nep-sea New Economics Papers
on South East Asia
Issue of 2015‒10‒04
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Spatial Patterns of Manufacturing Agglomeration in Cambodia, Lao People’s Democratic Republic, and Thailand By Toshitaka GOKAN; Ikuo KUROIWA; Nuttawut LAKSANAPANYAKUL; Yasushi UEKI
  2. Macroeconomic policies for full and productive employment : case studies of Thailand and Viet Nam By Weeks, John
  3. Gearing the Philippines for ASEAN Economic Community By Florian A. Alburo
  4. Policy Effects on Total System Energy Efficiency: Comparisons of Advanced and Developing Economies in the EAS region By Venkatachalam ANBUMOZHI; Phoumin HAN
  5. From Commodity Booms to Economic Miracles: Why Southeast Asian Industry Lagged Behind By Jean-Pascal Bassino; Jeffrey G. Williamson
  6. How We Measure Poverty Understates its Extent and Depth: Some Results By Edita Abella Tan
  7. Production fragmentation, upstreamness, and value-added : evidence from factory Asia 1990-2005 By Ito, Tadashi; Vezina, Pierre-Louis
  8. Working for Human Security:JICA’s Experience By Tsunekawa, Keiichi; Murotani, Ryutaro
  9. Moral incentives : experimental evidence from repayments of an Islamic credit card By Bursztyn,Leonardo A.; Fiorin,Stefano; Gottlieb,Daniel Wolf; Kanz,Martin
  10. Solar Power's Rise and Promise By Ernesto M. Pernia; Maria Janela M. Generoso
  11. 'Industrial Transformation with Heterogeneous FDI and Human Capital' By King Yoong Lim
  12. Can Thinking Green and Sustainability Be an Economic Opportunity for ASEAN? By Venkatachalam ANBUMOZHI; Ponciano S. INTAL, Jr.
  13. Robust Determinants of Growth in Asian Developing Economies: A Bayesian Panel Data Model Averaging Approach By Roberto Leon-Gonzalez; Thanabalasingam Vinayagathasan

  1. By: Toshitaka GOKAN (Institute of Developing Economies – Japan External Trade Organization); Ikuo KUROIWA (Institute of Developing Economies – Japan External Trade Organization, Bangkok, Thailand); Nuttawut LAKSANAPANYAKUL (Thailand Development Research Institute Foundation); Yasushi UEKI (Economic Research Institute for ASEAN and East Asia)
    Abstract: Due to lowering trade and transport costs, participation in the global value chains (GVCs) is becoming one of the most effective development strategies for many developing countries. Participation in the GVCs, however, is not sufficient; the formation of industrial linkages and clusters is critical for sustained economic growth. This paper identifies the manufacturing clusters in Cambodia, the Lao People’s Democratic Republic, and Thailand, using the method proposed by Mori and Smith (2013). The paper provides a map of industrial clusters by industry, which is tested against the hypothesis of spurious clusters. Moreover, the paper indicates the spatial structure of industrial agglomerations using the global extent and local density indices.
    Keywords: industrial agglomeration, cluster analysis, Lao People’s Democratic Republic, Cambodia, Thailand
    JEL: L60 R12 R14
    Date: 2015–09
  2. By: Weeks, John
    Abstract: This study reviews the available evidence and uses available statistics to assess the extent to which macroeconomic management has helped or hindered the goal of attaining full and productive employment, with case studies on Vietnam and Thailand. On the basis of this assessment, the study suggests policy options for the developing countries in the region. Increasingly serious concerns about the benefits of focusing on a narrow definition of macroeconomic stability motivate this study. Of main concern to the study is the tendency over recent decades to equate policy reform with non-interventionist or "neutral" macro policy.
