It was not an easy winter on Jordanians who faced a blizzard of high prices, writes Oula Farawati The cartoonist Imad Hajjaj says it best in a cartoon published in Abu Mahjoob. The cartoon character tells his kids, "I will throw you in the street, but I will create mechanisms to make sure you don't suffer." This is exactly the case of the new Jordanian consumerism policy: After decades of heavy subsidies on basic commodities, starting with fuel and ending with bread and milk, Jordan decided to leave consumers to fare for themselves by lifting all subsidies and opening the market to competition, leaving Jordanians who have yet to understand market mechanisms struggling to strike a balance between their limited incomes and increased prices. The government in February went ahead with a controversial scheme to lift all subsidies on oil derivatives which saw prices of kerosene go up by almost 60 per cent. The move had a domino effect on the cost of food, industry and transportation. The state-run Department of Statistics revealed last week that average consumer prices went up by nine per cent in the first two months of 2008 compared to the first two months of last year. The increase was due to prices going up for eggs and dairy products, which rose by 31 per cent, cereals (23 per cent) and some other commodities like fuel and electricity, oils and fruits which saw a hike of an average of 20 per cent. The department attributed the increase mainly to higher prices of fuel and electricity, which rose by 43 per cent last month and transportation services which went up by 19 per cent Rising prices and a stagnant income have pinched families' pocketbooks. Ayman Hamoudeh, a father of four, said he was still trying to absorb the prices shock. "I go to the supermarket and think twice before buying anything. My wife and kids complain but I am literally unable to meet all their needs." Head of the Union of Food Commodities Merchants Khalil Al-Haj Tawfiq confirmed that the wave of higher prices has swept all commodities, raising their prices from 40-150 per cent. Al-Haj Tawfiq noticed that merchants' sales have dropped by more than 50 per cent while citizens try to balance their spending. "We also noticed that people buy smaller quantities. The market mechanisms have changed a lot and we also now have to reconsider our purchasing orders and decrease the amounts we import by a considerable percentage," Al-Haj Tawfiq told Al-Ahram Weekly. A government official attributes the rise in prices to drought in Australia and demand for ethanol coupled with a weak dollar, which the Jordanian dinar has been pegged for decades. The official, who preferred anonymity, said citizens have to cut their spending and avoid impulse purchases in what the government terms "rationalised spending". The notion of rationalised spending and consumption struck a bitter chord with citizens who have already stretched their belts as they braced the expected rises in prices. The government of Jordan has raised the salaries of public sector employees earning less than 300 Jordanian dinars a month by 50 dinars. For those earning more than 300 dinars, the salaries were raised by 45 dinars. According to analysts, the increase compensates for only a small fraction of the price increases, while thousand of workers in the private sector got no such increases. Economist Hossam Ayesh sees this as only widening an already big gap between the rich and poor in Jordan, which is witnessing a surge in foreign direct investment and an economy growth of around six per cent, none of which is felt by the average Jordanian. "The government took all these decisions without proper planning. The poor will become poorer and the rich will become richer," he said. Lifting subsidies on oil derivatives is also endangering local industries, where fuel and labour prices are higher than similar industries in Egypt and Syria. According to analysts, many Jordanian industrial products will lose their competitive value as exports at the same time as their sales witness a steep drop due to citizens cutting their purchases. Lina Handileh, general manger of Philadelphia Factory for Chocolate, said she was trying to find a formula to offset the rising cost and declining sales. The cost of production at Handileh's factory rose by some 40 per cent. "The rise in the price of fuel is catastrophic. I still can't find the right formula to cope with all this pressure," she said. Local industries are calling for special energy prices for local factories. Maher Nasser, member of the Jordan Chamber of Industry, said energy makes up around 35 per cent of the gross cost of industry. "If the government doesn't support industries, many will suffer and will shut down, especially ceramics and plastics." In 2007, a survey by the Economist Intelligence Unit found that Amman was the most expensive Arab capital in terms of cost of living. The survey was conducted before the rise in oil derivatives, leaving Amman at the top of the list.
