The allocation is among the largest international commitments to Syria since the government this year said it needs around $85 billion in investment over the next five years to develop the country of 20 million people.

"An agreement has been reached and the Turkish government has extended a credit line. The money will be withdrawn on project by project basis," Mohammad Al-Hussein told Reuters in an interview on Sunday.

Al-Hussein did not specify the projects but the government had said it requires at least $9 billion to solve electricity shortages alone, and meet demand rising at 6 percent annually.

Repairing a dilapidated water network and expanding the modest transport network and health system also need funding.

Syria's population is about a third that of Turkey but its gross domestic product is less than a twelfth of its neighbor, with which it shares an 800-km (500-mile) border.

The two countries were foes until ties began to improve a decade ago, culminating in 50 bilateral agreements signed last year.

The minister said the projects financed by Turkey will go to Turkish companies according to arrangements by Turkey's state-owned Eximbank.

Al-Hussein was speaking on the sidelines of a "strategic council" meeting with Turkey in the Mediterranean port city of Latakia on Sunday that included more than 25 ministers.

Saudi Arabia signed a memorandum of understanding with the Finance Ministry in March to lend $140 million to raise power output.

Businessmen and independent economists have criticized Syria's opening to Turkey as profiting Turkish exporters without accompanying investments.

Turkish exports to Syria rose by 38 percent to $828 million in the first six months of 2010 compared with the corresponding 2009 period. Syrian goods going the other way, mostly oil, were half this figure, although they almost doubled.

Al-Hussein said building infrastructure and international development cooperation was a priority, pointing to a presidential decree this month establishing a state-owned holding company with capital of $108 million that will generate more revenue for the state.

"The new company will enter the investment market as a main player and will be entrusted with setting up a sovereign fund," said Al-Hussein, who will be also the chairman.

"Its capital will be wholly paid up by the treasury but we may later consider initial public offerings for projects the company enters," Al-Hussein said, without specifying what those projects would be.

The government already is a 50 percent shareholder in a subsidiary of the Qatari Diar conglomerate, which is controlled by Qatar's sovereign fund.

The Syrian subsidiary was set up several years ago to invest in real estate and power projects in Syria.