The International

The economic crisis of 2008 provided a stark reminder of the potential pitfalls of globalization. Due to its origins in US markets, early concerns focused on the crisis’s impact on western nations. Now, a report issued by the United Nations and the Asian Development Bank on February 17 demonstrates the effect of the crisis on one of the poorer regions of the world. Entitled, “Achieving the Millennium Development Goals in an Era of Global Uncertainty: Asia-Pacific Regional Report 2009/10,” the 128 page analysis offers a sobering look at the region’s current economic reality and warns of further fallout if immediate measures are not taken.

The report’s overall assessment: the Asia-Pacific Millennium Development Goals have taken a serious step back. Goal 1, the eradication of extreme poverty and hunger, has suffered most dramatically. The report estimates that by the end of 2010, an additional 21 million people will be living on less than $1.25 a day. The region is already home to more people living in extreme poverty – over 50 % of its population or roughly 900 million people – than anywhere else in the world.

Co-authored by the United Nations Development Program (UNDP), the Asian Development Bank (ADB) and the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), the report also suggests solutions to deal with the current reality. Dr. Noeleen Heyzer, UN Under-Secretary-General and Executive Secretary of ESCAP, noted that although the MDGs may be negatively impacted in the Asia-Pacific region, “we also have an opportunity […] as this crisis has exposed many vulnerabilities in the region – we can now address them and direct this recovery towards a stronger sustainable development path for the Asia-Pacific region.”

The crisis’s impact on extreme poverty and gender inequality

In September of 2000, world leaders gathered at UN headquarters in New York to sign the United Nations Millennium Declaration. The declaration expresses the global community’s intent to combat the problems that plague the poorest nations of the world. From this declaration emerged the eight Millennium Development Goals or MDGs. By 2015, each goal must meet specific targets. For example, MDG-1 seeks to decrease the number of people living in extreme poverty by half. In 2000, the World Bank defined extreme poverty as living on less than $1 per day. Based on more recent data, in 2008, the World Bank raised this line to $1.25 per day.

For the purposes of the study, Asia and the Pacific denote member countries of ESCAP. These include the countries of the Indian Sub-Continent, east and central Asian nations, as well as the Pacific island-nations. ESCAP members also include western nations such as the United Kingdom, France, the Netherlands and the United States; however the study focuses on countries within the geographic region.

Prior to the global economic crisis, it was expected that Asia and the Pacific would achieve most of the 2015 targets. Unfortunately, the extent of the crisis took a dramatic toll on the region’s progress, particularly on the goal of eradicating extreme poverty and hunger. Asia and the Pacific has made more overall advancement than Sub-Saharan Africa, but falls behind Latin America and the Caribbean on key development areas such as education, poverty eradication, infant mortality and sanitation.

The report pays particular attention to the issue of gender inequality. MDG-3 calls for the promotion of gender equality and the empowerment of women. An already vulnerable segment of the population, women have been more heavily impacted by the economic downturn. Female workers make up a majority of Asia’s temporary and low-skilled workforce. The report states that many women “have lost their jobs in export manufacturing, including garments, textiles and electronics – and in tourism and related services. […] For example, in Thailand between May 2008 and May 2009, the number of unemployed women increased by 47 per cent while the number of unemployed men increased by 15 per cent.”

The report goes on to explain that poverty has a cumulative and ultimately greater effect on women. At the collective level, poverty results in greater gender disparity in areas such as education. Women living in extreme poverty are often unable to attend school. This, in turn, hinders progress towards achieving universal primary education. In addition, women’s poverty negatively impacts infant mortality rates, the risks of contracting HIV and AIDS, and access to rural water supplies.

Seventeen year old Ms. Danielle Willis provided her unique perspective on the crisis’s impact. On February 10, Ms. Willis, along with UN delegates to the region, attended the “Human Face of the Global Economic Crisis – Pacific Conference.” The UN News Centre reported that attendees listened to Ms. Willis as she described the situation in her home country of Palau. She stated that “frustration, tension and violence at home and within communities is increasing.” Under such conditions, “girls and women are the most vulnerable due to existing gender inequality.”

So much data and so many countries: organizing the results

The report divides countries into two broad classifications: developed nations and developing nations. The former includes Australia, Japan and New Zealand. Within the latter group, countries were further divided into their geographic sub-regions and specialized groupings, such as Least Developed Countries (LDCs), Landlocked Developing Countries (LLDCs) and Small Island Developing States. Consequently, some countries may be subsumed under more than one category.

Sub-categorization was crucial to properly assessing the economic realities of each country. For example, China and India – the two most populous countries in the world – often skewed the data. To gain a more accurate picture of the region, the authors employed the classification of “Asia and the Pacific excluding India and China.”

‘Asia and the Pacific excluding China and India’ on some indicators has performed worse than the region as a whole: it has progressed only slowly in ensuring primary enrolment, and regressed on HIV prevalence. On the other hand, this group of smaller countries has done better on gender parity in secondary educational attainment on which it is an early achiever.”

For other regions within the study, similar categorizations were used. These include “South Asia – excluding India,” “Pacific Islands – excluding Papua New Guinea,” and “North and Central Asia – Excluding Russia.”

When assessing MDG status, each country or country group was placed into one of four categories, “early achiever – countries which have achieved the 2015 target; on track – expected to meet the target by 2015; off track: slow – expected to meet the target, but after 2015; off track: no progress/regressing – stagnating or slipping backwards.”

How and why the economic crisis affected the region

Because of the globalized nature of the world economy, all regions of the world were susceptible to the economic crisis. Asia and the Pacific was no exception. The report explains that the region became particularly vulnerable through the channels of “trade, equity markets, foreign direct investment, official development assistance and remittances.”

