By Thalif Deen
UNITED NATIONS, Feb 19 1998 (IPS)

The spreading cash crisis in East Asia threatens to wipe out hard-won economic gains in poverty alleviation in much of the region, diplomats heard here.

A meeting this week of the U.N. Commission for Social Development discussed how South Korea, Thailand, Indonesia, Malaysia and the Philippines – countries credited either with the eradication of poverty or moving toward that goal – are now cutting back on social services spending.

“The economic crisis has threatened to weaken the social progress and cohesion that had been built over the years,” Cielito Habito of the Philippines told delegates.

Those problems, ironically, were caused by the same forces that brought unprecedented growth: the liberalisation and globalisation of trade and investment. “The crisis showed that the free market, in itself, would not automatically translate into social progress,” he said.

Habito said his government was taking steps to ensure that social development targets were not unduly sidetracked by the corrective economic measures taken in response to the ongoing crisis.

The World Bank declared only last week that “no other group of countries in the world has produced more rapid economic growth and dramatic reduction in poverty than East Asia…(South) Korea, Malaysia and Thailand have virtually eliminated asbolute poverty, and Indonesia is within reach of that goal.”

Although poverty for the region as a whole has declined, the World Bank has estimated that there are still more than 350 million people living on less than one dollar a day while tens of millions of others live just above this poverty line.

About 800,000 workers have lost their jobs in Thailand while in Indonesia, some 2.4 million people are now unemployed. The Indonesian government has predicted this could double in the coming months.

According to the Bank, most of the countries in the region have virtually no unemployment insurance, social safety nets, and little provision for old-age pension insurance. “The ongoing financial crisis threatens to aggravate these (social) problems, and erase the gains made by millions,” the Bank said.

As a result of the crisis, the currencies of most countries in the region have been devalued and several banks and big businesses forced to close shop. Malaysia alone has lost over 160 billion dollars, mostly in currency and stock markets.

“Hopefully, it was the rich people’s money, not the poor people’s,” Ambassador Razali Ismail of Malaysia said. The Malaysian government, he said, has enforced sharp cuts in salaries as part of an major austerity drive.

The fast decline in currencies – with the Indonesian rupiah alone losing about 75 percent of its value against the U.S. dollar – has resulted in rising prices for imports, including staple commodities.

Julian Disney, President of the International Council on Social Welfare, told reporters that the current Asian crisis was a very clear indication of the importance of social development for good economic development.

The crisis had shown the relevance of one of the driving themes of the 1995 Social Summit, namely that “if you don’t get social development right, and if you don’t have proper democracy and honest government, you hurt not only your citizens but also the economy,” he said.

Roberto Bissio, managing editor of the annual “Social Watch” report, said that a major social drama was unfolding in East Asia. The decision by the Philippines to impose a 25 percent cut in the budgets of all public offices and institutions would have an enormous impact in such areas as health and education,and on the fate of a whole generation of children, he said.

“Yet, the crisis was not a result of government deficits, but had originated in the private sector,” he added.

Bissio said that countries, which a few weeks ago, were being held up as economic models, were now being criticised for not opening up their economies enough. “The whole spirit of the Social Summit was to place the economy at the service of the people. Now, that spirit was being reversed,” he said.

The United Nations predicts only a 4.0 percent growth rate for East Asia in 1998: down from 5.2 percent in 1997. The crisis – which began late last year – exacerbated the extreme fragility of the financial sector in many economies in East Asia.

The primary exceptions, according to the United Nations, are Hong Kong, China, Singapore and Taiwan “where banking systems are sound despite a high level of property loans.” The International Monetary Fund has been providing billions of dollars to bail out failing financial instutions in South Korea, Thailand and Indonesia.

Bissio said it was “outrageous” that IMF money was being used to bail out big banks and corporations. “Those losses were being socialised and the public would have to bear the cost,” he said.

Bissio also pointed out that “no one was bailing out small businesses, farmers and millions of workers.” In the last six weeks alone, he said, at least three million Indonesians had lost their jobs and there was no support for them.

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