Social Aspects of the Follow-Up to the Asian Financial Crisis

Article excerpt

In mid-1997 the countries of east and south-east Asia started to experience an unprecedented financial crisis after decades of dramatic economic growth. The countries most affected by the crisis were Thailand, Indonesia and the Republic of Korea, which experienced an abrupt fall of real GNP from 7 per cent or more annual growth down to zero or negative in just a few months.1 Brutal currency devaluations of up to 80 per cent, subsequently combined with falling property and market prices, caused marked declines in production, consumption and average incomes. By the end of 1998, real GNP had decreased by 15 per cent in Indonesia, 6.5 per cent in Thailand, 5 per cent in the Republic of Korea, and 3 to 4 per cent in Malaysia and Hong Kong (China). Forecasts for economic growth for Japan, Singapore, the Philippines and Viet Nam were also revised sharply downwards.

The social impact of the deterioration of these countries' economies has been extremely serious. In Indonesia, one in every five jobs in the modern sector was lost in 1998. In the Republic of Korea, one worker in 20 lost his/her job and the rate of registered unemployment has risen from 2.3 to 8.2 per cent. In Thailand, registered unemployment tripled, from 2 to 6 per cent. In Hong Kong (China) unemployment went from 2 to over 5 per cent over the first three quarters of 1998, and in Malaysia it is expected to double to 5.2 per cent.

The extent of the crisis has severely shaken the traditional social protection systems of the countries affected, and the pain has been further aggravated by the virtual absence of social security provision, especially in regard to unemployment. The situation has had disastrous consequences for the unemployed and their families, who have simultaneously lost their incomes and incomerelated benefits, such as health insurance. Though the financial situation has improved slightly in recent months, the social support available is far below what is required.

The origins and nature of this crisis, the severity and length of which were largely unforeseen by the governments of the countries concerned, or international financial institutions or most economists, naturally attracted the attention of the media, academics and politicians, as well as international institutions and organizations, including the ILO. Given its social mandate, the ILO was called upon to react promptly to the crisis. A number of technical missions (including on labour legislation) and a regional tripartite meeting (in April 1998) were among the ILO's initial responses.

In November 1998, the ILO's Governing Body (at its 273rd Session) reviewed the ILO's activities in response to the financial crisis in east and south-east Asia to date and discussed an in-depth analysis into the causes and consequences of the crisis. 2 In particular, it asked for the relationship between the ILO and regional and international financial institutions to be examined, along with ways of promoting dialogue and cooperation between these institutions. A report focusing specifically on ILO activities came before the Governing Body, to inform its deliberations on the strategy to be followed by the ILO in response to the crisis, and to guide its future work in this respect.

The critical situation affecting Asian enterprises and workers as well as the ILO's response to the region's economic difficulties -- which have led to multiple bankruptcies and loss of jobs (over 24 million in east Asia alone) were examined at a special symposium organized by the ILO in Geneva on 19-20 March 1999. The Reporter's conclusions of that important meeting are presented below.

The Social Impact of the Asian Financial Crisis: An ILO Governing Body Symposium, Geneva, 19-20 March 1999: Conclusions of the Reporter

The social cost of the Asian financial crisis has been extremely high, with a substantial rise in open unemployment and underemployment and a significant decline in real earnings, concentrated mostly in sectors of the economy linked to international trade and financial flows. …