nep-sea New Economics Papers
on South East Asia
Issue of 2007‒06‒11
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Globe: Asian Growth and Trade Poles: India, China, and East and Southeast Asia By Karen Thierfelder; Scott McDonald; Sherman Robinson
  2. Institutional Development, Financial Deepening and Economic Growth: Evidence from China By Paul Wachtel; Iftekhar Hasan; Mingming Zhou
  3. Bank Restructuring in Asia: Crisis management in the aftermath of the Asian financial crisis and prospects for crisis prevention -Malaysia- By ITO Takatoshi; HASHIMOTO Yuko
  4. Exchange Rate Pass-Through and Domestic Inflation: A Comparison between East Asia and Latin American Countries By ITO Takatoshi; SATO Kiyotaka
  5. Monetary policy, structural break, and the monetary transmission mechanism in Thailand By Hesse, Heiko
  6. GenerAsians Learn Chinese: The Asian American Youth Generation and New Class Formations By Deborah Wong
  7. Poverty in Rural Cambodia: The Differentiated Impact of Linkages, Inputs and Access to Land By Engvall, Anders; Sjöberg, Örjan; Sjöholm, Fredrik
  8. 'De-industrialisation' and colonial rule: The cotton textile industry in Indonesia, 1820-1941 By Pierre van der Eng
  9. Impacts of Japanese FTAs/EPAs: Post Evaluation from the Initial Data By ANDO Mitsuyo
  10. An Economic Analysis of Drawing Lines in the Sea By Paul Hallwood
  11. Customer Market Power and the Provision of Trade Credit; Evidence from Eastern Europe and Central Asia By Van Horen, Neeltje
  12. Oil Price Movements and the Global Economy: A Model-Based Assessment By Selim Elekdag; René Lalonde; Douglas Laxton; Dirk Muir; Paolo Pesenti
  13. The Simple Economics of Extortion: Evidence from Trucking in Aceh By Benjamin A. Olken; Patrick Barron
  14. Economisch belang van de Belgische havens : Vlaamse zeehavens en Luiks havencomplex – verslag 2005 By Frédéric Lagneaux
  15. Negotiating Memories of War: Arts in the Vietnamese American Communities By Yen Le Espiritu
  16. The Simple Economics of Extortion: Evidence from Trucking in Aceh By Barron, Patrick; Olken, Benjamin
  17. High Heterogeneous Information and Investment under Uncertainty By Shawn Ni; Ronald Ratti
  18. Dynamic Multi-Level Analysis of Households' Living Standards and Poverty: Evidence from Vietnam By Arnstein Aassve; Bruno Arpino

  1. By: Karen Thierfelder (United States Naval Academy); Scott McDonald (The University of Sheffield); Sherman Robinson (University of Sussex)
    Abstract: Using a global general equilibrium trade model, this study analyzes the impact on developing countries, of (1) the dramatic expansion of trade by India, China, and an integrated East and Southeast (E&SE) Asia trade bloc and (2) productivity growth in the region. China is an integral member of the E&SE Asia bloc, with strong links through value chains and trade in intermediate inputs, while India is not part of any trade bloc. The analyses consider the importance of their different degrees of integration into regional and global economies, focusing on potential complementarities and competition with other developing countries.
    Date: 2007–06
  2. By: Paul Wachtel; Iftekhar Hasan; Mingming Zhou
    Date: 2007
  3. By: ITO Takatoshi; HASHIMOTO Yuko
    Abstract: This paper analyzes the bank restructuring process in Malaysia from the currency crisis of 1997 to present. Even though the banking sector in Malaysia had relatively lower NPLs compared to other Asian countries, financial sector suffered financial crisis and various problems emerged. This paper covers topics such as setting up financial restructuring agencies, a scheme of capital injection to weak banks, and a corporate restructuring process conducted by the Malaysian government. Plans of Mergers/ closures of banks, setting up an asset management company, a recapitalization agency, and a corporate debt restructuring committee, such as Pengurusan Danaharta Nasional Berhad (Danaharta), Danamodal Nasional Berhad (Danamodal), and the Corporate Debt Restructuring Committee (CDRC), were accompanied by several policy measures such as an exchange rate system pegged to the U.S. dollar, capital controls, and a fiscal stimulus package. Through these measures, the authorities, to some extent, succeeded in bringing down NPLs and in merging several banks to some extent. The reform was considered basically completed by 2002. The banking sector was reorganized with 10 banking groups, and two of the restructuring agencies were closed by 2003.
