Explained: The Damascus Northern Entrance Zoning Area Fund

On May 23, 2022, the Ministry of Local Administration issued Decision No. 81/N, establishing the Damascus Northern Entrance (Qaboun-Harasta) Zoning Area Fund to cover all expenses for the zoning area. Damascus Cham Holding, a private joint-stock firm affiliated with the Damascus governorate, would take on management of the fund, despite some lack of clarity in the wording of the decision.

Article 19 and its amendments

The fund was established in accordance with Decree No. 66 of 2012, which stipulates the creation of two zoning areas within Damascus city. The decree was later amended by Law No. 10 of 2018, which stipulates the creation of such zoning areas within the zoning plans of administrative units.

Surprisingly, the decision to establish the Damascus Northern Entrance Zoning Area Fund was based on Article 19 of the two laws mentioned above, despite the fact that both versions of Article 19 did not mention any such fund.

Article 19 of Decree No. 66 included two items: first, it clarified the Damascus governorate’s duties in zoning areas and, second, it clarified the costs to be borne by the governorate. Article 19 appeared in an amended form in Law No. 10 of 2018, adding new duties to administrative units. However, the expenses taken on by those administrative units remained as they were previously.

In both versions, the administrative unit (in the case of Decree No. 66, this specifically means the Damascus governorate) bears all the costs of zoning, studies implementing infrastructure and other public facilities, compensation for eviction, rent allowances owed to occupants, public auction expenses, paying experts and contractors, surveying and technical work contracts, rewards, and bank interest.

On the other hand, zoning area funds were explicitly mentioned in Decree No. 19 of 2015, which addressed private joint-stock companies affiliated with administrative units. Such companies would be responsible for managing administrative units’ properties under the law.

Decree No. 19 of 2015

According to Decree No. 19, the Minister of Local Administration could issue a decree to establish private joint-stock holding companies based on a proposal from the governorate or city council. Such companies would be based on social, economic, and zoning studies aimed at administering and investing in all or some of an administrative unit’s properties. An administrative unit owns all of its private joint-stock holding company’s shares, while the company may establish or contribute to and manage subsidiary firms or shareholders.

Article 4 of Decree No. 19 states that an administrative unit may directly authorise a holding company, itself commissioned to an affiliate management firm, to administer its zoning areas. This task includes handling the duties of any newly established zoning area fund, collecting payment installments, and keeping track of loan repayments and any interest incurred, either directly or through banks.

Decree No. 19 also stipulates that after the validity period for a zoning area fund ends and when work is complete on the zoning area, then any remaining funds would go to the administrative unit.

Similar funds

In December 2012, the former Minister of Local Administration issued a decision establishing a fund for Damascus governorate’s first such zoning area, Marota City, dubbed the South of the Southern Ring Zoning Area Fund. The zoning area included parts of the Mazzeh and Kafr Sousseh real estate zones. The fund was established in accordance with Article 19 of Decree No. 66 of 2012.

The minister’s 2012 decision specified the sources for the fund as follows: a

• Annual appropriations allocated in the administrative unit’s independent budget, as well as any loans obtained from public and private banks;
• Interest on accounts deposited for the fund within a public bank;
• The governorate’s sales of its plots via public auctions;
• Revenues from the so called “exchange and participation contracts” for the Damascus governorate’s shares of zoning plots.

The decree does not define the nature of the exchange and participation contracts.

The 2012 decision considered the governor of Damascus to be the contracting party for these expenses, as well as the party authorised with liquidating and disposing of anything related to the funds’ financial resources. As executor, the governor was also tasked with choosing the fund’s accountant, provided that any movements in the fund be done through joint signature of both the executor and accountant.

It is unclear whether Damascus’ second zoning area, Basilia City, has its own independent fund, or if its fund is simply attached to that of Marota City.

Decision No. 81/N

Similarly, Decision No. 81/N of 2022 specified the sources of money for the Damascus Northern Entrance Zoning Area Fund, as follows: loans from approved banks and revenue from “exchange and participation contracts” drawn up by the Damascus governorate council for legal entities to own shares of zoning plots belonging to the governorate. The decision did not clarify what it meant by “legal entities.”

Decision No. 81/N, for the first time, explicitly mentioned Damascus Cham Holding. The decision notes that the fund would receive the revenue of zoning plots that the governorate sells through Damascus Cham Holding in public auctions.

Under the 2022 decision, money for the fund is deposited in an approved bank, with the Damascus governor playing the role of the accountant responsible for disposal or expense orders. When the work period for the fund ends, money that remains goes to the Damascus governorate after remaining financial obligations arising from implementation of the zoning area are paid.