nep-sea New Economics Papers
on South East Asia
Issue of 2008‒09‒13
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Trade and Investment Linkages and Policy Coordination: Lessons from Case Studies in Asian Developing Countries By Yann Duval
  2. Impacts of ASEAN Agricultural Trade Liberalization on ASEAN-6 Economies and Income Distribution in Indonesia By Rina Oktaviani; Eka Puspitawati; Haryadi
  3. Trade and investment linkages and coordination in Nepal: Impact on productivity and exports and business perceptions By Dilli Raj Khanal; Prakash Kumar Shrestha
  4. Financial services integration in East Asia: Lessons from the European Union By Gloria O. Pasadilla
  5. Co-integration and Causality Analysis on Developed Asian Markets For Risk Management & Portfolio Selection By Herwany, Aldrin; Febrian, Erie
  6. Is the World's Economic Center of Gravity Already in Asia? By Jean-Marie GRETHER; Nicole Mathys
  7. Trade facilitation in ASEAN member countries : measuring progress and assessing priorities By Shepherd , Ben; Wilson, John S.
  8. Inter-relationship between Economic Growth, Savings and Inflation in Asia By Dholakia Ravindra H.
  9. Infrastructure and economic growth in East Asia By Straub, Stephane; Vellutini, Charles; Warlters, Michael
  10. Assessing the impact of public spending on growth - an empirical analysis for seven fast growing countries By Moreno-Dodson, Blanca
  11. How relevant is infrastructure to growth in East Asia ? By Seethepalli, Kalpana; Bramati, Maria Caterina; Veredas, David
  12. Transit and Trade Barriers in Eastern South Asia: A Review of the Transit Regime and Performance of Strategic Border-Crossings By Prabir De; Abdur Rob Khan; Sachin Chaturvedi
  13. The impact of price subsidies on child health care use : evaluation of the Indonesian healthcard By Somanathan, Aparnaa
  14. Economic partnership agreements and the export competitiveness of Africa By Brenton, Paul; Hoppe, Mombert; Newfarmer, Richard
  15. Political violence and economic growth By Bodea, Cristina; Elbadawi, Ibrahim A.
  16. Use of modern medical care for pregnancy and childbirth care : does female schooling matter ? By Somanathan, Aparnaa
  17. Indagine esplorativa dell’atteggiamento dei consumatori europei verso riso e tapioca biologici importati dalla Tailandia [Explorative survey on the attitude of European consumers towards organic rice and tapioca imported from Thailand] By Maurizio Canavari; Pamela Lombardi; Bettina Riedel; Roberta Spadoni
  18. Comparing Chinese and the Indian Software MNCs: Domestic and Export Market Strategies and Their Interplay By Niosi, Jorge; Tschang, F. Ted

  1. By: Yann Duval (United Nations Economic and Social Commission for Asia and the Pacific ( UNESCAP), Thailand)
    Abstract: The Asia-Pacific Research and Training Network on Trade (ARTNeT) launched an exploratory study on trade and investment policy linkages and coordination in 2007 , which included exploratory surveys of private sector stakeholders in three South-Asian countries (Bangladesh, Nepal and Sri Lanka) on the need for improved trade and investment policy coordination and coherence based on the Policy Framework for Investment (PFI) developed by OECD. Following a short overview of trade and investment linkages from an Asian perspective, this paper summarizes the key findings from the exploratory surveys and draw preliminary policy implications.
    Keywords: Trade and Investment Linkages and Policy Coordination, Asian Developing Countries
    JEL: F1
    Date: 2008–05
  2. By: Rina Oktaviani; Eka Puspitawati; Haryadi (Bogor Agricultural University, Indonesia)
    Abstract: This research paper intends to analyse: (a) the impacts of ASEAN trade liberalization on the macroeconomy variables – gross domestic product (GDP), Terms of Trade (ToT), balance of trade, inflation and real wage – and agricultural industries (output, exports and imports) in the ASEAN 6 countries (Indonesia, Malaysia, the Philippines, Thailand, Singapore, and Viet Nam); and (b) the impact of trade liberalization on income distribution in Indonesia. A multi-country and multi-commodity computable general equilibrium (CGE) GTAP model has been used as the main tool of analysis.
