nep-sea New Economics Papers
on South East Asia
Issue of 2011‒06‒11
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Asia Rising: Emerging East Asian Economies as Foreign Investors By Hal Hill; Juthathip Jongwanich
  2. Climate Change Issues and Mitigation Actions in Indonesia By Arief Anshory Yusuf
  3. Rise And Fall Of Cities, Measuring Spatial Clustering And Economies Of Urban Agglomeration In West Java By Rullan Rinaldi; Eva Nurwita
  4. The Chinese Market and Thai Fragrant Jasmine Rice: Why does China, the world's largest rice producer, import rice from Thailand? (Japanese) By MIYATA Toshiyuki
  5. Foreign Ownership, Listed Status and the Financial System in East Asia: Evidence from Thailand and Malaysia By Mieno, Fumiharu
  6. Estimates of Fundamental Equilibrium Exchange Rates, May 2011 By William R. Cline; John Williamson
  7. Remittances and Economic Growth in Africa, Asia, and Latin American-Caribbean Countries: A Panel Unit Root and Panel Cointegration Analysis. By Bichaka Fayissa; Christian Nsiah
  8. Laos: Seeking a relationship with China (Japanese) By HARA Yonosuke; YAMADA Norihiko; KEOLA, Souknilanh
  9. Constructing the Index of Indonesian Monthly Private Consumption Expenditure By Achmad Kemal Hidayat; Arief Bustaman; Anhar Fauzan; Eva Nurwita; Adhitya Wardhana; Arief Anshory Yusuf
  10. It’s Not Only Rents: Explaining the Persistence and Change of Neopatrimonialism in Indonesia By Nina Korte
  11. Conservation and Climate Change Mitigation: A Framework and Principles from Regional Government’s Perspective and Its Financing Implication By Arief Anshory Yusuf
  12. Collective action, political parties and pro-development public policy By Keefer, Philip
  13. Hong Kong as an Economic Gateway (Japanese) By HISASUE Ryoichi

  1. By: Hal Hill; Juthathip Jongwanich
    Abstract: This paper documents and analyzes the rise of emerging East Asian economies as major international investors. Foreign direct investment (FDI) from these economies is rising faster than their economic growth, trade, and inward FDI, and the region is by far the most important investor from the developing world. We develop an analytical interpretation of the behaviour and competitive strategies of major developing East Asian outward investors. We conclude that the drivers of this outward FDI are generally consistent with the international investment literature. But in addition particular factors are at work, including the desire for natural resource security, and exceptionally high domestic savings rates. The major challenge for the rest of the world is to accommodate these FDI flows, as part of the global reorientation of economic activity towards East Asia.
    Keywords: East Asia, outward foreign investment, emerging economies
    JEL: F21 F23 O33 O53
    Date: 2011
  2. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: This paper first highlights at least four important issues relevant to be discussed in the context of climate change in Indonesia: (1) Indonesia is among the most vulnerable to climate change impact; (2) Indonesia is the second biggest contributor to global GHG emissions from land use change or deforestation; (3) As the fourth biggest country in term of population, Indonesia is also the candidate to become among the most important carbon emitters from energy consumption; (4) Indonesia is still struggling in economic development, particularly poverty alleviation. The first three issues are sufficient reasons for Indonesia, together with the rest of the world, to take necessary actions against climate change and the fourth issue is ‘the number one’ priority in Indonesian development and the element that must always be the prime consideration in any of those actions. This paper also review some of the actions that has been done particularly by Indonesian government in tackling climate change and questions some of its shortcomings and challenges.
