The Human Face of the Financial Crisis

The Human Face of theFinancial Crisis

Prof. Leonor Magtolis BrionesUP National College of Public Administration and Governance

andCo-Convenor, Social Watch Philippines

Fourth Annual Forum of Emerging Leaders in Asian JournalismAsian Center for Journalism, Ateneo de Manila University

May 18, 2009

Outline The triple threat to development in Asia-Pacificregion

• Financialcrisis

• Food and fuelprice hike

• Climate change

Implications of crisis in social development acrossthe region

Stimulus Packages, overview and critique

Role of civil society

Impact of the financial crisis onAsia-Pacific

The Economic and Social Survey of Asia and thePacific 2009 (UNESCO) reports a general declinein domestic demand and exports:

– Global investors pull funds out of emergingmarkets;

– Downturn in property prices and bank lending tothe property sector;

– Reduced bank lending to corporate and small andmedium-sized enterprises;

– Exports and foreign direct investments to be hit;

Declining Real GDP Growth Rates

6.28.5Vietnam

2.64.9Thailand

1.27.7Singapore

4.67.2Philippines

5.46.3Malaysia

6.16.3Indonesia

7.19.0India

2.55.0Korea (Rep. of)

9.013.0China

-0.72.4Japan

20082007Country

Source: Economic and Social Survey of Asia and the Pacific 2009, UN ESCAP

Inflation rates

24.48.9Vietnam

5.52.2Thailand

6.52.1Singapore

9.32.8Philippines

5.42.0Malaysia

10.36.4Indonesia

9.06.2India

4.72.5Korea (Rep. of)

5.94.8China

1.40.1Japan

20082007Country


Negative impact on livelihoodsand vulnerable groups

The 2009 UNESCAP report also states that:

• Preliminary estimates by the ILO indicate that2009 unemployment in Asia-Pacific couldincrease by between 7 to 23 million workers;

• Countries with slowing economies and rapidlabor force growth, ex. Cambodia, Pakistan,Philippines, will experience the greatest impact;

• Wage growth in real terms will unlikely exceed1.8%-- and outright wage reduction in countrieswith low economic growth seems inevitable.

Con’t, from UNESCAP 2009

The people most at riskfrom the crisis are the poor,women who are laborers inthe manufacturing sector,the youngest and oldestpopulations and sociallyexcluded groups

–Not only do these groups have fewerresources with which to cushion the impactof the shocks, but they also have lessinfluence on economic and politicaldecisions.

Food and fuel crisis

• Between 1998 to 2007, the price of crude oilincreased at an annual average rate of 21%,reaching $72/barrel in 2007;

• It accelerated further in the first half of 2008,reaching $140/barrel in July 2008

• Cereal prices increased 92% from April 2007 totheir peak in April 2008, in contrast to 29%increase from April 2006 to April 2007;

• Rice posted the steepest price increase in theshortest time: 150% from January to May 2008


• Higher food prices in Asia and the Pacificpushed up the number of undernourished peoplein the region from 542 million in 2003 to 2005 to584 million in 2007;

• Additional food price increases in 2008, alongwith the marked slowdown in economic activity,is likely to increase the number ofundernourished even more;

• Food price increases may push the poor toreduce the number of times and variety of foodthey eat, sell their meager assets, or takechildren out of school to work, harming their andtheir children’s prospects


Climate change in Asia-Pacific• The increase in the surface temperature in Asia

and the Pacific is much higher than the globalaverage… so is the impact;

• Changing whether patterns:– heighten livelihood insecurities (ex. agriculture and

fisheries sectors);– health threats (per WHO, environmental risk factors

contribute to 85 of the 102 categories of majordiseases and injuries);

– increased destruction of infrastructure(rainfall, floods, storms).


Threats to achieving MDGs

• The financial crisis, which threatenseconomic growth, creation of jobs and thedeterioration of incomes, poses increaseddifficulties to fight poverty and achievesocial conditions and the attainment ofMDGs;

• This is especially true in countries in theAsia-Pacific which are already strugglingto improve the human developmentconditions of the poor.

