nep-sea New Economics Papers
on South East Asia
Issue of 2007‒11‒17
sixteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Export-Total Factor Productivity Growth Nexus in East Asian Economies By Hailin Liao; Xiaohui Liu
  2. Globalization and Labor Market Integration in Late Nineteenth- and Early Twentieth-Century Asia By Gregg Huff; Giovanni Caggiano
  3. Evaluation of Non-Survey International IO Construction Methods with the Asian-Pacific Input-Output Table By Oosterhaven, Jan; Stelder, Dirk; Inomata, Satoshi
  4. Financial Transition in Pre-World War II Japan and Southeast Asia By Gregg Huff
  5. Border Industry in Myanmar: Turning the Periphery into the Center of Growth By Kudo, Toshihiro
  6. Determinants of Business Cycle Synchronization in East Asia: An Extreme Bound Analysis By Toan Nguyen
  7. Myanmar and Japan: How Close Friends Become Estranged By Kudo, Toshihiro
  8. Evaluating the Effectiveness of GMS Economic Corridors: Why is There More Focus on the Bangkok-Hanoi Road than the East-West Corridor? By Ishida, Masami
  9. Projecting Progress toward the Millennium Development Goals By White, Howard; Blondal, Nina
  10. Comparing the Networks of Ethnic Japanese and Ethnic Chinese in International Trade By Kumagai, Satoru
  11. Neural Network Based Models for Efficiency Frontier Analysis: An Application to East Asian Economies' Growth Decomposition By Hailin Liao; Bin Wang; Tom Weyman-Jones
  12. Industrialization in Egypt: Historical Development and Implications for Economic Policy By Ronia Hawash
  13. Assessing the Competitiveness of International Financial Services in Particular Locations: A Survey of Methods and Perspectives By George von Furstenberg
  14. Does Openness to Trade Make Countries More Vulnerable to Sudden Stops, or Less? Using Gravity to Establish Causality By Eduardo Cavallo; Jeffrey Frankel
  15. A Flowchart Approach to Malaysia’s Automobile Industry Cluster Policy By Kuchiki, Akifumi
  16. Who Eats the Most? :Quantitative Analysis of Pork Barrel Distributions in the Philippines By Kawanaka, Takeshi

  1. By: Hailin Liao (Dept of Economics, Loughborough University); Xiaohui Liu (Business School, Loughborough University)
    Abstract: Despite increasing interest in the relationship between trade and macroeconomic performance in development economics, very limited studies have been conducted on the causal links between exports and productivity growth in Asian economies. This paper examines empirically the interplay between exports and productivity growth for eight East Asian economies in a multivariate framework by applying bound tests and modified Wald tests. The results indicate that causality is bi-directional in the case of Korea, Singapore and Taiwan, while unidirectional from productivity to exports for Mainland China, Hong Kong, Indonesia, Malaysia and the Philippines. These findings provide little support for the conventional export-led growth hypothesis.
    Keywords: TFP, exports, bound tests, lag-augmented VAR, East Asian economies
    Date: 2007–11
  2. By: Gregg Huff; Giovanni Caggiano
    Abstract: This article uses new data sets to analyze labor market integration between 1882 and 1936 in an area of Asia stretching from South India to Southeastern China and encompassing the three Southeast Asian countries of Burma, Malaya and Thailand. We find that by the late nineteenth century, globalization, of which a principal feature was the mass migration of Indians and Chinese to Southeast Asia, gave rise to both an integrated Asian labor market and a period of real wage convergence. Integration did not, however, extend beyond Asia to include core industrial countries. Asian and core areas, in contrast to globally integrated commodity markets, showed divergent trends in unskilled real wages
    Keywords: Globalization; Labor market integration; Migration; Southeast Asia; Terms of trade, real wage convergence
    JEL: F15 F22 J31 N35 O15
    Date: 2007–07
  3. By: Oosterhaven, Jan; Stelder, Dirk; Inomata, Satoshi
    Abstract: This paper presents four non-survey methods to construct a full-information international input-output table from national IO tables and international import and export statistics, and this paper tests these four methods against the semi-survey international IO table for nine East-Asian countries and the USA, which is constructed by the Institute of Developing Economies in Japan. The tests show that the impact on the domestic flows of using self-sufficiency ratios is small, except for Singapore and Malaysia, two countries with large volumes of smuggling and transit trade. As regards the accuracy of the international flows, all methods show considerable errors, of 10%-40% for commodities and of 10%-70% for services. When more information is added, i.e. going from Method 1 to 4, the accuracy increases, except for Method 2 that generally produces larger errors than Method 1. In all, it seems doubtful whether replacing the semi-survey Asian-Pacific IO table with one of the four non-survey tables is justified, except when the semi-survey table itself is also considered to be just another estimate.
