nep-sea New Economics Papers
on South East Asia
Issue of 2014‒10‒22
fifteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Correlation Dynamics in East Asian Financial Markets By Kuper, Gerard H.; Lestano
  2. Connecting South Asia and Southeast Asia : A Bangladesh Country Study By Mustafizur Rahman; Khondaker Golam Moazzem; Mehruna Islam Chowdhury; Farzana Sehrin
  3. Labor market and demographic scenarios for ASEAN countries (2010-35). Education, skill development, manpower needs, migration flows and economic growth By Michele Bruni
  4. Gender Equality in the Labor Market in Cambodia By Asian Development Bank (ADB); ; ;
  5. Labor Policy Analysis for Jobs Expansion and Development By Orbeta, Aniceto Jr. C.; Paqueo, Vicente B.; Lanzona, Leonardo Jr. A.; Dulay, Dean Gerard C.
  6. The Philippines – Improving institutions, offering a vital and sustainable labor force to the region By Jose II TIUSONCO
  7. The Exporting and Productivity Nexus: Does Firm Size Matter? By Cassey LEE
  8. Monetary analysis and the global financial cycle: an Asian central bank perspective By Andrew Filardo; Hans Genberg; Boris Hofmann
  9. Wage Stagnation? Fact Disclosure and Cross-Country Comparison By Chang-Ching Lin; Juin-Jen Chang; Shu-Shiuan Lu
  11. Who benefits from government health spending and why? a global assessment By Wagstaff, Adam; Bilger, Marcel; Buisman, Leander R.; Bredenkamp, Caryn
  12. Delivering Results in Standards and Conformance in ASEAN: the Critical Roles of Institutional Strengthening and the Private Sector By Simon Pettman
  13. Asymptotic Distribution and Finite-Sample Bias Correction of QML Estimators for Spatial Error Dependence Model By Shew Fan Liu; Zhenlin Yang
  14. The risks associated with cloud computing. By Andries M.; Cassin G.; Bahhaouy A.; Philippe F.; Foratier Y.; Lopez Vernaza A.; Rigodanzo F.

  1. By: Kuper, Gerard H.; Lestano (Groningen University)
    Abstract: This paper examines the dynamic relationship between stock returns and exchange rate changes using daily data from January 3, 1994?September 27, 2013 for six East Asian countries: Indonesia, Malaysia, the Philippines, Singapore, South Korea and Thailand. We estimate conditional correlations using the multivariate GARCH-DCC model in order to disclose the relationship between stock markets and foreign exchange markets. This is important for understanding financial stability. The estimation results reveal time varying correlations in the pre and post Asian crisis and the Global Financial Crisis periods for all countries. The correlations are stronger when the crisis intensifies. The degree of interdependence between both markets reflects a mutually markets response to shocks and changes in policy.
    Date: 2014
  2. By: Mustafizur Rahman (Asian Development Bank Institute (ADBI)); Khondaker Golam Moazzem; Mehruna Islam Chowdhury; Farzana Sehrin
    Abstract: Economic integration is being inhibited by the poor state of transport connectivity between Bangladesh, and South Asia and Southeast Asia. This study reviews connectivity initiatives of Bangladesh and the two neighboring regions and proposes ways to deepen regional and interregional connectivity. Since the early 1990s, as a consequence of trade-led growth strategy, South Asia and Southeast Asia have emerged as important economic partners of Bangladesh both in terms of export destination and import sourcing. However, constraints “at the border†and “behind the border†have tended to undermine the prospects of reaping the benefits accruing from closer economic cooperation. There is now an increasing realization among policymakers in Bangladesh of the importance of transport integration as an effective tool for market integration and also for attracting efficiency-enhancing and market-seeking investment. This changed perspective has been reflected in Bangladesh’s long-term development policies. This study identifies cross-border initiatives with Bangladesh’s involvement particularly at the bilateral, subregional, and regional levels. Some of these initiatives are also integrated with Asia-wide broader connectivity particularly through the Asian Highway and Trans Asian Railway initiatives. Ongoing initiatives include construction and upgrading of multi-lane highways and railways, road and rail bridges, procurement of locomotives and wagons, and construction of internal container river ports. However, progress has been slow and cross-border transit still remains an unaddressed issue. A consensus among the concerned countries is needed with regard to standard operating procedures, harmonization of standards and customs procedures, and service charges and user fees for transit facilities. Additionally, significant investment will be required for trade facilitation and to upgrade border trade facilities at land ports, inland waterways, and sea ports. The study identifies five key areas where concrete action from major stakeholders is required : (i) mobilizing the necessary funds for building physical infrastructure; (ii) identifying and sequencing of priorities; (iii) cross-border coordination; (iv) building human resources to manage cross-border mega projects; and (v) building supply-side capacities to benefit from connectivity-driven regional market opportunities.