    Keywords: climate change, Indonesia
    JEL: Q54 Q56 Q58
    Date: 2011–06
  3. By: Rullan Rinaldi (Department of Economics, Padjadjaran University); Eva Nurwita (Department of Economics, Padjadjaran University)
    Abstract: With others neighboring Provinces in the western part of Java, the West Java Province shares the southeast Asian most densely urban area (Bodebek as part of Jabodetabek and Greater Bandung). This research tries to identify the spatial clustering of urban economies activities using employment data from Economic Census of 2006 as proxy for urban agglomeration. Using the identification result, we then estimate aggregate production function of the urban agglomeration area to calculate it’s economies of agglomeration. From the result we found that both Bodebek and Greater Bandung metropolitan area are both have been reach the stage of saturation in their economic activity. Meanwhile, the alternative definition of Bodebek shows the stage of slight increasing return to scale, indicate the economies are trying to expand to regain the economies of scale that has been saturated in origin area.
    Keywords: Sub National Data, Indonesia
    JEL: R11
    Date: 2011–06
  4. By: MIYATA Toshiyuki
    Abstract: In 2008, the world experienced a sharp increase in rice prices due to destabilization of international rice demand and supply. Under these circumstances, rice exports from Thailand—the world's top rice exporter—and Thai rice export prices increased dramatically, but the amount of high-quality fragrant Jasmine rice exported to China decreased by some 30% over the previous year. This paper examines why, amidst increasing world rice prices and expansion of the Thai rice export market overall, the export of fragrant Jasmine rice from Thailand to China dropped so dramatically. In fact, China is the world's top rice producer, and one of the world's top rice exporters. However, China also imports rice, albeit only several hundred thousand tons annually. Some 90% of China's rice imports are from Thailand, the majority of which is high-quality Jasmine rice. Meanwhile, due to expansion of the Chinese economy and change in eating habits of middle- and high-income groups in Chinese society, more than 80% of Thailand's Jasmine rice exported to China is demanded in southern China, especially, Guangzhou and Shenzhen. However, in 2008, amidst rising world rice prices, exports of fragrant rice from Thailand to China showed a sharp decrease. This paper summarizes the expansion of Thai-produced rice exports to China after 2000 and the rapid drop in such exports in 2008 and analyzes some of the problems found in China's rice business, such as the misuse of trademarks and the mixing of Thai-produced and China-produced fragrant rice in China.
    Date: 2011–01
  5. By: Mieno, Fumiharu
    Abstract: Existing studies on the financial system in East Asia have emphasized its excessive debt financing, the lack of a bond market and its limited function on corporate governance. Other apparent facts, such as the average low debt ratio, the existence of large but unlisted firms, and the significance of foreign firms in its economy are generally ignored. Based on a uniquely compiled database for the top 1000 firms in Thailand and Malaysia, we examined the distributional feature of listed status and foreign ownership, and then re-estimated the determinants of the capital structures. We confirmed basic facts, such as the fact that unlisted firms occupy a large portion in the distribution, and that the debt financing of major firms is relatively inactive. We also found the significance of foreign ownership and its negative relationship with debt financing and ‘going public’. Finally, we found that certain kinds of foreign firms tend to keep large retained earnings and non-bank debt, suggesting their deep reliance on self-financing and internal capital markets. The characteristics of corporate finance in East Asia can be explained in part by distributional features on listing status and foreign ownership. Our findings raised questions about the conventional view of the current policy framework which emphasized on the shift from financial intermediation to the capital and bond markets.
    Keywords: Financial System, Corporate Finance, East Asia, FDI
    JEL: G30 G32 O52
    Date: 2011–03
  6. By: William R. Cline (Peterson Institute for International Economics); John Williamson (Peterson Institute for International Economics)
    Abstract: This policy brief updates Cline and Williamson's estimates of fundamental equilibrium exchange rates (FEERs) to April 2011. Most currencies appear to have been reasonably close to their FEERs in April 2011. The most important exceptions are China, on the weak side, and the United States, on the strong side. The countries that need to seek weaker effective rates are those with large current account deficits: Australia and New Zealand, South Africa, Turkey, (marginally) Poland and Hungary, and the United States and Brazil. These are countries with floating exchange rates that have been pushed to an overvalued level by (in most cases) capital mobility and the carry trade, reinforced in the case of the United States by the dollar's role as the currency to which many other countries peg combined with the decision of some other countries to peg their rates at an undervalued level. The countries that need to revalue their effective rates are primarily Asian: China and countries that make it a priority to avoid losing competitiveness versus China (Hong Kong, Malaysia, Singapore, and Taiwan). The authors' calculations show the need for a slightly larger effective revaluation of the Chinese currency, the renminbi, this year (17.6 percent) than last (15.3 percent) and a larger appreciation of the renminbi in terms of the dollar (28.5 percent rather than 24.2 percent).