    Keywords: Non-survey estimates, International trade, Input-output tables, East-Asia, Southeast Asia, United States
    JEL: C81 D57 R15
    Date: 2007–07
  4. By: Gregg Huff
    Abstract: This article compares Japan and Southeast Asia before the Second World War to explore the question Goldsmith posed: why, since financial transition in all countries follows the same path, should there be such remarkable differences in the speed of transition? Beginning after the Meiji Restoration in 1868 and starting from the same per capita income as Southeast Asian countries, Japan had, by 1913, built a modern financial system comparable to those in the West. But finance in Southeast Asian countries was (and remained in 1939) little developed, dominated by metropolitan interests, heavily reliant on informal finance, and geared towards primary commodity exports. The article argues that Southeast Asia's no more than partial financial transition is explained by a continued ability to tap natural resources, limited technological change, and the laissez-faire stance of colonial governments. Japan, by contrast, could not depend on abundant resources for growth. Its experience demonstrates how nationalist objectives of military power and industrialisation can motivate government to accelerate financial transition
    Date: 2007–07
  5. By: Kudo, Toshihiro
    Abstract: The Myanmar economy has not been deeply integrated into East Asia’s production and distribution networks, despite its location advantages and notably abundant, reasonably well-educated, cheap labor force. Underdeveloped infrastructure, logistics in particular, and an unfavorable business and investment environment hinder it from participating in such networks in East Asia. Service link costs, for connecting production sites in Myanmar and other remote fragmented production blocks or markets, have not fallen sufficiently low to enable firms, including multi-national corporations to reduce total costs, and so the Myanmar economy has failed to attract foreign direct investments. Border industry offers a solution. The Myanmar economy can be connected to the regional and global economy through its borders with neighboring countries, Thailand in particular, which already have logistic hubs such as deep-sea ports, airports and trunk roads. This paper examines the source of competitiveness of border industry by considering an example of the garment industry located in the Myanmar-Thai border area. Based on such analysis, we recognize the prospects of border industry and propose some policy measures to promote this on Myanmar soil.
    Keywords: Myanmar (Burma), Greater Mekong Sub-region (GMS), Regional cooperation, Border industry, Cross-border trade, Migrant workers, Logistics, Center-periphery, Regional economic cooperation, International trade, Apparel industry, Migrant labor
    JEL: F15 F22 J31 L67
    Date: 2007–10
  6. By: Toan Nguyen (Room 1, Engineering Building No. 4, Yoshida Honmachi, Sakyo-ku, Kyoto,Japan)
    Abstract: We investigate the determinants of business cycle synchronization in East Asia by testing the robustness of the potential candidates, using the technique of Extreme Bound Analysis in an OLS regression framework with Newey-West correction for heteroskedasticity and autocorrelation. We find that trade openness and intra-industry trade are major channels of business cycle synchronization. Although the similarity of monetary policies is statistically correlated with degree synchronization, we are unsure whether the former causes the latter or vise versa. The findings are probably good news to the proponents of the prospective currency union. If the trend of increasing openness and bilateral intra-industry trade continues in East Asia, it is expected that the costs of forming a currency union would diminish as business cycles become more synchronized.
    Keywords: Business Cycle Synchronization; East Asia; Extreme Bound Analysis; Currency Union
    Date: 2007–10
  7. By: Kudo, Toshihiro
    Abstract: Independent Myanmar and Japan had long held the strongest ties among Asian countries, and they were often known as having “special relations†or a “historically friendly relationship.†Such relations were guaranteed by the sentiments and experiences of the leaders of both countries. Among others, Ne Win, former strongman throughout the socialist period (1962-1988), was educated and trained by the Japanese army officers of the Minami Kikan, leading to the birth of the Burma Independence Army (BIA). Huge official development assistance provided by the Japanese government also cemented this special relationship. However, the birth of the present military government (SLORC/SPDC) in 1988 drastically changed this favorable relationship between the two countries. When the military seized power in a coup, Japan was believed to be the only country that possessed sufficient meaningful influence on Myanmar to encourage a move toward national reconciliation between the junta and the opposition party led by Aung San Suu Kyi. In reality, Japan failed to exert such an influence due to its sour relations with the military government and reduced influence in the new international and regional political landscape. What is worse, Japan seems to be losing its say on Myanmar issues in the international political arena, as it has been wavering in limbo between the sanctionist forces, such as the United States and the European Union, and engagement forces, such as China and ASEAN.
