nep-sea New Economics Papers
on South East Asia
Issue of 2008‒03‒25
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Offshoring and Trade in East Asia: Statistical Evidences By WAKASUGI Ryuhei; ITO Banri; TOMIURA Eiichi
  2. Purchasing Power Parity in South Asia: A Panel Data Approach By Noman, Abdullah
  3. Hong Kong SAR as a Financial Center for Asia: Trends and Implications By Cynthia Leung; Olaf Unteroberdoerster
  4. Urbanization, educational expansion, and expenditures inequality in Indonesia in 1996, 1999, and 2002: By Akita, Takahiro; Miyata, Sachiko
  5. Agricultural technology choices for poor farmers in less-favored areas of South and East Asia: By Pender, John
  6. Geography vs. Institutions at the Village Level By Grimm, Michael; Klasen, Stephan
  7. Spatial coordination in public good allocation: Nonparametric evidence from decentralized Indonesia By Yamauchi, Futoshi; Chowdhury, Shyamal; Dewina, Reno
  8. Genetically modified food and international trade: The case of India, Bangladesh, Indonesia, and the Philippines By Gruere, Guillaume; Bouet, Antoine; Mevel, Simon
  9. Looking Toward the “New Era†Features and Background of the Japan-Thailand Economic Partnership Agreement By Aoki-Okabe, Maki
  10. Sterilization, Monetary Policy, and Global Financial Integration By Joshua Aizenman; Reuven Glick
  11. Asian-driven resource booms in Africa: Rethinking the impacts on development By Breisinger, Clemens; Thurlow, James
  12. The rise of supermarkets and their development implications: International experience relevant for India By Reardon, Thomas; Gulati, Ashok
  13. Spurious long-range dependence: evidence from Malaysian equity markets By chin, wencheong

  1. By: WAKASUGI Ryuhei; ITO Banri; TOMIURA Eiichi
    Abstract: Japanese shares of export and manufacturing value added in the global market have declined significantly, whereas those in China have risen sharply. Recent increase of global offshoring is noteworthy as a factor to cause changes in the structure of international trade and the production-depth. This paper examines how recent increase of offshoring by Japanese firms relates to the changes in the composition of export and manufacturing value added among Japan, China, East Asian countries, the US, and European countries, on the basis of our original survey of Japanese firmfs offshoring and the statistics of export and manufacturing production of these countries. It also discusses how the net cost saving of offshoring due to wage differentials and institutional factors will affect the sustainability of Japanese offshoring.
    Date: 2008–03
  2. By: Noman, Abdullah
    Abstract: The paper tests for PPP by investigating into the real exchange rates of seven South Asian countries. It employs two univariate unit root tests, namely, the ADF and the PP tests and two panel unit root tests, namely, the IPS and the CIPS tests. The univariate tests overwhelmingly fail to reject the unit root null. The IPS test also reinforces this result. The CIPS test that takes into account of cross section dependence produces mixed results. The findings, on the whole, fail to support stationarity of the South Asian real exchange rates and hence, PPP does not seem to be a valid proposition for the region.
    JEL: C23 G15 F31
    Date: 2008–03–17
  3. By: Cynthia Leung; Olaf Unteroberdoerster
    Abstract: We document Hong Kong SAR's evolving role as an international financial center in the Asia region, the importance of the growing special link with China as well as supply-side advantages, and outline the scope for future financial services growth. Hong Kong SAR has a long established track record as Asia's premier center for cross-border financial transactions. Further financial opening of China is likely to consolidate Hong Kong SAR's leading position as Asia's international financial center over the medium term. However, preserving Hong Kong SAR's first-mover advantage in the long-term calls for a development strategy that balances reaping the benefits from the special China role with the need to transcend into a truly international center in the long run.
