Asia's crisis deeper, longer and more painful

Asia's crisis deeper, longer and more painful

BANGKOK (AFP): Asia's economic crisis has inflicted deeper
misery and dragged on for longer than anticipated, the United
Nations said Wednesday in a report calling for sweeping reforms
of the global financial system.

The report, published by the UN Economic and Social Commission
for Asia and the Pacific, predicted a mild economic recovery this
year, but said it would be conditional on regional and
international factors.

A dramatic increase in poverty and rising unemployment coupled
with recession last year deepened the pain of the crisis which
erupted in 1997, said the Economic and Social Survey of Asia and
the Pacific.

Fundamental changes must be carried out to the financial
infrastructure of crisis-hit countries and developed nations must
shoulder the responsibility of reforming the global economic
system to forestall future crises, it said.

Proposals included the setting up of a new global body to
regulate short-term capital flows, to be known as the World
Financial Organization (WFO), and the establishment of an
international lender of last resort.

"The Asian crisis has turned out to be deeper and more long-
lasting than many analysts had predicted," the report said.

"Furthermore the fallout of the crisis has engulfed a number
of other countries outside the region, creating a strong negative
impact on global growth."

"While no foolproof guarantee can be offered it is evident
that a wide range of actions are needed at the national,
international and regional levels to minimize the possibility of
future crises."

The report predicted a "gentle" recovery would emerge in 1999,
but said a rebound was conditional on several Asian and
international factors.

"The weak state of the Japanese economy, possible slowdown of
the EU and despite its recent strength, likely flattening of
growth in the US economy in 1999 are the immediate sources of
uncertainty," ESCAP said.

"Other concerns relate to increased protectionism and
developments with regard to capital inflows -- in particular the
risk aversion of international investors/creditors is a source of
worry."

It predicted most of Asia and the Pacific would enjoy economic
growth in 1999 and cited some rays of hope, including
improvements in current accounts, rebuilt foreign exchange
reserves, declining interest rates and recovering exchange rates
and stock markets.

Attempts

But crisis-hit nations should renew attempts at corporate and
financial sector restructuring, problems which "remain major
impediments to growth in the immediate future," the report said.

Governments should also try to establish a social safety net
to mitigate the worst effects of the crisis, the report said.

It said unemployment in Indonesia stood at 4.7 percent in 1997
but nearly quadrupled to 21.3 percent last year. Malaysia saw its
jobless total rise from 2.7 percent to 6.4 percent, South Korea
from 2.6 percent to 7.7 percent and Thailand had seen a doubling
from 1.9 percent to 4.4 percent.

Stark figures were also included on poverty brought on by the
crisis.

In 1998 the poverty rate in Indonesia stood at 11 percent -- a
year later it had risen to 40 percent of the population. Thailand
saw poverty increase from 11 to 15 percent and Malaysia's went up
from seven to eight percent.

"The Governments' ability to address social problems has been
constrained by reduced revenues and in some cases by the
conditionalities of the (IMF) bailout packages," the closely
watched report said.

"However, some of the conditions were recently relaxed."

It went on to call for full-scale reform of the international
financial architecture to ensure sustained growth and to prevent
a recurrence of future crises.

Reforms must include improvements of emergency assistance and
better supervision of capital flows, it said.