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Catholic World News News Feature

The Human Face of the Asian Economic Crisis December 21, 2001

The financial disaster that struck Asia this summer has produced a widening circle of serious social effects. More than 10 million people have lost their jobs because of the recession. This was confirmed in a report by the International Labor Organization (ILO) published on September 24, which state that after decades of sustained growth (averaging over 8 percent per year in the post-war period) in southeast Asia the situation has deteriorated rapidly since 1997.

In Indonesia unemployment and under-employment (ranging between 9 and 12 percent in 1998) are accompanied by a lack of food brought on by drought. In Thailand there are more than 2 million unemployed. In China, in 1998 alone, 3.5 million have lost their jobs.

"Nations facing rapid globalization and competitive pressure," the ILO report says, "need to invest in skills development and training in their workforce. Training and education were at the heart of Southeast Asia's economic miracle and could well provide a way out of under-development and poverty."

The effects of the shortage of employment--as with most economic problems--are felt most severely by those already in need. "Stubbornly persistent high levels of unemployment and underemployment lead to social exclusion of the young and the old, the less skilled, the disabled and ethnic minority groups with a strong bias against women in all categories," said Michael Hansenne, the director general of the ILO.

The International Monetary Fund (IMF) has made errors in predicting and preventing the financial crisis in southeast Asia and Russia. "The IMF had not been properly informed about short-term capital movements. and should have done more to monitor the financial sectors," acknowledged IMF managing director Michel Camdessus. Still, he remained optimistic. "In Japan, the second half of next year should be the year of recovery; other countries should begin to recover in 2000 or 2001," he said. Camdessus is convinced that, "The worst has passed."

The point that must be understood is that Asia entered the economic crisis with a social structure that was already vulnerable--a socio-economic system in which 350 million people were living on an average income of a dollar a day or less. Now because of the loss of employment, combined with skyrocketing prices, millions of other people are being pushed below this severe poverty line.

For example in Indonesia the number of people classified as "very poor" has quadrupled: from 22 million in 1998 to 88 million in 1998. Insecurity and the difficulties attendant on mere survival are causing social unrest there. China, Vietnam, Myanmar, and Thailand fear that the Indonesian social revolt may spread to their own countries, where they too live in precarious economic conditions.

Thus the crisis that began in a few individual countries has affected the entire region. There has been a string of currency devaluations: 69 percent in Indonesia, 35 percent in South Korea, 29 percent in Malaysia, 27 percent in Thailand, 21 percent in the Philippines. The gross domestic product has dropped: in Indonesia from $200 billion in 1997 to $61 billion in 1998; in South Korea from $434 billion to $280 billion; in Thailand from $156 billion to $113 billion; in Malaysia from $96 billion to $68 billion. [All figures are expressed in US dollars.] To this must be added galloping inflation and a crash in the banking system. For example when Japan's Long Term Credit Bank crashed, it carried down $16 billion in unpayable debts.

While the poor feel the most urgent effects of the economic crisis, working families have seen the most dramatic changes in their ways of life. Due to the sudden onset of unemployment, in some countries the middle classes have almost disappeared. The sharp rise in the price of rice has had an enormous effect, both because it is the staple food of half the world's population and because the price increase was most acute precisely in the region where the most rice is eaten. As a result, more than 100 million people have been plunged below the poverty line.

WHAT HAPPENED?

According to economist Robert J. Samuelson:

After the Cold War, global capitalism gave prosperity to the world. Multinational companies and investors created a trans-national mass market and a middle class of consumers. But some countries became over-dependent on foreign capital--which, having entered in huge amounts, is trying to leave in the same way.

In brief, large private investors can finance feeble countries, thereby artificially stimulating their economy, and then leave, withdrawing the capital as soon as the positive business circle ends. "If this is globalization, better stay away," say government officials in Malaysia and Myanmar. This is why British Prime Minster Tony Blair has called for rules which would force investors to share in the same risks as the governments of the countries in which they put their capital.

The economic crisis in Asia was at the top of the agenda for an international conference held in Washington on September 30. While differences of opinion were legion, there was a consensus that some international cooperation would be required to help rebuild the Asian financial markets, and to avoid similar debacles in the future. Harvard economics professor Ezra Vogel put it, "China, Japan and the United States must work out a common basis of cooperation, and discuss the setting up of a regional economic post-crisis structure to help the reconstruction of east Asia."