    Date: 2007–06
  4. By: ITO Takatoshi; SATO Kiyotaka
    Abstract: Currency crises, accompanied by large devaluation, tend to have significant impacts on the domestic economy. If the exchange rate also depreciates in real terms, the economy can take advantage of the export price competitiveness to promote its exports. In contrast, if the currency devaluation induces an increase in domestic inflation, the currency value in real terms will return toward the pre-crisis level, which results in a loss of the export price competitiveness and, hence, a slow recovery from the severe economic downturn. This paper analyzes the degree of domestic price responses to the exchange rate changes in crisis-hit countries in East Asian and Latina American countries and Turkey in order to reveal why the post-crisis inflation performance was very different across countries. The structural vector autoregression (VAR) technique is applied to examining exchange rate pass-through. The degree of exchange rate pass-through is found to be higher in Latin American countries and Turkey than in East Asian countries with a notable exception of Indonesia. In particular, Indonesia, Mexico, Turkey and, to a lesser extent, Argentina show a strong response of CPI to the exchange rate shock. More noteworthy is that excessive supply of base money played an important role in increasing the domestic inflation rate in Indonesia, while such effect is not observed in other countries, which indicates the importance of credible monetary policy committed to price stability in order to prevent the post-crisis inflation. Shock transmission from import prices or PPI to CPI is quite large in Indonesia, Mexico and Turkey. This finding implies that the channel of shocks at different stage of pricing chain may be an additional factor in high domestic inflation.
    Date: 2007–06
  5. By: Hesse, Heiko
    Abstract: The paper studies monetary policy and the monetary transmission mechanism in Thailand in light of the Asian crisis in 1997. Existing studies that adopt structural vector auto-regression (VAR) approaches do not give a clear and agreed-upon view how monetary shocks are transmitted to the Thai economy that is subject to structural breaks. This study explicitly models a pre-crisis and post-crisis cointegrated VAR model. This analysis supports arguments that the trinity of open capital markets, pegged exchange rate regime, and monetary policy autonomy is inconsistent in the pre-crisis period. In contrast, the model points to an effective monetary policy in the post-crisis period. Further, the author analyzes the common driving trends of the model.
    Keywords: Economic Stabilization,Economic Theory & Research,Macroeconomic Management,Fiscal & Monetary Policy,Financial Economics
    Date: 2007–06–01
  6. By: Deborah Wong (University of California, Riverside)
    Abstract: Why is Jin telling us that we should learn Chinese? Is there an Asian American youth culture? How does immigration and relative generation define it? This essay addresses Americans of Asian descent1 who are roughly 18 to 25 years old: I focus on the mass-mediated popular cultures that they consume and create. My central question is how young Americans of Asian descent are in some ways moving away from the ‘Asian American’ cultural and political project created in the 1960s-70s that has driven Asian American Studies to date. This youth generation is no more homogeneous than any other, and my purpose here is to think about its identifications because I believe minoritarian politics are still essential to American democratic potential. Further, the relationship between immigration, transnational movement, and class-defined democracy is the challenge of this historical moment. My interest in two contrasting Asian American youth cultures is thus embedded in these broader questions, and for me have a certain urgency. I argue that this youth generation responds to the conditions of their moment in ways that
    Date: 2006–06
  7. By: Engvall, Anders (Stockholm School of Economics); Sjöberg, Örjan (Stockholm School of Economics); Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN))
    Abstract: Cambodia has been growing rapidly over the past few years but still remains one of the poorest countries in East Asia. In particular, poverty is widespread in rural Cambodia. This paper examines rural poverty in Cambodia with a view to furthering our understanding of the factors that might explain its occurrence and persistence. Setting out from the existing literature, it appears that reduced rural poverty in Cambodia would have to rest on two pillars. Firstly, improvements in agricultural productivity are necessary. Secondly, other income earning opportunities for the rural population have to be established. Using the 2004 Cambodian Socio-Economic Survey, and focusing on the binding constraints to development and poverty alleviation, we add detail to this picture. Our econometric results show that the main causes to poverty differ between landowners and landless and between different regions. Inputs to agriculture are critical to the landowning poor whereas linkages with the rest of the economy, while also essential to landowners, are of vital importance to the landless poor if their lot is to be improved.