    Keywords: decent work, full employment, macroeconomics, Thailand, Viet Nam, travail décent, plein emploi, macroéconomie, Thaïlande, Viet Nam, trabajo decente, pleno empleo, macroeconomía, Tailandia, Viet Nam
    Date: 2015
  3. By: Florian A. Alburo (School of Economics, University of the Philippines Diliman)
    Abstract: This paper argues that the way for the Philippines to the ASEAN Economic Community (AEC) is not through ASEAN but through the world. Being good neighbors will define the AEC and how the Philippines fits into it—not necessarily in the way it was planned. Of the 4 pillars underlying the AEC, the paper focuses on Pillar 1—Single Market and Production Base—and within this, trade in goods. During the period of AFTA implementation the Philippines did not only aggressively pursue a program of preferential tariff reduction but a concomitant reduction of MFN tariff rates. Between 1993 and 1999 the margins between Philippine AFTA rates and its MFN rates sharply declined, so that the initial preferential bias in terms of both exports to and imports from ASEAN diminished and trade shares with the region remained stable. In a sense the country’s readiness for AEC was already laid down at the start of AFTA and fortified when it unilaterally liberalized on an MFN basis. But this is only one, albeit critical, part, of the AEC package. The other pillars and the other parts of Pillar 1 are still beset by barriers to effective regional trade – mostly homegrown and putting the domestic house in order is necessary not only for the AEC but for firmer integration with the world economy. Even with the current progress in trade-in-goods, sustaining this requires a readiness that needs to be attended—with or without the AEC. Of the original 5 ASEAN members, most have successfully overcome barriers to integration into the regional and global trade and investment systems. Thus, for some of these countries, aggressive pursuit of the AEC is marginal and a by-product of global readiness. Their institutional machineries have been built around the global trading arena, their economic actors exploit their borders’ opportunities, their governments bold in forging agreements that open markets. The Philippines has yet to fully be ready for the global markets, its economic actors still have to appreciate borders and their potential for expanding markets, and its government carries out audacious reforms that realize its nearby neighbors can be exploited as part of the larger world economy.
    Keywords: AEC, Regional and World Trade
    JEL: F13 F15
    Date: 2015–09
  4. By: Venkatachalam ANBUMOZHI (Economic Research Institute for ASEAN and East Asia (ERIA)); Phoumin HAN (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: The study attempts to assess the policy effects and investigate the patterns of Total System Energy Efficiency (TSEE) in the economies of some selected Association of Southeast Asian Nations (ASEAN) and East Asia countries. Using time series data for 1971– 2011, a dynamic lag model of TSEE was formulated. The study starts by constructing the variables of fuel input and fuel output based on engineering concepts. We expect that the TSEE in these economies is likely to be explained by both foreign direct investment (FDI) and domestic investment. And above all, the policy effect will be the prime investigation for all changes in TSEE. The study found that policy effects on TSEE are likely to have occurred in Japan, the People’s Republic of China (PRC), the Philippines, Thailand, and India. However, a closer look and examination of each country’s economy are needed to understand TSEE changes and fluctuations. Another key determinant of TSEE is inward FDI (FDI-inflow), as a result of which the PRC and India have shown positive impacts. Our findings led to the following key policy recommendations: (1) the PRC and India provided good examples of using FDI-inflows to impact TSEE. This implies that the transformation sector will need large investments and public financing will play crucial role in an improvement of the transformation sector; and (2) the developed economies of Japan, the Republic of Korea, and Australia provided mixed outcomes in terms of how the Cebu Declaration is likely to have had an effect. Japan showed some effect, but there was no effect on TSEE in South Korea and Australia. Thus, it is hard for the developed economies to jump further from the high base efficiency, unless there is a technological breakthrough of high efficiency like in Japan. Therefore, we will discuss technological transfer in the transformation sector such as high efficient power plants in the context of a public financing framework to ensure that such technologies could be deployed to the developing economies as well as globally.
    Keywords: Total System Energy Efficiency, Policy Effects/Impacts, and Energy Efficiency
    JEL: Q43 Q48 Q48
    Date: 2015–09
  5. By: Jean-Pascal Bassino (Lyons Institute of East Asian Studies); Jeffrey G. Williamson (Harvard University, University of Wisconsin, and University of the Philippines School of Economics)
    Abstract: We propose a formal re-definition of the concept market failure based on the idea of the imperfect state. In the Neo-classical taxonomy, a decentralized regime of exchange is a market failure if its laissez faire equilibrium solution is welfare-dominated by a technically feasible alternative. If the state is perfect, that is, benevolent and its transactions cost of intervention is zero, every market failure can be remedied/corrected with a welfare gain. If the state is imperfect, that is, either non-benevolent or with non-zero transactions cost, the state intervention to correct the market failure can be welfare-reducing. Extending the logic behind Williamson’s remediableness criterion and Stiglitz’ constrained Paretoness, we introduce a new taxonomy of failures: the concept “proto-failure” now denotes any failure which laissez faire interaction cannot remedy without a welfare gain. The label “market failure” now denotes a proto-failure which the relevant state can correct with a welfare gain. A proto-failure that the relevant state cannot correct with a welfare gain we call “RC efficient.” We use the net welfare metric which explicitly accounts for transactions cost of intervention as efficiency criterion. The new taxonomy is equivalent to the old if the state is perfect, that is, all proto failures are market failures. When the state is imperfect, the set of market failures is smaller than the set of proto-failures. A proto-failure is a necessary--but not a sufficient--condition for a welfare-improving government intervention. This paper follows the Williamson counsel to “push the logic of positive transactions cost to completion.”
