nep-sea New Economics Papers
on South East Asia
Issue of 2012‒02‒01
eleven papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Asia 2050: Realizing the Asian Century: Overview By Harinder Kohli; Ashok Sharma; Anil Sood; Haruhiko Kuroda
  2. Foreign Output Shocks and Monetary Policy Regimes in Small Open Economies: A DSGE Evaluation of East Asia By Joseph D. ALBA; Wai-Mun CHIA; Donghyun PARK
  3. Energy Market Integration and Economic Convergence: Implications for East Asia By Yu SHENG; Xunpeng SHI
  4. Energy Market Integration in East Asia: A Regional Public Goods Approach By Philip ANDREWS-SPEED
  5. Interactive Learning-driven Innovation in Upstream-Downstream Relations: Evidence from Mutual Exchanges of Engineers in Developing Economies By Tomohiro Machikita; Yasushi Ueki
  6. French Firms at the Conquest of Asian Markets: The Role of Export Spillovers By Florian Mayneris; Sandra Poncet
  7. ASEAN in the Global Economy– An Enhanced Economic and Political Role By Anita Prakash; Ikumo Isono
  8. An Evaluation of Overseas Oil Investment Projects under Uncertainty Using a Real Options Based Simulation Model By Lei Zhu; ZhongXiang Zhang; Ying Fan
  9. The Village Fund Loan: Who Gets It, Keeps It and Loses It? By Kislat, Carmen; Menkhoff, Lukas
  10. Gas Market Integration: Global Trends and Implications for the EAS Region By Yanrui WU
  11. Impacts of Incoming Knowledge on Product Innovation: Technology Transfer in Auto-related Industries in Developing Economies By Tomohiro MACHIKITA; Yasushi UEKI

  1. By: Harinder Kohli (Centennial Group International and the Emerging Markets Forum); Ashok Sharma (Asian Development Bank); Anil Sood (Centennial Group International and the Emerging Markets Forum); Haruhiko Kuroda (Asian Development Bank)
    Date: 2011–05
  2. By: Joseph D. ALBA (Joseph D. ALBA Nanyang Technological University, Singapore); Wai-Mun CHIA (Wai-Mun CHIA Nanyang Technological University, Singapore); Donghyun PARK (Donghyun PARK Asian Development Bank (ADB), The Philippines)
    Abstract: East Asia’s small open economies were hit in varying degrees by the sharp drop in the output of major industrial countries during the global financial and economic crisis of 2008-2009. This highlights the role of monetary policy regimes in cushioning small open economies from adverse external output shocks. To assess the welfare impact of external shocks on key macroeconomic variables under different monetary policy regimes, we numerically solve and calculate the welfare loss function of a dynamic stochastic general equilibrium (DSGE) model. We find that CPI inflation targeting minimizes welfare losses for import-to-GDP ratios from 0.3 to 0.9. However, welfare under the pegged exchange rate regime is almost equivalent to CPI inflation targeting when the import-to-GDP ratio is one while the Taylor-type rule minimizes welfare when the import-to-GDP ratio is 0.1. We calibrate the model and derive welfare implications for eight East Asian small open economies.
    Date: 2011–12–01
  3. By: Yu SHENG (Yu SHENG Crawford School of Economics and Government, The Australian National University, Canberra, Australia); Xunpeng SHI (Xunpeng SHI Economic Research Institute for ASEAN and East Asia, Jakarta, Indonesia)
    Abstract: Energy Market Integration (EMI) has been pursued by East Asian countries in recent years, but how it could play a role in facilitating economic growth of countries in the region remains to be an empirical question. This paper uses the economic convergence analysis (including both the σ-convergence and β-convergence approaches) to examine the impact of EMI - measured by two newly constructed indexes (namely, the energy trade index and the energy market competition index) - at the country level, on dynamic economic growth path across countries, with a special interest to inform policy makings related to promoting EMI among East Asian countries. The result shows that a more integrated energy market may significantly reduce income disparity across countries and thus help poor countries to catch up with rich countries in economic development. Moreover, a comparison among the three regions including EU, NAFTA and EAS shows that EAS countries are more likely to achieve economic convergence along with the construction of EMI process. An important policy implication is that less developed countries in the EAS region can increase benefits from actively participating into the EMI process.
