World Bank warns social problems loom in Asia

By Tim Johnston in Bangkok

Published: February 11 2009 The World Bank has warned that East Asia’s economic problems are about to move into the social sphere as the region’s export industries start laying off workers.

“In very short order the focus is going to change from the financial crisis to an employment crisis: people starting to lose jobs and the politics of that are going to be very tough every place,” said James Adams, the World Bank’s vice president for East Asia and the Pacific.

Millions of workers across East and South East Asia have already lost their jobs due to the precipitous fall in demand in their traditional markets in the US and Europe. Governments in the region, led by China, have almost all put substantial stimulus packages in place.

The World Bank estimates that growth in Asia as a whole will remain at a relatively healthy 5.3 per cent in 2009, although that is a marked slowdown from the 7 per cent seen in 2008 and 9 per cent in 2007.

Mr Adams sees a danger of social unrest, but he says Asia’s governments are responding to the social challenges as well as the economic trials.

“What I find encouraging is that every country is talking about putting in place mechanisms to provide cash transfers to make sure some of the original tensions are dealt with reasonably efficiently,” he said in an interview in Bangkok.

Finance Ministers from the 10 members of the Association of South East Asian Nations along with China, Japan and South Korea are due to meet in Thailand’s resort town of Phuket on February 22 to discuss coordinating their response to the crisis.

High on their agenda will be the proposed expansion of the Chiang Mai initiative, a regional network of currency swap facilities that the Association’s members can call on if and when their currencies come under pressure.

But Mr Adams said that the countries of the region needed to resist the rising pressure for protectionist policies.

“The challenge is how to get through this transition in the next year. We see the big risks as the worries about protectionism, that the crisis results in policy changes which aggravate the problem rather than provide the basis for the resumption of growth,” he said.

He said that although export demand was unlikely to return in any strength until the end of the year, trade would in the future remain an important driver for at least the smaller export nations like Thailand and Vietnam.

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