nep-sea New Economics Papers
on South East Asia
Issue of 2013‒10‒11
fifteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Regional Borders and Trade in Asia By Woong Lee; Chankwon Bae
  2. An Asian Perspective on Global Financial Reforms By Peter J. Morgan; Victor Pontines
  3. The Prospective Evolution of the Vietnamese Power Sector: The Vulnerability and Externality Analysis By Trinh Hoang Anh Nguyen
  4. Monetary Policy Frameworks in Asia : Experience, Lessons, and Issues By Peter J. Morgan
  5. The Export Performance of Vietnam: Some Evidence Based on US Imports By Sadequl Islam
  6. Can Trade in Services Negotiation Help? Promoting cross border transactions of cultural media (Japanese) By KUNIMATSU Maki
  7. On the Relationship between Human Capital and Firm Performanc By Dinh Thi Thanh Binh; Le Minh Ngoc; Nguyen Huu Thinh; Bui Cao Khai; Tran Duy Hung; Nguyen Viet Duong; Le Thi Thu Trang
  8. Financial Health and Firm Productivity : Firm-level Evidence from Viet Nam By Shandre M. Thangavelu; Aekapol Chongvilaivan
  9. Public Sector Governance and Development Performance: An International Comparison with Special Focus on Vietnam By Peter Sturm
  10. Improving the Clean Development Mechanism Post-2012 : A Developing Country Perspective By Nhan-T Nguyen; Minh Ha-Duong; Sandra Greiner; Michael Mehling
  11. Financial Sector Assessment : Malaysia By World Bank
  12. Market Share and Exchange Rate Pass-through: Competition among exporters of the same nationality By YOSHIDA Yushi
  13. A trojan horse in Daoguang China? Explaining the flows of silver in and out of China By Irigoin, Maria Alejandra
  14. MDGs and gender inequality By Vani S. Kulkarni1; Manoj Pandey; Raghav Gaiha
  15. Current Account Adjustment in the Euro-Zone: Lessons from a Flexible-Price-Model By Christoph Zwick

  1. By: Woong Lee (KIEP - Korea Institute for International Economic Policy); Chankwon Bae
    Abstract: This paper investigates the effect of regional borders on trade in Asia. The regional borders define the three regions of Asia : South, Southeast, and East Asia. Regional trade indicates the flows of trade within a region, whereas regional border trade means trade across regions. A gravity model is augmented with the region dummies to estimate the regional border effects that capture any and all time-invariant factors promoting or impeding regional trade. The main finding is that regional border effects are asymmetric on the three regions in Asia. There is a large and significant regional border effect on South Asia, small on Southeast Asia, and negligibly negative on East Asia. The significant and positive regional border effect in South Asia suggests that countries share intrinsic factors facilitating trade between the countries in this region. Although the regional border effect of Southeast Asia is positive, its magnitude shows little difference between its regional trade and regional border trade. Finally, the estimate on East Asia presents a completely different picture from the actual data. It implies that there exist some factors leading to active regional border trade between East Asia and other Asian regions.
    Keywords: Border Effect, Regional Borders, Natural Trading Partners, the gravity model
    JEL: F13 F14 F15
    Date: 2013–09
  2. By: Peter J. Morgan (Asian Development Bank Institute (ADBI)); Victor Pontines
    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. Part one reviews the lessons of the global financial crisis (GFC) of 2007–09 and their relevance for Asian economies. Part two describes the major regulatory reforms that have been announced and possible concerns about their impacts on emerging economies. Part three reviews the literature aimed at quantifying the impacts of Basel III capital adequacy rules. Part four develops our methodology and analysis of the quantitative impact of Basel III capital adequacy rules on a panel of Southeast Asian financial institutions with emphasis on the effect on economic growth. Finally, the study concludes with a discussion on the policy implications of the results obtained from the previous section for Asian financial sectors and economies. Overall, we 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: Financial Reform, global financial crisis, Basel III, regulatory reform, Capital Adequacy Ratio, Asian economies, Southeast Asian, financaial institutions
    JEL: E17 G01 G18 G21
    Date: 2013–08
  3. By: Trinh Hoang Anh Nguyen (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech)
    Abstract: With its rapidly increasing power demand of 16% p.a since 1990s along with its limited supply power capacity, how sustainable is Vietnam's electricity development? What are the major factors explaining its performance relative to other Asian countries? To answer these questions, this paper examines the Vietnamese power system from the 1990s to 2040 by using LEAP simulation. Twelve vulnerability and externality indexes regarding social-economic-environmental dimensions are calculated to assess vulnerability levels of the sector in seven scenarios. External costs of CO2, NOx, SO2 and PM10 are calculated to examine how far the costs could affect on the electricity cost in Vietnam. In sensitivity analysis, the paper assesses the impacts of international coal price's fluctuations on the electricity price and the trade balance of Vietnam. The study confirms that Vietnam's power sector will become more vulnerable to fossil fuels' prices, environmental pollutants and climate change if the sector goes for the current policy pathways. With the efficiency scenarios examined in the study, the sector would be more independent and less vulnerable. To reduce the vulnerabilities, the study suggests that Vietnam should promote energy efficiency and electricity generation from non-fossil fuels and internalize external costs into the power sector. Vietnam needs also get involved in international financial mechanisms for clean development and technology transfer programs to efficiently exploit its renewable energy potentials.
