nep-sea New Economics Papers
on South East Asia
Issue of 2015‒04‒19
seventeen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Thailand's Economic Integration with Neighboring Countries and Possible Connectivity with South Asia By Chirathivat, Suthiphand; Cheewatrakoolpong, Kornkarun
  2. International food aid to Indonesia, 1950s-1970s By Pierre van der Eng
  3. Indonesia: Selected Issues By International Monetary Fund
  4. ASEAN Financial Integration By Geert Almekinders; Alex Mourmouras; Jian-Ping Zhou; Satoshi Fukuda
  5. Sub-National Institutions and Firm Survival in Vietnam By Doan, Quang Hung; Vu, Hoang Nam; Dao, Ngoc Tien
  6. ADB Perceptions Survey: Multinational Survey of Stakeholders 2012 By Asian Development Bank (ADB); Asian Development Bank (ADB; Asian Development Bank (ADB; Asian Development Bank (ADB
  7. Structural Transformation — How Does Thailand Compare? By Vladimir Klyuev
  8. The impact of trade and investment liberalization on the wage skill premium: evidence from Vietnam By Kien Trung Nguyen
  9. Indonesia: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Indonesia By International Monetary Fund
  10. Asia’s Quest for Inclusive Growth Revisited By Chie Aoyagi; Giovanni Ganelli
  11. Malaysia: Selected Issues Paper By International Monetary Fund
  12. Malaysia: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Malaysia By International Monetary Fund
  13. What Can Boost Female Labor Force Participation in Asia? By Yuko Kinoshita; Fang Guo
  14. Capital Controls and Financial Liberalization: Removing the Ideological Bias in Light of the Contribution of Keynes and Others and the Recent Experience By André de Melo Modenesi; Rui Lyrio Modenesi
  15. The impact of the global financial crisis on border-crossing mergers and acquisitions: A continental/industry analysis By Reddy, Kotapati Srinivasa
  16. How Bank Managers Anticipate Non-Performing Loans. Evidence from Europe, US, Asia and Africa By Ozili, PK
  17. Lao People's Democratic Republic: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for the Lao People's Democratic Republic By International Monetary Fund

  1. By: Chirathivat, Suthiphand (Asian Development Bank Institute); Cheewatrakoolpong, Kornkarun (Asian Development Bank Institute)
    Abstract: Thailand's increasing importance as a regional co-production base and as an intra-regional trade and border trade hub is due mainly to recent changes in its economic structure, namely, the lack of operational workers, rises in wages, and increases in outward foreign direct investment (FDI), together with a change of regional policies in Southeast Asia. As a result, improvements in physical connectivity, trade facilitation, energy cooperation, and financing infrastructure play an important role within an ongoing Association of Southeast Asian Nations (ASEAN) framework. Extending connectivity to South Asia could also complement the current promotion of regional trade and regional production networks. This paper reviews the current stages of Thailand's intra-regional trade, physical connectivity, trade facilitation, energy cooperation, and infrastructure funding as there are projects planned in these areas that could impact Thailand and its links to Southeast Asia and beyond to South Asia. However, Thailand's political instability impedes the progress and implementation of such projects. The paper also examines the current financing mechanism of Thailand's infrastructure projects that relies heavily on public spending. The authors propose strategies to promote Thailand's physical infrastructure, trade facilitation, and energy cooperation with the mainland countries of Southeast Asia and South Asia.
    Keywords: thailand; infrastructure; infrastructure financing; project finance; public-private partnerships
    JEL: F15 F36 H54
    Date: 2015–04–07
  2. By: Pierre van der Eng
    Abstract: Indonesia experienced growing shortfalls of food supplies during the 1950s and during the 1960s and 1970s it imported increasing amounts of rice, wheat and wheat flour. This paper investigates the role of food aid in this development. In the 1950s,Indonesia received some US PL480 food aid under concessional loans. Despite occasional famines, and the willingness of countries to supply food aid as grants,Indonesia did not request such food aid until 1966. Donations of wheat flour, rice and other food products started to arrive in Indonesia in 1967 and increased quickly since. During the 1970s one-third of Indonesia’s imports of both rice and wheat arrived as aid. Initially donor countries focused on rice aid in efforts to secure shares in Indonesia’s growing rice imports. But their focus shifted to wheat aid, in response to opportunities for them to grow Indonesia’s market for wheat-based products and secure market share. Food aid helped to alleviate food shortages, but it also strengthened the role of the official food logistics agency in Indonesia’s food markets.
