Asia's economies face stimulus downside
By Marwaan Macan-Markar
BANGKOK - As the global financial crisis triggered alarms across Asia,
Singapore responded with a government program to aid its vulnerable workforce.
The affluent city-state pumped US$3 billion into an employment protection
program.
Under the Jobs Credit scheme, which was unveiled as part of the country's
stimulus package to respond to the crisis, businesses were encouraged to retain
their employees through training programs aimed to improve their skills.
This across-the-board initiative, where the government offered employers "wage
support" for each employee, included small- and medium-sized enterprises and
larger companies. The city-state
was one of the worst-affected Asian countries, with its economic growth
dropping from 6.7% to minus 11.5% as the global crisis intensified in 2009.
"The Singapore government used the crisis as an opportunity to train its
workforce and provide better skills to improve competition in the medium term,"
said Gyorgy Szirackzi, a senior economist at the International Labor
Organization's (ILO) Asia-Pacific office in Bangkok. "This will also help in
the post-crisis stage."
This aid package accounted for a third of the $10.6 billion that the
city-state's government spent as its stimulus package to soften the blow from
the global crisis, which began in the United States in 2008.
Other East Asian countries followed this pattern of enhancing the quality of
their local workforces affected by the crisis, albeit through different
initiatives, Szirackzi told Inter Press Service. "Malaysia improved training of
graduates who were about to enter the workforce. They concentrated on
developing their IT [information technology] skills."
South Korea, on the other hand, gave a helping hand to its threatened workers
by enhancing their foreign language skills. "The government implemented a
program for young graduates to go abroad and learn a language to improve their
fluency," said the ILO official.
Such assistance to help skilled workers was with reason. These Asian countries
had economies more integrated to US markets. South Korea and Singapore "were
affected from the outset", states the ILO in a 2009 study. "In these economies,
job losses in the financial sector took place immediately."
But as the crisis spread, its impacts were felt in other developing countries,
with "millions of workers in key export industries in the region [having] been
retrenched," the ILO notes. "Sales of labor-intensive manufacturing products,
including toys and games, footwear and clothing are down sharply in the United
States and Europe, as are higher value-added goods such as computers and
related equipment and automobiles."
Countries like Thailand came to the rescue of some workers. Bangkok's financial
package to boost its heavily export-dependent economy allocated funds to
provide "skills training for retrenched workers", the ILO states.
The financial stimulus packages opened up jobs in other areas, too, as
government money for infrastructure programs, ranging from road-building to
improving drainage systems in urban centers, ensured more labor-intensive jobs.
These packages varied across East Asia. Indonesia and the Philippines had $7.1
billion and $7 billion, respectively, followed by Malaysia with $12.1 billion,
Thailand with $39 billion and South Korea with $53.4 billion, according to a
new United Nations report, "World Economic Situation and Prospects 2010".
Meanwhile, China, the region's economic powerhouse, dwarfed other countries
with its stimulus package - $585.3 billion - or nearly 13.3% of gross domestic
product (GDP).
Such government-led measures to expand "government expenditure on consumption
and investment" have helped countries in East Asia reap some rewards, the UN
report states. "The East Asian economies rebounded in the course of 2009 after
suffering severe downturns in the aftermath of the [US-based] Lehman Brothers
bankruptcy, when exports, industrial production and domestic investments
weakened sharply."
The UN is consequently upbeat about its economic forecast for East Asia,
predicting that the sub-region's economic growth will hit 6.7% in 2010, making
it "the highest among all regions of the world".
During recession-hit 2009, the sub-region's economic growth was 4.1%, down from
6.2% in 2008 and 9.3% in 2007, reveals the 180-page UN report. "In fact, much
of East Asia's growth in 2009 is accounted for by China, where GDP expanded by
8.1% compared to 9.0% in 2008."
Yet such a recovery has also given rise to a worrying question: When should
governments turn off the stimulus package taps?
An early or untimely end to the stimulus packages could undermine the emerging
signs of an economic recovery, the UN warns. "While the overall outlook for
East Asia is favorable, the region faces several major policy challenges and
downward risks, including a premature exit or sharp reversal of the
expansionary monetary and fiscal policy measures that were put in place over
the past year."
Particularly worrying is the specter of a double-dip recession, according to
the UN report.
The labor market will feel the heat of such an early end to the financial
packages, said Tiziana Bonapace, chief of the macroeconomic policy section at
the Economic and Social Commission for Asia and the Pacific, a Bangkok-based UN
regional body. "An early withdrawal of the stimulus packages could see some of
the special programs implemented in the region that ensured employment being
unwound."
Yet at the same time, governments will come under pressure "from growing public
discontent about the expanding public debt and that constant spending by
governments is crowding out the private sector," she told Inter Press Service.
"It is not an easy decision for governments to make. Much depends on the
circumstances of each country."
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