nep-sea New Economics Papers
on South East Asia
Issue of 2011‒06‒25
twenty papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Sequencing Regionalism: Theory, European Practice, and Lessons for Asia By Baldwin, Richard E.
  2. Financial Integration in Emerging Asia: Challenges and Prospects By Park, Cyn-Young; Lee, Jong-Wha
  3. Features of post-crisis protectionism in Asia and the Pacific By Martin Wermelinger
  4. Trade and Investment in the Greater Mekong Subregion: Remaining Challenges and the Unfinished Policy Agenda By Menon, Jayant; Melendez, Anna Cassandra
  5. ASEAN’s Free Trade Agreements with the People’s Republic of China, Japan, and the Republic of Korea: A Qualitative and Quantitative Analysis By Estrada, Gemma; Park, Donghyun; Park, Innwon; Park, Soonchan
  6. Environmental Kuznets curve in Indonesia, the role of energy consumption and foreign trade By Saboori, Behnaz; Soleymani, Abdorreza
  7. Inequality in Developing Economies: The Role of Institutional Development By Adalgiso Amendola; Joshy Easaw; Antonio Savoia
  8. Economic Crises and Institutions for Regional Economic Cooperation By Henning, C. Randall
  9. Is electrification welfare improving?: non-experimental evidence from rural Bhutan. By Kumar, Santosh; Rauniyar, Ganesh
  10. Early Warning Systems in the Republic of Korea: Experiences, Lessons, and Future Steps By Jung, Hyungmin; Yun Jeong, Hoe
  11. Comparing two financial crises: the case of Hong Kong real estate markets By LEUNG, K. Y. Charles; TANG, C. H. Edward
  12. Being Knowledgeable of Sociable?: Differences in Relative Importance of Cognitive and Non-Cognitive Skills By Changhui Kang; Sam-Ho Lee
  13. The effectiveness of virtual R&D Teams in SMEs: experiences of Malaysian SMEs By Ale Ebrahim, Nader; Abdul Rashid, Salwa Hanim; Ahmed, Shamsuddin; Taha, Zahari
  14. A study on influencers of total sales revenue of generic pharmaceutical companies in Indonesia By Simanjuntak, Destrina Grace; Tjandrawinata, Raymond R.
  15. Estimates of the long-run growth rate of Singapore with a CES production function By Rao, B. Bhaskara; Shankar, Sriram
  16. Globalization, Structural Change and Productivity Growth By Margaret S. McMillan; Dani Rodrik
  17. The long term impact of Vietnam war's veteran on economic governance By Dang, Duc Anh
  18. Exchange rate anchoring - Is there still a de facto US dollar standard? By Thierry Bracke; Irina Bunda
  19. Les éleveurs dans la gestion des menaces sanitaires globales : les éleveurs vietnamiens et la grippe aviaire By Figuié, M.; Desvaux, S.
  20. Assessing Development Strategies to Achieve the MDGs in Asia. Macroeconomic Strategies of MDG Achievement in the Kyrgyz Republic By Roman Mogilevsky; Anara Omorova

  1. By: Baldwin, Richard E. (The Graduate Institute of International and Development Studies)
    Abstract: Feedback mechanisms are the key to sequencing when it comes to regional integration; can mean that today’s policy or institution alters the political-economy landscape in a way that makes it politically optimal for future governments to take further steps toward integration—even when these steps are not politically optimal from today’s perspective. After outlining the theory, the paper uses feedback mechanisms to organize Europe’s postwar integration narrative, and then draws lessons for today’s integration of East Asia. The paper suggests that the spontaneous cooperation that created “Factory Asia” has not been codified. One starting point for Asian regional institutions would be to institutionalize the spontaneous cooperation that already exists on trade, services, and investment. New, creative thinking is needed on the sort of soft-law commitments and new modes of cooperation that would make this work with limited sovereignty pooling.