    Keywords: South Asia, Southeast Asia, connectivity, Bangladesh, cross-border initiatives
    JEL: F15 R42
    Date: 2014–09
  3. By: Michele Bruni
    Abstract: ASEAN countries have been moving at different speeds along the path of the so called Demographic transition and are at present at different stages of this complex process. As a consequence, starting in the very near future, some ASEAN countries will be affected by an increasing structural lack of labor supply, while in other a structural excess of labor supply will persist for at least 30-40 years. This situation has already contributed to divide ASEAN countries into two groups: departure countries and arrival countries. Data show that both departures and arrivals have been steadily increasing as well as labor mobility within ASEAN. Building on this demographic background, the paper proposes alternative labor market and demographic scenarios for the period 2010-35. The scenarios outline manpower needs, migration flows and population growth on the basis of the trends in WAP and alternative hypothesis on employment growth. The main conclusion is that the higher the rate of economic growth that will be attained by Singapore, Thailand, Malaysia, and Brunei (already relevant arrival countries), the higher their need of foreign labor. In fact, in a very near future the local labor supply of these countries will not be even sufficient to replace the workers that will leave for good the labor force due to retirement or death. In substance, the paper supports the idea that growing workers mobility within ASEAN countries will represent an unavoidable precondition for economic growth and social development. A survey of economic growth model brings us to support the idea that economic growth is the result of a process of technological upgrading, of diversification and structural change driven by the accumulation of capabilities, on one hand, and the transformation of the production structure, on the other. It is the knowledge base of a country that defines and limits the technologies a country can adopt, the production structure that may evolve, and therefore the possible paths to economic growth and social development. Speeding up economic growth and triggering successful catching up processes does require shifting production from low quality activities into “high quality activities”, to “jump” into new knowledge clusters. In order to do so a country also needs to drive the knowledge structure toward higher diversity and complexity, to endow its incoming labor force with new expertise and competences. The different levels of economic development reached by ASEAN countries have been fostered and reflect their different knowledge base. The percentage of people between 15-44 with secondary and tertiary education spans between the maximum of Singapore (91 per cent) and the minimum values that characterize Laos, Cambodia, and Vietnam (between 40 and 45 per cent). A more detailed analysis of the national educational attainments shows that beside Singapore -that has the world highest ranking in Industrial performance- only Malaysia and Indonesia have already shifted their production structure to high quality activities and new knowledge cluster or are ready to do so. The more polarized education structure of Thailand and possibly Myanmar suggest that these two countries have limited options to start the production of intermediate technology products, but could develop directly toward high technology sectors. In conclusion, the paper contends that in a very near future workers mobility within the ASEAN region will not be a choice, but a necessity imposed by demographic tendencies and economic growth. The pace of economic growth and the typology of development will determine the amount of labor force that will be needed and the competencies and skills that will be required by arrival countries. At the same time, the other ASEAN countries will be characterized by a structural excess of labor supply that will not be able to find a productive occupation in the national markets, since the rate of economic growth requested to absorb it will remain out of reach. It could be ASEAN goal to transform these weaknesses into strong points. The structural lack of labor supply that will affect Singapore, Thailand and, although in a lesser measure, Malaysia can be faced only in two ways: migration and delocalization of production. The second approach, although viable from an economic perspective, can provide only a very partial solution to the expansion of production, given its risks and serious political drawbacks. In this situation the papers proposes a series of policy options. In the first place, a correct migration policy can be based only upon a serious evaluation of the amount and typology of workers needed by arrival countries. The paper stresses the fact that the more developed economies do not need only skilled labor, but on the contrary -especially at the beginning of the migration process- they need mainly unskilled labor and only with time qualified workers and university graduates will become predominant. The other side of the coin is that the outflow of migrants presents both positive and negative aspects for departure countries. On one hand, it reduces the pressure on the labor market and provides remittances that could support productive investments. On the other hand, it depletes the knowledge structure and the capabilities of the departure countries because migrants are always, by definition, the most dynamic element of their societies. A correct approach to economic growth and catching up suggests that educational policies and industrial policies can play