Basic Capability Index (BCI)

65Nepal

58Lao, PDR

71India

99Malaysia

57Bangladesh

66Cambodia

77Philippines

84Indonesia

90China

99Japan

BCICountry

Source: Social Watch Report 2008

Health

17150.42250.5Vietnam

73541.651312.3Papua New Guinea

871.11970.6Thailand

554778940.9Timor-Leste

3224<0.14320.5Philippines

59460.42440.4Nepal

10474116914.5Myanmar

12100.41250.2Malaysia

43<0.129Japan

34260.12531Indonesia

82651.56655.0Cambodia

Under-5Mortality(per 1,000live births)

InfantMortality(per 1,000live births)

People withHIV/AIDS(15-49 yrs

old,%)

TB(cases per

100,000people)

Malaria(cases per

100,000people)

Country


Education

11.94369.99994.5Myanmar

4.520.369.767.265.1Pakistan

7.935.663.082.778.5Lao, PDR

6.041.065.188.963.6Bangladesh

2860.274.992.995.1Philippines

5.678.579.270.1Nepal

3.623.963.196.583.4Cambodia

11.073.188.576.4India

55.310099.8Japan

1757.489.594.598.7Indonesia

1.334.3Afghanistan

TertiaryEducationEnrolment

rate

Secondaryschool

Enrolment rate

Childrenreaching5th grade

PrimarySchool

EnrolmentRate

Literacy(15-24 yrs.

Old, %)Country


Reproductive Health

761508870Vietnam

564504765India

4054043.869Cambodia

585702049Bangladesh

492306088Philippines

488301970Nepal

38068Myanmar

1038019Timor-Leste

326601944Lao, PDR

574206692Indonesia

1018001452Afghanistan

Contraceptive useamong currently inunion women aged

15-49

EstimatedMaternal

Mortality ratio(per 100,000 live

births)

Birthsattended by

skilled healthpersonnel (%)

Women aged 15-49attended at least

once duringpregnancy byskilled healthpersonnel (%)

Country


Poverty in the Philippines

• Even before the onset of the global crisis,poverty in the Philippines had been rising;

• Household incomes had already beenfalling;

• Jobless growth has been persistent;

• Indicators in education, health andnutrition have not improved significantlywith posted economic growth.

Growth and Poverty in SelectedASEAN countries

Ave. PovertyReduction per year,

1990-2005 (mil)*

Average GDP Growth RatesCountry

0.247.746.968.21Vietnam

0.325.050.648.62Thailand

(0.06)5.023.962.19Philippines

0.014.794.999.47Malaysia

0.056.566.176.42Lao, PDR

3.295.070.987.87Indonesia

0.139.687.347.77Cambodia

2001-071996-20001991-95

Source: “Poverty in the Philippines: Causes, Constraints and Opportunities”, Aldaba (2009)

*Based on US$1.25 at 2005 PPP)

Philippines January 2009 LaborForce Survey

• The estimated number of population 15 years old and over increased byapproximately 1.267 million persons from January 2008 too January2009.

• Out of the estimated 58.7 million population 15 years old and over inJanuary 2009, only 37.1 million persons (63.3%) were reported to be inthe labor force (from 63.4% in January 2008).

• The number of employed persons in January 2009 was estimated at34.3 million (employment rate at 92.3 percent), lower than 2008 estimateof 92.6 percent.

• Regions with the lowest employment rates and are below the nationalemployment rate are:– National Capital Region 86.0%– CALABARZON 89.1%– Central Luzon 90.3%– Ilocos Region 91.5%– Central Visayas 92.2%

• Unemployment rate for January 2009 rose from last year’s 7.4 percentto 7.7 percent. Region with the highest unemployment rate is NCR with14 percent.

