By Linda Matar
Macroeconomic policies adopted during Bashar al-Asad’s regime have had serious socioeconomic consequences for the Syrian population. So detrimental to citizens’ everyday lives were these policies that they helped bring about the Syrian uprising now at play. The purpose of this essay is to shed light on the social and economic hardships that contributed to this social discontent.
Soon after assuming power in 2000, Bashar al-Asad introduced wide-ranging economic reforms that lay an irreversible foundation for a market-driven economic order. He enacted an investment-promoting decree; privatized state farms; introduced a private banking system; liberalized capital and trade accounts; heavily reduced customs duties; and promoted private sector-led investment at the expense of state-led investment.
Such changes built on the more limited market-friendly reforms gradually implemented by Bashar’s father, Hafiz al-Asad. Economic liberalization during Bashar’s regime also differed from his father’s in that it was advised by International Financial Institutions (IFIs), i.e., the IMF and the World Bank, which allegedly claimed that these reforms would promote macroeconomic stabilization. The parallel conviction that evolved among Syrian policymakers was that neoliberal policies and expanded private sector activities would inevitably “trickle down” and improve the social conditions of the majority of Syrians in terms of job creation and expanded social services. Nevertheless, a succinct review of the socioeconomic conditions of the past ten years reveals that developmental and welfare gains have not materialized. The move toward the market economy neglected equitable income distribution and social protection, thereby culminating in anti-developmental economic growth.
When Bashar took over, economic conditions in Syria were not in the best shape. The GDP growth rate was negative 2.5 percent in 1999 and zero percent in 2000, and GDP per capita witnessed an average growth rate of negative one percent from 1997 to 2001.[1] However, economic performance improved following the rise in international oil prices in 2002. The crude oil price of the Organization of Petroleum Exporting Countries (OPEC) reference basket increased from $27.6 per barrel in 2000 to $36.1 per barrel in 2004, further accelerating to $94.5 per barrel in 2008.[2] From 2004 to 2010, Syria witnessed an average economic growth rate of 5 percent per annum, mainly attributed to the production and export of crude oil. While Syrian oil export revenues increased by 18 percent to reach S£217.7 billion (approximately $4.7 billion) in 2008, they then dropped by 39 percent in 2009 following the decrease in oil production and depleted oil reserves.[3]
Investment rates increased from 17 percent of GDP in 2000 to 23 percent in 2007. While state-led investment decreased following the liberalization measures, private investment increased and was concentrated in short-term or single-deal attempts in the trade, finance, real estate, and service sectors.[4] Billions of dollars of Arab investment, especially from the Gulf, poured into Syria and were directed into real estate. This led to a boom in land prices, especially in the major cities of Damascus and Aleppo. Syria’s share of intra-regional Arab investment registered 9.9 percent in 2007 as total investment reached $787 million, 6.5 times higher than its 2002 level.[5] As such, the Syrian economy appeared to be on the upswing. Yet, investment in the real economy or the productive sectors of the economy retreated. The share of agricultural investment out of total investment fell from 16 percent in 2000 to 9 percent in 2007.[6] Moreover, investment in industry dwindled, causing the once exporting local industrialists to switch to importing or trading.
Economic growth was neither employment generating nor developmental. It was unable to create job opportunities for the 250,000 new Syrian entrants into the labor market per annum. While the latest official figures report an 8.1 percent unemployment rate, Syrian economists in 2009 estimated the rate to be 24.4 percent.[7] This rising unemployment rate and job insecurity can be attributed to the long-term contraction in the traditional manufacturing sector. Since the 1970s, the economy has mainly relied on geo-political and oil rents as opposed to productive and employment-generating investment. Moreover, poverty increased despite the growth in national income. With seven million people living below the poverty line, the poverty rate as a whole was 34.3 percent in 2010. In rural areas, it hovered at around 62 percent.[8]
The income inequality between rich and poor has widened since 2000, and social differences have become more palpable. The share of wages out of the national income was less than 33 percent in 2009, compared to nearly 40.5 percent in 2004, implying that profits and rents constituted more than 67 percent of the GDP.[9] The average household expenditure in 2009 was S£31,000 per month (approximately $653), of which S£14,000 (approximately $295) went toward food.[10] However, nearly 71 percent of Syrian workers were earning less than S£13,000 (approximately $274) a month, thereby indicating that the majority of wage-earning people were hardly surviving. Thus, neoliberal policies were harmful to the working class and lower middle class.
Since 2003, inflation rates have been steadily increasing. As advised by the IFIs, the Syrian government abandoned the policy of subsidies and lifted price controls. Nominal wages, despite their increase in the public sector during the period from 2001 to 2006, did not keep pace with inflation rates.[11] From 2006 to 2008, the inflation rate grew from 10 percent to 15 percent. If housing costs are included in those figures, it hovered around 17-20 percent.[12] This is compared to an average inflation rate of below 5 percent in the 1990s. The purchasing power of the majority of Syrians was therefore dampened. The phasing out of fuel, power, diesel, and fertilizer subsidies had a particularly negative impact on the poor, who were suddenly faced with elevated costs for these necessities. In addition, the severe drought in Syria for the past four or five years has forced farmers to farm less or abandon their crops, as they have not been able to finance the cost of production.
Therefore, the neoliberal reforms promulgated in the 2000s were neither pro-poor nor welfare enhancing. Policymakers conceived of employment generation and poverty reduction as by-products of the neoliberal paradigm and its associated profit-based resource allocation mechanism. However, overlooking the social side of market-driven economic reforms trapped the majority of Syrians in poverty. In order to ensure egalitarian outcomes, social policies should tally with economic policies. Poverty reduction, unemployment alleviation, and social protection should constitute the core of national economic policymaking and play a central role in determining macroeconomic strategies in Syria. With Syria likely to undergo a transition as a result of the uprising, it is imperative that future policy makers address the pitfalls highlighted here and adjust their policies in order to situate Syria on a developmental path that can benefit all of its citizens.
Linda Matar is a Ph.D. candidate in the Department of Economics at the University of London (SOAS). She will be joining MEI as a research fellow in the fall of 2012.
[1] Central Bureau of Statistics, Statistical Abstract (Damascus: Central Bureau of Statistics, 2002).
[2] Organization of the Petroleum Exporting Countries (OPEC), Annual Statistical Bulletin 2010/2011.
[3] Central Bank of Syria, Quarterly Statistical Bulletin 2010 (Damascus: Central Bank of Syria, 2010).
[4] Nabil Marzouk, “The Economic Origins of Syria’s Uprising,” Alakhbar Newspaper, 28 August 2011.
[5] Samir Seifan, “Syria on the Path to Economic Reform,” St. Andrews Papers on Contemporary Syria, 2010.
[6] Central Bureau of Statistics, Statistical Abstract (Damascus: Central Bureau of Statistics, 2009).
[7] M.J. Barout, The Last Decade in Syrian History (Al-‘aqd al-akhir fi tarikh Suriyah: jadalliyat al-jumud wa-al-islah) (Doha: Arab Centre for Research and Policy Studies, April 2011).
[8] Ibid.
[9] Nabil Marzouk, op. cit.
[10] Central Bureau of Statistics, Statistical Abstract (Damascus: Central Bureau of Statistics, 2009).
[11] Public sector wages increased by 85 percent during 2001-2006, but remained the same in 2006-2007.
[12] Samir Seifan, op. cit.
