Bailout packages in Asian countries
Syed Jamaluddin | Tuesday, 3 March 2009
The global financial meltdown slowed the growth of exports, investment, remittances and consumption everywhere. Governments across Asia are trying to tackle their impact of recession. Export-driven economies are now most vulnerable to the crisis and government are rushing to inject stimulus packages into the economies. Each country combats the recession in its own way.
In January, Japan's parliament passed a 4.0 trillion yen ($586 billion) stimulus plan and is considering additional measures to shore up the economy until 2010. Japan's economy shrank by 12.7 per cent in the fourth quarter, steepest drop in 35 years amid an unprecedented collapse in exports and production in the world's second biggest economy.
The Chinese government has announced a 4.0 trillion yuan ($586 billion) fiscal stimulus package to spur domestic demand and boost the slowing economy until 2010. All provincial and municipal governments have also come up with their own stimulus packages amounting to no less than 20 trillion yuan.
China's economic growth has been slowing for five consecutive quarters. It dipped to 9.0 per cent in the third quarter of 2008, the first growth rate below double digits in five years. China reported an unexpectedly sharp 17.5 per cent drop in January exports, the steepest decline since the country began its journey in higher growth path in 1993.
Due to weak demand for exports, several companies have closed shops in China, rendering millions of workers jobless. China's GDP growth weakened to 9.0 per cent in 2008 from 13 per cent in 2007.
India has lowered its economic growth for the first time in seven years. Industrial production declined. The rupee fell perilously close to 50 to a dollar last November. Some 65,000 jobs were lost between August and October. Two key sectors, agriculture and industry, were affected by the global economic slowdown. India has unveiled a 300 billion rupee package to bail out the corporate sector.
Singapore's government has unveiled a multi-billion-dollar plan to boost spending and cut taxes in a bid to ease the worst in the city-state's history. It lowered corporate taxes, subsidised wages, guaranteed bank loans and spent more on infrastructure as part of the $13.6 billion stimulus package. Singapore has slashed its 2009 growth forecast, saying the economy could shrink as much as five per cent as the global demand for export collapses.
South Korea's economy is slipping into recession with a sharp fall in exports and domestic consumption. Exports in January plunged by a record 32.8 per cent. The government, aiming for a 3.0 per cent growth in 2009, has allocated $102 billion in liquidity injections, tax cuts and stimulus packages.
Experts are less optimistic about the prospects of Taiwan's economy, predicting near zero growth rate for 2009. To boost domestic retail spending, the Taiwanese government has issued $2.5 billion worth of shopping vouchers to encourage consumers to spend. The govt has also announced a stimulus package aimed at creating 150,000 new jobs for 2009 to combat rising unemployment.
Thailand is suffering from a collapse in demand from the United States and Europe, the top buyers of Asian goods as they slip deeper into recession. Thailand's exports fell 15.7 per cent in December. Bank of Thailand has revised the economic growth targetto 0.2 percent for this year. The government's first package has earmarked $3.3 billion for social welfare and infrastructure. The second package is aimed at bolstering the property sector, small and medium enterprises, venture capital and debt restructuring.
The Malaysian government has released a $1.9 billion stimulus package to stimulate the faltering economy. They are likely to revise the growth target downward. Job losses are quite substantial.
The Philippine economy grew by 4.6 per cent in 2008 from a high of 7.2 per cent in the previous year. Exports plunged 40.4 per cent in December. The government has set up a one-billion-peso livelihood fund for overseas workers who would lose their jobs. The fund could be used to provide loans for returning workers.
Indonesia has set aside $6.31 billion stimulus fund to boost the economy. Taxes and import duties have been waived. The country is being pummelled by the global economic meltdown, December exports plunging 20 per cent from a year earlier as overseas demand shrinks.
In Vietnam, foreign investment is expected to slowdown while exports and remittances are expected to fall. The govt has already introduced measures to protect the poor and the vulnerable against unemployment and its consequences. The govt is formulating a stimulus package for the financial sector.
Economists predict Laos will experience lower economic growth. The global economic slowdown has mainly affected tourism, exports and foreign investment. The government is keeping a close watch on business operations and would assist companies that might need to lay off workers.
We have discussed above the bail-out scenario in some of the Asian countries in the context of global economic meltdown. We shall now discuss the situation in Bangladesh. Bangladesh's economy until now has been spared the worst consequences of the on-going crisis. Shipment of exports during October-December, 2008 plummeted by 1.4 per cent over the same period in 2007. It is to be kept in view that many of the developed country partners of Bangladesh which account for most of our exports are now officially in recession.
Bangladeshi exporters have been able to sustain their market share by offering discounts, order deferment and by taking significant cuts in profit. Currency depreciation of our competitors such as India, Sri Lanka and Pakistan has undermined our competitive strength. Stimulus packages of China and India will also affect Bangladesh in a negative manner. Over the last two years, a record number of workers had left the country in search of jobs abroad but it will be significantly lower in the current year. Bangladeshi migrant workers have started returning home as the global crisis is drying up businesses in host countries. They are mainly coming back from Middle Eastern countries. Migrant workers from other countries are also on the list of returnees.
Bangladesh's relative insulation from global capital market and heavy dependence on lower-end exports have provided some cushion to the economy. Policy makers could consider the idea of creating an export stimulus fund to support entrepreneurs and export business. Such a fund could be used to provide credit at a lower rate of interest, encourage adoption of new technology, product diversification and higher export incentives. President-elect of Bangladesh Garment Manufacturers and Exporters Association(BGMEA) has asked for a Tk 20 billion fund in the next budget to provide financial assistance to those factories hit by the recession. We must undertake appropriate initiatives and measures to address the attendant challenges and take advantage of the emerging opportunities.
