nep-sea New Economics Papers
on South East Asia
Issue of 2010‒09‒18
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Social movements and the crisis of neoliberalism in Malaysia and Thailand By Khoo, Boo Teik
  2. Critical connections : Islamic politics and political economy in Indonesia and Malaysia By Khoo, Boo Teik; Vedi, R. Hadiz
  3. In China's Wake: Has Asia Gained From China's Growth? By Peter E Robertson; Jessica Y Xu
  4. Augmented MCi: AN Indicator Of Monetary Policy Stance For ASEAN-5? By Wai Ching Poon
  5. Estimating Demand for Infrastructure in Energy, Transport, Telecommunications, Water and Sanitation in Asia and the Pacific: 2010-2020 By Bhattacharyay, Biswa N.
  6. Investigating the Effect of Exchange Rate Changes on Transpacific Rebalancing By Thorbecke, Willem; Komoto, Ginalyn
  7. Can Second-Generation Endogenous Growth Models Explain The Productivity Trends and Knowledge Production In the Asian Miracle Economies? By James B. Ang; Jakob B. Madsen
  8. The Asia Financial Crises and Exchange Rates By Oga, Takashi; Polasek, Wolfgang
  9. Multiple Regime Shifts: The Influence of ASEAN Politics on Financial Integration within South-East Asia By David Treisman
  10. Malaysia’s Outward FDI: The Effects of Host Market Size and Home Government Policy By Soo Khoon Goh; Koi Nyen Wong
  11. Testing Transmission Mechanisms on Economic Growth in Malaysia By Wai Ching Poon
  12. Analyzing the Productivity-Wage-Unemployment Nexus in Malaysia: Evidence from the Macroeconomic Perspective By Soo Khoon Goh; Koi Nyen Wong
  13. Feeding Southeast Asia: Mekong River Fisheries and Regional Food Security By Brooke Peterson; Carl Middleton
  14. The ASEAN Services Sector and the Growth Rebalancing Model By Aldaba, Rafaelita M.; Pasadilla, Gloria O.
  15. Turnover, Ownership and Productivity in Malaysian Manufacturing By Ergun Dogan; Koi Nyen Wong; Michael Meow-Chung Yap
  16. The Evolution of Singapore Business: A Case Study Approach By Anisha Sabhlok
  17. Dynamic Conditional Correlations in International Stock, Bond and Foreign Exchange Markets: Emerging Markets Evidence By Abdul Hakim; Michael McAleer
  18. VaR Forecasts and Dynamic Conditional Correlations for Spot and Futures Returns on Stocks and Bonds By Abdul Hakim; Michael McAleer

  1. By: Khoo, Boo Teik
    Abstract: Of the Southeast Asian countries most badly affected by the 1997 financial crisis, Malaysia and Thailand remain the most unsettled by its political fallout. Their present political situations are not akin to 'politics as usual'. Instead, they capture the unpredicted outcomes of post-crisis struggles to reorganize structures of economic and political power. Comparing the situations in Malaysia and Thailand, this paper focuses on their differing state and civil society engagements with neoliberalism. It is suggested that the post-crisis contestations, sometimes tied to pre-crisis conflicts in political economy, left something of a stalemate: neither neoliberalism nor the social movements satisfactorily fulfilled their agendas in either country.
    Keywords: Southeast Asia, Malaysia, Thailand, Social movements, Economic policy, Financial crises, Neoliberalism, East Asian financial crisis
    Date: 2010–06
  2. By: Khoo, Boo Teik; Vedi, R. Hadiz
    Abstract: This article explores Islamic politics in two Muslim-majority countries in Southeast Asia, Indonesia and Malaysia, by linking their trajectories, from late colonial emergence to recent upsurge, to broad concerns of political economy, including changing social bases, capitalist transformation, state policies, and economic crises. The Indonesian and Malaysian trajectories of Islamic politics are tracked in a comparative exercise that goes beyond the case studies to suggest that much of contemporary Islamic politics cannot be explained by reference to Islam alone, but to how Islamic identities and agendas are forged in contexts of modern and profane social contestation.
