nep-sea New Economics Papers
on South East Asia
Issue of 2007‒02‒10
fourteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Progress toward a Common Currency Basket System in East Asia By OGAWA Eiji; SHIMIZU Junko
  2. Determinants of the Profitability of Japanese Manufacturing Affiliates in China and Other Regions: Does Localization of Procurement, Sales, and Management Matter? By ITO Keiko; FUKAO Kyoji
  3. Comparing China and India: Is dividend of economic reforms polarized? By Sudip Ranjan Basu
  4. Urban income inequality in China revisited (1988–2002) By Sylvie Demurger; Martin Fournier; Shi Li
  5. Is East Asia Safe from Financial Crises? By Charles Wyplosz
  6. Volatility and Causality in Asia Pacific Financial Markets By Enzo Weber
  7. Stock Market Liberalisations in the South Asian Region By Husain, Fazal; Qayyum, Abdul
  8. 10 Years after the Crisis: Thailand's Financial System Reform By Menkhoff, Lukas; Suwanaporn, Chodechai
  9. Enhancing the efficiency of securities markets in East Asia By Ghosh, Swati; Revilla, Ernesto
  11. Health insurance for the poor : initial impacts of Vietnam ' s health care fund for the poor By Wagstaff, Adam
  12. Geographic Indications for Javanese Teak: A constitutional change By Dwi R. Muhtaman; Philippe Guizol; Jean-Marc Roda; Herry Purnomo
  13. Risk taking and the quality of informal insurance: gambling and remittances in Thailand By Douglas L. Miller; Anna Paulson
  14. Fungibility and the flypaper effect of project aid : micro-evidence for Vietnam By van de Walle, Dominique; Ren Mu

  1. By: OGAWA Eiji; SHIMIZU Junko
    Abstract: Ogawa and Shimizu (2005, 2006a) have proposed a possible way to create an Asian Monetary Unit (AMU) as a weighted average of the thirteen East Asian currencies (ASEAN + China, Japan, and Korea) and developed AMU Deviation Indicators for a surveillance process under the Chiang Mai Initiative. Both the AMU and the AMU Deviation Indicators are important in helping the countries in the region to recognize the necessity of moving toward a common currency basket system. However, there remains an open question about how to implement this system in East Asian countries. The purpose of this paper is to compile the latest issues of currency basket itself and to develop concrete steps toward a common currency basket system in East Asia. Particularly, we simulate possible individual currency basket weights based on trade shares of each East Asian country and convert them to G3 currency (the US dollar, the euro, and the Japanese yen) basket weights. We also investigate the discrepancies between the converted G3 currency basket weight of the AMU and the weights of the common G3 currency basket, which is to illustrate the reality of implementing a common currency basket system. We propose a possible way to shift from an individual G3 currency basket system to the AMU currency basket system. In this process, we expect that the Japanese yen would play a varying role at each stage toward monetary coordination in East Asia.
    Date: 2007–01
  2. By: ITO Keiko; FUKAO Kyoji
    Abstract: Does localization of procurements, sales, and management contribute to the profitability of overseas affiliates? This study examines this question by analyzing the performance of Japanese multinationals' manufacturing affiliates in China using a comprehensive affiliate-level dataset for the period from 1989 to 2002 collected by the Ministry of Economy, Trade and Industry (METI). We find that even though foreign multinationals often seem to enter China for the local market potential, affiliates with a higher local sales ratio tend to be less profitable - a pattern that is conspicuously different from that observed for Japanese affiliates in other regions such as the USA or the ASEAN-4, where local sales orientation has a positive impact on profitability. On the other hand, we find that Japanese affiliates' profitability was positively associated with their local procurement ratio. Using the coefficients of the profit function estimated from data on all Japanese manufacturing affiliates around the world, we can calculate the effect of localization (local sales and local procurements) on profitability by country, controlling for the level of GDP and per-capita GDP. In the case of China, the localization effects are positive following the country's accession to the WTO, suggesting that both local procurement and sales expansion contribute to higher profitability in China.
    Date: 2007–01
  3. By: Sudip Ranjan Basu (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: The paper develops a new measure of development, namely, development quality Index (DQI), to compare performance of China and India. The results show that national level development quality grew three times faster in China than in India. Conversely, the health quality grew three times as fast in India than China over the period 1980-2004. The overall regional development quality level improved in both countries, but polarization widened in China. The sign of inter-regional polarization in China indicates a rising concentration of development gains from economic reform policies, while in recent years there are trends of polarization in economic dimension of DQI in India.
    Keywords: Development, Inequality, Polarization, China, India
    JEL: C43 D63 O18
    Date: 2007–01
  4. By: Sylvie Demurger (HIEBS - Hong Kong Institute of Economics and Business Strategy - [The Hong Kong University]); Martin Fournier (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Shi Li (School of Economics and Business - [Beijing Normal University])
    Abstract: Using newly available spatial price deflators, this paper shows that inequality evaluations in the literature<br />overstate the magnitude of inequality and inequality changes in China, as well as the role played by regional differences in the recent inequality rise.
