ECONOMY-ASIA: Gains in Poverty Eradication Melt Away

• by Prime Sarmiento (manila)
• Tuesday, March 17, 2009
• Inter Press Service

But the global economic meltdown has forced Colli to shelve that dream. She worked as a bank teller and when informed of opportunities overseas, Colli applied and was accepted as a factory worker in Taiwan.

At 27, Colli started to dream again. She thought of saving her salary in Taiwan so that she could put up her own business, buy a house for her family and provide a better future for her child.

But in December 2008, after working for only six months in Taiwan, Colli returned to the Philippines - empty-handed and hopeless. She was among the thousands of workers who were laid off as the meltdown forced Taiwanese manufacturing firms to cut their exports.

Colli‘s story shows that in developing Asia it is the poor - with limited choices and resources - who are suffering most in the current global economic crisis, an era, economists say, is comparable to the Great Depression of the 1930s.

'Poverty incidence will definitely increase as there will be numerous job losses. Lower income for households means that some families will live beyond the poverty level,' said Filomeno Sta. Ana III, coordinator of the Manila-based advocacy group Action for Economic Reforms (AER), in an interview with IPS.

Analysts said the recession in the U.S. and other industrialised countries has reduced global demand for goods and services. The waning demand in such huge markets will force most export-oriented manufacturing firms to cut output and retrench workers.

The International Labour Organisation forecasts that the global unemployment rate will rise by seven percent this year. The number of unemployed in the world will hit over 200 million people, 10 percent of them in the developing Asian economies.

Unemployment and poverty threaten even those who are skilled and have cushy jobs. For instance, corporate executive Dennis Daniel Digal is holding on to his post in Germany, believing that it will be difficult for him to find a job either in Europe or in Asia what with companies not accepting any new hires.

Singapore-based programmer Florianne Hernandez wanted to quit her stressful job to pursue her dream of becoming a florist. But the economic crisis and news of massive retrenchment forced her to reconsider.

'I’m having second thoughts about my plan to take a break from the rat race because I am afraid that it would be hard for me to get another job,' Hernandez said. The global economic crisis will also wipe out the recent gains that developing Asia has achieved in eradicating poverty.

In its 2008 report on the Millennium Development Goals (MDGs) in the Asia-Pacific, the Asian Development Bank (AsDB), the United Nations Development Programme and the United Nations Economic Commission for Asia and the Pacific noted that the region’s 'greatest success' in achieving MDGs is reducing poverty incidence. 'Between 1990 and 2004, the proportion of people living on less than one US dollar a day fell from 32.3 percent to 17 percent. In just two years, between 2002 and 2004, the number of people living in extreme poverty fell by 82 million,' the report said.

AsDB senior economist Armin Bauer said the number of poor people may not rise because of the crisis. However, the crisis will definitely slow down the progress made on poverty reduction as workers will either lose their jobs or accept lower wages.

The World Bank noted in its December report that 'poverty rates are likely to fall further in 2009, declining to 10.68 percent for developing East Asia as a whole, compared with the 10.36 percent projected earlier this year''.

''While the number of poor people in the region will continue to decline, an estimated 5.6 million more people would have emerged from poverty next year if not for the slump,'' the Bank noted.

AER’s Sta. Ana said that the crisis has opened up new issues on how to pursue economic development and eradicate poverty. The traditional notion that an export-fuelled growth - which helped countries like China to post double-digit growth rate and reduce poverty - is not an option right now.

'You can’t expect exports to do the job right now,' he said, alluding to the waning demand in major markets as the U.S. and Western Europe.

Several developing Asian economies including China, India and the Philippines have unveiled their own stimulus packages. These packages include providing jobs to retrenched workers by employing them in government-funded infrastructure projects. This will hopefully boost consumption and keep the economy afloat.

But economists say the packages can only work over short term as most developing Asian economies cannot afford huge fiscal deficits.

AsDB economist Bauer said that aside from offering stimulus packages that provide emergency employment, governments in developing Asia should also think of boosting domestic consumption over the long term.

'We need collective action. The U.S. is trying to boost its consumption, but how about aggregate demand? Other countries should also increase their demand,' Sta. Ana said.

Jose Isidro Camacho, Credit Suisse’s vice-chairman for Asia-Pacific, is optimistic that Asia is in a better position to boost its consumption in the next few years. He said China, with its growing number of free-spending young professionals, will propel consumption growth in the continent. 'The 30-something young professionals are happy to spend, wiling to use credit cards and banks are delighted to lend them. They’re wiling to pay extra for brand names and many of them eat out. This age group is redefining China’s consumption habits and the rest of Asia, as well,' Camacho said at a recent briefing here.

© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service

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