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ILO Forecasts Social Suffering from Economic Crisis

By Gustavo Capdevila, IPS
15 April 1998

GENEVA, Apr 15 (IPS) - Asia's poorer sectors will face worse conditions in 1998 mainly due to inadequate political intervention to confront the region's financial crisis to date, forecast the International Labour Organisation (ILO).

The most seriously hit aspects of the Asian panorama are investment and the tendency to reduce poverty, which had seen spectacular advances in the last 20 years.

And worsening income distribution could create fertile ground for the germination of serious social disturbances, warned the ILO.

In a description of the crisis which broke out in 1997, the ILO said Southeast and eastern Asia have experienced an economic shake- up of unprecedented severity following decades of uninterrupted high growth levels.

The magnitude of the impact can be seen in the fact the most hard hit nations, Thailand, Indonesia and South Korea, saw the the growth in Gross Domestic Product (GDP) change abruptly from seven percent per year to zero or even negative values.

Although less affected, Malaysia, Singapore and the Philippines will also see significant deceleration of growth in 1998.

The ILO report predicted millions of workers would be left jobless as a result of cutbacks in staff, above all in construction, the financial services and industry.

This diagnosis added that underemployment will spread and the real income of workers will fall considerably, as a result of the reduction of demand for labour and increased inflation due to the devaluations.

The social situation will be further complicated by "the absence of effective social security networks," said the ILO in a report prepared for the meeting of governments, unions and employers to be held in Bangkok from April 22 to 24.

The vast majority of the laid off workers will in all probability recieve no help, having to face adversity with scarce resources, warned the document.

The ILO summed up the dangers thus: "The joint effects of the unforseen social difficulties, on the one hand, and the lack of means of collective aid, on the other, provide fertile ground where serious social disturbances could germinate."

In a study of the three worst hit countries, the report mentioned that unemployment in Indonesia will stand at between eight and 10 percent (7.9 to 9.2 million workers).

This unemployment in Indonesia, which stood at five percent in 1996, will depend on the increase in GDP, expected to fluctuate at between zero and minus five percent.

The amount of Indonesians living in poverty is calculated to be 22 million people, and this group will grow in considerable proportions, said the report.

In South Korea, unemployment went from 2.3 percent in October 1997 to 4.7 percent in February of this year, and it is believed it could increase to seven percent in May.

Up until just before the crisis, Thailand was undergoing full employment, as was shown by the increasing presence of foreign migrant workers.

However, in late 1997 unemployment already affected 3.4 percent of the workforce. Bangkok predicted that by the end of 1998, the unemployed would number around two million, equivalent to 5.6 percent of the economically active population.

The ILO said women have been the particularly vulnerable victims of the regional crisis, due to their unfavourable situation in the work market and their concentration in the most precarious forms of salaried work.

In the cases seen by the international agency indicate discriminatory redundancy has become a common practice.

The 6.5 million immigrant workers in the region in mid-1997 are up against similar difficulties. Many of the immigrants are undocumented and run the risk of being arrested and repatriated against their will.

As for the economic measures adopted to confront the crisis, the study indicates the most controversial are those applied in line with agreements made with the International Monetary Fund (IMF).

One of the most common criticisms of these IMF approved programmes is the extreme fiscal austerity they include.

Critics argue fiscal austerity is a strange solution to offer given the serious deflationary impact caused by the massive captial flight, said the ILO.

On the employment front, efforts to help the masses of redundant workers only cover a reduced part of the real needs.

South Korea excepted, no measures have been applied to provide unemployment benefit nor other social aid policies, said the report.

The ILO document encouraged the adoption of measures for urgent economic recovery, but also proposed starting a process of strengthening the social protection systems.

Thus, just as the Great Depression of the thirties led to a new social contract in the industrialised countries, the current crisis in Asia could offer the opportunity for a new development model geared more toward the social aspects, it concluded.