    Keywords: Trade and Investment, Indonesai, ASEAN, Agricultural
    JEL: F1
    Date: 2008–01
  3. By: Dilli Raj Khanal; Prakash Kumar Shrestha (*Institute for Policy Research and Development, Nepal)
    Abstract: This research paper intends to analyse: (a) the impacts of ASEAN trade liberalization on the macroeconomy variables – gross domestic product (GDP), Terms of Trade (ToT), balance of trade, inflation and real wage – and agricultural industries (output, exports and imports) in the ASEAN 6 countries (Indonesia, Malaysia, the Philippines, Thailand, Singapore, and Viet Nam); and (b) the impact of trade liberalization on income distribution in Indonesia. A multi-country and multi-commodity computable general equilibrium (CGE) GTAP model has been used as the main tool of analysis.
    Keywords: Trade and Investment, Nepal, Impact on productivity
    JEL: F1
    Date: 2008–02
  4. By: Gloria O. Pasadilla (Philippine Institute for Development Studies, Philippines)
    Abstract: This paper discusses the experience of the European Union, the steps taken to liberalize the financial sector, the specific features of its liberalization programme, the results achieved so far from these reforms and an assessment of potential lessons for other regional trading arrangements.Length: 47 pages
    Keywords: Financial services integration, East Asia
    JEL: F1
    Date: 2008–03
  5. By: Herwany, Aldrin; Febrian, Erie
    Abstract: Both practitioners and academicians demand a linkage model across financial markets, particularly among regional capital markets, for both risk management and portfolio selection purposes. Researchers frequently use co-integration and causality analysis in investigating the dependence or co-movement of three or more stock markets in different countries. However, they conducted the causality in mean tests but not the causality in variance tests. This study assesses the co-integration and causal relations among seven developed Asian markets, i.e Tokyo, Hongkong, Korea, Taiwan, Shanghai, Singapore, and Kuala Lumpur stock exchanges, using more frequent time series data. It employs the recently developed techniques for investigating unit roots, co-integration, time-varying volatility, and causality in variance. For estimating portfolio market risk, this study employs Value-at-Risk with delta-normal approach. The results show whether fund managers would be able to diversify their portfolio in these developed stock markets either in long run or short run.
    Keywords: Risk Management; Causality; Co-integration; Asian Stock Markets
    JEL: D53 G1 G11 G32 G0
    Date: 2008–08–27
  6. By: Jean-Marie GRETHER; Nicole Mathys
    Abstract: This paper proposes a simple measure of the World's Economic Center of Gravity (WECG) based on national GDP figures and the geographical location of the world's most important cities. This measure makes it possible to characterize the location of economic activity around the globe. It turns out that, over the 1975-2004 period, the WECG has shifted towards Asia, and the location of economic activity has become more evenly spread. On average, the distance to the WECG, which is highly correlated with the remoteness indicator frequently used in the trade gravity literature, has decreased more in Asian cities (-12%) and increased more in European cities (+16%).
    Keywords: Geographical location of economic activity; center of gravity; spatial imbalances
    JEL: F01
    Date: 2008–03
  7. By: Shepherd , Ben; Wilson, John S.
    Abstract: This paper reviews recent progress and indicators of trade facilitation in member countries of the Association of Southeast Asian Nations. The findings show that import and export costs vary considerably in the member countries, from very low to moderately high levels. Tariff and non-tariff barriers are generally low to moderate. Infrastructure quality and services sector competitiveness range from fair to excellent. Using a standard gravity model, the authors find that trade flows in Southeast Asia are particularly sensitive to transport infrastructure and information and communications technology. The results suggest that the region stands to make significant economic gains from trade facilitation reform. These gains could be considerably larger than those from comparable tariff reforms. Estimates suggest that improving port facilities in the region, for example, could expand trade by up to 7.5 percent or $22 billion. The authors interpret this as an indication of the vital role that transport infrastructure can play in enhancing intra-regional trade.
    Keywords: Transport Economics Policy&Planning,Free Trade,Economic Theory&Research,Trade Policy,Common Carriers Industry
    Date: 2008–05–01
  8. By: Dholakia Ravindra H.
    Abstract: The present study examines the inter- relationship between economic growth, saving rate and inflation for south-east and south Asia in a simultaneous equation framework using two stage least squares with panel data. The relationship between saving rate and growth has been found to be bi-directional and positive. Inflation has a highly significant negative effect on growth but positive effect on saving rate. Inflation is not affected by growth but is largely determined by its past values, and saving rate is not affected by interest rate. These findings for countries in Asia with widely divergent values of aggregates are very relevant for development policies and strategies.
