Asia-Pacific won't be unscathed from the current crises - but can emerge stronger
It would be difficult enough for the Asia-Pacific region, or any region for that matter, to deal with the fallout of just one global crisis. Yet, our region now finds itself dealing with three major global crises: a Great Recession, food and fuel price volatility and a range of climate change calamities. These three crises converged in 2008. How they are dealt with in 2009 will influence the future path of development in the Asia-Pacific region, and through that, the lives of billions of its peoples. ESCAP’s Economic & Social Survey of Asia and the Pacific 2009 provides groundbreaking analysis of regional trends which should assist policy makers identify solutions.
The repeated and brutal downward revisions of economic forecasts have confounded all but a few of the most seasoned analysts. Estimates of wealth wiped off balance sheets run into trillions and even tens of trillions of dollars. The Survey’s results paint a mixed picture. On one hand, developing countries in the region have shown that they are better prepared than in 1997 when the last financial crisis last hit. Over the past decade, their regulatory reforms in the financial sector, combined with cautious macroeconomic management policies, have built a protective buffer of foreign exchange reserves. On the other, despite the impressive economic growth experienced over the last decade, inequalities between rich and poor have worsened in the Asia-Pacific. This has brought to the fore vulnerabilities for which forward planning and policy action will be essential.
During the first part of 2008, crude oil prices soared to record levels and food commodity prices increased to the highest levels in over 20 years. This caused alarm amongst the developing countries of our region because of the disproportionate adverse impact on the poor. The impact was particularly severe as the price of the region’s main staple food, rice, increased by a staggering 150 per cent in only four months. Then, by early September, it was clear that the growing financial crisis would be particularly damaging given the region’s heavy reliance on exports to industrial countries for growth. As a result, 24 million people in Asia and the Pacific are in danger of losing their jobs, with women and youth disproportionately affected – and this is aggravated by an increase in the number of undernourished to 583 million in 2007, up from 542 million in 2003-2005. A worsening of the state of poverty and hunger in the region is now impossible to avoid and yet basic social protection programme coverage is low in the Asia-Pacific. It is estimated that only 30% of the elderly receive pensions and 20% of the population has access to health-care assistance.
These statistics suggest that there is a real need to strengthening social policies in order to create more resilient societies better able to face economic volatility. The provision of minimum wages, unemployment insurance and expansion of other social protection schemes will help bolster domestic demand during times of uncertainty. These social support systems need to be implemented as part of a development framework that helps create longer term macro-economic stability for the region.
These food/fuel and economic crises are problematic enough on their own, but the third global crisis of climate change threatens to have even more fundamental, long term consequences. Natural disasters, often associated with climate change stresses, struck with particular intensity in 2008. The number of deaths in the region reached 232,500 persons, accounting for a staggering 97.5 per cent of such fatalities worldwide. One of the deadliest storms ever, Cyclone Nargis, left a heart-wrenching trail of death and destruction in Myanmar: 84,500 people dead and 53,000 missing. Australia’s “big dry,” the worst drought in more than 100 years, entered its seventh year with fires causing devastation in the country’s south-east.
UN studies have shown that there is a direct correlation between poverty and vulnerability to disasters. As the numbers of poor increase in our region, so too will the number of people at risk.
Although all attention is now focused on fighting the economic crisis, addressing food and fuel security issues in combination with climate change is not necessarily a contradiction in policy objectives. The Global Green New Deal promoted by UN Secretary-General Ban Ki-moon is based on the premise that investing in the green economy can generate millions of jobs while addressing the challenges associated with reducing carbon dependency, protecting ecosystems and preserving water resources. There is untapped potential for developing countries in the region to cooperate in developing affordable climate-friendly technologies the promote energy efficiency and diversify energy sources to include renewables. Putting in place the appropriate financial incentives and regulatory frameworks regionally will help to secure energy supplies and speed up the transition to a low-carbon energy systems. Further development and implementation of the ESCAP framework on renewable and sustainable energy should be given priority. The region should also play a more influential role in the multilateral processes that are reforming the global architecture on finance, trade rules as well as climate change.
The converging crises can be used to jump-start a regional reorientation towards a more inclusive and sustainable development path. Some countries in the Asia-Pacific are in a stronger position to help not only themselves but also others to smooth the impact of the crises and strengthen regional solidarity. ESCAP’s Survey, launched globally today [26 March], emphasizes the importance of regional cooperation to develop long term solutions.