1998 - The year of living dangerously

By Luc DeMaret, in ICFTU OnLine
8 December 1997

Last year Asia was still venerated as a model of economic growth. It will begin 1998 with an unprecedented economic crisis, the outcome of which will depend on how industrial relations are managed. Social explosion or dialogue?

Brussels - December 8 1997 (ICFTU OnLine): With ecstatic reports from all the experts and the enthusiastic approval of the international financial institutions, it was only yesterday that Asia seemed to be leading the world in economic growth. Faced with this shower of praise, the warnings of the trade unions, humanitarian organisations and "greens" made little impact.

True, inequalities had grown in most of the countries of south-east Asia.

True, stability didn't always go hand in hand with human or trade union rights. True, environmental protection was not a priority. But why spoil the party?

Since the beginning of the sixties, the region's economy had been booming. The "tigers" (South Korea, Hong Kong, Singapore and Taiwan) were followed by the "baby tigers" (Thailand, Malaysia and Indonesia"). According to a recent survey by the French daily Le Monde (1) "Asia's efficient economies have reached 25 per cent of world Gross National Product. By the year 2000 they will have reached 30 per cent." In 1960 they only represented 4 per cent of world GNP. The human development index published each year by the UNDP shows a record increase for the countries of the region from 1960 until 1992. And very recently the World Bank (2) again welcomed "the unprecedented fall in poverty" in this part of the world, even though it drew attention to an increase in inequality.

Hidden behind the impressive macro-economic statistics however were the early signs of an economic and social crisis which, without a change of policy, is set to flare up in 1998.

So, last July's stock market crash which brought down the Thai baht, and with it the Filipino, Malaysian and Indonesian currencies, was predictable. Trade unions, notably the International Confederation of Free Trade Unions (ICFTU) and its Asian regional organisation, APRO, have long denounced the "casino economy" of the region and the lack of attention to the social dimension of economic development. "The capitalist maxim of increasing revenues by cutting costs to maximise profits, combined with a reduction in public expenditure, has simply made the rich richer and the poor poorer" (3) said Takashi Izumi, APRO General Secretary, just over a year ago. In fact, Asia's economic boom was nothing miraculous, notes the French monthly Le Monde diplomatique: "National and foreign capitalists operating in these countries have constantly increased their share of the market by stimulating exports thanks both to a cheap (exploited) and abundant labour force, the systematic intervention of the State, widespread public subsidies, a disregard for democratic institutions, political corruption that reached the highest echelons of the State and the liquidation of all trade union resistance" (4).

Heavily indebted, most Asian tigers and baby tigers had linked their currency to the US dollar in order to attract investors. Hit by rising inflation, parity between local currencies and the green bills became nearly meaningless and the steady rise of the dollar penalised the exports of most countries. Suddenly, the negative elements that had so far fed economic growth - heavy debt, speculation, structural imbalance and social distortion - all made themselves felt and provoked the most serious crisis the region has known.

The social impact of the crisis was soon apparent. On September 25, the Thailand confederation of industry and commerce, the employers' federation, announced that at least 120,000 workers would lose their jobs by the end of the year, and that job cuts would continue into 1998. The car industry plans to cut 30,000 jobs next year. APRO estimates that the crisis could cost the jobs of more than one million Thais out of a total working-age population (excluding agriculture) of 25 million workers.

For those who can keep their jobs, the future is scarcely any brighter, explains Duncan Campbell, one of the International Labour Organisation (ILO) representatives in Bangkok. "Wages have been lowered and the devaluation of the baht has resulted in a considerable loss in purchasing power".

In Indonesia, times have also changed. Following the wave of forest fires which have covered the country in dense smoke since October, and which speak volumes about the importance attached to environmental conservation, the economic and social sky is also covered by heavy grey clouds. Like the baht, the Indonesian rupiah has also reached its lowest level and many heavily indebted enterprises are now insolvent. At the beginning of November, the Indonesian entrepreneurs' association confirmed that half the 4.3 million day labourers in the construction industry had lost their jobs and that another 500,000 would no doubt go the same way. The head of one of the country's biggest enterprises indicated that the industry may get rid of ten per cent of its workforce, leaving hundreds of thousands out of work. Even with the help of the International Monetary Fund, called to the rescue, most economists predict that there will be no recovery before the end of 1998.

