by Piyaporn Hawiset
Asia's economic crisis has inflicted deeper misery and dragged on for longer than anticipated, the United Nations said on April 7, 1999 in a report calling for sweeping reforms of the global financial system. The report predicted a mild economic recovery in 1999, but said it would be conditional on regional and international factors.
A dramatic increase in poverty and rising unemployment coupled with recession in 1998 deepened the pain of the crisis which erupted in 1997, said the Economic and Social Survey of Asia and the Pacific. Fundamental changes must be carried out to the financial infrastructure of crisis-hit countries and developed nations must shoulder the responsibility of reforming the global economic system to forstall future crises, it said.
"The Asian crisis has turned out to be deeper and more long-lasting than many analysts had predicted," it added. "Furthermore the fallout of the crisis has engulfed a number of other countries outside the region, creating a strong negative impact on global growth. While no foolproof guarantee can be offered it is evident that a wide range of actions are needed at the national, international and regional levels to minimise the possibility of future crises."
The report published by the UN Economic and Social Commission for Asia and the Pacific, predicted a "gentle" recovery would emerge in 1999, but said a rebound was conditional on several Asian and international factors.
"The weak state of the Japanese economy, possible slowdown of the European Union and despite its recent strength, likely flattening of growth in the US economy in 1999 are the immediate sources of uncertainty," ESCAP said.
"Other concerns relate to increased protectionism and developments with regard to capital inflows -- in particular the risk aversion of international investors/creditors is a source of worry."
Crisis-hit nations should renew attempts at corporate and financial sector restructuring, problems which "remain major impediments to growth in the immediate future," the report said. Governments should also try to establish a social safety net to mitigate the worst effects of the crisis, the report said. It said unemployment in Indonesia had stood at 4.7 percent in 1997 but nearly quadrupled to 21.3 percent last year. Malaysia saw its jobless total rise from 2.7 percent to 6.4 percent, South Korea from 2.6 percent to 7.7 precent and Thailand had seen a doubling from 1.9 percent to 4.4 percent.
Stark figures were also included on poverty brought on by the crisis. In 1998 the poverty rate in Indonesia stood at 11 percent -- a year later it had risen to 40 percent of the population. Thailand saw poverty increase from 11 to 15 percent and Malaysia's went up from seven to eight percent.
"The Governments' ability to address social problems has been constrained by reduced revenues and in some cases by the conditionalities of the (IMF) bailout packages," the closely watched report said. "However, some of the conditions were recently relaxed."
It went on to call for full-scale reform of the international financial architecture to ensure sustained growth and to prevent a recurrence of future crises. Reforms must include improvements of emergency assistance and better supervision of capital flows, it said.
Asian governments were also advised to seek greater cooperation on financial sector supervision and to develop early warning systems. Despite the overall sceptisim there were some rays of hope for Asia contained in the report. It pointed to improvements in current accounts, rebuilt foreign exchange reserves, declining interest rates and recovering exchange rates and stock markets.