    Date: 2011–10–01
  4. By: Philip ANDREWS-SPEED (Philip ANDREWS-SPEED Chatham House, UK)
    Abstract: This study applies a regional public goods approach to the study of energy market integration (EMI) in East Asia, with a view to clarifying the outlook for such integration and the likely obstacles to be encountered. In addition to drawing on theoretical ideas relating to regional public goods, the paper will also draw on the experience of the European Union in its attempts to develop a single energy market. The study shows that many services are needed in order to develop and sustain a regional integrated energy market and that some of these services have characteristics of regional public goods, though some may also be trans-regional or global in nature as well. The study recommends that: EMI in East Asia should be pursued in an incremental manner and mainly at a sub-regional scale; and the specific steps taken towards EMI should be chosen on the basis of their likely positive economic impacts and their likely ease of delivery.
    Date: 2011–11–01
  5. By: Tomohiro Machikita (Tomohiro Machikita Institute of Developing Economies, Inter-disciplinary Studies Center, Japan); Yasushi Ueki (Yasushi Ueki Institute of Developing Economies, Bangkok Research Center, Thailand)
    Abstract: This paper presents a simple model of the innovations that result from face-to-face communication and mutual learning in upstream-downstream relations. To examine the framework, we empirically investigate the impact of mutual knowledge exchanges on product and process innovation using a survey of manufacturing firms in Indonesia, the Philippines, Thailand and Vietnam. Evidence from interconnected firms in developing economies suggests that firms with mutual exchanges between engineers and customers achieved product innovations with new technologies and new markets. However, this is not true for simple improvement of products or process innovation. Mutual exchanges with engineers can be expected to play an important role in the case of costly innovation and in situations unknown situation to the firms.
    Date: 2011–12–01
  6. By: Florian Mayneris; Sandra Poncet
    Keywords: Export spillovers, agglomeration, market entry barriers
    JEL: F10 R12 A A A A
    Date: 2011–12
  7. By: Anita Prakash (Anita Prakash Policy Relations Director, ERIA.); Ikumo Isono (Ikumo Isono Economist, ERIA)
    Abstract: Established in 1967, ASEAN has travelled a long way from a group of five nations to a thriving and leading group of ten countries. Based on the progress in the implementation of the blueprints for building the ASEAN community by 2015, there is an enhanced role for the ASEAN in dealing with regional and global challenges. It is emerging as a services hub in the region and is the chosen destination for investments. At the end of Indonesia’s chairmanship of ASEAN, which had set the theme ‘ASEAN in a global community of nations’, it is imperative to take a stock of the readiness of the region if it is well on its way to step into a truly global role in the near future, especially by its goal of becoming one community by 2015. With its strategic location, abundant natural resources, quality human resources and growing economies, ASEAN has engaged economically, by way of trade and investments, with all the large economies of the world. It has also gained strategic weight and drawn the attention of global players, both economically and politically. Its global engagement is best exemplified by the fact that 55 countries across the globe have appointed their envoys to the regional grouping and this number is growing. Sitting in the midst of giant economies like Japan, China and India, and with active economic relations with USA and the EU, ASEAN is now seeking its due share in the global economy and politics. This Policy Brief looks into the current global profile of ASEAN and brings out policy recommendations that would help ASEAN in finding its appropriate role in the global politics and economy.
