nep-sea New Economics Papers
on South East Asia
Issue of 2010‒02‒13
six papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Is this time different for Asia?: Evidence from stock Markets By Yushi Yoshida
  2. Does ASEAN Freer Trade Benefit Malaysia? By Othman, Jamal; Yaghoob, Jafari
  3. FTAs and Philippine Business- Evidence from Transport, Food, and Electronics Firms By Ganeshan Wignaraja; Dorothea Lazaro; Genevieve DeGuzman
  4. Global Production Sharing, Trade Patterns, and Determinants of Trade Flows in East Asia By Athukorala, Prema–Chandra; Menon, Jayant
  5. Governance, Institutions, and Regional Infrastructure in Asia By Prabir De
  6. Natural Gas Situation and LNG Supply/Demand Trends in Asia-Pacific and Atlantic Markets By Yoshikazu Kobayashi

  1. By: Yushi Yoshida (Faculty of Economics, Kyushu Sangyo University)
    Abstract: The recent sub-prime financial crisis initially affected the Asian economy to a degree comparable to that of the downturn in the Asian financial crisis; however, the recovery in Asia took place at a much faster pace than during the Asian financial crisis. We investigate whether the effects of sub-prime financial crisis on 13 Asian economies are similar to those of the previous crisis, by examining stock markets for volatility spillovers and causality directions between the US and Asia as well as for the degree of regional integration. The empirical evidence indicates stark differences between these two crises. First, the decline in volatility spillovers during the period of financial turmoil was more pervasive for the Asian financial crisis. Second, the estimated point of transition in correlation is indicative of market participants’ awareness of the upcoming stock market crash in September 2008. Third, the causality from the epicenter of crises is intensified during crisis. Fourth, regional integration was strengthened after the financial turmoil of the recent sub-prime financial crisis but not after the Asian financial crisis.
    Keywords: Asia, Contagion, Financial crisis, Spillover, Stock market integration.
    JEL: F31 F36 G15
    Date: 2010–02
  2. By: Othman, Jamal; Yaghoob, Jafari
    Abstract: This paper examines the impact of intra-ASEAN trade liberalization (AFTA) using a multi-country, computable general equilibrium model (GTAP Model) with special focus on Malaysia. The study considers the full elimination of intra-ASEAN import taxes and export subsidies. Results suggest that Malaysia‟s GDP would only increase marginally while the effects on the individual commodity sectors in the country differ substantially.
    Keywords: ASEAN Free Trade (AFTA); GTAP; CGE Trade Model; AFTA Impacts on Malaysia; Trade liberalization
    JEL: F15 D58
    Date: 2009–06–02
  3. By: Ganeshan Wignaraja; Dorothea Lazaro; Genevieve DeGuzman (Asian Development Bank Institute)
    Abstract: Within East Asia, the outward-oriented Philippine economy is a latecomer to using free trade agreements (FTAs) as a trade policy instrument and has relied heavily on the Association of Southeast Asian Nations (ASEAN) for regional liberalization. While negotiating FTAs has consumed scarce time and other resources, limited attention has been hitherto given to evaluating the impact of FTAs—particularly the 15-year-old ASEAN Free Trade Area (AFTA) agreement—on business activity in the Philippines. Using a survey of 155 manufactured goods exporters from three sectors (transport equipment, processed foods, and electronics), this study deals with three questions: (i) Do firms use AFTA and why?; (ii) What impedes firms from using AFTA and other FTAs?; and (iii) What can be done to improve FTA use at firm level in the future? The study finds that utilization of AFTA is higher than expected from existing studies and is set to double in the future. Econometric analysis suggests that firm age, domestic ownership, awareness of FTAs, and membership in the transport sector increase the probability of using AFTA. Surprisingly, among nonusers, a lack of information is the biggest barrier to FTA use. Other impediments to use include the availability of export processing zone incentive schemes, low most-favored-nation rates (particularly in electronics), delays in origin administration, rent-seeking behavior, and nontariff measures in partner country markets. Interestingly, the majority of firms do not think that multiple rules of origin in overlapping Asian FTAs add significantly to business costs. However, there is room for improvement in the system of AFTA rules of origin (e.g., lower value content and introduction of self-certification mechanisms). The examination of institutional support reveals an excess demand for a range of support services (e.g., information, technology-based, and small or medium enterprise extension services) that will enable firms to use FTAs more effectively in the future. The paper concludes by making the case for better mainstreaming of FTAs into Philippine national trade policy and for improving support services to firms.
