nep-sea New Economics Papers
on South East Asia
Issue of 2010‒06‒18
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns By Chia-Lin Chang; Thanchanok Khamkaew; Michael McAleer; Roengchai Tansuchat
  2. An Assessment of Forest Management Options for Preventing Forest Fire in Indonesia By Luthfi Fatah; Udiansyah
  3. Exchange Rate Misalignments and World Imbalances: A Fundamental Equilibrium Exchange Rate Approach for Emerging Countries By Nabil Aflouk; Jacques Mazier; Jamel Saadaoui
  4. Estimating International Transmission of Shocks Using GDP Forecasts: India and Its Trading Partners By Kajal Lahiri; Gultekin Isiklar
  5. The Survival of Small-scale Agricultural Producers in Asia, particularly Vietnam: General Issues Illustrated by Vietnam's Agricultural Sector, especially its Pig Production By Tisdell, Clem
  6. La conjoncture économique dans la région Asie-Pacifique après la crise des subprime By Lagadec, Gael; Ris, Catherine
  7. Household Demand for Solid Waste Disposal Options in Malaysia By Pek, Chuen Khee; Othman, Jamal
  8. Designing a Procurement Auction for Reducing Sedimentation: A Field Experiment in Indonesia By Beria Leimona; Brooke Kelsey Jack; Betha Lusiana; Rachman Pasha
  9. Social Capital and State-Civil Society Relations in Singapore By Tan Tay Keong
  10. Solid Waste Disposal: A Choice Experiment Experience in Malaysia By Pek , Chuen Khee; Othman, Jamal
  11. Cost-Effectiveness of Policy Options for Sustainable Wetland Conservation: A Case Study of Qixinghe Wetland, China By Wu Jian; Wang Xiaoxia; Niu Kunyu
  12. Agricultural Development in Traditional Asian Economies: Observations Prompted by a Livestock Study in Vietnam By Tisdell, Clem
  13. Adaptation Strategies to Address Coastal Erosion/Flooding: A Case Study of the Communities in Bang Khun Thian District, Bangkok, Thailand By Rawadee Jarungrattanapong; Areeya Manasboonphemphool
  14. A Contingent Valuation Estimation of Hill Recreational and Services Values in Malaysia By Pek, Chuen-Khee; Tee, Chee-Hoong; Ng, Phuay-Ying
  15. Natural Protection from International Competition in the Livestock Industry: Analysis, Examples and Vietnam's Pork Market as a Case By Tisdell, Clem; Lapar, Ma. Lucila; Staal, Steve; Que, Nguyen Ngoc
  16. Land Use Planning and Land Allocation in the Upland of Northern Laos: Process Evaluation and Impacts By Khamphay Manivong; Phouthone Sophathilath
  17. Are health shocks different ? evidence from a multi-shock survey in Laos By Wagstaff, Adam; Lindelow, Magnus
  18. The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994-2003 By Kambayashi, Ryo; Kawaguchi, Daiji; Yamada, Ken

  1. By: Chia-Lin Chang; Thanchanok Khamkaew; Michael McAleer (University of Canterbury); Roengchai Tansuchat
    Abstract: Asia is presently the most important market for the production and consumption of natural rubber. World prices of rubber are not only subject to changes in demand, but also to speculation regarding future markets. Japan and Singapore are the major futures markets for rubber, while Thailand is one of the world’s largest producers of rubber. As rubber prices are influenced by external markets, it is important to analyse the relationship between the relevant markets in Thailand, Japan and Singapore. The analysis is conducted using several alternative multivariate GARCH models. The empirical results indicate that the constant conditional correlations arising from the CCC model lie in the low to medium range. The results from the VARMA-GARCH model and the VARMA-AGARCH model suggest the presence of volatility spillovers and asymmetric effects of positive and negative return shocks on conditional volatility. Finally, the DCC model suggests that the conditional correlations can vary dramatically over time. In general, the dynamic conditional correlations in rubber spot and futures returns shocks can be independent or interdependent.
