nep-sea New Economics Papers
on South East Asia
Issue of 2010‒07‒03
fifteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Assessing Well-being Using Hierarchical Needs By Matthew Clarke
  2. Spatial Architecture of the Production Networks in Southeast Asia By Tomohiro MACHIKITA; Yasushi UEKI
  3. The Impacts of Face-to-face and Frequent Interactions on Innovation: Upstream-Downstream Relations By Tomohiro MACHIKITA; Yasushi UEKI
  4. Innovation in Linked and Non-linked Firms: Effects of Variety of Linkages in East Asia By Tomohiro MACHIKITA; Yasushi UEKI
  5. How Long Can The G20 old Itself Together?A Power Analysis By Prabhash Ranjan
  6. Banks and financial intermediation in emerging Asia: reforms and new risks By Madhusudan Mohanty; Philip Turner
  7. Resiliency of Production Networks in Asia: Evidence from the Asian Crisis By Dr.Ayako OBASHI
  8. Fragmentation in East Asia: Further Evidence By Dr. Mitsuyo ANDO; Dr. Fukunari Kimura
  9. Global Financial Crisis and Policy Responses in Southeast Asia : Towards Prudent Macroeconomic Policies By Dr. Friska Parulian
  10. Methods for Ex Ante Economic Evaluation of Free Trade Agreements By Cheong, David
  11. Search-theoretic Approach to Securing New Suppliers: Impacts of Geographic Proximity for Importer and Non-importer By Tomohiro MACHIKITA; Yasushi UEKI
  12. Regional Monetary Coordination in Asia after the Global Financial Crisis: Comparison in Regional Monetary Stability between ASEAN+3 and ASEAN+3+3 By Eiji Ogawa
  13. Characterizing the business cycles of emerging economies By Calderon, Cesar; Fuentes, Rodrigo
  14. Foreign Presence Spillovers and Firms’ Export Response:Evidence from the Indonesian Manufacturing By Dionisius Narjoko
  15. Sovereign Wealth Funds as domestic investors of last resort during crises By Hélène Raymond

  1. By: Matthew Clarke
    Abstract: Determining whether well-being has improved is an important multidisciplinary task. It is important therefore to develop a multidimensional measure of well-being that reflects a wide spectrum of human needs. A new approach is presented in this paper based on multidimensional hierarchical human needs and motivation. Improving well-being within this multidimensional approach requires progressive satiation of hierarchical needs. Eight indicators have been chosen to reflect these four hierarchical categories. This paper empirically applies this new measure of well-being to eight Southeast Asian countries for the period 1985-2000: Cambodia, Indonesia, Lao PDR, Malaysia, Philippines, Singapore, Thailand and Vietnam. Results for Australia are also provided as a comparative benchmark.[Research Paper No. 2005/22]
    Keywords: well-being, Maslow, Southeast Asia
    Date: 2010
  2. By: Tomohiro MACHIKITA (Inter-disciplinary Studies Center, Japan External Trade Organization); Yasushi UEKI (Bangkok Research Centre- Japan External Trade Organization, Thailand)
    Abstract: The main purpose of this paper is to provide empirical evidence on the inter-firm production networks in Southeast Asian developing economies. Using firm-level data obtained from a questionnaire survey of manufacturing firms in Indonesia, the Philippines, Thailand, and Vietnam in 2008, this paper presents the regional distribution of main customers and suppliers and their geographical proximity. Firm-level capabilities and transaction costs associated with specific inter-firm relationships would influence the distances between customers and suppliers. Ordered logistic estimations are carried out to examine factors affecting the spatial architecture of the production networks in the region.
    Date: 2010–02–01
  3. By: Tomohiro MACHIKITA (Inter-disciplinary Studies Center, Japan External Trade Organization); Yasushi UEKI (Bangkok Research Centre- Japan External Trade Organization, Thailand)
    Abstract: This paper proposes a new mechanism linking innovation and networks in developing economies to identify explicit production and information linkages and investigates the testable hypotheses of these linkages using survey data gathered from manufacturing firms in East Asia: Indonesia, Thailand, the Philippines, and Vietnam. We found that firms that dispatched engineers to customers achieved more innovations than firms that did not. Just-in-time relationship is effective for dealing with process innovation. We found that such strong complementarities are not effective for product innovation. These findings support the hypothesis that face-to-face communication and strong complementarities among buyer-seller networks have different roles in product and process innovation.
