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ASIA: Financial Crisis Stalls Region’s Poverty Reduction Targets

Marwaan Macan-Markar

BANGKOK, Sep 4 2009 (IPS) - For the past decade, it was demand for Asian exports from the developed world that helped this region march ahead towards meeting internationally set development targets – such as slashing the numbers living in poverty.

But the global financial crisis is threatening to put the breaks on the continent’s efforts in achieving the Millennium Development Goals (MDGs). The crisis that began in the United States and spread to other developed economies has seen markets for Asian exports dry up.

The MDGs were eight development targets that were set by the world’s leaders at a United Nations (U.N.) summit at the world body’s headquarters in New York in 2000. Eradicating extreme poverty and hunger was the first goal. Currently, there are over 1.4 billion people across the world living in extreme poverty.

Consequently, say experts, the Asia’s developing economies cannot look to exports – the traditional drivers of their economies – to help them meet MDG targets that countries across the world have pledged to meet by 2015. The first of the eight goals is to halve by 2015 the number of people living on less than one U.S. dollar a day since 1990.

"The size of the contraction of the economies in the developed world and the public debt means that economic growth in those countries will take some time to recover," said Tiziana Bonapace, an economist at the Economic and Social Commission for Asia and the Pacific (ESCAP), a Bangkok-based U.N. regional body. "The concern in our region is that there could be a slowing down in the poverty reduction rates."

The current crisis is far more daunting for the region than what it faced during the 1997 financial crisis, which began in Thailand and spread through other parts of South-east Asia. Then it was the regional economies that contracted, with some countries, like Thailand, going from double-digit growth to a minus growth.

"The ’97 crisis was ‘V’ shaped; the depth of the crisis was dramatic yet the recovery was fast," Bonapace said in an interview. "The export-oriented economies in the region exported themselves out of the crisis because the developed economies were not affected."

"But this time it is different. The opportunity to get out of the crisis through exports is not there," she added. "This financial crisis will mean governments having less resources to invest in areas to meet the MDGs."

A recent report by the Asian Development Bank (AsDB) makes a similar point, arguing that the Asia-Pacific region faces a challenge to meet its MDG poverty targets due to the global economic downturn.

"With the recent global downturn, which has led to large declines in exports, production, and aggregate demand, regional growth will continue to be under severe downward pressure," Jong-Wha Lee, the AsDB chief economist, said in a statement accompanying the report. "Slower growth in the short term will make progress in achieving the Millennium Development Goals difficult for many countries in Asia and the Pacific."

"Inflows of foreign direct investment fell sharply in a number of economies last year as a result of the global economic crisis," adds the Manila-based regional financial institution in its ‘Key Indicators 2009’, an annual statistical publication.

Reports released earlier in the year hinted at the troubled times the region faces. In May, for instance, the International Labour Organisation (ILO) revealed that the economic downturn could result in the total number of unemployed in the Asia-Pacific region in 2009, which could be between 9 and 26.3 million.

Such a forecast could mean "the number of people unemployed in the Asia-Pacific region as a whole could top 112.2 million people," the highest ever number of those without jobs in the region, according to the Geneva-based labour rights body.

"This crisis has exposed how vulnerable the export sector is," said Gyorgy Sziraczki, senior economist at the ILO’s Asia-Pacific office in Bangkok. "Asia benefited from its export dynamism in the past but it has now been left vulnerable as a result."

"Women are the worst affected, since they make up the largest pool of labour in the export sector of this region," he told IPS. "They helped to get their families out of poverty by working in factories in urban areas."

Asian giant China, which emerged as the factory to the world in the past 15 years, has played a significant role in seeing the region’s poverty numbers decline. It was responsible for close to 68 percent of the overall drop in the number of people living on less than one U.S. dollar a day. In 1990, there were an estimated 377 million Chinese living in absolute poverty, a number that has dropped to 173 million today.

Currently, over 640 million people in Asia and the Pacific – or nearly a fifth of the population in the region’s developing countries – live on less than one U.S. dollar a day. The majority of them live in the other Asian giant India, with close to 330 million people.

"Over the past 15 years, Asia has made rapid progress in the fight against poverty, reducing the number of poor from around one in two people to around one in four," states the AsDB in its recent report. "However, large pockets of extreme poverty continue to persist even as many economies have posted record growth over that time."

The current worry about the global financial crisis coming in the way of the Asia-Pacific region meeting its MDG targets on poverty echoes similar concerns that emerged in the last two years. Then it stemmed from the rise in oil and food prices. An estimated 100 million people around the world were pushed into absolute poverty due to the rise in food prices, the United Nations revealed last year.