Economic recovery to take 2 to 3 years

Published by rudy Date posted on February 19, 2009

Recovery from the current global financial crisis could even take longer than the 1997 Asian financial crisis, various international organization officials said Wednesday.

The International Labor Organization (ILO) also said the number of unemployed people could reach 23 million in Asia and 50 million globally between now and 2012 as the effects of the global financial crisis take their toll.

Dr. Ursula Schaefer-Preuss, vice president for Knowledge Management and Sustainable Development of the Manila-based Asian Development Bank (ADB), noted that besides being global as of this time, today’s financial crisis is causing a reversion of the pace of poverty reduction.

According to Preuss, the reversion is such because 60 percent of Asia’s final export go to the wealthiest countries—a market that is no longer available at the moment because of the global economic crunch.

“It was the strong export demands, coupled with devalued currencies [that] were the key factors in Asia’s quick recovery from the 1997 crisis.”

For many Asian countries, exports to the US, Europe and Japan provided a way out,” she said during the opening of the high-level regional forum titled Responding to the Economic Crisis—Coherent Policies for Growth, Employment and Decent Work in Asia and the Pacific being held in Manila.

She added that affected Asian governments also provided large-scale financing for social safety nets to support public employment programs and to strengthen social protection and insurance measures.

Two to three years

Financial analysts worldwide have predicted that the crisis would last the next two to three years, but admitted that estimate could change over time. Back in 1997, experts said the start of stabilization would be 1999.

Gyorgy Szirazcki, senior economist at the ILO Regional Office for Asia and the Pacific, conceded that recovery from the 2007 financial storm would definitely be longer because coherent policies are needed to reduce the dependence on exports and to rebalance the economies toward domestic and regional markets.

“It would definitely take time because we can’t go back to the old ways. We need a more balanced market that would maintain export growth and stir strong domestic market as well,” Szirazcki said.

Stephen Pursey, ILO director for policy integration and statistics, noted that coherent fiscal policies should involve allotment of stimulus packages, as well as implementing taxation measures.

OFWs vulnerable

Szirazcki and Pursey agreed that overseas Filipino workers, just like other migrant workers, would be vulnerable in the crisis.

The same report added that job security of new graduates and migrant workers with short-term contracts will also be threatened because of possible protectionism policy on the part of the host country.

As such, the various countries’ stimulus funds, according to ILO, should maintain household incomes and purchasing power. Packages should also be rolled out rapidly and should have a significant impact on employment almost immediately.

“Small and medium enterprises should also be supported so that they will be able to respond to the demand of their consumers,” he pointed out.

But Szirazcki argued that infrastructure projects should not be lost in the plan, because it is not confined to providing short-term jobs for construction workers.

“It [infrastructure projects] will also need skilled workers such as engineers, designers, and information and communications technology experts,” he said.

Millions to lose jobs

ILO warned that up to 23 million Asians could lose their jobs by the end of 2009 if current trends continue.

The international body said that up to 16 million affected vulnerable workers could be displaced in the Philippines and up to 21 million in Asia.

In terms of affected vulnerable workers, ILO projected an increase of 56 percent in East Asia, 66 percent in Southeast Asia and 77 percent in South Asia.

Vulnerable sectors refer to short-term contract workers, unsecured employments and migrant workers, according to Pursey.

“If you’re in any of these sectors then, you should be worried,” he added.

But Sziracki was quick to point out that foreign countries cannot stop recruiting migrant workers despite the global crunch.

“They cannot stop employing foreign workers. Countries need migrant workers—whether skilled or unskilled. Stopping recruitment will have a long-time effect on a country’s economy,” Sziracki said, citing the construction industry as one of the most active recruiters of foreign labor.

What governments can do

To combat the effects of the global financial crisis like unemployment, the government must be able to provide work in different sectors and social protection to individuals, and uphold social protection, Moazam Mahmood of ILO Geneva’s Policy Integration Department said.

“If you want fiscal policies to generate employment, give [the] money to sectors that can create jobs,” he added.

Also according to Sziracki, governments should strengthen or introduce an unemployment insurance system.

Social protection refers to the ability of a government to look after the needs of its people once a crisis starts affecting the economic and social aspects of a country.

Sziracki cited examples from India and Thailand’s strong social protection program, with Thailand allocating a big chunk of its budget to help the poor.

But Sziracki cleared that funds for programs such as the unemployment insurance system must not come from people and corporate taxes alone.

“The unemployment assistance could come from any kind of tax the government sees fit to use [for the system],” he said, reiterating that a company tax reduction program should still be implemented to help stop industries from collapsing.

He suggested that funds for the insurance system could be sourced from taxes contributed by the displaced workers when they were still working.

Philippines better off

In the local front, Labor Secretary Marianito Roque said Wednesday the country is still in a much better position to tackle unemployment because the government’s priority is the preservation of employment.

He added that the strength of the country’s labor market is also based on the continuing demand of foreign countries for overseas Filipino workers.

Roque said 3,000 migrant workers are still deployed daily despite the global financial crisis and the Philippine Overseas Employment Administration announced more than 400,000 job orders from countries like Canada, Bulgaria, Australia, the United Arab Emirates, Qatar and Japan.

Labor and Finance ministers, senior officials of the United Nations, World Bank and governments of more than 10 Asian countries are here in Manila until Friday for the high-level regional forum to discuss effective responses to the current economic crisis. It was convened by ILO in collaboration with the Asian Development Bank and the Department of Labor and Employment. –Llanesca T. Panti And Bernice Camille V. Bauzon, Reporters, Manila Times

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