(The writer is an economist and columnist)
In January, Japan's parliament passed a 4.0 trillion yen ($586 billion) stimulus plan and is considering additional measures to shore up the economy until 2010. Japan's economy shrank by 12.7 per cent in the fourth quarter, steepest drop in 35 years amid an unprecedented collapse in exports and production in the world's second biggest economy.
The Chinese government has announced a 4.0 trillion yuan ($586 billion) fiscal stimulus package to spur domestic demand and boost the slowing economy until 2010. All provincial and municipal governments have also come up with their own stimulus packages amounting to no less than 20 trillion yuan.
China's economic growth has been slowing for five consecutive quarters. It dipped to 9.0 per cent in the third quarter of 2008, the first growth rate below double digits in five years. China reported an unexpectedly sharp 17.5 per cent drop in January exports, the steepest decline since the country began its journey in higher growth path in 1993.
Due to weak demand for exports, several companies have closed shops in China, rendering millions of workers jobless. China's GDP growth weakened to 9.0 per cent in 2008 from 13 per cent in 2007.
India has lowered its economic growth for the first time in seven years. Industrial production declined. The rupee fell perilously close to 50 to a dollar last November. Some 65,000 jobs were lost between August and October. Two key sectors, agriculture and industry, were affected by the global economic slowdown. India has unveiled a 300 billion rupee package to bail out the corporate sector.
Singapore's government has unveiled a multi-billion-dollar plan to boost spending and cut taxes in a bid to ease the worst in the city-state's history. It lowered corporate taxes, subsidised wages, guaranteed bank loans and spent more on infrastructure as part of the $13.6 billion stimulus package. Singapore has slashed its 2009 growth forecast, saying the economy could shrink as much as five per cent as the global demand for export collapses.
South Korea's economy is slipping into recession with a sharp fall in exports and domestic consumption. Exports in January plunged by a record 32.8 per cent. The government, aiming for a 3.0 per cent growth in 2009, has allocated $102 billion in liquidity injections, tax cuts and stimulus packages.
Experts are less optimistic about the prospects of Taiwan's economy, predicting near zero growth rate for 2009. To boost domestic retail spending, the Taiwanese government has issued $2.5 billion worth of shopping vouchers to encourage consumers to spend. The govt has also announced a stimulus package aimed at creating 150,000 new jobs for 2009 to combat rising unemployment.
Thailand is suffering from a collapse in demand from the United States and Europe, the top buyers of Asian goods as they slip deeper into recession. Thailand's exports fell 15.7 per cent in December. Bank of Thailand has revised the economic growth targetto 0.2 percent for this year. The government's first package has earmarked $3.3 billion for social welfare and infrastructure. The second package is aimed at bolstering the property sector, small and medium enterprises, venture capital and debt restructuring.
The Malaysian government has released a $1.9 billion stimulus package to stimulate the faltering economy. They are likely to revise the growth target downward. Job losses are quite substantial.
The Philippine economy grew by 4.6 per cent in 2008 from a high of 7.2 per cent in the previous year. Exports plunged 40.4 per cent in December. The government has set up a one-billion-peso livelihood fund for overseas workers who would lose their jobs. The fund could be used to provide loans for returning workers.
Indonesia has set aside $6.31 billion stimulus fund to boost the economy. Taxes and import duties have been waived. The country is being pummelled by the global economic meltdown, December exports plunging 20 per cent from a year earlier as overseas demand shrinks.
In Vietnam, foreign investment is expected to slowdown while exports and remittances are expected to fall. The govt has already introduced measures to protect the poor and the vulnerable against unemployment and its consequences. The govt is formulating a stimulus package for the financial sector.
Economists predict Laos will experience lower economic growth. The global economic slowdown has mainly affected tourism, exports and foreign investment. The government is keeping a close watch on business operations and would assist companies that might need to lay off workers.
We have discussed above the bail-out scenario in some of the Asian countries in the context of global economic meltdown. We shall now discuss the situation in Bangladesh. Bangladesh's economy until now has been spared the worst consequences of the on-going crisis. Shipment of exports during October-December, 2008 plummeted by 1.4 per cent over the same period in 2007. It is to be kept in view that many of the developed country partners of Bangladesh which account for most of our exports are now officially in recession.
Bangladeshi exporters have been able to sustain their market share by offering discounts, order deferment and by taking significant cuts in profit. Currency depreciation of our competitors such as India, Sri Lanka and Pakistan has undermined our competitive strength. Stimulus packages of China and India will also affect Bangladesh in a negative manner. Over the last two years, a record number of workers had left the country in search of jobs abroad but it will be significantly lower in the current year. Bangladeshi migrant workers have started returning home as the global crisis is drying up businesses in host countries. They are mainly coming back from Middle Eastern countries. Migrant workers from other countries are also on the list of returnees.
Bangladesh's relative insulation from global capital market and heavy dependence on lower-end exports have provided some cushion to the economy. Policy makers could consider the idea of creating an export stimulus fund to support entrepreneurs and export business. Such a fund could be used to provide credit at a lower rate of interest, encourage adoption of new technology, product diversification and higher export incentives. President-elect of Bangladesh Garment Manufacturers and Exporters Association(BGMEA) has asked for a Tk 20 billion fund in the next budget to provide financial assistance to those factories hit by the recession. We must undertake appropriate initiatives and measures to address the attendant challenges and take advantage of the emerging opportunities.
(The writer is an economist and columnist)