nep-sea New Economics Papers
on South East Asia
Issue of 2017‒03‒19
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Collect More, Spend Better; Public Investment in Asian Frontier Markets By Manuk Ghazanchyan; Ricardo Marto; Jiri Jonas; Kaitlyn Douglass
  2. Manajemen pengeluaran publik di Indonesia: Tinjauan ekonomi Islam pada APBN 2017 By Jaelani, Aan
  3. Indonesia; 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Indonesia By International Monetary Fund.
  4. The Historical State, Local Collective Action, and Economic Development in Vietnam By Melissa Dell; Nathaniel Lane; Pablo Querubin
  5. Indonesia; Selected Issues By International Monetary Fund.
  6. Price and Wage Flexibility in Hong Kong SAR By Si Guo
  7. Myanmar; Selected Issues By International Monetary Fund.
  8. Myanmar; 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Myanmar By International Monetary Fund.
  9. On wartime money finance in the Japanese occupied territories during the Pacific War: The case of instant reserve banks as bad central banks By SAITO, Makoto
  10. Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network By Javier Garcia-Bernardo; Jan Fichtner; Eelke M. Heemskerk; Frank W. Takes
  11. Assessing the Fragility of Global Trade; The Impact of Localized Supply Shocks Using Network Analysis By Yevgeniya Korniyenko; Magali Pinat; Brian Dew
  12. Mega-Regional Trade Agreements: Costly Distractions for Developing Countries? By Badri Narayan G.
  13. International Financial Integration of East Asia and Pacific By Tatiana Didier; Ruth Llovet Montanes; Sergio Luis Schmukler
  14. Labour as a utility measure reconsidered By Ahlheim, Michael; Frör, Oliver; Nguyen Minh Duc; Rehl, Antonia; Siepmann, Ute; Pham Van Dinh
  15. Lao People's Democratic Republic; 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Lao People's Democratic Republic By International Monetary Fund.
  16. The Effect of Globalisation on Energy Footprints: Disentangling the Links of Global Value Chains By Kaltenegger, Oliver; Löschel, Andreas; Pothen, Frank
  17. The Indirect Effects of FDI on Trade: A Network Perspective By Rodolfo Metulini; Massimo Riccaboni; Paolo Sgrignoli; Zhen Zhu;
  18. Hoarding international reserves and global liquidity expansion, what are the links and do they matter? By Nady Rapelanoro

  1. By: Manuk Ghazanchyan; Ricardo Marto; Jiri Jonas; Kaitlyn Douglass
    Abstract: We use a dynamic small open economy model to explore the macroeconomic impact of alternative public investment scaling-up scenarios, analyzing how improving the efficiency of capital spending and of tax revenue collection affect growth and debt sustainability for three fast-growing Southeast Asian economies: Cambodia, Sri Lanka, and Vietnam. We show that a gradual public investment profile is more favorable than front-loading capital spending because we assume governments are able to gradually learn how to invest more efficiently, accelerating public capital accumulation and therefore growth. We discuss the pros and cons of alternative financing options and identify the financing mix that generates the best macroeconomic outcome. Sometimes overlooked, improving the efficiency of revenue collection over time may ease the burden of fiscal adjustment, achieving higher GDP growth with substantially lower debt-to-GDP ratios, and will help policymakers efficiently meet the challenge of addressing large infrastructure gaps while maintaining debt sustainability.
    Keywords: Public investment;Cambodia;Sri Lanka;Vietnam;Southeast Asia;Emerging markets;Tax collection;Capital expenditure;Fiscal policy;Public Investment, Growth, Debt Sustainability, Fiscal Policy, Revenue Collection, Cambodia, Sri Lanka, Vietnam.
    Date: 2017–01–24
  2. By: Jaelani, Aan
    Abstract: This paper discusses the management of public expenditures in Indonesia in State Budget 2017. The data collected from fiscal policy documents, especially about government spending plans in 2017, and then be reviewed by policy analysis, the theory of public expenditures, and the theory of public goods, and compared with the theory of public expenditure in Islamic economics. Public expenditure management in Indonesia has implemented a distribution system that divided public expenditure for central government expenditures, transfers to the regions, and the village fund. In terms of fiscal policy, public expenditure priorities to support the achievement of sustainable economic growth, job creation, poverty reduction, and the reduction of gaps in the welfare of the whole community. In Islamic economics, public expenditure is used to meet the needs of the community based on the principles of general interest (al-maslahat al-'ammah) derived from the shari'a. Public expenditure on Indonesia's government as an effective tool to divert economic resources and increase the income of society as a whole, and focused on the embodiment of the people's welfare.
