nep-sea New Economics Papers
on South East Asia
Issue of 2010‒08‒06
fifteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Technological Capability as a Determinant of FDI Inflows: Evidence from Developing Asia & India By Amitendu Palit; Shounkie Nawani
  2. Industry and skill wage premiums in east Asia By di Gropello, Emanuela; Sakellariou , Chris
  3. Fiscal Policy Coordination in Asia: East Asian Infrastructure Investment Fund By Abidin, Mahani Zainal
  4. European Views on Asia and Europe-Asian Relations By Venil Ramiah
  5. Estimates of the “Green” or “Eco” Regional Domestic Product of Indonesian Provinces for the year 2005 By Arief Anshory Yusuf
  6. Mexico and Singapore: Partners for Growth: Sharing the Economic Crisis Experience By H.E. Ms. Green
  7. Employment and Skills Strategies in Southeast Asia: Setting the Scene By Cristina Martinez-Fernandez; Marcus Powell
  8. The Effect of Income Shocks and Credit Constraint on Child Labor Participation and Poverty: The Case of Indonesia By Pipit Pitriyan; Ahmad Komarulzaman
  9. Scenarios for Climate Change Mitigation from the Energy Sector in Indonesia: The Role of Fiscal Instruments By Arief Anshory Yusuf; Ahmad Komarulzaman; Wawan Hermawan; Djoni Hartono; Kindy R. Sjahrir
  10. The Insertion of Small-scale Farmers into market auction, Can it really improve the Indonesian gurem farmersâ welfare? The perspective of the auction price formation and farmersâ motivation factors By Winarsih, Dwi; Sutanto; Augier, Laurent
  11. The Evolution of Singapore Business: A Case Study Approach By Anisha Sabhlok
  12. Analysis on Bandung Government Budget in Improvement of Human Resources Quality By Ben Satriatna
  13. Long-term growth and policy challenges in the large emerging economies By Paul Conway; Sean Dougherty; Artur Radziwill
  14. Equity in climate change: an analytical review By Mattoo, Aaditya; Subramanian, Arvind
  15. Survey Of State-Society Relations Social Indicators Research Project Executive Summary Report By Ooi Giok Ling; Gillian Koh; Tan Ern Ser

  1. By: Amitendu Palit; Shounkie Nawani
    Abstract: During 2006-07, FDI inflows into India were more than double than those in 2005-06. Indeed, during April-January 2006-07, inward FDI into India at US$16.4 billion, was far higher than the annual average inflow of US$2-3 billion during the late 1990s. In recent years, India has also emerged as one of the leading FDI destinations in Asia. On the whole, the pattern of FDI inflows to developing Asia itself has changed significantly over the years. Some leading Southeast Asian economies (for example, Malaysia, Indonesia, Thailand and Philippines) no longer attract as much FDI as they used to in the past. This is in sharp contrast to some East and Southeast Asian economies that continue to draw large FDI (for example, China, Hong Kong and Singapore). In the above context, this paper attempts to explain the country-wise variations in the pattern of FDI flows to developing Asian economies by empirically identifying locationspecific features influencing such flows. The paper argues that some countries in the region, which have developed long term sources of comparative advantages in the form of superior technological capabilities and supporting infrastructure have consistently attracted greater volumes of export-oriented FDI. These attributes are also crucial for explaining the steady improvement in FDI flows to India. The paper finds that with production processes becoming increasingly complex and technology-intensive, developing countries like India, must devote greater attention to the development of R&D and frontier technologies, failing which, they might lose out in the race for FDI. [Working Paper No. 193]
    Keywords: FDI inflows, technology and technological capabilities, locational advantages, IT-based communication facilities
    Date: 2010
  2. By: di Gropello, Emanuela; Sakellariou , Chris
    Abstract: This paper focuses on the estimation of skill/industry premiums and labor force composition at the national and sector levels in seven East Asian countries with the objective of providing a comprehensive analysis of trends in demand for skills in the region. The paper addresses the following questions: Are there converging or diverging trends in the region regarding the evolution of skill premiums and labor force composition? Are changes in skill premiums generalized or industry-related? How have industry premiums evolved? The analysis uses labor and household surveys going back at least 10 years. The main trends emerging from the analysis are: (a) increasing proportions of skilled/educated workers over the long run across the region; (b) generally increasing demand for skills in the region; (c) the service sector has become the most important driver of demand for skills for all countries (except Thailand); (d) countries can be broadly categorized into three groups in relation to trends and patterns of demand for skills (Indonesia, Philippines, and Thailand; Vietnam and China; and Cambodia and Mongolia); and (e) industry premiums have increased in three countries of the region (Philippines, Thailand, and Cambodia). These trends point to several policy implications, including that governments should focus on policies promoting access to education to address the increasing demand for skills and/or persistent skill shortages; support general rather than specific curricula given broad-based increases in skill premiums in most countries; better tailor curriculum design and content and pedagogical approaches to the needs of the service sector; andtarget some social protection programs to unskilled workers to protect them from the"unequalizing"impact of education.