    Keywords: Financial sector , Hong Kong Special Administrative Region of China , Capital flows , Banking , Foreign direct investment ,
    Date: 2008–03–05
  4. By: Akita, Takahiro; Miyata, Sachiko
    Abstract: "This paper considers urban-rural location and education as the main causes of expenditure inequality and attempts to examine inequality changes associated with urbanization and educational expansion in Indonesia from 1996 to 2002, using Indonesian monthly household consumption expenditure data. It introduces a hierarchical framework of inequality decomposition by population subgroups, which enables researchers to analyze inequality resulting from differences in educational attainment as well as inequality within each educational group, after the effects on inequality of urban–rural differences in the composition of educational attainments are removed. It finds that the urban sector's higher educational group contributes significantly to overall inequality. Inequality within the group increased significantly once Indonesia recovered from the financial crisis of 1998. This, together with educational expansion in urban areas, led to a conspicuous rise in urban inequality. Overall expenditure inequality has increased markedly, due not only to the rise in urban inequality but also a widening urban-rural disparity, accompanied by a population shift from the rural to the urban sector. Since more people will obtain higher education as the economy continues to develop, and more jobs requiring specialized skills become available in urban areas, urban inequality is likely to remain high. In order to mitigate urban inequality and thus overall inequality, the government needs to introduce policies that could reduce inequality among households whose heads have a tertiary education." from Authors' Abstract
    Keywords: Expenditure inequality, Urbanization, Educational expansion, Theil index, Two-stage nested inequality decomposition analysis, Public investment,
    Date: 2007
  5. By: Pender, John
    Abstract: "During the past several decades dramatic improvement has occurred in agricultural productivity and livelihoods in South and East Asia, stimulated by the Green Revolution and supported by several other factors. Nevertheless, hundreds of millions of rural people in less-favored environments of this region still live in poverty and received limited benefit from the Green Revolution. To address these problems, alternative technological approaches to the conventional Green Revolution technologies are being advocated to address the problems of poor farmers in less-favored areas of Asia, including low external input and sustainable agricultural approaches, organic agriculture and biotechnology. This paper reviews the literature on agricultural technology options in South and East Asia, drawing conclusions concerning technology strategies to reduce poverty among poor farmers in less-favored areas of this region. Among the main conclusions of the review are the following: 1. There is no technology approach that will work in all of the diverse circumstances of South and East Asia. 2. It is difficult, but not impossible, to identify and promote technologies that will substantially improve the livelihoods of poor people in less-favored areas. 3. Key requirements for technologies to be taken up by farmers and to have a substantial impact on reducing poverty are that the technology is profitable in a relatively short period of time; does not substantially increase risks; and is consistent with farmers' endowments of knowledge, management skill, land, labor, and other assets. 4. New technologies, by themselves, are not sufficient to bring about sustainable rural development and elimination of rural poverty, although they can have a major impact. Effective institutions and a stable and supportive policy environment are also critical. 5. Effective farmers' organizations accountable to poor farmers are a critical need for the success of all technologies in reaching the poor. Such organizations are needed to reduce the costs and improve the effectiveness of technical assistance efforts for all technologies, and are particularly important for technologies that require effective collective action and for increasing smallholders' access to markets for organic and other high value products. 6. Improved methods of technology dissemination are needed to reach poor farmers in less-favored areas. Top down technology transfer approaches that worked well with simple technology packages do not work as well with complex technologies that have to be adapted to local circumstances based on agro-ecological principles and local conditions. These lessons should give pause to advocates one particular technological approach as the solution for poor farmers in less favored environments of Asia and elsewhere. What farmers need are not technology dogmas but options that can work in their context, combining what is useful from different approaches. This requires a pragmatic approach to learning what works well where and why. In pursuit of such pragmatic options for farmers, research and development programs should not ignore the potentials of traditional farming practices or intensive Green Revolution type technologies, which are well suited to farmers' needs in many contexts." - from authors' abstract.
    Keywords: Agricultural technology, Low-external input agriculture, Organic farming, biotechnology, Sustainable agriculture, Less favored areas, Rural poverty, Land resources, Land management, Poverty reduction, small farms,
    Date: 2007
  6. By: Grimm, Michael (Institute of Social Studies); Klasen, Stephan (University of Göttingen)
    Abstract: There is a well-known debate about the roles of geography versus institutions in explaining the long-term development of countries. These debates have usually been based on cross-country regressions where questions about parameter heterogeneity, unobserved heterogeneity, and endogeneity cannot easily be controlled for. The innovation of Acemoglu, Johnson and Robinson (2001) was to address this last point by using settler mortality as an instrument for geography-induced endogenous institutions and found that this supported their line of reasoning. We believe there is value-added to consider this debate at the micro level within a country as particularly questions of parameter heterogeneity and unobserved heterogeneity are likely to be smaller than between countries. Moreover, at the micro level it is possible to identify more precise transmission mechanisms from geography via institutions to economic development outcomes. In particular, we examine the determinants of economic development across villages on the Indonesian Island of Sulawesi and find that geography-induced endogenous emergence of land rights is the critical institutional link between geographic conditions and technological change. We therefore highlight and empirically validate a new transmission channel from endogenously generated institutions on economic development.