    Keywords: Southeast Asia, Indonesia, Malaysia, Internal politics, Islam, Islamization, State, Economic transformation, Economic crises, Populism
    Date: 2010–06
  3. By: Peter E Robertson (UWA Business School, The University of Western Australia); Jessica Y Xu (Australian Government, The Treasury)
    Abstract: China’s growth has been rapid but the value of China's international trade has grown even faster. This trade-biased growth is bringing both challenges and opportunities for Asian economies that are highly integrated with Chinese trade networks. Moreover in ASEAN countries such as Indonesia and Malaysia, China’s success has been seen as a threat to its existing trade and manufacturing base. We use an historical simulation analysis to examine the impacts of China’s growth on Asian economies. We find that a decade of China’s growth has raised GDP per capita in the developed Asian economies by around 16%. The effect on the ASEAN-4 economies is not as strong but still large, the GDP of the ASEAN-4 economies increased by approximately 7%. The main source of these gains is found to be lower durable goods import costs which induce accumulation of machinery and equipment capital.
    Keywords: Economic Growth, China, Trade Costs
    Date: 2010
  4. By: Wai Ching Poon
    Abstract: This paper uses quarterly data from 1980 to 2004 for ASEAN-5 founder countries to estimate the weight of the Augmented Monetary Conditions Index (AMCI), and identifies the key transmission mechanism paths using Pesaran and Pesaran’s (1997) ARDL procedure, and Pesaran et al.’s (2001) bounds procedure. The roles of credit and asset price channels are assessed for aggregate demand conditions and in the transmission of monetary policy. Results reveal evidence of cointegration for all the ASEAN-Five founder countries. The estimate of the interest and exchange rate elasticities of aggregate demand is used to determine the weight of the exchange rate in the AMCI, and ultimately the weight is then used to construct the AMCI ratio. Exchange rate, asset price, and interest rate channels are three key transmission mechanisms in the conduct of monetary policy in Indonesia and Thailand. Meanwhile in Malaysia and Singapore, exchange rate, both the long and short term interest rate, and credit channels are three key transmission mechanisms in the conduct of monetary policy. In the Philippines, four key transmission mechanisms take place, namely the interest rate, exchange rate, credit, and asset price channels, with short rate relatively weaker than the long rate at the margin. The estimated weights of real interest rates and real exchange rate are used to estimate the AMCI ratios. The AMCI ratios range from 0.052 to 0.664 [0.052:1 for Philippines, 0.056:1 for Thailand, 0.073:1 for Indonesia, 0.109:1 for Malaysia; and 0.664 for Singapore]. Monetary conditions during the period under-study are found to be reflected in each of the central banks’ reaction to the prevailing economic situation, which implies that AMCI tracks the movements of the real GDP plausibly on the average, particularly after 1997.
    Keywords: Augmented Monetary Conditions Index; monetary policy; transmission mechanism
    JEL: E52
    Date: 2010–05
  5. By: Bhattacharyay, Biswa N. (Asian Development Bank Institute)
    Abstract: Infrastructure plays a key role in promoting and sustaining rapid economic growth. Properly designed infrastructure can also make growth more inclusive by sharing its benefits with poorer groups and communities, especially by connecting remote areas and small and landlocked countries to major business centers. Even if the Asia-Pacific region has witnessed progress in infrastructure development, the growth of infrastructure lags behind its economic growth, and also behind international standards of infrastructure quantity and quality. Inadequate infrastructure can hamper the potential economic growth of Asian countries, weaken their international competitiveness, and adversely affect their poverty reduction efforts. The circumstances and effects of the recent economic and financial crisis provide a number of reasons to further develop national and regional infrastructure in Asia. Among these reasons is that regional infrastructure enhances competitiveness and productivity, which could help in economic recovery and in sustaining growth in the medium to long-term. Regional infrastructure also helps increase standard of living and reduce poverty by connecting isolated places and people with major economic centers and markets, narrowing the development gap among Asian economies. This paper estimates the need for infrastructure investment, including energy, transport, telecommunications, water, and sanitation during 2010-2020, in order to meet growing demands for services and facilitate further rapid growth in the region. By using "top-down" and "bottom-up" approaches, this paper provides a comprehensive estimate of Asia's need for infrastructure services. The estimates show that developing countries in Asia require financing of US$776 billion per year for national (US$747 billion) and regional (US$29 billion) infrastructure during 2010-2020 to meet growing demand.
