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Global Recession: “Underdevelopment is a mixed blessing”

There are governments which insist that their countries are not affected by the global economic crisis. Most of the time they are not convincing; and their constituents do not believe in the supposed improvement of the economy. But some of these governments might be telling the truth. They may not be completely honest about the real economic situation of their countries but they may be correct when they insist that the fearsome credit crunch, housing bubble, and other familiar crisis indicators are not visible in their territories.

How is this possible? Countries with very small economies and countries which are not globally-integrated are usually the same countries which claim that the financial crisis has not affected them so far. This post cites a few examples:

An article in the World Bank blog which focuses on East Asia agrees that Laos is not severely hurting from the crisis because of its “unsophisticated economy.”

Laos has a relatively unsophisticated economy that is agriculture- and natural resource-based, although industry as share of GDP has been growing steadily in the last decade…So far, Laos has been affected by the crisis less than other countries, because underdevelopment and relative closeness of the country's economy – curses that turned out to be a mixed blessing.

Earlier, I quoted a Lao economist who asserts that Laos will survive the crisis because of its agriculture-based economy.

Laos depends mainly on its agricultural economy. Photo from Flickr page of sama sama - massa

Laos depends mainly on its agricultural economy. Photo from Flickr page of sama sama – massa

The author of Yek Livan Chayeh Dagh (means a cup of hot tea) notes that Iran, which does not have access to most of international financial markets, is less affected by the international financial crisis.

The reason is that Iran’s only link with outside world is through selling oil and its price has not fallen yet to critical price….I think the sections that will suffer a lot are the ones that provide service to new investments such as engineering consulting firms. The factories/enterprises that produce consuming goods such as food probably won’t find themselves in difficult situation.

Iman Brotoseno from Indonesia observes that the stock market crash did not hurt most Indonesians.

Wajar jika krisis ini ada imbasnya ke Pasar Modal Indonesia. Tapi hanya buat mereka kalangan ‘ the haves ‘. Kontribusi pasar modal di Indonesia kecil sekali dibanding dengan sektor perbankan dan riil. Menurut Mirza Adhityaswara, di Amerika lebih dari 60 % penduduknya berinvestasi di pasar modal. Sementara di Indonesia hanya sekitar 1 juta orang yang bermain secara langsung , sementara yang lain bermain dalam investasi tidak langsung seperti reksadana dan saham campuran, dengan jumlah ‘ hanya ‘ Rp 30 trilyun.

It's no surprise if Indonesia's stock exchange is affected by the crisis. (The crisis) mainly affects ‘the have’ community. Stock exchange contributes small to Indonesia's economy compared to banking and real sectors. According to Mirza Adhtiyaswara, more than 60% US citizens investing their money on stocks. While in Indonesia, only 1 million people directly pledge their money on stocks, and only few invest on bonds and mutual funds, in overall total of 30 Trillion Rupiah.

Tony Abaya cites the failures in exports and tourism in the Philippines as the country’s “temporary salvation.”

The main and major reason why this country has not been as shaken as our neighbors have been by the global recession is our failures to develop exports and tourism to the same extent as our neighbors have.

These two sectors are the lynchpins of our neighbors’ prosperity, and the collapse of these sectors worldwide has unhinged their economies, leading to closure of hundreds of thousands of enterprises and the loss of jobs for tens of millions of workers and employees.

In other words, our failures in exports and tourism have ironically become our temporary salvation

Those who are exalted will be humbled, as our more successful neighbors’ economic skyscrapers crack or crash in the Intensity 6 earthquake, while the modest Filipino 3-storey walk-up remains relatively unscathed, so far.

Thank God or Allah – as well as our clueless trapos (traditional politicians), – for our failures.

Fatos Lubonja in Albania blames the lack of instruments to measure the crisis for the “indifference” of the people on the global crisis.

Më bën shumë përshtypje se sa pak flitet në Shqipëri për krizën botërore ekonomike dhe se sa cekët mbi të gjitha. […]Besoj se një nga shkaqet kryesore të indiferencës sonë qëndron në faktin se na mungojnë instrumentat për të matur atë që të tjerët e quajnë “krizë” dhe në përgjithësi na mungon një sistem imuniteti që, me reagimin e tij, tregon shkallën e rëndësisë së sëmundjes. Kriza sot matet me përqindjet e humbjeve në bursë, me përqindjet e rritjes së papunësisë, me shkallën e falimentimeve të ndërmarrjeve, me shkallën e rënies së fuqisë blerëse, të eksportit e me rradhë. Për të gjitha këto ne nuk kemi tregues seriozë dhe të saktë. […]

I’m very impressed by how little and how superficial is spoken on the world economic crisis in Albania. […]I believe that one of the main causes of our indifferences is that we lack the instruments to measure what others call the “crisis” and in general we lack a system that, with its response, indicates the degree of importance of the disease. The crisis today is measured by the percentage of losses in the stock market, with increasing percentages of unemployment, the rate of bankruptcy of enterprises, the scale of the collapse of purchasing power, exports and so on. For all these we have no indication of the seriousness.

Dojdlivoe-leto from Kazakhstan remembers that the economic woes of the present are not as worse as the crisis in the 1990s [ru]:

There were times when all we had to eat were boiled macaroni and convenience soup from the grocery? This time, the worst thing that can happen is that we would have to abstain from shopping. It is not worth of panic.

The Iranian quote was translated by GV editor Hamid Tehrani. The Bahasa quote was translated by GV author Carolina Rumuat. The quote from Albania was translated by GV author Elena Ignatova. The Russian quote was translated by GV editor Adil Nurmakov.

5 comments

  • […] by renniek A post from Mong Palatino in his continuing series on the GFC for Global Voices on Global Recession: “Underdevelopment is a mixed blessing”: There are governments which insist that their countries are not affected by the global economic […]

  • Kevin, I believe food production will be the next boom due to out of control population growth and I fear the tipping point might be in the next decade.

    Will we learn from the GFC?

    I think not, due to the propping up our lifestyles with handouts instead of the “Tough Love” approach that the government in my opinion should have considered.

    Somewhere down the track there will be a societal shift, albeit reactive opposed to proactive and the pain will be more intense the longer it is delayed.

    I suspect countries like Laos won’t feel the shock when this eventuates.

  • Sorry, Mong, I thought this was a post by someone else.

  • […] This completes our initial series on the global economic crisis. The first post deals with the crisis in general and the discontent it is creating around the world. The second post reviews some of the bailout and stimulus plans of select countries. The third post identifies some survival tips and business opportunities related to the recession. The fourth post highlights the impact of global job losses and the situation of returning migrant workers. Countries which claim to be unaffected by the financial crisis are the focus of the fifth post. […]

  • Nik

    As has been said about the Philippines and can apply to a lot of these ‘resilient nations’, their economic ships are not sinking because they never really got far out from harbour in the first place.

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