a fundamental role. In order to do so educational policies must be designed and implemented in relations to the training needs of both departures and arrival countries, while industrial policies should provide a production structure capable of promoting economic growth and a labor demand coherent with the exits from the educational system. More specifically, at national level, education and training policies should: 1) in the short run, provide a correct response to the local labor demand in terms of skills; 2) in the long run, endow the incoming generations with the knowledge and the skills necessary to move the national production structure toward higher quality products. Moreover, the educational policies of the departures countries should be coordinated also with the industrial policies of the arrival countries so that the structural excess of labor supply of departures countries will find productive employment or in the arrival countries or in their investment in departures countries. In order to face such complex set of task, ASEAN countries will need, as already clearly suggested by the last ALM Working Program, a Labor Market Information System providing comparable information on the main aspects of human resources management, from demography to education and vocational training, from macroeconomic to employment, unemployment and migration, together with a broad comparative view of their labor market legislation. Therefore, an extremely important objective of ASEAN could be the constitution of an ASEAN Labor Market Information System aimed to collects, store and analyze the data produced at the national level, better their quality, and promote their comparability. The paper proposes a second important measure that responds not only to principles of equity and competitiveness but could also foster economic growth and social development: the creation of an Employment Migration Fund. A migrant brings with him a set of capabilities that are the result not only of its personal investment, but also of the investment in education made by its country of origin. In substance, the arrival of a migrant corresponds for the production system of the receiving country to the free acquisition of a factor of production. This is obviously true only if and when the migrant worker is needed, i.e. his services are essential and do not have a substitute in the arrival country. The paper has strongly argued that this situation will exist and persist for at last four ASEAN countries and will affect a number of workers largely in excess of those “forecasted” by international Institutions. This aspect of migration has been largely overlooked by the literature because migrations are still predominantly explained from the supply side, migrants being represented as people running away from misery and deprivation or just looking for higher wages and a better life. This perspective has brought to the proposal, almost 40 years ago, of the so-called Bhagwati tax. If we abandon this point of view and more in tune with reality and empirical evidence we realize that many developed economies that have been affected already for long time by below replacement fertility do not have enough internally “produced” labor not only to expand, but even to keep the present level of production, then we have also to change our image of the migrants. The first obvious implication is that the arrival country should pay to the departure country for each migrant employed in a productive job a price proportional to the cost supported by the government of the country of origin for its education and training. The proposal is that these contributions be collected in an Education Migration Fund managed by ASEAN to be used only to improve the education and training system of member countries by intervening on the infrastructures, training the teachers, providing equal opportunities, and promoting gender equality, in coordination with the industrial and macroeconomic policies required to start effective catching up processes. This measure would not only respond to a principle of equity, eliminate market distortions deriving from the free acquisition of factors of production by arrival countries, but in the growth perspective we have introduced, it would also be beneficial to arrival countries by fostering the process of catching up of the weaker economies, increasing their level of income and therefore expanding the market for the products coming from the more developed neighbors.
    Keywords: ASEAN; Labor market; Demography; Scenarios; Migration; Education; Growth
    JEL: F22 I25 J11 J24
    Date: 2013–01
  4. By: Asian Development Bank (ADB); (Regional and Sustainable Development Department, ADB); ;
    Abstract: Based on an analysis of gender inequalities, strategies and promising initiatives to counter gender discrimination and promote equality between men and women in Cambodia, Kazakhstan, and the Philippines, as well as an inventory of global good legal, economic, and social practices, this report summarizes the findings and recommendations for Cambodia. It shows how to improve equitable employment opportunities, remuneration and treatment for women and men at work to support the development of decent work and gender equality good practices in the country. The report is part of a series consisting of: •Good Global Economic and Social Practices to Promote Gender Equality in the Labor Market •Good Global Legal Practices to Promote Gender Equality in the Labor Market •Gender Equality and the Labor Market: Cambodia, Kazakhstan, and the Philippines •Gender Equality in the Labor Market in Cambodia •Gender Equality in the Labor Market in the Philippines.