GLOBALIZATION CHALLENGES THE CHURCH

"We must give more importance to the human and sociological aspects and the spiritual dimension of globalization," says Louis Sabourin, a professor at the University of Quebec and a member of the Pontifical Academy of Social Sciences. He continues:

It is a phenomenon which will grow in the future. We must, then, learn how to master and muster globalization, rather than be mastered by its manifestations. It is my deep conviction that the Church--by nature universal--cannot stay idle vis-a-vis the rapidly evolving process of economic and financial globalization.

The Church is not standing idle. Vatican institutions--the Council of Justice and Peace, the Pontifical Academy of Social Sciences, the Secretariat for the Jubilee, and many others--are spending more and more time studying the impact, both negative and positive, of globalization, and concentrating especially on its human and social dimensions. The Church in Asia is already engaged in actions to show solidarity with those in need (some of which are outlined below), and studying the possibilities for further intervention. On the level of political engagement, Catholics can play a decisive role. The Church often acts as mediator between conflicting parties, promoting dialogue and reconciliation. Thus the economic crisis provides a challenge for the Church.

In a pastoral exhortation on the economy published in Manila in July, the bishops of the Philippines said, "It is not surprising that the impact of the crisis is disproportionately against the poor--the fact is that our economy does not seem to have a human face." The bishops called for a general redirection of government financial policies, in favor of the poor. This approach, they said, would help to create "a caring economy--development with a human face."

At an August forum on the role of the Church in the Asian economic crisis, participants called on the Federation of Asian Bishops' Conferences (FABC) to send a delegation to the International Monetary Fund and the World Bank, "to discuss the impact of their policies on the peoples of Asia, in particular the poor." The forum also asked specific offices of the Holy See and other Church organizations throughout the world to make the same sort of interventions.

The participants in that forum--bishops, social and pastoral workers, theologians, and others--issued a statement in which they recalled the compassion Jesus showed for the crowds, the Asian Synod's appeal to the First World countries for solidarity, and the many protests voiced by Pope John Paul II against unjust mechanisms of finance and economy. The statement suggests that churches in Asia should put less emphasis on administration and more on pastoral concerns; the forum sough a change from investment in large buildings and structures to investment in people and their needs. The forum concluded: "The current Asian crisis is, for us, a moment of conversion, truth, and grace (kairos)."

This a time of discernment. Awareness of social and economic injustice and efforts to eliminate it are important steps in preparation for the Great Jubilee of the Year 2000. With this Dossier Fides has opened a debate on the human face of the Asian crisis: the practical consequences of macro-economic policies, the pain on the faces of the poor. At the same time we take the first timid steps toward a response on the part of the Church. Although modest, our proposals seek to meet fundamental needs and put human beings at the center of the national and world economy. The social-economic field is indeed one of the most urgent challenges for the missions on the threshold of the third Christian millennium.

INDONESIA: DESPERATE FAMILIES SEND CHILDREN TO "HOMES"

Pringsewu: Because of the serious economic crisis which has hit Indonesia, many families are having to send their children away to institutional homes. In Pringsewu, in Lampung province, southern Sumatra, the Franciscan Sisters run St. Vincent's Home. The director, Sister Ruth Rosiatmi, reports that at the beginning of the school year in July, they accepted four new children--three aged 15 and one of 6. "This is normal," the nun told Fides, "because we can take 55 and now have 54." The institute receives donations from the Franciscan community and from the government office for social affairs and spends about 12 million rupiah ($1,090) annually. Sister Rosiatmi says most of the children come from families suffering from economic difficulties, or from broken homes.

Among the newcomers are 6-year-old Septa from Bumi Aum village, not far from the home. Her mother is grateful that the little girl is happy--not at all homesick. Septa's father, who provided for a family of nine, died of a heart attack in June. Two of her brothers--aged 16 and 19--lost their jobs in carpentry because of their employer's bankruptcy.

The other three newcomers--the 15-year old girls Saini, Febri, and Rustiana--come from Belitang, about 350 miles north of the St. Vincent's Home in Pringsewu. They had been sent away from home because their large families could not adequately feed their children or pay school fees. The girls were found by pastoral workers who routinely visit the remote areas of the region.

The Catholic relief agency Caritas Indonesia plans to send aid support to orphanages and homes run by other religious groups--Muslims, Hindus, or Buddhists--particularly those in remote areas. Father Sunarko, a Caritas official, said that many of the 400 homes in the region can only manage to give the children one meal a day. It is reported that one Muslim orphanage in Cipanas, West Java, had to send some of the children home because it could no longer provide enough food.

