nep-sea New Economics Papers
on South East Asia
Issue of 2012‒01‒25
fifteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The Flows of the Pacific: Asian foreign exchange markets through tranquility and turbulence By Dagfinn Rime and Hans Jørgen Tranvåg
  2. Trade Opportunities for Climate Smart Goods and Technologies in Asia By Soumyananda Dinda
  3. The PRC’s Free Trade Agreements with ASEAN, Japan, and the Republic of Korea: A Comparative Analysis By Estrada, Gemma; Park, Donghyun; Park, Innwon; Park, Soonchan
  4. The 4th Science and Technology Basic Plan: A National Innovation System for New Challenges - Role of East Asia and Small & Medium Businesses By Aoki, Reiko
  5. The Impact of External Shocks in East Asia: Lessons from a Structural VAR Model with Block Exogeneity By Jean-Pierre Allegret; Cécile Couharde; Cyriac Guillaumin
  6. Investigating China's Disaggregated Processed Exports: Evidence that the RMB matters By Willem THORBECKE
  7. Towards effective emerging infectious disease surveillance: Cambodia, Indonesia, and NAMRU-2 By Ear, Sophal
  8. The impact of global climate change on the Indonesian economy: By Oktaviani, Rina; Amaliah, Syarifah; Ringler, Claudia; Rosegrant, Mark W.; Sulser, Timothy B.
  9. Can a KIS Overcome Resource Scarcity? By Agus Gunawan; Mohamed Wahdan; H. Jaap van den Herik; Terry Najja Kakeeto
  10. Closing The Waste Gap In Indonesia: Harnessing Industrial Waste To Prevent Pollution And Conserve Non-Renewable Resources By Vincent Aloysius; Dadan Umar Daihani
  11. The development of inequality and poverty in Indonesia, 1932-1999 By Bas van Leeuwen
  12. The quiet revolution in agrifood value chains in Asia: The case of increasing quality in rice markets in Bangladesh By Minten, Bart; Murshid, K.A.S.; Reardon, Thomas
  13. Indonesian Stock Market Crisis Observation with Spectral and Composite Index By Situngkir, Hokky
  14. Human rights as demands for communicative action By Gauri, Varun; Brinks, Daniel M.
  15. Demand and Reimbursement Effects of Healthcare Reform: Health Care Utilization and Infant Mortality in Thailand By Jonathan Gruber; Nathaniel Hendren; Robert Townsend

  1. By: Dagfinn Rime and Hans Jørgen Tranvåg (Department of Economics, Norwegian University of Science and Technology)
    Abstract: Using the longest data set on FX order flow to date, along with the broadest coverage of currencies to date, we examine the effect of FX order flow on exchange rates across small and large currencies, currencies with floating or fixed regimes, and across both tranquil and turbulent periods. Over our 15 years of data for eleven Asian and Australasian currencies, we find that order flow has a potentially strong impact on all exchange rates in the sample. The effect is strongest on floating exchange rates, both economically and statistically, but is sizeable also on the other exchange rates, especially during periods of turbulence. By creating a measure of regional order flow, we show that all exchange rates depreciate as flows are moved out of Asia/Australasia and into US dollars. This is true both across regimes and if their own flow is not included in the structure of the regional flow.
    Date: 2012–01–06
  2. By: Soumyananda Dinda (Chandragupt Institute of Management Patna, E-mail:,, &
    Abstract: This study focuses on trade opportunities of climate smart goods and technologies (CSGT) in Asia. Paper mainly highlights the export gaps for climate smart goods and technologies (CSGT) in Asia and identifies the trade opportunities among trade partners in intraregional and interregional. Applying the gravity model we estimate the export gap for the CSGT as the difference between the actual bilateral export flow and the mean value predicted by the model. In other words, ‘export gap’ is the difference between the actual and predicted export value. There is a scope to increase the export of climate smart goods and technologies with trading partners when the actual trade is below the predicted value ( i.e., negative value of the export gap). This gap actually provides the opportunity to raise the trade and attracting investment in CSGT sector and thereby development takes place. This paper also identifies the export gaps in CSGT for each regional member in its trade with partners within the region, EU, and North America (i.e., the US and Canada). This study contributes to the empirical literature in terms of measuring and identifying the potential trade opportunity of CGST in Asia. The paper also suggests that the climate smart export-led growth model is still valid in emerging Asian countries.
    Keywords: Bilateral trade flow, Climate Smart Goods and Technologies, Export, Gravity model, Export gap, Potential Trade, Asia.