    Keywords: asia-pacific infrastructure; regional infrastructure; infrastructure development
    JEL: L90 O10 O20 R11 R40
    Date: 2010–09–10
  6. By: Thorbecke, Willem (Asian Development Bank Institute); Komoto, Ginalyn (Asian Development Bank Institute)
    Abstract: This paper investigates the role that exchange rate changes can play in rebalancing transpacific trade. It presents evidence from a gravity model indicating that the exports from the People’s Republic of China (PRC) to the United States (US) are a key outlier in the global economy and that imbalances between the PRC and the US have remained large during the financial crisis that began in September 2008. It then reports that an appreciation of the yuan against the dollar would be required to rebalance bilateral trade between the US and the PRC. In the case of multilateral trade between the US and the rest of the world, on the other hand, the evidence indicates that a depreciation of the dollar would not substantially reduce the US global trade deficit. In the case of Asia’s exports, results presented here and elsewhere indicate that: (i) sophisticated exports produced within regional production networks depend on exchange rates throughout the region; (ii) labor-intensive exports from developing Asian countries are strongly influenced by each country’s own exchange rate; (iii) developing Asian countries compete extensively with each other in exports to third markets; (iv) a currency appreciation in developing Asia would increase capital and consumption goods imports; and (v) exchange rate volatility deters parts and components trade in Asia. These findings imply that Asia and the rest of the world would benefit if East Asian currencies could appreciate together against external currencies while maintaining relative currency stability within the region.
    Keywords: transpacific trade; exchange rate rebalancing
    JEL: F32 F41
    Date: 2010–09–08
  7. By: James B. Ang; Jakob B. Madsen
    Abstract: Using data for six Asian miracle economies over the period from 1953 to 2006, this paper examines the extent to which growth has been driven by R&D and tests which second-generation endogenous growth model is most consistent with the data. The results give strong support to Schumpeterian growth theory but only limited support to semi-endogenous growth theory. Furthermore, it is shown that R&D has played a key role for growth in the Asian miracle economies.
    Keywords: Schumpeterian growth; semi-endogenous growth; Asian growth miracle
    JEL: O30 O40
    Date: 2010–05
  8. By: Oga, Takashi (Chiba University, Chiba, Japan); Polasek, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: We analyse the volatility structure of Asian currencies against the U.S. dollar (USD) for the Thai Baht THB, the Philippine Peso PHP, the Indonesian Rupiah IDR and the South Korean Won KRW. Our goal is to check if the characteristics of the volatility dynamics have changed in a K-state switching AR(1)-GARCH(1,1) model in the last decade 1995-2008 covering the Asian crisis. We estimate the model of Haas et al. (2003) with MCMC and we find that for the four currencies the volatility dynamics has changed at least once.
    Keywords: Markov switching GARCH models, Asian currency crisis 1997, volatility breaks, Bayesian MCMC, model choice
    JEL: F31 C11 C22
    Date: 2010–09
  9. By: David Treisman
    Abstract: For the last two decades, a key policy objective of the Association of South East Asian Nations (ASEAN), to which it claims much success, has been the supra-national integration among the region’s financial markets. This paper critically appraises this claim by locating and estimating multiple structural breaks in two equity market-based indicators and by employing a method to examine the effects of the ASEAN decision-making regime on variations in South-East Asian equity prices. The main findings of the paper are that the majority of identified structural breaks coincide with regime shifts in the ASEAN decision-making mechanism but that the politics of the regimes has had little influence on supra-national integration of the region’s financial markets.