Malnutrition among children is one of the most serious effects of the economic crisis. This and other health problems push up the rates of child mortality; diarrhea already kills 60,000 Indonesian youngsters. More than half the children under the age of 2 in Java, the most populous island, suffer from malnutrition, according to reports from UNICEF, the UN children's fund. The government's minister of food, A. M. Saefuddin, said 17 million Indonesians face food shortages, and that in Central and East Java there are 4.4 million families who can only afford one meal a day. The price of rice has more than doubled and is the object of price speculation.

The economic collapse is also having a negative effect on family life. Reports from various regions show an increase in the number of married couples making requests to ecclesiastical courts for separation. In Bandung, West Java, in the first eight months of this year, as many as 752 couples made such requests. In Bakasi some 133 requests have been registered in the past two months. Diocesan offices confirm that economic problems furnish the reasons for most of the separations

PHILIPPINES: AIRLINE CLOSING LEAVES 8,000 JOBLESS

Manila: The Philippines Air Lines (PAL) has been closed down, despite government attempts to salvage the company. PAL closed down on September 23. It had been Asia's first and largest air carrier. Opened 57 years ago, it offered national and international flights, and served more than 7 million passengers in 1997, employing more than 8,000 workers.

But by 1998 the company was in debt to the tune of more than $2 billion, and only 14 of its 52 aircraft were flight worthy. Then a plan for expansion launched by business tycoon Lucio Tan, who had owned 70 percent of the company since it was privatized in 1992, collapsed. Tan had asked the employees to make sacrifices: the suspension of the collective-bargaining contract for a decade, in exchange for 20 percent of the company's corporate shares. In June, the company's problems were compounded when PAL had to deal with a 22-day strike on the part of 600 of its pilots.

PAL's closing is a blow to the Philippines, and it is expected to have disastrous effects on domestic transportation among the over 7,000 islands of the nation's archipelago. The government, which still held 18 percent of PAL shares, was unable to offer the loans which might have saved the airline, because the public debt was already dangerously high at $913 million.

President Estrada said the military air force will provide emergency services, such as transportation of the sick and of necessary medical supplies. PAL chiefs and trade unions are engaged in negotiations aimed at reviving the company, and on September 28 the two sides reached a tentative agreement which could eventually allow for flights to be resumed.

HONG KONG: GROWING UNEMPLOYMENT, SALARY CUTS

Hong Kong: Not even prosperous Hong Kong has been spared the disturbing effects of the economic crisis. According to the Census and Statistics Bureau, every day in the month of August almost 500 people lost their jobs; unemployment has reached a 15-year high of 5 percent. There are some 175,000 unemployed and 85,000 under-employed workers.

Hong Kong Telecom intends a 10 percent reduction in the salaries of its 13,800 workers, and will dismiss those who do not accept that cut. The company's chief executive, Linus Cheung Wing-lam, says this move could help to save at least $300 million per year, and thus prevent massive layoffs. The company cut its management staff by 270 in July.

Ip Kwok-fun, a Hong Kong Telecom employee for 20 years, said "It is unfair for a company that is profiting to punish its workers just to keep profit levels high. This is unacceptable." He is not alone; 90 percent of the members of the Telecom staff are opposed to salary cuts. On September 22, negotiations between workers and corporate management began, and the management promised to find ways to avoid salary cuts such as re-training, re-assignment, or transfer of the workers. But the union leaders fear the company is using delay tactics, while preparing a plan which could leave no room for negotiation.

Pay cuts are effecting other companies as well. The Labor Ministry reports that between June and August more than 700 workers were asked to take lower pay. Most brought their cases before the Labor Tribunal. To provide some perspective on the amounts involved, consider one case: Jennifer Chow Kit-Bing of the Hong Kong Urban Council proposed a reduction in pay for Filipino and Singhalese domestic staff in Hong Kong "to alleviate the weight of family expenses." The set wage for domestic workers in Hong Kong is already low-- less than 50¢ and hour. In practice, most domestic workers receive far less than that posted wage.

Japan: less spending, more fear, more suicide

Tokyo: Opulent Japan is also experiencing a fall in prices and a decline in commerce. The gross national product has fallen for the third consecutive quarterly period, and a total drop of 3.3 percent is predicted for 1998. Everything on the market is being sold for lower prices; the sticker prices for new cars are 20 percent lower than they were two years ago.

The major fear here is the threat of a banking collapse, triggered by the uncollectable debts guaranteed by corporations which have themselves lost more than half their value. The government has poured money into 19 troubled major Japanese banks, but analysts say that help will not be enough.

