Analysis: Signs of a faltering economy in Syria

Photo: Syriana2011/Flickr

Protests against President Bashar al-Assad’s government started in mid-March and have continued since

BEIRUT/ALEPPO,  – Mufid’s (second name withheld) small manufacturing business in a poor neighbourhood on the edge of Aleppo, Syria’s commercial capital, used to run on trust because he would receive goods and pay later – a system of trading that locals call `khamisat’.

Derived from the Arabic word for Thursday, `khamisat’ meant Mufid would only pay for his textiles at the end of the week, giving him a chance to collect money from retailers for that week’s sales. For an enterprise that employs 50 workers, but has low margins and little capital, the trust-based system offered a vital breathing space.

But a decade of doing business quickly changed when an uprising against President Bashar al-Assad’s government started in mid-March. Businessmen in Aleppo like Mufid learnt that the old system of `khamisat’ was no longer valid.

Fearing the Syrian pound would devalue as domestic consumption withered in the face of Assad’s crackdown on protesters, Aleppo’s importers lost confidence in their market. The trust that allowed `khamisat’ to function evaporated and cash became king.

“They said there was no way to get even a metre of textile without cash,” Mufid told IRIN. “I couldn’t afford to pay cash to get raw materials and then wait weeks to get the money back from the retailers. I used up all my savings and then told my workers, with tears in my eyes: ‘You have no work. If there is good news I will phone you.’”

There has been no need to call.

Mufid, a Sunni Muslim like the majority of Aleppans and Syrians, said he knows of dozens of other small business owners in Aleppo who were also forced to lay off staff and close down.

GDP will contract 10-20 percent this year. Only the fact that oil and agriculture, which make up 40 percent of GDP, and are not yet affected by the uprising, will help GDP not decline further

He said he was furious that the regime, led for the past half century by members of the minority Allawite sect, took his taxes but appeared unable to secure him the economic stability needed to earn a living for his family – the pact that had long kept Aleppo’s business community loyal to the Assad ruling family.

Fragile economy

Mufid’s story is just one example of the suffering that ordinary Syrians are facing in the face of a fragile economy – already struggling with market reforms after decades of Soviet-era central planning – which is now in serious decline.

Having grown by around 3.5 percent in 2010, the International Monetary Fund (IMF) believes the Syrian economy will contract by 2 percent this year. A leading Syrian economist, however, predicts things could be much worse.

“GDP will contract 10-20 percent this year. Only the fact that oil and agriculture, which make up 40 percent of GDP, and are not yet affected by the uprising, will help GDP not decline further,” said Jihad Yazigi, editor of Syria Report, the country’s leading monthly economic newsletter.

Official figures for the first half of 2011 showed the government had suspended its entire investment budget, which constituted 43 percent of the state’s US$16.7 billion annual budget.

European Union and US sanctions, as well as poor relations and a downturn in trade with neighbouring Turkey, are not helping.

In a country where extreme poverty may have risen over the five-year period from 2005 – in large part due to the mishandling of a chronic drought – and where unemployment is running at 15-25 percent, the investment budget was central to the state’s plan to create jobs and wealth.

The Baath Party’s coming five-year plan calls for investments of $100 billion, half of which was to come from the private sector. But that now – in the words of an economist in Damascus quoted by AFP – is “out of the window”.

Tourism, which normally accounts for 12 percent of GDP, has been decimated.

“I’ve worked here for 10 years and this is the worst for me,” said Ammar, a 35-year-old Kurdish waiter from a village outside Aleppo, surveying his empty café. “Now we get less income, but we pay more for life’s costs. Usually, the young, rich people come here to smoke water pipes and spend hours playing cards. Now I see few of them because they don’t want to spend money.”

Ammar said his monthly salary of $143 used to be supplemented twice or three – times by tips from customers, helping him provide for his wife, four children and elderly father. Now the tips barely cover his transport costs and cigarettes.

His packet of cigarettes now costs $1.53, up from one dollar two months ago. The sugar in his tea has also gone up, almost tripling from 51 US cents a kilo to $1.43 in just three months.

Observers say what began overwhelmingly as a political uprising – protest banners adorned with calls for freedom from oppression, not an end to policies of market liberalization – may soon begin to turn on the economic costs of repressing it.

Photo: Dana Hazeen/IRIN

The faltering economy is making it hard for families of business people to make ends meet (file photo)

According to the annual Conflict Intensity Index, released by risk analysis and mapping company Maplecroft on 12 October, Syria has slipped from a “medium risk” country to one at “extreme risk” on a scale that helps multinational corporations assess ongoing trends for conflict and potential risks to operations or investments.

“Conflict exponentially increases the risk of doing business within a country, as operations are disrupted and employees and assets are endangered,” noted Maplecroft analyst Jordan Perry.

Inflation

Despite a hard currency reserve that most economists put at $17-18bn, in addition to the $5bn pot to defend the Syrian pound, the cost of keeping inflation at bay for six months has clearly begun to take its toll on Syria’s finances.

