nep-sea New Economics Papers
on South East Asia
Issue of 2008‒01‒26
eight papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Indonesia’s Ponzi Economy: Does Financial Crisis Give a Lesson By Agustinus, Prasetyantoko; Luhur, Fajar-Marta
  2. High Growth and Low Consumption in East Asia: How to Improve Welfare While Avoiding Financial Failures By Céline Rochon; Maral Shamloo; Andrew Feltenstein
  3. Determinants of Corporate Performance of Listed Companies in Indonesia By Agustinus, Prasetyantoko; Rachmadi, Parmono
  4. The Role of Institutional Quality in a Currency Crisis Model By Yi Wu
  5. Facilitating Trade and Structural Adjustment: Experience in Non-Member Economies By Emilio Antonio; Osamu Onodera
  6. Taking stock: global imbalances. Where do we stand and where are we aiming to? By Andrea Fracasso
  7. Mixing Family With Business: A Study of Thai Business Groups and the Families Behind Them By Marianne Bertrand; Simon Johnson; Krislert Samphantharak; Antoinette Schoar
  8. Faciliter les échanges et l’ajustement structurel : l’expérience des économies non membres By Emilio Antonio; Osamu Onodera

  1. By: Agustinus, Prasetyantoko; Luhur, Fajar-Marta
    Abstract: After ten years of Asian crisis, it is still unclear what the roots of crises are really. This paper seeks to the explanation of the evolution of the capitalism system in Indonesia for gaining an important indication of the root of crisis as well as the future risk of crises of the Indonesia’s economy. This paper uses the micro evidence based on firm-level data in order to understand the behaviour of economic agents due to financial crisis by a question of whether the behaviour changes. Specifically, this paper is concerned with the financing behaviour of the firms in understanding the capitalism system which exists and evolves in Indonesia today based on the Minsky’s taxonomy (hedge, speculative or ponzi system of capitalism). Furthermore, this paper should have an implication in policies level by giving an early warning, whether Indonesia is still vulnerable to the crisis in the future. This paper begins by analyzing the financial ratio of listed companies in Indonesia by using the accounting data provided by the Jakarta Stock Exchange (JSX) and Indonesian Capital Market Directory published by ECFIN (Institute for Economic and Finance Research) in various publications
    Keywords: financing policies; financial instability; financial crisis
    JEL: D21 G32
    Date: 2008–01
  2. By: Céline Rochon; Maral Shamloo; Andrew Feltenstein
    Abstract: This paper analyzes certain policies that are typical of a number of rapidly growing East Asian countries in which a fixed exchange rate, combined with a surplus labor market, has made domestic assets relatively inexpensive, generating high rates of FDI as well as domestic capital formation. This "investment hunger" can lead to unanticipated declines in the returns to investment, and resulting financial insolvencies. Private consumption remains low and there are concerns that high savings rates cannot be sustained. We construct a dynamic general equilibrium model and apply it to a stylized Asian economy, loosely based upon China. We calibrate a benchmark equilibrium, and carry out various counterfactual simulations to analyze alternative policies, in particular tax cuts and exchange rate revaluations, as instruments in increasing private consumption while avoiding bank failures.
    Keywords: Economic growth , China, People's Republic of , Consumption , Financial crisis , Exchange rates , Labor markets ,
    Date: 2007–12–18
  3. By: Agustinus, Prasetyantoko; Rachmadi, Parmono
    Abstract: This paper is basically concerned with the factors determining corporate performance of listed companies in Indonesia, especially due to the 1997 financial crisis. The main results are fairly interesting in which firm size is positively related to firm profitability, but it is not related to market capitalization. It means that firm size is matter on the fundamental value of the firms, but it should not be important variable for market value of the firms. By employing panel data of 238 listed companies in Jakarta Stock Exchange (JSX) in the period 1994 – 2004 as the sample, we also find that macro factors are more important variables inducing firm performance, rather than firm-specific factors. It could be due to the 1997 great crisis. Our results also show that ownership factor matters on firm performance by the evidence that firms with majority foreign ownership have much higher performance in both measurements namely return on asset (ROA) and market capitalization growth than domestically-owned firms. Ordinary Least Square (OLS) is employed for the estimation procedure in this paper.
    Keywords: firm performance; firm strategy and financial crisis
    JEL: E32 L2
    Date: 2008–01
  4. By: Yi Wu
    Abstract: This paper is a theoretical study of the impact of institutional quality on currency crises from a public finance point of view. Recent empirical studies leave little doubt that weak institutions, including high levels of corruption, hinder economic performance. After the East Asian crisis, many observers have pointed to widespread corruption and crony capitalism as an underlying cause. Despite the popularity of the claim, there are only limited empirical and especially theoretical studies on the link between institutional quality and currency crises. This paper intends to fill in this void. We model institutional weakness as an inefficiency of the tax collection system. The model derived here shows that institutional weakness generally increases the likelihood of the existence of a self-fulfilling crisis equilibrium, and leads to larger currency devaluation when crises happen. However, this relationship could reverse when institutional weakness is very severe.
