Impact of the global economic crisis and disability & poverty in developing countries
Mr. Khandaker Jahurul Alam, Chairperson, Asia & Pacific Disability Forum & President, National Forum of Organizations with the Disabled (NFOWD)
The world is facing its worst recession since the 1930s. Typically, the financial crises erupted in different countries and the regions since 1980s like Mexico and Argentina‟s financial crisis and South East Asian countries‟ financial crisis in 1997. But these crises did not spill over the
boundaries. In September 2008, it sparked off in the USA, Europe and Japan and simultaneously proceeded towards the developing countries.
Impact of the economic crisis in the developing countries
The transmission of the economic downturn from rich to poor countries has occurred through a number of channels. This global crisis has put pressure on all important sources of external revenues for developing countries -exports, remittances, foreign direct investment, portfolio equity flows and aid– with significant effects on the real economy, which has further feedbacks between the real and financial sectors. It is yet to understand the precise effects of the developing countries from the crisis.
The World Bank estimates that developing countries face a financing gap of $270-$700 billion depending on the severity of the economic and financial crisis. Almost 40 percent of 107 developing countries were highly exposed to the poverty effects of the crisis and the remainder was moderately exposed, with less than 10 percent facing little risk. The Institute of International Finance estimates that global financial flows to developing countries will decline rapidly from roughly US$ 1 trillion in 2007 to US$ 165 billion this year.
Develop countries have been affected differently according to their economics, their size and their portfolio of industries. The financial crisis will have long-term implication for developing countries.
Exports : In developing countries, which are far more dependent on trade for growth, exports will shrink by some 2%-3% in 2009, WTO economists say. Signs of the sharp deterioration in trade were evident in the latter part of 2008 as demand sagged and production slowed. As a consequence, many thousands of trade related jobs are being lost.
Remittances - Remittances to developing countries jumped 15 percent in 2008 to $328 billion, but will plummet 7.3 percent in 2009, the World Bank predicted, revising its earlier forecast of a 5-percent decline this year. But the World Bank said there were “emerging signs of a bottoming
out” in the decline of remittance flows as the global economy begins to stabilise. South American countries have been worst affected, by contrast, remittances to South Asia and East Asia are expected to slowdown its growth despite the economic crisis. Remittances provide a lifeline to many poor countries and accelerate the pace of poverty reduction. Foreign Direct Investment/Portfolio Equity Flows- Foreign Direct Investment (FDI) inflows are estimated to have fallen by 21% in 2008 to an estimated $1.4 trillion, and will likely fall further in 2009, according to UNCTAD. The impact of the crisis varies widely depending on region and country with consequently varying impacts on the geographic patterns of FDI flows. Portfolio Equity Flows is declined to developing countries alarming rate than the FDI. Following the dramatic worsening of the financial crisis since September of last year, growth of the developing countries slowed. This is the first decline in total world production since the 1930s, and its impact is magnified in trade.
Bail out packages for what
The massive bail out packages, and the nationalisation of financial intermediaries and other assistance packages, reflect a reprioritisation of government expenditure in rich countries toward salvaging their own economies. Developed and developing countries already have spent $18 trillion to bail out financial institutions due to global crisis. However, no fund yet to disbursed for the poor of developing countries.
The biggest question is now being raised that what led to this global economic crisis or who have created this global crisis? Why financial institutes and big corporations get most of bail out funds from the developed countries‟ governments? While poor people of developing countries
have become victim now by this crisis, who will compensate their victimization?
Over the past year the world has spent $18 trillion to bail out financial institutions, while only two trillion dollars account for overseas development assistance given in the last 50 years. Through this striking revelation, UN Millennium Campaign questions the priorities of governments claiming to reduce poverty.
Official development assistant is likely to be constrained. Donor countries will accord the highest priority in their domestic economies and to containing the rise in unemployment. It is not yet clear whether aid will be cut or simply flat lined as a result. Previous experience was not a good. Moreover, Non-profit sector the world over is under severe stress due to the economic recession and the future too appears bleak. Many NGOs are resorting to cutbacks in budgets and programmes, wage freezes, travel restrictions and even laying off staff.
Crisis to trap 53m in poverty
New estimates for 2009, WB suggests that lower economic growth rates will trap 46 million more people on less than $1.25 a day than was expected prior to the crisis. An extra 53 million will stay trapped on less than $2 a day. This is on top of the 130-155 million people pushed into poverty in 2008 because of soaring food and fuel prices. The International Labour Organisation (ILO) suggests that 18-30 million jobs could be lost between 2007 and the end of 2009.
It was critical for exposed countries with fewer resources, to finance job creation, the delivery of essential services and infrastructure, and safety net programs for the vulnerable. Yet three quarters of these countries cannot raise funds domestically or internationally to finance programs to curb the effects of the downturn. One quarter of the exposed countries also lacked the institutional capacity to expand spending to protect vulnerable groups. Many of the most affected Low Income Countries (LICs) are heavily dependent on official concessional flows, which will be under pressure in donor countries facing their own fiscal challenges.
How does it affect Bangladesh?
In the global crisis, except garments and textile product, export earnings of other Bangladeshi product declined. However, real wage of garment workers has gradually declined along with numbers of job shrinking due to international price fall of garments. However, export earnings of primary products - shrimp and leathers and some of finished products reduced that squeezed employment of rural people.
