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Asia: Financial crisis threatens deeper poverty

NewsNotes, January-February 2009

Neither the richest nor the poorest Asian economies are immune from the worldwide financial meltdown. The economic crisis threatens to spark social unrest in China, Asia’s largest economy, and to drive millions of poor Burmese and Nepalese even deeper into poverty.

China’s urban unemployment rate is officially four percent, but one researcher says the true figure could be three times higher. Considering the large proportion of people employed outside of the official economy, Zhou Tianyong estimates unemployment in the cities at about 12 percent.

Zhou, a researcher at the Central School of the Communist Party in Beijing, said in December about a third of China’s small- and medium-sized businesses had to close or suspend production in 2008, and larger firms were not hiring. Those hardest hit are the tens of millions of migrants who, without work, must return to the poverty of China’s rural areas.

Although the country’s GDP has grown more than tenfold since 1978, Zhou says real unemployment has been increasing each year. He says unless the country’s leaders create more jobs, “the redistribution of wealth through theft and robbery could dramatically increase, and menaces to social stability will grow.”

Zhou says unemployment could rise to 14 percent in 2009, when China’s economic growth is expected to fall to 7.5 percent, compared with nine percent in the third quarter of 2008.

In Burma, Prime Minister Gen. Thein Sein said the global financial crisis was “irrelevant” to the country’s economy. On Dec. 2, he said the agriculture, forestry and fishing industries could absorb Burma’s millions of workers abroad if they were forced to return home.

However, an exiled labor rights activist in Thailand quickly disagreed. “It is a groundless statement,” said Moe Swe, head of the Yaung Chi Oo Burmese Workers Association. “If there are plenty of jobs for people in Burma, why have millions left Burma to work abroad?” He estimated four million Burmese are working outside, mostly in Thailand, Malaysia, Singapore and South Korea.

Aung Thu Nyein, a Burmese economic analyst based in Thailand, said the loss of jobs by migrant workers – with the interruption of their remittances from abroad – would have a severe impact on Burma’s domestic economy. 

Tay Za, one of Burma’s richest businessmen, reportedly told senior executives of his Htoo Trading Co. Ltd. on Dec. 3 the global recession was severely affecting the country’s business climate. He estimated GDP could drop by a quarter in 2008 due to falling demand for Burma’s main exports: natural gas, forest products, minerals, seafood and agricultural products. Tay Za‘s business interests include logging, tourism, hotels, air transport and construction.

Burma’s economic growth results largely from its natural gas exports, which account for more than half of its export receipts and foreign direct investment. In the last quarter of 2008 the price of oil and natural gas fell more than 50 percent as demand shrank in response to expectations of a prolonged recession.

In Nepal, the Maoists, who helped bring the country’s monarchy to an end and usher in a republic in May 2008, say the country’s backwardness has provided some protection from the international financial crisis. The country has “very few links with the global economy and the whole imperialist system” and appears to have escaped the impact of the global turmoil so far, says Finance Minister Baburam Bhattarai. However, he said Dec. 7 he was not sure the nation would be so fortunate in the coming months.

“What’s happening is a long-brewing crisis within the whole monopoly capitalist system. This is nothing surprising,” he added. “Monopoly capitalism is not sustainable, as it leads to unequal development. Capitalism is failing [and is now a] very ailing patient.”

Nepal is one of the world’s poorest countries, with around 80 percent of its people dependent on agriculture for a living. It relies on foreign aid for nearly 60 percent of its budget, and is aided by remittances from two million Nepalese working abroad.

“We can’t yet see the effects of this crisis because our remittances mostly come from oil-rich Gulf countries, and there’s not yet much of a downturn there,” Bhattarai said. He added that, with the slowdown that is now starting to grip Gulf nations, that picture could change – and Nepal’s fortunes with it.

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