Economic growth does not necessarily guarantee social equity and development. The Asia Pacific region has doubled its share of growth in the last 15 years, but many of the economies in the region are experiencing higher rates of unemployment with fewer jobs being created.
This worrisome trend of 'jobless growth' is the focus of the United Nations Development Programme (UNDP) report, entitled 'Asia Pacific Human Development Report 2006 - Trade on Human Terms', released on June 29, 2006.
For the region as a whole, both imports and exports are growing faster than in other parts of the world, thus telling the region's success story after opening up to global trade. But on the other side of the coin, most trade-intensive countries, like China and Singapore, have witnessed a substantial increase in unemployment rates.
Young women and men in the age group of 15-24 suffered on account of this rising unemployment. In 2004, youth made up one-fifth of the region's labor force but constituted half of the region's jobless population. Compared to the 1980s, when the economies of the region created 337 million jobs on the whole, in the 1990s - the period coinciding with trade expansion - they managed to create barely 176 million jobs.
On the eve of the report's release, UN Assistant Secretary-General Hafiz A Pasha said: "Asia-Pacific clearly has reasons to be proud of its significant overall trade gains in relation to the rest of the world; yet, even while the jobs are being created, they are not containing joblessness."
The phenomenon of jobless growth is illustrated by the fact that the manufacturing growth in East Asia increased almost by 180 per cent in 1990s, whereas the associated employment increased only by 3 per cent. The situation in the agriculture sector has been even worse, as people in rural areas went on to cash in on opportunities in other sectors of the economy.
In India, the employment burden has been increasingly taken up by the large informal sector - the residual employer - which has created work for those pushed out of the agricultural and rural sectors. The textiles and clothing sector is a major employer in this area. India's textiles and clothing industry has grown considerably, accounting for 14 per cent of total industrial production and nearly 30 per cent of total exports. Between 2004 and 2005, the country's exports to the US and EU grew by 22 per cent in value and over 11 per cent in volume, with the value of exports increasing by almost US$ 2 billion.
The report, however, talks about the sweatshop conditions in Delhi's garment industry, where workers are bound by informal contracts, have to work long hours with limited break and use outdated machinery. Costs are kept low by keeping wages low and circumventing the obligations required of employers in the formal sector, it adds. Further, there are worries that, though no job losses have been reported yet, many female workers are will lose their livelihood when the textile industry replaces handlooms with machine looms.
But with the new global trading environment, countries are under pressure to improve working conditions. Consumers in the importing countries are asking retailers to prove that goods are not produced in sweatshops. This could improve standards for many workers, but also drive some developing-country suppliers out of business, the report cautions.
Global outsourcing of services is another significant area where countries in the Asia Pacific region can widen their employment opportunities. India is a leading outsourcing destination country in the region, accounting for over 40 per cent of the global BPO market. From 2000 to 2004, the country saw an estimated 260,000 jobs created within the sector. The industry has also seen competing, low-cost destinations emerge in the Philippines, China, Malaysia, Thailand and Vietnam.
However, to take advantage of the opportunities from outsourcing, countries must remove existing impediments to growth. Observing that Asia's long-term success as an offshore destination will depend on how best countries can leverage their intellectual capital, the report cites the case of India, where an estimated 40 per cent of children drop out of school by the age of 10. "Clearly, countries must expand the reach of elementary education and academic institutions must focus on modernizing curriculum and aligning higher education with the needs of the industry," it emphasizes.
Another factor driving joblessness is the sharp shift to technology-oriented exports. At the same time, the labor force has been growing rapidly by 15.4 per cent in East Asia and the Pacific Island countries, and 24 per cent in South Asia. This hardly leaves room for the low skilled workforce to reap the benefits from free trade, says the report.
Developing countries have opened up their agricultural trade far more than the developed countries have. Lured by cheap imports, the Asia Pacific region has turned from being food exporters to being major food importers under the free trade regime. The world's least-developed countries, including Bhutan, Maldives, Nepal and Afghanistan, more than doubled their exports (as compared to the 1990s) and the trend is widening markedly.
Says Pasha, "A farmer from the Asia Pacific can compete with other farmers, but not with the rich-country agricultural subsidies. This has serious implications in terms of food security for half a billion poor people living in this region. South Asia has one of the highest number of undernourished people in the world - 22 per cent. In India, the cost of iron deficiency alone is estimated to total more than US$ 30 billion.
The report urges that expanded trade be accompanied by a set of complimentary policy strategies for mitigating jobless growth and investing in labor. "Asia and the Pacific have embraced globalization, but globalization cannot embrace the region's poor without determined action on the part of governments," underlines Pasha.
The report concludes with a bold new eight-point policy agenda that will make a difference in the lives of poor. These include:
* Investment for enhancing competitiveness, including in technical and tertiary education, and in research and development, especially for agriculture.
* Adoption of strategic trade and industrial policies by not opening up too early, and introduction of properly sequenced barriers within a timeframe.
* A refocus on agriculture, emphasizing investment in rural development and ensuring that global trade negotiations agree on special safeguard mechanisms.