nep-sea New Economics Papers
on South East Asia
Issue of 2012‒12‒22
ten papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Nonperforming loans and public asset management companies in Malaysia and Thailand. By Masahiro Inoguchi
  2. Mapping of Issues Development in Asia Pacific Economic Cooperation (APEC) and Indonesia Agenda toward 2013: A Historical Perspective By Maddaremmeng A. Panennungi; Rahadjeng Pulungsari; Evi Fitriani; Lily Tjahjandari; Surjadi; Padang Wicaksono
  3. Impact of Production Linkages on Industrial Upgrading in ASEAN, the People’s Republic of China, and India: Organizational Evidence of a Global Supply Chain By Machikita, Tomohiro; Ueki, Yasushi
  4. China-Japan-Korea (CJK)'s FTA Strategy towards ASEAN Countries: A Game Theoretical Approach By Fithra Faisal Hastiadi
  5. Lifestyle Choices and Societal Behavior Changes as Local Climate Strategy By Mohanty, Brahmanand; Scherfler, Martin; Devatha, Vikram
  6. Do Supply-Side Education Programmes Work? The Impact of Increased School Supply on Schooling and Wages in Indonesia Revisited By Gunilla Pettersson
  7. Improving the Tax System in Indonesia By Jens Arnold
  8. Modelling the Tax Burden on Labour Income in Brazil, China, India, Indonesia and South Africa By Luca Gandullia; Nicola Iacobone; Alastair Thomas
  9. Climate Change and Tourism in the Arctic Circle By Richard S. J. Tol; Sharon Walsh
  10. Prices Matter: Comparing Two Tests of Adverse Selection in Health Insurance By Polimeni, Rachel; Levine, David I.

  1. By: Masahiro Inoguchi
    Abstract: This paper explores the factors which eliminated the nonperforming loan (NPL) problem in Malaysia and Thailand following the 1997 Asian Financial Crisis. The number of NPLs which expanded in the aftermath of the crisis, has since declined in most Southeast Asian countries. Although previous studies have explored the causes of the increase in NPL numbers, few have analysed the factors that contributed to the reduction in their number in Asia. In Malaysia and Thailand, authorities put in place a number of measures to manage NPLs. As a vehicle to acquire NPLs from banks, Malaysia established the Pengurusan Danaharta Nasional Berhad (Danaharta) in 1998, while Thailand established the Thai Asset Management Corporation (TAMC) in 2001. We analyse whether the characteristic features of banks, improvements in macroeconomic conditions, and facilities for purchasing loans caused a reduction in the number of NPLs in Malaysia and Thailand. The results suggest that selling loans to a public asset management company was effective in reducing the number of NPLs in Thailand. However, while macroeconomic conditions influenced the decline in NPL ratios in Thailand, in Malaysia, good performing commercial banks and large commercial and investment banks generally had smaller NPL ratios throughout and following the crisis.
    JEL: G21 O16
    Date: 2012
  2. By: Maddaremmeng A. Panennungi (APEC Study Centre of University of Indonesia and Faculty of Economics University of Indonesia); Rahadjeng Pulungsari (APEC Study Centre of University of Indonesia and Faculty of Humanities University of Indonesia); Evi Fitriani (APEC Study Centre of University of Indonesia and Faculty of Social and Political Science University of Indonesia); Lily Tjahjandari (APEC Study Centre of University of Indonesia and Faculty of Humanities University of Indonesia); Surjadi (APEC Study Centre of University of Indonesia and Faculty of Economics University of Indonesia); Padang Wicaksono (APEC Study Centre of University of Indonesia and Faculty of Economics University of Indonesia)
    Abstract: APEC (Asia-Pacific Economic Cooperation) is one of the international economic cooperation which was established 1989. In the beginning of APEC, it was focused only for economic issues, especially related to the trade and investment; however, overtime the issues in APEC have moved into the non-economic issues. This study is aimed to analyze the development issues in APEC, in particular: first, analyzing the process and factor that affect the issues in APEC; second, mapping or grouping issues in APEC that accumulated from 1989 until 2010; third, analyze the potential agenda of APEC meeting in Indonesia 2013. Methods of data collection and information are based on literature studies of APEC meeting documents, interviews with resource persons from within and outside the Indonesia, and Focus Group Discussions (FGD of stakeholders). Method of analysis is based on descriptive analysis and simple statistics. Some findings are: First, issues development in APEC are influenced by two factors:(i) the events or factors related to the development of economic, social, political, and security in global, regional of APEC and APEC host country; (ii) the role of agents that bring the issues to the APEC also plays an important role apart from the government of a country/economy are PECC (Pacific Economic Cooperation Council), ASEAN (Association Southeast Asian Nations), WTO (World Trade Organization), ABAC (APEC Business Advisory Council), ASCC (APEC Study Centre Consortium), EPG (Eminent Persons Group) and PBF (Pacific Business Forum). Second, even though the issues are very broad in APEC which moves from the economic into broader of non-economic issues, the issues are still focused on the achievement of the APEC economic integration, particularly related to the Bogor Goals, as the nucleus of the whole issues. Third, all issues that evolved in APEC are part of the development issues in Indonesia in general; however, from the official documentation development plan document in Indonesia during the period, attention to issues in economic in the APEC begins to decline during the crisis and reform in Indonesia. By putting attention of the latest of issues development in APEC, the possible specific agendas of Indonesia in 2013 summit are inclusive economic growth (developments), connectivity (especially related to infrastructures), and blue economy (especially related to ocean related). All those agendas are inter-related issues of developments that have been developed since the establishment of APEC.
