KUALA LUMPUR - As the global economic slowdown deepens,
poverty in Asia is set to become further entrenched. The number of people
living in absolute poverty is increasing as a result of sagging incomes and loss
of jobs amid a collapse in export-led growth, which has been the region's road
to prosperity.
A slew of reports makes it clear that the global financial and economic crisis
will have a significant impact on the vulnerable section of the population in
Asia. A year ago there was still discussion about the possibility of Asia
"decoupling" from the recession in the rich countries; it is now clear that the
region is not immune.
Growth in developing Asia as a whole will fall three percentage
points this year to 3.4%, the slowest rate since the 1997-1998 Asian financial
crisis, according to the Asian Development Bank (ADB). Its recovery will depend
on the depth and length of the recession in the United States, Europe and
Japan, the destinations for about 60% of Asia's exports.
The global economic crisis will keep in poverty more than 60 million people in
developing Asia - including 14 million in China - and 24 million more in 2010
who would otherwise have been freed from that shackle had economic growth
continued at pre-crisis levels.
A just-released United Nations assessment says that both the number of poor and
the poverty rate are expected to increase further in some low-income southern
Asian economies. It has been widely accepted that the global crisis is likely
to wipe out gains made over the past decade in reducing poverty.
Across Asia, poor communities are feeling the consequences of the global
downturn particularly hard. Prices of food and fuel have declined from their
peaks, but not enough for people to return to 2007 living standards.
Research in poor rural and urban communities in five countries, including
Bangladesh and Indonesia, carried out by the Institute of Development Studies
(IDS) in Britain, found that people in poor communities are eating less
frequently, and less diverse and nutrient-rich foods. In some cases, people are
resorting to self-medication while children's education is suffering, with them
being withdrawn from school or in Islamic countries moving to (cheaper) madrassa
schools.
Export-dependant businesses are closing factories, laying off workers and are
being hit by supply chain disruptions. Declining prices in commodities such as
rubber mean reduced production, resulting in less income and job migration.
In the urban area around Jakarta, migrant export-sector workers started to
return home late in 2008 when their contracts were not renewed; others have had
their working hours reduced. Garment factory workers in Dhaka report that new
jobs are available, but these are in poor-quality, unsafe sub-contractor
sweatshops, rather than in factories that comply with labor standards.
More workers are having to resort to low-yield or dangerous jobs. People from
Kalimantan, Indonesia, are traveling to other islands to mine gold, while
cross-border smuggling is reportedly rising in rural Bangladesh - both illegal
and dangerous but potentially lucrative activities.
In China, tens of thousands of export-oriented firms in cities such as Shanghai
and Guangzhou have closed in recent months while 20 million domestic migrant
workers are said to have lost their jobs as a result of the collapse in export
orders.
As recession deepens in Europe, the United States and the Middle East, migrant
earnings sent home to developing countries may fall to about US$290 billion in
2009 from US$305 billion in 2008, according to the World Bank. For some
countries such as the Philippines, remittances from expatriate workers are the
single-largest source of export revenue.
The IBON Foundation in the Philippines reported that in the first three months
of this year, overseas remittances fell from 11 out of the 20 countries that
account for 96% of such remittances. Remittance growth in another four
countries is slowing and could soon turn negative.
In India, Bangladesh and Pakistan, remittance flows are forecast to slow
sharply to zero growth this year from over 16% growth in 2008. The rising
pressures on international labor markets are also being felt in Indonesia. Up
to 200,000 Indonesian workers, out of more than 4 million expatriate Indonesian
workers worldwide, might need to return home if the international economic
crisis remains severe, according to a report by the Lowy Institute in
Australia.
As for people who are employed but who do not earn enough to lift themselves
and their families above the poverty line, the International Labor Organization
forecasts that their number in Asia will increase by 50-120 million for the
period between 2007 and 2009.
The adverse impact of the crisis has been particularly harsh on women in the
region. An Asian Development Bank (ADB) official related how most workers in
the lower segment of the global supply chain of exported goods are women, and
they are being heavily affected by recent job losses - particularly in the
garments, textiles and electronics industries. These industries, heavily hit by
the current crisis, employ five female workers for every two males.
The impact of developments in international capital markets also presents
serious risks for Asian countries. In recent months, all major global financial
institutions have become much more risk-averse and financial agencies are much
more cautious about providing funds.
The ADB notes that "the region is ... experiencing a precipitous drop in
foreign direct investment" and "funding for infrastructure projects is fast
drying up". The result, says the Lowy Institute, is that many developing
countries are finding that their access to international capital is being
squeezed at a time when they are critically needed for development and to
overcome poverty.
Proposed reforms to financial institutions such as the International Monetary
Fund and development banks might provide some extra funding for developing
countries, the overall impact of the proposals currently under consideration
seems likely to be small.
There are also signs of increasing protectionism in capital markets. In recent
months, many rich countries have introduced various forms of assistance for
their domestic financial sectors. While some of these have been emergency
measures needed to head off systemic collapse, the Lowy Institute said some
other measures have the effect of tilting access to the playing field for
international capital markets in favor of rich countries at the expense of
developing countries. British Prime Minister Gordon Brown described these kinds
of measures as "mercantilism in a new form" and "a form of financial
protectionism".
Open economies in Asia will also need to contend with increased trade
protectionism in the industrialized countries. For example, since last
November's Group of 20 (G-20) summit in Washington, a pledge by leaders not to
raise new barriers to trade or investment has been widely flouted. The World
Bank recently estimated that 17 of the G-20 countries had instigated 47
policies that had restricted trade since the summit.
Difficulties faced during economically challenging times are usually compounded
by social problems. As the IDS research found, there are signs of rising
domestic violence growing inter-group tensions. Minority groups have been
criticized for taking advantage of the crisis, but are typically disadvantaged
compared with the majority in terms of access to official resources. Petty
crime, drug and alcohol abuse were reportedly on the rise. So were the
abandonment of children and the elderly; micro-credit default; and
criminalization of youth.
Help from governments is severely limited in many countries. Public safety nets
for the poor in Bangladesh, for example, were criticized for the small amounts
disbursed. In Jakarta, migrant workers who had lost their jobs were not able to
access government rice for the poor, which typically goes to longer-term
residents.
Chee Yoke Heong is a freelance journalist and researcher based in Kuala
Lumpur, Malaysia.
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