nep-sea New Economics Papers
on South East Asia
Issue of 2013‒10‒25
fourteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Urbanization and Expenditure Inequality in Indonesia: Testing the Kuznets Hypothesis with Provincial Panel Data By Perdamen Sagala; Takahiro Akita; Arief Anshori Yusuf
  2. Indonesia’s Debt-for-Development Swap Experience: Past, Present and Future By Essers, Dennis; Cassimon, Danny; Fauzi, Achmad
  3. Export Performance of South and East Asia in Modern Services By Shahbaz Nasir; Kaliappa Kalirajan
  4. Do the Poorest Ethnic Minorities Benefit from a Large-Scale Poverty Reduction Program? Evidence from Vietnam By Nguyen, Cuong; Phung, Tung; Westbrook, Daniel
  5. World Food Prices and Poverty in Indonesia By Peter Warr; Arief Anshory Yusuf
  6. Welfare Schemes and Social Protection in India By Raghbendra Jha
  7. How India fits into global production sharing: Experience, prospects and policy options By Prema-chandra Athukorala
  8. Growth, Growth Accelerations and the Poor: Lessons from Indonesia By Sambit Bhattacharyya; Budy R. Resosudarmo
  9. Small and Medium Enterprises' Access to Finance: Evidence from Selected Asian Economies By Charles HARVIE; Dionisius NARJOKO; Sothea OUM
  10. Poverty, Labour Markets and Trade Liberalization in Indonesia By Kis-Katos, Krisztina; Sparrow, Robert
  11. Trade and Investment Patterns in Asia: Implications for Multilateralizing Regionalism By Prema-chandra Athukorala; Archanun Kophaiboon
  12. Toward a Single Aviation Market in ASEAN: Regulatory Reform and Industry Challenges By Alan Khee-Jin TAN
  13. Risk-Taking Behavior in the Wake of Natural Disasters By Lisa Cameron; Manisha Shah
  14. From emerging economies toward the Emerging Triad By Hermann Sebastian Dehnen; Jan H. van Dinther; Norbert Koubek

  1. By: Perdamen Sagala (International University of University); Takahiro Akita (International University of University); Arief Anshori Yusuf (University of Padjadjaran, Indonesia)
    Abstract: Focusing on Indonesia, this study analyzes the relationship between inequality and the process of urbanization. It performs a panel data regression analysis to test the Kuznets inverted-U hypothesis for urbanization based on a provincial panel data set of 33 provinces over the period 2000-2009, constructed by using the core National Socio-economic Survey (core Susenas). Our results support the Kuznets inverted-U hypothesis, whether the Gini coefficient or the Theil indices are used as a measure of inequality. According to our estimates, expenditure inequality would reach the peak at an urbanization rate of around 46-50%. Since the 2010 urbanization rate is 50%, this indicates that expenditure inequality has already attained the peak value. Thus, further urbanization would decrease expenditure inequality, but all other things being equal.
    Keywords: urbanization, expenditure inequality, Kuznets hypothesis, panel data regression, Indonesia
    JEL: O18 R11
    Date: 2013–09
  2. By: Essers, Dennis; Cassimon, Danny; Fauzi, Achmad
    Abstract: This paper systematically reviews recent experience with debt-for-development swaps in Indonesia, the only debtor country where the number of such operations could warrant its qualification as a genuine government debt relief and development finance policy. First, we show that the 11 swaps Indonesia has signed with its bilateral creditors since 2002 perform rather erratically across four criteria: the increase of resources at the country and/or government budget level; the increase of resources for intended sector purposes; whether, taken together, these swaps ease debt burdens; and the extent of their alignment with government policy and systems. Second, the paper finds little evidence of learning on the Indonesian side. We believe Indonesia can take a more proactive stance in negotiating the economic terms underlying its debt swaps and suggest concrete ways to do so in future swap deals.
