But so far only three companies (Banque BEMO Saudi Fransi, IBTF and Arab Bank Syria) have registered – a far cry from the 30 companies expected by the Syrian Deputy Prime Minister for Economic Affairs Abdallah Dardari last summer.

According to the DSE’s vice chairman, Bassel Hamwi, many potential candidates weren’t sure when the exchange – which has been postponed several times since 2006 – would officially open. They also remain cautious about how successful it will become. “We need to wait at least three months. Many of my clients, including most of the banks in Syria, are interested but the procedure is not easy, ” says Raed Karawani from Karawani Law, a firm that represents several companies applying for a DSE license.

In a country whose economy is dominated by family-owned enterprises, the DSE also means kicking old habits. Trading on the new exchange implies a degree of transparency and standard accounting practices, which many Syrian companies are not used to. As an incentive, a new tax law was passed a year ago to spur the transformation of family-owned general partnerships into joint-stock companies by providing them special tax treatment.

But Hamwi admits that to date, only a few companies have used the new law. “In order to register, the name and the national number of each shareholder is required,” he says. “But national numbers were introduced in Syria only three years ago. Many companies, that have thousands of shareholders, will need time to get these numbers.”

The human resources deficit in Syria’s financial field also remains an issue. “For the DSE to work efficiently, we need the expertise of foreign brokerage companies,” says Karawani, who explains that’s why the Syrian Commission for Financial Markets and Securities demands that Syrian firms have a “strategic partner” (i.e. a foreign company registered on another board with significant results) that holds around 20 percent of their capital.

Before the global meltdown, such requirements may have seemed a little over the top. But not today, at least according to Karawani. “It looks like we were right. Other markets lack transparency due to the increasing number of new instruments,” he says. “So after what happened last year, foreign investors want to go back to basics, which is what the DSE will offer them.”

But the DSE is expected to generate keen interest mostly among local companies which, in the midst of Syria’s economic reform and liberalization program, have posted impressive growth for the past few years and are in need of new investment opportunities. In the absence of a formal stock exchange, around 50 holding companies have undergone over-the-counter IPOs that were often oversubscribed.

“Although they’re not listed, many local companies are already public and their [good] share prices reflect the reality of the market. Trading is already happening, so it will only get better if it happens on a formal stock exchange,” says Hamwi. Institutions with an exceptionally high level of revenues and transparency will be allowed to register on the “big board.” Those that haven’t been audited during the past three years but are deemed transparent will have access to an alternate, development board.

“It’s not unusual for a Stock exchange to open with only three companies,” says Hamwi, who believes another 12 will be listed by the end of 2009. But he remains cautious. “It will take one to two years for confidence and awareness to grow,” he says. “By that time, the world’s economy will do better. Anyway, the restructuring of family owned businesses to be able to get listed will need that time as well.”

Before a wave of nationalization swept the country in the mid-1950s, many companies were listed and traded  in Syria. The new stock exchange’s humble start may be nothing on the same scale, but it will still achieve a major objective: to give the world a clear indication that the country is becoming more liberalized.           

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