nep-sea New Economics Papers
on South East Asia
Issue of 2009‒05‒23
eleven papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The Asian “Noodle Bowl”:Is It Serious for Business? By Masahiro Kawai
  2. Agricultural Impact of Climate Change: A General Equilibrium Analysis with Special Reference to Southeast Asia By Fan Zhai
  3. East Asian and European Economic Integration: A Comparative Analysis By Capannelli, Giovanni; Filippini, Carlo
  4. The Impact of Outsourcing on the Japanese and South Korean Labor Markets: International Outsourcing of Intermediate Inputs and Assembly in East Asia By Ahn, Sanghoon; Fukao, Kyoji; Ito, Keiko
  5. Analysis on β and σ Convergences of East Asian Currencies By OGAWA Eiji; YOSHIMI Taiyo
  6. Acreage response of rice: A case study in Malaysia By Tey, (John) Yeong-Sheng; Darham, Suryani; Mohd Noh, Aswani Farhana; Idris, Nurjihan
  7. The Building Block versus Stumbling Block Debate of Regionalism: From the Perspective of Service Trade Liberalization in Asia By Hamanaka, Shintaro
  8. Gifted Kids or Pushy Parents? Foreign Direct Investment and Plant Productivity in Indonesia By Jens Matthias Arnold; Beata Smarzynska Javorcik
  9. Managing Prolonged Low Fertility: The Case of Singapore By Mukul. G Asher
  10. The Economics of Failed, Failing, and Fragile States: Productive Structure as the Missing Link By Erik S. Reinert; Rainer Kattel
  11. Sovereign Wealth Fund Investment Patterns and Performance By William L. Megginson; Bernardo Bortolotti; Veljko Fotak; William Miracky

  1. By: Masahiro Kawai
    Abstract: A lively debate is taking place over the impact of free trade agreements (FTAs) on East Asia's business between those who view the agreements as a harmful Asian "noodle bowl"—i.e., overlapping regional trade agreements—of trade deals and others who see net beneficial effects in terms of regional liberalization and a building block to multilateral liberalization. A lack of enterprise-level data has made it difficult to resolve the debate. Providing new evidence from surveys of 609 East Asian firms (in Japan, Singapore, Republic of Korea [hereafter Korea], Thailand, and Philippines), this paper seeks to address the critical question of whether the Asian noodle bowl of multiple overlapping FTAs is harmful to business activity, particularly for small- and medium-sized enterprises (SMEs).[ADBI WP NO 136]
    Keywords: regional trade; global financial crisis; economic downturn; Free trade agreements; GATT; WTO; ASEAN; PRC; ADB; APEC; rules of origins; Doha trade; JETRO; UNCTAD; GNI per Capita; Tariffs; economic integration; 1997–1998 Asian financial crisis; European and North American economic integration; FDI; MNC;trade liberalization; change in tariff classification (CTC) rule; value content (VC); ASEAN-PRC FTA; ASEAN-Korea FTA; and ASEAN-Japan Comprehensive Economic Partnership Agreement (CEPA); SME;export
    Date: 2009
  2. By: Fan Zhai
    Abstract: Capitalizing on the most recent worldwide estimates of the impacts of climate change on agricultural production, this paper assesses the economic effects of climate change for Southeast Asian countries through 2080. The results suggest that the aggregate impacts of agricultural damages caused by climate change on the global economy are moderate.However, the uneven distribution of productivity losses across global regions would bring significant structural adjustments in worldwide agricultural production and trade, ultimately leaving the developing world as a net loser. With the anticipated declining agricultural share in the economy, a reduction in agricultural productivity would have small, but non-negligible negative impacts on Southeast Asia’s economic output. However, the expected increase of crop import dependence in the coming decades would make most Southeast Asian economies suffer more welfare losses through deteriorated terms of trade. Depending on a country’s economic structure, the negative effects are expected to be less for Singapore and Malaysia, but greater for Philippines, Indonesia, Thailand, and Viet Nam. For Southeast Asia to cope with the potential agricultural damages arising from the expected changes in climate the region must concentrate on reversing its current trend of declining agricultural productivity.[ADBI WP NO 131]
    Keywords: atmospheric concentration; Intergovernmental Panel of Climate Change; Green Revolution; computable general equilibrium; evaporation; precipitation; AEZ analysis; Ricardian cross-sectional approach; Agricultural Productivity; Linkage; An Implicitly Direct Additive Demand System; Global Trade Analysis Project; International Monetary Fund’s; Baseline Agricultural Productivity Growth; Global Trade Analysis Project; Global cross-country analysis; agricultural damages; counterfactual scenario
    Date: 2009
  3. By: Capannelli, Giovanni (Asian Development Bank); Filippini, Carlo (Bocconi University)
    Abstract: This paper compares the economic integration processes of the European Union and the East Asian nations and comments on the possible reciprocal lessons, if any, that can be drawn in order to smooth the future paths of the two groups. On the EU side, institutions, structural policies, and the monetary union are most relevant, and in East Asia, production networks, trade, and financial cooperation. Both entities are presently facing difficult challenges to progress and growth.
