nep-sea New Economics Papers
on South East Asia
Issue of 2018‒01‒15
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Macroeconomic Overview of the Philippines and the New Industrial Policy By Rosellon, Maureen Ane D.; Medalla, Erlinda M.
  2. Innovation Activity of Firms in the Philippines By Quimba, Francis Mark A.; Albert, Jose Ramon G.; Llanto, Gilberto M.
  3. ICT Capital Spending, ICT Sector, and Firm Productivity: Evidence from Indonesian Firm-Level Data By Chaikal Nuryakin; Faisal Rachman; Ashintya Damayati; Nia Kurnia; Moslem Afrizal
  4. Erception of capital, profit and dividends affect the stock purchase intention in Indonesia public company By Muda, Iskandar
  5. Review of High-Value Agriculture in the Philippines with Comprehensive Subsectoral Focus: Livestock Industries By Domingo, Sonny N.; Olaguera, Ma. Divina C.
  6. A Review of Philippine Macroeconometric Models By Reyes, Celia M.; Abrigo, Michael Ralph M.; Quimba, Francis Mark A.; Baje, Lora Kryz C.; Dacuycuy, Connie B.; Calizo, Sylwyn Jr. C.; Tam, Zhandra C
  7. Monetary policy rule and its performance under inflation targeting: the evidence of Thailand By Taguchi, Hiroyuki; Wanasilp, Mesa
  8. Preliminary Finding of Small and Micro Firms Resilience in Indonesia By Dhaniel Ilyas
  9. Impact of Foreign Linkages on Innovation Activity of Manufacturing Firms in CALABARZON By Quimba, Francis Mark A.; Calizo, Sylwyn Jr. C.
  10. Climate-sensitive Decisions and Use of Climate Information: Insights from selected La Trinidad and Atok, Benguet Agricultural Producers By Reyes, Celia M.; Domingo, Sonny N.; Agbon, Adrian D.; Olaguera, Ma. Divina C.
  11. Sustainable Development Goal 5: How Does the Philippines Fare on Gender Equality? By David, Clarissa C.; Albert, Jose Ramon G.; Vizmanos, Jana Flor V.
  12. Are Democratic Regimes Antithetical to Globalization? By Mishra, SK
  13. Financial Inclusion: New Measurement and Cross-Country Impact Assessment By Cyn-Young Park; Rogelio Mercado Jr.
  14. When Officials Dont Know What They Dont Know: Dunning-Kruger Effect in the Case of Green Budgeting for Local Government By Alvin Ulido Lumbanraja
  15. The Horns of a Dilemma in Colonial Policies:Rice, Rubber and Living Standards in the Malay Peninsula By Kostadis J. Papaioannou
  16. Institutional Issues on Disaster Risk Reduction and Management By Domingo, Sonny N.
  17. Welfare Issues in Price Control on Occasions of Calamities, Emergencies, and Like Occurrences By Domingo, Sonny N.; Olaguera, Ma. Divina C.
  18. Severe Air Pollution and School Absences: Longitudinal Data on Expatriates in North China By Liu, Haoming; Salvo, Alberto