    Keywords: sequencing regionalism; lessons of European integration; East Asian integration; regionalism
    JEL: F02 F13 F15
    Date: 2011–06–01
  2. By: Park, Cyn-Young (Asian Development Bank); Lee, Jong-Wha (Korea University)
    Abstract: Using both quantity- and price-based measures of financial integration, this paper shows an increasing degree of financial openness and integration in emerging Asian markets. This paper also assesses the impact of a regional shock relative to a global shock on local equity and bond markets. The findings of this paper suggest that the region’s equity markets are integrated more globally than regionally, although the degrees of both regional and global integration have increased significantly since the 1997/98 Asian financial crisis. However, emerging Asia’s local currency bond markets remain generally segmented, being neither regionally nor globally integrated. A case can be made for the benefits of increased regional integration of financial markets. Financial integration at the regional level allows for the region’s economies to benefit from allocation efficiency and risk diversification. The findings of this paper suggest that policymakers in the region must strike the right balance between maximizing the net benefits from regional and global financial openness, and minimizing the potential costs of financial contagion and crisis.
    Keywords: emerging Asia; financial integration; cross-border financial flows; crossborder asset holdings; convergence of asset returns
    JEL: F30 F36 F41 G15
    Date: 2011–05–01
  3. By: Martin Wermelinger (University of St. Gallen)
    Abstract: This paper provides an overview of developments in implementation of protectionist measures relevant for Asia-Pacific economies in the period associated with recovery after the Global Economic Crisis of 2008/2009. At the very start of the Global Economic Crisis, there was a real fear that the sharp collapse in exports and production in many countries would lead to repeat of the damaging trade wars from the 1930s.
    Keywords: Post-crisis protentionalism, asia-the pacific, glonal economic crisis
    JEL: F1
    Date: 2011–03
  4. By: Menon, Jayant (Asian Development Bank); Melendez, Anna Cassandra (Asian Development Bank)
    Abstract: The Greater Mekong Subregion (GMS) is one of the most successful stories of economic transition and integration among developing countries. Strong rates of economic growth since the early 1990s have been fueled by increased trade and foreign direct investment (FDI) in the subregion. This economic progress has translated into marked improvements in living standards and human development outcomes, and dramatic reductions in poverty. Unilateral policy reforms and greater economic cooperation through the GMS Program in particular have led to positive trade and investment growth. More recently, membership in the World Trade Organization (WTO) and participation in the Association of Southeast Asian Nations (ASEAN) Free Trade Agreement (AFTA) and other preferential trading agreements have driven reforms. Despite these achievements, the trade policy reform agenda remains incomplete. It is important for the GMS members of AFTA to multilateralize their preferences in order to avoid trade diversion and deflection, and remain open to global trade. This should also be the objective of the various ASEAN+1 bilateral free trade agreements (FTAs). Retaining a multiple-tier tariff system is unlikely to mitigate revenue loss, but could unnecessarily burden an already stretched bureaucracy, or lead to more rent-seeking. In order to reduce vulnerability to external shocks, diversification of both export commodities and markets are being considered. Intra-sectoral diversification of export commodities is likely to be more viable and less costly than inter-sectoral diversification. It is unlikely, however, that any rebalancing of growth from foreign to domestic demand would be required in the GMS countries in order to increase resilience to external shocks.
    Keywords: Greater Mekong Subregion (GMS); Cambodia; the Lao People’s Democratic Republic (Lao PDR); Myanmar; Thailand; Viet Nam; trade and investment; regional economic integration; regional trade agreements; economic diversification
    JEL: F15 F59 O53
    Date: 2011–05–01
  5. By: Estrada, Gemma (Asian Development Bank); Park, Donghyun (Asian Development Bank); Park, Innwon (Division of International Studies); Park, Soonchan (Department of Economics and International Trade)
    Abstract: Expanding trade with East Asia’s “Big Three” economic giants—the People’s Republic of China (PRC), Japan, and the Republic of Korea—offers a new potential source of growth for ASEAN in the post-global-crisis period. In fact, ASEAN has been actively pursuing trade liberalization with the Big Three. The central objective of this paper is to qualitatively and quantitatively assess the different permutations of ASEAN’s free trade agreements (FTAs) with the Big Three (e.g., ASEAN–PRC, ASEAN–Japan, ASEAN–Republic of Korea, and ASEAN+3). Our qualitative analysis is based on the theory of economic integration, and our quantitative analysis is based on a CGE model. The two types of analyses both suggest that an ASEAN+3 FTA would deliver the largest benefits for the region.
