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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