Asian export crisis hits vulnerable groups

By Marwaan Macan-Markar

Asia’s developing countries face a bumpy ride in the year ahead as a slowing United States economy and a weakening of the dollar will hit the flow of exports to that western giant, warn economists from a regional U.N. body.  Thailand and the Philippines were two countries singled out by the economists for already feeling the cost of this emerging economic scenario. Thailand saw a decline in export growth in August last year — a 17.3 percent drop compared to the previous August — and the Philippines saw a 4.6 percent drop in exports in September last year from the previous September.

The sectors most affected in that 2007 slide in Thailand were garments, furniture and rubber, added the economists from the Economic and Social Commission for Asia and the Pacific (ESCAP). The sectors hit in the Philippines ranged from textiles and furniture to agricultural ones, such as banana and pineapple.

Currently, 15 percent of exports from Asia and the Pacific goes to the U.S. market, while 16 percent exports feed the demand from the European Union. The U.S. economy is expected to slow down from 2.9 percent to two percent growth. In addition, a weakening U.S. dollar and strengthening regional currencies have made exports from Asia more expensive to U.S. buyers.

The worst affected would be countries that depend on exports built around labour intensive products, a low-technology manufacturing industry and the agriculture sector, says Ravi Ratnayake, chief economist of the Bangkok-based ESCAP.

Consequently, governments in the region should invest in programmes to help the poor and the economically marginalised, since they would be the ‘’hardest hit” if the economic climate worsens, he added. ‘’It is important for governments to think about some social-safety net in the event of a crisis to protect the vulnerable groups.”

According to the International Labour Organisation (ILO), such vulnerable groups are part of the informal working sector, which, in 2007, accounted for 60 percent of the region’s labour force. Over a decade ago, when the financial crisis hit the region in 1997, some 66 percent of the labour force belonged to the informal sector.

‘’There has been progress made in the region to extend social protection for workers in the formal sector since the crisis, but we have not seen this in the informal sector,” Steven Kapsos, a labour economist at the ILO’s Asia-Pacific regional office in Bangkok, told IPS. ‘’Many of them work in the agriculture sector.”

The ILO estimates that there are nearly 900 million people across the region who fall into this vulnerable group, earning less than two U.S. dollars a day. But in 1997, the figure was much higher, accounting for about two-thirds of the labour force.

The only Asian country expected to withstand a dip in the global economy is India, says Ratnayake. The South Asian giant will be aided by the investments in its expanding manufacturing and service sector and ‘’more domestic demand.”

ESCAP’s note of caution, however, was balanced with an upbeat view that the broader outlook for 2008 would be robust, ‘’with developing economies projected to grow by 7.8 percent.” Yet that figure is lesser than the ‘’impressive” 8.2 percent growth rate the region achieved last year, revealed the U.N. body in an annual economic report for the region released this week.

As in previous years, India and China were credited for boosting the region’s economic health, with additional contributions from the ‘’energy-exporting countries of Central Asia, in particular the Russian Federation,” added the report, ‘Key Economic Developments and Prospects in the Asia-Pacific Region 2008′.

‘’Together, China, India and the Russian Federation accounted for more than two thirds of the growth of developing economies in Asia and the Pacific,” it stated. ‘’At the same time, the region’s developed economies grew at 2.2 percent in 2007, unchanged from the previous year.”

According to ESCAP, China’s growth continued to remain in the double figures, 11.5 percent in 2007, while India continued to register nine percent growth for the third consecutive year. Other countries that showed robust economic signs last year were Turkmenistan, with 10 percent growth, Uzbekistan, 9.1 percent growth, Kazakhstan, nine percent growth, and Vietnam, 8.3 percent growth.

The Japanese economy, the strongest in the region, has begun to show signs of slowing down, states ESCAP, consequently dampening hopes by the developing economies to turn to it as the U.S. economy weakens. ‘’Japan has yet to fulfil the expectations of becoming an alternative growth engine for the region to counteract the slowdown of the United Sates economy,” notes the ESCAP report.

A viable option for the region’s economies is to reduce their dependency on the U.S. market and turn to regional markets, Shamika Sirimanne, an ESCAP economist, told IPS. ‘’Asia’s developing economies must tap the markets catering to the emerging middle classes in places like China and India.”

ESCAP’s concerns about the uncertain economic climate Asian countries face in 2008 are not misplaced. On Tuesday, the World Bank also struck a cautionary note during its release of a report of the global economy. ‘’A weaker U.S. dollar, the spectre of an American recession and rising financial volatility could cast a shadow over (a) soft landing scenario for the global economy,” stated the report, ‘Global Economic Prospects 2008′.

The Washington D.C.-based financial institution predicted that the global economy would register 3.3 percent growth in 2008, down from 3.6 percent in 2007 and 3.9 percent in 2006. That was due ‘’largely to weaker growth in high-income countries.”   (IPS)

links: ILO Asia and Pacific office

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