    Keywords: ASEAN; People’s Republic of China (PRC); Japan; Republic of Korea; trade; free trade agreement; free trade area; CGE model
    JEL: F10 F14 F15
    Date: 2011–03–01
  6. By: Saboori, Behnaz; Soleymani, Abdorreza
    Abstract: This study examines the dynamic relationship among carbon dioxide (CO2) emissions, economic growth, energy consumption and foreign trade based on the environmental Kuznets curve (EKC) hypothesis for Indonesia during the period 1971–2007. The Auto regressive distributed lag (ARDL) methodology is used as an estimation technique. The results do not support the EKC hypothesis, which assumes an inverted U-shaped relationship between income and environmental degradation. The long-run results indicate that foreign trade is the most significant variable in explaining CO2 emissions in Indonesia followed by Energy consumption and economic growth. The stability of the variables in estimated models is also examined. The result suggests that the estimated models are stable over the sample period.
    Keywords: Environmental Kuznets curve; CO2 emissions; energy consumption
    JEL: Q53 Q51 Q43
    Date: 2011–06–14
  7. By: Adalgiso Amendola (Università di Salerno); Joshy Easaw (University of Swansea); Antonio Savoia (Department of Economics, University of Exeter)
    Abstract: This paper studies the distributive impact of institutional change in developing countries. In such economies, property rights systems may preserve the interests of an influential minority, who can control key-markets, access to assets and investment opportunities, especially if they enjoy disproportionate political power. We test this hypothesis using cross-section and panel data methods on a sample of low- and middle-income economies from Africa, Asia and Latin America. Results suggest that: (a) increasing property rights protection increases income inequality; (b) this effect is larger in low-democracy environments; (c) few countries have developed political institutions capable of counterbalancing this effect.
    Keywords: Inequality, developing economies, institutions, property rights, democracy.
    JEL: O15 O17 D70
    Date: 2011
  8. By: Henning, C. Randall (Peterson Institute for International Economics)
    Abstract: This paper examines the extent to which economic crises facilitate the development of more effective regional institutions and whether such institutions can shield regions from crises. It compares six regional economic crises over the last four decades and the institution building—or decay—that followed. The analysis concludes that five conditions are especially important in generating a constructive regional response: (i) a significant degree of regional economic interdependence; (ii) an independent secretariat or intergovernmental body charged with cooperation; (iii) webs of interlocking economic agreements; and, as elements of the multilateral context, (iv) conflict with the relevant international organization (such as the International Monetary Fund [IMF]); and (v) the support of the United States. The paper then reviews three episodes of crises in Europe, concluding that the Economic and Monetary Union (EMU) has deflected balance of payments and currency crises but not crises of other types, such as sovereign debt crises. Asian regionalism would be well served by heads of government taking the lead and delegating tasks to intergovernmental networks and secretariats, central banks and finance ministries retaining substantial collective autonomy in their fields of responsibility, and the use of concentric circles to accommodate countries with different levels of commitment to regionalism.
    Keywords: Economic crises; financial crises; regional institutions; Asian regionalism; regional integration
    JEL: F33 F36 F59
    Date: 2011–06–01
  9. By: Kumar, Santosh; Rauniyar, Ganesh
    Abstract: This paper investigates the income and educational impacts of a large village-based electrification program in rural Bhutan. We designed and administered a household and village-level socio-economic survey in the electrified and non-electrified villages and collected data on wide range of developmental outcomes. Using Propensity Score Matching (PSM) and propensity-based weighted regression, we find that access to electricity improved economic and educational outcomes. While access to electricity increased non-farm income by 60-70%, and it had no significant effect on farm-income. Since non- farm income consists of a small percentage of total household income, the impact should be considered modest and not large. We also nd that children in electrified households have 0.75 additional years of schooling, an increase of about 24%. Additionally, amount of evening study time at home is 10 minutes more for the children in the treated households compared to untreated households. We employed different matching algorithms and our results are consistent and robust to all matching estimator. Our study contributes to the few studies on infrastructure literature which has often been focused on transport, telecom, and water projects. Given the limited use of electricity for income-generating activities in Bhutan, investments in other complementary infrastructure, such as, markets, roads, information technology, credit may help the households to realize the full benefits of electrification.