    Keywords: Growth; Savings; Inflation; Asia; Simultaneity; Fixed-Effect
    JEL: C33
    Date: 2008–07–15
  9. By: Straub, Stephane; Vellutini, Charles; Warlters, Michael
    Abstract: This paper examines whether infrastructure investment has contributed to East Asia's economic growth using both a growth accounting framework and cross-country regressions. For most of the variables used, both the growth accounting exercise and cross-country regressions fail to find a significant link between infrastructure, productivity and growth. These conclusions contrast strongly with previous studies finding positive and significant effect for all infrastructure variables in the context of a production function study. This leads us to conclude that results from studies using macro-level data should be considered with extreme caution. The Authors suggest that infrastructure investment may have had the primary function of relieving constraints and bottlenecks as they arose, as opposed to directly encouraging growth.
    Keywords: Transport Economics Policy&Planning,Banks&Banking Reform,Achieving Shared Growth,Economic Theory&Research,Non Bank Financial Institutions
    Date: 2008–04–01
  10. By: Moreno-Dodson, Blanca
    Abstract: The goal of this paper is to understand better, at the empirical level, how public spending contributes to growth by focusing on both the level and composition of public spending, in connection to the dynamics of GDP per capita growth. It attempts to answer two specific questions: (a) What are the policy conditions under which public spending contributes positively to growth? and (b) What are the public spending components that have a stronger and longer-lasting impact on growth? The analysis is applied to a sample of seven fast-growing developing countries: Korea, Singapore, Malaysia, Thailand, Indonesia, Botswana, and Mauritius, which have been among the top performers in the world in terms of GDP per capita growth during the period (1960-2006). The rationale for this country sample selection is twofold. The first hypothesis is that, given their positive growth achievements over a relatively long time period, perhaps it is more straightforward to establish a link to public spending in those countries. Second, it is expected that the findings of the analysis will provide lessons regarding the level and composition of public spending that can be useful for other countries where growth has been less rapid. Assessing what role public spending has played in a dynamic growth context may indeed be enlightening for other cases as well. The paper is structured as follows. The first section is an introduction that provides relevant facts and information about the seven countries during the period of analysis, based on seven individual country case studies. Section II presents the theoreticalbackground behind the empirical analysis. Section III focuses on the empirical methodology, function specification, and variables selected. Section IV is dedicated to the results obtained with the cross-country analysis and some specific country results, as well as some comparisons with previous findings by other authors. Finally, Section V draws policy implications and concludes.
    Keywords: Public Sector Expenditure Analysis&Management,Public Sector Economics&Finance,Debt Markets,Achieving Shared Growth,
    Date: 2008–07–01
  11. By: Seethepalli, Kalpana; Bramati, Maria Caterina; Veredas, David
    Abstract: This paper seeks to shed some light on the extent to which infrastructure sub-sectors - energy, telecommunications, water supply, sanitation, and transport - contributed to growth in East Asia during 1985-2004. It also attempts to provide additional insights on whether the relationship between infrastructure and growth depends on five additional variables: the degree of private participation in infrastructure, the quality of governance, the extent of rural-urban inequality in access to infrastructure services, country income levels, as well as geography. The findings show that greater stocks of infrastructure were indeed associated with higher growth. However, a more nuanced look at the sensitivity of infrastructure impacts on the five additional variables yields different results, with some sectors supporting conventional expectations and others yielding mixed or counter-intuitive results. In particular, the telecom and sanitation sectors yield statistically significant results supporting the a priori hypotheses; electricity and water infrastructure provide mixed results; and road infrastructure consistently contradicts a priori expectations. The results are consistent with the widely-accepted idea in policy research that infrastructure plays an important role in promoting growth, as well as with the viewpoint that certain countries'endowments influence the growth-related impacts of infrastructure.
    Keywords: Transport Economics Policy&Planning,Governance Indicators,Banks&Banking Reform,Urban Slums Upgrading,Urban Services to the Poor
    Date: 2008–04–01
  12. By: Prabir De; Abdur Rob Khan; Sachin Chaturvedi (Research and Information System for Developing Countries)
    Abstract: The analysis of this paper shows that a regional transit arrangement would perhaps enhance the regional trade, controlling for other variables. At the same time, implementation of e-governance at border is found to be significant determinant of trade flows thus indicating e-filling of Custom formalities has been helping the trade to grow in eastern South Asia.