  1. By: Rosellon, Maureen Ane D.; Medalla, Erlinda M.
    Abstract: The Philippines demonstrated significant economic growth—and is still gaining momentum—in recent years. This was after being tagged as the ‘sick man of Asia’ for showing slow growth while its Asian neighbors flourished. To sustain the current growth momentum and make it inclusive, transforming the economy becomes crucial. The government developed a new industrial strategy. It started with the Manufacturing Resurgence Program which developed industrial roadmaps with the help of the private sector. This was meant to evolve into a Comprehensive National Industrial Policy (CNIP) that integrates industry/manufacturing with agriculture and services. The overall strategy identifies competition, innovation, and productivity as the underlying framework. The New Industrial Policy has further evolved into an Inclusive, Innovative Industrial Strategy (I3s) recognizing the crucial role of innovation especially as we are on the road towards Industry 4.0. The overall objective of the Philippine industrial strategy is to build globally-competitive industries as well as strong domestic and global linkages. Currently, there are 12 priority industries identified. To boost growth and make these industries competitive and productive, several strategic actions/measures have also been identified, such as addressing supply chain gaps, providing HRD and skills training, developing small and medium enterprises, considering innovation and upgrading, intensifying investment promotion, and addressing horizontal issues e.g. infrastructure, logistics, and regulatory processes, among others. With the strong economy that the Philippines has been experiencing and a new industrial policy being implemented, attaining growth that is sustainable and inclusive is promising. Manufacturing growth surpassing services sector growth in the last three years is a testament to the impact of the new industrial policy on the economy, especially in the manufacturing sector. With the continued implementation of the strategic actions and programs and support from stakeholders, goals that strengthen SMEs, industry and innovation hubs establishment, more and quality labor generation and labor productivity enhancement, among other aspirations for the industry, can be achieved.
    Keywords: Philippines, new industrial policy, Philippine industrial strategy, macroeconomic performance, Manufacturing Resurgence, Program
    Date: 2017
  2. By: Quimba, Francis Mark A.; Albert, Jose Ramon G.; Llanto, Gilberto M.
    Abstract: Set against a rapidly changing global environment, Philippine industries now, more than ever, are facing new demands that will require more innovation for firms to remain competitive across the global market. The PIDS Survey on Innovation Activities (PSIA) conducted among firms in food manufacturing, other manufacturing, ICT, and BPO suggests that in 2015, about 43% of Philippines establishments were innovation-active. Strikingly, the BPO sector spends the most for innovation activities despite it being the least innovation-active among the various sectors at a rate of just 30%. Intellectual property applications have been very low across all industries following firms’ tendency to view their product innovations as trade secrets in order to maintain their competitive edge against rivals. The study also finds that the conduct of knowledge management activities is positively correlated with firm size. Moreover, larger firms tend to rely on internal sources for their information and innovation which is the case with the food processing and automotive sectors. Results of the panel data model explaining innovative behavior among 2015 PSIA firms, that were also part of a pilot survey in 2009, showed that knowledge management activities and firm size are adequate determinants of innovation behavior. Taking all these survey results into perspective, a national policy that is grounded on consultations with all stakeholders in the innovation ecosystem should be pursued. Enabling the business environment through stronger intellectual property rights can also encourage more firms to innovate especially among wary multinational companies.
    Keywords: innovation, Philippines, process innovation, product innovation, micro, small and medium enterprises, industry-academe collaboration
    Date: 2017
  3. By: Chaikal Nuryakin (Researcher, Institute for Economic and Social Research, Faculty of Economics, University of Indonesia, Jakarta); Faisal Rachman (Institute for Economic and Social Research, Faculty of Economics, University of Indonesia); Ashintya Damayati (Institute for Economic and Social Research, Faculty of Economics, University of Indonesia); Nia Kurnia (Researcher, Institute for Economic and Social Research, Faculty of Economics, University of Indonesia, Jakarta); Moslem Afrizal (Researcher, Institute for Economic and Social Research, Faculty of Economics, University of Indonesia, Jakarta)
    Abstract: This study examined the impact of ICT on firm productivity in Indonesia. Using unbalanced panel data of medium and large manufacturing firms, we performed two kinds of estimation. The first estimation is Cobb-Douglas production function with output as the dependent variable. Capital was grouped into non-ICT capital and ICT capital in order to determine the impact of ICT on firm’s output creation. The second estimation used total factor productivity as the dependent variable, where TFP was estimated using Levinsohn-Petrin productivity estimator. As other internal and external factors were added to the regression as control variable, the study provides early evidence that while the impact of R&D and innovation still needs to be further elaborated, ICT capital may have a positive, but not always significant, impact on firm’s production and productivity in Indonesia.