But why did the economic crisis, which began in the United States, have such a dramatic impact on the region? According to a March 2008 UN report entitled “Addressing Triple Threats to Development,” part of the reason lies in the convergence of the economic meltdown of 2008 with unstable food prices and climate change. UN officials told Al Jazeera English that they believe these three issues “are reinforcing the impact of each other.” Unstable food prices, for example, have plagued the region for a longer period. Rice, a staple food for many Asia-Pacific nations, has fluctuated in price. This is due in large part to the rise in oil prices.

In many ways, this current round of instability comes on the heels of the regional economic crisis of 1997. Many Asian countries have just recently recovered from that predicament. According to the International Monetary Fund, the 1997 crisis began when East Asian currencies declined, beginning with Thailand’s baht. This led to a dramatic fall in Asian stock markets. At that time, then Malaysian Prime Minister Mahathir Mohamad blamed the free-fall of his country’s currency on foreign speculators, specifically Mr. George Soros. According to the Washington Post, Mr. Soros denied these allegations.

Others blame the rules of global trade, as constituted through the World Trade Organization, for keeping poor countries poor. For many years, organizations such as Oxfam International have called for reforming trade rules. The organization’s “Make Trade Fair” campaign seeks to end practices they believe unfairly favor western nations. These practices include dumping measures and forced liberalization of domestic markets. Dumping is the process of flooding foreign markets with goods at an artificially decreased price. Forced liberalization involves the forced removal of domestic protections that support the growth of nascent domestic industries.

Various reasons outside of the economic sphere also account for the region’s problems. Asia and the Pacific has been the scene for numerous natural and man-made disasters. From political instability in Pakistan and Afghanistan to the 2004 Tsunami, such events have taken a toll on the region’s poor.
Asia-Pacific needs more “social protection systems” and “fiscal stimuli”

In the face of so much uncertainty, what can be done to alleviate the situation? UN Assistant Secretary-General Ajay Chibber believes establishing and maintaining stabilizers or “social protection systems” may help. Social protection systems refer to government assistance programs, such as pensions for workers and other forms of social insurance. The report states that “only 20 per cent of the unemployed and underemployed [in the region] have access to labour market programmes, such as unemployment benefits, training or public works programmes, including food-for-work programmes.” In addition, only “30 percent of older people receive pensions.” Creating and maintaining such safety nets can help dampen the effects of an economic downturn.

Social protection programs also include other mechanisms, such as India’s “National Rural Employment Guarantee Scheme.” Established in 2006, this system “guarantees every rural household up to 100 days of unskilled manual wage employment per year at the statutory minimum wage.” In the years 2007 and 2008, the program “provided employment to 34 million households, more than half of whom came from the most marginalized groups,” of which “more than 40 per cent of the workers were women.” The system was credited for reducing poverty during more difficult years “by 10-15 percentage points.” Such programs, however, require outside funding sources, such as commercial banks. With credit markets drastically affected by the crisis, these social protections schemes may also suffer.

The report identifies “fiscal stimuli” as another possible solution. Fiscal stimuli refer to measures such as public expenditures on infrastructure, or a reduction in taxes. This is particularly useful in poorer nations where there is often an absence of stabilizers. Fiscal stimuli may offer temporary relief in the form of jobs and tax breaks, but the report warns that these policies may “distort economies” and can be “badly timed” and ultimately “ineffective.”

Help is needed from within the region and abroad

At the 2005 G8 summit in Gleneagles, Scotland, assembled nations pledged $128bn in foreign aid. The BBC recently reported that 2010 foreign aid expenditures will fall short of those pledged amounts by close to $21bn. Organizations such as Oxfam expressed their outrage, calling the prospects of such a shortfall a “scandal.” Prime Minister Gordon Brown agreed, stating that “I do not believe there can be any excuse for denying money promised to the poorest people on our planet.” According to the BBC, the UK Prime Minister will seek to establish a system that would make it difficult for countries to fall short of their pledged aid amounts. In addition, Mr. Brown is pushing for a global poverty summit to take place some time this year.

Foreign aid plays a significant role in poverty alleviation. Therefore, its function should not be underestimated. Professor Jeffrey Sachs believes that aid and direct investment can help extremely poor countries get out of the poverty trap. In a December 2009 article for the Ottawa Citizen, Professor Sachs, who is the director of the Earth Institute at Columbia University and a Special Advisor to UN Secretary-General Ban Ki-moon, explained that poorer nations “must use all of their current income just to stay alive, and even then, it’s not enough. In those cases, international development assistance is vital to break the poverty trap and to initiate self-sustaining growth.” But this money has not come through. Professor Sachs observed that richer nations have “found trillions of dollars in financial bailouts and squandered trillions more in war and military outlays. Yet [they have] not been able to meet extremely modest targets to help the poorest of the poor to survive and to begin the climb up the ladder of development.”

With poorer countries receiving less foreign aid, a key component for Asia-Pacific’s recovery may be greater regional cooperation. This includes increased trade and aid from developed nations within the region, such as Japan, and developing nations, such as China. The report calls for a reorientation of the Asia-Pacific market with increased regional trade, trade agreements, and less dependence on western markets.

Professor Sachs believes that Asia is well suited to emerge from the crisis, despite the significant downturn in its overall export markets. “If Asia could get its act together it is the surplus region of the world.” Speaking at the Asian Development Bank headquarters in January 2009, Professor Sachs stated that Asia and the Pacific needed to enact policy that could safeguard the region against a further downward slide. This “missing policy” should not solely be relegated to economic factors. In the end, the region’s recovery will require an “Asian led effort within Asia.”