Проектное финансирование в Сирии: обзор и основные факторы

Syria, officially the Syrian Arab Republic, is a country in the middle east, with a significant location at the heart of the trade site of the three continents of Asia, Europe, and Africa. Besides, the diversity of the terrain and its coastline on the Mediterranean Sea, making it one of the most attractive areas for investment.
The conflict in Syria has been going on for nine years. The results were brutal, main cities were severely damaged, infrastructure has been destroyed, factories and most services have been shut down, and the Syrian economy has shifted from a state economy to an informal economy.
It is difficult to give a precise figure on the cost of the crisis in Syria since March 2011, which may continue to increase, as the crisis is not over yet, not to mention the inability to count the current damage to infrastructure and thousands of residential, commercial, and industrial facilities.
ESCWA estimated the scale of destruction in physical capital and its sectoral distribution at more than $388 bn. However, statistics from local authorities, research centres, and international organisations show that the cost of the war on Syria is more than $400 bn, this amount is more than seven times the GDP of Syria in 2010 ($60.2 bn), the year before the crisis, which later led to a contraction of GDP of more than 60%.
To move to the new political and economic stage (stage of reconstruction). The post-crisis planners in Syria face many questions that revolve around the nature, foundations, objectives, and scope of the reconstruction process and its key participants. One of the most critical questions is how to finance the reconstruction process and what resources are available to the Syrian government to undertake such an enormous project.
In light of the limited internal options related to the ability to secure financial sources, the Syrian government may adopt a mechanism called “project finance”.
Despite the increasing trend in using project finance in the world, published empirical studies on the topic are limited.1 The majority of these published articles and working papers are theoretical rather than practical studies, focusing primarily on a detailed examination of narrow individual aspects such as risk management, types of interaction schemes used between participants, contractual framework, and credit structure.
This thesis investigates the role of project finance as a driver of economic growth; it is beneficial to the least developed economies as it can compensate for the lack of domestic financial
3
1 Megginson W.L. Introduction to the special issue on project finance. Review of Financial Economics, 2010.
development.2 Over the years, project finance proved to be one of the innovative techniques in bridging the resource constraints faced by most governments in financing large developmental investments.
Project finance is unique in its contractual structure; it can substitute for underdeveloped financial markets. It is an efficient way to fund capital-intensive and strategically important projects such as long-term infrastructure, industrial, or public services projects. This financing method often funds the development of energy, natural resource, and social infrastructure assets, as well as the provision of associated public services. Kleimeier and Megginson indicated that project finance is mainly used in infrastructure and the utility sector, where it is easy to create project structures with identified cash flow streams.3 H. Davis’ work comprises 38 case studies of project financing covering power, water, resources, and infrastructure projects in various countries, which illustrate different aspects of project finance across the world.4
Project finance may contribute to the real economy in both direct and indirect ways. Directly, it contributes to GDP formation by increasing an economy’s stock of capital and as an additional input in other sectors’ production processes. Indirectly, project finance increases total factor productivity by reducing transaction and other costs and generating positive externalities, such as those derived from roads and public infrastructure, allowing more efficient use of conventional productive inputs. The lack of an adequate infrastructure can pose big constraints on growth.5
The relevance of the thesis. In order to accelerate the Syrian economy during the reconstruction phase, it is necessary to increase investment in capital-intensive and strategically important projects, such as long-term infrastructure, industrial projects, and utilities, which play a role in economic development progress.
The success of investment projects determines the effectiveness of the financing model; therefore, it is urgent to determine an adequate and modern mechanism for financing long-term high- risk infrastructure projects at the reconstruction stage. Such a mechanism can be project finance, which will accelerate the country’s investment development, and increase the competitiveness of the economy.
Literature review. The formation of the thesis was influenced by the work of foreign and Russian authors on project financing. The research is made up of materials from the World Bank, the
2 Kleimeier S., Versteeg R. Project finance as a driver of economic growth in low-income countries. 2010. P.2.
3 Kleimeier S., Megginson W.L. Are project finance loans different from other syndicated credits? Journal of Applied Corporate Finance, 2000.
4 Davis H.A. Project finance: Practical case studies. London: Euromoney Publications, 1996.
5 Chan-Lau J.A., Kelhoffer K., Zhang J. Long-Run Economic Growth: Does Project Finance Matter 2016. P.3.
4