    Keywords: gender; women; labor market; global practices; legal; gender equality; ADB; ILO; GAD; gender and development; technical assistance; gender mainstreaming; discrimination; legislation; access to work; working women; recruitment; employment; international standards; minimum wage; equal remuneration; sexual harassment; labor clauses; public contracts; security; formal employment; informal employment; part-time work; short-term contracts; home workers; domestic workers; rural workers; entrepreneurs; cooperatives; social protection; maternity care; family leave; child care; association; collective bargaining; freedom of association; social dialogue
    Date: 2014–02
  5. By: Orbeta, Aniceto Jr. C.; Paqueo, Vicente B.; Lanzona, Leonardo Jr. A.; Dulay, Dean Gerard C.
    Abstract: The Philippines is at a crossroad. It can choose to continue to follow current unrealistic policies that despite good intentions have been shown to be actually detrimental to the poor. Or, it can elect to try another development path to get a better chance at reducing poverty. This study proposes a 12-point agenda, conveniently referred to as the Jobs Expansion and Development Initiative (JEDI) for poverty reduction. JEDI has two objectives. One is to expand gainful jobs through the acceleration of labor intensive production, particularly, the manufacturing of tradable commodities. The other is to improve investments in education and other human capital development and sustain total factor productivity gains. These objectives require inter alia minimum wage reform, which should be undertaken immediately, while investors are looking for new places to locate labor-intensive production and the Philippine economy is getting another look as a potential destination. The study recognizes the Filipinos` aspirations for secure jobs with decent wages. But it challenges the idea that imposing minimum wages and other current labor regulations should be the weapons of choice. They do not work; worse, there is preponderant evidence of its detrimental consequences. Alternatives should, therefore, be considered, such as better education, increased labor-intensive manufacturing, and greater opportunities for training on the job. Arguably, alternatives like these might take time. Consequently, bridging social protection programs need to be implemented in the meantime to help the poor directly with their subsistence needs. For this, instead of imposing mandatory minimum wages, the paper points out that it would be better to use direct and temporary income subsidy, carefully targeted to extremely poor households to meet suitable norms that society considers a public good. Such an approach would be both efficient and equitable, conforming to the general principle of public economics that a public good should be financed by general tax revenues. The study concludes that the time has come for the country to leave the beaten path and try new approaches that would rebalance current labor laws and practices to expand gainful jobs and minimize unintended consequences detrimental to the poor, the young, the women, the less educated, and the unorganized workers.
    Keywords: Philippines, jobs, minimum wages, labor market policy, human resource policy
    Date: 2014
  6. By: Jose II TIUSONCO (Asia Pacific Institute of Research)
    Abstract: Saddled with internal problems and external shocks the past three decades (1980 to 2010), the Philippines is back on its feet and getting ready to be fully integrated into Asia’s regional economy with better institutional and governance quality, focused public sector investments in infrastructure and human capital development, and armed with sustainable and dynamic labor force. It has achieved positive changes – significant progress – in governance and economic performance in recent years. It appears to be on track in addressing the critical development constraints to growth and poverty reduction through its inclusive growth agenda.  Noted for its English-speaking, young and mobile human capital, the Philippines has been a services- and consumption-driven economy with significant contributions from remittances of overseas Filipino workers and the information technology-business process management (IT-BPM). Its economy-wide productivity growth lagged and foreign investments stagnated for about three decades – between 1980 and 2009.  Human capital is seen as among the strongest assets of the Philippines. Bringing in foreign –and domestic – capital investments are necessary in transforming human capital into productive labor, thereby creating an enduring economic growth structure and poverty reduction. Private investments are critical in addressing key challenges and opportunities on i) persistent problem of unemployment and underemployment,   ii) reviving the manufacturing sub-sector, and iii) improving technological innovation and production capability.  Sustaining and scaling-up institutional reforms are necessary in getting out of the “middle income trap” and ultimately achieving prosperity. This is not going to be easy; and, yes, leadership and good governance are key factors towards this end.
    Date: 2014–08
  7. By: Cassey LEE (Institute of Southeast Asian Studies)
    Abstract: The main purpose of this study is to examine whether the relationship between exporting and productivity differs across firm sizes in the Malaysian manufacturing sector. A firm-level panel data from the Study on Knowledge Content in Economic Sectors in Malaysia (MyKE) is used in the study. Overall, exporters were found to be more productive than non-exporters. This productivity gap becomes less important as firms become larger. There is evidence that the selection process for exporting is binding only for small firms. Policies that are meant to encourage small firms to export need to focus on enhancing human capital and foreign ownership.
