nep-sea New Economics Papers
on South East Asia
Issue of 2013‒08‒31
fourteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Harmonization of trade in services by APEC members By Ishido, Hikari
  2. An Asian Perspective on Global Financial Reforms By Morgan, Peter J.; Pontines, Victor
  3. Elite Capture in Urban Development: Evidence from Indonesia By Rivayani Darmawan; Stephan Klasen
  4. APEC 2020: Multiplepaths to Attain the Bogor Goals By Maddaremmeng A. Panennungi
  5. Do They Look for Informal Jobs ?: Migration of the Working Age in Indonesia By Elda Luciana Pardede; Rachmanina Listya
  6. Changing local elite selection in Thailand : emergence of new local government presidents after direct elections and their capabilities By Funatsu, Tsuruyo
  7. Limits of monetary policy autonomy and exchange rate flexibility by East Asian central banks By Loeffler, Axel; Schnabl, Gunther; Schobert, Franziska
  8. Going beyond the zero-sum game: Flexisecurity as a tool for worker advancement in the Asia-Pacific region By Parvinder Kler
  9. Sources of fluctuations in parallel exchange rates and policy reform in Myanmar By Kubo, Koji
  10. Indonesian Cross-Border Labor Migration: Structure, Institutions and Governance By Ari Kuncoro; Arie Damayanti; Ifa Isfandiarni
  11. Global Financial Governance: Towards a New Global Financial Architecture for Averting Deep Financial Crises By Khan, Haider
  12. Stock index hedge using trend and volatility regime switch model considering hedging cost By Su, EnDer
  13. Foreign Direct Investment into Open and Closed Cities By Dascher, Kristof
  14. Disquiet on the weather front : the welfare impacts of climatic variability in the rural Philippines By Safir, Abla; Piza, Sharon Faye; Skoufias, Emmanuel

  1. By: Ishido, Hikari
    Abstract: This study maps out the degree of services trade liberalization by the APEC members toward achieving a Free Trade Area of the Asia-Pacific (FTAAP) and makes some comparative analyses. The study finds that the commitment level differs greatly between sensitive and less sensitive sectors, and that the commitment level under the ASEAN Framework Agreement (AFAS) package 8 is the highest among the four FTAs studied. It also finds that there are cross-country and sector-wide similarities in the pattern of service sector commitment under and across each of the FTAs; this implies that the shared domestic sensitivities can be overcome by an APEC-wide economic cooperation scheme for enhancing competitiveness (through, e.g., the Trans-Pacific Strategic Economic Partnership Agreement or TPP).
    Keywords: Asia, Oceania, North America, Latin America, Trade policy, International economic integration, TPP, Trade in services, ASEAN Framework Agreement on Services (AFAS), Regional Comprehensive Economic Partnership (RCEP), Trans-Pacific Partnership (TPP)
    JEL: F13 F15
    Date: 2013–03
  2. By: Morgan, Peter J. (Asian Development Bank Institute); Pontines, Victor (Asian Development Bank Institute)
    Abstract: The purpose of this study is to better understand the likely impact on Asian economies and financial institutions of various recent global financial reforms, including Basel III capital adequacy and liquidity rules. Overall, the authors find that the Basel III capital adequacy rules are likely to have limited impacts on economic growth in Asia, but other financial regulations, including liquidity standards and rules for over-the-counter (OTC) derivatives, could have stunting effects on financial development in the region.
    Keywords: asian economies; financial institutions; global financial reforms; basel iii; capital adequacy rules; liquidity rules; otc derivatives
    JEL: E17 G01 G18 G21
    Date: 2013–08–22
  3. By: Rivayani Darmawan (Georg-August-University Göttingen); Stephan Klasen (Georg-August-University Göttingen)
    Abstract: It has been argued that the potential gains of community-driven development (CDD) poverty programs are large as these can foster sustained poverty reduction. However, recent literature shows that community involvement can increase the risk of elite capture, particularly in more unequal communities. The risk is higher when the gap between the poor and the non-poor is larger with limited mobility between groups, the poor find it difficult to increase their bargaining power or voice their preferences. This paper contributes to the limited empirical literature on the existence of elite capture in social programs. Using community and household data from the Second Urban Poverty Project in Indonesia, we find robust evidence for the existence of elite capture under unequal communities. We further find that only when decision makers share similar characteristics with non-elites in terms of wealth, education and social networks, the share of pro-poor projects increases.
