Lizza Bornay-Bomassi analyzes the implications of the global financial crisis on security in Asia and recommends measures to prevent worst-case scenarios.

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For all the talk of stimulus packages and bailouts, the world is paying little attention to the possible effects of the global financial crisis on political stability in many developing countries. This threat is particularly acute in Asia-Pacific and South Asia, where many households and economies are dependent on the remittances of up to 50 million migrant workers. Money sent home by migrant workers adds up to $115 billion a year – more than any other part of the world – and accounts for a fifth of the two regions’ per capita income. Yet despite the economic dominance of China, India and Japan, and positive signs that the Chinese and Indian economies might rebound relatively unscathed from the crisis, many countries in Asia-Pacific and South Asia continue to experience an economic roller coaster ride that is far from over.

The crisis, though, is not just about finance and economics; it comes with serious social costs and increased vulnerabilities for the most destitute. Before the crisis, many Asia-Pacific countries were on track to meet the Millennium Development Goals. That is no longer the case. Many pundits are predicting a protracted slowdown of the global economy. If they turn out to be right, these countries may see social unrest become a major challenge in the foreseeable future.

Rising national and global unemployment levels will push down incomes and have ripple effects for many of the most vulnerable

Fewer employment opportunities worldwide are adversely affecting economies dependent on foreign remittances, exacerbating poverty and unemployment conditions, and contributing to local insecurity. Foreign remittances are the most direct form of income transfer, and a reduction in these cash flows has a direct impact on living standards and tax revenues, presenting an extra challenge for cash-strapped governments. In 2007, migrant workers from developing countries sent $371.3 billion back home. Thirty one per cent of this money went to Asia-Pacific and South Asia. By 2009, the World Bank had forecast a 5 to 8 per cent drop in remittance flows and had expressed concern that this decline would “cause hardships in many poor countries”.

Increasing unemployment is compounding the negative effects of dwindling remittances. Overseas workers are returning to their home countries to find even fewer domestic employment opportunities. The problem is especially pervasive among women and youth. Some 70% of Indonesian migrant workers are women, for example, and in developing Asia only about 60% of young men and 40% of young women are employed. These figures are of particular concern, as recent studies indicate an alarming link between large youth populations, unemployment and civil unrest, which often leads to radicalism.

Also worrying is historical evidence pointing to the high likelihood of violent conflict when population pressures (overpopulation coupled with competition over access to natural resources) combine with economic recession, as we have seen in countries such as the Democratic Republic of Congo, Liberia, Sierra Leone and East Timor.

Volatility in commodity prices is leading to social tensions

In very real terms, economic downturns most harshly affect the vulnerable and poor, the landless and dispossessed. As people pay more for less, cut back on consumption or turn to hoarding, frustration and desperation mount. Last year, extreme volatility in food prices prompted the World Bank to issue a statement warning that some 33 countries risked social upheaval. The relative calm observed since then has lulled many into a false sense of security.

But ongoing speculation in commodity markets continues to result in extreme fluctuations in the price of basic goods and threatens food and energy security. In the past, the desperate struggle to eke out a subsistence existence, the perceptions of unfairness, and the feeling among many that they have nothing to lose have repeatedly triggered social and political violence.

Reduced government revenue is further straining public services and provoking fear and resentment.

Relative prosperity in the Asia-Pacific has meant that many have looked the other way and endured the political shortcomings of the governing elite. But increasing poverty, unemployment, and declining standards of living do not bode well for parts of the world with deep-seated resentment towards corrupt governments. Exactly when and how such resentment will manifest itself is hard to anticipate. In the past, mass discontent has repeatedly led to popular unrest and the overthrow of several Asian leaders, including in the Philippines, Indonesia, and Thailand.

Implications for the most vulnerable

On the ground, the harsh realities are immediately evident.

Honora Corales, a 40-year old Filipino mother of five, just returned home from a ten-year stint as a domestic helper in Singapore. Her job there allowed her to put three of her five children through school, build a small house on the outskirts of Manila, and help her younger sister open a convenience store in their suburb.

Happy as she may be to return to the Philippines, her joy is overshadowed by the fact that she is unemployed, she will not be able to pay for her two younger children’s education, and the remaining installments on her mortgage will not be met.

Honora’s story is far from unique. More and more countries are sacrificing migrant workers with little advance warning in a bid to protect their own nationals. Singapore, for example, is expected to send back some 200,000 foreign workers by year’s end. Indonesia could see up to 400,000 workers return this year, and Bangladesh up to 70,000.

It is difficult to predict exactly how such layoffs will affect the Asia-Pacific and South Asian economies. But a surge of frustrated, returning workers will pose major problems. Even if it does not lead directly to violent conflict, there is the very real possibility that some countries may not be able to handle a potentially huge repatriation, and that those countries will sink deeper into crisis.

Where do we go from here?

The International Labor Organization organized a major conference this week on the global jobs crisis, which included many grandiose statements from world leaders and prominent civil society organizations. It remains to be seen if these grand gestures will yield concrete policy results. Despite all the billions spent on bailouts and assistance for struggling economies, less than 10 per cent is invested in schemes to create and retain jobs. For many of the most affected, such conferences still appear to be more lip service and not enough action.

Governments must find ways to address rising tensions at the earliest opportunity. Possible interventions include monitoring fluctuations in the price of consumption items to provide an early warning mechanism to predict social instability. In Bangladesh, Pakistan, the Philippines and Sri Lanka, migrant welfare funds help protect migrant workers by providing services such as reintegration assistance. These funds can serve as models for other countries in Asia-Pacific and South Asia.

Governments must share best practices and develop systems that record, recognize and address the needs of repatriating workers. They must work across borders with a coordinated regional strategy that addresses the needs of the most vulnerable populations and the least developed countries. Without such measures, Asia-Pacific and South Asia are dangerously close to a protracted recession that can seriously destabilize countries already prone to volatility.

Lizza Bornay-Bomassi is the Program Assistant to the EastWest Institute's Preventive Diplomacy Initiatives.