest developers, announced that it would invest over $2 billion to build a mixed-use project in the Sabboura neighborhood, just outside Damascus. This would contain 200,000 square feet of retail. Part of the plan is to create an attraction alongside the Beirut-Damascus Highway. “Syria has great potential,” said Ahmed Bin Brek, the company’s group vice president of corporate development. “We intend to be part of the future success of Syria.”