Economics and Policy
Egypt’s urban consumer inflation quickened to its fastest in two years last month, the central bank has said, driven by higher food prices and a sliding currency.
Economics and Policy
Security concerns and travel restrictions from Gulf Arab states have driven Lebanese tourist arrivals down by 27 percent during the small Mediterranean state’s peak season, Lebanon’s caretaker tourism minister said.
Elsewhere in Lebanon, declining consumer and business confidence will negatively impact the profitability of the country's banks in the second half of 2013.
Iran has taken delivery of several new oil tankers in recent weeks as it relies more on its own fleet capacity to help sustain crude export shipments in the face of western sanctions.
The US is planning $2.7 billion in new sales to Iraq of air defense and communications systems.
Companies and Strategies
Standard Chartered's net profits fell during the first half of the year as it wrote down its South Korea unit by US$1 billion, but income jumped at its UAE business as bad debts eased and the local economy recovered.
The Beirut Central District is advancing but the company in charge of its development is suffering under the economy and under verbal abuse. Solidere’s general manager Mounir Douaidy talks about the state of affairs after the precipitous drop in sales and profits.
Solidere has been in a down cycle on land sales and in a three-year slide of its share price. When would you expect the next cycle of upward development to kick in?
This is asking to look into a crystal ball. All I can say is that we will continue finishing the projects that we think we should finish. We have a mission, we have a mandate. We continue to do what we have to do and hope that external factors do not negatively impact all our effort.
The company’s performance numbers for 2012 are down 90 percent on net profit and the share price recently retreated to the $11 range in June. Is this an eight-year low for the stock?
An eight-year low? No… I can’t remember.
Is there still a need to find a bottom?
The share price going down to $11, and I don’t know if we bottomed out, is all subject to the political environment and whether we are going to see better days here or not.
You have foreign shareholders. Did the warnings that deterred Gulf citizens from coming to Lebanon also impact your shareholder behavior?
No, it didn’t impact our shareholder behavior. The result of [the travel bans] was that we lost on investors. [Last year] we were still seeing interest until all these bans came out and then all these potential investors that could have come from the [Gulf Cooperation Council] or the surrounding countries in the region, they disappeared. There was interest, and today there is no interest. Today there is nobody to generate that interest.
What do you feel most passionate about?
What I am passionate about is really this involvement in making part of the history of this country, at least through the rehabilitation and regeneration of the city center of the capital, trying to reposition it on the international map even as there is a lot of difficulty – it is not a hike, it is mountain climbing. It is fascinating on one hand but demoralizing on the other hand.
Do you feel drained at this stage?
Of course. There are moments when you feel desperate and tired and exhausted because [the opposition to Solidere] unfortunately doesn’t stop, but still I think we are doing the right thing. I think this project is that advanced that no matter how much opposition there is, it will not stop. Future generations will reap the benefits of what is being done today.
Among the more recent accusations against the company there was one that you muscled your way into hospitality operations and forced restaurateurs into contract. One local newspaper called this extortion. Would you not take someone to court who accuses you of extortion?
We won’t sue anybody for [saying] that. We created a hospitality unit not for a long-term business but as a tool. It is not part of the company’s objectives. The things that we went into were things that we thought no one else can do, and also these were concepts that were different from what existed. We did [concepts such as] S.T.A.Y. and Momo’s and Relay de Foche. If [the accusation of] extortion is related to Relay de Foche, okay, it is one little thing. Where is the trend? We are not creating [food & beverage] chains here trying to [dominate] the market. We are doing something very targeted for supporting our real estate activity, to create value over time and create activity.
How many people have you laid off recently by economic necessity and what is the ratio between average pay and C-Suite pay?
We are not laying people off. The definition of laying people off is when [institutions like] Bank of America, Citi, and HSBC lay off 30,000 people. We are not laying people off and what has been happening are cases which are very regular.
There has been no restructuring of your head count?
There has been a drop but not a big drop.
Can you name a percentage?
I don’t have the percentage. We have 1,000 employees when everybody is included. If you have like 15 people leaving for different reasons, what are we talking about? Nothing.
