November 18, 2008 4:30 pm

UN warns economic crisis could cause Asia unrest

Asian countries could face social unrest as their export-driven economies slow in response to the global economic crisis, a senior United Nations official has warned.

The slowdown in the US and Europe posed fundamental problems for Asian economies that used exports to fuel rapid growth, said Ajay Chhibber, an assistant secretary-general and head of the UN Development Programme’s regional bureau for Asia and the Pacific.

About 900m Asians lived below the World Bank poverty line, defined as an income of less than $1.25 a day, he said.

“But there are another 300m who just came out of that group, so they are literally on the margin,” he said. “If you have lower growth, you have rising unemployment and that makes all these people . . . vulnerable.

“We know what happens in crises; we focus a lot on banks and businesses but what also happens . . . is that children drop out of school and never go back. You can have intergenerational effects: once a girl drops out of school, that is a mother who is illiterate.”

Governments should work on expansionary budgets to increase employment, Mr Chhibber said, but that in itself would not be enough.

“Having stronger safety nets for these people will also be vital because otherwise you will see a lot of unrest on the streets.”

Asia should also consider paying poor families if they maintain their children’s attendance record at school or ensure they adhere to vaccination programmes.

Mr Chhibber, who worked for the World Bank in Asia before joining the UN, said the fall in commodity prices created problems and opportunities. Rural incomes had fallen but inflationary pressures had eased, giving greater latitude for expansionary fiscal policies to rekindle domestic demand.

Increased intra-regional trade was key to revival, he said. Low-cost producers such as Vietnam could compete against home-produced goods in China while more expensive countries such as Thailand could carve into Europe’s market share of China’s luxury sector.

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