nep-sea New Economics Papers
on South East Asia
Issue of 2016‒12‒18
twelve papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Indonesia and China: Friends or Foes? Quality Competition and Firm Productivity By Lili Yan Ing; Miaojie Yu; Rui Zhang
  2. Revitalizing Indonesia’s manufacturing: the productivity conundrum By Mohammad Zulfan Tadjoeddin; Ilmiawan Auwalin; Anis Chowdhury
  3. Analysis of Distributed Energy Systems and Implications for Electrification: The Case of ASEAN Member States By Han Phoumin; Shigeru Kimura
  4. Government Decentralization Program in Indonesia By Nasution, Anwar
  5. Vietnamese footwear export:The direction of trade and determinants of firms’ market penetration By Vu, Hanh; Doan, Hung
  6. Implications of Mega Free Trade Agreements for Asian Regional Integration and RCEP Negotiation By Fukunari Kimura; Lurong Chen
  7. Health communication, information technology and the public’s attitude toward periodic general health examination By Quan-Hoang Vuong
  8. Crosscutting cleavages and ethno-communal violence: Evidence from Indonesia in the post-Suharto era By Joshua R. Gubler; Joel S. Selway; Ashutosh Varshney
  9. "Conflict, Institutions, and Economic Behavior: Legacies of the Cambodian Genocide" By Katsuo Kogure; Yoshito Takasaki
  10. Estimates of Fundamental Equilibrium Exchange Rates, November 2016 By William R. Cline
  11. Welfare Gains from Reducing the Implementation Delays in Public Investment By Huseyin Murat Ozbilgin
  12. From 'precarious informal employment' to 'protected employment' : the 'positive transitioning effect' of trade unions By Serrano, M. R.; Xhafa, Edlira

  1. By: Lili Yan Ing (Economic Research Institute for ASEAN and East Asia (ERIA), University of Indonesia); Miaojie Yu (Peking University); Rui Zhang (Peking University)
    Abstract: We define and measure “firm-product-destination-year-specific export quality” and investigate how quality competition from China affects Indonesian firm productivity in the domestic and export markets. Our results suggest that an increase in Chinese exported product quality by 10 percent will increase the productivity of Indonesian firms by 0.4 - 0.5 percent in Indonesia’s domestic market, and increase Indonesian exporters’ productivity by 2 percent in the export market. Where we limit our sample to exporters only, an increase in Chinese exported product quality will increase Indonesian firm productivity in the export market, but not in the domestic market. Our findings broaden the horizon through which firms could benefit from opening up to trade.
    Keywords: Quality, productivity, competition, firm-level study, China, Indonesia
    JEL: F1 F12 F13 F14
    Date: 2016–12
  2. By: Mohammad Zulfan Tadjoeddin; Ilmiawan Auwalin; Anis Chowdhury
    Abstract: In light of continuing importance of the manufacturing sector, but declining dynamism, this paper investigates trends in productivity at firm levels. It finds that labour productivity has been either stagnant or falling in labour intensive manufacturing. The paper uses firm level cross-sectional and time series data and employs GMM techniques to estimate determinants of productivity. It finds that real wage is the most important variable that influences firm level productivity, followed by capital intensity. Contrary to the common perception, foreign ownership and export-orientation are not found to have statistically significant influence on firm level productivity. This finding is consistent for firms of all sizes – large, medium, small and micro. This implies that Indonesia can use wages policy, as Singapore did during the late 1970s-mid 1980s, to upgrade its manufacturing to higher value added activities.
    Keywords: manufacturing, productivity, firm-size, real wage, GMM
    JEL: E24 J24 J38 O14 O53
    Date: 2016
  3. By: Han Phoumin; Shigeru Kimura (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: The study of distributed energy systems (DES) in the Association of Southeast Asian Nations (ASEAN) highlights the potential role of DES to enhance electricity access and provide energy solutions as a modern energy system in response to increasing energy demand. This study grasps the overall status and policies of DES in selected ASEAN member states through literature survey and information exchanges from meetings and conferences within the region. The study also attempts to estimate the DES-related renewable energy capacity and investment needed for 2013-2040. At the ASEAN level, the estimates of DES-related renewable capacity and needed investment for combined renewable energy such as wind, solar photovoltaic (PV), geothermal, hydropower, and biomass will increase significantly from the investment opportunity of US$34 billion in the business-as-usual (BAU) scenario to US$56 billion in the alternative policy scenario (APS). At the same time, the application of DES-related renewable energy also implies reduced CO2 emissions of 46.1 million metric tonnes for BAU and 64.6 million metric tonnes for APS. Thailand's case study of DES in the form of small power producers (SPPs) and very small power producers (VSPPs) demonstrated the likelihood of DES expansion in ASEAN member states in the future. Finally, the study suggests that the DES-related investment opportunity is large, and will provide jobs and business opportunities to the community. DES is a modern generation system and its deployment will also help address the electricity supply shortage in ASEAN member states.
