nep-sea New Economics Papers
on South East Asia
Issue of 2016‒09‒18
sixteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Deregulation of the ASEAN air Transport Market: Measure of Impacts of Airport Activities on Local Economies By Isabelle Laplace; Chantal Latgé-Roucolle
  2. Global Value Chain and the Competitiveness of Asian Countries By KIYOTA Kozo; OIKAWA Keita; YOSHIOKA Katsuhiro
  3. Post-GFC external shocks and Indonesian economic performance By Prayudhi Azwar; Rod Tyers
  4. Key Success Factors in the Brazilian Coffee Agrichain: Present and Future Challenges By de Almeida, Luciana Florêncio; Zylbersztajn, Decio
  5. Template-type: ReDIF-Paper 1.0 By Ivan Gonzalez; Budy P Resosudarmo
  6. Production networks in the wind turbine industry, which place for developing countries in East Asia? By Hoai-Son Nguyen; Minh Ha-Duong
  7. Information expensiveness perceived by Vietnamese patients with respect to healthcare provider’s choice By Quan-Hoang Vuong
  8. An Empirical Investigation of Risk Sharing among Indonesian Households By Parantap Basu; Sigit Sulistiyo Wibowo
  9. Dynamics of Integration in East Asian Equity Markets By KOMATSUBARA Tadaaki; OKIMOTO Tatsuyoshi; TATSUMI Ken-ichi
  10. The More Children You Have the More Likely You Are to Smoke? Evidence from Vietnam By Mohamed Arouri; Adel Ben Youssef; Cuong Nguyen-Viet
  11. Commercial Bank Innovations in Small and Medium-Sized Enterprise Finance: Global Models and Implications for Thailand By Subhanij, Tientip
  12. Identifying and Decomposing Peer Effects on Participation Decisions Using a Randomized Controlled Trial By SHIMAMOTO Daichi; TODO Yasuyuki; Yu Ri KIM; Petr MATOUS
  13. Small Firms, Human Capital, and Productivity in Asia By Vandenberg, Paul; Trinh, Long Q.
  14. Corporate Restructuring in the Asian electronics market: Insights from Philips and Panasonic By Reddy, Kotapati Srinivasa
  15. An asymptotic expansion for forward-backward SDEs: a Malliavin calculus approach (Forthcoming in Asia-Pacific Financial Markets) By Akihiko Takahashi; Toshihiro Yamada
  16. Are Seminars on Export Promotion Effective? Evidence from a randomized controlled trial By Yu Ri KIM; TODO Yasuyuki; SHIMAMOTO Daichi; Petr MATOUS

  1. By: Isabelle Laplace (ENAC - Ecole Nationale de l'Aviation Civile); Chantal Latgé-Roucolle (LEEA - ENAC - Laboratoire d'Economie et d'Econométrie de l'Aérien - PRES Université de Toulouse - Ecole Nationale de l'Aviation Civile)
    Abstract: ASEAN Member States are currently in a step through liberalization of air traffic market in their region. The target is the 5th freedom right for South-East Asia in 2020. Two opposite effects might be observed following the deregulation: one negative on flag carrier due to increase in competition, one positive on national and regional economies. One main issue concerns the impact of expected development of airport activity on national and regional economies. We propose an estimation of these impact, using a two stage econometric model applied to four ASEAN countries. We show that GDP is the most sensible to air traffic growth in region where only international airports are located, that is for region that exhibit the highest level of development. We show that up to the 5th freedom right, given the expectation in tourism development, national GDP is expected to increase by 9% (Myanmar) to 51% (The Philippines) depending on the country. The magnitude of the impact depends on the tourism development expectation as well as on the tourism contribution to GDP. The analysis show then that economic benefit of air transport liberalization are non-negligible for the ASEAN countries. Given the magnitude of the estimated effect, the benefits would certainly overlap the negative effect of competition on the flag carriers.