    Keywords: Globalisation, Firm Size, Exporting, Productivity
    JEL: L60 O30 F14
    Date: 2014
  8. By: Andrew Filardo; Hans Genberg; Boris Hofmann
    Abstract: EM Asia has seen a transformation of its monetary policy environment over the past 2 decades. By far, the most relevant change has been the maturing of its financial systems and the growing relevance of the global financial cycle: financial inclusion has spread, financial markets have deepened and financial globalisation has linked domestic markets closer to international markets. One consequence of the maturing of the financial systems has been the weakening of the traditional case for the monetarist view of the roles of monetary and credit aggregates in the conduct of monetary policy: velocity has been unstable in ways similar to that in the advanced economies decades earlier; yet, longer-term monetary growth correlations with inflation are evident. In addition, the maturing of the financial systems has elevated concerns of financial stability, as both a source of shocks and as something central banks have a responsibility for. These developments have been further complicated by monetary policy spillovers from the advanced economies. The challenge now is how best to integrate mandates for financial stability into monetary policy frameworks, both conceptually and practically. Moreover, the exchange rate choice is particularly relevant in EM Asia. While managed exchange rate regimes in EM Asia have been implemented with mixed success, the risks associated with the choice can be seen through the lens of aggregates based on central bank balance sheets. The size and growth of central bank balance sheets suggest an ongoing build-up in risks. All this points to the need to consider alternatives to conventional inflation targeting frameworks. This paper lays out a policy framework based on a multi-pillar monetary policy approach as a potentially attractive alternative for EM Asia. The three pillars are based on economic, financial and exchange rate stability, respectively. This framework not only offers an alternative conceptual framework but also implies institutional reforms to ensure central banks take a longer term perspective when setting policy.
    Keywords: central bank mandates, financial cycle, financial inclusion, globalisation, managed exchange rates, monetary analysis, monetary policy frameworks, emerging Asia
    Date: 2014–09
  9. By: Chang-Ching Lin (Institute of Economics, Academia Sinica, Taipei, Taiwan); Juin-Jen Chang (Institute of Economics, Academia Sinica, Taipei, Taiwan); Shu-Shiuan Lu (Department of Economics National Tsing Hua University)
    Abstract: This paper sheds light on three important issues in the macroeconomics literature, which comes to a better understanding of Taiwan’s wage stagnation. First, we explore the trend of labor income shares, namely the labor income-output ratios, in Taiwan. This enables us to understand the distribution or tradeoff between labor and capital shares. Second, we calculate the correlation coefficients between real wages and gross domestic product (GDP) per capita, showing that whether Taiwan’s real wages and national incomes move in the opposite direction. Third, we calculate the gap between the marginal product of labor and real wage. This focus shows whether workers’ salary is consistent with their productivity in Taiwan. Of particular importance, in all issues we compare the Taiwan case with other neighboring countries of Asia. By these cross-country comparisons, we would like to examine whether the wage stagnation in Taiwan is unique or common in Asian countries. Finally, we briefly discuss Taiwan’s wage differences by sector and by education.
    Keywords: Labor share, Comovement of real wage and GDP per capita, Wages and productivity
    JEL: E24 E25 E32 O47
    Date: 2014–09
  10. By: Nazahah Abd Rahim (University of Gloucestershire, UK)
    Abstract: Corporate social responsibility (CSR) initiatives are being approached by corporations in so many ways and the most common in forms of campaigns, printed brochures, posters and sponsorships. This is becoming a problem because when corporations use existing resources to carry out their CSR initiatives, sometimes they are being carried away as not to think about whether they are going to have enough resources for future use, so as to become sustainable. But, there is another way of how corporations can be socially responsible which is to run their initiatives online via the internet or even through their corporate websites. Online CSR initiatives involve communicating any CSR information online, particularly on corporate websites such as annual report, CSR report, sustainability report, policy, recognition or awards, all communicated on corporate websites. With the vast advancement in technology particularly the internet, stakeholders expect the relevant information about the business to be made available and easily accessible. Hence, the most important characteristic of this is undoubtedly, that any CSR information can be accessed in real time, from anywhere and at relatively lower costs. The aim of this paper is to investigate the practice of online CSR initiatives by ACE market listed companies in Malaysia. ACE which is defined as Access, Certainty and Efficiency comprises of companies listed in the secondary market of Kuala Lumpur Stock Exchange (KLSE) which is now known as Bursa Malaysia. The ACE Market is different because it is sponsor-driven and open to companies of all sectors. Content analysis will be conducted to find out how the online CSR initiatives are being adopted by these companies. This study will be different from past studies and contribute to the body of knowledge by focusing on the secondary market rather than the main board of Malaysia’s stock exchange.