    Keywords: Elite capture; Community-driven Development; Inequality; Poverty; Indonesia
    JEL: H42 I32 D63
    Date: 2013–08–23
  4. By: Maddaremmeng A. Panennungi (APEC Study Centre University of Indonesia (ASC UI))
    Abstract: This paper is aimed at providing description of the Bogor Goals and the detail pathways to attain iy by 2020. By using the literature survey, especially the original documents related to the Bogor Goals, some previous studies, and descriptive data, this paper find out some conclusions. First, it is not easy to measure the achievement of Bogor Goals because there is no specific definition which encourage multi-interpretations; second, in the beginning, the pathways to achieve the Bogor Goals have been arranged through multilateral liberalization (WTO) and Osaka Action Agenda (Individual and Collective Action Plans), however, there are new path that have been agreed later by APEC Economic Leaders in Yokohama (2010), namely FTAAP (Free Trade Area of Asia Pacific). Third, the current situation shows that there are many competing patterns toward FTAAP and those patterns could lead to diverting APEC economies or realizing the true FTAAP to achieve the Bogor Goals.
    Keywords: APEC, Action Plans, Bogor Goals, Indonesia
    JEL: F02 F15
    Date: 2013–08
  5. By: Elda Luciana Pardede (Demographic Institute, FEUI); Rachmanina Listya (Demographic Institute, FEUI)
    Abstract: Characteristics of informal activity that are highly flexible in terms of working hours, barrier to entry, mobility, capital and skills requirement, have made informal jobs attractive for migrant workers in developing countries. Informal jobs are also theoretically claimed as a temporary position or transition for migrants who seek to work in more certain, formal jobs. Using individual’s jobs and migration history of adults obtained from the 2007 IFLS data from 2000--2007, this study aims to analyse how migration affects individual’s tendency to work in informal jobs by measuring the immediate effect of migration on the job's status. The result of clustered multinomial logit regression shows that individuals who migrate are less likely to work in informal job relative to formal job compared with individuals who do not migrate. This result contradicts the notion that migration is an act to look for opportunities with high uncertainty because migrants seem more likely to engage in formal jobs compared to non migrants. It may show that temporary positions into the formal jobs are not what the adult migrants in Indonesia are looking for.
    Keywords: Migration, Informal Sector, Employment, Indonesia
    JEL: J60
    Date: 2013–08
  6. By: Funatsu, Tsuruyo
    Abstract: Before rural local government units were established in Thailand, reform debates within the country faced a crucial issue: Candidates at the rural sub-district levels might adopt electioneering methods such as vote buying and the patronage system of the local political and economic elite, the methods that had been used in the national elections. In fact, the results of the 2006 survey in this paper, which followed the introduction of direct elections in rural local government units in 2003, contrast with the result anticipated during the debates on political reform. The preliminary data of the survey shows that the decentralization process and the introduction of the direct election system in the rural areas had some effect in changing the selection process of the local elite in Thailand.
