This article is clearly in the continuation of my two last posts concerning the situation in Syria and especially concerning the social and economic perspectives of the country. Syria is, as you all know by now, at a crossroad in terms of socio economic policy and the Tenth Five-Year Plan launched in 2005 is now arriving to its end and the Eleventh Five Year Plan is being finalized. As a reminder, the Tenth Five-Year Plan announced the transition from a socialist economy to a social market economy, notably by canceling progressively its subsidy system in numerous areas of the society. Syria was besides finally granted observer status at the World Trade Organization (WTO) in May, nine years after it first attempted to join, confirming the new road taken by the Syrian government. A Syrian official declared to this effect that the accession to the WTO will improve the access to the market, will strengthen the multilateral trading system and contribute to overall well-being and that of the Syrian people. What are therefore the results of this plan which on one side wanted a liberalization of the economy and struggle in the same time against poverty? Was this plan finally benefic for Syria and for the Syrian population?
Since 2008, the GDP growth reached 5 % in general and reflected the efforts of the country to create a social market economy: liberalization of trade policies and monetary unification of exchange rates and deregulation of the banking system. The banking system has besides very importantly benefited from this economic policy opening; we now find 13 privates banks in Syria. According to the Central Bank of Syria (CBS), the total banking assets reached 1,96 trillion Syrian Pounds (SYP) late 2009, thus registering an annual growth of 14.4%. The six state-run banks held around three quarters of the total assets, 1,48 trillion SYP, with a growth up to 10% in 2009, while private conventional and Islamic banks observing a growth of 26% and 57,7% to 411 billions SYP and 71 billions SYP respectively ( Yazigi J.,Syria Report, June 2010). The global amount of loans granted by banks to the private sector increased by 18.2% last year to 1,03 trillion SYP. Loans from state banks rose to 15%, while those granted by private conventional and Islamic banks jumped to 35% and 50% respectively. Islamic banking loans have, however, represented only 2% of the total of it. All sectors have benefited from this growth in business borrowing, except retail and wholesale trade, which seems to have been adversely affected by the global recession. Conversely, the number of agricultural lending has increased enormously, over 100%, in the light of the growth of agricultural activity. Agricultural lending has represented around 19% of total loans granted by the banking sector. Finally, lending to mining, industrial and infrastructural sector, combined in one unique same category, jumped to 70% in 2009 (Yazigi J.,Syria Report, June 2010).
The evolution and the growth of the banking system is definitely a mirror of this new Syria emerging as an attractive economic country with many opportunities, as well as the continuous increase of Foreign Direct Investment in the country which amounted around 3.5 trillion US dollars these two last years (Yazigi J.,Syria Report, June 2010), despite a slight decrease this year because of the financial crisis. The real estate prices are also soaring in Syria, Damascus becoming the eighth most expensive city in the world for office spaces and the second in the Arab world after Dubai (Yazigi J.,Syria Report, March 2009), notably due to high level of taxation. Global brands have now become commonplace and a rapidly expanding luxury goods market, centered in Damascus, serves also as one of the most high-profile signs of the changes underway within the Syrian economy. The economic liberalization is as we can observe on its way, what about the social aspect of this so called social economic market. The tenth national had actually as main objectives to also formulate financial policies that target the poor and improve income redistribution, as well as establish social safety nets.
Both aspects were not a success, quite on the opposite, the lower and middle classes did not benefit from this economic growth, and even worse, they suffered from it in many ways. The countries’ poorest are struggling to help themselves in the new economy due to a lack of employment opportunities, while the middle class is plummeting towards the poverty line because their incomes have not kept up with inflation, which rose to 17% in 2008 (FIDA, République arabe syrienne, programme d’options stratégiques pour le pays, 2009 December). The reasons behind the increases in prices were notably due to speculative real estate boom and the partial removal of common government subsidies. Wealth gaps and inequality have continuously increased these last few years. In 2003-4 for example, the bottom 20 percent of the population consumed only 7 percent of all expenditure in Syria, and the richest 20 percent consumed 45 percent (Syria Today, May 2010). Another way to observe this phenomenon is through the investor’s guide to Syria released in 2008 by The British Syrian Society. This guide delivers information on income distribution by socio-economic group. Breaking the country’s population down into six groups, it found that 3 percent of the population have a monthly income of between SYP 50,000 and SYP 100,000 (USD 1,087 and USD 2,174) while 47 percent live on less than SYP 11,000 (USD 240) per month, including 20 percent who live on less than SYP 5,000 (USD 108.70) (Syria Today, May 2010).
