GREAT PROMISE, LITTLE PROGRESS: THE COASTAL CITY

C O N F I D E N T I A L DAMASCUS 000786 SIPDIS SIPDIS NEA/ELA E.O. 12958: DECL: 07/31/2017 TAGS: ECON EIND PREL SY SUBJECT: GREAT PROMISE, LITTLE PROGRESS: THE COASTAL CITY OF TARTOUS Classified By: Charge D'Affairs Michael Corbin for reasons 1.4 (b) and (d) ¶1. (C) SUMMARY: Emboffs visited the coastal city of Tartous on July 9th. While the city and surrounding areas are rich in economic and natural resources, its development is well behind its potential. The area boasts two of Syria's three major ports, is widely known for its agricultural production, and is rich in natural beauty and archaeological sites well-suited for tourism. Nevertheless, much of this potential is stifled by poor urban planning, corruption, and bureaucratic hurdles that hinder investment. END SUMMARY. ¶2. (U) BACKGROUND: The city of Tartous is the capital of the Tartous governate, 140 miles northwest of Damascus and just north of Lebanon on the Mediterranean coast. It has a population of 874,000, most of whom are Sunni Muslims, although inhabitants in the neighboring hills are from the Alawite minority. There are also a few thousand Iraqi refugees now in Tartous, with a majority working in shipping and customs clearance. Tartous hosts two of Syria's major ports, as well as the Banyas Refinery and Power Plant and the Tartous Cement Plant. It is also widely known for its agricultural production - including citrus fruits, tobacco leaf, and olives. ¶3. (U) Tartous has historically been known as a fairly secular city. Indeed, during the day of their visit Emboffs noticed far fewer women wearing head coverings (the Hijab) than in Damascus and few mosques were observed near the business district. The regime's presence, however, in everyday life was clearly evident. The Ba'ath party headquarters and other security service buildings appeared to be better maintained than many other buildings in Tartous, and there were numerous depictions of President Asad - although some were likely leftover from the late June presidential referendum. Compared to other Syrian cities there was also an unusual number of photos and memorabilia of Asad's dead brother, Basel, as well as a large memorial park dedicated in his honor - likely related to Tartous's proximity to the nearby Alawite heartland. ¶4. (U) TOURISM DEVELOPMENT FACES SIGNIFICANT CHALLENGES: Tartous and the surrounding areas are also rich in archaeological sites, and the natural beauty of the coastline and local flora is obvious even to the untrained eye. Despite its potential attractions, however, Tartous continues to be woefully underdeveloped for the tourism market. While the city's shelves are well-stocked with local produce and there are several internet cafes, there is a clear deficit of decent hotels, cafes, and other tourist facilities. As a result, while the SARG has been hyping Tartous as an international tourist destination, most visitors appear to be from local Syrian cities. ¶5. (C) In recent years Tartous has attracted investor interest in the tourism sector, but the problems currently facing these projects underscore the long-term challenges for the Syrian tourism industry. In 2003, the SARG announced a nearly USD 500 million project to redevelop the Tartous corniche, including the development of hotels, villas, a commercial center, restaurants, and a marina. This large-scale tourism project - one of the first in Syria - is a joint investment between the local municipality and Syrian and British investors. The project is not slated for completion until 2009, but it is running well behind schedule, with business contacts assigning blame to the myriad of bureaucratic hurdles necessary for new developments in Syria. Emboffs observed that the project has not yet reached the building phase and noticed just one bulldozer and less than a dozen workers on the job the day of their visit. Despite the slow pace of the corniche project, investors are continuing to show interest in the area. In March 2007 Starwood Hotels signed a USD 25 million contract with the Syrian Danial Industries Company to manage a hotel under its "Four Points by Sheraton" brand. Nevertheless, even if this project is completed on time in 2011, there are more extensive problems challenging the development of tourism in Tartous. These include a local public infrastructure ill-suited to international travelers, numerous abandoned and crumbling buildings located on prime coastal real estate, and persistent electricity and water shortages. ¶6. (C) TARTOUS AS A HUB FOR TRANS-SHIPMENT FOR IRAQ AND THE GULF: The Tartous governate also plays a strategic economic role by hosting two of Syria's three major ports, Tartous and Banyas (the third is located in Lattakia). Syria's ports have reached maximum operating capacity over the past few years - in part due to Syria's increasing role as a major transit point for goods traveling to Iraq. Tartous Port - the largest Syrian port - is undergoing a major expansion and development project with the help of a USD 68 million loan from the European Investment Bank. Banyas Port is mainly linked to the import/export of petroleum and petroleum byproducts. Emboffs observed significant activity at the ports during their visit and noted that many of the trucks leaving the port gates were transporting new foreign automobiles - not surprising given the increasing number of Syrians buying imported cars in the past few years due to relaxed SARG import restrictions. In general, business contacts assert that the SARG's ability to maximize capacity at the ports, which they believe is not progressing quickly enough to respond to demand, is essential to the SARG's interest in positioning itself as a key trade transit point to Iraq and the Gulf. They also note that ongoing corruption both at the ports and the related customs offices is damaging the reputation of Syria's shipping facilities. ¶7. (C) Comment: The unrealized promise in Tartous highlights the SARG's continuing inability to effectively manage its economic and natural resources. As a result, the SARG is undermining its self-proclaimed economic goals of stimulating tourism development to help balance declining loss of oil production and positioning Syria as a strategic trade transit point between the West and the rest of the Middle East. The lack of political will to push for necessary economic reforms in the short to mid-term could have serious implications for Syria's ability to compete in the long-term with other countries in the region in both sectors. CORBIN