Can you tell us what the ratio of CEO salary to average salary is at Solidere?
I don’t have these figures. We never went into such benchmarking or statistics. But I can tell you something: it is again a misconception and fallacy that everyone thinks Solidere has very high salary levels. It is not true. We are either average or less than average in pay.
That applies to you too? Are you underpaid?
Yes, of course.
When it comes to planning an extravagant vacation, it seems to be more and more about the family. The latest report by the International Luxury Travel Market (ILTM) revealed a global growth in the multi-generational, family luxury travel market. The Lebanese are no exception; Nakhal, a Lebanese travel agency, told Executive that more than 60 percent of their high-end customers are families.
“Lebanese love to travel, and they are doing so more and more these days,” says Nadine Kurban Boutros, managing director of Kurban Travel, another Lebanese travel agency. While this statement may be true, budgets allocated for summer travel vary significantly among mid-income families and high-net-worth individuals whose extra spending power allows glamorous locations and exclusive lodging options. Executive sat down with a collection of travel experts in Lebanon to find out what the latest trends and destinations are in luxury travel.
The Grand Azur at Marmaris in Turkey is popular with the most well-heeled Lebanese
“Our wealthy customers generally take up to four short vacations of four to six days throughout the year,” says Hassana Darwish-Hussamy, the managing director of Concierge Master, a luxury services company with offices in Beirut. It’s a statistic that is in line with global, luxury travel trends.
Destination med
Although some of Hussamy’s clients ask her to plan a trip for them where they can discover a new destination or explore a different culture — in line with the global trends of ecotourism and adventure travel — Nakhal and Kurban’s clients tend to stick to the traditional destinations which naturally lend themselves to leisure and relaxation.
When the sun heats up and summer sets in, Lebanon’s wealthy mainly head to the nearby Mediterranean coast to cool down, perhaps due to its proximity, which is a plus when traveling with children. Travel experts Executive spoke with concur that the French Riviera, from Monaco to Saint Tropez, the Greek Islands — Mykonos, Crete and Santorini — and the Italian islands of Capri, Sicily and Sardinia are destinations of choice for their clients seeking a luxurious getaway.
The Lebanese are attracted to these destinations for their exclusive beach holidays and glamorous hotels. In fact, the islands off France and Italy were cited the most as prime luxury destinations by travelers and industry insiders surveyed in the ILTM report. “The Mediterranean has long been a prime destination for wealthy Lebanese because they can relate to it: it is almost the same as Lebanon,” says Hussamy. “They mainly go to the south of France, or Greece which is more accessible.”
Destinations in Asia or Africa that are commonly associated with tourism, such as Bali or the Seychelles, are considered unfavorable in the summer due to the hot and rainy weather, says Maud Nakhal, manager of Nakhal.
High-end travelers who want a change of pace from beach holidays are opting for the peace and tranquility of the European mountains. “We have beaches here [in Lebanon] and so some of our clients are asking for mountain destinations where they can get some fresh air and experience something different. The chalets in Meribel in France— traditionally ski destinations — are examples of such fully-serviced luxury lodgings finding success in the summer,” says Nakhal, describing fully serviced as having a chef and butler on duty, as well as specialized staff to entertain the children. Hussamy also mentions the mountainous villages of Switzerland such as Gstaad or Saint Moritz as a good villa rental spot for families with children, at a cost of $19,000 for ten days.
Chasing the stars
But choosing the destination is only the beginning and as Nakhal has seen, some clients do not care for the destination as long as the accommodation is deluxe.
Finding the most relaxing venue can be stressful
Wealthy clients who visit Kurban Travel prefer the five-star, ritzy city hotels to any other form of accommodation. To these clients, the service the hotel provides is the essential mark of luxury. “What the hotel offers you in terms of services is the main focus of the trip, and the destination is also important to some extent of course,” says Boutros. She gives the examples of the Turkish isles of Bodrum and Marmaris, both known for mass tourism but which are sometimes chosen by her clients specifically for their elite hotels, such as the Kempinski Hotel in Bodrum and the Grand Azur in Marmaris.