    Keywords: distributed energy system (DES), electricity access, investment opportunity, energy demand, energy security
    JEL: Q40 Q41 Q47 Q48
    Date: 2016–12
  4. By: Nasution, Anwar (Asian Development Bank Institute)
    Abstract: Without much preparation, Indonesia, in 2000, at a stroke replaced the previous system of centralized government and development planning with a wide range of decentralization programs. The reforms gave greater authority, political power, and financial resources directly to regencies and municipalities, bypassing the provinces. The powers transferred include those of executing a wide range of responsibilities in the areas of health, primary and middle-level education, public works, environment, communication, transport, agriculture, manufacturing, and other economic sectors. At the same time, the government replaced the antiquated cash-based, single-entry system of public finance with a modern double-entry accounting system that uses a single treasury account; is performance based; and has transparent management of the public treasury, tight expenditure and financial controls with performance indicators, computerized reporting, and a tightly scheduled auditing system. On the positive side, unlike in many developing and transition countries, the decentralization program in Indonesia has not caused major political or economic problems. However, the decentralization program was ill prepared and not carried out in a logical order for two reasons. First, the capacity of subnational governments to produce public and private goods, increase productivity and employment, and promote economic growth in their jurisdictions, was not increased. Because of the long tradition of centralization, local government never built the capacity to carry out economic planning and undertake initiatives to promote local economic growth. Before the reform, the local governments had mainly functioned as implementing agencies of national policies and programs. Second, the number of good financial managers, as required by the new laws of public treasury and auditing, was also limited and needed to be trained. The rising revenues of local governments do not follow their increasing government functions to promote economic development that could potentially cause fiscal imbalances.
    Keywords: Local government; decentralization; Indonesia; government finance; fiscal reform; debt financing; state-owned enterprises; public sector; desentralisasi; pemerintah daerah
    JEL: H70 H72 H74 H77
    Date: 2016–12–01
  5. By: Vu, Hanh; Doan, Hung
    Abstract: We investigate determinants of firms’ direction of trade by using panel data of Vietnam’s footwear firms for the 2006-2010 period. Since no variance was found between firms, a pooled multinomial logit model is consequently preferable. Notably, the economies of scale show positive and significant effects for footwear firms serving the USA and EU markets. Although Vietnamese footwear firms are less likely to export to the ASEAN countries, they tend to focus on the diversification of products in this market. Both private and FDI firms are less likely to export to the EU compared with their counter parts owned by the State (SOEs). However, private firms outperform SOES in the U.S market.
    Keywords: Direction of trade, footwear, export firms, multinomial logit, Vietnam
    JEL: F11 F14
    Date: 2016–12
  6. By: Fukunari Kimura (Economic Research Institute for ASEAN and East Asia (ERIA)); Lurong Chen (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: As mega free trade agreements (FTAs) are reshaping the rules of global governance, there is urgency for member states of the Association of Southeast Asian Nations (ASEAN) to take proper actions in response to the changing world economic order. On one hand, they should closely observe the progress of negotiations and follow up the issues that are under discussion in mega FTAs. On the other hand, they have to accelerate the pace in concluding the negotiations of the Regional Comprehensive Economic Partnership (RCEP).
    Date: 2016–12
  7. By: Quan-Hoang Vuong
    Abstract: Periodic general health examinations (GHEs) are gradually becoming more popular as they employ subclinical screenings as a means of early detection. This study considers the effect of information technology (IT), health communications and the public’s attitude towards GHEs in Vietnam. A total of 2,068 valid observations were obtained from a survey in Hanoi and its surrounding areas, out of which 42.12% said they were willing to use IT applications to recognise illness symptoms, nearly 2/3 of them rated the healthcare quality at average level or below. The data, which is processed by the BCL model, has shown that IT applications (apps) reduce hesitation toward GHEs, however, older peopleseem to have less confidence in using these apps. Health communications and government’s subsidy also increase the likelihood of people attending periodic GHEs. The probability of early check-ups where there is a cash subsidy could reach approximately 80%.