    Date: 2013–09
  11. By: Wagstaff, Adam; Bilger, Marcel; Buisman, Leander R.; Bredenkamp, Caryn
    Abstract: This paper uses a common household survey instrument and a common set of imputation assumptions to estimate the pro-poorness of government health expenditure across 69 countries at all levels of income. On average, government health expenditure emerges as significantly pro-rich, but there is heterogeneity across countries: in the majority, government health expenditure is neither pro-rich nor pro-poor, while in a small minority it is pro-rich, and in an even smaller minority it is pro-poor. Government health expenditure on contracted private facilities emerges as significantly pro-rich for all types of care, and in almost all Asian countries government health expenditure overall is significantly pro-rich. The pro-poorness of government health expenditure at the country level is significantly and positively correlated with gross domestic product per capita and government health expenditure per capita, significantly and negatively correlated with the share of government facility revenues coming from user fees, and significantly and positively correlated with six measures of the quality of a country's governance; it is not, however, correlated with the size of the private sector nor with the degree to which the private sector delivers care disproportionately to the better-off. Because poorly-governed countries are underrepresented in the sample, government health expenditure is likely to be even more pro-rich in the world as a whole than it is in the countries in this study.
    Keywords: Health Monitoring&Evaluation,Health Systems Development&Reform,Information Security&Privacy,E-Business,Economic Theory&Research
    Date: 2014–09–01
  12. By: Simon Pettman (European Advisory Services (EAS), Asia Office, Singapore)
    Abstract: Addressing technical barriers to trade is a key priority of ASEAN as part of trade facilitation in achieving an integrated economy under the ASEAN Economic Community in 2015 and in building an effective and competitive Economic Community beyond 2015. Standards and Conformance assessment measures, while seeking to ensure quality and safety of products for consumers, should not become barriers to trade across the region as ASEAN liberalises its trading regime. A delicate balance needs to be achieved between the two to build a thriving economic region. ASEAN has been working towards achieving standards harmonisation in its priority sectors of integration and bringing about regulatory convergence, taking into account the diversities in its ten member states. More, however, needs to be done and as this Policy Brief shows, the roles of institutional strengthening and the private sector are critical in this task.ASEAN members to quicken the development of a technologically more egalitarian region.
    Date: 2014–07
  13. By: Shew Fan Liu (School of Economics, Singapore Management University, Singapore, 178903); Zhenlin Yang (School of Economics, Singapore Management University, Singapore, 178903)
    Abstract: In studying the asymptotic and finite-sample properties of quasi-maximum likelihood (QML) estimators for the spatial linear regression models, much attention has been paid to the spatial lag dependence (SLD) model; little has been given to its companion, the spatial error dependence (SED) model. In particular, the effect of spatial dependence on the convergence rate of the QML estimators has not been formally studied, and methods for correcting finite-sample bias of the QML estimators have not been given. This paper fills in these gaps. Of the two, bias correction is particularly important to the application of this model. Contrary to the common perceptions, both the large and small sample behaviors of the QML estimators for the SED model can be different from those for the SLD model in terms of the rate of convergence and the magnitude of bias. Monte Carlo results show that the bias can be severe and the proposed bias correction procedure is very effective.
    Keywords: Asymptotics; Bias Correction; Bootstrap; Concentrated estimating equation; Monte Carlo; Spatial layout; Stochastic expansion