    Keywords: ICT — Productivity — TFP — R&D — Innovation
    JEL: E22 D24 O3
    Date: 2017–10
  4. By: Muda, Iskandar
    Abstract: This study aims to investigate the influence perception of Capital Gains and Dividends on Stock Purchase Intention in Indonesian companies. Variables used in this research are the capital, profit and dividends (independent variables) and Stock Purchase Intention (dependent variable) and to show their relationship, it was used multiple linear regression. This research included Manufacturing Companies listed on the Indonesia Stock Exchange and there were taken into account a number of 38 societies Data of this research are secondary data, obtained from the financial statements of the investigated companies published in the Indonesia Stock Exchange. The results showed that simultaneous independent variables have a significant influence on the capital structure, while partially effect on the Capital Shares Purchase Intentions. It was also shown that Profit and Dividends do not affect the Stock Purchase Intention.
    Keywords: Capital; Earnings; Dividend; Share Purchase Intention and Indonesian companies
    JEL: D53
    Date: 2017–05
  5. By: Domingo, Sonny N.; Olaguera, Ma. Divina C.
    Abstract: Enhancing the performance of the Philippine agriculture sector remains a key input to economic growth and inclusivity. Focus of development interventions in recent years have been on crops, particularly on the major grain staples. Shifting attention to more competitive and higher value commodities like livestock would do much in enhancing the livelihoods of smallholder farmers, as well as micro, small, and medium-sized enterprises within the sector. While the subsector presents a glimmer of light in local agriculture, its industries are beset with production and marketing issues. The main objective of this paper is to review the status and performance of the Philippine livestock sector. This review provides discourse on the livestock subsector's performance over the years and looks into ways of bettering outputs and competitive advantages both within domestic commodity systems and beyond.
    Keywords: Philippines, livestock sector, industry analysis
    Date: 2017
  6. By: Reyes, Celia M.; Abrigo, Michael Ralph M.; Quimba, Francis Mark A.; Baje, Lora Kryz C.; Dacuycuy, Connie B.; Calizo, Sylwyn Jr. C.; Tam, Zhandra C
    Abstract: This scoping paper presents the current landscape of the Philippine macroeconometric models by reviewing the inventory of earlier studies. It finds that a there is a need to devise a new model for the Philippines considering that only two models are actively being used in policy simulations.
    Keywords: macroeconomics, Philippines, macroeconometric model, error-correction model
    Date: 2017
  7. By: Taguchi, Hiroyuki; Wanasilp, Mesa
    Abstract: This article reviews the Thailand monetary policy rule and its performance under the adoption of inflation targeting regime since 2000. The study estimates the policy reaction function to see if the inflation targeting has been linked with an inflation-responsive monetary policy rule, and investigates whether the monetary policy rule would actually have its transmission effect on inflation, through tracing the impulse responses of inflation rate to monetary policy shocks in vector autoregressive (VAR) and structural VAR models. The study contributes to the literature by updating the assessment of the Thailand monetary policy through covering the period after 2015, when the Bank of Thailand has upgraded its inflation targeting framework by transforming it from range target to point target to provide a clearer policy signal to the public. The main findings are as follows. The estimation outcomes of the policy reaction function show that the Thailand monetary policy rule under the inflation targeting is characterized as an inflation- and exchange-rate- responsive rule with forward-looking manner, which is countercyclical against inflation in the long run, but is accompanied with slow adjustment toward a target policy rate. The results from the impulse response analyses imply that the Thailand monetary policy under the inflation targeting has only a marginal transmission effect on inflation probably due to the slow adjustment of policy rate.