    Keywords: Transit, Trade Barriers, Eastern South Asia, Transit Regime
    JEL: F1
    Date: 2008–06
  13. By: Somanathan, Aparnaa
    Abstract: Financial barriers to seeking care are frequently cited as one of the main causes of underutilization of child health care services. This paper estimates the impact of Indonesia's healthcard on health care use by children. Evaluation of the healthcard effect is complicated by the fact that card allocation was non-random. The analysis uses propensity score matching to control for systematic differences between treatment and control groups. A second potential source of bias is related to contemporaneous, exogenous influences on health care use unrelated to the healthcard itself. Using panel data collected prior to and after the introduction of the healthcard, a difference-in-differences estimator is constructed to eliminate the effects of exogenous changes over time. The author finds that although health care use declined for all children during the crisis years of 1997-2000, use of public sector outpatient services declined much less for children with healthcards. The protective effect of the healthcard on public sector use was concentrated among children aged 0-5 years. The healthcard had no significant impact on use of private sector services. The results highlight the need to provide adequate protection against the financial burden of health care costs, particularly during economic crises.
    Keywords: Health Monitoring&Evaluation,Health Systems Development&Reform,Housing&Human Habitats,Health Economics&Finance,Population Policies
    Date: 2008–05–01
  14. By: Brenton, Paul; Hoppe, Mombert; Newfarmer, Richard
    Abstract: Trade can be a key driver of growth for African countries, as it has been for those countries, particularly in East Asia, that have experienced high and sustained rates of growth. Economic partnership agreements with the European Union could be instrumental in a competitiveness framework, but to do so they would have to be designed carefully in a way that supports integration into the global economy and is consistent with national development strategies. Interim agreements have focused on reciprocal tariff removal and less restrictive rules of origin. To be fully effective, economic partnership agreements will have to address constraints to regional integration, including both tariff and non-tariff barriers; improve trade facilitation; and define appropriate most favored nation services liberalization. At the same time, African countries will need to reduce external tariff peak barriers on a most favored nation basis to ensure that when preferences for the European Union are implemented after transitional periods, they do not lead to substantial losses from trade diversion. This entails an ambitious agenda of policy reform that must be backed up by development assistance in the form of"aid for trade."
    Keywords: Economic Theory&Research,Free Trade,Emerging Markets,Trade Policy,Trade Law
    Date: 2008–05–01
  15. By: Bodea, Cristina; Elbadawi, Ibrahim A.
    Abstract: This paper analyzes the economic growth impact of organized political violence. First, the authors articulate the theoretical underpinnings of the growth impact of political violence in a popular model of growth under uncertainty. The authors show that, under plausible assumptions regarding attitudes toward risk, the overall effects of organized political violence are likely to be much higher than its direct capital destruction impact. Second, using a quantitative model of violence that distinguishes between three levels of political violence (riots, coups, and civil war), the authors use predicted probabilities of aggregate violence and its three manifestations to identify their growth effects in an encompassing growth model. Panel regressions suggest that organized political violence, especially civil war, significantly lowers long-term economic growth. Moreover, unlike most previous studies, the authors also find ethnic fractionalization to have a negative and direct effect on growth, though its effect is substantially ameliorated by the institutions specific to a non-factional partial democracy. Third, the results show that Sub-Saharan Africa has been disproportionately impacted by civil war, which explains a substantial share of its economic decline, including the widening income gap relative to East Asia. Civil wars have also been costly for Sub-Saharan Africa. For the case of Sudan, a typical large African country experiencing a long-duration conflict, the cost of war amounts to $46 billion (in 2000 fixed prices), which is roughly double the country's current stock of external debt. Fourth, the authors suggest that to break free from its conflict-underdevelopment trap, Africa needs to better manage its ethnic diversity. The way to do this would be to develop inclusive, non-factional democracy. A democratic but factional polity would not work, and would be only marginally better than an authoritarian regime.