    Keywords: Inequality; China; Spatial price deflators; Inequality decomposition
    Date: 2007–01–30
  5. By: Charles Wyplosz (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: This paper looks at the measures taken by East Asian countries since the 1997-8 crisis to reduce the odds of a new crisis. It finds that odds are low, but far from zero. Much progress has been done to deal with the vulnerabilities that have been identified so far, but some remain. The massive accumulation of foreign exchange reserves is raising the threshold at which markets would trigger speculative attacks, but the threshold is still well within reach of international markets. Efforts at building a regional defense system are slow and unlikely to come to fruition in the near future.
    Keywords: International Economics, Exchange Rates, Currency rises, Foreign exchange reserves
    JEL: F33 F36
    Date: 2006–05
  6. By: Enzo Weber
    Abstract: The present paper analyses interactions between the foreign exchange, money and stock markets in Asian Pacific countries from 1999 till 2006. Considering influences on financial market volatility, the estimations are carried out in multivariate EGARCH models using structural residuals. This approach consequently allows the identification of the contemporaneous effects between the variables. Structural VARs or VECMs can therefore give answers to questions of exchange rate stabilisation, monetary policy behaviour or equity market reagibility. Additionally, a correlation analysis of the identified innovations reveals the degree of coherence in the Asian Pacific region.
    Keywords: Structural EGARCH, Financial Markets, Asia Pacific
    JEL: C32 G15
    Date: 2007–01
  7. By: Husain, Fazal; Qayyum, Abdul
    Abstract: This study attempts to conduct an investigation of the characteristics of the South Asian stock markets including the effects of the opening of these markets. These markets were liberalised in early 1990s as a part of the economic reforms started in the South Asian region about two decades ago. The analysis is conducted for four countries in the South Asia, Bangladesh, India, Pakistan, and Sri Lanka, covering the period from 1980 to 2003. The analysis is done with the help of tables, regression analysis, Event Window analysis, and Error Correction Functions. The analysis indicates significant development in stock markets indicators such as market capitalisation and trading value in the region following liberalisation measures. However, the development in stock markets in South Asia does not seem to influence the real sector and the stock markets are still playing a minor role in their respective economies. The integration analysis suggests that the markets in South Asia are integrated with major markets, that is, of USA, UK, and Japan. There is clear evidence that the markets in India and Pakistan are affected by the major as well as the regional markets in the long run. In the short run, however, the markets appear to be independent of one another
    Keywords: Stock Markets; South Asia; Liberalisation; Pakistan; India; Sri Lanka; Bangladesh; Market Integration
    JEL: G1
    Date: 2006
  8. By: Menkhoff, Lukas; Suwanaporn, Chodechai
    Abstract: This paper uses the framework of long-term financial system development to describe and assess the reform process in Thailand after 1997. The present financial reforms are well in line with the pattern of financial development found in the academic literature. A detailed analysis of capital markets, specialized financial institutions and supervisory regulation shows recent advancements and open issues. The rapid rise of non-banks financial institutions can serve as a paradigmatic example of market driven dynamism requiring appropriate policy action. Overall, the building of modern and sophisticated financial institutions is an ongoing process which should consider human resource constraints.
    Keywords: Financial institutions, financial development, Thailand
    JEL: O1 G2
    Date: 2007–01
  9. By: Ghosh, Swati; Revilla, Ernesto
    Abstract: The authors explore the relative efficiency of stock markets across countries using newly available data on transactions costs and the quality of the informational environment of stock markets. These new measures are constructed from firm-level stock returns in a panel of 60 countries for the period 2000-04. The authors then develop a framework to understand the linkages between efficiency, liquidity, and their determinants. To give empirical content to the framework, they study the determinants of transactions costs and the quality of the informational environment. They find that some institutional arrangements-such as the availability of stock lending and short selling-and the openness of markets are associated with lower transactions costs. The authors also find that, although disclosure rules for directors and officers of listed firms are essential, the ability of shareholders to seek redress is more conducive to a better informational environment in stock markets. This in turn serves as the basis for the policy framework and recommendations for the East Asian region. In particular, the region needs to continue to strengthen the implementation and enforcement of corporate governance, to further enhance the market and institutional infrastructure, and focus on policy measures to foster a larger and more diversified investor base to continue to see gains in the efficiency of stock markets.
    Keywords: Markets and Market Access,Economic Theory & Research,Financial Intermediation,Access to Markets,Financial Crisis Management & Restructuring
    Date: 2007–02–01
  10. By: Sjöholm, Fredrik (European Institute of Japanese Studies)
    Abstract: Equitization (privatization) has been at the core of the policy debate in Vietnam over the last decade but the government’s attitude seems ambivalent. On the one hand, equitization is emphasized in policy statements. On the other, the progress on equitization has been relatively modest and SOEs continue to dominate the Vietnamese economy. This paper examines SOEs and the equitization process in Vietnam. We compare the development with guidelines from economic theory and with lessons from privatization programs in other countries. Equitization in Vietnam is found to target small SOEs and no larger ones, and it does not address the efficiency problem with state ownership since the state typically remains a controlling share of the equitized SOEs. Moreover, economic theory and experience from other countries suggest that the Vietnamese approach with diffused ownership in SOEs and in equitized firms; equitization to employees and management; and little participation of strategic investors, might not be the most efficient approach to public ownership and to equitization. We argue in this paper that Vietnam still has an opportunity to change its approach towards SOEs and equitization and thereby secure increased efficiency and economic growth.
