nep-sea New Economics Papers
on South East Asia
Issue of 2013‒05‒19
sixteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The 2030 Architecture of Association of Southeast Asian Nations Free Trade Agreements By Suthiphand Chirathivat; Piti Srisangnam
  2. The Impact of Indonesian Political Reform on Public Goods Provision; Market Efficiency; Security, Law and Order; and Political Participation By Muliadi Widjaja
  3. The Rise of Emerging Asia: Regional Peace and Global Security By Miles Kahler
  4. Catastrophic Medical Expenditure Risk By Gabriela Flores; Owen O'Donnell
  5. Production Externalities in the Wood Furniture Industry in Central Java By Roos K. Andadari; Henri L.F. de Groot; Piet Rietveld
  6. Regional Interest Rate Variations: Evidence from the Indonesian Credit Markets By Masagus M. Ridhwan; Henri L.F. de Groot; Piet Rietveld; Peter Nijkamp
  7. Deepening Association of Southeast Asian Nations’ Financial Markets By Choong Lyol Lee; Shinji Takagi
  8. An Economic and Social Review on Indonesia’s Direct Cash Transfer Program to Poor Families in 2005 By Muliadi Widjaja
  9. Association of Southeast Asian Nations, People's Republic of China, and India Growth and the Rest of the World : The Role of Trade By Robert Z. Lawrence
  10. Are Shocks to Disaggregated Energy Consumption in Malaysia Permanent or Temporary? Evidence from LM Unit Root Tests with Structural By Hooi Hooi Lean; Russell Smyth
  11. Export-Led Growth in Cambodia: An Empirical Study By Tuck Cheong Tang; Chea Ravin
  12. Lessons from the European Spaghetti Bowl By Richard Baldwin
  13. Current State and Issues of Logistics Cost Accounting and Management in Malaysia By Zakariah, Sahidah; Pyeman, Jaafar
  14. A brief future of Time in the monopoly of scientific knowledge By Asongu, Simplice A
  15. The Link between Homeownership Motivation and Housing Satisfaction By Tan, Teck Hong; Khong, Kok Wei
  16. International Price Dispersion and Market Segmentation in Japan and the United States : Theory and Empirics By K.C. Fung; Alicia Garcia-Herrero; Francis Ng

  1. By: Suthiphand Chirathivat (Asian Development Bank Institute (ADBI)); Piti Srisangnam
    Abstract: This paper investigates and analyzes the present status, potential, and prospects of Association of Southeast Asian Nations (ASEAN) free trade agreements (FTAs). It begins with a review of the historical evolution of ASEAN FTAs, which captures the achievements of the ASEAN Free Trade Agreement (AFTA) and the efforts meant to lead to a further step of deeper integration, i.e., the realization of the ASEAN Economic Community (AEC) by 2015. The paper then offers a view on how the grouping adopted an extension of ASEAN FTAs beyond the AEC—a widening integration process that includes ASEAN+1 FTAs, bilateral trading arrangements, and region-wide economic integration. These parallel developments present major challenges to ASEAN, particularly the move towards the AEC by 2015 and the attempts to broaden FTAs in East Asia. Ultimately, it is desirable for ASEAN to draw a clear picture of how the architecture of ASEAN FTAs in 2030 can be given shape.
    Keywords: ASEAN, FTAs, ASEAN+1, AEC, integration process, East Asia
    JEL: F13 F14 F15
    Date: 2013–04
  2. By: Muliadi Widjaja (Department of Economics, Faculty of Economics, University of Indonesia)
    Abstract: The purpose of this paper is to observe how the changes of political regime, fiscal decentralization, degree of openness in Indonesia after the 1998 political turbulence affect the economic institution and public goods provision. Because available time series data are limited, estimation on individual country parameter is obtained by applying panel data regional convergence method. The findings are that, while the changes of political settings from dictatorial to democracy worsen economic institution in Indonesia, it does not change the public goods provision in Indonesia.
    JEL: B52
    Date: 2013–04
  3. By: Miles Kahler (University of California, San Diego)
    Abstract: The rapid economic rise of China, India, and the Association of Southeast Asian Nations (ASEAN) could have several effects on regional peace and global security. The power transition perspective overstates the risk of conflict that results from convergence between dominant and challenger states. Rapid changes in economic and military capabilities can, however, have negative consequences for regional peace. Three features of the international environment—democratization, economic interdependence, and international institutions—provide weak insurance, at best, against conflict in Asia. Emerging Asian powers may also challenge existing global security regimes, a more indirect threat to global peace. The continuing contribution of Asia to global peace and security will require measures that will be difficult for newly empowered actors competing for status and influence.