    Keywords: Multivariate GARCH; volatility spillovers; conditional correlations; spot returns; futures returns
    JEL: C22 C32 G32 Q14
    Date: 2010–01–01
  2. By: Luthfi Fatah (Faculty of Agriculture Lambung Mangkurat University); Udiansyah (Faculty of Agriculture Lambung Mangkurat University)
    Abstract: This study highlights the root causes of forest fires in Indonesia and assesses a range of potential new policy options to improve the situation. Uncontrolled forest fires are one of the key causes of habitat destruction in Indonesia. The haze they produce causes significant pollution problems for people in the country and in surrounding nations. Partly as a result of these fires, Indonesia is currently losing nearly two million hectares of forest every year. Deforestation on this scale, at this speed, is unprecedented and deeply worrying. Indonesia's forests are home to a large share of the world's biodiversity and also provide a livelihood for millions of people. The study finds that the weak enforcement of forest conservation rules and regulations is a key problem and that this is caused by a wide range of resource and institutional failures. It highlights three key policy improvements that would address the forest fire problem in a cost effective way. The improvements involve strengthening policy implementation in the field, putting in place an effective reward and punishment system and the establishment of an institution to monitor and record stakeholder compliance and violation. The study recommends that all three of these policy options are of a high priority. It also highlights a number of steps that must be taken to make sure that they are implemented effectively. These include ensuring that parliament supports and finances the appropriate policies, and empowering local communities to help weed out corruption and bribery.
    Keywords: forest fire, Indonesia
    Date: 2010–04
  3. By: Nabil Aflouk (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Jacques Mazier (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Jamel Saadaoui (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII)
    Abstract: Since the mid-1990s, the world imbalances have increased significantly with a large US current deficit facing Asian surpluses, mainly Chinese. Since 2007, a partial reduction of these imbalances has been obtained, largely thanks to production's decreases, without large exchange rate adjustments. The Asian surpluses have remained important. The objective of this paper is to examine the exchange rate misalignments (ERM) of the main emerging countries in Asia and Latin America since the 1980s, so as to shed light on the 2000s by a long term analysis and compare with the industrialized countries' case. Our results confirm that ERM have been reduced since the mid-2000s at the world level, but the dollar remained overvalued against the East Asian countries, except the yen. Chinese, Indian and Brazilian exchange rate policies have been much contrasted since the 1980s. The Indian rupee has been more often overvalued while a more balance situation prevailed in Brazil only since the 2000s. The Latin American countries have faced wider and more dispersed ERM and current imbalances than East Asian countries. But Argentina, Chile and Uruguay benefits now of undervalued currencies while Mexico is closer to equilibrium.
    Keywords: Equilibrium Exchange Rate, Current Account Balance, Macroeconomic Balance, Emerging Countries
    Date: 2010–05–27
  4. By: Kajal Lahiri; Gultekin Isiklar
    Abstract: Using a Factor Structural Vector Autoregressive (FSVAR) model and monthly GDP growth forecasts during 1995-2003, we find that Indian economy responds largely to domestic and Asian common shocks, and much less to shocks the from the West. However, when we exclude the Asian crisis period from our sample, the Western factor comes out as strong as the Asian factor contributing 16% each to the Indian real GDP growth, suggesting that the dynamics of transmission mechanism is time-varying. Our methodology on the use of forecast data can help policy makers of especially developing countries with frequent economic crises and data limitations to adjust their policy targets in real time.
    Date: 2010
  5. By: Tisdell, Clem
    Abstract: Economic growth in more developed countries has resulted in farms increasing their scale of production and becoming more specialized in their production. The sizes of farms have tended to increase, agricultural production has become more capital-intensive, and the percentage of the workforce employed in agriculture has shown a falling trend. This process has been brought about by the operation of market systems and has reduced the number of small-scale agricultural producers. Asia still has a huge number of small-scale agricultural producers. As Asian countries experience economic growth and as market systems become more established in Asia, the survival of Asiaâs small-scale agricultural producers is likely to be threatened. Since these producers are poor, this is of concern to several international aid agencies. On the other hand, some Asian governments (such as Vietnamâs) want to encourage larger scale agricultural production units. This article presents arguments for and against government strategies to promote large-scale agricultural units in emerging economies and presents an economic theory that models agricultural supply in emerging economics as being dualistic in nature. It provides information about the predominance of small-scale units in agricultural production in Vietnam, particularly in pig production, and assesses policies proposed for by Vietnamâs Government for increasing the size of units producing pigs.