    Date: 2011–05
  7. By: Bichaka Fayissa; Christian Nsiah
    Abstract: This study estimates the macroeconomic impact of remittances and some control variables such as openness of the economy, capital/labor ratio, and economic freedom on the economic growth of African, Asian, and Latin American-Caribbean countries using newly developed panel unit-root tests, cointegration tests, and Panel Fully Modified OLS (PFMOLS). We use annual panel data from 1985- 2007for 64 countries consisting of 29 from Africa, 14 from Asia, and 21 from Latin America and the Caribbean region, respectively. We find that remittances, openness of the economy, and capital labor ratio have positive and significant effect on economic growth for all regions as a group and in each of the three in study. While the economic freedom index also has a positive and significant effect on growth in Africa and Latin America, however, its effect on the economic growth of Asia is mixed.
    Keywords: Workers’ Remittances, Economic Growth, Unit-Root tests, Error Correction Model, PFMOLS, Panel Data, Africa, Asia, Latin America/Caribbean
    JEL: E21 F21 G22 J61 O16
    Date: 2011–06
  8. By: HARA Yonosuke; YAMADA Norihiko; KEOLA, Souknilanh
    Abstract: In recent years, following huge changes in the international politics of East Asia, Laos's geopolitical position has once again been spotlighted, with some even speaking of their expectations that the country's position will rise from being an inland country to being a bridge country. However, without assistance from other countries, it is extremely difficult for the country to run itself. Against this background, its relationship with China, which provides large amounts of financial aid and investment, is becoming the greatest issue for Laos today. A typical example of this is new urban construction projects in Vientiane City in exchange for aid for the construction of a sports stadium.<br /><br />Although deepening its relationship with China brings Laos benefits, it is also creating several very serious problems, such as land and environmental issues as well as Laos's acceptance of Chinese into the country. These problems are not all due to the deepening of the China-Laos relationship; there are also problems with the Laos Government's development policies. However, it is a fact that most of these problems have arisen as a result of Laos's deepening dependence on China.<br /><br />Because the current China-Laos relationship has been built from the beginning to be advantageous to China, it is enormously difficult for Laos to develop an equal relationship with China. However, while still continuing to maintain its bond with China, it is important that Laos not accept aid and investment randomly but instead determine what is beneficial for the country and its people. An especially important issue is how Laos should deal with China as a member of ASEAN. Whatever the case, Laos faces difficult steering in its diplomacy due to its geographical and historical remoteness.
    Date: 2011–01
  9. By: Achmad Kemal Hidayat (Department of Economics, Padjadjaran University); Arief Bustaman (Department of Economics, Padjadjaran University); Anhar Fauzan (Department of Economics, Padjadjaran University); Eva Nurwita (Department of Economics, Padjadjaran University); Adhitya Wardhana (Department of Economics, Padjadjaran University); Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: Private consumption expenditure (PCE) contributes a major share in Indonesian GDP and its growth has been dominating the economic growth. PCE is also linked directly to the welfare of Indonesian people making it even more relevant for its close monitoring. However, despite the high volatility of macroeconomic conditions due to both global and domestic disturbances, indicators that measure PCE in frequency higher than quarterly is not yet existent in Indonesia. This paper is the first attempt to construct a monthly index of private consumption expenditure for Indonesia. Using a methodology based on the experience of other countries and constrained with data availability, we devise the index based on four statistically relevant variables: value added tax revenue, excise tax revenue, electricity consumption, and fuel consumption. Using the weights estimated based on the principal component analysis we found that our monthly PCE index fits well and correlate highly with the quarterly private consumption expenditure from the national accounts data. We hope that our initial attempt to construct the monthly PCE index will encourage others to devise even better measure of monthly consumption indicators.