    Date: 2010–02–10
  4. By: Tomohiro MACHIKITA (Inter-disciplinary Studies Center, Japan External Trade Organization); Yasushi UEKI (Bangkok Research Centre- Japan External Trade Organization, Thailand)
    Abstract: This paper proposes a new mechanism linking innovation and networks in developing economies to detect explicit production and information linkages. It investigates the testable implications of these linkages using survey data gathered from manufacturing firms in Indonesia, Thailand, the Philippines, and Vietnam. In-house R&D activities, internal resources, and linkages with local and foreign firms play a role in reducing the costs of product-and process innovation, and the search costs of finding new suppliers and customers. We found that firms with more variety of information linkages achieve more types of innovation. Complementarities between internal and external sources of knowledge are also found.
    Date: 2010–02–01
  5. By: Prabhash Ranjan
    Abstract: Since its emergence before the Cancun Ministerial in September 2003, the Group of 20 developing countries (which includes South Africa, India, China, Indonesia, Thailand and Pakistan) has become an important voice in WTO negotiations, particularly in the area of agriculture. This paper explains why it is important for the G20 to remain united, and also looks at the pitfalls that could derail this unity.[Working Paper 1]
    Keywords: Cancun Ministerial, developing countries, South Africa, India, China, Indonesia, Thailand,Pakistan, negotiations, WTO, agriculture,
    Date: 2010
  6. By: Madhusudan Mohanty; Philip Turner
    Abstract: The conventional view is that microeconomic reforms after the 1997-98 Asian financial crisis have greatly strengthened banking systems in Asia. Banks have become better capitalised, external exposures have been reduced and credit risk has been managed more effectively. But this conventional view does not take enough account of the macroeconomic background. A sharp rise in domestic savings, combined with the recent large-scale sterilised intervention and easy monetary policy, has led to very easy financing conditions for banks. Bank credit expanded. Banks have accumulated a large stock of government bonds. How these conditions will change and how this will affect banks in Asia is uncertain. Supervisory authorities therefore need to be sure that the present very liquid position of most banking systems in Asia does not allow significant (but so far only latent) increases in market and credit risk to go undetected.
    Keywords: Banking system, Asia, Financial markets, foreign exchange intervention
    Date: 2010–06
  7. By: Dr.Ayako OBASHI (Faculty of Economics, Keio University)
    Abstract: This paper presents the resiliency of international production networks stretched across the Asian region in face of the Asian financial and currency crisis back in 1997-98, as well as confirming its stability with consideration to adverse effects of the crisis. To examine the probability of survival once a trade relationship is established and the probability of revival after the transaction is broken off, survival analysis is conducted using the country-product level trade data. A series of survival analyses provide evidence supporting the view that transactions of intermediate goods within production networks are more likely to be stable and resilient to a temporary disruption compared to other transactions. First, even after considering the impact of the Asian crisis, machinery parts & components are more likely to be traded through long-lived trade relationships compared to finished products in intra-Asian trade. Second, machinery parts & components are no exception in that a non negligible portion of trade relationships was actually broken off amid the Asian crisis, but many of them were restored shortly afterward as compared to the others.
    Date: 2009–10–01
  8. By: Dr. Mitsuyo ANDO (Faculty of Business and Commerce, Keio University, Japan); Dr. Fukunari Kimura (Faculty of Economics, Keio University, Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: This paper analyzes the spatial pattern of production/distribution networks in East Asia. Two issues are investigated. The one is how the formation of networks has changed the intra- and inter-regional trade pattern. We find that an explosive expansion of intra-regional trade in machinery parts and components, in particular among developing countries, contributes to the current dense networking. The other is how corporate firms effectively organize fragmentation in terms of geographical distance and disintegration. The micro data of Japanese firms indicate that long-distance transactions are mainly intra-firm while transactions in local markets are predominantly arm’s-length (inter-firm), suggesting the formation of agglomeration.
