Construction-related companies in Turkey are expected to play a key role in the reconstruction of Syria, with stocks of Istanbul-listed firms continuing to rally as investors bet they will win contracts in redeveloping the war-torn country.
Shares of construction and building material firms, including Oyak Cement, Cimsa, Limak Cement and Enka Insaat, have been trading higher since December, when Bashar Al Assad's regime was toppled and a new government headed by Ahmad Al Shara took office in Damascus.
“Turkish companies will take a pivotal role in reconstruction of Syria, be it construction companies, energy companies or food production firms ... for building bridges, tunnels or any other infrastructure,” Kanat Kutluk, president of the Turkish Business Council in Dubai and Northern Emirates, told The National.
“Turkish companies have the financial muscle and the experience and technology ... and will play a key role. Political willingness is also there, as Turkey played a role in the liberation of Syria in the last phase, and due to that, we believe that there will be a positive discrimination towards Turkish companies.”
The Syrian economy has been devastated by the civil war, with the UN's Development Programme estimating cumulative losses at more $923 billion at the end of last year, which includes physical damage and economic losses.
"The scale of economic devastation is immense," the UNDP said. "When compared to Syria’s current gross domestic product – estimated at approximately $29 billion – the figures illustrate the monumental challenge of reconstruction ahead."
Roads, bridges, power plants, grain mills, storage depots and bakeries have been damaged or destroyed, often deliberately targeted by warring parties to weaken or harm opponents.
The country's economy is forecast to have contracted by 1.5 per cent for 2024, extending the 1.2 per cent decline of the previous year, a World Bank report said in May. According to official statistics, Syria’s GDP shrank by 54 per cent between 2010 and 2021. The impact of the civil war could be much larger, the World Bank said.
Ankara and Damascus are strengthening ties after the downfall of the Assad regime, with Syria’s newly appointed President Mr Al Shara visiting Turkey in February for talks on rebuilding the country. He also invited Turkish President Recep Tayyip Erdogan to Damascus in a sign of warming relations between the two leaders.
Turkey played a key role in supporting rebels against Mr Al Assad throughout Syria's civil war and Mr Al Shara is the leader of Hayat Tahrir Al Sham, which played the main role in bringing down the previous regime.
Gaziantep, a Turkish city bordering Syria, has emerged as an important industrial centre with a large presence of steel, construction and food production firms, and will play an important role in rebuilding Syria, Mr Kutluk said.
“I would expect we will probably get a nice share, not only because of the political aspects, but also because of the competitiveness of prices and the logistics, because Syria is our longest border with Turkey," he added. "And if you look at the surrounding countries, none of them have the industries that we have [to support the country in its reconstruction]."
TAV Airports, which has built airports in a number of countries, could find new opportunities in Turkey along with other companies, he said. “I am seeing tenders for many, many things and I believe they [Turkish firms] will take a role.”
Last month, Turkey sent a team of 25 technicians to Syria to work on rebuilding Damascus International Airport, with Ankara supplying security equipment and training for staff.
Turkish exports to Syria are forecast to increase more than 90 per cent this year and will exceed $20 billion by the end of 2028 amid new opportunities, said Ethan Bright, an economist at Oxford Economics.
"With the necessary capital and geographical proximity, Turkish construction firms are expected to secure a substantial share of reconstruction contracts," he added.
Rebuilding work involving damaged Syrian infrastructure, housing, energy grids and transport networks are among the important contracts that Turkish firms are expected to secure, said Hassan Fawaz, chairman and founder of GivTrade, an international broker.
The total cost of rebuilding the country is estimated at about $400 billion, Mr Fawaz said.
“Specific opportunities include cement and steel exports, with companies like Limak Cement and Iskenderun Demir Celik leading the way,” he added. “Companies like Enka Insaat, Yapı Merkezi and Emlak Konut are well-positioned for high-value projects, leveraging experience from Turkey's 2023 earthquake recovery.”
However, with the Syrian reconstruction likely to cost between $250 billion and $400 billion, it is “highly unlikely that Turkey will be able to provide reconstruction aid anywhere near this amount, nor fund initiatives independently”, S&P Global Market Intelligence said.
“We foresee potential agreements with regional partners to provide reconstruction aid or financing ... financial backing will be essential.”
Question of funding
However, funding will be one of the key challenges for the new regime as many of the international sanctions imposed on the country in the past are yet to be lifted, hampering fresh investment in Syria.
The UK government this month removed 24 Syrian entities from its sanctions list and unfroze their assets. Among those to have sanctions lifted were the Central Bank of Syria, petroleum companies and flag carrier Syrian Airlines.
The move came after EU countries suspended a range of sanctions on Damascus last month, including restrictions related to energy, banking, transport and reconstruction.
They also lifted the frozen assets of five banks, eased restrictions on Syria's central bank and indefinitely extended an exemption to facilitate the delivery of humanitarian aid.
However, US sanctions imposed on the country in 2019 as part of the Caesar Act remain in place. The Caesar Act, named after a Syrian photographer who documented war crimes against the population, places a ban on individuals and companies dealing with the former Syrian regime and its associates across entire economic sectors.
“International aid will play a key role in reconstruction efforts, some of which is likely to be geopolitically driven, but current sanctions have been known to complicate the flow of this,” Mr Bright said.
Meanwhile, building firms in the Middle East, including those based in Gulf countries, are also expected to benefit from Syria reconstruction efforts. Mr Al Shara visited Saudi Arabia last month and discussed ways to rebuild his country's war-damaged economy in a meeting with Crown Prince Mohammed bin Salman in Riyadh.
The discussions focused on expanding partnerships in the fields of energy, technology, education and health care to support rebuilding Syria, Mr Al Shara said after the meeting.
“Both Saudi Arabia and Qatar have engaged in discussions with Syria regarding reconstruction, though the extent of their involvement remains unclear and appears to be more tentative at this stage,” Mr Bright said.
“Saudi [Arabia] has spoken about the opportunity for investment that reconstruction presents, though we would expect Gulf nations to take on a role related more to financing and energy investments than direct construction and logistics projects.”
In January, Saudi Arabia’s Foreign Minister Prince Faisal bin Farhan visited Damascus and said the kingdom is taking part in talks with western powers to help remove sanctions against Syria and help it attract investment to rebuild the country.
The same month, Riyadh-listed Al Jouf Cement Company also signed a contract worth 38 million Saudi riyals ($10.1 million) with Mohammed Shahi Al-Ruwaili Contracting to sell all types of cement and clinker for the purpose of export to Syria, according to the company’s statement on Tadawul, Saudi Arabia's stock market.
Companies from China, Jordan, Egypt, Lebanon and Europe are also expected to be involved in building new projects in Syria. “China is strategically positioned for large-scale infrastructure projects and industrial development, potentially integrating these with its Belt and Road Initiative,” Mr Fawaz said. Regional neighbours, such as Lebanon and Jordan, could also benefit through cross-border trade, supplying construction materials and logistics.
“European companies may participate in specialised infrastructure projects and technical consulting services, while Egyptian firms are well-positioned for construction materials export and infrastructure development," he added.
However, any process of moving ahead with contracts will depend on “political stability, international funding availability, competitive advantages and diplomatic relationships with Syrian authorities", Mr Fawaz stressed.
This month, fighting broke out between militias linked to the ousted Assad regime and security forces killing hundreds of people, mostly from the Alawite minority in the western coastal region of Syria.
"One obstacle is security and custom tariffs, understandably, because they are establishing from a ruined country to a new system that eventually will be a good one," Mr Kutluk said. "And these challenges are not only for Turkish companies but for all companies."