    Keywords: FTA, The Philippines, Transport, Food, and Electronics Firms
    JEL: F1 F15 O24
    Date: 2010
  4. By: Athukorala, Prema–Chandra (Australian National University); Menon, Jayant (Asian Development Bank)
    Abstract: Global production sharing—the breakup of a production process into vertically separated stages that are carried out in different countries—has become one of the defining characteristics of world trade over the past few decades. Any analysis of trade patterns or its determinants that ignores this phenomenon, and the trade in parts and components that it generates, is likely to result in erroneous conclusions. This study examines the extent and pattern of these flows, focusing on East Asia, and probes its implications for the analysis of the determinants of trade flows. World trade in parts and components increased from about 18.9% to 22.3% of total exports between 1992/93 and 2005/06. Most of this growth emanates from East Asia, with its share in total world exports increasing from 27% to 39% over the same period. There was a notable decline in Japan’s share toward the end of this period, but this was more than offset by the rising importance of the People's Republic of China (PRC). In East Asia, most of this trade is in electronics. The econometric analysis reveals that parts and components are remarkably less sensitive to changes in relative prices; as a result, the sensitivity of aggregate trade flows to relative price changes diminishes as its share increases. This implies that exchange rate policy may be less effective in balance of payments adjustment, in countries where component trade is high and growing.
    Keywords: Global production sharing; product fragmentation trade; determinants of trade flows; exchange rate policy
    JEL: F10 F13 F23
    Date: 2010–01–01
  5. By: Prabir De (Asian Development Bank Institute)
    Abstract: This study is a comprehensive, empirical analysis of the linkages between governance, institutions, and regional infrastructure. The empirical results indicate that governance and institutions are crucial for regional infrastructure development: every one point improvement in governance results in a 1 to 1.5 point rise in regional infrastructure. Countries (and regions) with higher income, stronger institutions, better governance, and more open economies are likely to have higher levels of regional infrastructure. The findings of this paper suggest that our efforts to promote regional infrastructure must not be limited to traditional policy measures aimed at attracting investment in infrastructure, but must also address policy reform across a number of areas. Thus, institutions and governance must play an important complementary role in strengthening Asia’s regional infrastructure.
    Keywords: Governance, Institutions, Regional Infrastructure, Asia
    JEL: O19 F10 F15
    Date: 2010
  6. By: Yoshikazu Kobayashi (The Institute of Energy Economics, Japan)
    Abstract: Since the autumn of 2008, the global LNG supply/demand balance has eased substantially. Demand-side factors including the impact of the financial crisis on global natural gas consumption, and supply-side factors such as launchings of new projects and progress in unconventional natural gas development in North America are behind the LNG supply/demand balance change. For the immediate future, the LNG supply/demand balance is likely to remain easy. While the LNG situation is changing dramatically, key points to which we should pay attention over a short term with regard to a future LNG supply/demand outlook include LNG demand trends in the United States and China and destinations for exports from new LNG facilities launching operations by 2011. Factors that are expected to have great influences on future LNG supply and demand over a edium to long term may include the impact of the financial market credit crunch on investment in new medium to long-term gas development projects, gas shortages in the Middle East, and industrial nations’ ongoing efforts toward a low-carbon society.
    Keywords: liquid natural gas, LNG, energy supply, energy demand,
    JEL: Q40 Q41 Q43
    Date: 2010

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