    Keywords: APEC, Economic Integration, Non-Economic Issues
    JEL: F0 F15 F55
    Date: 2012–11
  3. By: Machikita, Tomohiro (Asian Development Bank Institute); Ueki, Yasushi (Asian Development Bank Institute)
    Abstract: This paper presents a simple model of industrial upgrading as a result of backward and forward information linkages between upstream and downstream relations. It also serves as an empirical investigation of the impact of mutual knowledge exchange on the knowledge production function using data on firms' self-reported customers and suppliers. Evidence from interconnected firms in Indonesia, Thailand, Philippines, and Viet Nam suggests that there are strong spillover effects between downstream and upstream firms in terms of international standard certification. The degree of product and process innovation is quite diverse across manufacturing firms within a local supply chain and within a global supply chain.
    Keywords: innovation; international production organization; backward forward linkages
    JEL: O31 O32 R12
    Date: 2012–12–05
  4. By: Fithra Faisal Hastiadi (Waseda University and University of Indonesia)
    Abstract: This paper analyzes the FTA strategies of China, Japan and Korea (CJK) toward ASEAN countries using a three-player game. It explores the implications of China, Japan, and/or Korea participating in an FTA with ASEAN and the corresponding rewards in a payoff matrix. The Nash equilibrium occurs when China, Korea and Japan all choose to participate in an FTA with ASEAN. Dominant strategies and response functions for each country are analyzed using Error Correction Mechanism (ECM) and Vector Auto Regression (VAR) models. The paper also finds that Japan’s action to create FTA will be the most effective for regional settings. Although the game analysis is backward looking, it is a useful benchmark for understanding future FTA policies in East Asia.
    Keywords: FTA, Game Theory, Error Correction Mechanism, Vector Auto Regressive
    JEL: F13 C70 C22
    Date: 2012–10
  5. By: Mohanty, Brahmanand (Asian Development Bank Institute); Scherfler, Martin (Asian Development Bank Institute); Devatha, Vikram (Asian Development Bank Institute)
    Abstract: The Asia-Pacific region is witnessing rapid economic growth. Along with rising incomes, the lifestyles of the large middle class are moving quickly towards a buy-and-discard consumer model that involves carbon-intensive products and services. This paper attempts to identify lifestyle changes at the individual level, and behavioral changes at the community level that could offer high carbon abatement potential. It also provides some good practices of public policies and policy recommendations that can be pivotal in making a business case of low-carbon and eco-efficient lifestyles, strengthening collective awareness, and influencing public decision-making in developing countries in Asia.
    Keywords: local climate strategy; renewable resources; conservation; environmental management; environmental modeling
    JEL: F18 H23 Q20 Q21 Q28
    Date: 2012–12–04
  6. By: Gunilla Pettersson (Department of Economics, University of Sussex, UK)
    Abstract: Indonesia each year allocates a large proportion of its total public spending to education and it is important to understand whether different groups, for instance, children from less advantageous socioeconomic backgrounds or girls benefit differentially from these public investments. It is also desirable to comprehend whether schooling translates into increases in wages that are similar in size for both for men and for women who obtain additional schooling. This paper uses the large-scale Presidential Instruction Primary School construction programme (SD INPRES) rolled out in Indonesia in the 1970s to examine the effect of increased school supply on schooling attainment: overall, by gender, and by socioeconomic background. It also constructs a new SD INPRES programme exposure variable that is used as an instrument for schooling to assess the causal effect of schooling on wages and whether the additional schooling induced by the programme had differential impacts for men and women. To preview the findings, SD INPRES programme exposure significantly increased schooling both for men and for women. Moreover, women benefitted more from the SD INPRES programme than men and so did individuals from less advantageous socioeconomic backgrounds contributing to a narrowing of schooling gaps by gender and by socioeconomic background. In addition, more schooling is found to cause higher wages for men and women and there appears to be an additional positive effect on wages for women through the additional schooling induced by the SD INPRES programme.