The struggle against poverty is also quite a failure. Data’s from 2007, show that people living in extreme poverty, defined as those unable to obtain their basic food and non-food needs, rose from 11.4 percent in 2004 to 12.3 percent in 2007. Based on results of a national survey conducted by the Central Bureau of Statistics in 2007, the number of people living in poverty, defined as those able to cover a reasonable amount of their basic needs, rose from 30.1 percent to 33 percent over the same period (Syria Today May 2010). About 62% of the people living in poverty are from rural areas and they live in food insecurity or are vulnerable (FIDA, République arabe syrienne, programme d’options stratégiques pour le pays, 2009 December).. We have to take into account that these results do not include major impacts which happen since 2007, such as the ending of fuel subsidies in early 2008 which saw the price of diesel triple overnight, the global food crisis of the same year which saw the price of basic food items rise sharply, the three-year drought which affected 1.3 million people in the east of the country, and the global financial crisis, which has limited remittances coming into Syria, are not accounted for. The picture is therefore as you understand much worse and as a lecturer at the National Institute of Public Administration, Ayham Asad said poverty in Syria was on the rise, with the country’s economic reform program negatively impacting the lower and middle classes. He besides rightly pointed out that the main reason for this situation lies in the basic structure of the reform process which is liberal par excellence, lacking the social dimension that would have enabled it to absorb the negative effects that could potentially occur due to the transition from one socio-economic model to another (Syria Today May 2010).
Should therefore the solution be through the National Social Aid Fund (NSAF), a social welfare fund to act as a safety net for the country’s poorest, as planned in the tenth five year plan and in the transition to a social market economy? The fund was to provide cash assistance in particular to those unable to work, such as the aged and disabled, widowed, divorced and separated women, orphans up to 15 years of age and families of prisoners. It therefore targeted around 2.2 millions of person living in extreme poverty and unable to cover their basic food and non-food needs. The NSAF has unfortunately not started and is unlikely to begin operating before 2011, while it should have begun few years ago. Linda Abdul Aziz, project director for the National Social Aid Fund at the Ministry of Social Affairs and Labour, said, which is being provided with technical assistance from the UNDP and UNFPA, that the process of identifying exactly who should receive support had taken longer than expected. The NSAF is actually ensuring themselves that the beneficiaries are really from the poor strata and not the middle class, and that they are committed to enhancing their own opportunities in the new social market economy (Syria Today May 2010).What does that mean exactly? Linda Abdul Aziz explains herself “We will help you if you are committed to helping yourself. So if you are lacking a decent education, for example, you need to ensure your children are attending school.” Ok, well your children going to school is a good idea, but what does in the mean time the parents do? What kind of work opportunity is offered to them? Should it not be the role of the State to create jobs opportunities?
The unemployment rate is actually constantly rising and there is now up to 20 to 25% of unemployed in the society. The labor market is unable to absorb the 380,000 people who swell the ranks of job seekers every year, while the government promised the creation of 250 000 jobs every year in the tenth year plan, which besides it was not able to realize (FIDA, République arabe syrienne, programme d’options stratégiques pour le pays, 2009 December). The type of investment Syria has attracted in recent years has not been sufficient to generate the jobs needed by the poor equipped with only a basic education. Job opportunities can be created by overhauling the country’s agricultural and industrial sectors for many analysts. The Agricultural sector should notably not be forgotten, it is actually employing a quarter of the workforce, contributing to 24% of the GDP and from 1994 to 2004, the real added value associated with the agricultural sector grew by 1.9% per year, and the number of agricultural jobs of 2.3% (FIDA, République arabe syrienne, programme d’options stratégiques pour le pays, 2009 December). Industries in Syria should be supported by the government and as pointed out by the economist Nabil Sukkar the government has not been able to generate or mobilize the middle class and create a small and medium enterprise sector that is dynamic enough(Syria Today May 2010). Many have said that before creating any kind of welfare fund for the poor, the government should concentrate its work on providing job opportunities to the people. This is actually the main demand of this class of the society, which does not wish to beg for assistance but on the opposite work.
The socio economic situation in Syria is becoming more unequal and while the average living standard of the majority of people has decreased, the rich have become wealthier and the poor, poorer. No creative solutions have yet been found to answer the issue of unemployment rise. In addition to this, a new labor act in Syria has been adopted last April and is clearly favoring employers against employee. The law sets the broad outlines of labor relations for the private, joint ventures and cooperatives – the public service is governed by a different law In relation to the subject of work, we should remind everyone, especially the government, that work is a right and not a privilege in our opinion. The eleventh five year plan would normally focus, according to different sources, on extending microfinance throughout the country and rolling out major public infrastructure developments, providing much needed employment opportunities, via public-private partnerships (PPP). Would this be enough? I am personally not sure. The Syrian government should definitely starts finding solutions which benefit the population as a whole and not a small minority. Liberal economic policies has proven around the world to be destructive for the middle and lower classes, Syria decision makers should not forget it, if they are working for the general interest of the country and its population as they claim it!