    Keywords: rice trade, wheat trade, food aid, Indonesia
    JEL: F14 N55 O19
  3. By: International Monetary Fund
    Keywords: Commodity markets;Corporate sector;Banking sector;Liquidity;Fiscal risk;Fiscal policy;Debt sustainability;Risk management;Selected Issues Papers;Indonesia;
    Date: 2015–03–19
  4. By: Geert Almekinders; Alex Mourmouras; Jian-Ping Zhou; Satoshi Fukuda
    Abstract: The establishment of the ASEAN Economic Community (AEC) at end-2015 has brought into sharp focus the issue of financial and economic integration in the region. This paper takes stock of ASEAN’s financial integration and prospects. ASEAN integration could accelerate in the years ahead; it will likely be a safe, gradual process consistent with the “ASEAN way†of consensus decision-making. Properly phased and sequenced, closer financial integration has the potential to help increase real incomes and accelerate real convergence within ASEAN and narrow the region’s gap with advanced Asia. Realizing the promise of financial integration will require ASEAN countries to make long-term investments in financial infrastructure. Policymakers can draw on the experience of their more advanced peers and of other regions. Gradualism and safeguards should not be excuses for inaction or financial protectionism. Reliance on flexible policy frameworks and a strengthened and tested regional financial safety net should be part of the agenda. Closer engagement with the Fund could also help.
    Keywords: Economic integration;Southeast Asia;Association of Southeast Asian Nations;Economic growth;Trade integration;Trade liberalization;Capital account liberalization;Cross country analysis;ASEAN, Financial integration, capital flows, financial sector liberalization.
    Date: 2015–02–23
  5. By: Doan, Quang Hung; Vu, Hoang Nam; Dao, Ngoc Tien
    Abstract: By combining two sets of survey data - provincial competitiveness index (PCI) from VNCI-VCCI and USAID and annual enterprise census from Vietnam General Statistics Office (GSO) for the period between 2005 and 2011, we estimate the effects of sub-national institutions measured by Provincial Competitiveness Index on firm survival in Vietnam. Our results show that sub-national institutions have a positive effect on firm’s survival in both short-run and long-run. The effect, however, diminishes over time, indicating that newly entered firms are more likely to survive.
    Keywords: Firm survival, Vietnam, Manufacturing, Provincial Competitiveness Index
    JEL: D2 L1 O17
    Date: 2013–06
  6. By: Asian Development Bank (ADB); Asian Development Bank (ADB (Department of External Relations, ADB); Asian Development Bank (ADB (Department of External Relations, ADB); Asian Development Bank (ADB
    Abstract: The 2012 ADB Perceptions Survey gauges and tracks stakeholders’ perceptions of the mission of the Asian Development Bank (ADB) to help reduce poverty and contribute to development in Asia and the Pacific. The survey, the third of its kind since 2006, was carried out among 900 opinion leaders in 31 member countries, drawn from a broad cross section of stakeholders in government, media, civil society, academia, the private sector, and development partners. Key findings of the survey reveal that stakeholders continue to strongly acknowledge ADB’s impact on development. Majority of stakeholders also view ADB as a trusted, reliable, and competent organization with excellent knowledge of the region.
    Keywords: ADB perceptions survey, multinational survey of stakeholders, global opinion leaders, ADB performance, GlobeScan report, source of knowledge, knowledge-sharing, improving infrastructure, economic integration, regional cooperation, gender equality, Public Communications Policy, stakeholders, perceptions, impact assessment and effectiveness, 2012 perceptions survey, stakeholders, stakeholders views, adb relevance
    Date: 2013–08
  7. By: Vladimir Klyuev
    Abstract: Thailand stands out in international comparison as a country with a high dispersion of productivity across sectors. It has especially low labor productivity in agriculture—a sector that employs a much larger share of the population than is typical for a country at Thailand’s level of income. This suggests large potential productivity gains from labor reallocation across sectors, but that process—which made a significant contribution to Thailand’s growth in the past—appears to have stalled lately. This paper establishes these facts and applies a simple model to discuss possible explanations. The reasons include a gap between the skills possessed by rural workers and those required in the modern sectors; the government’s price support programs for several agricultural commodities, particularly rice; and the uniform minimum wage. At the same time, agriculture plays a useful social and economic role as the employer of last resort. The paper makes a number of policy recommendations aimed at facilitating structural transformation in the Thai economy.