    Date: 2009–10–01
  9. By: Dr. Friska Parulian (Associate Researcher, Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: The global fi nancial crisis hit the Southeast Asian economies through fi nancial and real sectors by the combination of lower global demand and tighter credit demand effect. The challenge for policymakers in this region is not just to prevent the escalation of the crisis and to mitigate the downturn, but also to ensure a good starting position once the rebound sets in. Policymakers should avoid taking on an excessive level of debt or creating the conditions for an infl ationary bubble by the current reaction to the global slowdown. A prudent counter-cyclical policy is necessary, and we should not ignore the medium and long-term sustainability.
    Date: 2009–07–01
  10. By: Cheong, David (World Trade Institute)
    Abstract: This paper provides practical techniques to policymakers for evaluating the potential economic effects of a Free Trade Agreement (FTA). To this end, the paper discusses how to apply three methods: (i) trade indicators, (ii) SMART (Software for Market Analysis and Restrictions on Trade) in WITS (World Integrated Trade Solutions), and (iii) the GTAP (Global Trade Analysis Project) model. The paper identifies the different aspects of an FTA that each method can evaluate, describes data sources and software requirements, specifies how to interpret the output from each method, and discusses the strengths and limitations of each method. To illustrate each method, there are examples applied to countries in the Association of Southeast Asian Nations (ASEAN), particularly Cambodia, Lao People‘s Democratic Republic, and Vietnam.
    Keywords: regionalization; evaluation methods; trade indicators; SMART model; CGE analysis; preferential trade agreements; Asia
    JEL: F13 F15
    Date: 2010–06–01
  11. By: Tomohiro MACHIKITA (Inter-disciplinary Studies Center, Japan External Trade Organization); Yasushi UEKI (Bangkok Research Centre- Japan External Trade Organization, Thailand)
    Abstract: This paper empirically examines whether firms consider geographic proximity as they seek for a new supplier. While addressing the difference between importers and non-importers, we estimate the effects of geographic proximity on the dynamic process of procurement, using survey data gathered from manufacturing firms in Indonesia, Thailand, and Vietnam. We find that the firms procuring intermediate goods from nearby suppliers and locally owned firms are more likely to form new trade relationships with suppliers. The more sensitive they are about the geographic proximity of their suppliers, the more likely it is that locally dependent firms will seek out new sources of supply of raw materials. This relationship disappears for firms which import some of their inputs.
    Date: 2010–02–01
  12. By: Eiji Ogawa
    Abstract: This paper analyzes how much deviation we have among Asian currencies, which include the Indian rupee, the Australian dollar, and the New Zealand dollar, given that we are discussing East Asian Community based on ASEAN+3 (Japan, China, and South Korea)+3 (India, Australia, and New Zealand). We investigate whether the instability or deviation of intra-regional exchange rates would increase when the additional three countries (India, Australia, and New Zealand) join the ASEAN+3. Contribution of each currency to the weighted average of AMU-wide Deviation Indicators shows that movements in the Japanese yen have contributed to those in the weighted average of the AMU-wide Deviation Indicators over time during the sample period from January 2000 to January 2010. Moreover, we use concepts of β and σ convergences in the context of economic growth to statistically analyze convergence or divergence for the ASEAN+3+3 currencies. The addition of the Indian rupee into the ASEAN+3 currencies makes the regional currencies unstable before and during the global financial crisis. Moreover, comparison between ASEAN+3+3 and ASEAN+3+Indian currencies shows that the addition of only the Indian rupee is relatively more stable than the addition of the Australian dollar and the New Zealand dollar as well as the Indian rupee since September 2008. It is worthy to consider that India will join the Chiang Mai Initiative to manage currency crises while the monetary authorities will conduct surveillance over stability of the intra-regional exchange rates in the near future.