    Keywords: Post Conflict Reconstruction,Population Policies,Hazard Risk Management,Post Conflict Reintegration,Social Conflict and Violence
    Date: 2008–08–01
  16. By: Somanathan, Aparnaa
    Abstract: Controversy exists over whether the estimated effects of schooling on health care use reflect the influence of unobserved factors. Existing estimates may overstate the schooling effect because of the failure to control for unobserved variables or may be downwardly biased due to measurement error. This paper contributes to the resolution of this debate by adopting an instrumental variable approach to estimate the impact of female schooling on maternal health care use. A school construction program in Indonesia in the 1970s is used to construct an instrumental variable for education. The choice between use and non-use of maternal health services is estimated as a function of schooling and other variables. Data from the Indonesia Family Life Survey are used for this paper. Standard regression models estimated in the paper indicate that each additional year of schooling does indeed have a significant, positive effect on maternal health care use. Instrumental variable estimates of the schooling effect are larger. The results suggest that schooling has a positive impact on maternal health care use even after eliminating the effect of unobserved variables and measurement error. This paper moves beyond previous work on the impact of education on health care use by adopting an IV approach to address the problem of endogeneity and measurement error. IV methods have been used widely in the labour economics literature to examine the impact of schooling on wages and other labour market outcomes but rarely to estimate the effect of schooling on health outcomes.
    Keywords: Health Monitoring&Evaluation,Population Policies,Health Systems Development&Reform,Gender and Health,Primary Education
    Date: 2008–05–01
  17. By: Maurizio Canavari (Alma Mater Studiorum University of Bologna); Pamela Lombardi (Alma Mater Studiorum University of Bologna); Bettina Riedel (Humboldt University to Berlin); Roberta Spadoni (Alma Mater Studiorum University of Bologna)
    Abstract: This paper deals with the introduction and promotion of innovative and differentiating products in distribution places geographically far and culturally different by the country of origin/production. In an international trade context, environmental elements (e.g. the introduction of organic agriculture) and the role of the country of origin/production could influence the consumers’ perception of the distribution places. This study is aimed at deepening the knowledge about European consumer attitudes towards Thai organic rice and tapioca imported from Thailand. In particular, the purpose was to explore relevant attributes for the quality product perception, motivations for purchasing, limiting factors, reasonable price brackets, trust elements. In this first phase of research, a qualitative approach was used. Four focus groups in different European countries (Germany, Greece, Italy and Scotland-UK) were administered by one or two investigators each. The participants were recruited using a convenience sampling method, gathering 6-8 persons per focus group). The discussions were recorded, transcribed and analysed through a qualitative approach. Finally, an exhaustive list of semantic categories was created, explained and supported by parts of the discussions. The results show that the participants still do not know much about these products, especially about tapioca. They tend to favour the product’s nutritional aspects, followed by its taste and smell, which in any case were not deemed satisfactory; however, they want also that a series of social and environmental benefits are satisfied. In general, Thai organic rice is perceived as a “different type” of rice and tapioca as a “new product”. The most important critical issues affecting participant’s opinions include: the lack of trust in the certification process by foreign countries and the low attitude towards trying food novelties seemed due to a sense of loyalty to (or affection for) local food traditions. One of the most important trust elements is represented by the brand of the distributor, the producer and the EU and national certification bodies; in particular, participants associate some parameters of guarantee and safety to brand’s name. The information obtained could be useful in further explorations of this topic and it needs to be tested with a quantitative approach in order to obtain an evaluation of the relative importance of the different semantic categories.
    Keywords: marketing of quality food products, differentiating elements, international trade context, focus group, semantic categories
    JEL: Q13
    Date: 2008–08
  18. By: Niosi, Jorge (Department of Management and Technology, University of Québec at Montréal); Tschang, F. Ted (School of Business, Singapore Management University)
    Abstract: China and India are emerging as major new entrants in the international software industry. Both are rapidly learning through outsourcing with multinational enterprises from advanced nations. Yet, their paths to this dynamic sector are very different. Chinese software firms have focused on their domestic market by working with foreign MNCs, while they move cautiously abroad. Indian firms, despite already being large, continue to expand overseas as well as to climb the value chain. We show that a macro perspective on the global movement of work can be gained by utilizing concepts from different approaches to the MNC. At the same time, the innovation systems perspective is necessary to explain the foundations of the industry. The paper provides hypotheses and performs an initial validation of them. It concludes that the internationalization and learning processes are somewhat different in the Chinese and Indian MNCs, and provides explanations for the different patterns.
    Keywords: outsourcing, software industry, industrial development, MNCs, MNEs, multinational enterprise, China, India
    JEL: L23 L24 O14 O32 P45
    Date: 2008

This nep-sea issue is ©2008 by Kavita Iyengar. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.