    Keywords: wages, schooling, Indonesia, labour, education policy
    JEL: O12 J31 I25
    Date: 2012–12
  7. By: Jens Arnold
    Abstract: Indonesia has come a long way in improving its tax system over the last decade, both in terms of revenues raised and administrative efficiency. Nonetheless, the tax take is still low, given the need for more spending on infrastructure and social protection. With the exception of the natural resources sector, increasing tax revenues would be best achieved through broadening tax bases and improving tax administration, rather than changes in the tax schedule that seems broadly in line with international practice. Possible measures to broaden the tax base include bringing more of the self-employed into the tax system, subjecting employer-provided fringe benefits and allowances to personal income taxation and reducing the exemptions from value-added taxes. Similarly, broad-based investment credits would be a less distortive way to enhance investment incentives than selective tax holidays. Introducing a targeted, simplified tax regime for small and medium-sized enterprises, as currently planned by the government, could foster their integration into the tax system in the longer run, even if its short-run revenue potential is limited. Upgrading tax administration has made substantial progress in Indonesia since 2002, although there is still scope to improve the training of tax officers and the administration’s audit and litigation capacities, while strengthening internal control systems and enhancing the transparency of administrative decisions. The audit system could be further improved by allocating more tax audits on the basis of compliance risks. In the natural resources sector, particularly in mining, there is a case for increasing the government’s share of resource rents through higher tax rates imposed on these rents, as opposed to taxing revenues. This would imply a willingness of the government to bear a larger share of the exploration and development risk than heretofore, which Indonesia, with its improved access to international financial markets and a diversified resource portfolio, is now well placed to do. In the mining sector, a powerful rent tax regime with a large government take would serve the country better than export taxes and ownership restrictions that have been decided recently. This Working Paper relates to the 2012 OECD Economic Review of Indonesia (<P>Améliorer le système fiscal en Indonésie<BR>L’Indonésie a beaucoup amélioré son système fiscal au cours de la dernière décennie, tant en ce qui concerne le montant des recettes collectées que l’efficience administrative. Néanmoins, les recettes fiscales restent faibles au regard de la nécessité d’accroître les dépenses consacrées aux infrastructures et à la protection sociale. À l’exception du secteur des ressources naturelles, l’augmentation des recettes fiscales doit passer avant tout par l’élargissement de l’assiette et l’amélioration de l’administration fiscale, plutôt que par une révision du barème d’imposition qui semble globalement conforme à la pratique internationale. Parmi les mesures possibles pour élargir l’assiette figurent l’intégration des travailleurs non salariés dans le système fiscal, l’assujettissement à l’impôt sur le revenu des personnes physiques des biens en nature et des indemnités versés par l’employeur, et la réduction des exemptions à la TVA. Dans le même ordre d’idées, l’introduction de crédits d’impôt généreux en faveur de l’investissement serait un moyen de stimuler l’investissement qui induirait moins de distorsions que des exonérations fiscales sélectives. La mise en place d’un régime simplifié et ciblé pour les petites et moyennes entreprises, actuellement envisagé par les pouvoirs publics, pourrait favoriser leur intégration dans le système fiscal à plus long terme, même si l’effet à court terme sur les recettes est limité. La modernisation de l’administration fiscale a beaucoup progressé en Indonésie depuis 2002, bien qu’il soit encore possible d’améliorer la formation des agents des impôts et de renforcer les capacités de l’administration à mener des vérifications et à agir en justice, tout en consolidant les systèmes de contrôle interne et en accroissant la transparence des décisions administratives. Le système de vérification pourrait être perfectionné en fondant les décisions de contrôle fiscal sur les risques de non paiement. Dans le secteur des ressources naturelles, et notamment les industries extractives, il y a lieu d’accroître la part des rentes de ressources revenant à l’État en relevant les taux d’imposition de ces rentes, au lieu de taxer les recettes. Une telle mesure impliquerait la volonté des pouvoirs publics de prendre à leur charge une partie des risques d’exploration et de mise en valeur plus importante qu’auparavant, ce qui est tout à fait à la portée de l’Indonésie, qui bénéficie aujourd’hui d’un meilleur accès aux marchés internationaux de capitaux et d’un portefeuille de ressources diversifié. Dans le secteur minier, un régime performant d’imposition des rentes, qui permette à l’État de percevoir une fraction élevée des recettes, servirait davantage les intérêts du pays que les taxes à l’exportation et les restrictions à la propriété qui ont été décidées récemment. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Indonésie 2012 (
    Keywords: industrial policy, tax administration, Indonesia, export taxes, tax exemptions, tax systems, natural resource taxation, politique industrielle, ressources naturelles, administration fiscale, Indonésie, exonération fiscale, système fiscal, taxes à l’exportation