    Keywords: geography, migration, land rights, institutions, technology adoption, agricultural development, Indonesia
    JEL: K11 O12 Q12
    Date: 2008–03
  7. By: Yamauchi, Futoshi; Chowdhury, Shyamal; Dewina, Reno
    Abstract: "This paper examines dynamics in public good accessibility and cross-community inequality in Indonesia, using village-level panel data from 2000 to 2006 from their decentralized public-good allocation system. The introduction of decentralization makes public-good investment dependent on initial local income and endowment, and makes it difficult to coordinate investment decisions across communities. Our analysis also shows that possible strategic interactions among communities connected with transportation infrastructure (externalities) implies spatial divergence. Empirical evidence on education and heath facilities, however, demonstrates that during the decentralized period, (1) accessibility to school has improved and school investments were effectively coordinated over space; (2) hospital access has improved only marginally; but (3) per-capita availability of schools and local medical clinics (puskesmas) in the community shows convergence toward low-level equilibria. Despite the coordination in spatial allocation even in the decentralization period (observed in intervillage accessibility), endogenous population mobility and growth partially cancel the benefits of the coordinated efforts in public-good allocation. This point requires further policy attention." from Authors' Abstract
    Keywords: Public goods, Education, health, Spatial coordination, Poverty dynamics,
    Date: 2007
  8. By: Gruere, Guillaume; Bouet, Antoine; Mevel, Simon
    Abstract: "Genetically modified (GM) food crops have the potential to raise agricultural productivity in Asian countries, but they are also associated with the risk of market access losses in sensitive importing countries. We study the potential effects of introducing GM food crops in Bangladesh, India, Indonesia, and the Philippines in the presence of trade-related regulations of GM food in major importers. We focus on GM field crops (rice, wheat, maize, soybeans, and cotton) resistant to biotic and abiotic stresses, such as drought-resistant rice, and use a multi-country, multi-sector computable general equilibrium model. We build on previous international simulation models by improving the representation of the productivity shocks associated with GM crops, and by using an improved representation of the world market, accounting for the effects of GM food labeling policies in major importers and the possibility of segregation for non-GM products going toward sensitive importing countries. The results of our simulations first show that the gains associated with the adoption of GM food crops largely exceed any type of potential trade losses these countries may incur. Adopting GM crops also allows net importing countries to greatly reduce their imports. Overall, we find that GM rice is bound to be the most advantageous crop for the four countries. Second, we find that segregation of non-GM crops can help reduce any potential trade loss for GM adopters, such as India, that want to keep export opportunities in sensitive countries, even with a 5 percent segregation cost. Lastly, we find that the opportunity cost of segregation is much larger for sensitive importing countries than for countries adopting new GM crops, which suggests that sensitive importers will have the incentive to invest in separate non-GM marketing channels if exporting countries like India decide to adopt GM food crops." from Authors' Abstract
    Keywords: Genetically modified food, International trade, Developing countries, Segregation,
    Date: 2007
  9. By: Aoki-Okabe, Maki
    Abstract: This paper examines Thai-Japanese relations through analysis of EPA. There are two questions. The first involves the features of JTEPA as an EPA. By scrutinizing the features of the EPA, we would like to approach the institutional framework of the “new era†which will be brought about by JTEPA. The second question is how did the governments of Thailand and Japan come to conclude JTEPA? By reviewing the focal points of the negotiations, we will describe the background of the formation and aims of JTEPA. Finally, we conclude that JTEPA is a culmination of the existing Thai-Japanese relations, and was built based upon the existing divergence of economic institutions. At the same time it upgrades the bilateral partnership to a framework for multilateral cooperation by considering assistance toward Cambodia, Laos and Myanmar and Vietnam. The author would like to emphasize that JTEPA was designed based on the idea of a further integration of CLMV and Thailand, an original member of ASEAN.