    Keywords: external public debt; debt relief; debt swaps; development aid; Indonesia; aid
    JEL: H63 F34 F35
    Date: 2013–10
  3. By: Shahbaz Nasir; Kaliappa Kalirajan
    Abstract: Advancements in information and communications technologies (ICTs) have increased the possibilities for trade in modern services and many Asian emerging and developed economies are participating increasingly in these new trade activities. This paper examines the export performance of these emerging and developed Asian economies in selected modern services: computer and information services, business and professional services, and telecommunications services, using a stochastic frontier gravity type model. Estimation results show that performance of emerging economies in South Asia and the ASEAN region, in terms of realization of export potential, is considerably lower than that of the developed world in North America and Europe. The results also show that the number of graduates and the ICT infrastructure in emerging countries are amongst key factors for modern services exports. These findings suggest that emerging economies need to remove ‘behind the border’ constraints and adopt advanced technologies in order to catch up with the high performing developed countries.
    Keywords: Services exports, stochastic frontier gravity model, Asia, North America, and Europe.
    JEL: F14 C24
    Date: 2013
  4. By: Nguyen, Cuong; Phung, Tung; Westbrook, Daniel
    Abstract: To increase the opportunities for poor ethnic minorities to benefit from economic growth the government of Vietnam implemented one of the biggest poverty reduction programs entitled ‘Socio-economic Development for the Communes Facing Greatest Hardships in the Ethnic Minority and Mountainous Areas’ during 2006 - 2010. This paper estimates the program’s impacts on households in the project areas. We find that the program had positive impacts on several important outcomes of the ethnic minority households, including productive asset ownership, household durables ownership, and rice productivity. Positive impacts were also recorded for agricultural income, household total income, and household per-capita income. A particularly important result is that poverty among minority households in treatment communes declined significantly more than it declined in comparison communes. Finally, ethnic minority households enjoyed a reduction in travel time to health facilities, relative to households in control communes.
    Keywords: Poverty reduction, ethnic minority, household survey, Vietnam.
    JEL: H43 I3 O1 O10
    Date: 2013–06–22
  5. By: Peter Warr; Arief Anshory Yusuf
    Abstract: Spikes in international food prices in 2007-2008 worsened poverty incidence in Indonesia, both rural and urban, but only by small amounts. The paper reaches this conclusion using a multi-sectoral and multi-household general equilibrium model of the Indonesian economy. The negative effect on poor consumers, operating through their living costs, outweighed the positive effect on poor farmers, operating through their incomes. Indonesia’s post-2004 rice import restrictions shielded its internal rice market from the temporary world price increases, muting the increase in poverty. But it did this only by imposing large and permanent increases in both domestic rice prices and poverty incidence. Poverty incidence increased more among rural than urban people, even though higher agricultural prices mean higher incomes for many of the rural poor. Gains to poor farmers were outweighed by the losses incurred by the large number of rural poor who are net buyers of food and the fact that food represents a large share of their total budgets, even larger on average than for the urban poor. The main beneficiaries of higher food prices are not the rural poor, but the owners of agricultural land and capital, many of whom are urban based.
    Keywords: Indonesia; food prices; poverty incidence; general equilibrium modeling.
    JEL: D58 I32 F14
    Date: 2013
  6. By: Raghbendra Jha
    Abstract: This paper provides a broad overview of welfare schemes in India and their impact on social protection during a period of high economic growth. It summarizes India’s performance with respect to select economic and social indicators relative to select low and middle income countries in the Asia Pacific region. It further overviews trends in some key select economic and social indicators for India and discusses India’s attainment in Social Protection relative to an index of such protection provided by the Asian Development Bank. The basic messages of this paper are as follows. (i) When compared to low and middle income countries in the Asia Pacific India’s economic performance has outstripped its performance in social and welfare indicators. (ii) Despite this India is spending less on social welfare programs and other welfare schemes than many countries in the Asia Pacific, including some of those whose economic performance has been less impressive than India’s. (iii) Finally, the paper argues that the efficiency and effectiveness of key welfare programs in India need to be substantially improved. Particular attention needs to be paid to female participation in and their access to social welfare programs.
