nep-sea New Economics Papers
on South East Asia
Issue of 2010‒04‒11
eleven papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Trade and Investment Policies and Regional Economic Integration in East Asia By Chia, Siow Yue
  2. Why don't Asians invest in Asia:The determinants of cross-border portfolio holdings By Alicia García-Herrero; Philip Woolbridge; Doo Yong Yang
  3. China’s Exchange Rate Policy and Asian Trade By Alicia Garcia-Herrero; Tuuli Koivu
  4. Cost Reduction Effects of “pseudo FTAs†in Asia -Application of a price model based on a multilateral I/O table- By Tamamura, Chiharu
  5. Green Services and Emergence and Recovery from the Global Economic Slowdown in Developing Asian Economies By Stoughton, Mark; Venkatachalam , Anbumozhi
  6. The Determinants of Internal Migration in a Developing Country: Quantitative Evidence for Indonesia, 1930-200 By van Lottum, J.; Marks, D.
  7. A survey on European integration, offshoring and trade By Ekaterina Sprenger
  8. Education Impact Study: The Global Recession and the Capacity of Colleges and Universities to Serve Vulnerable Populations in Asia By Postiglione, Gerard
  9. A Comparative Empirical Examination of Outward Direct Investment from Four Asian Economies: China, Japan, Republic of Korea and Taiwan By K.C. Fung; Alicia Garcia-Herrero; Alan Siu
  10. Surfing the Waves of Globalization: Asia and Financial Globalization in the Context of the Trilemma By Joshua Aizenman; Menzie D. Chinn; Hiro Ito
  11. Foreign Direct Investment in Cross-Border Infrastructure Projects By Alicia García-Herrero; K.C. Fung; Francis Ng

  1. By: Chia, Siow Yue (Asian Development Bank Institute)
    Abstract: The global economic crisis has affected the East Asian economies via trade and investment. The export-led model which had been responsible for the “East Asian Miracle” now must redirect the basis of growth from exports sent to the US and Europe to regional and domestic demand. Regional trade integration has been market-led through production networks and foreign direct investment (FDI). Since the proliferation of bilateral and plurilateral free trade agreements (FTA) and economic partnership agreements (EPA) has not resulted in an integrated regional market, it is important that East Asia seek an arrangement for a region-wide FTA/EPA. Currently, there are proposals for an ASEAN+3, an ASEAN+6, Pan-Asia, and Asia Pacific initiatives. While proponents of a region-wide FTA/EPA highlight its benefits, skeptics and critics point to the difficulties of reaching consensus in a region with widely varying political, economic, and social systems. Ultimately it will depend on a political-economic decision based on a cost-benefit analysis of liberalization, facilitation, and cooperation in a region-wide FTA.
    Keywords: east asia trade policy; east asia regional integration; free trade agreements
    JEL: F13 F14 F16 O24
    Date: 2010–04–05
  2. By: Alicia García-Herrero; Philip Woolbridge; Doo Yong Yang
    Abstract: This paper seeks to understand why Asian foreign investment is concentrated in financial markets outside of the region instead of in Asian markets. We analyse empirically the geographical composition of the cross-border portfolio holdings of more than 40 source countries. We compare these benchmark results with those of four subgroups: advanced industrial economies; emerging market economies; European economies; and Asia-Pacific economies. The lack of liquidity in Asian financial markets turns out to be one reason why Asian capital is invested predominantly outside the region, notwithstanding the short distances and large trade flows between Asian economies. Initiatives to improve the liquidity of Asian financial markets, therefore, may be a useful way to stimulate financial integration within the region.
    Keywords: Cross-border portfolio investment; regional financial integration; gravity model.
    JEL: F21 F36 G11
    Date: 2009–04
  3. By: Alicia Garcia-Herrero; Tuuli Koivu
    Abstract: This paper shows empirically that China’s trade balance is sensitive to fluctuations in the renminbi real effective exchange rate. However, the current size of the trade surplus is such that exchange rate policy, alone, will probably not be able to address the imbalance. The reduction in the trade surplus is limited mainly because Chinese imports do not react as expected to exchange rate appreciation. In fact, they tend to fall rather than increase. By estimating bilateral import equations for China and its major trading partners, we find that such reaction of imports to exchange rate appreciation is generally confirmed for South-East Asian countries but not for others. This might be a direct consequence of Asia’s vertical integration as a large share of Chinese imports from Southeast Asia is directed to reexporting. We also find that the total exports from a number of Asian countries react negatively to a renminbi appreciation, which points to a dependence of Asian countries’ exports on those of China.