Of the affluent, global travelers interviewed by the ILTM, 46 percent cite privacy as the top priority for their trip, and villas within resorts have become more popular among these consumers. Nakhal cites the demand for plush villa accommodations launched by Club Med in its Antalya resort. With packages starting from $10,000 per week, these villas come with a private pool, a cabana on the beach, access to restaurants exclusive for the villa guests and 24-hour butler service. Nakhal says it has booked seven such villas so far this season (by mid-July 2013). Hussamy recommends those Club Med villas for the families among her clients, as they are ideal for children.
Villa rental has the advantage of offering privacy, good quality and excellent service — all priorities for affluent travelers — while at the same time allowing clients to enjoy being part of a crowd, if they so wish. “Some people prefer a villa as they can dictate their own terms, mixing with people when they want and being able to retreat to their lavish private surroundings when they feel like it. In a hotel, they will always be surrounded by people,” says Nakhal.
Cruising in comfort
Another holiday option chosen by high net worth travelers is a sea trip. Here again, some opt for being on a private boat while others choose to be part of a luxury cruise.
“Vacations on private speed or motor yachts are very trendy among the wealthy right now,” says Hussamy, explaining how the luxury yachts she recommends to her clients are fully crewed and serviced with a minimum of five to six staff, including a chef, a butler and a maid. Such a trip is only for the high-income families, says Hassana, as a motor yacht would cost $65,000 per week while the sailing yachts rage from $2,600 to $7,800 per day depending on whether the cruise is across the French Riviera trajectory or the Turkish or Greek island one, the French Riviera being the more expensive option. Meals are excluded from the cost as well — while the chef is present on boat, clients are still charged half- or full-board meals per day.
Nakhal’s high-end customers ask for cruises on the Club Med 2, a five-star boat which fits a hundred people on five tiers and sails along the Cote D’Azur for the cost of $5,000 per head, transportation to the boat excluded. Crystal Cruises, of which Hussamy is the agent, are medium-sized luxury cruise boats offering a very high level of service — with a ratio of one staff member for each two guests — spacious cabins and high-end meals, including a concept developed by the chef of Nobu, arguably New York’s finest Japanese restaurant.
Clients with a passion for the sea enjoy both these modes of sailing. “The yacht is private, more like a fully serviced home, while the cruise offers you a variety of excellent entertainment. We cannot really compare but it’s like the difference between a boutique hotel and a seven star hotel,” says Hussamy.
Whether by the sea or in the mountains, or whether by boat or in a hotel, luxury traveling is still thriving in Lebanon despite the tough times, says Boutros. Hussamy agrees, adding that within the small market of affluent people in Lebanon, luxury travel is an expense that is considered non-negotiable.
“The Lebanese are very good clients: when they are enjoying themselves on a trip with their family or friends, they forget what they have paid; the important thing for them is to have fun and be happy. They are also seeking the very best and have become more extravagant in their travels. Even if they spend above their budget on travel that is okay with them as they want to make it worth it,” says Nakhal.
Time and again we hear of Lebanese having more success at home than abroad, so often that it is starting to become a cliché. Yet like most clichés, there lies a strand of truth behind stories of their successes. The case of Just Falafel provides yet another telling example.
The firm, founded in 2007 in the United Arab Emirates by Lebanese-British entrepreneur Fadi Malas, is making a big name for itself globally. By taking humble Lebanese falafel and marketing it as a clean and healthy alternative to fast food, the company has brought it to new markets — primarily the Gulf but now also the United Kingdom, North America and soon to be India. So far the group says they have over 1,000 franchises in 19 countries worldwide, while profits doubled to $3.5 million in 2012. An initial public offering is rumored to be in the offing, which Malas says would help boost their rapid global expansion.
Related article: Shawarma goes global
The company’s growth has been built on a mixture of aggressiveness and clever marketing. On the advertising side, they have shunned traditional routes in favor of online and particularly Facebook — where they have invested heavily. More fundamentally, however, the company has set themselves the target of rapid growth. In the UK, rather than aiming for a gradual approach they are planning to have 200 stores by 2017. All this has given the impression of a rising force in the food industry, with the company being featured in major Western media outlets including the Financial Times and the BBC.