    Keywords: Labor Markets,Water and Industry,Tertiary Education,Education For All,Secondary Education
    Date: 2010–07–01
  3. By: Abidin, Mahani Zainal (Asian Development Bank Institute)
    Abstract: East Asian countries were seriously affected by the 2008 global crisis through a steep fall in exports. This experience exposed the vulnerability of the East Asian growth model and emphasized the importance of generating regional growth by expanding domestic demand and enlarging intra-regional trade. A key factor to achieving higher regional economic growth and enlarging intra-regional trade is the better connectivity of infrastructure such as roads, ports, airports, and rail links. Although some East Asian countries have made large investments in improving their infrastructures, others still lag behind. In response to the global crisis, East Asian countries have allocated a significant proportion of their stimulus packages to infrastructure development. While these investments have improved national facilities, East Asian countries will only be well connected when there are good cross-border infrastructures in place. This requires a large amount of funding, and funds from both within and outside the region could be mobilized to fulfill these huge financing needs. Hence, an East Asian Infrastructure Investment Fund (EAIIF) is proposed to provide a mechanism to organize this funding and to be a platform for deciding on cross-border infrastructure projects. The EAIIF would be anchored to the existing Association of Southeast Asian Nations+3 mechanism with the leader's summit being the apex of the decision making process. A four-level mechanism is proposed, consisting of cooperation amongst political leadership; a steering committee and secretariat for executing the decisions of the leaders; fund mobilization; and the implementation and monitoring of projects. Projects chosen could be those with a high rate of commercial returns or those with the highest social benefits. The EAIIF would invite the private sector to participate by setting a framework for the sharing of risks between the public and private sectors. Likewise, there would also be a sharing of risks between countries.
    Keywords: East Asian Infrastructure Investment Fund; regional crossborder infrastructure investment
    JEL: E61 E63 F15 H40 H54
    Date: 2010–07–30
  4. By: Venil Ramiah
    Abstract: This paper examines in its first part, the views of leading European academics, politicians, lobbyists and opinion-makers on the issue of relations with Asia. The second part of this paper looks at what might be done to improve the Asian side of things. Two measures are proposed. First, there must be an attempt at intellectual introspection, as to what might be presented as a credible set of Asian values. Most importantly, these values must come from within Asia, rather than being an attempt to show how Asia is different from the West. Second, armed with greater consensus, Asia must be willing to get involved, to carry out the international relations that are expected of the great power that it wants to be. This includes diversifying relations with other regions and specific attention towards keeping the US engaged in the Asian region through greater burden sharing. It is these steps that will make Asia a worthy partner for Europe and an equal player in Europe-Asia relations. [Working Paper No. 4]
    Keywords: Asia, Europe, EMU, unemployment, labour-oriented governments, financial crises, European academics, politicians, lobbyists,opinion-makers,
    Date: 2010
  5. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: A trial estimate of the Green or Eco-Regional Domestic Product (ERDP) for 30 provinces in Indonesia for the year 2005 was attempted. ERDP was calculated by subtracting from “brown” Gross Regional Domestic Product (GRDP), the value of liquidation of all kind of assets, man-made and natural. The types of assets covered are man-made capital, oil and natural gas, as well as other non-oil-gas minerals. The environmental assets liquidation included are environmental degradation of local and global pollution. This estimate is the first covering all provinces in Indonesia which enable informative cross-provincial comparison. It is found that the sustainability of the economic development of such provinces as Papua, East Kalimantan, West Nusa Tenggara, Riau and South Sumatra are in question as they rank low in term of the ratio of ERDP to GRDP. It implies that their future generations are among the most vulnerable. The rapid economic development in the provinces is dominantly caused by the liquidation of natural resource assets especially from oil, gas and other mineral extraction. The findings call for the need to diversify economic activity to avoid being too dependent on the extractive and polluting sectors. Sustainability could also be enhanced by way of increasing productivity so that for each unit of the liquidation of natural assets, we can generate welfare as much as possible.