    Keywords: Rural Electrification; Development Effectiveness; Asian Development Bank; Impct Evaluation; South-east Asia; Bhutan.
    JEL: O18 O20 N75
    Date: 2011–02–20
  10. By: Jung, Hyungmin (Early Warning Office); Yun Jeong, Hoe (Asian Development Bank)
    Abstract: This paper examines the cases of the Early Warning System (EWS) in the Republic of Korea, which was introduced in the wake of 1997/98 Asian financial crisis in a policy effort to prevent its recurrence. The EWS in the Republic of Korea was expanded into a national system in 2005 incorporating the finance, real estate, commodities, and labor sectors. This paper provides the descriptions of each EWS sector and documents several episodes of their policy contributions. The past experiences suggest that quantitative models tend to have difficulty predicting a crisis due to the changing nature of crises. Hence, it is desirable that quantitative models are supplemented by qualitative analysis reinforcing EWSs with various methodologies. To improve economic surveillance and message delivery to guide proper policy actions, the independence of surveillance unit should be maintained and the scope of monitoring should be expanded to incorporate regions and markets other than domestic ones given the growing influences of the external sector on the domestic economy through trade and financial linkages.
    Keywords: EWS; crisis; surveillance; monitoring; quantitative model; qualitative analysis
    JEL: E44 E61 F37
    Date: 2011–03–01
  11. By: LEUNG, K. Y. Charles; TANG, C. H. Edward
    Abstract: Hong Kong is no stranger to bubbles or crisis. During the Asian Financial Crisis(AFC), the Hong Kong housing price index drops more than 50% in less than a year. The same market then experiences the Internet Bubble, the SARS attack, and recently the Global Financial Crisis (GFC). This paper attempts to provide some “stylized facts” of the real estate markets and the macroeconomy, and follow the event-study methodology to examine whether the markets behave differently in the AFC and GFC, and discuss the possible linkage to the change in government policies (“learning effect”) and the flow of Chinese consumers and investors to Hong Kong (“China factor”).
    Keywords: regime switching; structural change; small open economy; bounded rationality; banking policy
    JEL: E50 E44 R20 E60
    Date: 2011–01
  12. By: Changhui Kang (Department of Economics, Chung-Ang University); Sam-Ho Lee (UWA Business School, The University of Western Australia)
    Abstract: This paper develops a model of college admissions that emphasizes their role as a human capital evaluation method. Given multiple dimensions of human capital, di¤erent pattens of human capital evaluation and develpment emerge as equilibria. These equilibria with a varying emphasis on di¤erent aspects of human capital can match an observed di¤erence in college admission patterns between East Asian countries and the U.S. The model has a macroeconomic implication about the relationship between measured human capital and economic performances. We demonstrate the support for this implication through cross-country regressions.
    Date: 2011
  13. By: Ale Ebrahim, Nader; Abdul Rashid, Salwa Hanim; Ahmed, Shamsuddin; Taha, Zahari
    Abstract: The number of small and medium enterprises (SMEs), especially those involved with research and development (R&D) programs and employed virtual teams to create the greatest competitive advantage from limited labor are increasing. Global and localized virtual R&D teams are believed to have high potential for the growth of SMEs. Due to the fast-growing complexity of new products coupled with new emerging opportunities of virtual teams, a collaborative approach is believed to be the future trend. This research explores the effectiveness of virtuality in SMEs’ virtual R&D teams. Online questionnaires were emailed to Malaysian manufacturing SMEs and 74 usable questionnaires were received, representing a 20.8 percent return rate. In order to avoid biases which may result from pre-suggested answers, a series of open-ended questions were retrieved from the experts. This study was focused on analyzing an open-ended question, whereby four main themes were extracted from the experts’ recommendations regarding the effectiveness of virtual teams for the growth and performance of SMEs. The findings of this study would be useful to product design managers of SMEs in order to realize the key advantages and significance of virtual R&D teams during the new product development (NPD) process. This in turn, leads to increased effectiveness in new product development's procedure.
    Keywords: Virtual Teams; New Product Development; Survey Finding; Small and Medium Enterprises.
