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Thursday, April 2, 2009

G-20 Needs to ‘Put the Fire Out,’ Asean Envoy Says

LONDON - APRIL 1:  Queen Elizabeth II poses wi...Image by Getty Images via Daylife


April 1 (Bloomberg) -- Thai Prime Minister Abhisit Vejjajiva said it would be a “great disappointment” if Group of 20 leaders fail to coordinate a global stimulus and head off social unrest in developing nations.

“It’s imperative that we try to move the global economy out of the current recession and make sure that the poorest are not hard hit,” Abhisit said in an interview with Bloomberg Television in London, where he was attending the G-20 Summit as chairman of the 10-member Association of Southeast Asian Nations. “Unless there is a rapid recovery we’ll see many more job losses and also possible social tensions.”

Southeast Asian countries are pushing for bigger rescue packages as demand for their computer chips, commodities and cars plunges amid the worst downturn since World War II. Exports by developing Asian economies may shrink 10.3 percent this year, after growing 14.7 percent in 2008, according to an Asian Development Bank report.

Abhisit took power in December after supporters shut down the country’s airports for eight days and a court dissolved the former ruling party for vote buying. Since then separate demonstrators have called on him to quit, and they have surrounded his Bangkok office complex for the past week.

G-20 heads of state have said the summit is unlikely to yield more spending plans and that they will focus on greater oversight of hedge funds, private-equity firms and derivatives markets. The recession is hitting developing Asia in “an increasingly severe manner,” the ADB report said, with 2 million job losses forecast this year in Thailand alone.

‘Still Burning’

“The fire is still burning and there are still a lot of people, very vulnerable people, still trapped inside,” said Abhisit, who oversees the country of 66 million people. “Surely the priority must be to put the fire out and make sure we protect people.”

The MSCI Asia Pacific excluding Japan Index has dropped 46 percent in the past year, while nine of 10 Asian currencies tracked by Bloomberg have dropped against the dollar in 2009.

Indonesia’s economy, Southeast Asia’s largest, expanded the least in two years in the fourth quarter, and Thailand is facing its first recession in a decade. Singapore is in its deepest downturn ever, while Malaysia’s economy grew at the slowest pace in seven years in the final three months of 2008.

“In a lot of emerging and developing economies we do not have a strong social safety net in place, so job losses there are much more devastating than job losses in industrial countries,” Abhisit said.

Stimulus Programs

Global economies need to introduce stimulus programs to create at least 90 million jobs by the end of next year to forestall a jobs crisis, the United Nation’s labor organization said March 25. Announced stimulus packages as a percentage of GDP for advanced economies averaged 1.3 percent, less than half that allocated by developing and emerging economies.

President Barack Obama has urged the G-20 to find a unified approach to the recession. In the run-up to the meeting, Germany, France and Australia have resisted the U.K.’s call for G-20 nations to increase spending.

Asian members of the G-20 include China, Japan, India, Indonesia and South Korea. The 19 developed and emerging economies plus the European Union represent 85 percent of the world economy.


Asian governments, which hold about two-thirds of the world’s foreign-exchange reserves, have taken steps to shield their currencies from speculative attacks. Japan, China, South Korea and 10 Southeast Asian countries agreed in February to pool $120 billion to shore up regional stability.

The IMF said last month it would make loans easier to get for developing nations that have low inflation, moderate levels of foreign debt and sound public finances. Mexico said yesterday it would activate a credit line of at least $30 billion from the international lender.

Asian countries “welcomed” the new facility though the stigma attached to borrowing from the IMF might deter countries from using it, Abhisit said. The IMF forced them to adopt harsh economic policies in return for bailouts during the financial crisis a decade ago.

“What we would like to see is the possibility of tapping into countries with surplus reserves that somehow can find their way into helping developing economies,” he said. “The IMF could maybe act as coordinator, as a provider of guarantees.”

Thailand and the rest of Asean, where exports amount to 70 percent of gross domestic product, rely on developed countries to grow their economies. Many won’t start growing again until the world buys more of their goods, Abhisit said.

“It’s not often that you get so many leaders in the world to gather around,” he said. “The failure to respond, the failure to rise up to the challenge, will be very costly.”

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