    Keywords: Private consumption expenditure, Macroeconomic Policies, Indonesia
    JEL: E2 E21 C43
    Date: 2011–06
  10. By: Nina Korte
    Abstract: Indonesia has long been associated with neopatrimonialism, corruption, collusion, and nepotism as the main modi operandi of politics, economics and public administration. Despite various measures and initiatives to fight these practises, little evidence for a significant decline can be found over the years. Rather, longitudinal analysis points to changes in the character of neopatrimonialism. Based on more than 60 in-depth interviews, focus-group discussions, and the analysis of both primary and secondary data, the aim of this article is, first, to describe the changes that have taken place, and, second, to investigate what accounts for these changes. Political economy concepts posit the amount and development of economic rents as the explanatory factor for the persistence and change of neopatrimonialism. This study’s findings, however, indicate that rents alone cannot explain what has taken place in Indonesia. Democratisation and decentralisation exert a stronger impact.
    Keywords: Economic Rents, Neopatrimonialism, Democratisation, Decentralisation, Indonesia
    Date: 2011–05
  11. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: This paper highlights the importance of regional governments in the context of Indonesian struggle to resolve the problem of climate change, in particular, and wider area of environmental problem. It emphasizes, that regional governments, more often than not, overlook the value of conservation, despite evidences that conservation not only has the benefit of securing the welfare of future generation but also can avoid various environmental problem and many natural disasters of today. There is a need to modify the paradigm of financing for climate change mitigation or adaptation from focusing on searching external financing with the basis of compensation but optimizing internal source of financing as it is the local who will benefit from many of our conservation actions.
    Keywords: climate change, conservation, regional development, Indonesia
    JEL: Q54 Q56 Q58
    Date: 2011–06
  12. By: Keefer, Philip
    Abstract: Broad consensus exists that the ability of political actors to make credible commitments is key to development. An important and little-explored determinant of the credibility of political commitments is the existence of organizations that facilitate citizen collective action to sanction political actors who renege. This paper focuses on one essential organization, the political party. Three measures of political parties are used to assess cross-country differences in the degree to which politicians facilitate the ability of citizens to act in their collective interest. Each of these measures is associated with superior development outcomes, above and beyond the effects of competitive elections. These results have implications for understanding the extraordinary economic success of some East Asian countries and notable lags among others: East Asian non-democracies exhibit more institutionalized ruling parties than other non-democracies, while East Asian democracies exhibit equally or less institutionalized parties. The evidence suggests that greater research and policy emphasis be placed on the organizational characteristics of countries that allow citizens to hold leaders accountable.
    Keywords: Parliamentary Government,Political Systems and Analysis,Politics and Government,Corporate Law,E-Government
    Date: 2011–06–01
  13. By: HISASUE Ryoichi
    Abstract: Hong Kong has played a major role as an economic and financial center in the Asia-Pacific. This role has not been simply as a "connecting point" for economic activity among different worlds, but also as a "gateway" for regulating these differences. Since opening the port in the mid-19th century, following the free trade framework under the "Era of Empires", Hong Kong has cultivated the "connections" and "flows" of people, goods, money, and information from South China to Southeast Asia, the Americas, Oceania, and inland areas of North and Central China. Later, with the emergence of a new era of globalization due to a new world order at the end of the 20th century, the rise of "Open China" makes Hong Kong once again as a gateway between China and the world. However, this role was not established in a day; rather, it is an extension of the multilevel and countless "connections"and "flows" that the city has inherited since the mid-19th century. On this basis, Hong Kong functions as part of not only the Chinese economy but also the regional and global economy even more than before.
    Date: 2011–01

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