    Keywords: Myanmar (Burma), Japan, China, ODA, Foreign Relations, Cold War
    JEL: F14 F35 N45
    Date: 2007–08
  8. By: Ishida, Masami
    Abstract: Since the inauguration of the Greater Mekong Sub-region (GMS) Economic Cooperation Program in 1992, road infrastructure projects have played a very important role. Their economic significance, especially, has become a focal point after the introduction of the concept of the three economic corridors in 1998: the East-West Economic Corridor; the North-South Economic Corridor; and the Southern Economic Corridor (Figure 1). The completion of the Second International Mekong Bridge between Mukdahan, Thailand and Savannakhet, Laos was an epoch-making event in the development of the East-West Economic Corridor. The business community, however, has paid more attention to the Bangkok-Hanoi Road than the East-West Economic Corridor. This study examines the reasons why the former has received more focus than the latter, by using criteria such as population density and the economic scale at a provincial or state level. Thereafter, the effectiveness of other economic corridors is examined, by applying the same criteria.
    Keywords: Transportation, Gravity, Population, Regional Income, Thailand, Vietnam, Southeast Asia, Regional economic cooperation, Greater Mekong Sub-region (GMS)
    JEL: M31 R40 R58
    Date: 2007–10
  9. By: White, Howard; Blondal, Nina
    Abstract: The Millennium Development Goals have become the frame of reference for most of the development community: the standard by which performance will ultimately be judged. Given their importance, considerable attention has been paid as to whether these goals will be met or not. The overwhelming conclusions from such analyses are not positive. The goals will not be met. There are exceptions — education has expanded rapidly, although questions are raised about quality, and some countries, notably in South East Asia, but also South Asia to a lesser extent, have done well across the board and will meet several of the goals. But many countries, most especially in Africa, will not. The projections show that poverty will become more heavily concentrated in Africa in both relative and absolute terms. In addition, whilst urban poverty will increase, in 2015 poverty will remain a predominately rural phenomenon, with 60-70 per cent of the poor (depending on the measure) living in rural areas. But these projections are based on assumptions, including the assumption of business as usual. Various adverse shocks may result in far worse scenarios. On the other hand, more intensive promotion of propoor policies can mean that the goals might yet be realized.
    Keywords: Millennium Development Goals; poverty; developing countries
    JEL: O1 I3
    Date: 2007–08
  10. By: Kumagai, Satoru
    Abstract: In this paper I re-examined the trade enhancing effects of ethnic Chinese networks, found by Rauch and Trindade (2002), on a newer and extended data set. The effects are estimated by the gravity equation with the product of the population ratio (or absolute number) of the ethnic Chinese in both the importing and exporting countries, and are reaffirmed positive and statistically significant. I also compared the effects of two different ethnic Japanese networks, i.e., the networks of long-term Japanese stayers in foreign countries, and the networks of permanent Japanese residents in foreign countries. It is found that the former has stronger trade enhancing effects than the latter. This shows that the effects of ethnic networks on international trade can be generalized beyond the ethnic Chinese, and the ’cohesiveness’ of the ethnic network matters to the trade enhancing effects of the network.
    Keywords: Trade, Networks, East Asia, China, Japan, International trade, Overseas Chinese, Overseas Japanese
    JEL: F10
    Date: 2007–07
  11. By: Hailin Liao (Dept of Economics, Loughborough University); Bin Wang (Dept of Economics, Loughborough University); Tom Weyman-Jones (Dept of Economics, Loughborough University)
    Abstract: There has been a long tradition in business and economics to use frontier analysis to assess a production unit’s performance. The first attempt utilized the data envelopment analysis (DEA) which is based on a piecewise linear and mathematical programming approach, whilst the other employed the parametric approach to estimate the stochastic frontier functions. Both approaches have their advantages as well as limitations. This paper sets out to use an alternative approach, i.e. artificial neural networks (ANNs) for measuring efficiency and productivity growth for seven East Asian economies at manufacturing level, for the period 1963 to 1998, and the relevant comparisons are carried out between DEA and ANN, and stochastic frontier analysis (SFA) and ANN in order to test the ANNs’ ability to assess the performance of production units. The results suggest that ANNs are a promising alternative to traditional approaches, to approximate production functions more accurately and measure efficiency and productivity under non-linear contexts, with minimum assumptions.