    Keywords: China, trade, exports, real exchange rate
    JEL: F1 F14
    Date: 2009–07
  4. By: Tamamura, Chiharu
    Abstract: This paper examines the repercussion effects on the production cost of industries in Asian countries when some countries eliminate tariffs and import commodity taxes on all imports. This kind of analysis is related in some sense to that measuring the effects of FTAs on economies, and thus may be considered as an analysis of “pseudo FTAs.†Examining a number of combinations of “pseudo FTAs†between China, Japan, and ASEAN, it is found that the case of China plus Japan plus ASEAN is the most effective “pseudo FTA†of the combinations in terms of production cost reduction. The method is a form of price model based on the Asian International Input-Output Table. Almost no studies on price models related to multilateral I/O tables have been implemented thus far.
    Keywords: Input-Output Models, Input-Output Table and analysis, Trade, Input-Output Tables, International Trade, Asia
    JEL: C67 D57 F1
    Date: 2010–03
  5. By: Stoughton, Mark (Asian Development Bank Institute); Venkatachalam , Anbumozhi (Asian Development Bank Institute)
    Abstract: <p>The global economic slowdown has again highlighted the vulnerability of export-led development models and economies to downturns in export markets. Economic deepening or “rebalancing” with an emphasis on service-sector development should be—and is becoming—one long-term response to the crisis by Asia's emerging economies. In the long run, sustainable economic development will depend in part on achieving a “green” trajectory of service sector development, in which services help green the “product economy.” <p>In the short run, however, can services help address short- and medium-term challenges of emergence and recovery from the crisis—particularly those of at least resuming historic rates of poverty alleviation and inclusive growth? Meeting these challenges will require that export sectors deal successfully with challenging market conditions. <p>There is a class of closely related business-to-business services which act to green the product economy, and which would improve the competitiveness of export sectors and husband scarce public resources by optimizing the efficiency of infrastructure utilization. These are functional procurement/efficiency services, which transform procurement of environmentally problematic goods and services—such as waste disposal, energy, chemicals, and transport—into performance-based services in which service providers profit by increasing the customer's eco-efficiency. Energy Service Companies (ESCOs) are the best-known of these service models. These services appear to have strong potential among the larger, more sophisticated institutions and commercial and industrial enterprises in developing Asian states, particularly in Asia's more advanced developing economies.
    Keywords: green service sector; energy service companies asia
    JEL: L80 L88 O14 O19 O25
    Date: 2010–03–31
  6. By: van Lottum, J.; Marks, D.
    Abstract: This study specifies and estimates a gravity model for inter-provincial migration in Indonesia. Using panel data for Indonesia’s 26 provinces for 5 survey years between 1930 and 2000 we show that throughout the twentieth century economic factors were more important in the explanation of inter-provincial migration patterns in Indonesia than planned migration policy aimed at the redistribution of the population. In addition, our regression analysis demonstrates that the urban primacy of Jakarta, Indonesia’s capital, had a strong effect on the direction and size of migration flows as well. Our findings thus suggest that the costly government-supported migration is not very successful and that a strongly centralized government induces migration flows to the capital. These findings have policy implications for other developing countries.
    Keywords: Internal Migration; Indonesia; Gravity Model; Policy; Development
    JEL: J61 J68 N15 O15
    Date: 2010–02–15
  7. By: Ekaterina Sprenger (Osteuropa-Institut, Regensburg (Institut for East European Studies))
    Abstract: This note describes Central and Eastern European countries’ (CEECs) involvement in production and trade in Europe. After having liberalised their economies in the 1990s, CEECs have become a part of international production networks in Europe. International production/distribution networks in East Asia have been developing simultaneously. The paper compares production and trade patterns in Europe and East Asia.