    Keywords: Airport capacity
    Date: 2016–05–01
  2. By: KIYOTA Kozo; OIKAWA Keita; YOSHIOKA Katsuhiro
    Abstract: This paper examines the competitiveness of industries in six Asian countries—China, India, Indonesia, Japan, South Korea, and Taiwan—using the World Input-Output Database tables from 1995 to 2011. Competitiveness is measured by the value added that industries contribute to the production of final goods, which we refer to as global value chain (GVC) income, rather than by gross exports. We find that the competitiveness of manufacturing is increasing in China, India, and Indonesia, whereas it is decreasing in Japan, South Korea, and Taiwan. Even though we focus on the GVC income rather than gross exports, the increasing competitiveness of Chinese, Indian, and Indonesian manufacturing is remarkable. We also find that, unlike EU countries, Asian countries have generally been able to combine increasing GVC job opportunities with a rise in real income. The GVC income in Asian countries presents a different picture to that in European countries.
    Date: 2016–08
  3. By: Prayudhi Azwar; Rod Tyers
    Abstract: The post-GFC era sees slower global growth and a substantial Chinese slowdown, unusually combined with lower investment financing costs, and with the eventual prospect of a US-led re-tightening of global financial markets. For Indonesia in the medium term, these developments imply a slowing of export growth and a temporary surge in net inward investment incentives. These changes are examined here using a numerical macro model. The results suggest that recent fiscal reform is long-run beneficial and that it will moderate the negative effects of expectations linked to these global events, the formation of which is shown to be an important determinant of performance. Finally, a sensitivity analysis is conducted, mainly on parameters indicating Indonesian openness to trade and finance. Liberal product markets and home investment are shown to offer unambiguous gains in the face of negative external shocks, while openness to external financial flows does not.
    Keywords: Indonesia, External shocks, Exchange rates, Macroeconomic policy
    JEL: E37 E44 E47 E65 F47 N15
    Date: 2016–09
  4. By: de Almeida, Luciana Florêncio; Zylbersztajn, Decio
    Abstract: Coffee production has grown 100% in volume over the past 30 years, with 30 million bags of coffee consumed every year in the world. Brazil is responsible for 35% of this production, followed by Vietnam (16%), Indonesia (7%), Colombia (5%), and Ethiopia (5%). At this pace, consumption has expanded not only in traditional markets such as the United States of America (4.2 kg/year), Germany (6.9 kg/year) and France (5.7 kg/year), but also in tea‐driven markets such as Japan, Korea, Russia and China (CECAFE 2013). In 2013, Brazil harvested 49.15 million 60 kg bags of processed coffee, 38.29 million of which were of Arabica coffee and 10.86 million of Conilon species (CONAB 2014). The planted area in Brazil is 2.3 million hectares and there are about 287,000 producers, predominantly mini and small farmers. Having continental dimensions, the country presents a variety of climates, reliefs, altitudes and latitudes that allow the production of a wide range of types and qualities of coffee (MAPA 2014). This research aimed to clarify present and future challenges for the Brazilian coffee agrichain, considering the growing demand and also competitiveness between the coffee countries’ producers. To capture the vivid perception of the actors in the coffee chain, a qualitative approach was employed. The research was conducted in three phases. In the first phase, 10 coffee specialists were interviewed using the snowball technique with the saturation premise, to identify the coffee sector’s main milestones for Brazil over the next 30 years. In the second phase, desk research was conducted to collect data and bibliographical information. This culminated in eight key success factors for coffee farming management. Finally, in the third phase, the results of phase two were submitted for analysis by 39 coffee farmers through three discussion panels held in the major producing regions: Sul de Minas (corresponding to 60% of the national production), Cerrado Mineiro (with 20%), and Matas de Minas (with 15%) (CECAFE 2012). The first outcome was a comparative analysis of the three regions using the lens of the key success factors and, secondly, the main future challenges faced by each region. Added to those results, the panels provided insights for public policies and private strategies. The study consolidated new drivers of change that directly impact corporate strategies and public policies, namely: a) increasing complexity in coffee farming, b) farm succession, c) mechanization, d) increased use of pesticides, d) climate change, e) consumer behavior, and e) risk management in the coffee agrichain. Given these drivers of change, companies in the Brazilian coffee agrichain may move forward with relevant strategic focus on important issues, leading to: i) loyalty from the farmer to guarantee high quality coffee supply, ii) increase in entry barriers to ensure the maintenance of leadership in world coffee production and exportation, iii) operational risk minimization for companies as well as coffee farmers, iv) encourage and participate in the farmers´ actions to make coffee activity more environmental friendly, and finally, v) designing marketing plans connected with the coffee consumers’ habits and desires, current and future.
