nep-sea New Economics Papers
on South East Asia
Issue of 2014‒12‒08
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Connecting South and Southeast Asia : Implementation Challenges and Coordination Arrangements By Moe Thuzar; Rahul Mishra; Francis Hutchinson; Tin Maung Maung Than; Termsak Chalermpalanupap
  2. Growth Strategy with Social Capital and Physical Capital- Theory and Evidence: the Case of Vietnam By Cuong Le Van; Anh Ngoc Nguyen; Ngoc-Minh Nguyen
  3. How Close is Asia to Already Being A Trade Bloc? By Chunding Li; John Whalley
  4. Can Indonesia’s Fiscal Policy be Sustained, with Exploding Debt? By Tari Lestari
  5. ASEAN-India Gas Cooperation: Redifining India's "Look East" Policy with Myanmar By Anindya BHATTACHARYA; Tania BHATTACHARYA
  6. How Sustainable Energy Trend gives Producers Benefits: A Case of Southeast Asian Palm Oil By Yamaura, Koichi; Fewell, Jason; Garay, Pedro
  7. Measuring economic ill-being: Evidence for the ‘Philippine Misery Index’ By Beja, Edsel
  8. Credit Constraints and Impact on Farm Household Welfare: Evidence from Vietnam’s North Central Coast region By Tran, Minh Chau; Gan, Prof Christopher; Hu, Baiding
  9. Absorbing innovative financial flows: Looking at Asia By Rehman Sobhan
  10. The Value of Policies to Conserve Native Bees in Northern Thailand-A Discrete Choice Experiment By Narjes, Manuel; Lippert, Christian
  11. Task Force: Connecting India, China and Southeast Asia - New socio-economic developments By Senz, Anja (Ed.); Reinhardt, Dieter (Ed.)
  12. Macroeconomic Policy Games By Bodenstein, Martin; Guerrieri, Luca; LaBriola, Joe
  13. The Gravity of Experience By Dutt, Pushan; Santacreu, Ana Maria; Traca, Daniel

  1. By: Moe Thuzar (Asian Development Bank Institute (ADBI)); Rahul Mishra; Francis Hutchinson; Tin Maung Maung Than; Termsak Chalermpalanupap
    Abstract: With closer regional integration there is increasing interest within the Association of Southeast Asian Nations (ASEAN) and on the part of ASEAN’s dialogue partners in the potential gains of closer connections between Southeast Asia and South Asia. The strategic positions of India, Myanmar, and Thailand provide the basis and scope for implementing multi-modal connectivity projects, for building upon and improving existing infrastructure and processes for cross-border connectivity in trade. With outward-looking policies in the various subregions that seek to link their economies closer than ever, the ASEAN and South Asian countries are presented with a wide array of options at the bilateral, subregional, and regional levels that can be pursued in partnership under the different frameworks for cooperation. The role of regional entities such as the Asian Development Bank is also important to consider. This paper assesses the political economy and other implications of cross-border connectivity between South and Southeast Asia, and suggests practicable options for moving forward.
    Keywords: cross-border connectivity, South Asia, Southeast Asia, multi-modal connectivity projects, coordination framework
    JEL: F55 H77 H87 O19 P48 R11
    Date: 2014–09
  2. By: Cuong Le Van (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, VCREME - VanXuan Center of Research in Economics, Management and Environment - VanXuan Center of Research in Economics, Management and Environment); Anh Ngoc Nguyen (DEPOCEN - Development and Policies Research Center); Ngoc-Minh Nguyen (DEPOCEN - Development and Policies Research Center)
    Abstract: We study the impact of social capital in both simple theoretical and empirical model with the main assumption is the price of physical capital is a decreasing function of social capital. In our theoretical model, there exists a critical value such that firm will not invest in social capital if its saving is lower than the critical value and otherwise. Moreover, the output depends positively and non-linearly on the social capital. Our empirical model that captures the impact of physical capital, human capital, and social capital using the database from Survey of Small and Medium Scale Manufacturing Enterprises (SMEs) in Vietnam 2011, confirms the conclusions of the theoretical model.