On 24 September, the government announced a ban on imports of all goods carrying a tariff over 5 percent, a move the minister of economy and trade acknowledged was aimed at “preserving foreign reserves”.

Coffee and flour shot up by 50 percent while the price of cars, already prohibitively high in Syria with an average import tariff of 60 percent, increased 10-20 percent as dealers emptied showrooms in expectation of further price hikes.

Crucially, the price of heating oil, subsidized by the state and used by the majority of Syrians to heat their homes through cold winters, is expected to more than double from 31 to 78 US cents per litre, according to Mohammed Khaled, formerly a wealthy businessman with strong ties to the government who defected to the opposition. He is now “economic representative” for the Supreme Council of the Syrian Revolution.

A Western diplomat in Damascus could not confirm that price rise, but said shortages of heating oil had already forced prices up to 51 US cents a litre, a rise of 65 percent.

On 4 October last year, Minister of Economy and Trade Nidal al-Shaar said the government had rescinded the import ban “due to the legitimate demands of citizens, as it had more negative repercussions than expected”.

af/eo/cb
source www.irinnews.org

SYRIA: Insecurity makes drought-hit farmers even more vulnerable

Photo: Joe Bombardier/Flickr

Syrian herders and farmers have suffered from drought for four of the past five years, and are now even more vulnerable because of the instability

BEIRUT/DUBAI, 17 February 2012 (IRIN) – Instability in Syria has aggravated an already vulnerable situation for tens of thousands of farmers and herders affected by recurrent drought, but only a fraction of them have received assistance because of chronic “serious underfunding” of humanitarian programmes in Syria, the UN Food and Agriculture Organization (FAO) warns.

“They are really in bad shape. They need assistance,” said Abdulla Tahir Bin Yehia, FAO representative in Syria. “We are willing and able to reach many of the farming communities affected by the drought and the crisis, provided resources are made available by the donor community.”

“[But] no single donor has given us a single penny this year,” Bin Yehia said. “Funding from the donor community is absent.”

So far, FAO – a technical agency which needs to be funded to operate – has relied on its own funds, as well as money from the UN Central Emergency Response Fund.

Drought has hit much of northern and eastern Syria since 2006, causing tens of thousands of farming families to migrate to informal camps bordering urban centres in search of work.

“As they are considered internally displaced people, they lack the status of refugees and can hardly benefit from international assistance,” Rula Asad, co-founder of the group Al Hababeen, one of the few providing them with some relief, told IRIN.

But in the months since March 2011, many of those areas – namely Homs, Hama, Idlib and suburbs of Damascus – have been swept up in a popular, and increasingly armed, uprising against President Bashar al-Assad, who has responded, in some places, with mortar and grenade attacks, as well as fire from tanks and helicopters.

Because of the ongoing crisis, some 18,000 migrant farming families have had to return to their areas of origin in the northeast, and “are now left with no source of income and are in need of humanitarian assistance in order to re-start their livelihood activities,” said Abeer Etefa, regional public information officer for the World Food Programme (WFP).

We could not help due to a lack of humanitarian funding

Despite better rainfall in 2011, many of those who returned to their farmland did not plant because they had no seeds and “we could not help due to a lack of humanitarian funding,” FAO’s Bin Yehia said. Farmers in drought-hit areas are mostly small-scale and thus there are few opportunities for casual labour in these areas, he added.

Reduced mobility

Rising transportation costs and reduced mobility as a result of the insecurity in some parts of the country have contributed to business and livestock losses among rural people in the central, coastal, eastern and southern governorates who have been less able to market their products, FAO said.

In the northeastern drought-hit areas, herders now have less mobility because of the insecurity, which has also discouraged farmers from pursuing their seasonal migration to western parts of the country for casual agricultural labour. Areas in the west where agriculture remains healthy are now suffering from a shortage of seasonal casual labour.

Most irrigation pumps are powered by petrol, but a fuel shortage has hiked fuel prices, and subsequently prices of spare parts, animal fodder and transportation have increased. Thus even those who were able to scrape together a harvest are struggling, and exports have decreased. (There are differing explanations for the cause of the fuel shortage. Some say the government is hoarding it to fuel its own tanks and to collectively punish the population. Others say drivers trucking it in have been deterred by the insecurity).

While last year’s national production of wheat was the best in the past five years, 65,633 families were unable to plant because of a lack of seeds or suffered crop failures in the 2010-11 season despite the better conditions, Bin Yehia said.

This year’s rains have been decent so far, but must be sustained until mid-April to ensure a good harvest in June.

FAO support

FAO has supported 7,000 small herders in Hassakah, Deir-ez-Zor and Homs governorates with animal feed; 2,000 farmers in Deir-ez-Zor with seeds; and 500 women-headed families with income-generating activities in Hassakah and Idlib governorates – “but this is a small number out of 65,000 households who need humanitarian assistance.”

