Economic Crisis Hits Asia Hard

The impact of the crisis in the industrialised countries was transmitted to the economies of Asia with rapid speed. The initial impact was marked by sudden reversals of capital flows, plunging stock markets and even depreciating currencies, followed by region-wide declines in exports and industrial production. This has triggered widespread factory closures, rising unemployment, and lowering of real wages.

The latest World Bank forecasts are that the global economy will shrink by 1.7% in 2009. Trade volumes would drop a record 6.1 percent from 2008, led by a steep decline in the trade of manufactured goods, the largest contraction in 80 years, i.e., since the Great Depression. The trends in the industrialised countries will continue to determine the health of the Asian economies.

The myth that Asia was decoupled was quickly debunked. The entire model of development, of partial industrialisation of the Newly Industrialising Countries (or NICs) model, was export driven and export dependent. Growth rates in the region plummeted in 2008 and will continue to drop in 2009. According to Asian Development Bank figures GDP rates in Asia have dropped from 9.5% in 2007, to 6.3% in 2008, to 3.4% predicted in 2009. The hardest hit are the most export dependent economies: In Singapore the economy is predicted to shrink by 5% this year; Hongkong China growth is forecast at -2%; Taiwan -4%; South Korea -3%.

For the Philippines, the IMF revised its growth projections from 2.25% in 2009 to zero growth. As a reflection of contracting economies, exports fell 39.1% from February 2008 to 2009. It is expected to drop 13-15% in 2009, while imports are expected to drop by 12-14%.

Increasing unemployment
The most immediate and serious impact are retrenchments, especially in export driven industries such as electronics, as well as reduction in remittances of overseas migrant workers. This also means that the first blows are hitting women workers, given that in the electronics sector in the region, 3/5 are women workers.

This pattern of increasing unemployment is being repeated, to varying degrees, in countries in the region. According to 2009 ILO research in Indonesia some 40,000 workers were retrenchments in the last two months of 2008; Vietnam, 300,000 formal sector workers could be retrenched in 2009. In Asia overall the number of unemployed could spiral by 23 million and by 51 million globally in 2009 alone. Any gains made by working people in Asia, due to partial industrialisation in the last two to three decades, could be wiped out.

The impact of the economic crisis resulting in a rise in job losses, comes after the food price crisis in 2008, where staples, such as rice increased by 400% in some areas in the Philippines. While world food prices have gone down, in many TW countries they are coming down very slowly or not at all. In the Philippines staple food prices are higher than 2007 levels.

Workers and the middle-class hit
For the poor of Asia capitalism has been in crisis for some time now, not being able to provide the basic necessities of life. But what we are seeing as a result of the current crisis is a further intensification of hardship and poverty, especially affecting those sectors that did manage to make some partial gains in the last two to three decades, i.e. low-income workers, and even the middle classes, who are now being affected and find themselves in an increasingly precarious position.

The middle classes, include young college graduates who have traditionally been absorbed into the service sector, are being hit hard. In China, for example, in December 2008, 1.5 million college graduates of the 5.6 million who graduated in 2008 couldn't find work by year-end. There are 4 million from previous years still looking for work. Another 6 million college graduates will enter the workforce in 2009.

Filipino workers face big job losses
An Inquirer article reported that according to economist Benjamin Diokno, 11 million workers could lose their jobs as the crisis hits the Philippines economy in 2009. In 2008, according to ILO researchers, some 250,000 workers in plant and machine operation and assembly were retrenched. If workers in electronics and garment and textiles are included the total number could be well over 300,000 retrenched last year, mostly since October when the economic crisis hit.

Some of the industries hardest hit so far are garments, textiles and electronics. Women account for 72.3% of the work force in the electronics and 86.5% in the garments sector. The Calabazon area has been hardest hit. Seven to eight out of ten laid off workers in the export processing zones (EPZs) are women. Workers in the EPZs are also suffering big reductions in wage incomes due to compressed work week schemes, with women workers only allowed to work for two to three days per week.

Meanwhile thousands of OFWs are returning home as factories close overseas. Those most affected include factory workers in Taiwan and domestic workers in Singapore, Hongkong and Macau, a majority of whom are women. And workers who are still employed face wage cuts as a result of reduced working hours, suspension of implementation of wage orders, contractualization and outsourcing, as well as cutbacks in overtime and holidays.

The DOLE figures contradict the independent research data, claiming that only some 40,000 workers were laid-off in 2008. This under-representation of the impact of the crisis on unemployment is alarming, as it signifies the government’s refusal to acknowledge the seriousness of the economic situation facing the country and its people.

In the 2009 budget, the Philippines government would spend P7,391.54 per person for debt servicing while allotting only P2,050.98 per person for education, P301.52 for health, P57.48 for housing and P112.80 for social services. In a crisis situation, when large-scale economic stimulus to boost the national economy through public expenditures is required, such a budget is grossly inadequate. It’s a ‘business as usual’ budget and the continuation of the anti-people neoliberal economic policies that this government and the political establishment of this country is still wedded to.