International Monetary Fund, the International Finance Corporation, international consulting and rating agencies, materials from books and journal articles, foreign periodicals Project Finance Magazine, the Central Bureau of Statistics in Syria, Syrian Central Bank, Syrian Ministry of Finance, and the Syrian Investment Agency.
P. Nevitt was one of the first authors to justify project financing, presenting the general theory of project financing. Many texts (S. Gatti, F. Fabozzi, A. Fight, M. Khan, R. Parra, M. Morrison, etc.) contain detailed descriptions, analyses, and examples of project financing, the works of B. Esti are highly specialized and mainly devoted to risk analysis. While the materials published by international financial organizations, such as the World Bank, are often presented in the form of databases, which must be analysed by the reader.
Among the works devoted to project financing in Russia, it is necessary to note the works of I. Nikonova, A. Smirnov, G. Kalmykova, V. Kasatonov, D. Morozov, V. Fauzer, I. Rodionov, etc. They examined the main features of project financing, presented practical examples of project financing in the CIS and abroad.6 The modern tools for managing risks arising from implementing large investment projects and ways to minimize them are described.
Problem statement. The difficulty of the availability of funding and scarcity of financial resources and expertise has always been a barrier to the achievement of several development projects. It will be one of the obstacles to the reconstruction process in the Syrian Arab Republic, which require substantial financial resources, human expertise, material, and other equipment, are not available to the Syrian government.
The Syrian government issued many investment legislations that encourage investment, starting with the Investment Promotion Law No. 10 of 1991 and its amendments. The Syrian government also formed “The Syrian Investment Authority” under Legislative Decree No. 9 of 2007; this was accompanied by the issuance of Investment Promotion Decree No. 8 of 2007, which replaced the Investment Law No. 10 of 1991 and its amendments.
In general, these procedures aimed at encouraging foreign investments and granting investors generous tax incentives and exemptions. It provided investors with many facilities enabling the investor to set up investment projects with competitive economic interest.
6 The Commonwealth of Independent States: Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, and Uzbekistan.
5

The research problem is mainly the current crisis in Syria, and the resulting destruction and losses, which in the next stage inevitably necessitate planning for the reconstruction process and how to secure funding for this process.
The purpose of the thesis. The purpose of the research is the justification of an integrated approach to project finance of investment reconstruction projects in Syria.
In general, this research aims to solve the following problems:
1. To structure scientific approaches to understanding the essence of project finance; (1.1+1.2)
2. Identify the advantages and disadvantages of project finance in comparison with other models
for financing investment projects; (1.3)
3. Identify the features of project finance in the world and Arab countries, mainly in the GCC
region; (2.1+2.2+2.3)
4. Clarify the reality of the Syrian economy since the beginning of the war in 2011, in terms of
losses and damages, size of the available national resources, required investments, and the
necessary financing; (3.1+3.2)
5. Analyse the investment environment in Syria and clarification of investment opportunities
available to capital; (3.3)
6. Substantiate the author’s approach to the implementation of project finance in Syria using model
mathematical tools; (3.2+3.3+3.4)
Research methodology. The theoretical basis of the research is the work of leading experts in
the field of project finance, corporate finance theory, Islamic finance, financial markets, economic and mathematical modelling, as well as laws and regulations of the Syrian government and many Arab countries.
The thesis employed methods of scientific knowledge as observation, statistical analysis, regression modelling, theoretical analysis, comparative analysis, economic-statistical analyses, the generalization of scientific and statistical data, and presentation of theoretical and empirical knowledge in the form of a scientific text. The author analysed historical data on the size, dynamics, and structure of project financing in the world, particularly in the GCC countries. The economic indicators data that reflects the effects of the Syrian economic crisis has also been investigated.
Significance of the research. The results of this research can contribute effectively to shed light on the international experience of project finance and clarify the strengths and weaknesses in them. To enable the necessary reforms to be introduced in the policies used in planning the reconstruction process to advance and develop the investment climate.
6

This research may prove to be useful in identifying the investment situation in Syria, highlighting the advantages of project finance and the purpose of attracting it. To recommend the most important procedures, which may help to attract and develop project finance in Syria.
The practical significance of the thesis. The thesis’s practical significance lies in a comprehensive study of the possibility of applying project financing at the reconstruction stage in Syria. The proposed project finance mechanism can be reviewed and applied by the Syrian government’s legislative and executive bodies.
The thesis presents an ideology of creating an evaluation of an investment program within the framework of a project financing system in the Syrian reconstruction phase.
Publications on the topic of the thesis. The author published an article in a journal included in the list of Russian peer-reviewed scientific publications approved by the Higher Attestation Commission of the Russian Federation.
The volume and structure of the thesis. The thesis consists of an introduction, three chapters, a conclusion, and the list of references, including 112 titles, five appendices. The content of the work is set out on 74 pages, including 13 tables, 13 figures.