    Keywords: energy planning, sustainable development, vulnerability, externality, Vietnam, electric power
    Date: 2013–01–31
  4. By: Peter J. Morgan (Asian Development Bank Institute (ADBI))
    Abstract: This paper analyzes the evolution of East Asian monetary policy frameworks over the past two decades, chiefly in response to shocks from the Asian financial crisis of 1997–1998 and the global financial crisis (GFC) of 2007–2009. The Asian financial crisis showed the importance of exchange rate flexibility and credible policy frameworks, leading to increased central bank independence, greater focus on inflation policy and more flexible exchange rates. A key lesson of the GFC was the importance of containing systemic financial risk and the need for a “macroprudential†approach to surveillance and regulation that can identify system-wide risks and take appropriate actions to maintain financial stability. Emerging economies face particular challenges because of their underdeveloped financial systems and vulnerability to volatile international capital flows, especially “sudden stops†or reversals of capital inflows. The paper reviews the history of East Asian monetary policy frameworks since 1990; describes current monetary policy frameworks, including issue of price versus financial stability for a central bank and the policies a central bank can use to manage financial stability; the monetary policy transmission mechanism based on financial linkages and financial deepening; assesses policy outcomes including inflation targeting and responses to the “Impossible Trinityâ€; and makes overall conclusions. The paper finds that East Asian central banks have generally managed inflation and growth well over the past decade, but the difficulties faced by central banks of advanced countries in the aftermath of the GFC suggests that not all problems have been solved yet.
    Keywords: Monetary policy framework, Asia, Asian financial crisis, central bank independence, Capital Inflows, inflation policy
    JEL: E52 E58 F31 F32 G18
    Date: 2013–09
  5. By: Sadequl Islam (Department of Economics, LaurentianUniversity, Sudbury,Ontario, Canada P3E 2C6)
    Abstract: This paper examines the export performance of Vietnam based on US imports. The empirical analysis of the paper is based on US imports from Vietnam at the two? and ten?digit levels for the 1994?2011 period. The paper examines the composition of exportsfrom Vietnam, the degree of concentration of exports, and the extent of export similarity with selected comparator countries. Based on the Global Trade Analysis Project (GTAP), the paper also explores the welfare effects of further trade liberalizations on Vietnam and other countries
    Keywords: Concentration, exportsimilarity, general equilibriumanalysis.
    JEL: F1
    Date: 2013
  6. By: KUNIMATSU Maki
    Abstract: Liberalization of audio visual (AV) services should promote cross border transactions of cultural media. However, because of certain sensitivity in the industry, regulations for foreign products or capitals in developed and developing countries remain, and liberalization is not progressing. This paper analyzes the use of the cluster approach to bundle several related sectors for trade in services negotiations and designs a cluster to liberalize the cultural media industry. The cluster is then applied to the actual regulatory environment of the industry in Indonesia and Malaysia to demonstrate the usefulness of the approach for the liberalization negotiation. The "Cool Japan" strategy, which industrializes the contents and culture of Japan and aims at a global launch, is positioned as an important part of the country's growth strategy today, and a trade policy may accelerate it. This paper discusses the liberalization of the sector concerned which contributes to the overseas expansion of Japan's cultural media.
    Date: 2013–09
  7. By: Dinh Thi Thanh Binh (Faculty of International Economics, Foreign Trade University); Le Minh Ngoc (Faculty of International Economics, Foreign Trade University); Nguyen Huu Thinh (Faculty of International Economics, Foreign Trade University); Bui Cao Khai (Faculty of International Economics, Foreign Trade University); Tran Duy Hung (Faculty of International Economics, Foreign Trade University); Nguyen Viet Duong (Faculty of International Economics, Foreign Trade University); Le Thi Thu Trang (Faculty of International Economics, Foreign Trade University)
    Abstract: This paper applies the ordinary least square regression model to estimate the effects of the human capital on the business performance of small and medium enterprises (SMEs) in Vietnam. We exploit the cross-sectional data of SMEs for the year 2009. The estimated results show that basic and professional education of the firm owner are important factors affecting the success of the firm. Further, experience in owning a business before can help the firm owners enhance their performance. Finally, knowledge from learning is seen to have a strong effect on entrepreneurial performance.