    Keywords: ASEAN, equity prices, financial markets, integration, politics, structural breaks
    JEL: F36 G12 G15 F42
    Date: 2010–05
  10. By: Soo Khoon Goh; Koi Nyen Wong
    Abstract: This study estimates the possible determinants of outward FDI from Malaysia by introducing host market size and home government policy on capital outflows using multivariate cointegration and error-correction modeling techniques. The empirical results indicate that there is a positive long-run relationship between Malaysia’s outward FDI and its key determinants, viz. foreign market size, real effective exchange rate, international reserves and trade openness. In order to capitalize on globalization, the main findings suggest that apart from the market-seeking incentive and the adoption of outward-oriented policies, the Malaysian government could also encourage outward FDI by implementing liberal policy on capital outflows. However, this can pose a dilemma to the economy. On one hand, encouraging FDI outflows may tend to retard domestic investment seeing that it has been an important source of economic growth over the last three decades. On the other hand, restricting FDI outflows could discourage potential Malaysian multinational corporations from seizing opportunities abroad and to become regional and international players in the long run. The present study has important policy implications for the country’s economic development and the internationalization of Malaysian firms in the era of globalization.
    Keywords: Outward FDI, Malaysia
    JEL: F21
    Date: 2010–05
  11. By: Wai Ching Poon
    Abstract: This paper examines various transmission mechanism channels on economic growth in Malaysia over the quarterly period 1980:1-2004:4 using bounds testing approach. The bounds test reveals evidence of cointegration between the real GDP and the real exchange rate and share prices that address the exchange rate and asset price channels as the key transmission mechanisms in the conduct of the monetary policy stance. Nevertheless, the saving interest rate and credit channels are of insignificant.
    Keywords: cointegration, transmission mechanism channels, monetary policy stance, bounds test, Malaysia
    JEL: E52
    Date: 2010–05
  12. By: Soo Khoon Goh; Koi Nyen Wong
    Abstract: Using multivariate cointegration and error-correction modeling techniques, this paper attempts to examine whether there exists a productivity-wageunemployment relationship in Malaysia at the macroeconomic level. The main findings show that unemployment is dichotomized from the long-run equilibrium relationship between labor productivity and real wages, implying labor productivity is an important long-run factor in determining real wages, while unemployment has negligible effect on the real wage rates. However, the real wages are very responsive to a change in labor productivity, signaling the labor market is tight that leads to an increase in unit labor cost. To be more resilient to rising wages and productivity gap in a globally competitive environment, the Malaysian industries should move up the value chain, and promote skill- and technology-intensive production.
    Keywords: Real wages, productivity, Malaysia
    JEL: J39
    Date: 2010–05
  13. By: Brooke Peterson; Carl Middleton
    Abstract: This paper reviews the available literature that links regional food security to the Mekong River’s wild capture fisheries, and argues for recognition of the existing contribution that the fisheries make to regional development. With a focus on the proposed Mekong mainstream dams, it explores how decision-making on large water infrastructure should be strengthened by appropriately recognizing and accounting for basin-wide environmental, social and cultural considerations, in addition to economic factors.
    Keywords: economic factors, regional, food security, Mekong, river, fisheries, development, water, infrastructure, environmental,
    Date: 2010
  14. By: Aldaba, Rafaelita M. (Asian Development Bank Institute); Pasadilla, Gloria O. (Asian Development Bank Institute)
    Abstract: <p>The growth rebalancing model, which places the nontradable services sector on center stage, is important to spur on faster growth in this sector and tap its potential to become another engine of growth for ASEAN economies. While ASEAN countries have allocated the bulk of their fiscal stimulus packages to infrastructure spending, the present levels are nevertheless considered insufficient to create a large impact on growth. By focusing on the provision of infrastructure and social services like power, ports, roads, and mass transit, along with health and education, governments can address the large investment backlogs in these sectors. Except for Singapore, ASEAN countries remain protective of their services sectors. To encourage and renew private sector interest in infrastructure investment in the region, governments have an important role to play in creating an enabling environment, particularly in maintaining an efficient and competitive services sector. <p>The growth rebalancing model's emphasis on environmental protection, low carbon growth, and green strategies places the spotlight on new areas of services investment where ASEAN countries could develop market niches. Thus, ASEAN governments should pursue policies that support these new growth areas by encouraging research and development, strengthening mechanisms for the transfer of green technology, and promoting greater private sector participation.