    Keywords: Welfare Schemes, Social Protection, SPI, India
    JEL: D63 H53 H55 I38
    Date: 2013
  7. By: Prema-chandra Athukorala
    Abstract: Global production sharing—the break-up of the production process into geographically separated stages—is an increasingly important facet of economic globalization that opens up opportunities for countries to specialize in different slices (tasks) of the production process depending on their relative cost advantage. This paper examines India’s role in global production sharing from a comparative East Asian perspective in order to contribute to the contemporary policy debate in India on the link between export performance and ‘jobless growth’ in domestic manufacturing in India. The analysis reveals that India has so far failed fitting into global production networks in electronics and electrical goods, which have been the prime movers of export dynamism in China and the other high-performing East Asian countries. Further reforms to improve the overall investment climate is even more important for reaping gains from this new form of international exchange than for promoting the standard labour intensive exports. There is also a strong case, based on the experiences in East Asia and elsewhere, for combining further reforms with a proactive investment promotion campaign to attract multinational enterprises (MNEs) engaged in global production networks.
    Keywords: global production sharing, production fragmentation, foreign direct investment, export performance
    JEL: F21 F23 F53 O33
    Date: 2013
  8. By: Sambit Bhattacharyya; Budy R. Resosudarmo
    Abstract: We study the impact of growth and growth accelerations on poverty and inequality in Indonesia using a new panel dataset covering 26 provinces over the period 1977-2010. This dataset allows us to distinguish between mining and non-mining sectors of the economy. We find that growth in non-mining significantly reduces poverty and inequality. In contrast, overall growth and growth in mining appears to have no effect on poverty and inequality. We also identify growth acceleration episodes defined by at least four consecutive years of positive growth in GDP per capita. Growth acceleration in non-mining reduces poverty and inequality whereas growth acceleration in mining increases poverty. We expect that the degree of forward and backward linkages of mining and non-mining sectors explain the asymmetric result. Our results are robust to state and year fixed effects, state specific trends, and instrumental variable estimation with rainfall and humidity as instruments.
    Keywords: Indonesia, growth; growth accelerations; mining, poverty; inequality
    JEL: I32 N15 O11 O13 O49
    Date: 2013
  9. By: Charles HARVIE (School of Economics, Facutly of Commerce, University of Wollongong); Dionisius NARJOKO (Economic Research Institute for ASEAN and East Asia (ERIA)); Sothea OUM (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: This paper sheds light on the issue of SME financing in selected Asian economies using a unique sample survey. It elaborates on (i) the key sources of external finance for SMEs (ii) the extent to which, if at all, the SME sector as identified by firm size, country and in aggregate for a sample of countries in Asia is systematically disadvantaged, or rationed, with respect to access to external financing, (iii) the key factors contributing to the extent of this rationing, focusing upon firm characteristics, owner characteristics and firm performance, and (iv) the importance of financial rationing for SME performance. Our empirical results confirm the salient characteristics of successful SMEs with regard to accessing external funding, their ability to access multiple financial institutions and types of finance, and identifying potential credit rationing or risk premiums imposed by financial institutions on SMEs. The results also reveal how risk premiums affect the innovation capability and exporting activity of SMEs.
    Keywords: small and medium enterprises (SMEs), external financing, rationing, firm characteristics, Asia.
    JEL: G32 L22
    Date: 2013–10
  10. By: Kis-Katos, Krisztina (University of Freiburg); Sparrow, Robert (Australian National University)
    Abstract: We measure the effects of trade liberalization over the period of 1993-2002 on regional poverty levels in 259 Indonesian regions, and investigate the labour market mechanisms behind these effects. The identification strategy relies on combining information on initial regional labour and product market structure with the exogenous tariff reduction schedule over four three-year periods. We find that poverty reduced more in regions that were more strongly exposed to import tariff liberalization. Among the potential channels behind this effect, we highlight the formalization of the unskilled labour force and structural reallocation of labour. We also show that job formation and increases in unskilled wages were related to reductions in import tariffs on intermediate goods and not to reductions in import tariffs on final outputs. These results point towards increasing firm competitiveness as a driving factor behind the beneficial poverty effects.