    Keywords: coffee, agribusiness, key success factors, Agribusiness,
    Date: 2016–05
  5. By: Ivan Gonzalez; Budy P Resosudarmo
    Abstract: The lack of empirical consensus about the interrelation between growth in different economic sectors and income inequality leads to unclear targeting in policy-making. This paper provides evidence of a causal relationship between economic growth in the manufacturing, agriculture and services sectors and income inequality, measured by an income equality variable, using panel data for Indonesian districts and cities over the period 2000 to 2010. The results from between-effects and instrumental variables regression estimates show a positive impact of both manufacturing and services shares of GDP on income inequality. The share of agriculture in GDP, however, shows a negative impact on with income inequality, implying that growth in agriculture has been more inclusive compared to growth in manufacturing or services. The causal effects are robust to the incorporation of education, employment, government spending, credit or quality of government covariates.
    Keywords: economic growth, income inequality, sectoral analysis, development economics
    JEL: O11 O14 O15 O47 I32
    Date: 2016
  6. By: Hoai-Son Nguyen (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - AgroParisTech - AgroParisTech, CleanED - Clean Energy and Sustainable Development Lab - USTH - Université des Sciences et des Technologies de Hanoi); Minh Ha-Duong (Université des Sciences et des Technologies de Hanoi - USTH (VIETNAM) - USTH - Université des Sciences et des Technologies de Hanoi, CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - AgroParisTech - AgroParisTech, CleanED - Clean Energy and Sustainable Development Lab - USTH - Université des Sciences et des Technologies de Hanoi)
    Abstract: My doctoral research intersects two recent developments of the global economy. The first is the emergence of the wind turbine industry, to provide the machines for climate-friendly electricity generation. The second is the increasing importance of production networks in East Asia. Production networks are defined by the cross-border dispersion of component production/assembly within vertically integrated production processes. In industries where a production network pattern is in place, each country specializes in a particular stage of the production sequence. The ultimate goal of my research is to understand which factors determine the participation of East Asia developing countries in wind turbine industry’s production network. The findings from this research will broaden our understanding on production networks and its policy implications for developing countries in East Asia, Vietnam in particular. This first-year poster presents four preliminary trade data analysis results. A) Except for a unique decline in 2009, the extent of the wind turbine network had been expanding during the period 2007-2014. B) The network was intra-regional rather than inter-regional. C) Europe was the largest one followed by Asia. D) Developing countries in East Asia only account for minor share of the network. Next, these findings will be confronted to the existing theoretical concept models based on neo-classical trade theory; industrial organization theory and global value chain theory. In the following years, such quantitative international trade analysis will be completed by qualitative sector surveys, most likely in Europe.
    Keywords: International Economics, Organization Behavior, Trade, Production fragmentation networks, Renewable Energy, Wind turbine industry
    Date: 2016–04–14
  7. By: Quan-Hoang Vuong
    Abstract: Background: Patients have to acquire information to support their decision on choosing a suitable healthcare provider. But in developing countries like Vietnam, accessibility issues remain an obstacle, thus adversely affect both quality and costliness of healthcare information. Vietnamese use both sources from health professionals and friends/relatives, especially when quality of the Internet-based cheaper sources appear to be still questionable. The search of information from both professionals and friends/relatives incurs some cost, which can be viewed as low or high depending low or high accessibility to the sources. These views potentially affect their choices.Aim & Objectives: To investigate the effects that medical / health services information on perceived expensiveness of patients’ labor costs. Two related objectives are: i) establishing empirical relations between accessibility to sources and expensiveness; and, ii) probabilistic trends of probabilities for perceived expensiveness.Results: There is evidence for established relations among the variables “Convexp” and “Convrel” (all p’s
    Keywords: Healthcare provider; Quality of information; Health data; Consumer behavior; Vietnam
    JEL: I18
    Date: 2016–09–15
  8. By: Parantap Basu (Durham Business School); Sigit Sulistiyo Wibowo (Universitas Indonesia Depok)
    Abstract: This study investigates the formation of risk-sharing group in circumstances where households face barriers to insurance. We test alternative risk sharing models which include full risk sharing, borrowing-saving and private information about income and e↵orts. Using the Indonesia Family Life Survey (IFLS) dataset, this study provides evidence that the full risk-sharing hypothesis fails. There is some evidence that IFLS households smooth consumption using the credit market. No evidence is found in favor of risk sharing models with private information about e↵ort and productivity. We then explore the possibility of Indonesian households forming stable informal risk sharing groups to mitigate idiosyncratic consumption risks. We find strong evidence of such endogenous group formation among IFLS households as a vehicle of informal risk sharing.