Combined with those made vulnerable by drought in the two previous years, a total of nearly 300,000 households have needed “life-sustaining assistance” in the last three years, Bin Yehia said, and less than 20 percent of them have received it because of the lack of funding.

ah/eo/ha/cb  source www.irinnews.org

OPT: Boosting protection and tackling food insecurity

Photo: Erica Silverman/IRIN

West Bank unemployment is running at about 24 percent, according to the UN

RAMALLAH,  – The humanitarian community’s 2012-2013 Consolidated Appeals Process (CAP) for the occupied Palestinian territory (oPt) has a narrower scope than in previous years, focusing on two strategic objectives: improving the protective environment, including access to essential services like health care and education, and tackling food insecurity especially in areas where the Palestinian Authority (PA) has limited access.

Policies related to Israel’s occupation are still the main driver of serious protection and human rights concerns, according to the CAP.

The two-year aid strategy document requests US$416.7 million to implement 149 relief projects in 2012 (17 by local NGOs, 84 by international NGOs and 48 by UN agencies) in fields such as agriculture, water, sanitation and hygiene, cash for work, and food and cash assistance.

CAP tackles the most urgent humanitarian needs of 1.8 million vulnerable Palestinians in the Gaza Strip, Area C of the West Bank, East Jerusalem and the Seam Zone – the area between the “Separation Barrier” and the Green Line.

“Protecting and preserving the whole range of basic human rights are the focus of this CAP,” oPt Resident Humanitarian Coordinator Maxwell Gaylard told IRIN, including violations of international humanitarian law, and the right to dignity and a normal life.

Aid workers in oPt are looking to address the root protection problems that are creating humanitarian needs.

Displacement

Displacement remains a chief protection concern. Nearly 1,100 Palestinians (over half of them children) were displaced due to home demolitions by Israeli forces in 2011 – over 80 percent more than in 2010, according to the UN Office for the Coordination of Humanitarian Affairs (OCHA).

CAP programmes address this problem through shelter assistance, legal aid and by campaigning for Palestinian rights, in addition to protection presence programmes.

For example, the World Council of Churches sponsors the Ecumenical Accompaniment Programme in Palestine and Israel (EAPPI), bringing internationals to the West Bank to provide a protective presence for vulnerable Palestinian communities, where they monitor the conduct of Israeli soldiers and settlers.

The “global protection cluster working group” defines protection as activities aimed at obtaining full respect for the rights of the individual in accordance with human rights law, international humanitarian law and refugee law.

More than physical security, protection encompasses civil and political rights, such as the right to freedom of movement, the right to political participation, and economic, social and cultural rights, including the right to education and health.

In situations of conflict that obligation extends to all parties, and according to the UN, in the case of the oPt the state of Israel as the occupying power has an obligation under international humanitarian law to ensure the welfare of the Palestinian population.

Food insecurity

Some 30 percent of the Palestinian population in the West Banka and Gaza are food insecure, including more than half the Gaza population, according to the UN.

The root cause remains the loss of livelihoods and lack of income opportunities due to Israel’s blockade of Gaza, and its closure regime in the West Bank, according to the Appeal.

Serious shortages of drugs – some life-saving – and medical disposables continue in Gaza, due to mistrust between Fatah and Hamas

Aid workers in the region are seeking ways to enable Palestinians to meet their own needs, particularly after the World Bank, the International Monetary Fund and UNESCO announced in spring 2011 that PA institutions were prepared for statehood after the completion of the Palestinian Reform and Development Plan (PRDP - Palestinian Prime Minister Salam Fayyad’s ambitious two-year state-building plan).

Palestinian President Mahmoud Abbas’s September 2011 bid for statehood before the UN remains under consideration.

The CAP was developed in consultation with the PA, particularly the ministry of planning and administrative development, to ensure coherence with Palestinian development strategies, such as the PRDP.

However, “the PA’s capacity to work as government is hindered by the Fatah-Hamas divide,” said minister of planning and administrative development Ali Jarbawi during the launch of the Appeal.

“Serious shortages of drugs – some life-saving – and medical disposables continue in Gaza, due to mistrust between Fatah and Hamas,” said World Health Organization head in Jerusalem Tony Laurance. “If this cannot be resolved, Palestinians may have to look to donors,” he said.

CAP funding requests for the oPt reached $804.5 million in 2009, after the Israeli Operation Cast Lead in Gaza, up from $452.2 million in 2008. The 2011 CAP for oPt called for $536.3 million.

However, three years after the end of Cast Lead, the UN Relief and Works Agency (UNRWA) has launched an emergency appeal for Gaza and the West Bank worth just over $300 million.

“The emphasis on protection interventions is due to the nature of the humanitarian situation in the oPt,” UNRWA spokesperson Chris Gunness told IRIN. “This is very much a protection crisis, whereby access and movement are continuing to be eroded and vulnerability is on the rise,” he said.

Most UNRWA projects within the emergency appeal are also part of the CAP.

es/cb
source www.irinnews.org