    Keywords: trade liberalization, labour markets, poverty, Indonesia
    JEL: J13 O24 O15
    Date: 2013–09
  11. By: Prema-chandra Athukorala; Archanun Kophaiboon
    Abstract: This paper documents and analyzes emerging patterns of trade and foreign direct investment in Asia with a view to informing the contemporary policy debate on multilateralizing regionalism. The key theme running through the paper is the pivotal role of global production sharing in transforming trade patterns. The findings make a strong case for a global, rather than a regional, approach to trade and investment policy making. Global production sharing has strengthened economic interdependence among the countries in the region, but the dynamism of the regional cross-border production networks depends inexorably on trade with the rest of the world, particularly with North America and the European Union.
    Keywords: global production sharing, free trade agreements, foreign direct investment, Asia, economic integration
    JEL: F13 F23 F53
    Date: 2013
  12. By: Alan Khee-Jin TAN (Faculty of Law, National University of Singapore)
    Abstract: The ASEAN Single Aviation Market or Open Skies project aims to liberalize the air transport industry in ASEAN by 2015. However, the project faces significant obstacles, including non-acceptance by key member states and an incomplete agenda that excludes more ambitious relaxations to market access and ownership and control rules. The ASEAN states’ failure to forge a truly single market and a common negotiating position risks disadvantaging their airlines visà- vis competitors from larger unified markets such as China.
    Keywords: Air Transportation, Air Travel, Airline, Aviation
    JEL: L93
    Date: 2013–10
  13. By: Lisa Cameron; Manisha Shah
    Abstract: We investigate whether experiencing a natural disaster affects risk-taking behavior. We conduct standard risk games (using real money) with randomly selected individuals in rural Indonesia. We find that individuals who recently suffered a flood or earthquake exhibit more risk aversion. Experiencing a natural disaster causes people to perceive that they now face a greater risk of a future disaster. We conclude that this change in perception of background risk causes people to take fewer risks. We provide evidence that experimental risk behavior is correlated with real life risk behavior, highlighting the importance of our results.
    JEL: D81 O12 Q54
    Date: 2013–10
  14. By: Hermann Sebastian Dehnen (University of Wuppertal, Schumpeter School of Business and Economics); Jan H. van Dinther (University of Wuppertal, Schumpeter School of Business and Economics); Norbert Koubek (University of Wuppertal, Schumpeter School of Business and Economics)
    Abstract: In this article an entirely new structural approach called the ‘Emerging Triad’ is identified, which is dealing with the increasing regional, intra- and interregional integration of the emerging regions Latin America, Southeast Asia and sub-Saharan Africa. In this context the increasing south-south cooperation’s, specific transregional free trade agreements as well as foreign direct investments are identified as the main driver for this ongoing networking process. For a deeper analysis of this development the regional trading blocs Mercosur, SADC and ASEAN as well as specific countries are chosen. Due to their increasing industrialization a similar development like the one of the BRIC countries can be anticipated for these regions in the upcoming years. Apart from the industrialization, the increasing integration and interdependence of specific countries or even regions is going to be a relevant factor with respect to future market entry decisions of companies of the southern developing countries and a deeper market penetration of northern developed market multinational enterprises. As a consequence the growing relevance of these regions in the global trade and business due to its strong economical development will lead to an ongoing alignment process between the established northern Triad and the new identified emerging triad. This convergence became obvious especially during the global crisis in 2009 and 2010. Finally the new approach of the Emerging Triad and the northern triad with its developed nations are included into a double helix structure which stands for the increasing tradeoff between the industrialized world and the emerging world.
    Keywords: Emerging triad, emerging markets, emerging market economies, BRIC, double helix structure, base of the pyramid, south-south cooperation, regional integration, Triad, FDI, trade
    Date: 2013–10

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