    Keywords: Agricultural policies, Asia, economies of scale, farm sizes, household agriculture, industrial agriculture, pigs, Vietnam, Agricultural and Food Policy, International Development, Q1, Q11, Q12, Q15, Q18,
    Date: 2009–06
  6. By: Lagadec, Gael; Ris, Catherine
    Abstract: This article offers elements to assess the effects of the world economic crisis in the Asia-Pacific region. The mechanisms and development of the subprime crisis are briefly recalled in order to examine how far they reach in the area. Examining the situation of the area’s economies, with a distinction between developed economies, emerging countries and developing economies highlights how the transmission of the crisis grows with the level of development. Being vulnerable due to their important dependency on revenues from outside (tourism, raw materials export, private transfers, aid…) the Pacific small developing economies have been indirectly affected by the crisis. Indeed the world economic crisis has increased the economic difficulties which the governments and populations of the Pacific already had to face when the oil and food prices rose, which seriously undermined them. Focus is laid on the three French Pacific territories. As they have hardly integrated international exchanges and rely mainly on transfers from the metropolis, their characteristics have somehow protected them from the crisis. The macroeconomic indicators of the Pacific industrialising countries are rather favourably-oriented yet the slowdown of economic growth has further weakened the most vulnerable populations.
    Keywords: Economic tendency; Subprime crisis; Asia-Pacific
    JEL: E32 O56 O53
    Date: 2010–08
  7. By: Pek, Chuen Khee; Othman, Jamal
    Abstract: This paper estimates the economic values of household preference for enhanced solid waste disposal services in Malaysia. The contingent valuation (CV) method estimates an average additional monthly willingness-to-pay (WTP) in solid waste management charges of €0.77 to 0.80 for improved waste disposal services quality. The finding of a slightly higher WTP from the generic CV question than that of label-specific, further reveals a higher WTP for sanitary landfill, at €0.90, than incineration, at €0.63. This suggests that sanitary landfill is a more preferred alternative. The logistic regression estimation procedure reveals that household’s concern of where their rubbish is disposed, age, ownership of house, household income and format of CV question are significant factors in influencing WTP.
    Keywords: contingent valuation; logistic regression; solid waste disposal; willingness-to-pay.
    JEL: Q51
    Date: 2010–06–01
  8. By: Beria Leimona (The World Agroforestry Center); Brooke Kelsey Jack (The World Agroforestry Center); Betha Lusiana (The World Agroforestry Center); Rachman Pasha (The World Agroforestry Center)
    Abstract: The setting of this study is a watershed in Lampung, Indonesia where soil erosion has broad implications for both on-site and off-site environmental damage. The strategy to engage farmers in environmental protection initiative is through the Payment for Environmental Services (PES) scheme. A key condition of PES is transparency regarding the conditions under which incentives or rewards can be granted. Balanced information and the power of transaction are the basis for any environmental service (ES). A contract procurement auction is an alternative mechanism for extracting information from ES providers on levels of payments or incentives that will cover their costs when joining a conservation program. This study tested the application of a procurement auction method to reveal hidden information on the opportunity costs of supplying environmental services. The result show that a seal-bid, multiple round second-price Vickrey auction with a uniform price can be applied where most of the auction participants have a low education level, low asset endowment, small plot size and where market-based competitiveness is not common. It reveals too that farmers' bids to be involved in conservation contracts is more dependent on their learning process during the auction than observable factors such as their socioeconomic background, their awareness of conservation and their social capital state. Finally, it shows that introducing procurement auction as a market-based approach to rural communities does not harm their social relationships and is an applicable method in a rural setting.