    JEL: C13 F18 O53 Q Q54 O11 O13
    Date: 2011–11
  3. By: Estrada, Gemma (Asian Development Bank); Park, Donghyun (Asian Development Bank); Park, Innwon (Division of International Studies, Republic of Korea University); Park, Soonchan (Department of Economics and International Trade, Kongju National University)
    Abstract: The role of the People’s Republic of China (PRC) in East Asia’s recovery from the recent global financial and economic crisis highlighted the PRC’s growing role as an engine of growth for the region. From the viewpoint of the PRC, there are many potential gains from entering into free trade agreements (FTAs) with its neighbors, who collectively form a large and fast-growing market. In this paper we qualitatively and quantitatively assess the four main permutations of the PRC’s FTAs with the region’s major economies: PRC–ASEAN, PRC–Japan, PRC–Republic of Korea, and ASEAN+3. We compare the effects of the FTAs on the PRC’s output and welfare. Our comparative analysis shows that the PRC would gain from all three bilateral FTAs, while gaining the most from a larger region-wide FTA such as ASEAN+3.
    Keywords: ASEAN; PRC; Japan; Republic of Korea; trade; free trade agreement; free trade area; CGE model
    JEL: F10 F14 F15
    Date: 2012–01–01
  4. By: Aoki, Reiko
    Abstract: We give and over view of the Japanese 4th Science and Technology Basic Plan, 1 April 2011 - 31 march 2016, focusing on the four major challenges: recovery & revitalization from earthquake disasters, green innovation, life innovation, and science, technology and innovation system reform. Then we examine two important topics from other essential schemes in the Basic Plan: East Asia Joint Research Program (e-Asia JRP) and Small Business Innovation Research (SBIR). e-Asia JRP consists of multilateral collaboration in science and technology research and funding among participating countries. It will constitute a part of larger East Asian collaborative efforts in science, technology and innovation. SBIR is a scheme to help individuals and new firms develop and then commercialize innovative technology and products. SBIR consists of initial subsidies and then loans on very favorable terms. We also look at three examples of SBIR success: motor insulation ideal for hybrid and electric vehicles, cancer fighting cyclodextrin, and a key system for high security machines.
    Date: 2012–01
  5. By: Jean-Pierre Allegret; Cécile Couharde; Cyriac Guillaumin
    Abstract: In this paper, we examine the relative importance of external shocks in domestic fluctuations of East Asian countries and check if these shocks lead to asymmetric or symmetric reactions between the considered economies. To this end, we estimate, over the period 1990.1-2010.4, a structural VAR model with block exogeneity (SVARX model) relying on a comprehensive set of external shocks. We firstly document a rising impact of these external shocks on domestic variables since the mid 1990s. Finally, real oil price and U.S. GDP shocks have a significant impact on domestic activity and lead to more symmetric responses, compared to U.S. monetary shock and MSCI Index financial shocks.
    Keywords: external shocks, East Asia, SVARX model
    JEL: F32 F33 F42
    Date: 2012
  6. By: Willem THORBECKE
    Abstract: China's trade surplus is entirely in processing trade. Processed exports are final goods produced using parts and components coming from East Asian supply chain countries. Many claim that because much of the value added of China's processed exports comes from East Asian countries, exchange rates in supply chain countries should affect China's processed exports and the renminbi should not. To investigate these issues, this paper disaggregates processed exports into their two main categories—processing with imported materials (PWIM) exports and processing and assembly (PAA) exports. For PWIM exports, much of the value added comes from China, while for PAA exports, most of the value-added comes from supply chain countries. Dynamic ordinary least squares (DOLS) results indicate that East Asian exchange rates affect both types of exports and that the renminbi significantly affects PWIM exports but not PAA exports. Since PWIM exports are now six times the value of PAA exports, these results indicate that the renminbi matters for aggregate processed exports.