    Keywords: Green Regional Domestic Product, Green Accounting, Indonesia
    JEL: Q56
    Date: 2010–07
  6. By: H.E. Ms. Green
    Abstract: This paper is a lecture series by H.E. Ms. Rosario Green, who shares the economic crisis experience of Mexico and Singapore, who are also partners for growth.
    Keywords: economic crisis, Mexico, Singapore, partners, growth
    Date: 2010
  7. By: Cristina Martinez-Fernandez; Marcus Powell
    Abstract: The Southeast Asian region has experienced some of the highest growth rates in the world, with investments in skills playing a significant role in helping national economies to adjust to changes in working practices, advances in technology, and challenges associated with globalisation. In some countries this process has been more successfully managed and significant advances have been achieved in growth rates and employment levels, but in others it has resulted in stagnation of economic sectors, underemployment, rising unemployment levels and social exclusion for large sections of society.
    Date: 2010–07
  8. By: Pipit Pitriyan (Department of Economics, Padjadjaran University); Ahmad Komarulzaman (Department of Economics, Padjadjaran University)
    Abstract: Lies near the Eurasia and Indo-Australia’s border plate, Indonesia is categorized as natural disaster prone areas. It is common for Indonesian to experience earthquakes that occurs due to volcanic activities or ground movement. The most frequent natural disasters hit these districts are: landslide, earthquake, and flood. The other type of natural disaster is drought, which is more common to the rest of areas and more predictable compare to the previous disasters. For those who are living in disaster prone areas, disasters do not only destroy their assets, but also damages their source of income. Moreover, it can affect the decision of household related to the activity of their child. This study aims to analyze the effect of income shocks and credit constraints on poverty and child working activity in Indonesia. We will employ logit regression to estimate the effect of income shocks and credit constraints on income. Furthermore, multinomial logit estimate will be used to capture the effect of income shocks and credit constraints on household’s poverty status and household’s child activity. It is hipotized that the disaster-related-income-shock and constraints to acquire credit have significant effect on poverty as well as child working activity.
    Keywords: shock, credit constraint, child labor, poverty, disaster
    JEL: D19 D31 I32 J22 Q54
    Date: 2010–06
  9. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University); Ahmad Komarulzaman (Department of Economics, Padjadjaran University); Wawan Hermawan (Department of Economics, Padjadjaran University); Djoni Hartono (Graduate Program of Economics, University of Indonesia); Kindy R. Sjahrir (Fiscal Policy Office, Ministry of Finance. Republic of Indonesia)
    Abstract: As mandated by the recent Copenhagen Accord, Indonesia submitted a nationally appropriate mitigation actions plan to reduce greenhouse gasses emission by 26% by 2020. However, for now, specific strategies especially appropriate instruments to achieve those targets are yet under early planning stage. This study is an attempt to contribute to the policy design on how Indonesia can achieve that target in particular for the energy sector by looking directly at specific instruments available and under the discretion of Indonesian government particularly the Ministry of Finance. For this purpose, we constructed AGEFIS-E model, a computable general equilibrium (CGE) model with a focus on energy sector and fiscal instruments. As the departure from the previous literature on CGE modeling in Indonesia, this model incorporates explicitly the renewable energy such as geothermal and hydropower. It was used to exercise various scenarios of finding an effective mix of instruments to reduce emissions from the energy sector. We find that a scenario of engineering the energy relative prices through pricing-instruments is an effective way to achieve a given target of reducing emissions from the energy sectors. More specifically, we conclude that removing energy subsidy (fuel and electricity) can contribute to significant reduction in carbon emissions. Adding a carbon tax to the policy mix will complement to find the best scenario to achieve a certain target of emissions reduction. A target of 14% reduction of emissions from the energy sector, for example, can be achieved by removing energy subsidy complemented by a carbon tax of only around US$3/ton CO2. Half of the reduction is attributed to the removing energy subsidy alone, suggesting evidence that the emissions reduction potential of energy pricing reform has been overlooked in the policy agenda.