    Keywords: watershed, Indonesia
    Date: 2010–04
  9. By: Tan Tay Keong
    Abstract: This paper shows that the realization of Singapore’s vision of “active citizenship†and “state-society partnershipâ€, to a significant extent, depends on how social capital is being created and renewed in Singapore’s evolving political landscape.[Working Paper 9]
    Keywords: Singapore, vision, active citizenship, state-society, partnership, social capital, renewed, political landscape
    Date: 2010
  10. By: Pek , Chuen Khee; Othman, Jamal
    Abstract: Increasing generation of solid waste requires better quality disposal options in Malaysia. Control tipping is the most commonly used complemented by sanitary landfill and incineration. This study estimates the non-market values of improved waste disposal services and also ranking them using choice experiment. River water quality is the most concerned followed by psychological fear, air pollution and land use. Socio-economic background and distance factor influence the types of compensating surpluses. These conclude the importance of perception, influenced by socio-economic background, the presence of the Not-In-My-Backyard syndrome and that sanitary landfill is more preferred.
    Keywords: Solid waste disposal; willingness-to-pay; choice experiment
    JEL: Q51
    Date: 2009–10–01
  11. By: Wu Jian (School of Environment and Natural Resources, Renmin University of China); Wang Xiaoxia (School of Environment and Natural Resources, Renmin University of China); Niu Kunyu (School of Environment and Natural Resources, Renmin University of China)
    Abstract: This study assesses a number of potential policy options that could help protect the Qixinghe Wetlands which lie in the country's Sanjiang Plain. The region's wetlands are the most important breeding ground and migration route for waterfowls in Northeastern Asia, and provide a habitat for numerous species of wildlife. They face many challenges, one of the most significant being the disruption of the water supplies that feed them. Agriculture is the main cause of this problem, accounting for more than 75% of the total water use in the area. As the flow of water entering the wetlands is diverted, its ecosystem is damaged. This problem affects many wetland areas in China. The study is the work of a team of researchers from Renmin University of China, led by Wu Jian. It assesses the best way to reduce the conflict between wetland water needs and off-site water use. Its overall aim is to help policy makers decide how best to balance economic development with wetland conservation. The study recommends that the local government should reconstruct the irrigation system in the area surrounding the Qixinghe Wetlands as soon as possible. At the same time, training on water saving practices should be promoted amongst farmers. The study also suggests how these two key policies could be supported by improvements in conservation funding and management.
    Keywords: wetland, China
    Date: 2010–02
  12. By: Tisdell, Clem
    Abstract: China began its economic reforms in 1979 and Vietnam followed in 1986. Since then both countries have experienced rapid economic growth, falling poverty rates and significant rises in per capita income. At the same time, substantial restructuring of their economies has occurred, a feature of which has been a decline in the relative contribution of agriculture to total employment and output. These changes are outlined. Significant changes have also occurred in the agricultural sectors of China and Vietnam and these are reviewed. In both countries, the livestock sector has grown in relative importance. Households are the main contributors to agricultural production but their individual holdings of land are small and households keeping livestock mostly only hold a few head. Given the exit of farmers from agriculture, pressures are mounting for increasing the size of agricultural units. This exit can add to economic efficiency and growth. Policies to facilitate movements from farm to non-farm employment are discussed and analysed. Property rights and the marketability of agricultural land can facilitate such movements and contribute to economic efficiency. In recent times, China and Vietnam have extended property rights in agricultural land and have increased its marketability. These measures are outlined. With further economic development and transition, it is predicted that these rights and the marketability of agricultural land will be further extended
    Keywords: Agricultural development, Asia, China, economic transition, farm employment, land reforms, land rights, livestock, non-farm employment, structural change, Agricultural and Food Policy, International Development, Livestock Production/Industries, Q10, Q15, Q18, O2,
    Date: 2010–05
  13. By: Rawadee Jarungrattanapong; Areeya Manasboonphemphool