    Keywords: emerging economies, power transition, regional institutions, Asia, conflict, interdependence, democratization
    JEL: F02 F51 F52 F53
    Date: 2013–05
  4. By: Gabriela Flores (Institute of Health Economics and Management, University of Lausanne, and Institute of Health Policy and Management, Erasmus University Rotterdam); Owen O'Donnell (Erasmus School of Economics, Erasmus University Rotterdam, and University of Macedonia, Greece)
    Abstract: Medical expenditure risk can pose a major threat to living standards. We derive decomposable measures of catastrophic medical expenditure risk from reference-dependent utility with loss aversion. We propose a quantile regression based method of estimating risk exposure from cross-section data containing information on the means of financing health payments. We estimate medical expenditure risk in seven Asian countries and find it is highest in Laos and China, and is lowest in Malaysia. Exposure to risk is generally higher for households that have less recourse to self-insurance, lower incomes, wealth and education, and suffer from chronic illness.
    Keywords: medical expenditures, catastrophic payments, downside risk, reference-dependent utility, Asia
    JEL: D12 D31 D80 I15
    Date: 2012–07–24
  5. By: Roos K. Andadari (Satya Wacana Christian University); Henri L.F. de Groot (VU University Amsterdam); Piet Rietveld (VU University Amsterdam)
    Abstract: This paper exploits micro firm level data to examine the impact of spatial clustering and links to foreign buyer networks on firm performance in the wood furniture industry in Central Java, Indonesia. The analysis is based on an annual manufacturing survey. We identify the impact of specialization of the cluster, diversification, and links to foreign buyer networks. For this purpose, a production function framework is developed. The results lend support to the view that clustering of large and medium scale specialized firms improves firm performance, while clustering of small scale specialized firms and clustering of diverse firms are not conducive to firm performance. We also find a clear positive association between involvement in exporting activities and firm performance.
    Keywords: Productivity, Externalities, Wood Furniture Industry, Indonesia
    JEL: D20 R11 R32
    Date: 2012–07–18
  6. By: Masagus M. Ridhwan (VU University Amsterdam); Henri L.F. de Groot (VU University Amsterdam); Piet Rietveld (VU University Amsterdam); Peter Nijkamp (VU University Amsterdam)
    Abstract: This paper explores the determinants of regional differences in interest rates based on a simple theoretical model of loan pricing. The model demonstrates how risks, costs, market concentration and scale economies jointly determine the bank's interest rates. Using recent data of the Indonesian local credit markets, we find that regional interest rate variations are positive and significantly affected by the banks' risk factor, the operating costs, and market concentration. Scale economies negatively affect the interest rates. These findings help to explain geographical segmentation in loan markets.
    Keywords: regional capital mobility, loan pricing, interest rates, Indonesia
    JEL: R51 E43 C33
    Date: 2012–07–18
  7. By: Choong Lyol Lee (Asian Development Bank Institute (ADBI)); Shinji Takagi
    Abstract: This paper discusses the financial landscape of the Association of Southeast Asian Nations (ASEAN), a region engaged in building an economic community (a “single market and production baseâ€) by 2015. In particular, it reviews where ASEAN’s financial markets and institutions now stand and suggests possible ways in which they might be developed further to meet the aspirations of the region. Diversity characterizes the ASEAN financial landscape today. While some countries have relatively developed capital markets, commercial banks and insurance companies, in the others neither the markets nor the institutions are well developed. But regardless of where they are today, size is the critical constraint in all of ASEAN’s domestic financial systems. Thus, promoting regional financial integration is essential to developing a financial system with sufficient depth and liquidity. To support market development and financial integration, regional cooperation would be particularly useful, which could take the form of creating new institutions, such as : a mechanism for monitoring financial integration; a region-wide deposit insurance system; a regional credit rating scheme; a regional financial market supervisory system; a region-wide payment and settlement system; capacity building initiatives; and a consumer protection system. ASEAN’s consensus-driven decision-making process has delayed many of the institutional reforms critical to integration. The ASEAN leaders must recognize that the ASEAN principles and ideals that have worked well in the past in creating the unity of purpose may no longer be adequate in this fast changing world. In order to succeed in achieving the level of financial development commensurate with high-income status by 2030, the ASEAN member countries must go far beyond what is likely achievable in the early phases of the ASEAN Economic Community by surrendering more of their national sovereignty to create regional institutions with binding rules.