All of this optimism about the firm’s global growth is somewhat tempered by its Lebanon figures. Just Falafel opened four stores in the country last year, with the modest target of eight by the end of 2013. Even that, admits Safa’a Fares, storeowner and franchise communication manager, now looks to be out of their reach. While a fifth store is due to open later this month in Beirut’s southern suburbs, Fares says the others have been yet more victims of the economic climate.
“They are postponed,” Fares says, citing the planned store in the southern city of Saida, which has been host to numerous clashes, as an example of how politics is bleeding into their business model. “The political situation affected the economic situation, the economic situation affected our decisions in making things happen quickly. So we are taking it at a slower pace.”
The company, she says, is not abandoning the country that claims — contrary to what its neighbors believe — to have spawned falafel, but they are shelving major expansion plans. “Our concentration now is targeted outside Lebanon until things are more settled here and people are ready.” Though Fares says the company are still aiming for 25 stores in Lebanon eventually, it will be a “couple” of years before they push for growth, looking to Canada and the UK to make up the difference.
There are other reasons why perhaps growth in Lebanon might be harder to come by than in other markets, particularly competition. Unlike in the West and other markets, the franchise is competing with hundreds of other traditional falafel stores. “We have a lot of resistance from the people living here — they think that falafel is being invaded and they want to protect their heritage,” Fares says. “They don’t understand that it is our heritage…that we are not competing with falafel, we are falafel.”
But while competition with local companies is clearly a factor undermining growth, other firms such as Shawarmanji have shown that it is possible to repackage a classic Lebanese dish successfully in Lebanon. The fact that Just Falafel is backtracking is perhaps yet another indicator of the weakness of the economy.
Even Fares herself is setting her sights on other markets. She has recently been appointed the responsibility of taking the franchise to Turkey, where they have one store and are aiming for five more by the end of the year. “It is a great market, they all eat meat there — they don’t have any vegetarian options,” she says.
With an aggressive growth strategy, Just Falafel looks set to keep expanding in the coming years. How big they can get is a matter that will ultimately be decided outside Lebanon — in the new markets they are targeting. The plans are certainly grand. “I think if you ask our CEO he would say we are aiming for 100,000 [stores],” Fares says. “Every two or three months he puts a new target for us…we are not going to stop.”
Unfortunately, for their Lebanese branch, however, while they may not have ground to a halt, they have at least put the brake pads on.
Economics and Policy
Egypt’s foreign reserves rose to their highest level in almost two years, reaching $18.8 billion at the end of July, according to the latest central bank figures.
More from the Associated Press
Profits at Dubai-based construction company Drake and Scull International rose 63 per cent year on year to $14 million during the three months to June as the Dubai-based contractor benefited from a revival in construction markets in Saudi Arabia and the UAE.
Budget airline Air Arabia, United Arab Emirates’ only publicly-listed carrier, reported an 15 per cent increase in second-quarter net profit as it carried more passengers.
What do a building, a billboard ad, a handbag and a website have in common? They all had a designer involved in their production.
Despite its wide scope — ranging from fashion to graphic design and from animation to architecture — and its integration in almost all businesses, the creative industry is undervalued in Lebanon today. This lies in sharp contrast to the regional and even global interest in Lebanese design talent, but the good news is that a slow but steady, community-based effort is on track to bring more recognition and more business to the design community. The most impressive expression of this effort is Beirut Design Week (BDW), a tandem carriage of practical events and theoretical information dedicated to celebrating local achievements while conveying global design expertise.
Maya Karanouh, chief executive of Tag Brands, a branding and advertising agency, along with her business partner Doreen Toutikian, are cofounders of BDW. They are convinced that the real story of Lebanon’s lively design community is just now beginning to be written. “So many Lebanese universities have solid programs in design education — from architecture to interior design to graphic design to fashion design — and they are still evolving and getting more diversified,” says Karanouh. She adds that there are trends toward recognizing local designers and toward design-oriented galleries where artistic yet functional objects are displayed instead of paintings.