    Keywords: Asia; Cambodia; Poverty; Rural; Agriculture; Linkages
    JEL: O12 O13 O18
    Date: 2007–05–26
  8. By: Pierre van der Eng
    Abstract: Did colonial rule in Indonesia have a de-industrialising impact? Using the case of the cotton textile industry, this paper finds little evidence. Value added in the industry increased in Java during 1820-71, increased more than three-fold during 1874-1914 and doubled during 1934-41. Most activity involved finishing of imported cotton cloth. Spinning and weaving increased marginally, as high labour intensity of small-scale production, marginal local raw cotton production, and competitive international markets for yarn and cloth precluded domestic production. Unfavourable real exchange rates discouraged investment in modern spinning and weaving ventures. From 1934, production increased rapidly due to trade protection and technological change in small-scale weaving.
    Keywords: Cotton textiles, manufacturing, Indonesia, trade policy, technological change
    JEL: F13 L67 N65 O14 O33
    Date: 2007
  9. By: ANDO Mitsuyo
    Abstract: This paper attempted to assess impacts of existing Japanese EPAs in their initial years and to draw policy implications for possible future FTAs/EPAs. Our gravity model estimations as well as detailed analysis on trade and actual tariff reduction by EPAs demonstrated that the Japan-Singapore EPA has almost no direct impact on trade since actual reduction of tariffs by the EPA is quite limited. On the other hand, our empirical investigation confirmed a certain degree of positive impact of the Japan-Mexico EPA on trade, particularly on the export side, and investment. Several important outcomes of the EPA beyond tariff removal are also revealed. Discussion on future designs of FTAs/EPAs includes issues on some possible abuse of phasing out tariffs, desirable structure of EPA tariffs, effective utilization of EPAs beyond trade liberalization, and the relationship with multilateral trade liberalization.
    Date: 2007–06
  10. By: Paul Hallwood (University of Connecticut)
    Abstract: It is shown that low dispute costs relative to expected resource rents from oceanic resources favor drawn out disputes over maritime boundaries; asymmetric dispute costs favor agreement on boundaries wanted by the low dispute cost state party; and high symmetric dispute costs favor formation of joint development zones. The fact that most maritime boundaries have not yet been drawn suggests that state parties think that resource rents that can be drawn from the oceans are high relative to dispute costs. Moreover, the recent mini-trend towards JDZs in East Asia suggests that state parties in the area have recently reassessed dispute costs as being higher than previously believed.
    Keywords: Law of the Sea, joint development zones, maritime boundaries, marine boundaries, lines in the sea
    JEL: F51 Q22 Q58
    Date: 2007–05
  11. By: Van Horen, Neeltje
    Abstract: Statistics show that the sale of goods on credit is widespread among firms even when they are capital constrained and thus face relatively high costs in providing trade credit. This study provides an explanation for this by arguing that customers that possess strong market power are able to increase their customer surplus by demanding to purchase the goods on credit. This gain in customer surplus increases with the degree of asymmetric information between buyer and seller with respect to product quality. Therefore, firms that are perceived as risky are especially subject to the market power of the customer and have to sell their goods on credit. Using detailed firm-level data from a large number of firms in Eastern Europe and Central Asia, this paper finds evidence consistent with this hypothesis. We find a strong positive correlation between customer market power and trade credit provision. Furthermore, this relationship is especially strong when the supplier is more risky and in countries with limited financial sector development or weak legal system.