Can the economy absorbincreasing job seekers?

• Official GDP growth projection for 2009 is 3.1%to 4.1%

• Other rating agencies have projections lowerthan that of government’s:– IMF: 2.25 % (as of February, under review)– Moody’s: 2 to 3 %– Standard and Poors: 2.2 %– World Bank: 1.9 % (from 3 % last December)

• Global recession threaten overseas jobprospects for Filipinos

Stimulus Packages

Are government effortsadequate to provide social

protection in the short and longterm?

Economic stimulus packages in Asia and the Pacific

The Economic and Social Survey of the East Asia andthe Pacific 2009 Report gives details on the economic stimulus packages of some countries in the region.

East and North-East Asia

China$584 billion package to stimulate domestic demand - includes a component for health and education

$123 billion to improve the country’s health caresystem which includes - an annual subsidy - upgrading of grassroots medical institutions, health services and public hospitals


East and North-East Asia

Korea

Committed 4% of its GDP for a package that includes

- job creation - welfare support - reduced real estate taxes

Specific mention is made of providing betterjob training through expansion of the internshipsystem

The 50 million won “Green New Deal Jobcreation Plan” is intended for environment-friendly job creation


North and Central Asia

Armenia, Georgia, Kazakhstan, Russian Federationand Turkmenistan

fiscal stimulus packages focus largely on tax packages, namely in VAT, income tax, tax codesand the like

The Pacific Islands

Northern Marianas Islands, American Samoa, Guamfiscal stimulus packages are largely on infrastructure,food assistance and tax incentives


South and South-West Asia

India

focuses on tax relief, support of manufacturingenterprises and infrastructure

Pakistan

has a $7.6 billion Stand-by Arrangement with IMF tohandle its budget deficit

has set up the Benazir Income Support Programmeto provide monthly cash benefits

Sri Lanka

has unveiled a $141 million package largely focusedon incentives for exporters, cuts in energy prices, aswell as reduction in “the expenses of governmentofficials”


South-East Asia its countries have among the largest fiscal stimulus that are largely focused on tax breaks and incentives, rescue operations for industries and infrastructure

Indonesiahas $6.1 billion

Malaysiahas $1.9 billion

Philippineshas $6.5 billionhas set up a separate allocation for conditional cash transfers

Singapore has $13.7 billionpackage include cash transfers to employers

Thailandhas $3.3 billionpromises a one-time cash distribution program

Vietnamhas $1 billionis packaging subsidized loans to farmers

Stimulus packages neglects development of local capacities to cope with crisis

stimulus packages of both donor and recipient countriesgive an impression that these are designed for quick results

as the ESCAP report points out, short term responses are not sustainable if the crisis will linger

short-term responses like cash transfers and short term job creation are focused on the individuals

a truly effective capacity development focuses on organizations, like communities, builds up their capacities to find solutions to survive the crisis as well as assure them of sustained growth

short-term solutions, like prolonged cash transfers,may not be complimentary to local capacity development, may lead to dependency, do not solve problems of poverty, low levels of productivity, employment and community morale

Partnership with civil societyorganizations

The ESCAP 2009 report states that civil society organizations are key partners in the alliances forfor development, particularly for local capacity development

CSOs have shown they are innovative and creativein delivering capacity development services at the local level

This is particularly shown by Social Watch Philippines - active in international campaigns - has shown its effectiveness in campaigning for participatory budgeting at the national and local levels - has capacitated local communities and developed monitoring mechanisms on MDG goals, particularly education, health, agriculture and the environment

The financial crisis is not only aboutbanks, stimulus packages, tax relief and

infrastructure. The human face of thecrisis is reflected on:

• the mothers who die while giving birthunattended by physicians;

• infants dying due to preventable causes;• workers laid-off from jobs;

• graduates who have little job opportunities;• millions of people suffering from hunger

and limited access to adequate food.

Thank you.

Documents

The Human Face of the Financial Crisis