    Date: 2012–01
  7. By: Ear, Sophal
    Abstract: Emerging infectious diseases (EIDs) pose international security threats because of their potential to inflict harm upon humans, crops, livestock, health infrastructure, and economies. The following questions stimulated the research described in this report: What infrastructure is necessary to enable EID surveillance in developing countries? What are the cultural, political, and economic challenges that are faced? Are there generalizations that may be made to inform engagement with developing countries and support EID surveillance infrastructure? Using the U.S. Naval Area Medical Research Unit No. 2 (NAMRU-2) as a common denominator, this report compares barriers to EID surveillance in Cambodia and in Indonesia and presents key factors—uncovered through extensive interviews—that constrain disease surveillance systems. In Cambodia, the key factors that emerged were low salaries, poor staff and human resources management and the effect of patronage networks, a culture of donor dependence, contrasting priorities between the government and international donors, and the lack of compensation for animal culling. Cambodian authorities have resisted a compensation scheme thus far, with speculation suggesting that the reason for this is the government’s concern that the possibility for corruption among poultry-holders is too great a risk. The Cambodian military has also played a part. The government ceased a merit-based salary supplement scheme for civil servants (including laboratory employees funded by the Global Fund to Fight Aids, Tuberculosis and Malaria) after the military is alleged to have demanded similar pay incentives which donors had no interest in funding. In Indonesia, the key issues emerging as barriers to effective surveillance include poor host-donor relationships, including differing host-donor priorities and a misunderstanding of NAMRU-2 by Indonesian Authorities; low salaries; a decline in the qualifications of personnel in the Ministry of Health; poor compensation for culling; and difficulties incentivizing local-level reporting in an era of decentralization. Conflict between external and host actors was given the greatest emphasis, with “viral sovereignty” the primary problem. The Indonesian government perceived unfair treatment when it was asked to pay millions of dollars for a vaccine developed from a sample it originally provided for diagnostic purposes to the U.S. government through NAMRU-2. A poor host-donor relationship is a major barrier in Indonesia, which exhibits greater political and financial autonomy than Cambodia and other less-developed countries. Ultimately these differences are symptomatic of Cambodia’s and Indonesia’s different levels of development and their roles within the international community. This context demonstrates the primary difference in existing barriers to surveillance between the countries. Thus, it is reasonable to hypothesize that other developing countries face similar barriers along a continuum from one extreme (Cambodia, where a genocide resulted in the death of a quarter of the population) to another (Indonesia, where state-of-the-art-labs can be run by Indonesians educated in countries such as France and Australia with some donor funds). Scientists are fully capable of fixing technical problems in surveillance systems, but non-technical barriers have been more difficult to confront. Not surprisingly, the primary challenges impeding surveillance are observed on the human resources side of the equation. When it comes to viral sovereignty, technology transfer has been proposed as a possible solution to enable resource-constrained countries to produce their own vaccines. Yet this is easier said than done; international development has tried for more than six decades to raise living standards with limited success. What is certain is that Indonesia’s human resources are already capable of producing some vaccines given sufficient technology, while Cambodia will require a decade or more to develop such a capability. It is clear that in Cambodia, technology transfer is necessary but not sufficient. Many of the key factors emerging from interviews with in-country practitioners are the direct result of the existing level of development and, as such, are perhaps beyond the scope of health and scientific agencies at this point. Nevertheless, greater understanding is a critical first step in mitigating negative outcomes.
    Keywords: Cambodia; Indonesia; Namru-2; Avian Influenza; H5N1; Political Economy
    JEL: K32 N35 H51 I18
    Date: 2011–10–08
  8. By: Oktaviani, Rina; Amaliah, Syarifah; Ringler, Claudia; Rosegrant, Mark W.; Sulser, Timothy B.
    Abstract: Global climate change influences the economic performance of all countries, and Indonesia is no exception. Under climate change, Indonesia is predicted to experience temperature increases of approximately 0.8°C by 2030. Moreover, rainfall patterns are predicted to change, with the rainy season ending earlier and the length of the rainy season becoming shorter. Climate change affects all economic sectors, but the agricultural sector is generally the hardest hit in terms of the number of poor affected. We assess climate change impacts for Indonesia using an Indonesian computable general equilibrium (CGE) model that focuses on the agricultural sector. Climate change input data were obtained from the International Food Policy Research Institute's International Model for Policy Analysis of Agricultural Commodities and Trade. Our results show that by 2030, global climate change will have a significant and negative effect on the Indonesian economy as a whole. In these projections, we see important impacts for particular sectors in the CGE model, especially for the agricultural sector (both producers and consumers) and in rural areas and for poorer households. Real gross domestic product (GDP) drops slightly and the consumer price index (CPI) increases by a small amount. Negative GDP growth is chiefly the result of adverse impacts on agriculture and agro-based industries, with the largest impact for soybeans, rice, and paddy (unmilled rice). Decreasing output of paddy and rice will adversely affect the country's food security. Domestic prices for paddy and rice increase significantly, pushing up the CPI. Taking international food price shocks into account would increase negative impacts. We find that addressing constraints to agricultural productivity growth through increased public agricultural research investments will be important to counteract adverse impacts of climate change. Enhanced awareness of both government agencies and farmers will be needed for the rural economy to adapt to the adverse impacts of climate change.