    JEL: L17 P23 O32 O31 L15 P4
    Date: 2011–04–07
  14. By: Simanjuntak, Destrina Grace; Tjandrawinata, Raymond R.
    Abstract: This paper empirically examines the influence of firms’ one-year lagged of total new products (t-1), one-year lagged profitability (t-1), and market share of new products to firms’ amount of sales revenue in pharmaceutical generic companies in Indonesia. The data used in this study was panel dataset, gathered from six large pharmaceutical generic companies in Indonesia, during the period 2006 to 2010. The regression analysis method uses fixed effect models, with generalized least squares (GLS) method. The result shows that firms’ one-year lagged of total new product (t-1), one-year lagged profitability (t-1), and market share of new products to be positive and affect significantly the firms’ sales revenue in the pharmaceutical generic companies in Indonesia.
    Keywords: Pharmaceutical Generic Companies; Profitability; New Generic Product; Market Share; Sales Revenue
    JEL: L21 C23 A10 G30 M21
    Date: 2011–06–17
  15. By: Rao, B. Bhaskara; Shankar, Sriram
    Abstract: This paper estimates with the Bayesian methods a CES production function for Singapore for 1960-2009. It is found that the elasticity of substitution is 0.6, technical progress is labour augmenting and the steady state growth rate of Singapore is about 1.8%.
    Keywords: Bayesian methods; CES production function and Technical progress
    JEL: D24 C11
    Date: 2011–06–13
  16. By: Margaret S. McMillan; Dani Rodrik
    Abstract: Large gaps in labor productivity between the traditional and modern parts of the economy are a fundamental reality of developing societies. In this paper, we document these gaps, and emphasize that labor flows from low-productivity activities to high-productivity activities are a key driver of development. Our results show that since 1990 structural change has been growth reducing in both Africa and Latin America, with the most striking changes taking place in Latin America. The bulk of the difference between these countries’ productivity performance and that of Asia is accounted for by differences in the pattern of structural change – with labor moving from low- to high-productivity sectors in Asia, but in the opposite direction in Latin America and Africa. In our empirical work, we identify three factors that help determine whether (and the extent to which) structural change contributes to overall productivity growth. In countries with a relatively large share of natural resources in exports, structural change has typically been growth reducing. Even though these “enclave” sectors usually operate at very high productivity, they cannot absorb the surplus labor from agriculture. By contrast, competitive or undervalued exchange rates and labor market flexibility have contributed to growth enhancing structural change.
    JEL: O1
    Date: 2011–06
  17. By: Dang, Duc Anh
    Abstract: I investigate the effects of Vietnam War’s veteran on long run economic development in Vietnam. Using a unique dataset containing the number of war invalids at province levels, I find the number of war invalids from each province to be an important determinant of its current economic performance. To correct for potential biases arising from reverse causality, measurement error and unobservable province characteristics, I use an instrumental variable approach exploiting distance to the 17th parallel demilitarized zone. I also find that the importance of the war invalids for contemporary development is a result of its impacts on overall provincial economic governance and other disaggregated economic institutions, such as the pro-activity of provincial leadership, the quality of the legal institutions and services supporting business development.
    Keywords: War invalids, economic governance, economic development, Vietnam
    JEL: O10 O43
    Date: 2010–01–01
  18. By: Thierry Bracke (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Irina Bunda (IMF-Singapore Regional Training Institute, 10 Shenton Way, MAS Building, Singapore 079117.)
    Abstract: The paper provides a measure of exchange rate anchoring behaviour across 149 emerging market and developing economies for the 1980-2010 period. An extension of the Frankel and Wei (2008) methodology is used to determine whether exchange rates are pegged or floating, and in the case of pegs, to which anchor currencies they are pegged. To capture the role of major currencies over time, an aggregate trade-weighted indicator is constructed based on exchange rate regimes of individual countries. The evolution of this aggregate indicator suggests that the US dollar has continuously dominated exchange rate regimes, despite some temporary decoupling during major financial crises. JEL Classification: F30, F31, F33.
    Keywords: de facto exchange rate regimes, international monetary system, emerging and developing economies, global currencies.