    Keywords: East Asia; European Union; regional integration; economic cooperation
    JEL: F59 P52
    Date: 2009–05–01
  4. By: Ahn, Sanghoon; Fukao, Kyoji; Ito, Keiko
    Abstract: Applying a common empirical approach to comparable industry-level data on production, trade, and labor markets for Japan and South Korea, this paper aims to investigate the impacts of outsourcing on different sectors of the labor market focusing on differences in educational attainment. While outsourcing measures used in previous studies only take account of the outsourcing of intermediate inputs, this paper, utilizing the Asian International Input-Output Tables, incorporates the outsourcing of assembly. The econometric results indicate that outsourcing to Asia (particularly to China) has a negative impact on the demand for workers with lower education and a positive impact on the demand for workers with higher education both in Japan and Korea. Moreover, the international outsourcing of assembly has a significant impact on skill upgrading, particularly in the Korean electrical machinery sector.
    Keywords: Outsourcing, labor demand, skill upgrading, Japan, Korea, manufacturing, Asian International Input-Output Tables
    JEL: F14 F16
    Date: 2009–03
  5. By: OGAWA Eiji; YOSHIMI Taiyo
    Abstract: This paper focuses on recent events which include the RMB reform in China and the global financial crisis to investigate statistically recent diverging trends among East Asian currencies. For the purpose, their weighted average value (Asian Monetary Unit: AMU) and their deviations (AMU Deviation Indicators) from benchmark levels are used to analyze both β and σ convergences of East Asian currencies. Our analytical results show that the monetary authority of China has still kept stabilizing the exchange rate of the Chinese yuan against only the US dollar even though it announced its adoption of a managed floating exchange rate system with reference to a currency. Analytical results on β and σ convergences show that deviations among the East Asian currencies have been diverging in recent years, especially after 2005. The widening deviations reflect not the RMB reform but recent international capital flows and the global financial crisis. In addition, it is important as its background that the monetary authorities of the countries are adopting a variety of exchange rate systems. In other words, a coordination failure in adopting exchange rate systems among these monetary authorities increases volatility and misalignment of intra-regional exchange rates in East Asia.
    Date: 2009–05
  6. By: Tey, (John) Yeong-Sheng; Darham, Suryani; Mohd Noh, Aswani Farhana; Idris, Nurjihan
    Abstract: This paper serves as preliminary study to investigate the relative impacts of various factors on acreage response of rice in Malaysia. The findings provide mixed signals which are different from other rice production countries. Hence, future studies are deemed essential to probe the issues with justifications by looking at the connection of Malaysian paddy production and economic theory, as well as implications to policymakers.
    Keywords: Acreage response; rice; paddy
    JEL: Q11
    Date: 2009–05–17
  7. By: Hamanaka, Shintaro (Asian Development Bank)
    Abstract: When debating the pros and cons of economic regionalism, haven't we focused enough on trade in goods at the expense of services? This article argues that regionalism is certainly a building block, not a stumbling block to a multilateral trading system, using the services liberalization scheme of Association of Southeast Asian Nations (ASEAN) as a case study. At the same time, it is critical to set out a proper institutional arrangement to ensure that regional services liberalization initiatives reinforce the global services regime. This paper proposes an amendment of the current GATS Article V to define the appropriate relationship between multilateralism and regionalism in the context of services.
    Keywords: GATS; AFAS; ASEAN; services; regionalism; free trade; economic integration
    JEL: F15 O19
    Date: 2009–05–01
  8. By: Jens Matthias Arnold; Beata Smarzynska Javorcik
    Abstract: This paper uses micro data from the Indonesian Census of Manufacturing to analyze the causal relationship between foreign ownership and various aspects of plant performance. It examines the implications of foreign ownership in three different contexts: entry of foreign investors through greenfield projects, foreign acquisitions and foreign privatizations. To control for the possible endogeneity of FDI decision propensity score matching is combined with a difference-in-differences approach when the latter two settings are considered. The results suggest that new greenfield entrants outperform new domestic producers in terms of productivity. They also tend to be larger, more capital intensive and more involved in international trade. Further, the findings indicate that foreign ownership leads to significant productivity improvements in the acquired plants. The improvements become visible in the acquisition year and continue in subsequent periods. After three years, the acquired plants exhibit a 13.5 percent higher productivity than the control group. The rise in productivity is a result of restructuring, as acquired plants increase investment outlays, employment and wages. Foreign ownership also appears to enhance the integration of plants into the global economy through increased exports and imports. Finally, productivity improvements and evidence of restructuring are also found in the context of foreign privatizations.