The decision of the Gulf States to send illegal migrant workers home will only add to the problem. Since October 15 nearly 30,000 Indonesians have been repatriated from Saudi Arabia. Many more are expected to follow, with an estimated 700 "recruitment" agencies operating in Djakarta, sending tens of thousands of illegal migrants to the Gulf. It is the money sent home by its migrant workers that has enabled the Philippines, and its currency, the peso, to keep its head above water following the monetary storm. Last year the 650,000 Filipinos working outside their country repatriated a cool 7.5 billion dollars. But the increase in money transfers in November will fall again next year say experts, creating an even greater deficit in the trade balance.

According to the TUCP, the national trade union centre, the economic outlook for 1998 is far from encouraging and unemployment, which affects more than 8 per cent of the working-age population of nearly 30 million people, could rise further following the economic slowdown, recorded for the first time in 1997 after three consecutive years of strong growth. The repeated denunciations of Malaysian Prime Minister Mahatir Mohamad, accusing foreign speculators of causing the stock market crash, have not helped stop the steady fall in the value of the ringgit, Malaysia's currency. The resulting loss of purchasing power for the country's workers is worrying the national trade union centre, the MTUC. It recently denounced the low wage policy applied by Kuala Lumpur.

Millions of Malaysians earn less than 450 ringgits per month and the exploitation of more than 2.5 million migrant workers has accentuated the downward pressure on wages. Malaysia is by no means out of the doldrums yet, and a prolonged recession may have catastrophic consequences. Between 1997 and next year it has to build as many commercial premises in the country as it has over the last fifty years. Building loans currently represent one quarter of the country's GNP? South Korea (see Trade Union World No.3/97) has not been spared the turbulence of the stock market and even Hong Kong is set to see a slowdown in its economy next month.

The big strikes in Korea at the beginning of 1997 showed that the labour world will not remain indifferent to the policies its government is following to overcome the crisis. Meeting in Manila at the beginning of November for a session of the UN's Economic and Social Committee for Asia and the Pacific (ESCAP), representatives of the region's government pointed to the harmful social impact of the "economic volatility" of the principal countries affected by the monetary crisis which could, they warned, "extend to other countries" in the region. Adrianus Mooy, the executive secretary of ESCAP, urged governments not to undermine social development in any corrective measures they choose to take to find a way out of their difficulties.

1998 will be a test of many of these countries' approach to social dialogue. That test will be all the more significant, stresses APRO, given that most of the countries concerned are in the process of reforming their labour codes, further reducing the margin of manoeuvre for the already hard-pressed trade unions: a ban on independent trade unions in Indonesia, closely supervised freedom in Korea, Thailand and Malaysia and restrictions in the Philippines.

"Some of the governments?will find themselves caught between the reformers' demands for cost cutting, higher taxes and other austerity measures on the one hand, and the demands of the workers and the very poor on the other" explained Michael Richardson in the Herald Tribune (5). In such a situation, a social explosion cannot be discounted. Unless, as Duncan Campbell, an ILO expert, hopes, the crisis has a salutary effect. He notes "a growing recognition of the need to develop healthy industrial relations in the region".

The trade unions, at any rate, are prepared to play their role. APRO has announced a special forum of trade union leaders from East and South East Asia on "The Labour Agenda - Tackling and Beyond the Economic Turmoil", to be held in February. By then we may have a better idea of the direction of government policy.

Sources:

(1) "Horizons", Le Monde, February 27, 1996
(2) "Everyone's miracle? Revisiting Poverty and Inequality in East Asia", World Bank, August 1997
(3) Free Labour World, June 26, 1996
(4)"Typhon financier sur les tigres d'Asie" article by Frëdëric F. Clairmont in Le Monde diplomatique, October 1997.
(5) "Financial Crisis Leaves Asian Leaders Shaky", Herald Tribune, November 6, 1997.

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