    Date: 2009–11
  8. By: Postiglione, Gerard (Asian Development Bank Institute)
    Abstract: This paper reviews the capacity of colleges and universities to serve poor and vulnerable populations during past and present economic shocks. The main argument is that the environment of the global recession-an Asia far more economically integrated than during past economic shocks, with more unified aspirations to be globally competitive and socially responsible-need not delay reforms in higher education. In fact, the global recession is an opportune time for higher education in the Asia and Pacific region to continue reforming governance and administration, access and equity, internal and external efficiency, and regional collaboration. This paper proposes a series of measures to increase the resilience of higher education systems in serving poor and vulnerable populations during the economic recession. These measures include: (i) tuition assistance, subsidies, and loans; (ii) information and guidance for first-generation college students on choosing appropriate programs of study; (iii) community-based vocational and technical higher education that provides jobs in a rapidly changing labor market; (iv) innovative forms of cost sharing between public and private institutions of higher education; (v) resource decisions made on the basis of performance-based objectives; (vi) intensification of philanthropic culture that provides scholarships for poor students; (vii) upgrading of research about problems confronting poor communities; and (viii) regional strategies across the Asia and Pacific region for closer instructional program collaboration among colleges and universities
    Keywords: colleges universities serve poor; education vulnerable economic shocks; education impact study
    JEL: I20 I20 I21 I22 I23 I28 I29
    Date: 2010–03–29
  9. By: K.C. Fung; Alicia Garcia-Herrero; Alan Siu
    Abstract: In this paper we compare and contrast the determinants of outward direct investment from China with those from Japan, South Korea and Taiwan. We examine both descriptively as well as econometrically the various motives and factors behind the investment abroad from these four Asian economies. The hypotheses we are testing include the market-seeking hypothesis, the natural resource-seeking hypothesis, the technology acquisition hypothesis and the human capital hypothesis. We examine outward direct investment for China for the years 1991-2006, Japan for 1983-2007, Korea for 1980-2007 and Taiwan for 1968-2007. Our results using the full set of determinants yield uniform support for the marketseeking hypothesis. The natural resource-seeking motives hold for Japan and Korea, while the technology acquisition hypothesis seems relevant for Taiwan. Chinese investments tend to go to destinations with poorer labor quality. In addition, openness is important for Japanese investment abroad, while distances deter investment from China and Korea.
    Date: 2009–09
  10. By: Joshua Aizenman; Menzie D. Chinn; Hiro Ito
    Abstract: Using the “trilemma indexes” developed by Aizenman et al. (2008) that measure the extent of achievement in each of the three policy goals in the trilemma—monetary independence, exchange rate stability, and financial openness—we examine how policy configurations affect macroeconomic performances, with focus on the Asian economies. We find that the three policy choices matter for output volatility and the medium-term level of inflation. Greater monetary independence is associated with lower output volatility while greater exchange rate stability implies greater output volatility, which can be mitigated if a country holds international reserves (IR) at a level higher than a threshold (about 20% of GDP). Greater monetary autonomy is associated with a higher level of inflation while greater exchange rate stability and greater financial openness could lower the inflation rate. We find that trilemma policy configurations and external finances affect output volatility through the investment or trade channel depending on the openness of the economies. While a higher degree of exchange rate stability could stabilize the real exchange rate movement, it could also make investment volatile, though the volatility-enhancing effect of exchange rate stability on investment can be offset by holding higher levels of IR. Our results indicate that policy makers in a more open economy would prefer pursuing greater exchange rate stability while holding a massive amount of IR. Asian emerging market economies are found to be equipped with macroeconomic policy configurations that help the economies to dampen the volatility of the real exchange rate. These economies’ sizeable amount of IR holding appears to enhance the stabilizing effect of the trilemma policy choices, and this may help explain the recent phenomenal buildup of IR in the region.
    JEL: F15 F21 F31 F36 F41 O24
    Date: 2010–04
  11. By: Alicia García-Herrero; K.C. Fung; Francis Ng
    Abstract: In this paper we critically review the relevant information and literature and that can enhance the feasibility and the successful implementation of cross-border infrastructure projects. We provide detailed information concerning FDI into the major emerging regions: East Asia/Pacific, Latin America and Eastern Europe. We also discuss the theoretical and empirical literature which sheds light on the characteristics of transnational infrastructure projects, who should conduct them and what determines their existence. The literature points to the importance of governments to be involved in transnational infrastructure projects as there are clear externalities which will otherwise not be reaped. It also points to the importance of coordination for the project to be successful. The ADB is well placed to perform that role. Lastly we provided a total of six cases of cross-border infrastructure projects, with two from East Asia, two from Latin America and two from Eastern Europe. These cases illustrate the critical need for smooth coordination over the diverse groups of team players, a top-level backing of the projects as well as a thorough Understanding of all the political and financial factors involved that can influence the success of these projects.
    Date: 2009–09

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