    Date: 2013
  8. By: Shandre M. Thangavelu (Asian Development Bank Institute (ADBI)); Aekapol Chongvilaivan
    Abstract: Does financial health shore up firm productivity? This paper empirically investigates this question and presents productivity as another driving factor in translating financial development into real economic progress. Our empirical framework employs Levinsohn and Petrin’s (2003) semi-parametric estimation of total factor productivity (TFP) using firm-level panel data during 2002–2008, and incorporates financial health variables into conventional determinants of firm productivity. Our findings suggest that liquidity and access to external credit boosts firm productivity, with the latter particularly imperative for exporting and/or importing firms. We also present supplementary results regarding economies of scale, high-tech capital accumulation, human capital investment and foreign ownership.
    Keywords: Financial health, firm productivity, Vietnam, TFP, panel data, Semiparametric Estimation
    JEL: O16 O25 O53
    Date: 2013–09
  9. By: Peter Sturm (Governance consultant, 14 rue Corot, 78370 Plaisir, France)
    Abstract: Development theory has increasingly focused on public sector governance and pertinent institutions as key determinants of successful development. This paper discusses the concepts of public sector governance and alternative development indicators. Both theory and empirical evidence investigated suggest a significant interrelationship between a country’s quality of public sector governance, the institutions shaping it, and development performance, however measured. Quantitative measures of these concepts are then used to depict Vietnam’s comparative performance in the pertinent areas. The main result of this comparison is that Vietnam’s development performance – whether measured by the level of GDP pc or the Human Development Index – ranks in the second lowest quintile among the 178 national economies for which comparable date exist. This weak performance is then related to the country’s public sector governance ranking, which is similarly unimpressive. It is argued that Vietnam’s lagging performance regarding relevant aspects of governance holds back the country’s broader development. The paper then discusses opportunities for and obstacles to improving public sector governance: Readily available information on governance principles and corresponding institutional structures prevailing in the “best practice” countries (e.g. Norway, New Zealand, Denmark etc.), and these countries’ willingness to share their expertise, offer the opportunity for other countries to improve their own performance by adapting top performers’ practices and experience to their own local conditions. The key to such knowledge transfer is the political will to implement it, and the major obstacles to doing so are the resistance from entrenched interest groups, combined with the inertia of some pertinent “cultural” characteristics.
    Keywords: governance, development, business climate, Vietnam.
    Date: 2013
  10. By: Nhan-T Nguyen (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech); Minh Ha-Duong (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech); Sandra Greiner (Climate Focus - Climate Focus B.V.); Michael Mehling (Ecologic Institute - Ecologic Institute)
    Abstract: In this article, we assess the future prospects of the Clean Development Mechanism (CDM) from the perspective of a developing country, drawing on Vietnam as a case study. First, we review the performance of the CDM and describe the evolution of carbon markets on the path towards a post-2012 climate regime. Next, we place Vietnam in a post-2012 context, and assess potential project resources, challenges, and opportunities that could arise for the country from a future climate policy framework. Our analysis suggests that the CDM should remain in place and be improved to facilitate more meaningful participation by developing countries in climate mitigation efforts beyond 2012. Finally, the article sets out eight proposals that could help improve the CDM as the world progresses towards a new international climate policy framework.
    Date: 2013–09–30
  11. By: World Bank
    Keywords: Finance and Financial Sector Development - Debt Markets Banks and Banking Reform Private Sector Development - Emerging Markets Finance and Financial Sector Development - Access to Finance Finance and Financial Sector Development - Bankruptcy and Resolution of Financial Distress
    Date: 2013–03
  12. By: YOSHIDA Yushi
    Abstract: Our dataset is unique and allows us to control for market share among competing exporters with the same nationality. Using a sample from January 1988 to December 2005 on exports of five Japanese major ports to six destination countries, we examine the effect of market share (with respect to competitors from the same country) on exchange rate pass-through (ERPT). We provide empirical evidence that market share among the same nationality on exchange rate pass-through matters and is consistent with the findings of Feenstra et al. (1996), which show a non-linear relationship between market share and exchange rate pass-through. The result remains robust when the market share of the country is also included in the regression. Quantifying the economic significance of the market share effect, our evidence shows that the shifts in the ERPT of Japanese exports are more pronounced in Asian countries whereas the ERPT has been relatively stable over the last two decades for the United States. Our evidence implies that Japanese exports do not account for the observed recent decline in the ERPT of U.S. imports whereas Japanese exports' ERPT declined more substantially in China.