    Keywords: Labor productivity;Thailand;Agricultural sector;Migrant labor;Nonmetropolitan areas;structural transformation; industrialization; agricultural price support
    Date: 2015–03–04
  8. By: Kien Trung Nguyen
    Abstract: This paper examines the impact of trade and investment liberalization on the wage skill premium between skilled and unskilled workers in Vietnamese manufacturing. The result from an econometric analysis using a firm-level dataset reveals the important role of trade liberalization as an impetus for narrowing the skill premium. There is also evidence that foreign investment has a significant effect on widening the wage skill premium. More importantly, export-oriented foreign investment is likely to play an important role in the determination of the wage skill premium in the Vietnamese manufacturing.
    Keywords: Wage skill premium, tariffs, firm ownership, trade and investment liberalization
    JEL: F14 F16
    Date: 2014
  9. By: International Monetary Fund
    Abstract: KEY ISSUES Context: Indonesia has strengthened policy and reserve buffers since mid 2013, in the face of global headwinds from the commodity down-cycle and episodes of volatility affecting emerging market economies. Policies have aimed at containing external and inflation pressures, helping to preserve macroeconomic and financial stability. With growth slowing, the new government is keen to jump start supply-side reforms aimed at raising potential growth while strengthening the external position. Upfront actions to curb fuel subsidies have opened fiscal space to support infrastructure spending. Near-term outlook: After slowing in 2014, growth is projected to tick up to 5.2 percent in 2015, factoring in an anticipated jump in public investment in infrastructure. Inflation has temporarily risen on earlier fuel price increases, but is expected to return to within the target band by year end. Notwithstanding soft commodity prices, the current account deficit is projected to narrow further in 2015. Risks to the outlook arise mainly from a deeper•than-expected slowdown in emerging market trading partners and surges in global financial market volatility, which could exacerbate strains on the domestic banking and corporate sectors. Policy mix: The current policy mix aims at improving growth potential while consolidating recent stability gains and containing vulnerabilities. Fiscal policy should be geared towards securing space for more social and capital spending, underpinned by a broad-based strategy for increasing nonoil tax revenues, while pursuing moderate deficit reduction over the medium term. Monetary policy needs to remain focused on anchoring inflation expectations and facilitating external adjustment, supported by continued exchange rate and bond yield flexibility. Bank funding pressures, while showing signs of easing, will need to be managed through stronger policy coordination and improved market functionality. Financial stability is expected to be preserved through enhanced risk assessment and effective prudential measures, anchored by a strong crisis management framework. Structural reforms should be aimed at easing supply bottlenecks and improving the investment climate in order to create new jobs, bolster medium-term growth prospects, and strengthen the external position.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Corporate sector;Fiscal reforms;Monetary policy;Bank supervision;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Indonesia;
    Date: 2015–03–19
  10. By: Chie Aoyagi; Giovanni Ganelli
    Abstract: Despite the rapid economic growth and poverty reduction, inequality in Asia worsened during last two decades. We focus on the determinants of growth inclusiveness and suggest options for reform. A cross cross-country empirical analysis suggests that fiscal redistribution, monetary policy aimed at macro stability, and structural reforms to stimulate trade, reduce unemployment and increase productivity are important determinants of inclusive growth. The main policy implication of our analysis is that there is still room to strengthen such policies in Asia to better achieve growth with shared prosperity. In particular, scenario simulations based on our results suggests that the effect of expanding fiscal redistribution on inclusive growth could be sizeable in emerging Asia, since the estimated improvement in our proxy of inclusive growth – a measure of growth in average income “corrected†for the equity impact—ranges from about 1 to about 8 percentage points.
