Posted by Joshua on Sunday, May 4th, 2008
Photo: The cost of many basic foods, like at this market in Amman, has doubled. Some in the middle class are tilting toward poverty.
The Middle East is being hit with high rates of inflation caused by sky rocketing prices for primary commodities and basic food stuffs, high unemployment, and the dismantling of age old subsidies. Many Arab countries have been pulling the plug on food and energy subsidies for decades.
Syrians are facing a double whammy – radical hikes in food and petrol prices combined with slashes in state subsidies.
In Lebanon, prices have risen by 43 percent over the past 21 months while the official unemployment rate stands at 10 percent, although independent estimates put it at 20 percent.
In Egypt, "food prices rose by up to 50 percent, a hard blow to the poor, who spend a higher proportion of their incomes on foodstuffs." writes Reuters. Consumer prices rose 14.4 percent in the year to March, the highest inflation rate in more than three years. Mubarak responded on Wednesday by proposing a 30 percent increase in basic public-sector salaries, which start at about 300 pounds ($56) a month. He told his government to find the extra revenue to cover the extra cost. Police are stationed heavily about the city to prevent the sort of protests that rocked the city in April.
In Jordan, security forces recently arrested three activists for distributing leaflets calling for a general strike to protest food prices and government policies that fail to help the poor, activists said on Sunday. Jordan's government has enforced steep fuel price rises and the cost of everything from bread to apartments has soared, hitting many people hard. Activists say the authorities have in recent weeks refused permission to allow any public protests against the price hikes.
Robert Worth of the NYTimes recently wrote and interesting analysis of the regional tensions stemming from run away inflation.
Even as it enriches Arab rulers, the recent oil-price boom is helping to fuel an extraordinary rise in the cost of food and other basic goods that is squeezing this region’s middle class and setting off strikes, demonstrations and occasional riots from Morocco to the Persian Gulf.
Here in Jordan, the cost of maintaining fuel subsidies amid the surge in prices forced the government to remove almost all the subsidies this month, sending the price of some fuels up 76 percent overnight. In a devastating domino effect, the cost of basic foods like eggs, potatoes and cucumbers doubled or more.
In Saudi Arabia, where inflation had been virtually zero for a decade, it recently reached an official level of 6.5 percent, though unofficial estimates put it much higher. Public protests and boycotts have followed, and 19 prominent clerics posted an unusual statement on the Internet in December warning of a crisis that would cause “theft, cheating, armed robbery and resentment between rich and poor.”
The inflation has many causes, from rising global demand for commodities to the monetary constraints of currencies pegged to the weakening American dollar. But one cause is the skyrocketing price of oil itself, which has quadrupled since 2002. It is helping push many ordinary people toward poverty even as it stimulates a new surge of economic growth in the gulf.
The Middle East’s heavy reliance on food imports has made it especially vulnerable to the global rise in commodity prices over the past year, said George T. Abed, the former governor of the Palestine Monetary Authority and a director at the Institute of International Finance, an organization based in Washington.
Corruption, inefficiency and monopolistic economies worsen the impact, as government officials or business owners artificially inflate prices or take a cut of such increases.
“For many basic products, we don’t have free market prices, we have monopoly prices,” said Samer Tawil, a former minister of national economy in Jordan. “Oil, cement, rice, meat, sugar: these are all imported almost exclusively by one importer each here. Corruption is one thing when it’s about building a road, but when it affects my food, that’s different.”
In the oil-producing gulf countries, governments that are flush with oil money can soften the blow by spending more. The United Arab Emirates increased the salaries of public sector employees by 70 percent this month; Oman raised them 43 percent. Saudi Arabia also raised wages and increased subsidies on some foods. Bahrain set up a $100 million fund to be distributed this year to people most affected by rising prices. But all this government spending has the unfortunate side effect of worsening inflation, economists say. Countries with less oil to sell do not have the same options.
In Syria, where oil production is drying up, prices have also risen sharply. Although it has begun to liberalize its rigid socialist economy, the government has repeatedly put off plans to eliminate the subsidies that keep prices artificially low for its citizens, fearing domestic reprisals.
Even so, the inflation of the past few months has taken a toll on all but the rich.
Thou al-Fakar Hammad, an employee in the contracts office of the Syrian state oil company, has a law degree and earns just less than 15,000 Syrian pounds, or $293, a month, twice the average national wage. His salary was once more than adequate, and until recently he sent half of it to his parents.
But rising prices have changed all that, he said. Now he has taken a second job teaching Arabic on weekends to help support his wife and young child. Unable to buy a car, he takes public buses from his two-room apartment just outside Damascus to work. He can afford the better quality diapers for his son to wear only at night and resorts to cheaper ones during the day. He cannot send anything to his parents.
“I have to live day to day,” he said. “I can’t budget for everything because, should my child get sick, I’d spend a lot of what I earn on medication for him.”
At the same time, a new class of entrepreneurs, most of them with links to the government, has built gaudy mansions and helped transform Damascus, the Syrian capital, with glamorous new restaurants and cafes. That has helped fuel a perception of corruption and unfairness, analysts say. On Wednesday the state-owned newspaper Al Thawra published a poll that found that 450 of 452 Syrians believed that their state institutions were riddled with corruption.
“Many people believe that most of the government’s economic policies are adopted to suit the interests of the newly emerging Syrian aristocracy, while disregarding the interests of the poor and lower middle class,” said Marwan al-Kabalan, a political science professor at Damascus University.