    JEL: F13 H21 H23 H24 H25 H26 H27 L78 O17 O23 O24 O25
    Date: 2012–10–30
  8. By: Luca Gandullia; Nicola Iacobone; Alastair Thomas
    Abstract: This paper examines the taxation of labour income in five key emerging economies: Brazil, China, India, Indonesia and South Africa (the “BIICS” countries). The paper highlights the key features of the taxation of labour income in these countries, and then uses this information to model the tax burdens on labour income in each country following the OECD's Taxing Wages methodology. Average and marginal tax wedges in Brazil and China (Shanghai) are found to be similar in size in 2010 to those of many OECD countries. In contrast, India, Indonesia and South Africa (as well as rural China) impose very low average and marginal tax wedges compared to the vast majority of OECD countries. These relatively low tax wedge results are not altogether surprising given that these countries also currently have lower tax-to-GDP ratios than the OECD average. However, the results suggest that, in the long-term, reforms will be necessary in most of the BIICS countries if the labour income base is to significantly contribute to funding the substantial increases in public expenditure, particularly on infrastructure and social insurance, that will inevitably come as these countries continue to grow.<P>Modéliser la charge fiscale pesant sur les revenus du travail en Afrique du Sud, au Brésil, en Chine, en Inde et en Indonésie<BR>Ce document propose un examen de la taxation des revenus du travail dans cinq grandes économies émergentes, à savoir l’Afrique du Sud, le Brésil, la Chine, l’Inde et l’Indonésie. Il met l’accent sur les principales caractéristiques des régimes d’imposition en vigueur dans ces pays, les informations correspondantes étant ensuite utilisées pour modéliser la charge fiscale pesant sur les revenus du travail dans chaque pays à l’aide de la même méthodologie que celle suivie par l’OCDE pour sa publication intitulée Les impôts sur les salaires. Il apparaît qu’au Brésil et en Chine (Shanghai), les coins fiscaux moyens et marginaux sont du même ordre que ceux d’un grand nombre de pays de l’OCDE en 2010. En Afrique du Sud, en Inde et en Indonésie (ainsi qu’en Chine rurale) en revanche, les coins fiscaux moyens et marginaux sont très faibles en comparaison de ceux de la grande majorité des pays de l’OCDE. Le niveau relativement bas de ces chiffres n’est pas vraiment surprenant étant donné que ces pays affichent actuellement des rapports impôt/PIB inférieurs à la moyenne de l’OCDE. Il donne cependant à penser que, sur le long terme, des réformes seront nécessaires dans la plupart de ces économies si la taxation des revenus du travail doit apporter une contribution notable au financement des hausses considérables des dépenses publiques, en particulier dans les domaines des infrastructures et de la sécurité sociale, qu’elles devront inévitablement assumer à mesure qu’elles continueront à croître.
    Keywords: personal income tax, tax wedge, social security contributions, labour income, coin fiscal, cotisations de sécurité sociale, revenus du travail, impôt sur le revenu des personnes physiques
    JEL: H24 H55
    Date: 2012–12–12
  9. By: Richard S. J. Tol (Department of Economics, University of Sussex, Brighton, United Kingdom; Institute for Environmental Studies, Vrije Universiteit, Amsterdam, Netherlands; Department of Spatial Economics, Vrije Universiteit, Amsterdam, Netherlands); Sharon Walsh (Economic and Social Research Institute, Dublin, Ireland)
    Abstract: We estimate grid level tourist numbers to Arctic Circle countries under a number of climate change scenarios. At present, the highest tourism volumes are found in Canada and most of the Scandinavian countries. In general, it appears that tourists are attracted to regions with better infrastructure and nicer cities. Under each climate change scenario, Russia sees a significant increase in tourist numbers because Russia is big, its climate is expected to show some improvement and it is relatively close to the growing markets of South and East Asia. A growth in tourist numbers is also projected for Canada and Alaska. While our simulations do not show a re-distribution of tourists within the Arctic under climate change, the volume is likely to increase.
    Keywords: Climate climate change; tourism; destination choice; arctic
    JEL: Q54 L83
    Date: 2012–12
  10. By: Polimeni, Rachel; Levine, David I.
    Abstract: A standard test for adverse selection in health insurance examines whether people with characteristics predicting high health care utilization are more likely to buy insurance (or buy more generous nsurance). George Akerlof’s theory of adverse selection suggests a test based on prices: those who purchase insurance at the regular price will have higher expected utilization than those buying insurance when offered a deeply discounted price. Both tests provide (different) lower bounds on self-selection. We use a randomly allocated coupon for deeply discounted health insurance in rural Cambodia coupled with a longitudinal survey to test for adverse selection. While the standard test can show only a small amount of self-selection, the Prices test shows vastly more self-selection – providing a much more informative lower bound.
    Keywords: Business, Management, Marketing, and Related Support Services, Human Resources Management and Services, D82, I13, Asymmetric and Private Information, Health Insurance
    Date: 2012–12–12

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