    Keywords: Social capital; optimal growth
    Date: 2014–02
  3. By: Chunding Li; John Whalley
    Abstract: FTA bilateral and regional negotiations in Asia have developed quickly in the past decade moving Asia ever closer to an economic union. Unlike Europe with the EU and the 1997 treaty of Rome and the 1993 NAFTA in North American, Asian economic integration does not involve a comprehensive trade treaty, but an accelerating process of building one bilateral agreement on another. For countries in Asia there is negotiation of a China-Japan-Korea agreement, a China-India agreement, a Trans-Pacific Partnership (TPP) agreement, and a Regional Comprehensive Economic Partnership (RCEP). This paper uses a fifteen-country global general equilibrium model with trade costs to numerically calculate Debreu distance measures between the present situation and potential full Asia integration in the form of a trade bloc. Our results reveal that these large Asia economies can be close to full integration if they act timely in agreements through negotiation. All Asia countries will gain from Asia trade bloc arrangements except when the Asia FTA can only eliminate tariffs. These countries' gain will increase as bilateral non-tariff elimination deepens. Larger countries will gain more than small countries. Asia FTA, Asia Union and RCEP will benefit member countries more than ASEAN+3. Global free trade will benefit all countries the most.
    JEL: D58 D61 F15
    Date: 2014–08
  4. By: Tari Lestari (Directorate of State Finance and Monetary Analysis (BAPPENAS))
    Abstract: The debate over debt issues always becomes hot potatoes to be discussed. Recent data in debt position which accounted for 1.977,71 trillion IDR onDecember31st2012 has made a thousand eyes looking at The Central Government and questioning whether Indonesia should continue to rely on debt for development financing, and whether its debt level is dangerous for fiscal sustainability or not. This paper analyzes debt sustainability by using Natural Debt Limit (NDL) approach introduced by Mendoza-Oveido. In order to examine how the Indonesian government reacts to changes in its debt position, this paper estimates fiscal reaction functions using an econometric approach, namely Vector Error Correction Model (VECM). The result shows that: (i) natural debt limit for Indonesia is 32,3% over GDP; (ii) since 1992 the central government has run a sustainable fiscal policy, by reducing the primary deficit or increasing the surplus in response towards rising debt. Indonesia has a space to utilize more debt, but in a good manner (well-managed) especially aimed for productive and priority spending such as for infrastructure and education.
    Keywords: Crisis, Fiscal sustainability, Natural Debt Limit, Public Debt, Fiscal Reaction Function, Deficits
    JEL: H62 H63
    Date: 2014–11
  5. By: Anindya BHATTACHARYA (The Celestial Earth Consultant, India); Tania BHATTACHARYA (The Celestial Earth Consultant, India)
    Abstract: As economic power shifts towards Asia---particularly China, India and the Association of Southeast Asian Nations (ASEAN) ---a robust energy cooperation within this region will help sustain the region's development. Cooperation master plans already in place include interconnecting power grids and gas pipelines, engaging in cross-border power projects and promoting freer trade of energy commodities among the countries. The East Asia Summit region (EAS) pioneers such cooperation not only within the ASEAN region and the Greater Mekong Subregion (GMS) but with nations such as India, Russia, the United States, and Australia as well. This study, though, focuses more on India and how its Look East Policy helps forged trade and other bilateral cooperation with the ASEAN nations, and how Myanmar plays a strategic role in India's energy security. This study also concentrates on a particular energy resource---natural gas---and develops a quantitative assessment model to evaluate India and its neighbouring countries' long-term natural gas demand, corresponding infrastructure requirements, and investment demand. Specifically, it looks at how India’s Look East Policy can help secure the required amount of natural gas from the ASEAN and East Asia region and at what cost. There is nothing new with including Myanmar in a discussion on regional energy cooperation. After all, this is a country with abundant untapped natural resources, including hydro and natural gas. However, very few studies have so far focused on Myanmar’s strategic location and geography and how it can provide the non-energy resources---such as land, water, human resources, and maritime channels for seaborne trade---needed to develop a robust integrated energy market. All these are essential factor inputs for large-scale energy infrastructure projects. This study thus explores Myanmar's role in helping India with the latter's own energy security. Through a three-stage analysis of the regional energy problem, the study demonstrates that India is eventually going to depend more on gas (after coal) for its energy supply. As India’s home-grown gas supply is not sufficient to meet its domestic gas demand, it currently imports more than 75 percent of its requirement from Qatar. Given the growth in future demand, growing supply volatility of Middle East gas, and increasing gas prices (including Asian premium), any dependence on the Middle East's supply makes gas more expensive and vulnerable for India. Also, since more than 27 percent of the landed price of gas and LNG in the country consists of transport cost, it is important to reduce the distance of transport.