    JEL: L14 L10
    Date: 2007–06
  12. By: Selim Elekdag; René Lalonde; Douglas Laxton; Dirk Muir; Paolo Pesenti
    Abstract: We develop a five-region version (Canada, an oil exporter, the United States, emerging Asia and Japan plus the euro area) of the Global Economy Model (GEM) encompassing production and trade of crude oil, and use it to study the international transmission mechanism of shocks that drive oil prices. In the presence of real adjustment costs that reduce the short- and medium-term responses of oil supply and demand, our simulations can account for large endogenous variations of oil prices with large effects on the terms of trade of oil-exporting versus oil-importing countries (in particular, emerging Asia), and result in significant wealth transfers between regions. This is especially true when we consider a sustained increase in productivity growth or a shift in production technology towards more capital- (and hence oil-) intensive goods in regions such as emerging Asia. In addition, we study the implications of higher taxes on gasoline that are used to reduce taxes on labor income, showing that such a policy could increase world productive capacity while being consistent with a reduction in oil consumption.
    Keywords: Economic models; Inflation and prices; International topics
    JEL: E66 F32 F47
    Date: 2007
  13. By: Benjamin A. Olken; Patrick Barron
    Abstract: This paper tests whether the behavior of corrupt officials is consistent with standard industrial organization theory. We designed a study in which surveyors accompanied truck drivers on 304 trips along their regular routes in two Indonesian provinces, during which we directly observed over 6,000 illegal payments to traffic police, military officers, and attendants at weigh stations. Using plausibly exogenous changes in the number of police and military checkpoints, we show that market structure affects the level of illegal payments, finding evidence consistent with double-marginalization and hold-up along a chain of vertical monopolies. Furthermore, we document that the illegal nature of these payments does not prevent corrupt officials from extracting additional revenue using complex pricing schemes, including third-degree price discrimination and a menu of two-part tariffs. Our findings illustrate the importance of considering the market structure for bribes when designing anti-corruption policy.
    JEL: D73 O12
    Date: 2007–06
  14. By: Frédéric Lagneaux (National Bank of Belgium, Microeconomic Information Department)
    Abstract: This paper is an annual publication issued by the Microeconomic Analysis service of the National Bank of Belgium. The Flemish maritime ports - Antwerp, Ghent, Ostend, Zeebrugge - and the Autonomous Port of Liège play a major role in their respective regional economies and in the Belgian economy, not only in terms of industrial activity but also as intermodal centres facilitating the commodity flow. This update paper provides an extensive overview of the economic importance and development of the Flemish maritime ports and the Liège port complex in the period 2000 - 2005, with an emphasis on 2005. Focusing on the three major variables of value added, employment and investment, the report also provides some information about the financial situation in each port. A global indication concerning the financial health of the companies studied is also provided. These observations are linked to a more general context, along with a few cargo statistics. Annual accounts data from the Central Balance Sheet Office were used for the calculation of direct effects, the study of financial ratios and the analysis of the social balance sheet. The indirect effects of the activities concerned were estimated in terms of value added and employment, on the basis of data from the National Accounts Institute. 2005 was a year of steady growth for most Flemish maritime ports, in terms of quantity of cargo handled and value added, although there was a slight deceleration in comparison to the previous year. The employment situation was, by contrast, somewhat mixed, while investment soared, far exceeding the pace recorded since 2000. The current changes in world trade patterns are having a substantial impact on the operations of the Flemish and Liège ports, situated at the heart of one of the wealthiest and busiest trading regions of the world. To cope with the accelerating internationalisation of port competition and the tremendous growth of containerised seaborne transport, the ports concerned need to constantly adapt their infrastructures, through innovation and investment. As major logistic centres, they have to face the challenge of responding to increasing demand in terms of capacity, while adding as much value as possible to the goods passing through them. Accessibility and seamless connections with the hinterland are key to their success and durability. This has become absolutely vital in a climate of growing regional and international competition, accentuated by the booming Asian economies. The port of Liège is striving to turn a threat into an opportunity. In the wake of the Cockerill Sambre blast furnace closure, the Liège port complex is undergoing a major restructuring. Cargo figures were down sharply in 2005, while the economic situation of the area was dominated by stagnation or decline in terms of value added, employment and investment. However, this fall could be shortlived since the revival expected from the development of value-added logistics will also generate increased activity, traffic and demand for manpower. The present report provides a comprehensive account of these issues, giving details per economic sector, though the comments are confined to the main changes that occurred in 2005.