    Keywords: FTA (Free Trade Agreement), EPA (Economic Partnership Agreement), Regional integration, Japan, ASEAN, Thailand, International economic relations, International agreements, International cooperation
    JEL: F13 F15
    Date: 2008–02
  10. By: Joshua Aizenman; Reuven Glick
    Abstract: This paper investigates the changing patterns and efficacy of sterilization within emerging market countries as they liberalize markets and integrate with the world economy. We estimate the marginal propensity to sterilize foreign asset accumulation associated with net exports and various forms of capital flows, across countries and over time. We find that the extent of sterilization of foreign reserve inflows has risen in recent years to varying degrees in Asia as well as in Latin America, consistent with greater concerns about the potential inflationary impact of reserve inflows. We also find that sterilization depends on the composition of balance of payments inflows.
    JEL: F15 F21 F31
    Date: 2008–03
  11. By: Breisinger, Clemens; Thurlow, James
    Abstract: "Today's resource boom in Africa, driven by Asian economic growth, offers new opportunities for resource-rich African countries. Contrary to the experience of previous booms, however, most mining profits now accrue to foreign companies, leaving little room for governments to use revenues for pro-poor investments or to mitigate adverse distributional impacts. Taking Zambia as a case study, this paper shows that despite privatization, Dutch disease remains a valid concern and may hamper economic diversification, worsen income distribution, and undermine poverty reduction strategies. Mining royalties must, therefore, be increased and used to finance growth-inducing investments that encourage pro-poor economic diversification, else many African countries will remain caught in a resource trap." from Author's Abstract
    Keywords: Dutch disease, Resource booms, Privatization, Income distribution,
    Date: 2008
  12. By: Reardon, Thomas; Gulati, Ashok
    Abstract: "The Indian Council for Research on International Economic Relations (ICRIER) was invited by the Indian Ministry of Commerce and Industry to conduct a study titled “The Impact of Organized Retailing on the Unorganized Retail Sector.” Because organized retail in India is still in its infancy, it was deemed critical to look at the experience of other countries, especially developing ones. Thus, ICRIER sought the assistance of Dr. Thomas Reardon and Dr. Ashok Gulati, co-directors of Markets in Asia, a joint program of the International Food Policy Research Institute (IFPRI) and Michigan State University. ICRIER asked Reardon and Gulati to help research and report on the international experiences in the growth and expansion of modern retailing in developed and developing countries and the implications for India. This report is a contribution to that effort. This paper focuses on the emergence of modern retailing with respect to food and what implications it can have for various stakeholders in the food supply chain. While we briefly review the US and European experience, we focus on the developing countries of Latin America and East Asia (including China), where the supermarket revolution started in the early to mid-1990s. We looked at the patterns of the diffusion process in modern retailing in terms of “waves” that go from country to country, and within a country from first-tier cities to second-tier and then third-tier cities, and from processed to semiprocessed to fresh products. We also treat the challenges and opportunities that modern retailing has posed for various stakeholders in the supply chains, especially for traditional retailers, farmers, and consumers. We also looked at several instances when governments helped small retailers or upgraded wetmarkets by (1) establishing affirmative action policies to strengthen their competitiveness so they could also participate effectively in the transition to modern retailing, and (2) providing compensation to help them change their lines. The paper concludes by surmising what lessons other countries' experiences in the supermarket revolution have for India which is on the threshold of a major structural change in retailing. The expectations and concerns are high. Accordingly, India must form its own model of retail development to meet its priorities, learn from challenges that others have faced, and successful examples of strategies for “competitiveness with inclusiveness” among traditional retailers, wholesaler, and farmers entering an era of rapid retail transformation and concomitant food system change." from Author's Abstract
    Keywords: Supermarkets, Wholesalers, Modern retail, Small farmers, Traditional retail, Supply chains, Competitiveness, Inclusiveness,
    Date: 2008
  13. By: chin, wencheong
    Abstract: In this paper, a modified variance aggregated-time approach is used to examine the long-range dependence behaviour of the Malaysian stock exchange. We studied the 20 years daily data which included the pre- and post-economic crises encountered in the Malaysian stock exchange. The unawareness of economic shocks and short-range dependence in all the indices has triggered the spurious long-range dependence in our empirical results. It is also found that the modified approach estimation is robust under the presence of short-range dependence.
    Keywords: Keywords: long-range dependence; variance aggregated-time plot; financial time series; self-similar process.
    JEL: C13 C22 C01
    Date: 2008

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