    Keywords: total factor productivity, neural networks, stochastic frontier analysis, DEA, East Asian economies
    JEL: D24 C45 O47 O53 L60
    Date: 2007–11
  12. By: Ronia Hawash (Faculty of Management Technology, The German University in Cairo)
    Abstract: Although Egypt has begun industrialization long ago (1920's), it is still lagging far behind other countries that have begun the industrialization process much later than Egypt. The arising problem is that the Egyptian manufactures' sector is facing a deteriorating position in terms of trade, as the Egyptian economy faces competitive pressures from three fronts: First, countries within the MENA region which opened up their economies early and took positive measures to increase their competitiveness such as Tunisia and Morocco. Second, East Asian economies and European transition economies which are characterized by having more efficient productive structures using skilled labor and capital intensive activities and hence produce higher value added and better quality goods. Third, the large unskilled, labor abundant, low wage economies such as China, India and Bangladesh that have been integrating rapidly in the global economy, exerting growing competitiveness pressures on countries exporting low-skilled manufactures such as Egypt. This paper deduces that the constraints to having a booming industrial sector are related to the inefficient human resource development, technical constraints, legislative constraints and economic constraints. Accordingly, the paper recommends having more investments in human development, building the capabilities of the public sector, more enhancements for the small industries, and managing the process of integration in the global economy.
    Keywords: Industrial development, industrial policy
    JEL: O14 L60 E61
    Date: 2007–10
  13. By: George von Furstenberg (National Science Foundation and Indiana University Bloomington)
    Abstract: The International Financial Services (IFS) industry is restructuring internally and by location. This paper outlines the economic forces and analytical methods that may be applied to examine the economic drivers of these processes as ever more cities, particularly in East Asia, are vying to attract IFS providers and their clients. The ICT revolution has made those IFS that can be commoditized footloose in search of cost efficiency. High value-added financial services, however, will continue to be developed and coordinated in a few major IFS centers that have invested in, or capitalized on, regional or global advantages for themselves and their clients. The resulting pattern of functional fragmentation and geographic dispersal may facilitate analyses of the competitiveness of different lines of the financial services business in a particular location by methods such as Data Envelopment and Stochastic Frontier Analysis. These forms of comparative efficiency analysis have recently been questioned and their results reinterpreted.
    Keywords: offshore centers, international financial services, Data Envelopment Analysis, Stochastic Frontier Analysis
    JEL: E44 F30 G20
    Date: 2007–11
  14. By: Eduardo Cavallo (Inter-American Development Bank); Jeffrey Frankel (Harvard University)
    Abstract: Openness to trade is one factor that has been identified as determining whether a country is prone to sudden stops in capital inflows, crashes in currencies, or severe recessions. Some believe that openness raises vulnerability to foreign shocks, while others believe that it makes adjustment to crises less painful. Several authors have offered empirical evidence that having a large tradable sector reduces the contraction necessary to adjust to a given cut-off in funding. This would help explain lower vulnerability to crises in Asia than in Latin America. Such studies may, however, be subject to the problem that trade is endogenous. Using the gravity instrument for trade openness, which is constructed from geographical determinants of bilateral trade, this paper finds that openness indeed makes countries less vulnerable, both to severe sudden stops and currency crashes, and that the relationship is even stronger when correcting for the endogeneity of trade.
    Keywords: Sudden Stops, Current Account Adjustment, Trade, Gravity Model
    JEL: F32 F36 F41
    Date: 2007–10
  15. By: Kuchiki, Akifumi
    Abstract: In this paper, we apply a flowchart approach to investigate Malaysia’s automobile cluster policy. We investigate whether the industrial cluster policy has been successful or not, suggest policy prescriptions, and propose a way to prioritize policy measures. Our flowchart approach leads to the following three policy prescriptions: (1) Malaysian firms should establish sites for exporting compact cars with automatic transmissions; (2) actors in the public, semi-public and private sector should work to upgrade skilled labor; and (3) the central government should promote liberalization and deregulation to attract foreign firms into the supporting industries.
    Keywords: Malaysia, Automobile industry cluster, Policy prescriptions, Actors, Deregulation, Industrial estates, Industrial policy
    JEL: G18 O18 R11
    Date: 2007–09
  16. By: Kawanaka, Takeshi
    Abstract: Since a pork barrel is crucial in buying off voters, competition over the distributions among legislators has been considered as one of the main factors in producing congressional political dynamism and congressional institutions. This paper aims to test the theory of pork barrel distributions in the Philippines through OLS regression on the quantitative data of the 12th congress. The results show that some attributes of legislators are statistically significant in estimating pork barrel allocations, but, do not support the hypothesis that the legislators’ proximity to leaders is a determining factor in the distributions.
    Keywords: Pork barrel, Legislative politics, Budget, Philippines, Politics, Subsidies, Political corruption, Legislation
    Date: 2007–10

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