    Keywords: credit access, risk sharing, endogenous group formation
    Date: 2015–02
  9. By: KOMATSUBARA Tadaaki; OKIMOTO Tatsuyoshi; TATSUMI Ken-ichi
    Abstract: This paper investigates the dynamics of integration in East Asian equity markets between 1995 and 2013 using a smooth-transition correlation GARCH model. Our results show that East Asian equity market integration among China and other countries has increased significantly since 2007, whereas that among other East Asian equity markets excluding China increased significantly in an earlier period from 1999 to 2001. Additionally, we find that increasing integration has been mostly caused by correlation increases in after-trading hours. These results suggest that stock prices in East Asia are sensitive to Europe and U.S. stocks because Europe and U.S. investors were actively investing in East Asian stocks. Indeed, the periods reflect striking increases in integration that correspond approximately to the start of intensive Europe and U.S. investment activity in East Asian stock markets.
    Date: 2016–08
  10. By: Mohamed Arouri (LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique); Adel Ben Youssef (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - CNRS - Centre National de la Recherche Scientifique); Cuong Nguyen-Viet (Chercheur Indépendant)
    Abstract: There is no doubt that parental smoking can cause health problems for children. It is expected that parents who are aware of the harmful effect of secondhand smoke would decrease parental smoking when having more children. Yet, using instrumental variable regressions and data from the 2006 and 2008 Vietnam Household Living Standard Surveys , we find a very strongly positive and significant effect of the number of children on the probability of households smoking tobacco in Vietnam. Having an additional child increases the probability of households consuming tobacco by approximately 15 percent. These findings imply low awareness levels regarding the harmful effects of secondhand smoke on children " s health in Vietnam and indicate the need for policy action that disseminates knowledge on the harmful effects of smoking.
    Keywords: I31,parental smoking behaviors, children,health, instrumental variable regressions JEL Classifications: I12,O1
    Date: 2016–01–12
  11. By: Subhanij, Tientip (Asian Development Bank Institute)
    Abstract: In Thailand, the government has long recognized the importance of small and medium-sized enterprises (SMEs) to the economy and has given a large amount of financial support to this sector. Still, SMEs are not able to catch up with larger enterprises and the constraints to SME financing remain the main topic of policy discussion today. Against this background, the important issue for Thailand may not be about the lack of financial assistance per se but about how to design an appropriate market-friendly business model and supporting scheme to help SMEs gain access to credit on a sustainable basis. Given the success of microfinance around the world, a large number of commercial banks have made a profitable business out of this sector. This paper explores various business models by commercial banks in microfinance and provides policy implications for Thailand. By making use of commercial banks' competitive advantage, Thailand can create a more market-friendly environment for SME financing. This will also ensure that lending to small-business clients is not a burden to the government and is self-sustaining in the long run.