Meanwhile unemployment in Japan has reached 4.5 percent--an unusually high rate for that industrious nation--and the fear of unemployment seems to be causing an increase in the number suicides. Police say that in 1997 as many as 3,556 people committed suicide for economic reasons, and in 1998 a considerable increase is expected; in Osaka a 50 percent increase has already been recorded. People are gripped by fear for the future, and as a result the income left over after government tax cuts is going into saving, not prompting the sort of spending that could help revive the market. This is the way the Asian crisis affects a rich country; it is estimated that families have accumulated savings that amount 250 percent of the gross national product. Not even a decrease in interest rates-- which now stand at an insignificant 0.25 percent--had the desired effect of resuscitating the economy.

CHINA: PENSIONS AND SALARIES OVERDUE

Wuhan: A plan to "improve" state industries, begun by the government more than a year ago, is causing an increase in unemployment and discontent in many parts of China. From among the thousands of possible examples, consider the case of Wuhan, in Hubei province. Hundreds of pensioners demonstrated on September 18 because their salaries had not been paid for several months. "Pensioners organized a sit-in in front of the main steel works," reported Qin Yongmin, a democracy activist. (The owners of the steel plant deny the complaint.) In June 2,000 laid-off workers had organized a public protest demanding payment for their last six months of work. The police intervened, but made no arrests.

Protests have become more and more frequent following the government reforms, which stipulate that public companies must either show a profit each year or close down immediately. Zeng Peiyan, head of the state commission for development program, said the government intends to invest $1.2 trillion in new infrastructure (highways, railways, electricity networks, dams) in the next three years. But official sources say that for this year the public sector will cut 11 million jobs in Wuhan.

At the same time the United States is applying diplomatic and economic pressure, pushing China to open its huge market to foreign companies. For multinational corporations, the promise of a market with 1.2 billion potential customers is enormously attractive. "We know the Chinese have problems: the economic crisis, the support of public companies, rebuilding after the floods," says David Aaron, an undersecretary in the US Department of Commerce, "but we hope China will soon become part of the International Commerce Organization." As things stand in China, products may not be freely distributed and licenses are not given to foreign companies in the service and telecommunication sectors.

PAKISTAN: CRISIS CAUSING "BRAIN-DRAIN"

Islamabad: This is not a happy time for Pakistan. The economic crisis and smoldering political problems (many of them regarding the role of Islam in public life and national law) are causing a real "brain drain." Engineers, bankers, medical doctors, and businessmen are moving out of the country to settle in Canada, Australia, and the United States. It is estimated that at least 50,000 qualified professionals have left the country in the past four years; many emigrants who had returned home are now about to move back again to the developed countries. Numerous industrialists and businessmen are moving their enterprises to Canada and the Persian Gulf countries. "There are no prospects and no future for professionals here," says Munir Ahmed, who is returning to America after working for two years in Karachi.

In the National Assembly, opposition to the proposed 15th amendment to the Constitution, which establishes Islamic law at the basis of the state, has proven stronger than expected. A coalition of religious minorities has stalled the approval process, and this could lead to the resignation of Prime Minster Nawaz Sharif and the government majority, which is now supported by the Pakistan Muslim League.

On the other hand, a September 24 meeting at the United Nations between the Pakistan and Indian prime ministers resulted in an announcement that their respective countries will sign the international nuclear test ban agreement before the end of the year. This announcement is widely seen as motivated by a desire for economic survival. The two countries had ample incentives for their decision: it enabled them to maintain the close commercial relations that exist between these neighbors on the Indian subcontinent, and to end the economic sanctions imposed by the United States.

THAILAND: PEOPLE POUR OUT OF CITIES

Bangkok: Migrant workers--who in the 1980s and 1990s left fields and rural villages for electronic, car, and plastics factories--helped to produce the Asian "miracle." But in this time of crisis they are the first to lose their jobs and be sent home. This is causing a dramatic flood of laid-off workers from the cities to the villages: migration in reverse. Official government figures speak of 2 million new jobless last year. It is estimated that more than 1.3 million of these people are village residents who worked in the cities, and have now been forced to return home. But in the rural areas there is neither work and nor food for these returning natives. Moreover, experts warm of an increase of abuses against women and minors and other crimes. There is also fear of a rapid spread of AIDS in regions lacking sanitary assistance.

Another group facing special problems are foreign workers--mostly from Myanmar, South Korea, and Indonesia. At the first sign of crisis, the government found that one of its most popular responses to the economic difficulty was to send these foreigners home. Thailand has already forced out 250,000 such workers.