The sentiment is shared by Mo Saad and Leen Sadder, two Lebanese designers who are working successfully in the United States. They are in the process of implementing a membership association for designers in the Middle East. It will be a branch of AIGA, a US-based professional design organization with over 23,000 members. Launched from Beirut during BDW 2013, AIGA Middle East is AIGA’s second affiliate outside of the US after China, Saad and Sadder tell Executive. They bristle with enthusiasm about the great creative talent found in the region and the global interest in it. “AIGA’s vision is to go global, and when we approached them [with AIGA Middle East] they instantly went for the idea, especially since there’s a growing interest from the West in Arab designers and calligraphy,” says Saad.
Drawing exposure
Yet, save for around a dozen well-established Lebanese designers in fields such as fashion and architecture, the general public is unaware of this national community and its wealth of talent. “The biggest challenge for designers in Lebanon, aside from the political tensions of the country, is public awareness, which needs to be dealt with, and also governmental support in terms of raising international awareness, helping designers find global points of distribution and having more competitions for designers,” says Karanouh, explaining how design and the creative industry represent a country’s culture.
The minimal exposure of Lebanese and Arab designers occurs at both the local and global levels. “There is so much talent in the country but it’s not exposed, so very few know about the Middle East designers unless they are actively trying to pinpoint them,” says Saad, giving the example of a friend who was congratulating him on AIGA Middle East and asking him to introduce him to talented Arab designers for his branding needs.
A related challenge facing designers is that local clients tend to under-appreciate their work. “The striking difference between working in Paris and in Lebanon is that in Paris they value your work and appreciate the time it takes to reach a final product and so you get paid accordingly without having to validate it. As a freelancer in Lebanon, I frequently have to justify why I am asking for such a figure, I have to explain the design process and convince the client of the value of my work,” says Dima Boulad, a Lebanese graphic and motion designer and creator of the brand Dessine-Moi Un Oiel.
The founders of AIGA Middle East also talk about the lack of value placed on a designer’s work when clients ask a freelance designer to create a logo for a pittance of $50 or to finish a 15-minute animation video in less than a day. Among the aims of the association are to educate the public about design and to ask for and protect the rights of designers.
Designers are in essence entrepreneurs who are working hard to establish their business, says Toutikian, who is developing a research-focused design consultancy under the name MENA Research Center. She emphasizes that the Lebanese market’s small size means it is paramount for designers to think globally while sustaining a local base.
Designers need incentives to work in or from Lebanon, and the nascent design industry needs the government’s support for that. “Lebanese designers abroad are doing so much better than they do in their own country, so how are we going to create this platform where designers stay, or leave but come back with fresh ideas?” asks Toutikian.
Feeling that the Lebanese government has other priorities, Karanouh and Toutikian took the matter of increasing public appreciation of design into their own hands by founding BDW, an event which, in other countries, is organized by the government. Held for the second time this summer, BDW is geared to be an annual experience that brings the country’s design community to the forefront of public attention while offering designers good prospects for collaboration.
Personalizing design
“The general community discovered designers that they wouldn’t normally know of,” said Karanouh, explaining how BDW provides designers with a different way of interacting with the public through events showcasing their work and through the workshops they can give throughout the week. “Once you know a designer in that personal manner, you will identify with their work more and be more likely to buy it,” explains Karanouh.
Designers participating in BDW 2013 tell Executive that the concept works. “It was great exposure which allowed me to sell most of my products. Being featured in such an exhibition gives a sort of credibility to my work and a sort of push,” says Boulad.
When compared with its first edition in 2012, BDW has nearly doubled. Eighty-five designers participated and 100 events were held. The organizers claim they encountered much larger and more eager audiences in this year’s workshops and events.
One drawback of the week is that it is a once-a-year occurrence, say designers, who feel a need to see year-round collaborations in their community. “One needs to remember that BDW is an annual event and that designers need support and recognition year out, especially at the beginning of their careers,” says Toutikian. AIGA Middle East is hoping to develop a local design community, which will perform that role and provide a platform for designers to collaborate with and support each other.
AIGA Middle East has already raised enthusiasm among Lebanese designers. “As a designer, I would surely be part of AIGA Middle East because this is the platform we need. It is worth the extra effort on my part because it helps build connections and the more connections one has, the more collaborations one can build. We are in the same sphere after all,” says Boulad of Dessine-Moi Un Oiel.