    Abstract: Coastal erosion is a serious problem in Thailand nowadays. The impacts of coastal erosion on the flat and low-lying Gulf area are expected to be high. The sediment supply to the coasts in the Upper Gulf of Thailand, including Bang Khun Thian district in Bangkok, has been decreasing because of dam constructions, combined with relative sealevel rise (subsidence) due to excessive ground water extraction. The loss of coastal land significantly affects the livelihood of the local people. At present, the Bangkok boundary mark at Bang Khun Thian district is already submerged. The mark was made taller by the Bangkok Metropolitan Administration afterwards. Over the past 28 years, coastal erosion has decreased the shoreline by 4-800 meters, at the rate of 20-25 meters per year. Two villages in Bang Khun Thian, whose major economic activities are shrimp and blood cockle farming, have been affected by coastal erosion. This study aims to determine households' adaptation strategies to address coastal erosion/flooding. It entailed a site visit, discussion with the local people, literature review, and a household survey. The results indicate that households have individually applied three types of autonomous adaptation strategies, which are (1) protection (e.g., stone breakwaters, bamboo revetments, and dike heightening), (2) retreat, and (3) accommodation. Of these, protection is the most popular. Each household had applied more than one adaptation option. The annual adaptation cost is approximately US$3,130 per household, which is equal to 23 percent of the average household income. The average inundated area is about 0.9 hectare per household or 8 percent of the household aquaculture area. The existing government's assistance for coastal erosion/flooding is in the form of stone breakwater, which is ineffective, and flooding compensation. This study showed that individual adaptation strategies, without any collective adaptation strategies, may not be effective solutions due to the occurrence of negative externalities if the neighbors do not apply/maintain their own protection structures. Secondly, due to low educational attainment and lack of other knowledge and skills, farmers could not shift to other occupations. This lack of livelihood choices explains why farmers are willing to pay highly to apply/maintain their protection structures. Lastly, for the protection structure to be effective in protecting the shore, it should be planned for the whole Upper Gulf of Thailand. Thus, the cooperation of the national government, local governments, and the public is necessary to address the problem of coastal erosion/flooding.
    Keywords: coastal erosion, Thailand
    Date: 2009–11
  14. By: Pek, Chuen-Khee; Tee, Chee-Hoong; Ng, Phuay-Ying
    Abstract: This study estimates the economic values of household preference for preservation and conservation of hill recreational and services values in Malaysia. The Contingent Valuation technique is employed on 100 randomly selected households in the vicinities of Taman Melawati Hill. The study finds that hill preservation is important and the public is willing to pay for initiatives to mitigate further degradation to this ecosystem. More specifically, the study ascertains that households on average are willing to donate MYR92.40 per annum to the trust fund for hill mitigation management initiatives. This value conveys a total economic value of MYR51.6 million per annum, based on the Selangor state population who are willing to pay for the mitigation cause. This substantial value can help policy makers to identify any mismatch between what the public actually demands and are wiling to pay for and the degradation to the supply due to modern developments.
    Keywords: willingness-to-pay; hill recreational and services values; contingent valuation
    JEL: Q51
    Date: 2010–05–18
  15. By: Tisdell, Clem; Lapar, Ma. Lucila; Staal, Steve; Que, Nguyen Ngoc
    Abstract: In some countries, local agricultural products (particularly livestock products) are shielded from international competition by ânaturalâ factors influencing the purchase of products. These factors include strong local tastes (or preferences) that favour the local product and the absence (or relative absence) of complementary retail outlets or home appliances suitable for storing and preparing potential imported substitutes. The desire for fresh meat rather than chilled or frozen meat, the absence or limited accessibility of supermarket outlets and limited refrigeration possibilities in homes can limit imports into developed countries of meat supplied by developed countries. From consumerâs perspectives these fresh or raw products are significantly different products from their frozen or processed alternatives, and so face different demand parameters. This product differentiation is nearly always ignored in trade models, which instead assume homogenous commodities. Where local fresh products make up over 90% of sales, such as pork in Vietnam, this unrecognized product differentiation can undermine model results, since raw or fresh products are generally untradeable. Examples of such limitations on trade are given for several developing countries, including some African nations. Religious consideration can also be a factor restricting international trade in livestock products and sometimes, government regulations on food imports reflect the tastes of local buyers, for example their demands for food purity and so on. Some simple economic analysis is provided of how local producers of livestock benefit from natural protection. Drawing on the results of recent research completed in Vietnam and other sources, factors that provide natural protection to Vietnamâs pork industry are identified, and particular attention is given to their implications for small-scale household pig producers compared to larger-scale commercial pig producers in Vietnam. It is noted that the current protection of Vietnamâs pig industry is not entirely based on preference for pork from local breeds of pigs but arises for other reasons. Some consideration is given to whether the natural protection of Vietnamâs pig industry will change in the future.