    Keywords: State budget, fiscal policy, public expenditure, welfare, shariah
    JEL: E62 G28 H11 H41 H53 O23 P51
    Date: 2017–03–01
  3. By: International Monetary Fund.
    Abstract: The Indonesian economy continues to perform well, supported by robust growth and greater macroeconomic stability. A prudent mix of macroeconomic policies and structural reforms has helped the economy weather the commodity down-cycle and several episodes of emerging market (EM) financial turbulence. Securing and boosting growth in a more uncertain external environment requires maintaining policy buffers, while upgrading the medium-term framework through fiscal and structural reforms.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Corporate sector;Tax reforms;Fiscal reforms;Private investment;Monetary policy;Economic indicators;Debt sustainability analysis;External Sector Report;Staff Reports;Press releases;Indonesia;
    Date: 2017–02–03
  4. By: Melissa Dell; Nathaniel Lane; Pablo Querubin
    Abstract: This study examines how the historical state conditions long-run development, using Vietnam as a laboratory. Northern Vietnam (Dai Viet) was ruled by a strong centralized state in which the village was the fundamental administrative unit. Southern Vietnam was a peripheral tributary of the Khmer (Cambodian) Empire, which followed a patron-client model with weaker, more personalized power relations and no village intermediation. Using a regression discontinuity design across the Dai Viet-Khmer boundary, the study shows that areas historically under a strong state have higher living standards today and better economic outcomes over the past 150 years. Rich historical data document that in villages with a strong historical state, citizens have been better able to organize for public goods and redistribution through civil society and local government. This suggests that the strong historical state crowded in village-level collective action and that these norms persisted long after the original state disappeared.
    JEL: N15 O43
    Date: 2017–03
  5. By: International Monetary Fund.
    Abstract: Indonesia: Selected Issues
    Keywords: Fiscal policy;Economic growth;Private investment;Manufacturing;Capital inflows;External debt;Tax reforms;Social safety nets;Selected Issues Papers;Indonesia;
    Date: 2017–02–10
  6. By: Si Guo
    Abstract: The paper assesses the price and wage flexibility in Hong Kong SAR. At the aggregate level, it compares Hong Kong SAR with the United States, the United Kingdom and Singapore by examining the three commonly used macroeconomic relationships among inflation, unemployment, wage growth, and output fluctuations. At the industry level, the paper compares the distributions of labor earnings and price growth in Hong Kong SAR and the United States. It further estimates a model of wage formation under downward nominal wage rigidity to compare the extent of wage rigidity in Hong Kong SAR and the United States. Overall, the comparisons show that broadly speaking, price and wage adjustments are more flexible in Hong Kong SAR than other economies.
    Keywords: Wages;Hong Kong Special Administrative Region of China;Wage flexibility;Wage adjustments;Prices;Price adjustments;United States;United Kingdom;Singapore;Cross country analysis;flexibility, labor earnings growth, inflation
    Date: 2017–01–20
  7. By: International Monetary Fund.
    Abstract: Myanmar: Selected Issues
    Keywords: Financial sector;Banks;Capital markets;Fiscal reforms;Climatic changes;Fiscal risk;Selected Issues Papers;Myanmar;
    Date: 2017–02–02
  8. By: International Monetary Fund.
    Abstract: Myanmar’s historic general elections in late 2015 resulted in a wave of optimism. Foreign investor interest is strong and development partners are scaling up their engagement. The new government was formed in April and is articulating its economic plans as an integral part of political and economic transition.
    Keywords: Article IV consultation reports;Economic growth;Monetary policy;Flexible exchange rate policy;Fiscal policy;Budget deficits;Fiscal reforms;Financial sector;Economic indicators;Balance of payments statistics;Debt sustainability analysis;Staff Reports;Press releases;Myanmar;
    Date: 2017–02–02
  9. By: SAITO, Makoto
    Abstract: This paper explores how the Japanese government financed war expenditures locally in the occupied territories during the Pacific War. First, the reserve banks, founded instantly by the government, funded the occupation forces by issuing their bank notes in North/Central China, and Southern Regions. Second, the Japanese government financed military expenses by requesting the existing central banks to issue their legal tenders in Manchuria, Indochina, and Thailand. In the years 1943-1945, the first method in the regions with sharp inflations yielded 559.7 billion yen at face value, but only 7.2 billion yen at purchasing power parity (PPP), while the second in the regions with relatively low inflations generated only 5.8 billion yen at face value, but still 3.6 billion yen at PPP. In the former regions, the occupation forces did not acquire that much purchasing power, while in the latter regions, non-negligible portions of the occupied countries' nominal GDP were transferred to the occupation forces.
