Institute for War and Peace Reporting | Giving Voice, Driving Change

Bid to Boost Consumer Spending Falls Flat

Syrians living on low wages deride government Eid bonus.
By IWPR
When Wafaa Jannad, a 39-year-old civil servant, heard that she and her colleagues were to receive a bonus from the government, she was thrilled.



Jannad, who lives in the suburbs of Damascus, said that she spends a large part of her monthly salary of not more than 136 US dollars on treatment for her sick father, who is in his eighties.



She thought the extra bonus of 43 dollars would help her pay for his medication but Jannad’s optimism was short-lived. She said she eventually realised that once the money was spent, she would be back struggling to make ends meet.



“Most [public] employees are poor. Few can sustain a decent living standard without having second or third jobs,” she said, adding that many of her colleagues had been eagerly awaiting the grant.



In September, Syrian president Bashar al-Assad issued a decree offering one-time subsidies for all public sector employees. The total to be distributed was around 200 million dollars, according to government officials.



The finance minister, Mohamad al-Hussein, said the grants would help increase the purchasing power of Syrians and so spur economic demand, according to a statement issued in mid-September by the state-run news agency SANA.



There are around two million public employees in Syria, mostly working in education and health and mostly suffering from low incomes and high living costs.



The proportion of public employees who earn less than 136 dollars a month is 44 per cent, according to figures from the official General Social Security Organisation.



The subsidy was distributed just before September’s religious commemoration of Eid al-Fitr, which is a time when Syrians, and Muslims in general, hold banquets and donate to the poor.



In parallel with the government’s decision, private employers were asked by the chamber of commerce to give their employees a bonus equivalent of 40 per cent of their monthly salary and most complied.



Shop owners and businessmen said that the grant has created activity in an otherwise stagnant retail market. Mohamad Barakat, the owner of a clothing shop in downtown Damascus, said that sales increased following the distribution of the money.



He said that the payments rescued his business after sales plunged in the summer despite the drastic discounts he had offered.



But economic experts criticised the decision, arguing that the government ought to devise more sustainable solutions to stagnation and poverty rather than the short-term policies currently being implemented.



The grant was important but far from sufficient to improve people’s living conditions, said Ahmad Munir al-Hamash, a Damascus-based economist and the head of the Arab Association for Economic Research.



“They [the government] tossed [the money] into the market to silence hungry children and provide basic needs for people,” he said.



According to local economists, there is a big gap between the average income in Syria and the cost of living, which has increased significantly recently.



The World Bank puts Syrian gross national income per capita at 2,090 dollars in 2008 compared, for example, to 6,350 dollars in neighbouring Lebanon. In Syria, however, purchasing power is being eaten away by annual inflation of 20.5 per cent.



United Nations figures show that 30 per cent of Syrians live in poverty and 11 per cent live under the extreme poverty line.



For Mounzir Khaddam, another economist and a professor at Tishreen University in Lattakia, the grant itself will exacerbate the economic problem.



“The grant… would lead to rapid inflation. It will induce demand without increasing supply,” he explained.



Khaddam said Syria’s economy was seriously sick, with a high fiscal deficit and rising unemployment.



Meanwhile, government officials continue to blame the economic difficulties on external factors like the international financial crisis and the drought that has severely affected the agricultural sector.



Some observers point the finger at the rapid shift from a state-run economy to a more market-oriented one but say that remedies to these economic woes would not be difficult to implement.



The economic expert, Hamash, believes that the unrestricted liberalisation of trade in Syria has had a negative impact on the economy.



He said that many local factories that were employing thousands of workers could not withstand competition from cheaper products and were forced to cut production or sometimes close completely, leading to waves of unemployment.



He also put the blame on arbitrary taxation laws that have relieved capital owners of paying high taxes in order to encourage investment but placed the burden on common people.



The government had slowed its investments in the public sector, giving the deficit as an alibi, he added.



For Khaddam, the solution was to create a proper legal and political environment for investments to prosper in the country and that way to help in the creation of job opportunities.



He also urged the government to return to its role as a promoter of social and economic development by putting forward more effective plans to lessen the negative effects of the market economy.



After receiving the grant, many public employees said that it was not enough to improve their living conditions.



In addition to his job as a teacher in the public sector, Nabil Mohamad works as a taxi driver in the afternoons to be able afford to send his four children to school.



“My salary is not enough to feed them [my children] and pay the rent,” he said. “It is expensive to send children to school. Then you have to pay for books and stationery.”



Ibrahim Issa, a public employee, relies on the cultivation of a piece of land for extra income.



“I don’t know how I will buy a house so my daughter or son can get married. Everything is expensive and getting more so,” he said.