    Date: 2013–09
  13. By: Irigoin, Maria Alejandra
    Abstract: Written on board of US Steamer San Jacinto – anchored in Shanghai in October 1856 - a report to the New York Times on the “Progress of the Rebellion in China” indicated that the US government “was forced to buy the Carolus dollars at an increasing sacrifice in order to pay its high salaried officers, not for what they are bought, for a Carolus dollars count not more than a Mexican or American with the pursers of the US navy”. In Shanghai the coin was at 50% premium above of the Mexican coin or any other silver coin of equal weight in circulation. No reason was given for such wild appreciation other than “the prejudice of the Chinese” in favour of the old Spanish American coin. According to the source “one hundred Carolus could buy in any established commercial house in China 150 American dollar or other silver dollars (and) a hundred pound draft on the bank of England maybe had for 250 or 270 Carolus, and larger or smaller ones in the same ratio” at the time when 450 or more pesos were required elsewhere in Europe or America for a sterling. The reporter concluded that in no other place the famous coin was worth more than its standard value. That China had a problem with silver is well known to the economic and monetary history literature. In the last 20 years or so the silverization of China has been pivotal in the explanation of the Great Divergence and more traditionally has occupied the interest of economic historians of China and Asia since, probably it firstly occurred in the late 18th century. There is a wealth of studies on trade and monetary history of China, the Pacific Rim and globally which have emphasized the role of silver in the Middle Kingdom since the 16th century. A more traditional historiography has insisted on the de-silverization of China by mid-19th century, which some associate with the Daoguang Depression – provoked by the acute alteration in the exchange rate of copper cash to silver that characterized the period.
    JEL: N0 R14 J01
    Date: 2013–01
  14. By: Vani S. Kulkarni1; Manoj Pandey; Raghav Gaiha
    Abstract: Abstract As the countdown to 2015 has begun, debates about the continuation of the MDGs and their reformulation have taken on greater urgency and significance. Our view is that there is a need to reformulate them to better reflect deprivations and inequities that are pervasive but not sufficiently emphasised in the present version. A case in point is gender inequality. While various dimensions of gender inequality are included in the MDGs, we argue that these reflect a somewhat narrow focus – especially because the deprivation that women face from the womb to the rest of their lives – is not fully captured. Following Amartya Sen and others, we focus on the phenomenon of ‘missing women’ that best captures the cumulative impact of multiple deprivations to which they are subjected. Our analysis reinforces the case for this measure, and broadens and updates recent estimates of missing girls and women. The key questions addressed are the reasons underlying the continuing increase in the number of missing women in China and India. We broaden this measure by including: (i) missing adult women; (ii) excess maternal mortality ratio; (iii) casualties resulting from violent conflicts and the forms these take; and (iv) domestic violence against women. Even though the magnitudes differ, these together are a brutal violation of women’s human rights that remains pervasive in a large part of the developing world – especially Asia and North Africa. The perspective on gender inequality offered here may seem daunting, but raises concerns that go much beyond the somewhat narrow focus that the MDGs embody. The policy implications are accordingly more formidable, but underline the centrality of women’s empowerment through education and employment opportunities, social networks that give women voice to express their concerns arising from life-long deprivations that often take brutal forms, expansion of health services to reduce infant and maternal mortality risks, and enforcement of laws that penalise violation of women’s human rights.
    Date: 2013
  15. By: Christoph Zwick (Karl-Franzens University of Graz)
    Abstract: This paper deals the ongoing current account adjustment process in the southern Euro - area countries. It applies an extended version of the Obstfeld/Rogoff (2005) model to Euro-Zone- imbalances and provides an interpretation of the results. I develop a five-region-version of the model, consisting of a EMU – deficit (GIPS)- and a EMU – surplus region besides the United States, Asia and OPEC. The model also allows for changes in the relative size of the tradable- to the non- tradable sector, induced by changes in the relative prices of tradable- to non-tradable goods. The paper shows the approximated sizes and the directions of price movements, which are implied by the current account adjustment process that started in the GIPS countries after the financial crisis. It argues, that declines in output and employment during the adjustment process follow intuitively from the model results. These output losses result from sticky prices in combination with a limited nominal depreciation of the common currency and the importance of intra-EMU adjustment. The paper further shows that supply-side changes, global rebalancing issues and the time horizon of the rebalancing process have an important impact on the size of the price movements. Despite the discussed weaknesses of the model, the analysis clearly suggests unfinished real effective exchange rate adjustment in Greece, Spain and Portugal implying further negative economic consequences on these economies by the rebalancing process. Italy might be an exception.
    Date: 2013–08

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