    Keywords: State Owned Enterprises; Privatization; Equitization; Vietnam
    JEL: L32 P21 P31
    Date: 2006–08–01
  11. By: Wagstaff, Adam
    Abstract: Vietnam ' s Health Care Fund for the Poor (HCFP) uses government revenues to finance health care for the poor, ethnic minorities living in selected mountainous provinces designated as difficult, and all households living in communes officially designated as highly disadvantaged. The program, which started in 2003, did not as of 2004 include all these groups, but those who were included (about 15 percent of the population) were disproportionately poor. Estimates of the program ' s impact-obtained using single differences and propensity score matching on a trimmed sample-suggest that HCFP has substantially increased service utilization, especially in-patient care, and has reduced the risk of catastrophic spending. It has not, however, reduced average out-of-pocket spending, and appears to have had negligible impacts on utilization among the poorest decile.
    Keywords: Health Monitoring & Evaluation,Health Economics & Finance,Housing & Human Habitats,Health Law,Health Systems Development & Reform
    Date: 2007–02–01
  12. By: Dwi R. Muhtaman; Philippe Guizol; Jean-Marc Roda; Herry Purnomo
    Abstract: The central issue addressed in this paper is whether geographic indication (GI) can be applied as a tool to encourage some furniture industries and teak producers to take collective action to improve teak product quality and increase global market competitiveness. This paper explores the possibility of implementing GI on teak as a means to improve local community rights to manage teak resources, Perum Perhutani revenues and the perception of teak wood products on national and international markets, as well as employment in the furniture industry. The paper also discusses the institutional arrangement necessary to enable GI implementation on teak. After the 1998 financial crisis, Javanese furniture industries experienced a boom, but illegal logging in state forests surged as well. Unfortunately this development was disconnected from forest resources capacities. Stakeholders made a living from bad practices and misuse of forest resources. Furniture was rejected because of its bad quality, and wood was wasted. Instead of producing high-quality teak products, Java turned to mass production of cheap furniture for national and international markets. As a result wood supply was shrinking, putting many furniture enterprises and their hundreds of thousands of employees in jeopardy. Indonesian furniture is getting a bad reputation on the international market. Indonesians by culture have the perception that teak wood is something special, and on the world market teak is the best-known tropical species. In other good news, local community enthusiasm for planting teak is growing. Building on this we expect that GI to help maintain a common interest among stakeholders. GI designation is a sign that goods have a specific geographic origin and possess qualities or have a reputation because of that place of origin and the knowledge of local communities. Most commonly, a GI consists of the name of the place of origin of the goods. Agricultural products typically have qualities that derive from their place of production and are influenced by specific local factors, such as climate and soil.
    Keywords: Teak; Geographic Indication; Furniture; Community; Collective action
    JEL: K42 L73 O13 Q16 Q17 Q23 Q34 Q56 Q57
    Date: 2006–01
  13. By: Douglas L. Miller; Anna Paulson
    Abstract: More than 35% of Thai households either give or receive remittances, and remittances account for about one-third of the income of the receiving households. Remittance relationships may be an important source of protection against adverse events for the individuals involved. This paper provides evidence that remittances behave in a way that is consistent with insurance: they are sensitive to shocks to regional rainfall and they respond to household level events. The paper goes on to consider how the quality of insurance that is offered through remittances affects household risk taking behavior. Specifically, we show that the likelihood and the amount of gambling increase with the quality of informal insurance. The findings suggest that households who are more insured shift their portfolios toward riskier investments.
    Keywords: Gambling industry ; Payment systems ; Insurance
    Date: 2007
  14. By: van de Walle, Dominique; Ren Mu
    Abstract: While most economists assume that aid is fungible, most aid donors behave as if it is not. The authors study recipient government responses to development project aid in the context of a specific World Bank-financed project. They estimate the impact of a rural road rehabilitation project in Vietnam on the kilometers of roads actually rehabilitated and built. Using local-level survey data collected for this purpose, the authors test whether the evidence supports the standard economic argument that there will be little or no impact on rural roads rehabilitated, given fungibility. They find evidence that, although project aid impacts on rehabilitated road kilometers were less than intended, more roads were built in project areas. The results suggest that there was fungibility within the sector, but that aid largely stuck to that sector.
    Keywords: Transport Economics Policy & Planning,Rural Roads & Transport,Rural Transport,Roads & Highways,Housing & Human Habitats
    Date: 2007–02–01

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