    Date: 2010–06
  13. By: Calderon, Cesar; Fuentes, Rodrigo
    Abstract: Using the dating algorithm by Harding and Pagan (2002) on a quarterly database for 23 emerging market economies (EMEs) and 12 developed countries over the period 1980.Q1 - 2006.Q2, the authors proceed to characterize and compare the business cycle features of these two groups. They first find that recessions are deeper and more frequent among EMEs (especially, among LAC countries) and that expansions are more sizable and longer (especially, among East Asian countries). After this characterization, this paper explores the linkages between the cost of recessions (as measured by the average annual rate of output loss in the peak-to-trough phase of the cycle) and several country-specific factors. The main findings are: (a) adverse terms of trade shocks raises the cost of recessions in countries with a more open trade regime, deeper financial markets and, surprisingly, a more diversified output structure. (b) U.S. interest rate shocks seem to have a significant impact on the cost of recessions in East Asian countries. (c) Recessions tend to be deeper if they coincide witha sudden stop, but the effect tends to be mitigated in countries with deeper domestic credit markets. (d) Countries with stronger institutions tend to have less costly recessions.
    Keywords: Debt Markets,Currencies and Exchange Rates,Emerging Markets,Economic Theory&Research,Banks&Banking Reform
    Date: 2010–06–01
  14. By: Dionisius Narjoko (Dionisius Narjoko Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia)
    Abstract: This paper examines the existence of spillovers associated with the presence of multinational enterprises (MNEs) on a firm’s decision to export, and on export intensity. It utilizes data from Indonesian manufacturing for the census years 1996 and 2006. Channels through which MNEs can affect other firms’ export behavior are considered and tested. The econometric analysis suggests that the contribution of MNEs in improving technological knowledge raises the likelihood that domestic firms will enter the export market, and improves export performance. The analysis finds weak evidence to support the hypothesis that competition, created by the operation of MNEs, facilitates entry into export markets. Further analysis however shows that the impact of competition depends on the level of productivity of the domestic firms. In particular, the more productive firms are suggested to have been able to benefit more than the less productive ones. The overall analysis suggests that given the mixed evidence, policies to promote MNEs are still worth pursuing. The most obvious justification comes from the positive impact of the increased pool of technological knowledge. Other than this, strengthening trade facilitation seems to be a positive proposition, given the finding that many of the new domestic exporters seem to have been constrained in increasing their exports.
    Date: 2009–12–01
  15. By: Hélène Raymond
    Abstract: Usual definitions of Sovereign Wealth Funds (SWFs) put emphasis on their foreign investments. But after September 2008, some Sovereign Wealth Funds refrained from foreign investments and intervened to support their home economies during the crisis. We show that the interventions of Sovereign Wealth Funds as domestic “investors of last resort” are far from marginal and that they are not a passing innovation of the last global crisis. We review first the cases of interventions of SWFs as “shareholders of last resort” and differentiate interventions targeted on banks, from more general interventions designed to support non financial firms. We also run some regressions to quantify the impact of Gulf SWFs’ interventions on their home Stock returns and volatility. We find that the interventions of the Kuwaiti SWF were unsuccessful, whereas the Qatari intervention of October 2008 managed to rise effectively the Stock market return in the short run. We then turn to the interventions of SWFs as “lenders of last resort” and insurance funds against major crises. In some cases (Russia, 2009; Australia, 2007-2008) the lending by SWFs is targeted on the home banking sector. SWFs can provide medium term financing to ease the liquidity constraints of banks, whereas Central Banks’ loans are mostly at short term. But the intervention of Saudi Arabian SWF in 2008 was of a different kind, as the lending was targeted on non financial firms to make up for banks’ reluctance to lend and stimulate the economy. Lastly we discuss the role of Sovereign Wealth Funds as insurance funds against major crisis. SWFs may be used for government spending during crises or even intervene on Stock markets to counter speculative attacks, as was illustrated by the interventions of the Singaporean SWF GIC and of the HKMA.
    Date: 2010

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