Budget deficits of Bangladesh is about 5 percent in the current fiscal year that is one of the major problems to provide the fund for creating the new employment. The government of Bangladesh has also faced the fund crisis to increase the social safety net and social empowerment like employment creation scheme, food for work and different types of allowance.
The growth of remittances from Bangladeshi nationals working abroad was slowdown. However, new departures of Bangladeshi migrants are decreasing. Moreover, international return flows of migrants have increased with a higher rate. Overall situation of overseas employment will reinforce the shortage of employment opportunities and further strain tight labour market in Bangladesh. As a result, rural households income or livelihoods are squeezing. It estimates that Aid flow is now decreasing in government and non-government channels in current year. Moreover, NGOs funding is under severe stressed due to currency devolution of the pound and euro during last year. In financial crisis, pound was devaluated by 25 percent, resulting the NGOs funding decreased. New funding commitment for NGOs of Donors is still below than previous year.
Impact on person with disabilities by economic crisis
Incidence any crisis or disaster, poor especially hardcore poor are always affected. Majority of disabled people are in below poverty line. Poverty is both a major cause and consequence of disability. Poverty and disability reinforce each other contributing to increased vulnerability and exclusion. Crises affect disabled people and mass people differently, and the current global financial crisis is no exception. Older and disabled people are at greater risk of abuse because of the recession.
While the greatest impacts may be difficult to quantify, as of today there is no doubt that the financial crisis does not have only financial and monetary implications; the negative impact of the crisis on the enjoyment and realization of human rights is both evident and alarming. The financial crisis has exacerbated the difficult situation of the extreme poor, who were already greatly affected by dramatic rise in food and energy prices last year and by the challenges posed by the impact of climate change.
Mainstreaming is a crucial methodology, allowing taking into account the needs of people with disabilities at all stages of development of various policies. Enacting the law for rights of persons with disability in the different developing countries, Disability development is slowly moving forwards to mainstreaming these countries in the current decades. Implementation process of Convention on rights of Persons with disabilities (CRPD) also creates a new wave to mainstreaming disability. As a result, the governments of the developing countries formulate policy for development of persons with disability and implement the mainstreaming development projects for them. Inclusive design and universel design is well articulated and tried to introduce for mainstrem development project by the governments of different developing countries.
As part of NFOWD advocacy, the government of Bangladesh included the disability in the first and Second PRSP. It was for first time government of Bangladesh included the disability in the Midterm development Plan. As a result, the government introduced „Allowance for persons with disability, Education stipend for learners with disability and micro credit under social safety net. The Directorate of Primary Education took an effort to implement „Inclusive Education‟.
It is observed that disabled people are now taking opportunity to their employment in the formal and informal sectors. However, most of them are employed in the informal sector. In the recent years, disabled men and women take opportunity to get employment in the export-oriented garment factory and textile sector.
Traditionally disabled people have been the „reserve army of labour‟, ‟the last to be hired the first to be fired‟, seen as expendable at times of economic crisis. Additionally, in times of recession, persons with disabilities face particular difficulties caused by a lack of work and
increased isolation, discrimination and xenophobia. Disabled People, their families, the unemployed and the poor cannot become the scapegoat for a crisis not of their making. In the econonic crisis, the new mainstream disability development projects are now stalled due to shortage of fund. New job at export oriented and manufacture industries are stoped for disabled people. Disabled persons has lost their job in formal sesctor. General unempolment situation creates the presure in informal sector that has pushed the disabled people from their empolment.
Due to rise of unempolment and poverty, the goverments needs to expand social protection and social safety net progarms. Bangladesh government has incresed to widen and deepen the social safety net programs by increasing the total number of beneficiaries and increasing the allotment during current and previous fiscal years. It is experianced that the increasing rate of total safety nets programs are too much below than the rate of total safety nets programs has expanded in the two fiscal year. In the current fiscal year, almost 2.5 percent of GDP will be allocated for the social safety net and social empowerment programmes. However, the government lagged behind the target of the total number of beneficiaries for allowance for persons with disability in the two fiscal year.
Clearly the impact of the financial downturn on charities is widening and deepening. Some charities still face that double whammy of a drop in income as well as an increased demand for services. However, NGOs funding has been decreasing during last one year especially for currency develution of Pound and Euro. NGOs are laying off staff and cutting back aid programmes as the global recession bites, and the prospects for 2010 also look bleak.
In the developing countries, the Corporate Social Fund has been incresasing during last few years which creates the new wave of the NGOs funding. But economic crisis has meltdown the Corporate Social Fund in developing countries. We need to create a new guideline for Corporate Social Fund as developed countries has introdued the new guideline for giving bonus of senior bank executives, resulting in financial crisis.
The global financial and economic crisis must be seen as an opportunity to undertake innovative solutions in full compliance with human rights obligations, and to place people at the center of policy measures. While this crisis should prompt the international community to re-structure the global financial and monetary systems, it also offers an opportunity to review existing social policies, strengthen social protection systems and re-structure taxation systems at the domestic level.
Finally I can say to mobilize fund to implement the CRPD that will lead the mainstreaming disability and also ensure the rights of Persons with disabilities. To introduce inclusive design of mainstrem development project by the governments of different developing countries, Persons with disabilities may get opportunity to ensure their fundamental rights. To create the demand of disability development within short term, special measure will need to increase NGOs funding specially in the economic crisis period.