This collaboration is something that Sadder considers essential to raise awareness about the country’s design scene. “Pushing against the current as an individual is hard, but when you push together as a community, it’s different,” says Sadder.
At long last, Beirut’s urban experience may finally be ready for visitor masses. Two projects — an entertainment center fitted with a multiplex cinema and a department store — are slated for completion at year-end 2013 and 2015, respectively. The entertainment center will go into business “in October or November; in any case before the end of the year,” says Mounir Douaidy, general manager of Solidere.
The two projects comprise what is called the “North Souks”, located on the edge of the current Souks, and representing close to 40 percent of the Souks’ 118,000 square meters (sqm) after completion. The North Souks have been delayed several times, and the current projection of their delivery puts is roughly 15 years past the initial target date for opening the Souks.
The uppity, well-to-do crowd among Souks’ patrons will moreover have a 16,000 sqm wellness center cum furnished apartments complex in nearby Patriarch Hoyek Street at their disposal, for convenient stay.
As for other downtown development projects, such as landscaping the Waterfront District and completing infrastructures, citizens will have to wait until 2014 to see what Solidere decides on their implementation timeline, according to Douaidy. Perhaps unsurprisingly, the reason for those new delays is the dearth of investment deals.
According to data circulated in June by FFA Private Bank, Solidere’s total land sales in 2012 were driven entirely by a single, $50 million transaction — a roughly 11,000 sqm portion of the Waterfront District. With sales revenue contracting that year by 79 percent to $49.6 million, net profit dropped 90 percent year-on-year to $16 million.
When Executive interviewed Douaidy in mid-2012, plot sales had failed to materialize in the first part of the year but he professed optimism, saying that larger sales might return in the third or fourth quarters. Now, a year later, he confesses that “things do not look very bright” for 2013 sales revenues. But he adds a small note of positivity, emphasizing that investor interest has not shriveled up completely. “We have people knocking on the door, but all of this is not translating [into sales] because every day there is [a new problem] and investors keep postponing.”
Financially, the Solidere story serves as a case study on non-predictability, demonstrating perfectly how extraneous factors have voided any ability to make assessments related to downtown Beirut. When equity analysts for Blominvest started covering Solidere in May 2010, they estimated that 2012 results would come in at $451 million in revenue and $272 million in net profits.
When compared with the real results, this 17-fold over-expectation of Solidere’s 2012 annual profit illustrates how extremely vulnerable the company is to external security and political factors, reflecting the vulnerability of Lebanon’s entire economy. This also explains why Douaidy defiantly says, “The only negative impact on the share price of our company is the political situation.”
Solidere stock slipped below $12 per share in early June and entered the slow trading days of summer at $11 to $12, levels not seen that low since summer 2005. Douaidy, ever the optimist, contrasts the dramatic drop in Solidere’s share price with the company’s net asset value (NAV). Combined, the land and real estate portfolios and the company’s liquidity and quasi-liquidity according to him constitute a net asset base of $8 billion, or $45 to $50 per share.
Continuity, as far as Solidere is concerned, has been concentrated in three areas. In terms of NAV, the valuation of its land bank has been justifiably more resilient than those of other large regional developers where elasticity of supply for desert parcels may have been under-represented in considerations.
The second factor of continuity has been the consistency of its board of directors, where six of twelve board members have been on their seats, uninterruptedly, since 1994. This latter consistency was softened a bit by four “new” faces, including Douaidy, coming to the board table in 2012.
A third important factor in the Solidere experience has been controversy. Although the company’s engagement in the rebuilding of Beirut over the past ten years alone resulted in creating some $7 to $8 billion in property according to Douaidy’s estimate, the past 18 years have seen continuous domestic animosity against the company which, for whatever reason, just kept polarizing people.
In Douaidy’s perception, the reputation of Solidere is marked by a perfect split. Investors he meets abroad, he says, “see in Lebanon and in this project in particular a huge success story. They are amazed by the achievements and standard of execution. But our own people here, they want to kick you down, they want to crush you and destroy this company because it doesn’t fit their political views or because they are jealous [of its] success.”
