nep-sea New Economics Papers
on South East Asia
Issue of 2009‒10‒17
six papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Kerala Fights Clock in ASEAN Free-Trade Deal By Ranjit Devraj
  2. Emerging Asia's Middle Class-A Force to be Reckoned With By Steffen Dyck
  3. Liberalizing air cargo services in APEC By Geloso Grosso, Massimo; Shepherd, Ben
  4. Pricing of Asian temperature risk By Fred Benth; Wolfgang Karl Härdle; Brenda López Cabrera
  5. Bt Brinjal: Introducing Genetically Modified Brinjal (Eggplant/Aubergine) in Bangladesh By Mst. Meherunnahar; D. N. R. Paul
  6. Coping with Rising Food Prices: Policy Dilemmas in the Developing World By Nora Lustig

  1. By: Ranjit Devraj
    Abstract: Kerala will be in trouble if India signs FTA with ASEAN which comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. ASEAN already has FTAs with three other dialogue partners — China, Japan and South Korea. It will hit the livelihood of 2 million fishmen and families Kerala. If the FTA goes goes through, pepper may cease to be produced in Kerala, the land where it originated.
    Keywords: pepper, Kerala, India, ASEAN, China, south korea, japan, FTAs, free trade agreements, Indonesia, fishermen, fisheries, Thailand, coconut farmers, rubber, tea, coffee, productivity, labor costs, vietnam, cops, economy, food security, inputs
    Date: 2009
  2. By: Steffen Dyck
    Abstract: The emergence of a large and dynamic middle class raises Asia’s profile as an attractive market destination for products ranging from consumer goods to financial services. There are even hopes that the Asian consumer will replace the US as “world consumer of last resort”, although this seems unlikely in the foreseeable future.
    Keywords: health, Asian countries, global crisis, human capital, disposable income, quality, taxes, public services, education, consumer goods, financial services, products, Asian, dynamic middle class, market, chinese, US, china, economic growth, poor, rich, household wealth
    Date: 2009
  3. By: Geloso Grosso, Massimo; Shepherd, Ben
    Abstract: This study aims at assessing the link between a more liberal air cargo regime and increased bilateral merchandise trade in the Asia Pacific region, under the auspices of APEC. Using the gravity model and employing the Air Liberalisation Index (ALI) developed by the WTO Secretariat, this paper finds strong support for two hypotheses. First, more liberal air services policies are positively, significantly and robustly associated with higher bilateral trade in merchandise. The results also show that air transport policy matters more for some sectors than for others. A particularly strong relationship is found between bilateral liberalisation and trade in manufactured goods, time sensitive products, and parts and components. Considering the sector found to be most sensitive to the degree of aviation liberalisation, the estimates imply that a one point increase in the ALI is associated with an increase of 4% in bilateral parts and components trade, prior to taking account of general equilibrium effects. These findings have important policy implications. In particular, economies actively seeking greater integration in international production networks could greatly benefit from a more liberal aviation policy regime.
    Keywords: Aviation; international trade in services; liberalization; international trade in goods; parts and components trade; production networks; APEC.
    JEL: L93 F15 F13
    Date: 2009–10–07
  4. By: Fred Benth; Wolfgang Karl Härdle; Brenda López Cabrera
    Abstract: Weather derivatives (WD) are different from most financial derivatives because the underlying weather cannot be traded and therefore cannot be replicated by other financial instruments. The market price of risk (MPR) is an important parameter of the associated equivalent martingale measures used to price and hedge weather futures/options in the market. The majority of papers so far have priced non-tradable assets assuming zero MPR, but this assumption underestimates WD prices. We study the MPR structure as a time dependent object with concentration on emerging markets in Asia. We find that Asian Temperatures (Tokyo, Osaka, Beijing, Teipei) are normal in the sense that the driving stochastics are close to a Wiener Process. The regression residuals of the temperature show a clear seasonal variation and the volatility term structure of CAT temperature futures presents a modified Samuelson effect. In order to achieve normality in standardized residuals, the seasonal variation is calibrated with a combination of a fourier truncated series with a GARCH model and with a local linear regression. By calibrating model prices, we implied the MPR from Cumulative total of 24- hour average temperature futures (C24AT) for Japanese Cities, or by knowing the formal dependence of MPR on seasonal variation, we price derivatives for Kaohsiung, where weather derivative market does not exist. The findings support theoretical results of reverse relation between MPR and seasonal variation of temperature process.
    Keywords: Weather derivatives, continuous autoregressive model, CAT, CDD, HDD, risk premium
    JEL: G19 G29 G22 N23 N53 Q59
    Date: 2009–10
  5. By: Mst. Meherunnahar (Coastal and Bio-diversity Project, Department of Environment (DoE)); D. N. R. Paul (Atish Dipankar University of Science & Technology (ADUST))
    Abstract: Brinjal, also known as eggplant and aubergine, is Bangladesh’s third most important vegetable in terms of both yield and area cultivated. It is only surpassed by potatoes and onions. However, the yield of brinjal could be much higher would it not be decimated by the brinjal shoot and fruit borer, which is the most destructive insect pest in South and South East Asia. Genetically modified brinjal (Bt brinjal) has the potential to bump up agricultural productivity in Bangladesh and other countries. This paper provides a brief overview of Bangladesh’s vegetable sector and reviews the key issues of introducing Bt brinjal in Bangladesh. It summarizes the results of recent research undertaken in Bangladesh on the environmental safety of Bt brinjal and concludes that Bt brinjal could make a significant contribution to Bangladesh’s agricultural sector and more broadly, Bangladesh’s economy and living standards.
    Keywords: brinjal, GM food, agriculture, Bangladesh, eggplant
    Date: 2009–10
  6. By: Nora Lustig
    Abstract: Rising food prices cause considerable policy dilemmas for developing country governments. Letting domestic prices adjust to reflect the full change in international prices generates inflationary pressures and causes severe hardship for poor households lacking access to social safety nets. Alternatively, governments can use food subsidies or export restrictions to stabilize domestic prices, yet this exacerbates global food price increases and undermines a rules-based trading system. The recent episode shows that many countries chose to shift the burden of adjustment back to international markets. The use of corn and oilseed for the production of biofuel will result in a recurrence of such episodes in the foreseeable future. [WP No. 164]
    Keywords: Food Prices, Inflation, Poverty, Africa, Asia, Latin America, Caribbean, domestic prices, trading system, export, households, social safety nets, inflationalry pressures, governments, households, global food prices, international markets
    Date: 2009

This nep-sea issue is ©2009 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.