The Asian Financial Crisis
The total deregulation of the banking and financial
markets aided by the revolution in communications technology has
facilitated instantaneous money transfers worldwide. This has enabled
currency speculators to move immense resources electronically at a blink
across countries. In this cybertech globalised economy, money has become
a product in itself that money buys and sells. It has been estimated
that for every $1 circulating in the productive economy, $20 to $50
circulates in the pure world of finance. Since these transactions take
place through unmonitored computer networks, no one knows how much is
really involved (Korten 1996b: 28). This financial system is beyond the
control of governments, which cannot ensure the stability of markets or
currency values in the face of the tremendous acceleration of
speculation (Barnet and Cavanagh 1996: 361). The result is that the
world financial system has become extremely vulnerable to technological
breakdown, short term speculation and freelance decision making (Ibid:
361).
In fact, global financial gamblers have been
responsible for many of the financial crises that have caused
devastating effects worldwide; large institutional players such as
speculative hedge funds, the investment banks and the mutual and pension
funds have led to short term capital flows across national borders in
search of quick and high returns amounting to US$2 trillion changing
hands everyday. In 1997, Thailand was forced to devalue its currency
after it came under sustained speculative attack; this spread to the
rest of Southeast Asia and South Korea. The huge inflows turned to
sudden massive outflows as speculators acted like a herd, rushed out in
panic. Roughly $22 billion and $30 billion flowed out of Asia in 1997
and 1998 respectively (Lester et al 2000: 194). Banks failed and
stock markets collapsed; the economies of the region went into a
tailspin. The cost of the crisis to the region in 1998 alone was said to
be some $260 billion or one percent of global output, equivalent to the
annual income of SS Africa (UNCTAD 1998).
The social fallout was severe and are likely to
persist long after economic recovery. The immediate effects were
political chaos mass unemployment, food shortages, spiraling food
prices, riots and millions became impoverished overnight. Many local
businesses went bankrupt due to high interest rates, currency
devaluation and credit squeeze. A total of 435 Malaysian firms were
declared bankrupt in the nine months from July 1997 to March 1998.
Livelihoods were lost for employers and employees, as they did not
receive rescue packages unlike the large conglomerates.
Poverty increased markedly in Indonesia where 20
percent or 40 million were affected. In Korea and Thailand poverty is
expected to rise to 12 percent: 5.5 million and 6.7 million,
respectively. Unemployment rose in all the affected countries. More than
13 million people lost their jobs. Real wages in Korea fell by nearly 10
percent in the 12 months following April 1997. Social budgets were under
tremendous strain.
In Philippines health expenditures declined by 10
percent with 6 percent reductions in family health and nutrition and 10
percent in communicable disease control; while in Malaysia the cut was
initially 18-12 percent but a stimulus package was later introduced (UNDP
1999:42).
The increased social social stress and fragmentation
was evident: rising domestic violence, street crime and suicides were
reported in all countries. The worst affected countries were Indonesia,
Thailand and Korea. (Ibid).
In Indonesia, the collapse of the rupiah and the
spiraling inflation estimated at over 80 percent in 1998, have sapped
purchasing power and eroded savings; unemployment was forecasted at 15
million in 1998 or 17 percent of the work force; wages fell by some
40-60 percent and poverty would increased by 50 percent by the end of
1998 (UNCTAD 1998: 73; UNDP 1999:40). The financial
turmoil was followed by social upheavals that affected all sectors of
society: the military dictatorship collapsed; ethnic tensions emerged;
the Chinese were targeted, shops were looted and burnt, pogroms were
conducted and Chinese women were raped. In the aftermath, many left to
set up homes in Malaysia and Singapore. Ethnic and religious tensions
have continued unabated in the outer islands of the Republic and
thousands have died as a result.
In Korea workers took to the streets in droves;
unemployment seriously deteriorated and was estimated at 10 percent by
the end of 1998. The crisis hit women, the young and unskilled workers
hardest. Unemployment declined by 7.1% among women between April 1997
and April 1998, compared with 3.8 percent for men. Migrant workers were
also hardest hit, many were sent back. School enrollments declined but
drop outs registered increases of 36 percent in 1998. Women suffered
increased domestic violence - seven times more in 1999 as compared to
1998. Suicides increased from 620 a month in 1996 to more than 900 a
month in mid 1998 (UNDP 1999:40).
In Thailand unemployment almost doubled to 8.8
percent between 1997 and Feb 1998. Since the onset of the crisis three
years ago, some 1.8 million workers with primary and less than primary
education lost their jobs and aggregate wage earnings of this group fell
by 13 to 20 percent (The Nation, 22 July 2000). Poverty increased
by one third by the end of 1998 as a result of job losses in augmenting
rural and urban under-employment and in reducing urban worker
remittances to rural families. With the drop in household incomes
parents could not afford to send their children to school; as a result
elementary school dropouts almost tripled from 1997 to 1998 (UNCTAD
1998: 74). In one study nearly 100,000 students are not in either
primary or secondary education (UNDP 1999:40); the public health
budget was reduced by 10 percent while the community and social services
took a cut of 7.6 percent. Most Thais from the construction industry
(which was hardest hit with 1.1 million laid off), returned to the rural
areas to eke out a living. Since the 1997 crisis income disparity in
Thailand has widened. The poorest saw their annual household income
reduced to 3.8 percent from 4.2 percent in 1997 while the richest group
were two percent richer at 58.5 percent in the same period. After the
crisis, 3.1 million ‘new poor’ were added to the 11.4 percent of the
population considered poor (Yuwadee T., 1 Aug. 2000).
The IMF medicine meted out to these economies which
included high interest rates, tight monetary policies, cutback in
government spending and the closure of banks, worsened the crisis
further.
The economic crisis has made child sex tourism worse.
The number of foreigners coming to Asia for child sex is rising sharply,
says the organisation End Child Prostitution in Asian Tourism (ECPAT) at
a UN sponsored regional conference on child sex tourism held in Manila
recently. As a result of the economic crisis, prices for children have
gone down, more children are living on the margins of society and more
foreign paedophiles are streaming into the region (The Sun Aug
27, 2000).
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