    Keywords: ASEAN, financial markets, financial landscape, regional cooperation, financial integration, regional credit rating scheme
    JEL: G10 G18 G20 G28 O16 O53
    Date: 2013–03
  8. By: Muliadi Widjaja
    Abstract: This paper contains a report on the findings of a survey on the implementation of the Direct Cash Transfers (Bantuan Langsung Tunai) program. The survey named Susenas (National Socio-Economic Survey) was held across Indonesia in the aftermath of the program in 2006. The economic purpose of this government’s welfare program was to dampen the increasing rate of poverty incidence in Indonesia due to the increase of gas prices. Several issues featured in this paper are the achievement of the program in distributing the cash transfers;, how the recipients used the funds they received; the impact of the cash transfers on the recipients’ working behavior; the socialization method of the program; and finally, the problems that arose during the program’s implementation. The findings are that the program was not properly prepared and not properly organized; it achieves the goal in resisting the increase of poverty rate due to gas price increases.
    Keywords: Cash Transfers, Welfare, Poverty
    JEL: I38
    Date: 2013–04
  9. By: Robert Z. Lawrence (Asian Development Bank Institute (ADBI))
    Abstract: This paper explores the impact of past and future growth in the Association of Southeast Asian Nations (ASEAN)1 Since the mid-1990s, ACI growth has improved the non-oil terms of trade of the developed countries. There have also been strong complementarities between ACI suppliers of intermediate inputs and PRC exports. More developed Asian countries have benefited from PRC capital goods demand. ACI growth has, however, put competitive pressures on other less-developed manufacturing exporters, worsening their terms of trade and constraining their pricing ability. ACI growth has been especially beneficial for oil and minerals commodity producers. On the other hand, net food importers and oil importing countries have been adversely affected by high import costs. , the People's Republic of China (PRC), and India—here referred to as the ACI countries—on aggregate welfare, relative wages, and global emissions in the rest of the world. It outlines several analytical frameworks, considers effects over the past decade and, based on consensus forecasts, the implications of that growth for the rest of the world in the decades to come. Future ACI growth provides opportunities and challenges for the rest of the world. For developed countries the opportunities are for selling high-end services and capital and consumer goods in the ACI markets and enjoying the benefits from intra-industry trade; the challenges will come from increased head-to-head competition in manufactured goods and services that should become more intense in future decades. For medium-income producers currently at between 30% and 60% of US levels, there will be a tougher tradeoff between more intensive competition with the PRC and serving the growing middle classes in ACI countries. For poorer countries, there will greater opportunities for becoming part of global supply chains in manufactured exports. Standard frameworks that assume internal factor mobility suggest continuing pressures for wage inequality in developed countries. But these hinge on the assumption that the ACI and developed countries will continue to produce similar products and that the ACI will specialize in unskilled labor-intensive products. In fact, as their exports become more technology—intensive and developed countries more specialized these pressures could be alleviated. On the one hand, as the “flying geese†process continues, exports from countries with lower incomes than the PRC are likely to displace PRC labor-intensive exports rather than domestic production in developed countries. On the other hand, while it may cause job loss and erode the returns to specific factors, PRC export growth is less likely to be a source of wage inequality in advanced economies.
    Keywords: Association of Southeast Asian Nations (ASEAN), China, PRC, India, trade, flying geese, Intra-industry trade, global supply chains, manufactured exports
    JEL: F01 F10
    Date: 2013–04
  10. By: Hooi Hooi Lean; Russell Smyth
    Abstract: The objective of this paper is to examine whether energy consumption in Malaysia, disaggregated by sector and type, is stationary or contains a unit root. To realize our objective we apply the Lagrange multiplier (LM) family of unit root tests with up to two structural breaks. Depending on the decision rule for selecting between results in the no-break, one break and two-break cases, we find that energy consumption is stationary for between 50 per cent and 70 per cent of the disaggregated energy series and between 25 per cent and 50 per cent of sectors. Implications for the Malaysian government's attempts to reduce fossil fuel consumption are discussed.
    Date: 2013–05
  11. By: Tuck Cheong Tang; Chea Ravin
    Abstract: The study examines the export-led growth (ELG) hypothesis for Cambodia. The sample covers annual observations between 1972 and 2008. The Granger's non-causality tests support ELG as well as the growth-led exports. Also, there is causality from imports growth to exports growth. The study also presents the results of impulse response functions and variance decomposition. Some policy implications are viewed in the study.