    Keywords: Inclusive growth;Asia;Income distribution;Poverty reduction;Monetary policy;Fiscal reforms;Cross country analysis;Inclusive growth; Asia; inequality; economic growth
    Date: 2015–02–26
  11. By: International Monetary Fund
    Abstract: This Selected Issues paper examines the implications of lower crude oil prices on Malaysia’s economy. Although Malaysia’s net oil exports are now very small as a share of GDP, its gas exports are sizeable. The paper provides some background on the structure of energy production and trade in Malaysia, and presents results from empirical analysis of the oil prices on Malaysia’s growth. It is concluded that the decline in prices is likely to have a net negative impact on growth, even though the recent decline in oil prices partially reflects supply considerations.
    Keywords: Energy sector;Economic growth;Oil prices;Natural gas;Fiscal risk;Debt sustainability;Fiscal reforms;Subsidies;Risk management;Cross country analysis;Economic models;Selected Issues Papers;Malaysia;
    Date: 2015–03–03
  12. By: International Monetary Fund
    Abstract: This 2014 Article IV Consultation highlights that Malaysia’s well-diversified economy continued to perform well in 2014. Growth accelerated to 5.9 percent, aided by robust domestic private demand and a recovery in exports. Lower energy costs helped contain inflation to 3.1 percent despite the removal of fuel subsidies and increase in electricity tariffs. Growth is expected to moderate to 4.8 percent in 2015. Strong investment momentum should help offset headwinds from continued fiscal consolidation. Lower energy prices will be a drag on oil and gas production but should provide a boost to the large non-oil sector.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Fiscal reforms;Monetary policy;Nonbank financial sector;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Malaysia;
    Date: 2015–03–03
  13. By: Yuko Kinoshita; Fang Guo
    Abstract: Both Japan and Korea are trying to boost female labor force participation (FLFP) as they face the challenges of a rapidly aging population. Though FLFP has generally been on a rising trend, the female labor force in both countries is skewed towards non-regular employment despite women’s high education levels. This paper empirically examines what helps Japan and Korea to increase FLFP by type (i.e., regular vs. non-regular employment), using the SVAR model. In so doing, we compare these two Asian countries with two Nordic countries Norway and Finland. The main findings are: (i) child cash allowances tend to reduce the proportion of regular female employment in Japan and Korea, (ii) the persistent gender wage gap encourages more non-regular employment, (iii) a greater proportion of regular female employment is associated with higher fertility, and (iv) there is a need for more public spending on childcare for age 6-11 in Japan and Korea to help women continue to work.
    Keywords: Labor force participation;Japan;Korea, Republic of;Norway;Sweden;Asia;Women;Employment;Cross country analysis;Structural vector autoregression;Econometric models;female labor force participation, fertility, labor market duality
    Date: 2015–03–16
  14. By: André de Melo Modenesi; Rui Lyrio Modenesi
    Abstract: o label the defense of capital controls (CC) as a left-wing proposal is a misconstruction. Such labeling uses the Borsa economicist criterion, which reduces the dichotomy between right and left to a distinction between liberalism and interventionism. Yet, under this criterion, the use of CC cannot be labeled as a leftist proposal. The interventionism underlying the defense of CC, as pioneered by Keynes and developed by Tobin, Davidson, Stiglitz and Rodrik, is not the fruit of an ideological conviction favoring widespread and indiscriminate State intervention. For them, CC are instruments to be used under specific economic circumstances. To call CC a practice typical of left-wing governments is also a misinterpretation. Among the countries using strict forms of CC since the 1990’s–Chile, China, India, Malaysia and Thailand–only China’s government may be called leftist. The other countries’ political panorama is more complex than may suppose those who believe in a simple and direct relationship between CC and political ideology. The discussion should be stripped of the prevalent ideological bias: CC are not inherent to the political leanings of the governments that adopt them but are an expedient used under a pragmatic justification. Recognizing this is an important step toward a more objective analysis of the incidental opportunity of using CC, without prejudice. CC should be used whenever the benefits surpass the costs of their implementation. Rotular o controle de capitais como uma proposta da esquerda é um duplo equívoco. Tal rotulação tem como base critério economicista à Borsa, que reduz a dicotomia entre direita e esquerda à distinção liberalismo econômico versus intervencionismo. Além disso, o intervencionismo econômico subjacente à defesa do controle de capitais por parte dos autores analisados (Keynes, Tobin, Davidson, Stiglitz e Rodrik) não é fruto de convicção ideológica em prol de ampla e indiscriminada interferência do Estado na economia. Para eles, controles são instrumentos de utilização tópica, justificada pragmaticamente, ou seja, de acordo com circunstâncias econômicas específicas. Taxar o controle de capitais como prática de governos de esquerda também é incorreto. Dos cinco principais países que usaram controle de capitais a partir da década de 1990 – Chile, China, Índia, Malásia e Tailândia –, só o governo chinês pode ser considerado de esquerda. O panorama político dos demais países é muito mais complexo do que supõem os que acreditam haver uma relação simples e direta entre o controle de capitais e o posicionamento ideológico dos governos que o praticam. Reconhecer isso é um importante passo na direção de uma avaliação mais objetiva da eventual oportunidade de se adotar controle de capitais, sem preconceito. Controles devem ser usados sempre que os benefícios de sua adoção suplantem os custos.