    Date: 2011–06
  19. By: Figuié, M.; Desvaux, S.
    Abstract: This paper documents the logics underpinning Vietnamese farmers' management practices of an emerging disease, the avian flu (H5N1). In the area of our survey, one the front line of the fight against H5N1 according to international organizations (WHO, OIE, FAO), farmers and their poultry are supposed to be highly impacted by the epizootic caused by the virus. Moreover, farmers are called upon to collaborate to the global fight against the virus before it mutates in a pandemic virus. Our study shows that direct (poultry mortality) and indirect impacts (consequence of the measures imposed by the government to contain the virus, fluctuation of consumers' demand,...) show to be relatively limited when compared to the permanent state of instability which characterizes the context of poultry production in the surveyed village. This instability is mainly related to numerous and regular poultry infectious diseases and market instability. If international community considers H5N1 as a zoonotic risk and a pandemic threat which asks for emergency tools, H5N1 is framed by the farmers of our study as an epizootic problem manageable through routinized measures. These measures aim at minimizing the economic impact of the disease rather than preventing poultry from the disease. Consequently, local management of the disease cannot fit with the precautionary approach promoted by the international community. ...French Abstract : Cet article analyse la logique de gestion d'une émergence sanitaire, la grippe aviaire (H5N1) dans l'espace confiné d'une communauté d'éleveurs vietnamiens, et la confronte à celle de l'espace public des organisations internationales (OMS, OIE, FAO,...). La zone d'étude appartient à ce que les organisations internationales considèrent comme la ligne de front de la lutte internationale contre la grippe aviaire. Les éleveurs, à travers leurs volailles, y sont considérés comme d'importantes victimes de l'épizootie provoquée par le virus. Ils sont en outre très largement sollicités pour participer à la lutte contre le virus, afin d'éviter que celui-ci ne mute en un virus capable de provoquer une pandémie mondiale de grippe. Cependant, notre travail montre que l'impact du virus dans le village étudié se révèle relativement limité dans ses effets directs (mortalités) et indirects (mesures d'urgence, conséquences économiques et réglementaires), compte tenu du contexte permanant de pression infectieuse (maladie de Newcastle et autres), et d'instabilité des marchés que connaissent les éleveurs. La comparaison avec la logique de la communauté internationale montre que la grippe aviaire a été appréhendée par les éleveurs essentiellement dans sa dimension épizootique (au détriment des dimensions zoonotique et pandémique) et gérée par des stratégies routinières de minimisation des effets plutôt que de contrôle des causes. En ce sens, le virus s'il a posé problème aux éleveurs du village étudié n'a cependant pas été appréhendé comme un risque et encore moins vécu comme une crise sanitaire. Sa gestion locale ne peut relever du même principe de précaution qui a guidé la communauté internationale.
    JEL: D70 D8 I10 Q10
    Date: 2011
  20. By: Roman Mogilevsky; Anara Omorova
    Abstract: The paper aims at analyzing macroeconomic and financial strategies, which are to ensure achievement of the Millennium Development Goals (MDGs) in the Kyrgyz Republic. The paper is based on results of simulations generated through the application of standard MAMS, a computable general equilibrium model adjusted to the country situation and calibrated with data of Kyrgyzstan. MAMS-model-based simulation results indicate that a continuation of the current policies under the baseline scenario would allow for achieving MDG1 (poverty reduction) only; the country would fall short of the targets for other MDGs. In order to achieve all MDGs, the country needs to increase government spending on MDG-relevant sectors (education, health, water and sanitation) by 7.8-8.1% of GDP per annum in comparison to the baseline scenario. The scenario that combines increased taxes and aid inflows seems to be the most realistic, but it would still require very substantial increases in tax collections and grant aid. The situation is going to be easier, if the economic growth rates 2011-2015 would be higher than 7% per annum. This is possible, if the government would be more successful in implementation of structural reforms, FDI and private domestic investments attraction and mobilization of resources for infrastructure development. Another possible way out is a substantial increase in government spending efficiency allowing for receiving higher social returns for money spent.
    Keywords: CGE model, Kyrgyzstan, macroeconomic policies, Millennium Development Goals
    JEL: D58 E61 E62 H50 H51 H52 H54 H6 I1 I2 O11 O15 O53
    Date: 2011

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