Accessibility links

Asia: World Bank Focuses On Maintaining Living Standards

  • Robert Lyle

Washington, 28 January 1998 (RFE/RL) -- The World Bank says that East Asia's economic crisis risks undermining one of the most remarkable economic and social achievements in modern history unless the region embraces fundamental social and financial reforms.

The comment came from the bank as its president, James Wolfensohn, embarks on a whirlwind visit to six countries experiencing various levels of financial crisis.

World Bank officials say Wolfensohn will meet with senior government officials as well as representatives from business, labor unions and civil society on the tour, designed to assess the effectiveness of bank efforts so far to help stem the crisis.

Wolfensohn will be in Thailand Friday, going on to Singapore, Malaysia, Indonesia, the Philippines and South Korea over the following eight days.

Bank Vice President for the East Asia and Pacific Region, Jean-Michel Severino, says the bank's programs are designed to help build the foundation for protecting living standards until growth resumes, strengthening social protection for the poor and other vulnerable groups during the crisis, and improving the quality and transparency of government institutions in dealing with the domestic economy in each country. He said that will include a key focus on problems of corruption.

The bank's Vice President for Poverty Reduction and Economic Management, Masood Ahmed, says that while most international efforts are focusing on restoring financial stability and rebuilding confidence among both foreign and domestic investors, the bank is focusing on protecting living standards of the people of Asia, especially the poor.

He told a press conference in Washington Tuesday that although poverty in the region as a whole has declined, millions of people are living at barely above the poverty line of one dollar a day. Rapidly rising unemployment could quickly push many of them below the poverty line.

He says that most of these countries have "virtually no" unemployment insurance, social safety nets or old-age pension schemes. Those must be designed and put in place quickly. Korea, for example, he says, has relied on rapid growth and lifetime employment to provide social security for its citizens, while Thailand and Indonesia have relied upon rural family ties.

Korean political leaders say it came as a shock to most Koreans that their economy had so many serious underlying problems. Meeting with reporters in Washington Tuesday, Korean National Assembly member Lee Tae-Sup said that once the shock wore off, however, Koreans decided to totally revamp the country's economy and society.

"Life-time employment cannot be guaranteed any longer," he said, noting that while employers have agreed to use lay-off only as a last measure, workers and their unions have agreed to restraint in their demands and willingness to be retrained for new jobs.

Lee said Korea sees the current crisis as a "blessing in disguise" because it is turning out to be a "golden opportunity" to get not only a new political leadership in the country but to completely restructure the economy to make it more "efficient and flexible."

The Chairman of the Foreign affairs and National Unification Committee, National Assemblyman Park Chung-Soo agreed, saying most people "didn't realize" the economy was so fragile. Park said even the opposition did not understand just how bad the situation was, but that now the country is rallying around the new President-elect and accepting that there must be a complete reform.

Indonesia, an East Asian nation with far more serious financial difficulties, launched more of its promised reforms Tuesday. The head of the International Monetary Fund (IMF), Michael, said major changes, including ending special privileges for companies controlled by Indonesian President Suharto's children, abolishing domestic trade restrictions and a new, revised national budget are being achieved ahead of plan.

Camdessus particularly welcomed the Indonesian government's agreement to guarantee the obligations of depositors and creditors for Indonesian banks until a new Bank Restructuring Agency can take over the broad powers of restructuring all financially weak banks.

Camdessus also expressed support for a private initiative to renegotiate an estimated $65 billion of private business debt in Indonesia with major foreign banks. Indonesian Presidential advisor Radius Prawiro, said there are negotiations underway to set up a repayment schedule for 228 cash-strapped companies. The rapid decline of the country's currency against other currencies left many of these companies unable to meet their foreign debt obligations.

U.S. Treasury Secretary Robert Rubin threw American support behind the private debt rescheduling project, saying the international community has a "strong interest" in seeing Indonesia succeed in restoring financial stability."