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UN warns of Asian growth
deception
By Marwaan Macan-Markar
BANGKOK - A regional United Nations body is
displaying rare courage in knocking down the mantra that
impressive economic growth figures are a panacea to help
developing countries rise out of poverty. The global
body's recognition of certain challenges facing
countries in Asia comes despite UN experts' predictions
that the region will be the envy of the world due to its
healthy economic numbers in 2005.
Developing
economies in the Asia-Pacific region will grow faster
than the global average next year, but will face
challenges from volatile oil prices, an end to World
Trade Organization (WTO) textile quotas, slowing growth
in major export markets and a rise in jobless rates, the
global body said on Monday.
The Asia-Pacific is
due to record a 6.2% growth rate against the average
3.4% predicted for the world economy, the Economic and
Social Commission for Asia and the Pacific (ESCAP), a
Bangkok-based UN agency, said on Monday. Though the
average growth rate for developing Asian economies is
projected to slow to 6.2% from 6.9%, the region "will
continue to have the highest growth rates in the world",
said Kim Hak-Su, executive secretary of ESCAP.
The region's economic engine will be powered in
the new year by China, with an estimated growth of 8.8%,
Vietnam 7.3%, India 6.8%, Thailand 6.0%, and Kazakhstan
with 8.5%, ESCAP states in a report analyzing the
Asia-Pacific economies in 2005. The US economy, on the
other hand, is expected to strike a 3.5% growth rate and
the European economy is set to grow by 2.5%, the report
adds.
But Kim cautions against a round of good
cheer, since there will be contrasts in the Asia-Pacific
economy next year due to factors that include high oil
prices and rising joblessness.
Growth in the
jobless rate
South Korea, still hailed as one of
Asia's success stories after the 1997 regional financial
crisis, is being offered as "exhibit A" to drive home
the point that growth figures can be deceptive when
assessing the health of a country's economy for its
people. "South Korea has achieved economic growth at the
loss of employment," Kim told reporters.
It is a
reality that may prove true across the Asia-Pacific
region in 2005, despite indicators pointing to robust
growth rates, warn senior ESCAP officials. "Jobless
growth is a big problem in the region and policymakers
have to make sure that growth is pro-poor," said Raj
Kumar, head of ESCAP's research and policy analysis
division. "We cannot rely on trade alone to help the
poor."
Malaysia, another East Asian star
performer after the 1997 crisis, is inflicted with the
same contradiction as South Korea - healthy growth
indicators, but a loss of jobs. "Malaysia's unemployment
rate has doubled between January 2002 till now," Kumar
told Inter Press Service.
According to ESCAP,
South Korea's economy achieved 3.2% growth in 2003,
followed by 5.2% in 2004. It's growth rate in 2005 is
expected to hover around 4.2%. At the same time,
however, the unemployment figure in this East Asian
nation rose to 3.6% by the end of 2004 - higher than the
2.8% jobless rate reached at the end of 2002.
The point hammered home by ESCAP has been
welcomed by critics of the World Bank-led view that
promotes economic reform in the name of growth. "It is
fantastic that organizations like ESCAP are saying this,
because it may create a new policy debate," Nicola
Bullard of Focus on the Global South, a Bangkok-based
think-tank, told IPS.
"The mainstream view is so
obsessed with growth that they don't look at
employment," she added. "Growth is only an economic
indicator and doesn't tell you anything about who the
winners and losers are and what the social consequences
will be."
According to Kumar, the signs of
jobless growth in South Korea and Malaysia and "pockets
of other economies" are due to economies being shaped by
key sectors such as information technology (IT). "There
are new service and IT jobs linked to growth and
exports, but there are not as many jobs in the
manufacturing sector."
However, ESCAP's sober
assessment of the region's economies not churning out
new jobs is only one of the many woes that Asia-Pacific
economies may have to stomach in the new year.
Other risks
These are likely to come
from fluctuating oil prices, the weakening US dollar and
the slowing down of three major economies, China, Japan
and the United States. "If the three big economies slow
down, it will adversely affect the Asia-Pacific
economies that depend on exports," said Kim.
Oil
prices, which extended gains above US$41 a barrel on
Tuesday, will fluctuate in 2005 because of the war in
Iraq, erratic supplies, and rising demand for energy in
growing economies such as India and China, the
Associated Press reported Kumar as saying.
Moreover, domestic oil subsidies are
unsustainable in some countries, Kim added, citing
Indonesia, where subsidies in 2004 will likely amount to
"nearly a quarter of total government revenues".
But smaller Asian economies that have depended
on garment exports may be worse off for another reason -
the multi-fiber agreement (MFA) ending in December.
"Pakistan, Bangladesh, Nepal, Vietnam and Cambodia are
some of the countries [that] will suffer," said Kim. The
quotas gave favorable import tariffs to countries such
as Bangladesh, where textiles account for 75% of total
exports, and Sri Lanka, where they account for close to
50%, he said.
Under the MFA, developing
countries supplied clothes under a quota system to
markets in the United States and Europe. UN officials
fear that hundreds of thousands of garment factory
workers, most of them young women, will be out of jobs
when this quota-agreement ends and production will be
subject to the whims of the free market, where China,
with its army of cheap labor, stands to gain.
ESCAP's concern over the uncertain job market
comes in the wake of a report issued last week by the
International Labor Organization, which argued that the
global economy needed to create decent and productive
employment to help the nearly 1.4 billion people living
in poverty.
(Inter Press Service)
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