Trends by Martin Khor
Monday 2 January 2012
Be Prepared – a good motto for 2012
Both natural calamities and man-made economic problems marked the
passing year, and we should be prepared to face more of the same or
worse in the new year.
At this time 12 months ago, this column had highlighted how the dying
year 2010 could be labeled the year of natural calamities, and predicted
more on the way.
Sure enough, the year that has just passed witnessed even worse disasters.
If 2010 was marked by the Haiti earthquake, 2011 surpassed that in
impact (if not in deaths) by the Fukushima triple tragedy of earthquake,
tsunami and nuclear accident.
But Fukushima was only the worst of the calamities that included hurricanes
in Central and Latin America, drought in parts of Africa, massive
floods in Thailand and elsewhere, and many typhoons and storms in
This new year, more is in store from Mother Nature. Extreme weather
events are expected to be more frequent and more intense, and some
of these are linked to climate change, according to a recent report
of the inter-governmental panel on climate change (IPCC).
The extensive flooding in Thailand in October and November, which
wreaked havoc on homes, factories, farms and entire towns, is a warning
to Malaysians on the intensity of what may happen here someday. The
floods that have recently affected many Malaysian states may in future
be even more intense and more damaging.
Another disaster in our region was caused by the tropical storm Washi
that swept across Mindanao in Southern Philippines in December, killing
over 1,000 people and displacing 300,000 in massive flooding, flash
floods and landslides.
Better disaster risk preparations would have helped avert the high
number of casualties, according to Filipino Senator Loren Legarda,
a disaster risk reduction champion for the UN International Strategy
for Disaster Reduction (UNISDR).
She called on local authorities throughout Philippines to invest in
flood infrastructure, including river embankments, pumping stations,
flood walls, drainage systems, storm drains, canals and flood retention
areas, noting the high number of casualties caused by Washi could
be due to a lack of awareness of the risks involved.
Countries should implement the UNISDR strategy, which aims to guide
and coordinate efforts to reduce disaster losses and build more resilient
communities and countries.
Greenhouse Gases continue to increase at an alarming rate in the atmosphere,
the effects of climate change are bound to worsen. Thus, a useful
New Year resolution that countries should make is to put in much more
effort and funds to strengthen disaster preparedness. It will save
many lives, homes and other properties.
The new year 2012 will likely suffer from man-made disasters as well.
A new world-wide recession is now a larger possibility, as the economic
austerity policies across Europe and the deleveraging of its banks
take effect this year in reduced demand, higher unemployment, credit
tightening and reduced output.
The year will continue to witness the Eurozone governments wrestling
to save the Euro. If, as many analysts predict, the policy makers
remain behind the curve of events on the ground, then 2012 will be
a disaster year for Europe, with recessionary effects on the rest
of the world.
If, however, the European leaders and institutions get their act together,
then the disaster could yet be averted. But fewer experts believe
that policy will finally get ahead and prevent chaos.
As with natural disasters, preparedness for economic slowdown or recession
is needed, at least to cushion the effects.
A slowdown in the advanced economies will affect developing countries
through the trade and finance channels. On the trade front, developing
countries that are more export-dependent must expect to be hit by
reduced demand for their products and by lower commodity prices.
On the finance front, developing countries should expect a reversal
of the strong capital inflows of the past couple of years as Western
funds seek the “safe havens” of their own countries during these uncertain
Indeed, a significant net outflow of portfolio capital has already
begun in several Asian countries, including India, Thailand and Malaysia.
The outflow can be absorbed without much difficulty in countries like
Malaysia that have strong current-account surpluses, but can be a
significant problem for countries like India which have a current-account
deficit and which have relied on capital inflows to cover it.
2011 was a turning point in laying the foundations for the current
economic problems. Thus, 2012 could be the year when these problems
mature into fully-fledged crises. Thus we should be preparing early
for what the year may bring.