Unemployment In Asia Alarms U.N.

The annual U.N. World Economic and Social Survey released July 27 says that unemployment has been rising sharply in a number of Asian countries, and is expected to get worse this year. The increase in the numbers of people without jobs is attributed to massive lay-offs of both skilled and unskilled workers, particularly in four Asian countries: Indonesia, Thailand, South Korea and the Philippines.

The number of unemployed in Indonesia alone is expected to be between eight million and nine million in 1998, raising the rate of unemployment there to nine percent.

In South Korea and Thailand, the jobless rates are expected to jump from a pre-crisis annual average of under three percent to six percent and eight percent respectively while in the Philippines, the unemployment rate could reach 10 percent this year. Unemployment is also up in both Hongkong and China, the report says.

The average unemployment rate throughout Asia for 1998 is expected to reach 3.5 percent compared with an average of about 2.5 percent in 1997.

The International Labor Organization (ILO) has estimated that the number of people falling below the government's poverty line in Indonesia in 1998 could increase substantially from the 22.5 million in 1996.

The report says that the after-effects of the third major currency crisis of the 1990s has plunged several of the world's fastest growing economies into a severe recession, slowed world economic growth and highlighted dangerous weaknesses in the international market for financial assets.

The economic shock waves set off by a run on East Asian currencies (the two previous crises struck the Exchange Rate Mechanism of the European Union in 1992 and the Mexican peso in 1994) will slow world growth to an estimated 2.5 percent in 1998, after two straight years of better-than three percent growth.

The developing countries are the hardest hit. Growth in 1998 might not exceed three percent, after an average of about five percent in five of the six preceding years.

The economies of industrial nations are projected to grow by 2.5 percent, down from a decade-high of 2.7 percent in 1997 while the economies in transition will grow by three percent or more this year, up from 2.7 percent growth in 1997.

"What is needed at this time, according to a growing number of experts, is not more decontrol and deregulation, but more effective official oversight and market-based controls of financial markets," the survey says.

There were notable weaknesses in official oversight of the three nations at the epicenter of the crisis -- Thailand, South Korea and Indonesia -- as well as in the rescue programs devised for these countries by the International Monetary Fund (IMF). The IMF programs demanded fiscal tightening -- higher taxes and reduced public spending -- as well as higher interest rates as conditions for loans to shore up their battered national currencies and banking systems.

The survey says that even during the early stages of the crisis critics questioned the need for such measures in countries with no history of fiscal balances.

The severity of the ensuing recessions appear to bear out the contention that "sharply contractionary macro-economic targets set for the Asian economies by the IMF and the austerity that accompanied them were irrelevant to the real problem."

The survey says that investors and currency speculators expect countries to undertake austerity measures to boost confidence, and the IMF's stated first order of business was to restore investor confidence.