ECONOMICS-ASIA: Beware of the Growth Deception, Warns U.N. Body

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, Dec 13 2004 (IPS) - A regional U.N. body is displaying rare courage in knocking down the mantra that impressive economic growth figures are a panacea to help developing countries rise out of poverty.

It comes despite U.N. experts predicting that the Asia-Pacific region will be the envy of the world due to its healthy economic numbers in 2005.

The Asia-Pacific region is due to record a 6.2 percent growth rate against the 3.5 percent predicted for the world economy, said the Economic and Social Commission for Asia and the Pacific (ESCAP), a Bangkok-based agency of the global body, on Monday.

The region’s economic engine will be powered in the new year by China, with an estimated growth of 8.8 percent, Vietnam 7.3 percent, India 6..8 percent, Thailand 6.0 percent, and Kazakhstan with 8.5 percent, states ESCAP in a report on the Asia-Pacific economies in 2005.

The U..S. economy, on the other hand, is expected to strike a 3.5 percent growth rate and the European economy is set to grow by 2.5 percent, the report adds.

But Kim Hak-Su, executive-secretary of ESCAP, cautions against a round of good cheer, since there will be contrasts in the Asia-Pacific economy next year because of growth in the jobless rate.

And South Korea, still hailed as one of Asia’s success stories after the 1997 financial crisis, is being offered as exhibit ‘A’ to drive home the point that growth figures can be deceptive when assessing the health of a country’s economy for its people..

”South Korea has achieved economic growth at the loss of employment,” Kim told reporters.

It is a reality that may prove true across the Asia-Pacfic region in 2005, despite indicators pointing to a robust pace of growth, warn senior ESCAP officials.

”Jobless growth is a big problem in the region and policy makers have to make sure that growth is pro-poor,” said Raj Kumar, head of ESCAP’s research and policy analysis division. ”We cannot rely on trade alone to help the poor.”

Malaysia, another East Asian star performer after the 1997 crisis, is inflicted with the same contradiction as South Korea – healthy growth indicators but a loss of jobs. ”Malaysia’s unemployment rate has doubled between January 2002 till now,” Kumar told IPS.

According to ESCAP, South Korea’s economy achieved a 3.2 percent growth in 2003, followed by 5.2 percent in 2004 and it is expected to hover around 4.2 percent in 2005.

Yet at the same time, in this East Asian nation the unemployment figure rose to 3.6 percent by the end of this year – higher than the 2.8 percent jobless rate by the end of 2002.

The point hammered home by ESCAP has been welcomed by critics of the World Bank-led view that promotes economic reform in the name of growth. ”It is fantastic that organisations like ESCAP are saying this, because it may create a new policy debate,” Nicola Bullard of Focus on the Global South, a Bangkok-based think-tank, told IPS.

”The mainstream view is so obsessed with growth that they don’t look at employment,” she added. ”Growth is only an economic indicator and doesn’t tell you anything about who the winners and losers are and what the social consequences will be.”

According to Kumar, the signs of jobless growth in South Korea and Malaysia and ”pockets of other economies” are due to economies being shaped by key sectors such as information technology (IT). ”There are new service and IT jobs linked to growth and exports, but there are not as many jobs in the manufacturing sector.”

However, ESCAP’s sober assessment of the region’s economies not churning out new jobs is only one of the many woes that Asian and Pacific economies may have to stomach in the new year. The others are the risks due to the fluctuating oil prices, the weakening U.S. dollar and the slowing down of three major economies, China, Japan and the United States.

”If the three big economies slow down, it will adversely affect the Asia-Pacific economies that depend on exports,” said Kim.

But smaller Asian economies that have depended on garment exports may be worse off for another reason – the multi-fibre agreement (MFA) ending in December. ”Pakistan, Bangladesh, Nepal, Vietnam and Cambodia are some of the countries who will suffer,” said Kim.

Under the MFA, developing countries supplied clothes under a quota system to markets in the United States and Europe. U.N. officials fear that hundreds of thousands of garment factory workers, most of them young women, will be out of jobs when this quota-agreement ends and production will be subject to the whims of free market, where China, with its army of cheap labour, stands to gain.

ESCAP’s concern over the uncertain job market comes in the wake of a report issued last week by the International Labour Organisation (ILO), which argued that the global economy needed to create decent and productive employment to help the nearly 1.4 billion people living in poverty.