    Keywords: Thailand, Local government, Elections, Social strata, Education, Direct election, Social class
    JEL: I2 N4 N9
    Date: 2013–03
  7. By: Loeffler, Axel; Schnabl, Gunther; Schobert, Franziska
    Abstract: Given low interest rates in the large industrial countries and buoyant capital inflows into the emerging markets East Asian central banks have accumulated large stocks of foreign reserves. As the resulting easing of monetary conditions has become a threat to domestic price and financial stability, the East Asian central banks have embarked on substantial sterilization operations to absorb what we call surplus liquidity from the domestic banking systems. This has brought the East Asian central banks into debtor positions versus the domestic banking systems. We show based on a central bank loss function that given buoyant capital inflows and exchange rate stabilization the absorption of surplus liquidity leads either to financial repression, or rising inflation or both. Assuming that a debtor central bank moved towards a freely floating exchange rate to gain monetary policy independence, we show that monetary policy independence is undermined by sterilization costs and revaluation losses on foreign reserves. --
    Keywords: Debtor Central Banks,Monetary Policy Autonomy,Sterilization,Exchange Rate Regime,East Asia
    JEL: E52 E58 F31
    Date: 2013
  8. By: Parvinder Kler
    Keywords: Flexicurity, job security, flexible labour markets, Asia-Pacific, International Political Economy
    JEL: I39 F59 J59
    Date: 2013–04
  9. By: Kubo, Koji
    Abstract: Myanmar maintained a multiple exchange rate system, and the parallel market exchange rate was left untamed. In the last two decades, the Myanmar kyat exchange rate of the parallel market has exhibited the sharpest fluctuations among Southeast Asian currencies in real terms. Since the move to a managed float regime in April 2012, the question arises of whether exchange rate policies will be effective in stabilizing the real exchange rate. This paper investigates the sources of fluctuations in the real effective exchange rate using Blanchard and Quah’s (1989) structural vector autoregression model. As nominal shocks can be created by exchange rate policies, a persistent impact of a nominal shock implies more room for exchange rate policies. Decomposition of the fluctuations into nominal and real shocks indicates that the impact of nominal shocks is small and quickly diminishes, implying that complementary sterilization is necessary for effective foreign exchange market interventions.
    Keywords: Myanmar, Foreign exchange, Real and nominal effective exchange rates, Structural VAR
    JEL: F31 F41 O53
    Date: 2013–02
  10. By: Ari Kuncoro (Institute of Economic and Social Research University of Indonesia); Arie Damayanti (Graduate School of Economics, University of Indonesia); Ifa Isfandiarni (Institute of Economic and Social Research University of Indonesia)
    Abstract: The purpose of the paper is to examine the rationale of current institutional and governance structure and the roles of various public and private agencies involved in this process. The paper found that drawn by lucrative profits the industry has attracted many entrants which intensify competition among sending firms. The most obvious change brought by this development is the increase of recruitment costs. This has also affected the supply-demand imbalances which in turn has profound impacts on the distribution of values (rents) in the industry. Some of the increase in recruitment costs can also be attributed to the introduction of the law 39/2004 which formalizes the role of local recruiters (brokers) though it also provides some protection to workers. But the net benefits may not be great since sending firms can always shift the burdens to workers through salary deductions in the first few months of working contracts. The effort to create a new independent agency as mandated by the new law to provide implementing service, coordination and monitoring of international migrant workers has yet to bear fruit. A clear division of labor is needed, but due to the huge rents involved this may need political intervention from the highest level of government.
    Keywords: Indonesia Migrant Worker
    JEL: J61 O17
    Date: 2013–07
  11. By: Khan, Haider
    Abstract: This paper analyzes the problems of creating and expanding national macroeconomic policy space and economic governance for the developing countries in particular within a framework of overall global and regional financial architectures. It develops a critical constructivist evolutionary theory of international financial institutions and arrangements within a framework of dynamic complex adaptive economic systems(DCAES), and applies this particularly to the current problems of developing countries. More specifically, the paper analyzes the following aspects: • Proposed BASEL III reforms for more stringent capital requirements and their implications for the developing world in particular. • BIS proposals for better regulation of financial derivatives, including commodities futures, by moving away from OTC transactions towards organized exchanges. • The IMF’s response to recent and emerging global economic and challenges, and the evolving nature of its role. • The most appropriate role of regional arrangements in financial stabilization, based on experiences with such arrangements in this and prior episodes of crisis. The Basel reforms and the BIS proposals for regulating the derivatives markets have many positive features. However, they have not been designed with the needs of DCs and LDCs in mind. The consequences of Basel I and II and proposed Basel III are analyzed from the perspective of the developing countries. It turns out that specific concerns of developing countries have not received adequate attention within the Basel Reform Initiatives and more can be and needs to be done. Most importantly, the role of IMF under the present globalization arrangements and repeated financial crises is studied by following such a critical constructivist evolutionary theory of international financial institutions within a rigorous DCAES framework. Here, too, the key finding is that much more can be done to help the developing countries than has been done so far. Furthermore, the potential for such global reforms in the wake of the global financial crisis and the great recession is analyzed from a dialectical social constructivist viewpoint that combines the power of --sometimes conflicting-- norms and ideas with the underlying structural contradictions to produce a “critical-constructivist” analysis of the potential for change. It is shown that IMF must and can change in a direction which allows for greater national policy autonomy. It is also shown that the IMF needs complementary regional institutions of cooperation in order to create a stabilizing hybrid global financial architecture that will be more democratic and pro-development in terms of its governance structure and behavior. Thus regional financial architectures will need to be integral parts of any new global financial architecture (GFA).The tentative steps taken towards regional cooperation in Asia since Asian financial crisis are discussed to illustrate the opportunities and challenges posed by the need to evolve towards a hybrid GFA. The opportunities and challenges arising from the current global crisis are also analyzed in this context.