    Keywords: Climate change, Economy, Impact model, national CGE model, Computable general equilibrium (CGE) modeling,
    Date: 2011
  9. By: Agus Gunawan (UNPAR; TiCC, Tilburg University; and Maastricht School of Management); Mohamed Wahdan (Menoufia University, Egypt; and MSM, the Netherlands); H. Jaap van den Herik (TiCC, Tilburg University, the Netherlands); Terry Najja Kakeeto (TiCC, Tilburg University; and MSM, the Netherlands)
    Abstract: TResource scarcity for managerial tasks is a major problem in Indonesia although many human resources are available. However, the majority of them does not have a sufficient qualification or adequate skills for performing a management task. This paper aims at describing how a Knowledge-intensive System (KIS) can be used as a tool to help manufacturers to overcome resource scarcity for managers. Our focus is on the Indonesian SME Garment Manufacturers (ISGMs). A prevailing question reads as follows. How does an ISGM employee handle a KIS as a tool to overcome resource scarcity for managers? We note that the KIS will support the ISGM owner in three areas: (1) recording the business transactions according to Indonesia’s accounting standards, (2) interpreting financial statements analyses, and (3) interpreting analyses on daily business indicators. To answer the research question, our research method consists of observations, in-depth interviews, and a semi-structured questionnaire. Thirty-one Indonesian garment managers and twenty-four Indonesian financial experts participated in the interviews and filled in the questionnaire. The findings of the study indicate that there exists a resource scarcity for managers. This gap is filled in by ad hoc managers. Using the financial interpretation provided by a KIS, the ad hoc ISGM manager may obtain an actual insight into the business performance. As a result, the ad hoc manager may well deal with the information, and talk at a par with the financial experts and funding agencies. Based on the interviews and the questionnaire, we conjecture that in the long run, the ad hoc managers will be able to learn how to overcome the resource scarcity problem by using the knowledge of the company and the knowledge extracted from a KIS.
    Keywords: Knowledge-intensive System, Financial Analysis, Resource Scarcity, Indonesia SME Garment Manufacturers
    JEL: Q54 O11 O13
    Date: 2011–11
  10. By: Vincent Aloysius (DBA Candidate at Trisakti–Maastricht School of Management, E-mail:; Dadan Umar Daihani (Trisakti University)
    Abstract: According to the World Waste Survey 2009 by Chalmin and Gaillochet, an estimated twelve million tonnes of hazardous waste was generated in Indonesia in that year. Only a small fraction of this waste, an estimated one million tonnes was reported to be managed properly. These figures are alarming in two ways. Firstly, the fact that such a large amount of waste is being unmanaged indicates a high pollution risk. Secondly, it highlights a significant opportunity lost from not practicing resource recovery from waste. Many other developing countries could be in a similar situation as Indonesia with a lack of waste management capacity and pollution problems from unmanaged waste. How can we encourage the growth of industrial waste management to close the gap between waste generated and waste managed? What instruments can policy makers use to encourage industries to demand, and entrepreneurs to build capacity for waste management through resource recovery solutions? This paper is based on an on-going research focused on the internal and external drivers that can influence firms to adopt 3R (Reuse, Recycle and Recovery) solutions for the waste their operations generate. It is expected that this research delivers some in-sights into the effectiveness of the current policies and the environmental disclosure program vis-à-vis the awareness, commitment and compliance to the firm’s internal policies on waste management. A conceptual model representing the above variables was developed and revised following an initial study. It is hoped that the findings of this research would provide better understanding into what are the drivers and how they interact and work through the aid of this model. The research will take the perspective of environmental practitioners from various industries and to what extend the shift to 3R solutions has been achieved. It is hoped that some recommendations to policy makers could evolve from this study to encourage more 3R solutions by industries and thereby closing the waste gap in Indonesia. This paper does not explore the outcomes of the study but rather describes the approach and methodology outlined to effectively execute the research. The findings of the research will be the subject of future papers.