    Keywords: Agricultural policies, Asia, economies of scale, farm sizes, household agriculture, industrial agriculture, pigs, Vietnam, Agricultural and Food Policy, International Relations/Trade, Q1, Q11, Q12, Q15, Q18,
    Date: 2009–11
  16. By: Khamphay Manivong; Phouthone Sophathilath
    Abstract: Shifting cultivation, a farming practice on which majority of the upland population in the Lao People Democratic Republic (Lao PDR) has been heavily dependent upon, was identified as the main cause of rapid deforestation in the country. To address the problem, a Land Use Planning and Land Allocation (LUP/LA) program has been implemented since the start of the 1990s. This study reviewed the LUP/LA policy and assessed the implementation of the program as well as its livelihood and environmental impacts. Research undertaken in two districts - at Xieng Ngeun district of Luangphabang province and at Namo district of Oudomxay province - showed the need for program improvement. Recommendations are provided to improve program implementation.
    Keywords: land use, Lao PDR
    Date: 2009–10
  17. By: Wagstaff, Adam; Lindelow, Magnus
    Abstract: In Laos health shocks are more common than most other shocks and more concentrated among the poor. They tend to be more idiosyncratic than non-health shocks, and are more costly, partly because they lead to high medical expenses, but also because they lead to income losses that are sizeable compared with the income losses associated with non-health shocks. Health shocks also stand out from other shocks in the number of coping strategies they trigger: they are more likely than non-health shocks to trigger assistance from a nongovernmental organization and other households, dis-saving, borrowing, asset sales, an early harvest, the pawning of possessions, and the delaying of plans; by contrast, they are less likely to trigger assistance from government. Consumption regressions point to only limited evidence of households not being able to smooth consumption in the face of any shock. However, these results contrast with households'own assessments of the welfare impacts of shocks. The majority said they had to cut back consumption following a shock and that shocks considerably affected their welfare. Only health shocks are worse than a drought in terms of the likelihood of a family being forced to cut back consumption and in terms of the shock affecting a family's well-being"a lot."The poor are especially disadvantaged in terms of the greater damage that health shocks inflict on household well-being. Health shocks stand out too in leading to a loss of human capital: household members experiencing a health shock did not recover their former subjective health following the health shock, losing, on average, 0.6 points on a 5-point scale. The wealthier and better educated are better able to limit the health impacts of a health shock; the data are consistent with this being due to their greater proximity to a health facility.
    Keywords: Health Monitoring&Evaluation,Health Systems Development&Reform,Housing&Human Habitats,Rural Poverty Reduction,Economic Theory&Research
    Date: 2010–06–01
  18. By: Kambayashi, Ryo (Hitotsubashi University); Kawaguchi, Daiji (Hitotsubashi University); Yamada, Ken (Singapore Management University)
    Abstract: The statutory minimum wage has steadily increased for decades in Japan, while the median wage has fallen nominally since 1999 because of a severe recession. We use large micro-data sets from two government surveys to investigate how the minimum wage has affected the wage distribution under unusual circumstances of deflation. The compression of the lower tail of the female wage distribution is largely explained by an increased real value of the minimum wage. Steady increases in the effective minimum wage reduced employment among low-skilled, middle-aged female workers, but the mechanical effect associated with disemployment on wage compression was minimal.
    Keywords: minimum wage, wage distribution, wage inequality, employment, deflation
    JEL: J23 J31 J38
    Date: 2010–05

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