    JEL: C10 C15 C21
    Date: 2014–09
  14. By: Andries M.; Cassin G.; Bahhaouy A.; Philippe F.; Foratier Y.; Lopez Vernaza A.; Rigodanzo F.
    Abstract: Information systems are of strategic importance in both the banking and insurance sectors. The development of cloud computing is a recent advance that has become a subject of attention. Cloud computing is defined as a "method of processing a client's data, which are exploited via the Internet in the form of services provided by a service provider. Cloud computing is a special form of information technology (IT) outsourcing, in which end users are not informed of the location or internal structure of the cloud." This topic is particularly current for a number of regulatory bodies. In France, the Agence Nationale de Sécurité des Systèmes d’Information (ANSSI – French Network and Information Security Agency) is working on regulation via a certification mechanism. In 2012 the Commission Nationale de l’Informatique et des Libertés (CNIL – French Data Protection Authority) issued recommendations for companies considering subscribing to cloud computing services. Abroad, many supervisory authorities have issued statements (the United States of America, Singapore, the Netherlands), or imposed a system of prior authorisation (Spain) for the use of this technology. In this context, the Secrétariat général de l’Autorité de contrôle prudentiel (SGACP – General Secretariat of the Prudential Supervisory Authority) conducted a short survey to engage in a dialogue with companies in the banking and insurance sectors on the scope, use and risks of cloud computing. A total of 14 companies from the insurance sector and 12 from the banking sector responded to a questionnaire at the beginning of this year, providing a representative view on these topics. The first idea that emerged from this dialogue was a need to clarify the concept of cloud computing by offering a multi-criteria definition, inspired by that given by the American National Institute of Standards and Technology (NIST). The SGACP therefore proposes to describe these services as follows: cloud computing consists in using remote servers to store and process data traditionally located on local servers or on the user's terminal; it enables on-demand and self-service network access to virtualised and pooled computing resources typically charged for on a pay-per-use model; three types of services are offered (IaaS – Infrastructure as a Service, PaaS – Platform as a Service, SaaS – Software as a Service), deployed according to four models (internal private cloud, external private cloud or community cloud, public cloud, hybrid cloud). The credit institutions and insurance undertakings (companies) responding to the questionnaire confirmed that cloud computing poses greater risks compared to conventional IT outsourcing. The numerous risks identified include data privacy, unavailability of data and data processing, loss of integrity (especially the risk of non-reversibility or lock-in) and finally the area of evidence and control. They agree on the need for a stronger legal environment, the need for certain technical security measures, the need to audit the service provider, the need for the provider to commit to continuity of service and, finally, the need to obtain a guarantee from the service provider on the reversibility of the service. However, opinions differ on the importance of the economic aspects surrounding cloud computing, with many companies claiming that security considerations should prevail in analysing its value. Moreover, it is noted that an overwhelming majority of companies use cloud computing in management areas considered outside the "core business", even if use in more sensitive areas is also beginning to emerge. It also appears that there are differences in the procedures for the adoption of cloud computing between the insurance and banking sectors. As a result of this initial analysis, which shall be refined as changes in the use and the risks of cloud computing are observed, the Autorité de contrôle prudentiel (ACP – Prudential Supervisory Authority) is encouraging the companies it supervises to take suitable risk management measures in respect of the following aspects: - Legal: by enforcing a mandatory contractual framework for cloud computing services; - Technical: by encrypting data during transport and storage (in the absence of anonymisation); - Supervision of the service provider: by ensuring audit capability and the right for the ACP to conduct audits; - Continuity of the service: by ensuring that the expectations of the client company can be formalised in service contracts; - Reversibility of the service: by defining the conditions of reversibility when subscribing to the service; - Integration and architecture of information systems: by adapting the organisation and governance of information systems to the use of cloud computing. These good practices form part of the broader framework defined for the supervision of outsourced services, including conventional outsourcing. The expectations of the ACP in terms of governance of decisions, risk analysis, contractual elements, monitoring and the internal control of cloud computing services are therefore similar to those currently in force in prudential supervision.
    Keywords: .
    Date: 2013
  15. By: Noorhayati Mansor (UniSZA, Malaysia); Wong Jinq Yih (UniSZA, Malaysia)
    Abstract: This study examines the perceptions of Malaysian palm oil managers regarding the impact of implementing various CSR initiatives for stakeholder groups on firms’ nonfinancial performance. The stakeholder groups are investors, customers, suppliers, communities and the environment. The nonfinancial performance is measured by research and development, market development, market size and personnel development. Mailed questionnaires were used and 54 estate managers participated in the study. The results show a relatively moderate level of CSR implementation in the palm oil industry. The mean scores range from the lowest of 3.00 (communities’ protection) to the highest of 3.79 (suppliers’ pricing practices). The study reveals that managers perceived only CSR initiatives toward investors (ß = 0.494, p
    Date: 2013–09

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