    Keywords: SME; Thailand; bank; financing; microfinance; loans; credit; MFI; SFI; financial institution; commercial banking; financial access
    JEL: E50 G21
    Date: 2016–09–12
  12. By: SHIMAMOTO Daichi; TODO Yasuyuki; Yu Ri KIM; Petr MATOUS
    Abstract: Utilizing a randomized controlled trial (RCT) in traditional clusters of apparel and textile firms in Vietnam, this paper investigates how firms' decisions to participate in seminars on export promotion are affected by their information exchange peers. We identify the effect of the number of peers participating in the seminars by using the number of randomly invited peers as an instrument. In addition, because we held three one-day seminars consecutively and invited each firm to one of the seminars, we can isolate the peer effects based on the reduction of the psychological costs of participation--or social utility--from other effects through information confirmation among the peer participants and free riding on peer information. We find that peers' participation in the seminars has a positive effect overall. To further decompose this positive effect, we distinguish between peers participating on the same day and other days, finding that the former has a positive effect while the latter has no significant effect. These results imply that peer effects arise mostly through the social utility channel. The presence of positive peer effects suggests that multiple equilibria in terms of the share of participants within each network of firms may emerge, which is also consistent with our observations.
    Date: 2016–08
  13. By: Vandenberg, Paul (Asian Development Bank Institute); Trinh, Long Q. (Asian Development Bank Institute)
    Abstract: The paper analyzes the link between human capital and firm-level productivity in five Asian countries. It draws on a dataset of over 4,000 enterprises and considers both the prior educational attainment of workers and in-service training programs of enterprises. Differences between small, medium-sized, and large enterprises and between countries are also presented. The key finding is that both preservice education and in-service training are positively correlated with labor productivity. The productivity of small and medium-sized enterprises (SMEs) is enhanced by a higher level of skills and education of the workforce, just as it is with large firms. However, there are country differences. The policy implications are that competitiveness is enhanced both by raising the general level of education in the workforce and by encouraging enterprise-based training programs.
    Keywords: SME; human capital; firms; enterprises; services; productivity; skills; education; in-service training; labor; workforce; competitiveness; enterprise-based training; People’s Republic of China; Indonesia; Malaysia; Thailand; Viet Nam
    JEL: D22 D24 J24
    Date: 2016–09–12
  14. By: Reddy, Kotapati Srinivasa
    Abstract: The surge in Asian electronics business becomes a global platform for international vendors and customers. Conversely, Chinese and Korean firms have become the foremost manufacturing & fabrication nucleus for electronic supplies in the world. This is also a roaring example of success from Asian developing nations. This case presents the fortune of Asian rivals in the electronics business that made Philips and Panasonic to redesign and reform their global tactics for long-term sustainable occurrence in the emerging economies market. Further, it also discusses the reasons behind their current mode of business and post deal issues. This case describes a way to impart the managerial and leadership strategies from the regular business operations happening in and around the world. Exclusively, it focuses on designing inorganic choices such as self-off, joint venture, shuffle and merging strategies from theory to application.
    Keywords: Asian electronics market; sell-offs; joint ventures; TV business; multinational companies; layoffs
    JEL: G3 G34 M1 M16 M3
    Date: 2016
  15. By: Akihiko Takahashi (University of Tokyo); Toshihiro Yamada (Hitotsubashi University)
    Abstract: This paper proposes a new analytical approximation scheme for the representation of the forward-backward stochastic differential equations (FBSDEs) of Ma and Zhang (2002). In particular, we obtain an error estimate for the scheme applying Malliavin calculus method for the forward SDEs combined with the Picard iteration scheme for the BSDEs. We also show numerical examples for pricing option with counterparty risk under local and stochastic volatility models, where the credit value adjustment (CVA) is taken into account.
    Date: 2016–09
  16. By: Yu Ri KIM; TODO Yasuyuki; SHIMAMOTO Daichi; Petr MATOUS
    Abstract: This paper investigates the impacts of informational and motivational seminars on export promotion targeting small and medium enterprises (SMEs) in the traditional apparel and textile clusters in Vietnam. To control for biases due to self-selection, we conducted a randomized controlled trial and invited randomly selected firms to participate in one-day seminars. Because only some of the invited firms participated in the seminars, we employ an instrumental variable approach in which dummies for random invitation are used as instruments for quantifying participation. We find that the seminars had no significant effect on most firms' preparation for, perception of, or engagement in exporting activity. However, the seminars encouraged large firms and firms with prior export experience, which possibly embody higher productivity and absorptive capacity, to (re-)start exporting. Our results suggest that productivity improvement is an effective means to encourage underdeveloped firms to export, whereas provision of information is effective for productive firms.
    Date: 2016–08

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