    Keywords: general health examination; subclinical screenings; ICTs; healthcare subsidy
    JEL: D12 D83 I12 I18
    Date: 2016–12–13
  8. By: Joshua R. Gubler; Joel S. Selway; Ashutosh Varshney
    Abstract: Recent literature has shown that crosscutting social cleavages reduce the likelihood of civil war. This article argues that the same logic does not apply to lower-scale group violence such as riots, which differ in such a way that crosscutting social cleavages should often have the opposite effect, increasing both the frequency and scale of riots. We test this argument by analysing Muslim–Christian violence in the post-Suharto era, combining a new subnational data set of ethno-income and ethnogeographic crosscuttingness with a new and comprehensive subnational data set of violence in Indonesia. Our findings suggest that high ethno-income crosscuttingness, when combined with a high degree of urban anonymity and close living quarters, is a potent setting for inter-group communal violence. We conclude with a discussion of how context matters in understanding the effect of macrostructural variables such as crosscuttingness on violence.
    Keywords: crosscutting cleavages, ethnicity, riots, violence, Indonesia, Muslim, Christian
  9. By: Katsuo Kogure (Graduate School of Economics, Osaka University); Yoshito Takasaki (Faculty of Economics, The University of Tokyo)
    Abstract: This paper examines how the Cambodian genocide under the Pol Pot regime (1975-1979) altered people’s post-conflict behaviors through institutional changes. Combining spatial genocide data and the 1998 Census microdata, we compare the impacts of the genocide on subsequent investments in children’s education between couples who had their first child during and after the Pol Pot era. Because under the Pol Pot regime private ownership was completely denied and spouses and children were owned by the state as collective property, these couples had quite distinct institutional experiences: The former were controlled as family organizations and the latter were not. We find that the genocide adversely influenced children’s education among the former couples, but not the latter ones. We discuss plausible mechanisms underlying these patterns, shedding new light on why institutions which emerged during the conflict persistently shaped people’s post-conflict behaviors.
    Date: 2016–12
  10. By: William R. Cline (Peterson Institute for International Economics)
    Abstract: As of mid-November, the US dollar has become overvalued by about 11 percent. The prospect of fiscal stimulus and associated interest rate increases under the new US administration risks still further increases in the dollar. An even stronger dollar would widen the path of growing trade deficits already in the pipeline. As President-elect Donald Trump has attributed trade deficits largely to past trade agreement “disasters,” there is a corresponding risk of escalating trade policy conflict, in a perverse dynamic reminiscent of the initial years of Reaganomics. In October 2016, the base month of this new set of fundamental equilibrium exchange rate (FEER) estimates, the US dollar was overvalued by 8 percent, about the same amount as identified in the three previous issues in this series. The real effective exchange rate (REER) of the dollar in October was 17 percent above its level in mid-2014. Given the two-year lag from the exchange rate signal to the trade outcome, the US current account deficit is on track to widen from 2.7 percent of GDP this year to nearly 4 percent by 2021. The new estimates, all based on October exchange rates, again find a modest undervaluation of the yen (by 3 percent) but no misalignment of the euro and Chinese renminbi. The Korean won is undervalued by 6 percent. Cases of significant overvaluation besides that of the United States include Argentina (by about 7 percent), Turkey (by about 9 percent), Australia (by about 6 percent), and New Zealand (by about 4 percent). A familiar list of smaller economies with significantly undervalued currencies once again shows undervaluation in Singapore and Taiwan (by 26 to 27 percent), and Sweden and Switzerland (by 5 to 7 percent).
    Date: 2016–11
  11. By: Huseyin Murat Ozbilgin
    Abstract: This paper studies the welfare impact of a reform that reduces the completion duration of public capital. For a sample of emerging economies, I inspect the welfare gains from shortening the completion time from 10 to 3 years by tailoring a parsimonious general equilibrium model. My analysis reveals sizable gains from the reform. For the mean emerging country in the sample, the reform brings about 1.53 percent benefits in terms of compensating variation in consumption. Rising social demand for public investment under a shorter implementation duration moves the economy towards a higher public capital to output ratio, which leads to higher levels of private investment and consumption, bringing notable welfare gains. Most of the gains accrue within 15 years after the reform. For certain countries, such as Thailand, Romania, Russia, and India, the gains emerge as remarkably large, whereas for another group that includes Serbia, Bulgaria, Phillippines, and Argentina, the gains turn out to be modest.
    Keywords: Public investment, Time-to-Build, Externalities, Welfare
    JEL: E22 E62 H30 H54
    Date: 2016
  12. By: Serrano, M. R.; Xhafa, Edlira
    Keywords: precarious employment, informal workers, employment security, trade union role, case study, Brazil, India, Israel, Korea R, Nepal, Nigeria, Philippines, UK, Zambia
    Date: 2016

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