International Business: ASIA
JOBS SHOCK IN ASIA
Layoffs could reach 2 million
The Asian crisis is gaining momentum. In early December, the hopes for an early return to confidence evaporated. First, it became clear that the scale of South Korea's crisis is greater than anyone imagined even a few weeks ago. Doubts are now mounting that the International Monetary Fund can force the kind of change that Korea and other Asian nations need. In Japan, backroom political maneuvering seemed to stall the restructuring of the nation's banks.
The global fallout from the crisis is also becoming apparent. In Asia, the pain of layoffs is starting to be felt, and social unrest may ensue. Certainly the region's growing middle class must scale down its expectations. Investors in the U.S., who had at first discounted the effect of Asia's turmoil on earnings, are now rethinking their positions. The operations of blue-chip companies such as Boeing, Coca-Cola, and Oracle are all showing signs of Asian fatigue. And the ultimate casualty could be the U.S. bull market. As the next three stories demonstrate, there is more bad news yet to come out of Asia.
Scores of employees from Dongbang Peregrine Securities Co. in South Korea were dead set on saving their jobs. DPS was closing three offices and letting go several dozen workers. So the white-collar employees, clad in headbands and carrying protest banners, stormed the headquarters in early December. For two days, they bullied firm officials by banging on tables and chanting slogans. The exhausted executives finally promised to consider how to turn around the slumping company without firing so many people.
But even if these protesters keep their livelihoods, many others won't. An unemployment crisis is gathering force in Asia, and layoffs are soaring to levels not seen for more than a decade. Asia's currency crisis, which touched off bankruptcies, halted spending, and slowed growth when it began in July, is likely to result in nearly 2 million Asian workers losing their jobs by next year. Not just the Korean financial sector, but Thai assembly plants, retail stores in Hong Kong, and construction sites in Indonesia are firing workers by the thousands. Migrant workers who fueled Asia's building boom are likely to be sent home. Even Japanese are seeing their long-sacred lifetime employment system shrivel.
If these workers take to the streets in force, the region's political calm could be shattered. David C. Roche, an economist at London's Independent Strategy Ltd., notes that Mexican living standards fell nearly 30% after the peso shock three years ago. That kind of drop in Asia would produce "nothing short of a revolution," Roche says. Compounding the risk is that most Asian countries lack unemployment benefits. As a result, says the International Labor Organization, the sharp increase in layoffs could be catastrophic. "There's going to be a lot of unrest in Thailand, Indonesia, and Korea," says W.R. Simpson, a senior ILO official in Bangkok.
Already the numbers of unemployed are alarming. In Indonesia, 420,000 construction, textile, and electronics workers have lost their jobs so far, according to labor union leader Tohap Simanungkalit, and the number could reach 1 million by next year. In Korea, the government predicts that chaebol and banks will have to lay off 350,000 Korean workers--without a social safety net--over the next few months.
"NEW CONCEPT." Korean workers are bewildered by the possibility that they could lose their cozy jobs, where promotions have been based on seniority and initiative has counted for little. "This may sound odd to foreigners, but layoffs and pains of restructuring are a whole new concept for Koreans," says Sakong Eun Duk, a Hanwha Economic Research Institute economist. Many are ready to take to the streets. Chong Kyong Ok, a manager at a merchant bank whose operations were suspended, may join in the street protests. "Now, workers are paying the price to clean up the mess others created," he says.
Asia's other emergency-ward patient, Thailand, is bracing for tougher times. It expects unemployment to rocket from 1.17 million now to 2 million by the end of next year. The government has established a "Mass Layoffs Center" to match people with jobs via computer, but it will be unable to cope with the influx.
Yet the potential for unrest in Thailand is mitigated slightly by the economy's dependence on agriculture, which employs 60% of the Thai workforce--and by Thais' more fatalistic view of life. Rather than riot, the newly unemployed may head back to their villages and farms or take up new professions. Sirivat Voravetvuthikun, a Bangkok broker who went bankrupt, became a local media celebrity after he started peddling homemade sandwiches--first in the lobby of his building, then to a local hospital. Without bitterness, a sweat-drenched Sirivat tells a visitor to his kitchen work space: "I deserve my fate."
Even Hong Kong is feeling the strain of the regional slowdown. The giant Yaohan department store closed in late November, throwing more than 2,700 workers into the street. Real estate agents have been closing shop as property sales dive and prices have fallen more than 20% since October. "Unemployment is issue No.1 in Hong Kong," says Lee Cheuk Yan of the Hong Kong Federation of Trade Unions.
Securities houses are also bracing for a tough year. Peregrine, which has been hammered by turbulence in the regional markets, laid off 275 people, many of them in Hong Kong. "The markets are bad, and we need to hunker down and prepare for hard times," says Shankar Dey, managing director of Peregrine India, where 19 people were let go. Deutsche Morgan Grenfell Inc. also closed its eight-person equities operation in Bombay. And Jardine Fleming Securities Ltd. in Hong Kong is looking to cut more staff after laying off several.
Even if protests over job losses are subdued, the layoffs will change Asia's labor markets for decades. Asia's miracle used to mean that just about every employee would have a job for life. The image of Asia's workers may now change--from salaryman in a starched white shirt to banner-waving protester.By Mark L. Clifford in Hong Kong, with Moon Ihlwan in Seoul, Michael Shari in Bangkok, and bureau reportsReturn to top