Will the American Attack on Syria cause an Asian Financial Crisis?
Article: Ravinesh Sakaran – Contributor
Much debate has been going on about the United States’ imminent threat to wage war with Syria. Most of the debates are based on the humanitarian aspects for intervention. However an economic consequence to the debate has not been focused.
An act of military aggression by the United States may not only destabilize the world economy, but also create a massive economic catastrophe to the Middle East and its South Asian neighbor, India.
India’s economic woes might also tend to spill over to its South East Asian counterparts. The domino effect is inevitable with the Indonesian currency, the Rupiah, falling to its lowest levels in four years. The Malaysian economy also seems to be between a rock and a hard place, as Malaysia’s economic outlook was downgraded from stable to negative, which then prompted the Malaysian Prime Minister Najib Razak to make an unprecedented increase in fuel prices for the country to combat a crumbling budget deficit, thus leaving the country susceptible to a high risk of inflation.
Why would these economies, which are thousands of miles away from Canada, be of any importance to Canadians or to the U of R specifically? Even during the Asian Financial Crisis of 1997, North America wasn’t affected at all. However, over the past 20 years, the landscape of global finance and economics has evolved in an extreme and drastic fashion. The Canadian economy has, to some extent, integrated with other Asian economies. A perfect example of victims of global finance would be during the 2008 financial crisis when the Americans suffered a sub-prime mortgage crisis, which in turn dragged the world economy into a recession.
However, this time the effects of a war on Syria might not be so dramatic, but indeed will bring a certain amount of economic hardship to the Canadian economy, because these Asian countries send a huge number of international students to Canada for post secondary education.
According to the Canadian Bureau for International Education, a group to which most Canadian universities and colleges belong, reports that in 2011, Canada was the world’s sixth most popular destination for international students.
A study done by Roslyn Kunin & Associates, Inc. estimated that in 2010 alone, international students spent in excess of $7.7 billion on tuition, accommodation and discretionary spending; created over 81,000 jobs; and generated more than $445 million in government revenue.
Altogether, there were more than 218,200 long-term, which means staying for at least six months, international students in Canada in 2010, generating more than $6.9 billion to the Canadian economy.
Short-term students who pursued language training also contributed an estimated $788 million to the Canadian economy.
Overall, Roslyn Kunin & Associates, Inc. concludes that the total amount that international students spend in Canada ($7.7 billion) is greater than our export of unwrought aluminum, $6 billion, and even greater than our export of helicopters, airplanes and spacecraft, $6.9 billion, to all other countries.
Roslyn Kunin & Associates, Inc. also provided a striking example of the value of the educational service to the value of traditional goods with Saudi Arabia spending the equivalent 44% of the value of the goods that they import from Canada on educational services.
For 2010, in Saskatchewan alone, international students spent a whopping $120.5 million, contributing $69 million to the GDP and creating 1050 jobs.
International students are essential to the U of R and to the domestic Saskatchewan economy, if an Asian economic crisis emerges, this time stemming from India, Saskatchewan will experience some economic challenges.
India has grown remarkably in the past decade. From 2002 to 2011 India’s average growth rate was 7.7%. However India’s growth rate has declined to a mere 4.4% a year and the rupee has been experiencing a devastating downward spiral, falling 17% against the US dollar, causing an excessive increase in prices for imported goods. Its drop this year is one of the steepest in the world. This phenomena is mainly attributed to the Federal Reserve’s scaling back on it’s Quantitative Easing program, a monetary policy that injects capital into the economy.
Thus leaving a recovering American economy to suck capital from emerging economies.
The newly appointed Governor of the Reserve Bank of India, Raghuram Rajan has brought some optimism to the Indian stock market and to the rupee, however escaping inflation might be a tough act to follow as inflation might come from rising oil prices due to an impending American intervention in Syria. India’s rupee may self-destruct and cause an Asian financial crisis.
A shattered currency for the Asian continent will not prove to be beneficial to the Canadian economy foreign governments might reduce the number of students they send abroad through scholarships and foreign students might be deterred to study abroad with such highly disparaging exchange rates.
Thus, to conclude, an American strike on Syria might prove to be detrimental not only to the Middle East, Asia but also to Canada.