    Keywords: money finance, wartime finance, occupation, central bank, reserve bank
    Date: 2017–02
  10. By: Javier Garcia-Bernardo; Jan Fichtner; Eelke M. Heemskerk; Frank W. Takes
    Abstract: Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identification of OFC jurisdictions has become a politicized and contested issue. We introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This granular firm-level network data uniquely allows identifying both sink-OFCs and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation. We identify 24 sink-OFCs. In addition, a small set of five countries -- the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland -- canalize the majority of corporate offshore investment as conduit-OFCs. Each conduit jurisdiction is specialized in a geographical area and there is significant specialization based on industrial sectors. Against the idea of OFCs as exotic small islands that cannot be regulated, we show that many sink and conduit-OFCs are highly developed countries.
    Date: 2017–03
  11. By: Yevgeniya Korniyenko; Magali Pinat; Brian Dew
    Abstract: Anecdotal evidence suggests the existence of specific choke points in the global trade network revealed especially after natural disasters (e.g. hard drive components and Thailand flooding, Japanese auto components post-Fukushima, etc.). Using a highly disaggregated international trade database we assess the spillover effects of supply shocks from the import of specific goods. Our goal is to identify inherent vulnerabilities arising from the composition of a country’s import basket and to propose effective mitigation policies. First, using network analysis tools we develop a methodology for evaluating and ranking the supply fragility of individual traded goods. Next, we create a country-level measure to determine each country’s supply shock vulnerability based on the composition of their individual import baskets. This measure evaluates the potential negative supply shock spillovers from the import of each good.
    Keywords: International trade;External shocks;Manufactured goods;Supply;Imports;International trade, supply shocks, spillovers, network analysis.
    Date: 2017–02–13
  12. By: Badri Narayan G. (School of Environmental and Forestry Sciences, University of Washington-Seattle, USA)
    Abstract: This paper examines how new trade rules under mega-regional agreements (in the Asia Pacific and the Atlantic) aim to liberalise ‘substantially all trade and investment’ but commitments undertaken by member countries could potentially impact on the health of the public in these countries. The mechanism of impact that the paper examines is through tariff elimination and the requirements of stronger intellectual property commitments for partner countries. We analyse two interlinked policy concerns: first, how tariff reduction/elimination under mega regional agreements impact on prices of tobacco and tobacco products as well as sugar and sugary beverages. Second, how mega regional agreements with Trade-Related Aspects of Intellectual Property Rights (TRIPS) like and TRIPS-plus commitments could modify intellectual property rules among partner countries and impact on developing countries’ access to life saving drugs and access to medicines. Using dynamic-GTAP model we find that there are significant health consequences of commitments undertaken by developing countries. Simulation results reveal: first, production of sugar increases under trade agreements with potential detrimental health effects. Second, stricter intellectual property rules under mega trade agreements lead to net global gains but developing countries suffer in terms of adverse health impact and from regulatory chill effect.
    Keywords: Economic Integration; Trade Policy; Government policy
    JEL: F15 F13 I18
    Date: 2017–03
  13. By: Tatiana Didier (World Bank Group); Ruth Llovet Montanes (World Bank Group); Sergio Luis Schmukler (World Bank Group)
    Abstract: This paper provides a comprehensive analysis of how economies in the East Asia and Pacific (EAP) region have been integrating financially with the rest of the world since the 1990s, using bilateral data on portfolio investments, syndicated bank loans, mergers and acquisitions (M&As), and greenfield investments. Four main messages emerge from the analysis. First, the region is increasingly more connected with itself and with the rest of the world, even relative to GDP. Second, although economies in the North capture the bulk of the region's inward and outward investments, EAP's connectivity with the South has grown relatively faster. Third, EAP is relatively more connected through arm’s length financing (portfolio investments and syndicated loans) with the more financially developed North, and through FDI (M&A and greenfield investments) with itself and the South. Fourth, more developed EAP economies have a larger role in EAP’s arm’s length investments than in the region's FDI.
    Keywords: cross-border capital flows; foreign direct investment; international financial integration; portfolio investments; syndicated loans; trade flows
    JEL: F14 F21 F23 G15
    Date: 2017–02
  14. By: Ahlheim, Michael; Frör, Oliver; Nguyen Minh Duc; Rehl, Antonia; Siepmann, Ute; Pham Van Dinh
    Abstract: In Stated Preference studies for the appraisal of environmental projects in poor countries or regions it often turns out that the stated willingness to pay of people for environmental improvements, which is used as measure of individual welfare changes, is very low. This is often interpreted as the result of extremely tight budget constraints, which make it impossible that people express their true appreciation of an environmental project in terms of their willingness to pay for it. Therefore, it is sometimes suggested to use labour contributions instead of money as a numeraire to measure utility in such studies. In this paper we show theoretically and empirically that this suggestion is not compatible with the principles of welfare theory because of several inconsistencies. We also illustrate the validity of our arguments empirically based on the results of a Contingent Valuation study conducted in a rural area in northern Vietnam.