Despite Lebanon’s commercial heart suffering acute business arrhythmia, Solidere is putting on a brave face and is still working to complete a potent ventricle to ready downtown Beirut for the days when normalcy settles here — whenever that might be.
In an alarming report published early July, the World Food Programme and the Food and Agriculture Organization of the United Nations warned of the catastrophic state of the Syrian agricultural sector and of the serious threat that the decline in farming production presents to the population’s food supply.
The crisis is so serious that a few days before the beginning of Ramadan, a month when predominantly Muslim countries typically see a peak in food consumption, the Minister of Economy announced that the government would dip into its strategic reserves to provide sufficient food for the population.
According to the joint WFP/FAO report, wheat production, which is essential because bread is a staple food of the population, is in freefall. The wheat harvest this year is estimated at 2.4 million tons, 15 percent less than last year and 30 percent less than the average production of 3.5 million tons in the preceding three years.
Stocks are also low, officially at 2.9 million tons at the beginning of this year but in reality probably much lower because many storage silos have been destroyed. The report estimates that some 1.4 million tons will need to be imported in order to meet the needs of the population.
Every day in Damascus and across Syria, bakeries providing bread at the government-subsidised price now witness hours-long queues, while the market price of bread has increased threefold.
Meanwhile, the sugar beet harvest is estimated at only a third of last year’s yield, at 400,000 tons. Sugar beet is also a staple of the Syrian diet, and Syrians are among the largest per capita consumers of sugar beet in the world. Here too imports are required to meet demand, and a tender for the purchase of 276,000 tons from world markets was issued in June. The livestock sector, which traditionally accounts for some 35 percent of the Syrian agricultural production, is also vulnerable. The number of sheep fell from 15.5 million to 11 million heads, while exports, traditionally at 3 million heads and generating around $450 million per year, will fall to 100,000 in 2013. In the rural areas of Syria many households own livestock that often constitutes most, if not all, of the household income.
The poultry industry, which generated nearly 1 million direct and indirect jobs, has lost nearly half of those jobs and two-thirds of its production units. This alarming situation is rooted in factors now well-established. The violence of Syria’s ongoing civil war, which has spread to almost all of the country, is a main factor. It has displaced and exiled many farmers; destroyed infrastructure, equipment, fields, livestock; and prevented farmers from accessing their fields, obtaining inputs and marketing their products.
The sanctions imposed by the West are also to blame. Although no specific sanctions target agriculture, except for those on chemicals that have reduced the supplies of pesticides, the measures taken against the banking sector and the establishment of a blacklist of public entities have scared away foreign companies, causing shortages of many inputs. Finally, the fivefold increase in the value of the dollar against the Syrian pound has led to an explosion in the cost of imported inputs, and banking loans have dried up.
This decline in farming output is causing serious concerns in Damascus. As food supplies have grown tighter in urban areas, inflation has skyrocketed to the triple digits, and many Syrians have seen their diets reduced to bread and sugared tea. The options the government has at hand are limited. It is seeking to encourage production at all costs, including, for instance, paying higher prices to farmers for their crops, especially wheat and sugar. The price paid to sugar growers actually increased 50 percent year-on-year. Last October, the Minister of Agriculture also advised the population to grow fruits and vegetables and raise chickens in their backyards and gardens. The remark reflected the level of concern of the authorities and the partial transformation of the Syrian economy into a subsistence economy.
Now that the government has dipped into its stocks, it remains to be seen what other options it has left. These “strategic” reserves were supposed to be used only in an “emergency situation”, which probably fits as the best description of the state of the Syrian agriculture and economy today.
Jihad Yazigi is editor-in-chief of The Syria Report
Economics and Politics
Lebanon's finance minister Mohammad Safadi has denied claims that payments to public sector workers will be delayed in August, saying the government will soon authorize $794 million of extra spending in an “urgent” decree.
Income at UAE energy giant Dana Gas ell by almost half during the second quarter after lost production in the Kurdish region of Iraq and difficulties collecting debts from Egypt.