    Date: 2012–01–01
  8. By: Lei Zhu (Center for Energy and Environmental Policy Research, Institute of Policy and Management, Chinese Academy of Sciences); ZhongXiang Zhang (Research Program, East-West Center); Ying Fan (Center for Energy and Environmental Policy Research, Institute of Policy and Management, Chinese Academy of Sciences)
    Abstract: This paper applies real options theory to establish an overseas oil investment evaluation model that is based on Monte Carlo simulation and is solved by the Least Squares Monte-Carlo method. To better reflect the reality of overseas oil investment, our model has incorporated not only the uncertainties of oil price and investment cost but also the uncertainties of exchange rate and investment environment. These unique features have enabled our model to be best equipped to evaluate the value of oil overseas investment projects of three oil field sizes (large, medium, small) and under different resource tax systems (royalty tax and production sharing contracts). In our empirical setting, we have selected China as an investor country and Indonesia as an investee country as a case study. Our results show that the investment risks and project values of small sized oil fields are more sensitive to changes in the uncertainty factors than the large and medium sized oil fields. Furthermore, among the uncertainty factors considered in the model, the investment risk of overseas oil investment may be underestimated if no consideration is given of the impacts of exchange rate and investment environment. Finally, as there is an important trade-off between oil resource investee country and overseas oil investor, in medium and small sized oil investment negotiation the oil company should try to increase the cost oil limit in production sharing contract and avoid the term of a windfall profits tax to reduce the investment risk of overseas oil fields.
    Keywords: Overseas Oil Investment, Project Value, Real Options, Least Squares Monte-Carlo
    JEL: Q41 Q43 Q48 G31 O13 O22 C63
    Date: 2011–11
  9. By: Kislat, Carmen; Menkhoff, Lukas
    Abstract: The village funds programme in Thailand is one of the biggest microfinance programmes in the world aiming at improving access to finance and income in rural areas. Earlier studies indicate that the programme is successful in realising its ambitions to some degree. We extend this work by analysing a second wave of a household survey and find that village fund borrowers are consistently characterised by a lower economic status; accordingly village fund loan are an important lifeline to those households. However, we cannot identify any significant substitution between village fund loans and other loans, raising doubts about the long-run impact of the village fund programme.
    Keywords: rural finance, informal financial institutions, microfinance, Thailand
    JEL: O16 O17 G21
    Date: 2012–01
  10. By: Yanrui WU (Yanrui WU UWA Business School, University of Western Australia)
    Abstract: East Asia is already the main destination of the world's commercial liquefied natural gas (LNG). However, the gas markets in the EAS area are either underdeveloped or fragmented. The objectives of this study are twofold, namely, i) to present a review of the trends in global gas market integration and ii) to draw implications and make recommendations for gas market development in the EAS area. To achieve the goal of an integrated gas market in the EAS region, governments in member economies must work together to implement a plan. Specifically, four recommendations are made to the EAS states: adopt a formal program to promote and nurture the development of gas markets in member states and phased sectoral reforms in relatively mature markets; set targets to gradually harmonise regulatory and technical standards in the gas sector; coordinate better to promote their "gas" causes; and boost cross-border connectivity and trading within the area and eventually achieve regional gas market integration.
    Date: 2011–11–01
  11. By: Tomohiro MACHIKITA (Tomohiro MACHIKITA Institute of Developing Economies, Inter-disciplinary Studies Center, Japan); Yasushi UEKI (Yasushi UEKI Institute of Developing Economies, Bangkok Research Center, Thailand)
    Abstract: This paper studies two questions on the role of networked sources of knowledge influential to product innovation. First: What is the extent of technology transferred through vertical linkages and public-private alliances, including university-industry linkages, in the phase of product improvement and development? Second: What types of knowledge are transferred from external technology sources? In a sample of ASEAN firms’ self-reported partner data restricted to automotive related industries, we found that direct linkages with MNC customers in foreign countries resulted in a lower propensity of product innovation. Indeed, incoming knowledge from MNC customers relating to the management of quality of existing products especially explained the lower propensity of product innovation. We also found that production linkages with MNC suppliers in foreign countries resulted in a higher propensity of product innovation. Incoming knowledge from MNC suppliers about quality controls explained a lower propensity of product innovation. These findings empirically indicate that networked sources of knowledge have a significant influence trade-off between maintaining existing operations and developing new products. The impacts of public-private alliances on innovation are sizable compared with the impacts of vertical linkages. Public-private alliances and vertical linkages offer knowledge with different effects on product innovation.
    Date: 2011–11–01

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