    Keywords: Energy Market Integration, Natural Gas, India, Myanmar Energy
    JEL: Q43
    Date: 2014
  6. By: Yamaura, Koichi; Fewell, Jason; Garay, Pedro
    Keywords: Competition, Market Power, Palm Oil, RDE, sustainable energy, International Relations/Trade, Resource /Energy Economics and Policy,
    Date: 2014
  7. By: Beja, Edsel
    Abstract: This paper uses the gap between the level of an economy’s well-being and that of a people’s well-being as a measure of the overall economic ill-being in a society. In particular, it argues that such disparity is measurable using objective measures of and subjective measures for inflation and joblessness. The inflation rate in this regard signifies the affordability of goods and services; its subjective counterpart then indicates the sense of whether the people can actually afford goods and services or not. The joblessness rate meanwhile shows the extent to which there is no gainful employment; its subjective counterpart then represents the sense of being jobless as understood by the people. The results indicate that the overall economic ill-being in the Philippines did not change much even with robust economic growth in recent years. This finding unveils a scene that is different from that painted by official statistics from the country.
    Keywords: Economic ill-being; well-being; misery index, Philippines
    JEL: C43 D60 E24 E31 E66 I31
    Date: 2014–11–05
  8. By: Tran, Minh Chau; Gan, Prof Christopher; Hu, Baiding
    Abstract: This study aims at identifying factors affecting formal credit constraint status of rural farm households in Vietnam’s North Central Coast region (NCC). Using the Direct Elicitation method (DEM), we consider both internal and external credit rationing. Empirical evidences confirm the importance of household head’s age, gender and education to household’s likelihood of being credit constrained. In addition, households who have advantages in farm land size, labour resources and non-farm income are less likely to be credit constrained. Poor households are observed to remain restricted by formal credit institutions. Results from the Endogenous Switching Regression model suggest that credit constraints have negative impact on household’s consumption per capita and informal credit can act as a substitute to mitigate the negative influence of formal credit constraints.
    Keywords: Credit constraint, determinants, impact, welfare, rural households, Agribusiness, Community/Rural/Urban Development, Consumer/Household Economics, International Development,
    Date: 2014
  9. By: Rehman Sobhan
    Abstract: This paper explores the scope of IDF to compensate for declining ODA and/or to enhance the efficiency of ODA. It shows that IDF has not helped much to increase the volume of aid. With regard to efficiency, the role of IDF related mechanisms remains controversial. In view of the above, it may be more productive to focus on other resources available to Asia. The paper points to two such resources, namely the surpluses accumulated in the form of reserves, SWFs, etc. and the migrant remittances. Efficient utilization of these two sources can vastly change the development finance landscape in Asia.
    Keywords: Innovative Development Finance; GFATM; GAVI; ODA; Sovereign wealth fund; South-South Cooperation
    JEL: O16 O19
    Date: 2014–10
  10. By: Narjes, Manuel; Lippert, Christian
    Abstract: This article is an attempt to estimate the economic value of policies aimed at conserving native bees (and their pollination services) in Northern Thailand, by means of a discrete choice experiment. The preferences of 198 longan (Dimocarpus longan) farmers for three conservation strategies in particular, namely “bee-friendly pest management”, “improving native bee habitats within agro-forest ecosystems” and “fostering the husbandry of native bee species”, were analyzed. Thereby, the part-worth utilities of these strategies and of their potential effects on the population of native bees were estimated with conditional logit and random parameter logit models. Furthermore, the contribution of a “cost” attribute to the explanation of the utility associated with the choice alternatives allowed the calculation of willingness to pay estimates for the individual conservation strategies and for changes in the population of native bees. As a result, a positive contribution of the proposed conservation measures to the utility derived from the choice alternatives containing them could be established. Similarly, positive changes in the population of native bees also increased the chances of related conservation policy profiles being chosen. It can be concluded that the population of longan farmers is generally willing to pay for the conservation of native bees in their region, although explaining their preference heterogeneity for the proposed conservation measures will require further analyses.