    Keywords: Manufacturing growth, Southeast Asia, history
    JEL: F14 L60 N65 O14
    Date: 2015–05
  6. By: Edita Abella Tan (School of Economics, University of the Philippines Diliman)
    Abstract: The paper examined the methodology used for measuring the country’s poverty line and poverty rate. It finds that the poverty line was not based on the cost of meeting an acceptable or minimum standard of living or of meeting basic needs by which to classify families as poor as is customarily done in other countries. The measure uses a simple construct referred to as subsistence poverty line to establish the overall poverty line. The subsistence poverty line is estimated to be the cost of food consumption of low-income families that meets their nutritional requirements. Thirty per cent of the subsistence poverty line is added to it to account for all non-food needs. The allotted budget for non-food needs is too low and not sufficient to meet the cost of all non-food basic needs. Consequently, the poverty line as measured does not meet all basic needs including food and underestimates the country’s poverty rate. The underestimation of the poverty rate is seen in the higher rate of deprivation in particular basic needs such as housing, food consumption and education than the official poverty line. The paper concludes by recommending that the government gives high priority to slum clearance and housing program as a strategy for social and economic development. Housing for the poor has not been a priority of the government. So far only about 1% of the national budget goes to housing. At this time, the government has the resources to launch a massive housing program to eradicate the slums in five to ten years time. The paper cites existing and potential sources to finance a massive housing program. It cites the very successful housing program of Singapore and how it contributed to its sustained high rate of economic development.
    Keywords: Measurement and analysis of poverty
    JEL: I32
    Date: 2015–09
  7. By: Ito, Tadashi; Vezina, Pierre-Louis
    Abstract: We exploit the recent release of the 2005 Asian Input-Output Matrix to dress a picture of the geographic fragmentation of value added in Factory Asia from 1990 to 2005. We document 3 stylized facts. The first is that the average share of foreign value added embedded in production rose by about 7 percentage points between 1990 and 2005, from 9% to 16%. The second is that, contrary to popular belief, China's production embeds a smaller share of foreign value added than other Factory Asia countries'. Between 1990 and 2005 among Factory Asia countries China grew most after Japan as a source of value added to other countries' production. Third, country-industries at the upstream and downstream extremities of the supply chain embed a smaller share of foreign value added than those with intermediate levels of upstreamness.
    Keywords: Asia, China, International economic relations, International trade, Industry, Factory Asia, Supply chains, Upstreamness
    JEL: F13 F15
    Date: 2015–08
  8. By: Tsunekawa, Keiichi; Murotani, Ryutaro
    Abstract: This paper reviews the experiences of the government of Japan to incorporate the human security concept as one of basic principles of its ODA policy, and JICA’s activities to operationalize the human security principle. It then examines the challenges and problems JICA has faced in its human-security-oriented field operations. More specifically, it analyzes four cases – Myanmar, the Philippines, Afghanistan, and Sudan – by focusing on the two major challenges: (1) possible contradictions between state security and human security, and (2) special difficulties in the pursuit of comprehensive empowerment to cope with downside risks. On the first point, JICA has tried to persuade the reluctant governments to accept human-security-oriented activities as measures that can eventually contribute to strengthening state security. To cope with down side risks, JICA has supported comprehensive empowerment of individuals, communities, and public organizations to enhance their preparedness against various risks, but there still remains a challenge because comprehensive empowerment is a formidable task that requires cooperative efforts by many actors. To do so, shaping a common understanding of the human security agenda will be necessary.
    Keywords: human security , Japan , state security , downside risk , empowerment , peace-building
    Date: 2013–12–17
  9. By: Bursztyn,Leonardo A.; Fiorin,Stefano; Gottlieb,Daniel Wolf; Kanz,Martin
    Abstract: This paper studies the role of morality in the decision to repay debts. Using a field experiment with a large Islamic bank in Indonesia, the paper finds that moral appeals strongly increase credit card repayments. In this setting, all of the bank's late-paying credit card customers receive a basic reminder to repay their debt one day after they miss the payment due date. In addition, two days before the end of a ten-day grace period, clients in a treatment group also receive a text message that cites an Islamic religious text and states that ?non-repayment of debts by someone who is able to repay is an injustice.? This message increases the share of customers meeting their minimum payments by nearly 20 percent. By contrast, sending either a simple reminder or an Islamic quote that is unrelated to debt repayment has no effect on the share of customers making the minimum payment. Clients also respond more strongly to this moral appeal than to substantial financial incentives: receiving the religious message increases repayments by more than offering a cash rebate equivalent to 50 percent of the minimum repayment. Finally, the paper finds that removing religious aspects from the quote does not change its effectiveness, suggesting that the moral appeal of the message does not necessarily rely on its religious connotation.
