Economy / Assessment
Economy / Assessment
Strength & Opportunities
Aleppo has the following strengths and opportunities that can be exploited in the future to improve its competitive advantage:
- Entrepreneurship is strong.
- Cost of living is comparatively low.
- Water resources are plentiful.
- Aleppo's large agricultural hinterland provides opportunities.
- Syria's State-owned enterprises (SOE) policies are an Aleppo advantage.
- Syria Turkey Free Trade Agreement has future potential
Weaknesses & Threats
Aleppo's competitive position is being seriously eroded and it is under the following threats:
- The economic metropolitan size of Aleppo is smaller than other competitor cities, and it has less product variety and choice.
- The dynamics of Aleppo's economy are severely slowed down by the weak access to central government in Damascus
- The city's "old industries" are seeing a remarkable decline, and this decline is likely to continue as the economy continues to develop.
- Finance and insurance services remain underdeveloped and fail to serve Aleppo's current and potential use of trading and investment activities.
- National and international air access to Aleppo is very weak, and Aleppo's airport standards are woefully inadequate.
- Aleppo is not widely recognized outside Syria. This is creating a clear disadvantage for the city in manufacturing as much as in tourism
- Aleppo's labor force lacks a demographic dividend; its population's share of working age people is low, due to weak female participation and high percentage of youth.
- Aleppo's labor force training and education levels are very low.
- Leisure resources are very limited in the city affecting both tourism and the quality of life for residents.
Aleppo is a city with more than 2.1 million inhabitants half of them are youth! It is the manufacturing center of Syria. The private sector dominates the city's economy, reflecting the population's a high degree of entrepreneurship. However, income levels are low, due to low educational levels, high illiteracy, and low women participation.
The Facts & Figures section below is based on 2004 Census data, and it helps to take a glimpse at Aleppo's competitive position in comparison with other Syrian cities.
Aleppo is the manufacturing powerhouse of Syria; it is home to 30-40 percent of national manufacturing. The City's export share is around 35 percent of Syria's total non-oil exports. Moreover, Aleppo dominates both textiles and pharmaceuticals industries in the country. The city has a substantial presence in all four subsectors of manufacturing: textiles, chemical, engineering and agro-food sector.
In Syria, more than 30 percent of firms work in the textile sector, and the textile sector produces a little over third of the manufacturing production. Aleppo is the home to about 35 percent of Syria's textile firms.
However, the textile sector is suffering from a downturn on employment, production, and exports. Many textile producers have reported huge drops in exports and severe losses; some have closed business; some are considering moving to other markets such as Egypt. Most have halved the number of shifts or even closed down part time with a severe impact on employment. Reasons for this decline are:
- Competition from China: industrialists did not anticipate adequately the threat of China; labor costs are much lower in China and labor and product quality is higher. Internationally, the EU lowered its import tariffs on Chinese imports this has diverted trade to China from older suppliers like Syria. Domestically, Syria has lowered its import tariffs on textiles, and increased quotas. consequently local products share in the Syrian domestic market has declined from a virtual monopoly to perhaps less than 30 percent
- the World-wide Recession has reduced demand for all type of consumer goods both in domestic and international markets
- the Political relations of Syria with the US, European Union, and France is making it difficult to buy Syrian imports in overseas markets
- The Syrian Government has raised the price of energy and the wages of public workers. Both have significantly raised production costs.
- investment climate in Syria is still much worse than in competing countries, like Egypt, Tunisia, or Morocco
- excessive reliance during the 1990s on Russian and ex-Soviet Union markets
- authorities that assess profit taxes based on turnover, rather than actual profits. Hence, during the recession companies had to pay high taxes despite evidence of losses
We believe that the current downturn is a permanent change, and not simply a short-term problem as a result of the world-wide recession. Aleppo needs to shift production to higher-end niche market that require increased quality, rapid reaction, a short term market cycle, low production batches, close contacts with markets and buyers, excellent transport and logistics to bring products to market quickly, improved design capacity, and a more skilled labor force.
The chemical sector has a long tradition in Aleppo, as it supplied cosmetics, perfumes and soaps (for which Aleppo is famous'), as well as dyes for textiles and other products. Today, the chemical sector produces a growing variety of products including plastic products; plastic textile linens; rubber products; adhesives; shampoos, soaps and cleaners; cosmetics, fertilizers, pesticides, and pharmaceuticals. The chemical sector in the first half of 2009 accounted for more than 52.3 percent of all exports from Aleppo, pharmaceuticals, makes up most of these exports.