    Keywords: branch survey, maritime cluster, subcontracting, indirect effects, transport intermodality, public investments.
    JEL: C67 H57 J21 L22 L91 L92 R15 R34 R41
    Date: 2007–06
  15. By: Yen Le Espiritu (University of California, San Diego)
    Abstract: In the United States, the writing on the Vietnam War involves the highly organized and strategic forgetting of the Vietnamese people. In a highly original work that investigates the production of American cultural memory, Marita Sturken shows that in the United States, the narrative of the Vietnam War foregrounds the painful experience of the Vietnam veterans in such a way that the Vietnamese people are forgotten: “They are conspicuously absent in their roles as collaborators, victims, enemies, or simply the people whose hand and over whom (supposedly) this war was fought” (Sturken 1997, 62). Likewise, US scholars have refused to treat Vietnamese refugees as genuine subjects, with their own history, culture, heritage, and political agendas.
    Date: 2006–06
  16. By: Barron, Patrick; Olken, Benjamin
    Abstract: This paper tests whether the behaviour of corrupt officials is consistent with standard industrial organization theory. We designed a study in which surveyors accompanied truck drivers on 304 trips along their regular routes in two Indonesian provinces, during which we directly observed over 6,000 illegal payments to traffic police, military officers, and attendants at weigh stations. Using plausibly exogenous changes in the number of police and military checkpoints, we show that market structure affects the level of illegal payments, finding evidence consistent with double-marginalization and hold-up along a chain of vertical monopolies. Furthermore, we document that the illegal nature of these payments does not prevent corrupt officials from extracting additional revenue using complex pricing schemes, including third-degree price discrimination and a menu of two-part tariffs. Our findings illustrate the importance of considering the market structure for bribes when designing anti-corruption policy.
    Keywords: corruption; double-marginalization; extortion
    JEL: D73
    Date: 2007–06
  17. By: Shawn Ni (Department of Economics, University of Missouri-Columbia); Ronald Ratti (Department of Economics, University of Missouri-Columbia)
    Abstract: A sudden change in investment environment shifts objective uncertainty (characterized by parameters that determine the distribution of returns) and at the same time heightens subjective uncertainty (about the data generating parameters) unevenly across investors. For a given state of economy, the uncertainty facing the investor is the sum of the uncertainty in the data and the uncertainty of the investors assessment of the expected return distribution. In this model the option value of waiting to invest depends not only on the objective uncertainty as in the traditional theory but varies systematically with investor information and Bayesian updating of outlook for the project. Simulation of the model suggests that during a state characterized by greater uncertainty and higher potential expected return investment will be by an abnormally high percentage of informed investors and may increase overall. For over 10,000 instances of firm-level FDI data for Korea from 1996 to 2001, regression results are consistent with the hypothesis that disproportionably more FDI is made by experienced (hence more informed) investors during heightened uncertainty.
    Keywords: uncertainty, investor information, option value, Bayesian updating, FDI
    JEL: D8 E22 F21
    Date: 2007–05–15
  18. By: Arnstein Aassve (Institute for Social and Economic Research); Bruno Arpino (University of Florence)
    Abstract: The paper investigates the role of multi-level structures in poverty analysis based on household level data. We demonstrate how multi-level models can be applied to standard poverty analysis and highlight its usefulness in terms of assessing the extent community characteristics matter in determining poverty status and dynamics. We provide two applications. The first is an example of a growth model that control for characteristics measured at the initial time period, and considers directly to what extent the same characteristics contribute to explain changes in economic wellbeing over time. In the second application we model the determinants of escaping poverty. Both applications use longitudinal data from Vietnam recorded at two points in time during the nineties, a period where Vietnam experienced strong economic growth. We demonstrate that failing to control for multi-level data structures could give incorrect inference about the effect of covariates of interest. We also demonstrate how the multi-level models can be used for regional and community level policy analysis that otherwise is difficult to implement in more standard regression analysis.
    Date: 2007–05

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