    Keywords: growth rebalancing model; asean services sector; governmental policies
    JEL: F40 L80 L91
    Date: 2010–09–07
  15. By: Ergun Dogan; Koi Nyen Wong; Michael Meow-Chung Yap
    Abstract: Applying Foster, Haltiwanger and Krizan‟s (1998) decomposition of productivity growth method to Malaysian manufacturing census data for 2000 and 2005, we analyse if firm turnover by ownership (domestic versus foreign) has any impact on the sector‟s aggregate productivity growth. The findings show that turnover matters regardless of ownership but, more importantly, attracting foreign direct investment inflows could induce positive „net entry effect‟. The manufacturing sector‟s heavy dependence on FDI is underscored by the significant contribution of large MNCs to export value. Foreign entrants also have an important positive impact on sector productivity. The analysis shows that large-sized foreign and domestic entrants are more productive than medium-sized and especially small-sized ones. Among survivors, large foreign and domestic establishments fare the worst. Mediumsized domestic survivors, on the other hand, contribute the most to boosting sector productivity. The study demonstrates the usefulness of such an analytical framework by drawing out important implications for state industrial policies based on ownership and firm size.
    Keywords: Ownership, firm turnover; productivity; manufacturing; Malaysia
    JEL: D24 F14 L60 O12
    Date: 2010–05
  16. By: Anisha Sabhlok
    Abstract: This volume contains summaries of 12 case studies for three categories of business organisations defined by ownership, i.e. foreign, state and (local) private. The case studies explore the history and pattern of development of 12 business groups/companies in Singapore, highlighting specified aspects including: turning points in terms of business growth, diversification and expansion in domestic, regional and global markets, the strategies that led to their achievements, the role of the government and the measures taken at micro-levels to negotiate the transition to a knowledge-based economy (KBE), and world-class excellence. [Working Paper No. 10. (Volume 2)]
    Keywords: business, organisations, case studies, Singapore, domestic, regional, global markets, government, micro-levels, world-class, excellence
    Date: 2010
  17. By: Abdul Hakim (Faculty of Economics, Indonesian Islamic University); Michael McAleer (Econometric Institute, Erasmus School)
    Abstract: The paper models the dynamic conditional correlations in emerging stock, bond and foreign exchange markets using the DCC model of Engle (2002) and the GARCC model of McAleer et al. (2008). The highly restrictive DCC model suggests that the conditional correlations of the overall returns are constant. In contrast, the GARCC model finds that the conditional correlations between bond-bond markets and between stock-stock markets are relatively constant across developed-emerging markets, while those between emerging-emerging markets are dynamic. The conditional correlations between stock-bond markets across developed-emerging markets are also more dynamic as compared with those between emerging-emerging markets.
    Date: 2009–10
  18. By: Abdul Hakim (Faculty of Economics, Indonesian Islamic University); Michael McAleer (Econometric Institute, Erasmus School)
    Abstract: The paper investigates the interdependence and conditional correlations between futures contracts and their underlying assets, both for stock and bond markets, and the impact of the interdependence and conditional correlations on VaR forecasts. The paper finds evidence of volatility spillovers from spot (futures) to futures (spot) markets, and time-varying conditional correlations between futures and their underlying assets. It also finds evidence that the DCC model of Engle (2002) provides slightly better VaR forecasts as compared with the CCC model of Bollerslev (1990) and the BEKK model of Engle and Kroner (1995).
    Date: 2009–10

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