    Keywords: climate change, computable general equilibrium model, fiscal instruments, energy, Indonesia
    JEL: D30 D58 Q40 Q48 Q54 Q56 Q58
    Date: 2010–07
  10. By: Winarsih, Dwi; Sutanto; Augier, Laurent
    Abstract: The condition of small-scale farmers in Indonesia is getting worse that is caused by an unfair low price that reflects to the low level of revenue for their income. This happens either because the dependency on trader/middlemen for selling the produce and the low accessibility of farmers to the market. The existence of auction mechanisms created by the Indonesian government auctions is still dominated by traders/middlemen, so that the increasing of prices have not affected to the farmers. Alternatively, by linking directly farmers to the auction mechanism will be analyzed in a descriptive and a qualitative ways from the point of view of price formation in the auction and the farmersâ determining factors to participate in the auction. The analysis conducts policy recommendations for ongoing agricultural auction development with the direct participation of small-scale farmers in the mechanism.
    Keywords: Small-scale Farmers, Auction mechanism, price formation, farmerâs motivation, International Development,
    Date: 2010–03–29
  11. By: Anisha Sabhlok
    Abstract: This paper is the result of a pilot study conducted to track, explore and analyse various aspects of the evolution of Singapore business within a holistic framework using case study methodology. Following the Introduction in Section 1, Section 2 provides the backdrop against which the evolution of business organisations is viewed, i.e. a brief overview of the evolution of the Singapore economy from an entrepot in the mid-1960s to a globally connected manufacturing and services hub at the turn of the millennium. Section 3 provides an outline of the scope, methodology and rationale of this study. Section 4 contains summaries of the observations based on the case studies (refer to volume 2) for the three categories of business organisations in respect of the specified aspects of their business development. Section 5 contains notes and comments based on findings from existing studies and statistics relating to the size, composition and performance of Singapore companies to provide supplementary perspectives. The Concluding Remarks in Section 6 make a preliminary attempt to address questions raised on issues concerning Singapore’s businesses and specified aspects of their evolution based on the perspectives gained from the case studies covered and some of the relevant existing literature and statistics. The advantages and limitations of the methodology adopted in the study and possible areas for further research are also outlined. The Appendices contain detailed explanatory notes on concepts, indicators and benchmarks relevant to the analysis in the study. [Working Paper No. 10]
    Keywords: evolution, pilot study, Singapore, the scope, methodology, rationale, concepts, indicators
    Date: 2010
  12. By: Ben Satriatna (Department of Economics, Padjadjaran University)
    Abstract: Experts have long proposed using public services provision as a primary tool for improve the quality of human live in the developing world. Providing a proper basic education and health services to the community can help them to achieve a well living condition. In many developing countries, government becomes the main stakeholder of the provision these public services. Their policies in providing public services commonly reflected in their budget allocation. Therefore, the concern of government toward their citizen’s quality of life can be observed from their budget allocation. Using the major city of Bandung Indonesia as a case study, this research attempts to explore the condition on how far the government’s concern to improve its citizen. This research investigates the allocation of government budget on basic education and health spending. Using the data of government budget between 2005 to 2008 period, this research finds that the allocation of government budget on basic education and health services follows an increasing trend. However, compared to other similar cities the proportion of this allocation is still considered low. In addition, this research also finds that most of this budget is spent to finance routine expenditure instead of development expenditure. This condition is heavily influenced by the condition where the number of government officer is still considered large. And also low public control toward the use of government budget. The research also provides a number of recommendations to overcome several obstacles that inhibit bigger budget allocation to development expenditure in basic education and health services. The research suggests that the government should create a more efficient working system that can lead to reduction of current expenditure. In addition, since public control in government expenditure can address a better public expenditure allocation, the information of government budget should be disseminated widely to public. Therefore, the government should develop a system to increase transparency in government budget allocation.