    Keywords: Foreign direct investment, Productivity
    JEL: F23 O33 D24
    Date: 2009
  9. By: Mukul. G Asher
    Abstract: This paper analyzes Singapore’s multi-pronged approach to managing prolonged low fertility which has led to population aging, labor force shortages, increasing elderly dependency ratios, and feminization of the elderly population. This approach has emphasized high growth, and has given priority to becoming an attractive business location over providing adequate and equitable retirement and health financing; and has pursued policies designed to generate high levels of net immigration. The chosen policy priorities have created a dilemma centering on ensuring Singapore’s business competitiveness on the one hand, and meeting its residents’ needs and expectations on the other. In spite of many measures to boost fertility levels (official Total Fertility Rate was 1.29 in 2007, a rate at which population is reduced by 50% in 45 years), as well as high net immigration, population aging is expected to accelerate after 2010. This, along with high income inequalities (Gini coefficient was 0.52 in 2005), will make continuation of current policy priorities even more challenging for the policymakers. While future policy developments are difficult to predict, greater political contestability is likely to hasten the path toward policy priorities which give greater weight to the needs and expectations of the current Singapore residents, even if that leads to lower (but more sustainable and socially cohesive) growth.[ADBI WP NO 114]
    Keywords: population explosion; unmanageable; Total Fertility Rate; Gini Coefficient; demographic trends; high life expectancy; childbearing; age-structural composition; feminization; Population Pyramids; labor force; financial adequacy; demographic transition; Fiscal Management; Net Immigration; Children Development Cosavings (Baby Bonus) Scheme; Financing Retirement; Health Care; Central Provident Fund; social risk pooling elements; Medisave Account; Housing and Development Board
    Date: 2009
  10. By: Erik S. Reinert; Rainer Kattel
    Abstract: The starting point of this paper is the proposition that there is a strong relationship between a particular type of national economic production structure and the propensity of a nation-state to fail. The failed states have common economic factors that distinguish them from, e.g. Finland, Canada or Singapore. The assertion is that any policy aiming at preventing nation-states from failing and/or alleviating poverty, should . in order to avoid treating mere symptoms rather than causes . include an analysis of how to bring the productive structures of failing states closer to the structure of those states that work satisfactorily and democratically. Typically failing and failed states have a very low percentage of GDP produced in the manufacturing (increasing returns) sector. The paper will provide extensive statistical data from 1950-2003 documenting the shift in national economic structure as a necessary starting point for economic growth.
    Date: 2009–01
  11. By: William L. Megginson (Price College of Business); Bernardo Bortolotti (Fondazione Eni Enrico Mattei and Università di Torino); Veljko Fotak (University of Oklahoma and Fondazione Eni Enrico Mattei); William Miracky (Monitor Group)
    Abstract: This study describes the newly created Monitor-FEEM Sovereign Wealth Fund Database and discusses the investment patterns and performance of 1,216 individual investments, worth over $357 billion, made by 35 sovereign wealth funds (SWFs) between January 1986 and September 2008. Approximately half of the investments we document occur after June 2005, reflecting a recent surge of SWF activity. We document large SWF investments in listed and unlisted equity, real estate, and private equity funds, with the bulk of investments being targeted in cross-border acquisitions of sizeable but non-controlling stakes in operating companies and commercial properties. The average (median) SWF investment is a $441 million ($55 million) acquisition of a 42.3% (26.2%) stake in an unlisted company; the most active SWFs originate from Singapore or the United Arab Emirates. Almost one-third (30.9%) of the number, and over half of the value (54.6%) of SWF investments are directed toward financial firms. The vast majority of SWF investments involve privately-negotiated purchases of ownership stakes in underperforming firms. We perform event study analysis using a sample of 235 SWF acquisitions of equity stakes in publicly traded companies around the world, and document a significantly positive mean abnormal return of about 0.9% around the announcement date. However, one-year matched-firm abnormal returns of SWFs average -15.49%, suggesting equity acquisitions by SWFs are followed by deteriorating firm performance. In cross sectional analysis, we find weak evidence of benefits associated with a monitoring role of SWFs and evidence consistent with agency costs created by conflicts of interest between SWFs and minority shareholder. SWFs have collectively lost over $57billion on their holdings of listed stock investments alone through March 2009.
    Keywords: Sovereign Wealth Funds, International Financial Markets, Government Policy and Regulation
    JEL: G32 G15 G38
    Date: 2009–04

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