    Keywords: E-Business,Bankruptcy and Resolution of Financial Distress,Debt Markets,Banks&Banking Reform,Emerging Markets
    Date: 2015–09–23
  10. By: Ernesto M. Pernia (School of Economics, University of the Philippines Diliman); Maria Janela M. Generoso (School of Economics, University of the Philippines Diliman)
    Abstract: Time was when solar energy was facilely dismissed as impractical, inefficient, and pricey. In recent years, however, innovations in technology, regulation, and financing have resulted in remarkable efficiency improvements and price reductions, thereby reversing the skepticism about this renewable energy (RE) source. In this paper, we explore how this has happened, to what extent photovoltaic solar technology has been accepted around the world, and what might be its potential for inclusive green growth. We find that adoption of both on-grid and off-grid solar systems has been widespread and rapidly increasing. Particularly noteworthy is the utilization of small- scale individual or distributed off-grid solar home systems (SHS) in remote and underserved areas in the developing world, including East Africa and South Asia. It appears that the Philippines has been a relative latecomer. Data show that solar power's "installed" capacity remains a tiny fraction of all RE sources (that also include hydro, geothermal, wind, biomass, and ocean). Moreover, such capacity is for ongrid only; there seems none as yet installed for off-grid SHS. We conclude with the paper's main points and possible implications for policy and research.
    Keywords: Renewable energy, Inclusive green growth, Rural electrification, Economic development
    JEL: O10 O14 Q20 Q28
    Date: 2015–08
  11. By: King Yoong Lim
    Abstract: This paper examines industrial transformation using an imitation-innovation growth model with a stylised internalisation framework developed to determine the composition of heterogeneous foreign multinationals in a developing host economy. A key feature of the model is the introduction of a dichotomous relationship between domestic and foreign ?firms, where the latter, each of which consisting of an expert bringing either standardisation or sophisticated know-how, perceives heterogeneity among the productivity of domestic workers. Productivity is a transformation of ability, hence linking the skills acquisition decision and foreign subsidiaries? operational mode choice along the same ability distribution. Calibrated for Malaysia, the simulations uncover complementarities between labour market and FDI-promoting policies. These complementarities are stronger in an environment with endogenous technological change.
    Date: 2015
  12. By: Venkatachalam ANBUMOZHI (Economic Research Institute for ASEAN and East Asia (ERIA)); Ponciano S. INTAL, Jr. (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: ASEAN member states (AMS) are confronted by serious environmental problems that threaten to undermine future growth and regional stability. This paper considers four major environmental challenges that policymakers across ASEAN will need to address towards 2030: water management, deforestation and land degradation, air pollution, and climate change. We argue that these challenges, each unique in its own way, exhibit the characteristics of wicked problems. As developed in the planning literature, and now applied much more broadly, wicked problems are dynamic and complex, encompass many issues and stakeholders, and evade straightforward, lasting solutions. Detailed case studies are presented to illustrate the complexity and significance of these environmental challenges, as well as their nature as wicked problems. The most important implication of this finding is that there will be no easy or universal solutions to environmental problems across ASEAN, as Environmental Performance Indicators (EPI) illustrate. This is a caution against over-optimism for formulating sector-specific solutions. It is not, however, a counsel for despair. We suggest general principles which may be useful across the board to tackle the issues and accelerate green growth. These are: a focus on cobenefits; an emphasis on stakeholder participation; a commitment to scientific and technological research; an emphasis on long-term planning; pricing reform; tackling governance issues, in addition to generally bolstering institutional capacity with regard to environmental regulation; and a strengthening of regionally coordinated approaches and international support.
    Keywords: green growth, environmental performance indicators, regional cooperation, sustainability
    JEL: Q32 Q34 Q37
    Date: 2015–09
  13. By: Roberto Leon-Gonzalez (National Graduate Institute for Policy Studies); Thanabalasingam Vinayagathasan (National Graduate Institute for Policy Studies)
    Abstract: This paper investigates the determinants of growth in the Asian developing economies. We use Bayesian model averaging (BMA) in the context of a dynamic panel data growth regression to overcome the uncertainty over the choice of control variables. In addition, we use a Bayesian algorithm to analyze a large number of competing models. Among the explanatory variables, we include a non-linear function of inflation that allows for threshold effects. We use an unbalanced panel data set of 27 Asian developing countries over the period 1980–2009. Our empirical evidence on the determinants of growth suggests that an economy’s investment ratio is positively correlated to growth, whereas government consumption expenditure and terms of trade are negatively correlated. We also find evidence of a nonlinear relationship between inflation and economic growth, that is, inflation impedes economic growth when it exceeds 5.43% but does not have any significant effect on growth below that level.
    Date: 2015–09

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