    Keywords: Native Bee Conservation, Crop Pollination, Northern Thailand, Discrete Choice Experiment, Conditional Logit, Random Parameter Logit., Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Risk and Uncertainty,
    Date: 2014–09
  11. By: Senz, Anja (Ed.); Reinhardt, Dieter (Ed.)
    Abstract: The border regions between Northeast India, Bangladesh, Myanmar and Southwest China are characterized by close historical, intra-ethnic relations and a developing civil society sector as well as violent conflicts and disputes about hydropower and resource extraction projects. What is more, this region will be affected by climate change. The articles reflect expanding regional economic relations, resource extraction projects, climate change challenges, minority issues and the potential for further involvement of the civil society.
    Abstract: Die Grenzregionen zwischen Nordostindien, Myanmar und Südwestchina sind geprägt von engen historischen, intra-ethnischen Beziehungen, von einer sich entwickelnden Zivilgesellschaft sowie von Gewaltkonflikten und Konflikten über Wasserkraft- und Ressourcengewinnungsprojekte. Diese Region wird zudem vom Klimawandel betroffen sein. Die Aufsätze behandeln die wachsenden regionalen Wirtschaftsverbindungen, Ressourcenerschließungsprojekte, Herausforderungen des Klimaschutzes, Minderheitenfragen sowie Möglichkeiten des zivilgesellschaftlichen Engagements.
    Keywords: India,Northeast India,Myanmar,Yunnan,China,ethnic minorities,economic development,hydropower,resources,climate change
    Date: 2014
  12. By: Bodenstein, Martin (National University of Singapore); Guerrieri, Luca (Board of Governors of the Federal Reserve System (U.S.)); LaBriola, Joe (University of California, Berkeley)
    Abstract: Strategic interactions between policymakers arise whenever each policymaker has distinct objectives. Deviating from full cooperation can result in large welfare losses. To facilitate the study of strategic interactions, we develop a toolbox that characterizes the welfare-maximizing cooperative Ramsey policies under full commitment and open-loop Nash games. Two examples for the use of our toolbox offer some novel results. The first example revisits the case of monetary policy coordination in a two-country model to confirm that our approach replicates well-known results in the literature and extends these results by highlighting their sensitivity to the choice of policy instrument. For the second example, a central bank and a macroprudential regulator are assigned distinct objectives in a model with financial frictions. Lack of coordination leads to large welfare losses even if technology shocks are the only source of fluctuations.
    Keywords: Optimal policy; strategic interaction; welfare analysis; monetary policy cooperation; marcroprudential regulation
    JEL: E44 E61 F42
    Date: 2014–09–23
  13. By: Dutt, Pushan (INSEAD, Singapore); Santacreu, Ana Maria (Federal Reserve Bank of St. Louis); Traca, Daniel (Universidade NOVA de Lisboa, Portugal)
    Abstract: In this paper, we establish the importance of experience in international trade for reducing trade costs and facilitating bilateral trade. Within an augmented gravity framework, we find that an additional year of experience at the country-pair level reduces trade costs by 2.0% and increases bilateral exports by 8%. The effect of experience is stronger for country-pairs that are more distant, who do not share a common border, and who lack colonial and legal ties. Further, experience raises both the extensive and the intensive margins of trade. In a dynamic trade model with heterogeneous firms and where export-experience reduces trade costs, our empirical results imply that benefits of experience are shared industry-wide and that experience lowers the variable component of trade costs.
    Keywords: Gravity model; Trade costs; Experience; Extensive and intensive margin.
    JEL: F10 F14
    Date: 2014–03–01

This nep-sea issue is ©2014 by Kavita Iyengar. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.