    Keywords: dynamic complex adaptive economic systems; financial crises; global financial architecture; regional financial architectures; a hybrid GFA; regional cooperation; BASEL III reforms; the BIS proposals; the IMF
    JEL: E5 F3
    Date: 2013–08
  12. By: Su, EnDer
    Abstract: This paper studies the risk hedging between stock index and underlying futures. The hedging ratios are optimized using the mean-variance utility function as considering the hedging cost. The trend of returns and variance are estimated by the model of regime switch on both vector autoregression (VAR) and GARCH(1,1) compared to three restricted models: VAR switch only, GARCH(1,1) switch only, and no switch. The hedge portfolio is constructed by Morgan Stanley Taiwan Index (MSTI) and Singapore Traded MSTI futures. The hedge horizon is set as a week to reduce the hedging cost and the weekly in-sample data cover from 08/09/2001 to 05/31/2007. The rolling window technique is used to evaluate the hedge performances of out-of-sample period spanning subprime, Greek debt, and post-risk durations. The subprime period indeed is evidenced very vital to achieve the hedge performance. All models perform surprisingly far above average during subprime period. The hedge ratios indeed are the tradeoff between maximum expected return and minimum variance. It is demonstrated challenging for all models to increase returns and reduce risk together. The hedge context is further classified into four hedge states: uu, ud, du, and dd (u and d denote respectively usual and down) using the state probabilities of series. The regime switch models are found to have much greater wealth increase when in dd state. It is decisive to hedge risk in dd state when volatility is extensively higher as observed recurrently in subprime period. Remarkably, the trend switch is found having larger wealth increase while the volatility switch is not found prominent between models. While the no switch model has larger utility increase in uu state as most observed in Greek debt or post risk period, its performance is far below average like other models.
    Keywords: stock index, regime switch, hedging cost, hedging ratio
    JEL: C13 C51
    Date: 2013–01–09
  13. By: Dascher, Kristof
    Abstract: This paper argues that the more open a city is to immigration, the more likely it is to welcome -- and hence also receive -- foreign direct investment. If immigration is allowed to complement the inflow of foreign capital, urban rent rises by more. This extra rise in rent aids in appeasing owners of capital specific to local traditional industries who else become worse off as foreign direct investment flows in. The paper's model may help give a simple alternative explanation of why urban centers such as Hong Kong, Singapore, Dublin or many cities on China's Eastern coast have received so much more FDI per capita. These cities could draw on a nearby pool of extra labor that -- by driving rents up and keeping wages down -- may have been decisive in the political struggle over whether to let foreign direct investors in.
    Keywords: Foreign Direct Investment, Open City, Immigration, Urban Rent
    JEL: F11 F23 R23
    Date: 2013–08–08
  14. By: Safir, Abla; Piza, Sharon Faye; Skoufias, Emmanuel
    Abstract: Three recent rounds (2003, 2006, and 2009) of the Family Income and Expenditure Survey are matched to rainfall data from 43 rainfall stations in the Philippines to quantify the extent to which unusual weather has any negative effects on the consumption of Filipino households. It is found that negative rainfall shocks decrease consumption, in particular food consumption. Rainfall below one standard deviation of its long-run average causes food consumption to decrease by about 4 percent, when compared with rainfall within one standard deviation. Positive deviations above one standard deviation have a limited impact. Moreover, for households close to a highway or to a fixed-line phone, consumption appears to be fully protected from the impact of negative rainfall shocks.
    Keywords: Science of Climate Change,Climate Change Mitigation and Green House Gases,Water Conservation,Regional Economic Development,Climate Change Economics
    Date: 2013–08–01

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