    Keywords: Cambodia; Exports; Imports; Growth
    JEL: E2 F4
    Date: 2013–05
  12. By: Richard Baldwin (Asian Development Bank Institute (ADBI))
    Abstract: European economic integration fascinates and inspires for the way it brought peace to a continent torn by violent and long-standing rivalries. The lessons from Europe, however, cannot be applied directly as the degree of the European Union’s supranationality is unthinkable elsewhere. This paper discusses how Europe overcame the specific problem of overlapping free trade agreements (FTAs) with the Pan-European Cumulation System which instituted common rules of origin, regional cumulation of value, and completed the full matrix of bilateral FTAs. After this, Europe had what can be thought of as a “customs union†for rules of origin.
    Keywords: Spaghetti Bowl, European Union, EU, overlapping free trade agreements (FTAs), customs union
    JEL: F15 F2
    Date: 2013–04
  13. By: Zakariah, Sahidah; Pyeman, Jaafar
    Abstract: Background: Logistics cost is an important factor affecting the competitiveness on both macro (national) and micro level (firms). Logistics cost indicates the performance of logistics industry, efficiency level and its competitiveness. Research Problem: Despite of its significance, current state of logistics cost accounting and management in Malaysia has not properly addressed and the issues surround logistics cost measurement remains incoherent. Aim of research: The purpose of this study is to give an overview of the current state and issues of logistics cost accounting and management in Malaysia. Research Method: This study used content analysis as a qualitative research tool, and supported by literature material with regards the concerned research tool. Findings: This study has found the importance of having standard logistics cost accounting measurement, which plays a vital role in determining the accuracy of the logistics cost and ascertain the efficiency level of logistics industry in Malaysia. Implication: This study leads to trigger the awareness of current state and issues of logistics cost accounting and management in Malaysia.
    Keywords: logistics cost; logistics cost accounting; cost management
    JEL: G0 R4 R59
    Date: 2013–01–01
  14. By: Asongu, Simplice A
    Abstract: This seminal paper provides global empirical evidence on catch-up processes in scientific and technical publications. Its purpose is to model the future of scientific knowledge monopoly in order to understand whether the impressive growth experienced by latecomers in the industry has been accompanied by a similar catch-up in scientific capabilities and knowledge contribution. The empirical evidence is based on 41 catch-up panels which together consist of 99 countries. The richness of the dataset allows us to disaggregate countries into fundamental characteristics based on income-levels (high-income, lower-middle-income, upper-middle-income and low-income), legal-origins (English common-law, French civil-law, German civil-law and, Scandinavian civil-law) and, regional proximity (South Asia, Europe & Central Asia, East Asia & the Pacific, Middle East & North Africa, Latin America & the Caribbean and, Sub-Saharan Africa). Three main issues are investigated: the presence or not of catch-up processes, the speed of the catch-up processes and, the time needed for full (100%) catch-up. The findings based on absolute and conditional catch-up patterns broadly show that advanced countries will continue to dominate in scientific knowledge contribution. Policy implications are discussed.
    Keywords: Research and Development; Catch-up
    JEL: F42 O10 O30 O38 O57
    Date: 2013–05–01
  15. By: Tan, Teck Hong; Khong, Kok Wei
    Abstract: It is reasonable to believe that the degree of housing satisfaction may depend on the motivation of home owning as motivation has been an important reason in the explanation of homeownership. There is little empirical evidence demonstrating how homeownership motivation, as defined by local amenities investment, social capital investment, residential stability, and financial benefits of home owning affect housing satisfaction in the Malaysian context. In this paper, Structural Equation Modeling (SEM) was used to examine the link between homeownership motivation and housing satisfaction. Results showed that social capital investment and residential stability of homeownership appears to be important determinants of housing satisfaction. The findings also indicated that interdependencies among homeownership motivation variables were important extensions of the housing satisfaction model because they help improve the ability of model to predict housing satisfaction.
    Keywords: Homeownership, Motivation, Housing Satisfaction, Structural Equation Modeling (SEM)
    JEL: R21 R31 R38
    Date: 2012–04–18
  16. By: K.C. Fung (Asian Development Bank Institute (ADBI)); Alicia Garcia-Herrero; Francis Ng
    Abstract: This paper focuses on the pricing behavior of Japanese and United States firms selling their identical products in New York City, Chicago, Osaka, and Tokyo. The authors utilize some simple models of international price dispersion and market segmentation that generate predictions about testable prices. The dataset, which consists of prices of identical products in the Japanese and American cities, was collected and accepted by both governments. Using this data, versions of international price dispersion theories are tested and some empirical evidence to support the view that simple international price dispersion models can partly explain the observed prices is found.
    Keywords: International Price Dispersion, market segmentation, Japan, The United States, pricing behavior, firms, idetntial products
    JEL: F12 F14 L11 L13
    Date: 2013–04

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