P. S. Suryanarayana
Several countries hope to ride out the current crisis by banking on the growth trajectories of China and India despite their new concerns over the emerging scene.
East Asian states, which planned to prevent a future shock in their own backyards when the current financial crisis first hit other regions several weeks ago, are coming to terms with reality. It is now recognised across East Asia, home to a number of one-time economic tigers, that the gathering ‘global crisis’ may no longer be warded off in this region.
Japan, still the world’s second largest economy, has now formally declared recession. And, Singapore, the main financial centre in the Southeast Asian sub-region, is also not fighting shy of acknowledging a similar economic slowdown in the city-state. In some contrast, Malaysia, another key economy, has so far managed to stay above the recession mark by shaping a stimulus package. More importantly, the big East Asian picture is dominated by political-level expectations that China’s huge economic stimulus may work wonders. These expectations have not so far been neutralised by China’s new assessments that the worsening global conditions had now begun to “weigh on [its own] job market.”
On balance, though, the actual and potential fallout along the Asiatic rim of the Pacific Ocean is still far from clear. Lacking still are definitive data from the different national authorities and varied interest groups.
Anecdotal evidence in this situation is indicative of job losses in not just the financial sector, more especially banks. Here, too, no discernible pattern across this vast region is being talked about at the moment. As informally identified by interlocutors, some key sectors, where recession has already set in or is taking hold in the region as a whole are shipping and aviation. Tourism, construction industry, and information technology are also being mentioned among those already affected in different measure in different states.
Although the practice of employing foreign workers is prevalent in many countries globally, Southeast Asian states like Malaysia and Singapore are in the top bracket in this category. Indian professionals are present across the high-end spectrum in this region, while skilled and unskilled workers from South Asia, including India, are very conspicuous, too.
Instances of a sudden increase in the home-bound remittances by Indian workers have come to light, especially in Singapore, indicative of a possible winding-down of their work. Nonetheless, the available anecdotal evidence in this regard is insufficient to draw any definitive conclusion one way or another about actual or potential job losses in the unskilled sector.
Of greater certainty, as of now, is that East Asia is free of gory stories such as acute-distress deaths among native and foreign workers and professionals. The impact of job cuts by multinational companies, especially banks, is of course being felt among foreign professionals, including Indians, in East Asia, too.
Yet, braving the predictions of a ‘global economic crisis’ beyond the financial domain, India and Malaysia are engaged in what can be seen as exemplary South-South cooperation. An India-Malaysia Capital Markets Forum, a thematic anti-thesis to the current fears of a global financial meltdown, was launched on November 20. And, the coincidental awarding of a Mumbai monorail contract to a consortium of corporate players from India and Malaysia could not have been better timed to buck the doomsday prophecies. Malaysia sees India as a major partner for economic engagement, and New Delhi is reciprocating such sentiments and deep interest, says Indian High Commissioner Ashok Kantha.
On a different plane, the Association of South East Asian Nations (ASEAN), which includes Malaysia, can tap the resources of key dialogue partners – China, Japan, and South Korea. Besides Malaysia, the 10-member ASEAN has in its fold key sub-regional economies like Indonesia, Singapore, Thailand, and Vietnam. In 2000, these eight countries helped evolve the Chiang Mai Initiative for inter-state cooperation of the kind relevant at this stage to prevent or bust economic crises in East Asia.
International envoys, including India’s S. Jaishankar, call for a close look at the nuances of economic diplomacy by Japan, China, and India in the context of the recent Group-20 Summit. While larger strategic considerations will obviously determine state-sponsored diplomacy in the evolving global situation, non-official experts are, as can be expected, divided in their opinions.
A dominant view, outside the ambience of official diplomacy, is that China, despite its stunning growth in recent years, wants to be counted only as a developing economy in the G-20 equations. After Barack Obama’s election, a Chinese official said China, the largest developing country, and the United States, the largest developed economy, must engage each other more meaningfully.
So, several Southeast Asian countries hope to ride out the current crisis by banking on the growth trajectories of China and also India, despite their new concerns over the emerging scene. Much will depend on how far China, now under growing economic pressure from the U.S., can fulfil such hopes by accommodating the relatively less developed countries.
Unsurprisingly in these circumstances, Japan has pledged $100 billion towards the International Monetary Fund. Beyond Japan’s intentions of signalling its solidarity with the developing bloc, it is obvious that the game-plan is also to show that China, with huge foreign exchange reserves, hasn’t done so. Of course, Japan has often been accused of resorting to cheque-book diplomacy to earn points as a responsible stake-holder in the international system. However, a top Japanese official has told this correspondent that it is better to be “damned” for cheque-book diplomacy rather than for not resorting to it! And, Tokyo can now argue that such diplomacy to meet a global financial crisis is not at all out of place and may indeed be a ‘creative’ way.