    Keywords: Financial crisis , Corruption , Tax collection , Tax systems ,
    Date: 2008–01–10
  5. By: Emilio Antonio; Osamu Onodera
    Abstract: This paper is the second of four country case studies which is a part of a broader research programme addressing trade and structural adjustment issues in non-member economies which was conducted as a follow-up to Trade and Structural Adjustment: Embracing Globalisation (OECD, 2005) which identified policies for successful trade-related structural adjustment. This paper studies the trade liberalisation experience of the Philippines from the 1980s. The report consists of 7 main parts; Part 1 provides the introduction, part 2 looks at the economic policies in the Philippines from the 1970s, and part 3 takes a general look at the general structure of the economy. Part 4 takes a closer look at the trade liberalisation in the Philippines which was implemented in three phases, (1) initial trade reforms (1981-88), (2) second phase (1991-93) and (3) third phase (1994-96). Part 5 takes an overview of the structural adjustments which took place in manufacturing and agriculture, with Part 6 taking a closer look at four sectors, electronics, food processing, cement, and business process outsourcing sectors. Part 7 concludes with lessons learnt and opportunities and challenges for further liberalisation. Despite considerable liberalisation including in trade policy since the 1980s, the Philippines economy posted only lacklustre performance initially. After a growth period in the 1990s and the Asian crisis, it is only in the recent past that some of the reforms are starting to pay off. The importance of a stable political and macroecnomic environment, need for appropriate exchange rates, need for early elimination of quantitative restrictions in trade reform, early deregulation on FDI are some of the lessons learnt. While challenges remain, better results are expected in the future if complemented with further reforms.
    Keywords: trade, liberalisation, exchange rate policy, tariffs, structural adjustment, Philippines, Macroeconomic instability, import-substitution, electronics, export processing zones, Food processing, cement, business process outsourcing and IT services, liberalization
    Date: 2007–10–29
  6. By: Andrea Fracasso
    Abstract: For two and a half decades the US has accumulated large current account deficits, mainly financed (though to different extents at different times) by the savings of the sluggish European and Japanese economies, of the fast-growing Asian countries and of the oil-producing nations. This peculiar situation represents what has been called the global imbalances phenomenon. This work reviews and analyses several contrasting contributions on a series of issues regarding global imbalances, namely their nature, their underlying forces, their past evolution and their expected developments. This work also contributes to the literature in that it distinguishes and clarifies the issues of sustainability and vulnerability of global imbalances. In addition, this work tackles the relationship between global imbalances and the recent reforms and stance of the IMF, the link between global imbalances and international reserve accumulation, the implications of global imbalances on economic theory and modelling, and the compatibility of global imbalances with two alternative and stylized representations of the current international monetary system.
    JEL: F02 F3 F4 F5
    Date: 2007
  7. By: Marianne Bertrand; Simon Johnson; Krislert Samphantharak; Antoinette Schoar
    Abstract: Families run a large fraction of business groups around the world. In this paper, we analyze how the structure of the families behind these business groups affects the groups' organization, governance and performance. To address this question, we constructed a unique data set of family trees and business groups for nearly 100 of the largest business families in Thailand. We find a strong positive association between family size and family involvement in the ownership and control of the family business. The sons of the founders play a central role in both ownership and board membership, especially when the founder of the group is gone. The availability of more sons is also associated with lower firm-level performance, especially when the founder is no longer present. We identify a possible governance channel for this performance effect. Excess control by sons, but not other family members, is associated with lower firm performance. In addition, excess control by sons increases with the number of sons and with the death of the founder. One hypothesis that emerges from our analysis is that part of the decay of family-run groups over time may be due to a dilution of ownership and control across a set of equally powerful descendants of the founder, which creates a race to the bottom in tunneling resources out of the group firms.
    JEL: D13 G30 J12 Z19
    Date: 2008–01
  8. By: Emilio Antonio; Osamu Onodera
    Abstract: Le document ci-après présente la deuxième des quatre études de cas menées dans le cadre d'un programme de recherche plus général consacré aux échanges et aux ajustements structurels dans plusieurs pays non-membres de l'OCDE ; ces travaux font suite à l'étude intitulée Les échanges et l'ajustement structurel : les enjeux de la mondialisation (OCDE, 2005), qui définissait les mesures nécessaires à la réussite de l'ajustement structurel dans le domaine des échanges. Le présent document porte sur la libéralisation du commerce aux Philippines à partir des années 1980. Le rapport comprend sept grandes sections : introduction (partie 1) ; historique de la politique économique des Philippines à compter des années 1970 (partie 2) ; aperçu général de la structure de l'économie (partie 3) ; examen détaillé de la libéralisation des échanges aux Philippines, réalisée en trois phases - 1981-1988 (premières réformes), 1991-1993 (deuxième phase) et 1994-1996 (troisième phase) - (partie 4) ; aperçu global des ajustements structurels apportés dans les domaines de l'agriculture et des produits manufacturés (partie 5) ; étude détaillée de quatre secteurs - électronique, agroalimentaire, ciment et délocalisation des processus d'affaires (partie 6) ; enseignements tirés, opportunités et défis concernant la poursuite de la libéralisation (partie 7). Bien que la libéralisation ait considérablement progressé depuis les années 1980, y compris dans le domaine de la politique commerciale, l'économie des Philippines n'a d'abord affiché que des performances peu enthousiasmantes. Après une période de croissance dans les années 1990, la crise asiatique est survenue et les réformes n'ont commencé à porter leurs fruits que récemment. Parmi les enseignements tirés au fil des années, on peut citer : l'importance d'un environnement politique et macroéconomique stable, la nécessité de taux de change appropriés, la nécessité d'une suppression rapide des restrictions quantitatives qui pèsent sur la réforme des échanges et d'une déréglementation prochaine des investissements directs étrangers (IDE). Il est vrai que certaines difficultés subsistent, mais l'on s'attend à des résultats plus convaincants à l'avenir si les réformes se poursuivent.
    Keywords: libéralisation, ajustement structurel, échanges, Philippines, instabilité macroéconomique, barrières douanières, politiques de taux de change, substitution aux importations, Électronique, zones franches d’exportation, agroalimentaire, ciment, sous-traitance des processus d’affaires, services informatiques
    Date: 2008–01–09

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