The same attitudes are visible in Jordan. Even before the subsidies on fuel were removed this month, inflation had badly eroded the average family’s earning power over the past five years, said Mr. Tawil, the former economic minister. Although the official inflation rate for 2007 was 5.4 percent, government studies have shown that middle-income families are spending far more on food and consuming less, he added. Last year a survey by the Economist Intelligence Unit found that Amman was the most expensive Arab capital in cost of living.
Mr. Abdul Raheem, the clothing store employee in Amman, said, “No one can be in the government now and be clean.”
Meanwhile, his own life has been transformed, Mr. Abdul Raheem said. He ticked off a list of prices: potatoes have jumped to about 76 cents a pound from 32 cents. A carton of 30 eggs went to nearly $4.25 from just above $2; cucumbers rose to 58 cents a pound from about 22. All this in a matter of weeks.
“These were always the basics,” he said. “Now they’re luxuries.”
Syria: Public sector salaries up by 25 percent
Posted: 04-05-2008 , 07:48 GMT
Syrian President Bashar al-Assad on Saturday issued a decree, stipulating a raise of 25 percent to the monthly salaries and wages for the civil and military workers of the state ministries, administrations, public establishments, companies of the public sector, municipalities, popular work, the permanently confiscated companies and private schools and similar public sector bodies. According to SANA, the Syrian leader also ordered a raise of 25 percent to the pensions of the retired civilians and military veterans.
The news agency quoted Syria's Finance Minister Mohammed al-Hussein as saying that more than two million people will be affected by the increases which will be effective from May. Syria's state employees earn an average monthly salary equivalent to US$175.
According to AFP, Assad's decision to raise salaries came as sources in Syria reported the price of heating oil had climbed by 340 percent per litre on Saturday. Over the past week the price of foodstuff including vegetables, meat, milk, cereals and cooking oil has grown by 30-60 percent, prompting the government to stop the import of certain cereals including lentils and bulgar wheat
The Syrian government more than tripled the price of gas oil on Saturday, kicking off a program to remove big subsidies on the fuel.
Khalid Oweis, Reuters
Pump owners said a liter of gas oil went up to the equivalent of 54 U.S. cents from 15 cents. The state imports large volumes of the fuel at around $1 liter.
An official in the ruling Baath party told Reuters last month that preparations were under way for the gradual removal of gas oil subsidies, which cost the treasury $9 billion a year.
Gas oil is used in Syria on a large scale for industry, transport and heating.
The gas oil price increase came as the government announced a 25 percent hike in public sector salaries to help the population absorb rising living costs and the impact of subsidy cuts.
The increase, which will take effect this month, covers 2 million public workers and retirees, the state news agency said. Syria has a population of 18 million.
The government has taken limited steps to liberalize the economy and lower subsidies in recent years to counter U.S.-led efforts to isolate Syria and the impact of falling production of crude oil, the main source of hard currency.
Petrol prices went up sharply in the last two years to 87 U.S. cents a liter.
Syria's top cellphone firm posts 29 pct profit rise
Sun May 4, 2008 by Khaled Yacoub Oweis
DAMASCUS, May 4 (Reuters) – Net profit at Syria's largest mobile phone operator Syriatel rose 29 percent in 2007 to 6.67 billion Syrian pounds ($150.2 million) compared to the year earlier, according to annual results published on Sunday.
An increase in customers and an expansion of services were behind the improvement, said Syriatel, which is negotiating to be taken over by Turkish counterpart Turkcell TCELL.IS(TKC.N: Quote, Profile, Research).
Revenue rose 24 percent over the same period to 39.4 billion pounds ($856.5 million) and subscribers rose 33 percent to 3.34 million, comprising 55 percent of the Syrian market.
Network Capacity rose by 1.4 million lines to 4.7 million and infrastructure for an advanced 3G broadband Internet service was set up but the lack of government approval has delayed full launch of the service, the company said.
"The service will increase our customers and solve the Internet bottleneck problems of Syria," Syriatel said in an advert in local newspapers.
Syriatel is at least 69 percent owned by Rami Makhlouf, who is the target of U.S. sanctions imposed on him in February as part of a U.S.-led campaign to isolate the Baath Party-led government in Damascus.
Gulf shareholders own a minority share of Syriatel, which has a 10 percent stake in a Yemeni mobile operator with 120,000 subscribers.
Makhlouf, the cousin of President Bashar al-Assad and Syriatel's chairman, is negotiating to sell most of his share to Turkcell for an estimated price of around $1 billion.
Diplomats and financiers told Reuters this week that he United States was putting pressure on Turkcell to abandon the takover.
The U.S.Treasury Department has warned American investors in Turkcell, which is listed in Istanbul and New York, about the company's plan to buy Syriatel, they said.
Turkcell denied on Thursday there was U.S. pressure on the company to scrap the deal and said that the talks with Syriatel were continuing. Turkcell had expected the negotiations to conclude in March.
The Treasury Department has designated Makhlouf "a regime insider whom improperly benefits from and aids the public corruption of Syrian regime officials." The move was made under an expansion of the sanctions announced in an executive order by President George W. Bush on Feb. 13.
The order freezes any assets Makhlouf holds under U.S. jurisdiction and forbids American citizens or entities from doing business with him. Makhlouf, 39, has denied the U.S. charges. He said he did not have assets in the United States and his businesses were legitimate.
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