Syria has the largest number of drug manufacturers in the Arab world, although the industry is a relatively recent arrival in Syria, dating back just to the late 1980s. There are currently 60 private sector companies, plus a small number of public sector companies. About half of the 60 national firms are located in Aleppo, including seven of the larger ones, making Aleppo the producer of 60 percent of pharmaceutical production in value terms.
Syria is an agricultural country. In 2007, 21 percent of its GDP was earned in the agricultural sector, the agro-food industry produced 24.5 percent of national manufacturing net domestic production and 23 percent of national agricultural exports.
Aleppo is surrounded by agriculture, and it has a city population of 2.1 million and a governorate population of 4.4 million (2004 Census data). This has enabled the city to host both primary agro processing and secondary and tertiary agro processing industries. Moreover, Aleppo has long traditions in some agro-food processing production (like olive oil).
Syria has virtually unlimited tourism potential, this potential is fueled by its civilization, which is one of the most ancient on earth, and by its natural environment of coast, mountains and desert, and by its historical sites that have global cultural and religious significance.
Aleppo is one of the jewels of Syria; however, its share in total tourism is unexpectedly small. Moreover, most of Aleppo's tourism is not related to its cultural, religious or historical assets, but rather either to its business and conventions, or to visits for personal and family reasons.
The tourism industry in Aleppo faces a lot of challenges including the inadequacy of its airport, its limited hotel capacity, its poor night life and entertainment scene, weak marketing, and poor human resource capacity.
The traditional handicraft sector in Aleppo includes a wide variety of materials, including textiles, garments, leather goods, embroidery, wooden boxes, furniture, copper, and metal goods. Textile dominates the sector with 37.3 percent of all businesses, and 44.7 percent of all workers in the Old City of Aleppo.
The traditional handicrafts in Aleppo have lost much business, and the number of craftsmen that practice these crafts is constantly declining. We attribute this to several reasons such as: illegal imports, lack of innovation, lack of international exposure, communication barriers, and lack of Branding.
We don't, yet, have a good idea on the business services that the private sector offers in Aleppo. However, a look at business services that are provided by the public sector or by semi-public institutions, such as the three Aleppo chambers, shows that the following services are missing:
- Export promotion
- International business matchmaking
- Information about international trade and law
- Information about international trade practices
- International arbitration and dispute settlement
- Training to increase international competitiveness
- Product design
- Technical product development
- Quality control and quality assurance in the manufacturing process
- International management training
- Training for international marketing
- International market research
- Export insurance
- Export loans
- Incubator services for new companies
- Product testing
- Infrastructure services
- Market research and data collection
Following the banking reform of 2003, an increasing number of international banks have established Syrian affiliates since 2004. And the insurance industry also is seeing rapid growth. However, the financial and insurance industry in Aleppo still faces the following challenges:
- Bank Business Lending doesn't match Aleppo's development needs.
- Aleppo does not host headquarters for banks and insurance companies. And local branches can only run routine consumer operations.
- The number of branch offices for banks and insurance companies is small
- No stock exchange
Aleppo has the second largest international in Syria, and the local business need this airport to be efficient enough to provide the international access they need. However, the Aleppo Airport faces the many challenges, including:
- The airports is owned and managed by public authorities. There is no competition for passengers or freight, and hence little incentive to produce better services, to attract a greater number of passengers, or a greater number of airlines. There is no price competition as prices are set by national authorities with little regard to demand or supply.
- Traffic is weak; Aleppo landed roughly 10 planes a day, and had 1,136 passenger arrivals and departures daily. No cargo is unloaded in Aleppo and the total freight throughput was 2.3 tons per day
- Aleppo Airport has very few direct connections to the rest of the world, and virtually no freight connections
- A small airport size, and an outdated layout and lack of character
- Lack of a business lounge and other services for business class travelers, including a lack of internet services;
- Management problems including broken phones and poor hygiene of toilets and public facilities;
- Lack of travel services including information and transfer desks;
- Lack of an airport hotel to handle late arriving or transit passengers.
Sheikh Najjar is located some 10 km to the north east of Aleppo city boundaries. It is a city independent of the Aleppo City Council. It operates under a Board with 15 members headed by the Governor, and managed by a General Manager. It includes industry, housing, infrastructure, green areas, commercial services, and administrative areas. Its industrial area is divided into three zones: light and non-polluting industry, medium sized industry, and heavy industry. By the start of June 2009, 413 industrial firms were already operating in the city and an additional 1,129 were under construction.