    Date: 2015–01
  15. By: Reddy, Kotapati Srinivasa
    Abstract: While referring to the recent study on the 2007-2008 global financial crisis, and cross-border mergers and acquisitions in 26 countries (Reddy, Nangia, & Agrawal, 2014b), this paper aims to further examine the impact of financial crisis on the later form of market in 13 sub-continentals, three sectors and 21 industries. Using their research design, we define and test the hypotheses whilst improve the discussion on historical views of the financial crisis and market for inbound acquisitions in the world economy, developed markets, developing markets and BRIC group. We find that rate of growth in number (value) of cross-border acquisitions has markedly declined reporting to continentals and industries around the crisis. We eventually suggest that emerging market economies in Asia, Africa and Latin American regions are found to be exciting in attracting direct international investments from both developed and other developing markets whilst focusing deeply on fiscal deregulation and policy amendments, particularly during post-crisis.
    Keywords: Global financial crisis; Mergers and acquisitions; Cross-border acquisitions; International investments and acquisitions; Foreign direct investment; World economy
    JEL: F2 F21 F3 F4 G1 G3 G34 M1 M16 O1 O5 O57
    Date: 2015
  16. By: Ozili, PK
    Abstract: This study extends the literature on the determinants of NPL. I investigate whether banks anticipate non-performing loans by making balance sheet adjustments. This study draws insights into the actions taken by credit risk management teams and bank managers to minimize the size of non-performing loans. After examining 82 banks from US, Europe, Asia and Africa, the result indicate that banks adjust the level of loan loss reserves and loan growth to minimize the size of NPLs. Our results do not show evidence that loan diversification minimizes NPLs. Further, I find that banks in developing countries reduce loan growth when they expect high NPL while banks in developed countries do not anticipate the level of NPL by adjusting loan growth. Further, I find that post-crisis Basel regulation did not lead to a decrease in the size of NPLs among banks in developed countries but appear to minimize NPLs in some developing countries. Overall, the significance and predictive power of each bank-specific factor (excluding loan diversification), regulatory variable and macroeconomic indicator in explaining NPLs depends on regional factors (less significantly) and country-specific factors (more significantly).
    Keywords: Non-performing Loans, Credit risk, Macroeconomic determinants, bank specific determinants, banking
    JEL: G20 G21 G32 G38
    Date: 2015
  17. By: International Monetary Fund
    Abstract: This 2014 Article IV Consultation highlights that the real GDP growth of Lao People’s Democratic Republic is expected to moderate from 8 percent in 2013 to 7.5 percent in 2014. Domestic activity has slowed, and credit growth has declined from excessive levels. Inflation has declined to 3 percent from 6.5 percent at end-2013, largely owing to weaker food and fuel price momentum. To address vulnerabilities, Executive Directors have emphasized the need for continued fiscal consolidation, greater exchange rate flexibility, tighter monetary conditions, strengthened financial supervision, and improved bank resolution and crisis prevention frameworks.
    Keywords: Article IV consultation reports;Fiscal policy;Fiscal consolidation;Monetary policy;Bank supervision;Financial stability;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Lao P. D..R.;
    Date: 2015–02–26

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