    Keywords: government budget, education, health
    JEL: I18 I22
    Date: 2010–06
  13. By: Paul Conway; Sean Dougherty; Artur Radziwill
    Abstract: Taken together, Brazil, China, India, Indonesia and South Africa – the “BIICS” – have been an important engine for world growth, and they account for a growing share of global output. However, further reforms will be needed to ensure catch-up to OECD GDP per capita levels over the long term. This paper uses the OECD’s Going for Growth framework, as well as other available evidence linking policies to economic performance, to identify key structural policy challenges in the BIICS for the years ahead. While such challenges vary from country to country, common areas for reform include strengthening policies in the areas of education, product market regulation and labour markets, as well as improving more basic market institutions. This Working Paper relates to the OECD’s Economic Policy Reforms: Going for Growth 2010 ( and the Economic Surveys of China, India, South Africa, Indonesia, and Brazil (<P>Croissance de long terme et défis de politique économique dans les grandes économies émergentes<BR>Pris ensemble, l’Afrique du Sud, le Brésil, la Chine, l’Inde et l’Indonésie - les « BIICS » - ont largement contribué à la croissance mondiale et ils représentent une part croissante de la production mondiale. Cependant, de nouvelles réformes seront nécessaires pour leur permettre de rattraper, à terme, les niveaux de PIB par habitant des pays de l’OCDE. Le présent chapitre utilise le cadre d’analyse mis au point par l’OCDE pour les besoins du projet Objectif croissance, ainsi que d’autres données établissant un lien entre les politiques publiques et la performance économique, pour identifier les principaux enjeux de politique structurelle auxquels les BIICS vont être confrontés dans les années à venir. Ces enjeux diffèrent selon les pays, mais un certain nombre de réformes communes semblent nécessaires, notamment pour renforcer les politiques publiques dans les domaines de l’éducation, de la réglementation des marchés de produits et du marché du travail, ainsi que pour améliorer certaines institutions fondamentales de l’économie de marché. Ce Document de travail se rapporte aux Réformes économiques: Objectif croissance 2010 ( et aux Études économiques de l'OCDE de : la Chine, l’Inde, l’Afrique du Sud, l’Indonésie, et le Brésil (
    Keywords: education, institutions, regulation, structural policy, indicators, reforms, poverty, income, institutions, éducation, régulation, politique structurelle, indicateurs, réformes, pauvreté, revenus
    JEL: O4 P5
    Date: 2010–03–19
  14. By: Mattoo, Aaditya; Subramanian, Arvind
    Abstract: How global emissions reduction targets can be achieved equitably is a key issue in climate change discussions. This paper presents an analytical framework to encompass contributions to the literature on equity in climate change, and highlights the consequences -- in terms of future emissions allocations -- of different approaches to equity. Progressive cuts relative to historic levels -- for example, 80 percent by industrial countries and 20 percent by developing countries -- in effect accord primacy to adjustment costs and favor large current emitters such as the United States, Canada, Australia, oil exporters, and China. In contrast, principles of equal per capita emissions, historic responsibility, and ability to pay favor some large and poor developing countries such as India, Indonesia, and the Philippines, but hurt industrial countries as well as many other developing countries. The principle of preserving future development opportunities has the appeal that it does not constrain developing countries in the future by a problem that they did not largely cause in the past, but it shifts the burden of meeting climate change goals entirely to industrial countries. Given the strong conflicts of interest in defining equity in emission allocations, it may be desirable to shift the emphasis of international cooperation toward generating a low-carbon technology revolution. Equity considerations would then play a role not in allocating a shrinking emissions pie but in informing the relative contributions of countries to generating such a pie-enlarging revolution.
    Keywords: Climate Change Mitigation and Green House Gases,Climate Change Economics,Environmental Economics&Policies,Air Quality&Clean Air,Environment and Energy Efficiency
    Date: 2010–07–01
  15. By: Ooi Giok Ling; Gillian Koh; Tan Ern Ser
    Abstract: The executive summary reports on major findings from a survey conducted among a random sample of 1,054 Singaporeans and Permanent Residents aged 18 to 65. Focus is on views of public policies in three areas, namely, political participation, social capital and trust and provision of public goods and services. [Working Paper No.5]
    Keywords: survey,Singaporeans, Permanent Residents, social capital, public goods, services
    Date: 2010

This nep-sea issue is ©2010 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.