The world is suffering from a global job crisis, and Asia-Pacific economies, which are highly dependent on exports, will find themselves in deep trouble this year with a high unemployment rate, labor officials said at a meeting being held in Manila.
Unemployment rate in Asia and the Pacific is forecast to rise 5.9 percent in 2009 compared with last year's level, with 23.3 million more people left jobless, as the global economic crisis hurts trade and reduces labor demand, said a senior International Labor Organization (ILO) official on Wednesday.
Sachiko Yamamoto, ILO Regional Director for Asia and the Pacific added that the crisis will increase the number of workers in vulnerable employment by over 60 million.
The Asia-Pacific region is home to about one billion people which ILO put into "vulnerable" employment sector. These workers, mostly based in developing Asian economies, do not enjoy enough labor rights and social protection in case of job losses, personal or family illnesses or other difficulties.
The current turmoil will worsen the "jobless growth" situation in the region, Yamamoto said at the opening of the three-day ILO regional meeting.
"Even before the crisis began, Asia's rapid economic growth in recent years did not create enough decent employment opportunities for the region's massive workforce," she said.
The Asia-Pacific countries, led by China and India, are among the world's fastest growing economies. Exports fueled the boom with developing Asian economies expanding by over ten percent in 2007.
But the credit crunch that first gripped the United States and later affected the other economies in Europe and Asia crimped consumption globally. This hurt the export-oriented Asia-Pacific economies, as most of their goods and services are usually shipped out to the Unites States and European countries. Growth in developing Asian economies slumped to 7.8 percent in 2008.
"As companies (in Asia and the Pacific) are slashing production, closing factories and dismissing workers, unemployment will increase significantly," said Ursula Schaefer-Preuss, vice president for knowledge management and sustainable development at the Asian Development Bank (ADB). The meeting is held by ILO in collaboration with ADB and the Philippine Department of Labour and Employment to help seek solution to the current job crisis in the region.
Preuss said that women, the newly-graduated and the low-skilled migrant workers are the most vulnerable and the most likely to be retrenched first.
Gyorgy Sziraczki, ILO's senior economist, said recently-deployed migrant workers are the ones who are really hit the hardest by the crisis. These workers scrimped and saved just to cross borders, hoping for better opportunities. But such hopes died when they had to return home as they were dismissed.
The retrenching of migrant workers bring more problems to developing economies, especially to countries like the Philippines, Nepal and Tajikistan where remittances have long supported the domestic economies.
"Remittances historically act as counter cyclical measures. They generally rise when the recipient country suffers economic downturn following a financial crisis or natural disaster. This time, however, remittances are actually declining due to the economic recession in the sender countries," Preuss said.
The unemployment problem combined with declining remittances will increase poverty levels in Asia.
If the growth rate of gross domestic product (GDP) slows by two percentage points this year in the region, compared to 2008, about 20 million more people will fall below the poverty line, said the ADB president. Last year, the bank offered new ways to measure poverty in Asia and the Pacific and fixed 1.35 U.S. dollars a day as a new poverty line for the region.
Raising Local Consumption Needed
Indeed, the economic crisis is not only weakening trade and finance, but also threatens human development. This calls for a more coordinated response to the crisis, according to Stephen Pursey, ILO's director for policy integration and statistics.
"This is clearly a global crisis so the response should be interdependent and coordinated," he said.
ILO Senior Technical Specialist Moazam Mahmood said labor protectionism will not work as it's counterproductive.
There are migrant workers everywhere, said the specialist, adding that a country trying to shun out migrant workers to protect local workers may in fact be hurrying its own nationals who also crossed borders to find jobs.
Several Asian countries are now implementing fiscal stimulus packages to cushion the impact of the crisis on their domestic economies. These packages usually include a budget for building infrastructures which provides employment and boosts consumer spending.
But as ILO's Sziraczki said, "the problem is not legislating stimulus but rolling out the money."
Not all developing Asian economies have enough funds to implement a fiscal stimulus package. This is why, Pursey said, "countries with strong fiscal position may help more vulnerable ones."
Preuss said ADB is requesting its shareholders to increase the bank's general capital so that it could have enough funds to finance rural and urban infrastructures and strengthen social safety nets.
The crisis also offers an opportunity to rethink growth strategy in the region, said Moazam, adding that exports may continue to drive growth in developing Asian economies but this should be balanced by policies meant to develop local consumption.
"We can’t export our way out of the crisis. There's also a need to build up domestic market and consumption," he said.