    Keywords: Contingent Valuation,Cost-benefit Analysis,Developing Countries,Public Expenditures,Vietnam,Willingness to work
    JEL: D61 H43 Q51
    Date: 2017
  15. By: International Monetary Fund.
    Abstract: Growth remains strong, although it has slowed as the economy faces headwinds from major trading partners, low metals prices and a slowdown in agriculture. Inflation has risen slightly but remains contained. Domestic risks include a sustained reversal of fiscal consolidation, high public debt and weak public banks. On the external front, a tightly managed and overvalued exchange rate, low reserves and dollarization make Laos vulnerable to terms of trade shocks or capital flows reversals.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Fiscal consolidation;Banking sector;Monetary policy;Flexible exchange rate policy;Reserves accumulation;Economic indicators;Balance of payments statistics;Millennium Development Goals;Debt sustainability analysis;Staff Reports;Press releases;Lao P. D..R.;
    Date: 2017–02–15
  16. By: Kaltenegger, Oliver; Löschel, Andreas; Pothen, Frank
    Abstract: This paper investigates the impact of global value chains on energy footprints. Energy footprints are consumption-based indicators which record the energy used to produce a country's final demand. In order to disentangle key characteristics of global value chains and their effects on the global energy footprint, we employ structural decomposition analyses (SDA). Furthermore, the analysis combines a retrospective with a prospective SDA approach. After an analysis of the global energy footprint for the period between 1995 and 2009, we discuss three scenarios of international integration and their implications for energy footprints for the period from 2009 to 2030. Our results show that the global energy footprint has increased by 29.4 % from 1995 to 2009, and the scenarios indicate that it will increase by another 23.5 % until 2030. Economic activity is the most important driver for the increase in energy footprints. Rising final demand alone would have increased the global energy footprint by 47.0 % between 1995 and 2009. The composition of countries from where consumption and investment goods come adds another 12.6 %. Sectoral energy intensity reductions are the most important decelerator of energy use (-27.8 %). There is a substantial contribution of changing global value chains on the rise in the global energy footprint (7.5 %): Stronger backward linkages in global value chains increased the global energy footprint by 5.5 % between 1995 and 2009. Changes in the regional composition of intermediate inputs raised it by another 1.8 %. The shift of the world economy towards East Asia alone would have increased the global energy footprint by 3.0 %. The sectoral composition of global value chains, on the other hand, had a negligible effect on energy footprints.
    Keywords: Energy footprints; Global value chains; Structural decomposition analysis; Logarithmic mean Divisia index; Multi-regional input-output analysis; Environmental-economic accounting
    JEL: C43 C67 C82 F18 Q43
    Date: 2017–03
  17. By: Rodolfo Metulini (Department of economics and management, University of Brescia); Massimo Riccaboni (IMT School for advanced studies); Paolo Sgrignoli (Institute for economics, Scuola Superiore Sant'Anna, Pisa); Zhen Zhu (IMT School for advanced studies);
    Abstract: The relationship between international trade and foreign direct investment (FDI) is one of the main features of globalization. In this paper we investigate the effects of FDI on trade from a network perspective, since FDI takes not only direct but also indirect channels from origin to destination countries because of firms' incentive to reduce tax burden, to minimize coordination costs, and to break barriers to market entry. We use a unique data set of international corporate control as a measure of stock FDI to construct a corporate control network (CCN) where the nodes are the countries and the edges are the corporate control relation ships. Based on the CCN, the network measures, i.e., the shortest path length and the communicability, are computed to capture the indirect channel of FDI. Empirically we find that corporate control has a positive effect on trade both directly and indirectly. The result is robust with different specifications and estimation strategies. Hence, our paper provides strong empirical evidence of the indirect effects of FDI on trade. Moreover, we identify a number of interplaying factors such as regional trade agreements and the region of Asia. We also find that the indirect effects are more pronounced for manufacturing sectors than for primary sectors such as oil extraction and agriculture.
    Keywords: Networks; Foreign direct investment; Corporate control
    JEL: C21 F10 F14 F23 L22
    Date: 2017–03
  18. By: Nady Rapelanoro
    Abstract: Global liquidity expansion raises concerns amongst regulators and policy makers, especially since its evolution is closely related to destabilizing phenomena’s, particularly for the financial sector. Despite that those effects are largely investigated in the advanced countries, the literature is scarce concerning the effects for the emerging and developing economies. In this paper, our objective is to investigate the links between the hoarding reserves observed in the Asian emerging economies and the development of the global liquidity conditions in the core countries. For this purpose, we study the theoretical relationships between the two phenomena and provide an empirical approach that evaluates the influences of the growing demand for reserves in the emerging countries into the main reserves issuing country. We particularly focus on macroeconomics consequences and the effects on the developments of global liquidity conditions.
    Keywords: SVARs, Global liquidity, Emerging countries, International reserves.
    JEL: C32 E42 E43 F41
    Date: 2017

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