    Keywords: Industrial Waste Management, Waste Management Policy, 3R Waste Solutions, Resource Recovery, Environmental Rating and Disclosure Program
    JEL: Q54 F14 O13
    Date: 2011–11
  11. By: Bas van Leeuwen
    Abstract: In this paper we estimate inequality in Indonesia between 1932 and 1999. There was an increase in inequality at the start of this period but then a sharp decline from the 1960s. A shift from domestic to export agriculture over the period up to the Great Depression accounts for the increase in inequality. During the 1930s, as the price of export crops declined, the income of rich farmers suffered a blow. Yet, this was counterbalanced by increasing gap between expenditure in the urban and rural sectors, causing an over-all rise in inequality. As for the second half of the century, we find that the employment shift towards manufacturing and services, combined with an increase in labour productivity in agriculture, accounts for the decline in inequality. These inequality trends had an effect on poverty as well, but prior to the 1940s the negative impact of the rise in inequality was offset by an increase in per capita GDP. Between 1950 and 1980 a decline in inequality, combined with increased per capita GDP rapidly raised a large portion of the population above the poverty line.
    Keywords: Indonesia, inequality, poverty, economic development
    Date: 2012–01
  12. By: Minten, Bart; Murshid, K.A.S.; Reardon, Thomas
    Abstract: In Bangladesh—one of the poorest countries in Asia, where rice accounts for almost 70 percent of consumers' caloric intake—the share of the less expensive, low-quality coarse rice is shown to be rapidly decreasing in rice markets and the quality premium for the best-quality rice has been consistently on the rise in the last decades. It thus seems that the role of rice as only a cheap staple food is being redefined. The off-farm share in the final consumer price increases from 27 percent to 35 percent to 48 percent for low-, medium-, and high-quality rice, respectively, and the increasing demand for higher quality is thus seemingly associated with a more important off-farm food sector—in particular, milling, retailing, and branding—as well as a transformed milling industry. We further find that the labor rewards for and the technical efficiency of growing different rice qualities are not significantly different, and farmers do not benefit directly from consumers' increased willingness to pay for higher rice quality.
    Keywords: Markets, milling, Quality, rice, value chains,
    Date: 2011
  13. By: Situngkir, Hokky
    Abstract: The paper discusses the employment of the index composed from the dynamical tree of correlations among stock prices both with the popularly used standard (conventional) composite one. The spectral index focus on the dynamics of the correlation coefficients among stock prices while composite index is the dynamical aggregate of the whole stocks traded in the market. Some advantages is conjectured by incorporating both indexes to the historical data of Indonesian Stock Market data. Both are shown potentially useful for detecting the crisis as well as the general stock-prices relations on fundamental issues, generally social, economic, and political situations on which the Indonesian stock market is influenced.
    Keywords: composite index; spectral data; crisis; social economic and political issues
    JEL: D53 R53 G15 O16 E44 C4 P16
    Date: 2012–01–14
  14. By: Gauri, Varun; Brinks, Daniel M.
    Abstract: A key issue with human rights is how to allocate duties correlative to rights claims. But the philosophical literature, drawing largely on naturalistic or interactional accounts of human rights, develops answers to this question that do not illuminate actual human rights problems. Charles Beitz, in recent work, attempts to develop a conception of human rights more firmly rooted in, and helpful for, current practice. While a move in the right direction, his account does not incorporate the domestic practice of human rights, and as a result remains insufficiently instructive for many human rights challenges. This paper addresses the problem of allocating correlative duties by taking the practices of domestic courts in several countries as a normative benchmark. Upon reviewing how courts in Colombia, India, South Africa, Indonesia, and elsewhere have allocated duties associated with socio-economic rights, the paper finds that courts urge parties to move from an adversarial to an investigative mode, impose requirements that parties argue in good faith, and structure a public forum of communication. The conclusion argues that judicial practice involves requiring respondents to engage in communicative, instead of strategic, action, and explores the implications of this understanding of human rights.
    Keywords: Human Rights,International Terrorism&Counterterrorism,Parliamentary Government,Gender and Law,Health Law
    Date: 2012–01–01
  15. By: Jonathan Gruber; Nathaniel Hendren; Robert Townsend
    Abstract: The Thai 30 Baht program was one of the largest health system reforms ever undertaken by a low-middle income country. In addition to lowering the cost of care for the previously uninsured in public facilities, it also entailed a fourfold increase in funding provided to hospitals to care for the poorest 30% of the population (who were already publicly insured). For the previously uninsured, we find that the 30 Baht program led to increased health care utilization, as well as a shift from private to public sources of care. But, we find a larger increase for the poor who were previously publicly insured, especially amongst infants and women of childbearing age. Using vital statistics records, we find that the increased access to healthcare by the publicly insured poor led to a reduction in their infant mortality of at least 6.5 per 1,000 births. This suggests significant improvements in infant mortality rates can be achieved through increased access to healthcare services for the poor and marginalized groups.
    JEL: I0 I1
    Date: 2012–01

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