x Abu Dhabi, UAESunday 23 July 2017

Wealth divide widens as Syrian market shifts gear

Importers of modest vehicles report flat sales - a sign that the middle class is saving money - but trade is booming in the expensive segment.

Range Rovers, on display at an auto show in Damascus this month, are in high demand despite a steep luxury tax.
Range Rovers, on display at an auto show in Damascus this month, are in high demand despite a steep luxury tax.

DAMASCUS // The Italian sports car company Maserati will launch its range of high-price, high-performance vehicles in Damascus this month, the latest in a string of luxury car manufacturers eyeing Syria's ultra-rich elite.

Although importers of more modest vehicles are reporting flat sales this year, a sign that the middle classes are cautiously saving their money in the face of economic uncertainties, those selling the most expensive marques say business is booming. "You wouldn't believe how strong the demand is for Maserati and cars like that here," said Theodor Zarour, the marketing manger of Al Khouli Motors, the official importers. "People are lining up to put a deposit down, to add their name to the waiting list."

Those signing up for a new piece of exclusive Italian machinery are doing so without even knowing what the final cost is - prices are yet to be determined - although they are likely to get little, if any, change out of a quarter of a million dollars. "Three or four years ago there was no real market for this type of car here, but it is happening now," Mr Zarour said. "We've got companies like Porsche with cars for US$200,000 [Dh734,000] or more and they are doing great sales.

"The market is more robust in the top of the range than in the middle. The opportunities are with the expensive cars; things are moving at that level." It is a graphic illustration of the changes taking place in Syria as the country shifts from an insular and unsustainable socialist economy to a market-oriented, western-style system, open to international trade and creating lucrative new business opportunities.

It is, however, also a stark reminder of the problems involved in such a transition and the difficulties in ensuring that the wealth generated trickles down to the middle class and poor. The Syrian government has made wealth distribution a priority in its economic planning and, five years ago, pledged to cut poverty rates. Rather than embracing unfettered capitalism it has devised a "socialist market", a system designed to offer a balanced economy.

It has met with some success, according to the International Monetary Fund. While much of the world slid into recession during 2008 and 2009, the Syrian economy continued to grow. It is predicted to do so again this year, driven in part by a healthy tourism industry, foreign trade and a liberalising financial sector. However, an as-yet unpublished joint study by the government's State Planning Commission (SPC) and United Nations, is widely believed to show poverty is spreading.

Unconfirmed details from the study indicate the proportion of Syrians living in "extreme poverty" - defined as unable to meet even their basic food needs - has risen to 12.3 per cent in 2007 from 11.4 per cent in 2004. That amounts to more than 2.3 million people. The proportion living in "poverty", defined as able to meet a reasonable amount of their basic needs, has also risen to 33 per cent over the same time frame from 30.1 per cent, the report is expected to show.

According to the government-run Central Bureau of Statistics, the average annual salary in Syria last year was just $2,904. Some economists warn that even these figures underplay the real extent of today's poverty, with two major events occurring after the SPC/UN research period. Long-standing government subsidies have recently been cut and a three-year drought has devastated eastern Syria since 2007, destroying the livelihood of hundreds of thousands of people.

Although there are no current statistics on the wealth gap - these are expected to be released when the SPC/UN report is published this year - there is a consensus among Syrian analysts that the benefits resulting from the changing economy have, so far, remained largely in the hands of the already wealthy few. "We have 200 to 300 people here and they have more money than they will ever be able to spend; it's just not an issue to them," said a property developer, speaking on condition of anonymity. "Beneath that we have a layer of very rich people, they're very wealthy. Then there is the middle class, which is small, and even it has money problems. Beneath them is everyone else."

For those at the top of the economic pyramid, times have never been better, at least if luxury car sales are any indication. Syria was BMW's top-performing Middle East market last year, bucking global trends with a 53-per-cent sales increase. Such figures are made all the more remarkable given the government's policy of heavily taxing cars, especially those bought by the very rich. Engines larger than 1.6 litres are subject to a purchase tax of 66 per cent. There are additional luxury taxes to pay on high-end models.

A top-of-the-line Range Rover in Syria retails at a shade under $300,000, of which $63,000 is luxury tax, a fact that does nothing to deter an average of two buyers a month here from purchasing one. "This year was a good year," said Hussam Safia, the sales supervisor at the Ghreiwati Group, the official Syrian importer of Land Rovers and Jaguars. "We have a lot of VIPs who buy these cars." His optimism contrasted with the downbeat assessments made by marketing teams of less-expensive brands, who complained that sales were down compared with 2007, despite increasing availability of bank loans and installment financing options.

"It has been a very bad year; people have no money to spend on new cars," said Mahdi Khadra, the sales manager with al Shahba, Syria's Honda distributor. "Two years ago it was great, last year was middling, this year bad. We are hoping the future will be better, but it's unclear what to expect." The Range Rover importers were confident that the very wealthy would keep on buying. "Now that the 2010 model is coming out, owners of the 2009 version want to trade in the old and buy the new," Mr Safia said. "This will be a good year, I'm sure."

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