    Keywords: Monetary policy rule, Inflation targeting, The Bank of Thailand, Policy reaction function, and Vector autoregressive model
    JEL: E52 E58 O53
    Date: 2017–12
  8. By: Dhaniel Ilyas (Researcher, Institute for Economic and Social Research, Faculty of Economics, University of Indonesia, Jakarta)
    Abstract: Survivability (resilience) of Indonesia small and micro firms seems to have a strong relation with firm’s size. Smaller firms have higher probability to operate longer due to their flexibility. These resilience is related to their choice of using only their owned self-capital without making any bank/non-bank loans. The characteristic make them tougher in facing economic crisis and easier for them to re-organize their business. Female owner tends to choose this ‘no-loan’ strategy in Indonesia case. These preliminary findings needs further investigation using more details data.
    Keywords: SMFs — Indonesia — Firm Survival — Firm Resilience — Economic Crises
    JEL: E22 L10 O10
    Date: 2017–12
  9. By: Quimba, Francis Mark A.; Calizo, Sylwyn Jr. C.
    Abstract: Despite several studies exploring innovation activities in the Philippines, no clear answer has been provided to the question of whether having foreign linkages can induce knowledge transfer and innovation. This study probes deeper into the role of foreign linkages to innovation activities of manufacturing firms in the CALABARZON region. Utilizing a probit estimation and an IV regression to control for endogeneity brought forth by omitted variable bias, the results show that foreign linkages can indeed positively affect a firm’s likelihood to undertake product innovation that involves the development of a new product using a technology new to the firm. On the other hand, process innovation has consistently shown to be positively influenced by foreign linkages. Given these results, it can be inferred that having foreign linkages and participating in the global value chain impacts both process and product innovations positively. Thus, it is important to highlight the need to promote stronger regional and global linkages to sustain the manufacturing growth in CALABARZON. Moreover, supporting series of training that teach the 5S system through government channels like the Technical Education and Skills Development Authority and the various state universities and colleges are as important. Highlighting the role of industrial parks and recognizing the value of establishment-level data are also key points in this study.
    Keywords: Philippines, innovation, manufacturing, process innovation, product innovation, CALABARZON, foreign linkages
    Date: 2017
  10. By: Reyes, Celia M.; Domingo, Sonny N.; Agbon, Adrian D.; Olaguera, Ma. Divina C.
    Abstract: Valuing climate information is now an important discourse in mainstream economic thinking with the development of the von Neumann-Morgenstern utility hypothesis and of the refinement of decision theory under uncertainty. This discourse is important in valuing weather information and climate-related decision support, particularly among agricultural stakeholders. The need to understand better the use and value of climate information and climate-sensitive decisions among smallholder farmers in selected farmers in Atok and La Trinidad Benguet, Philippines is the aim of this paper. Measures implemented to mitigate the effects La Nina and El Nino include changing the timing of planting and crop shifting and changing the location of crops. Farmers rely to indigenous knowledge when it comes to frost forecasting. On the average, 300 truckers from the trading post transport commodities outside the province on a daily basis. But during typhoons, many traders prefer to delay their deliveries. Farmers shared that weather/climate information is a major factor taken into consideration in their planning and crop decision making. Climate date for the rainy and or dry season was considered as the most important information they need. Given the unique microclimatic condition of the province, farmers need a localized forecast from PAGASA.
    Keywords: climate, climate information, climate-sensitive decisions, weather information, Benguet
    Date: 2017
  11. By: David, Clarissa C.; Albert, Jose Ramon G.; Vizmanos, Jana Flor V.
    Abstract: The global goal to attain gender equality, including ending all forms of discrimination against women and girls, and ensuring their safety, is central to the achievement of the Sustainable Development Goals. Its attainment means that every person, regardless of sex, is empowered to reach their full potential. This entails having both men and women given equal opportunities to education, paid employment, and real decisionmaking power whether in private or public sectors. This paper discusses how the country fares in several gender-related indicators that can be used to monitor progress toward gender equality and women empowerment. It provides an overview of the current situation in areas such as equality of human capabilities, equality of economic opportunity, equality in political voice and leadership, and the safety of women and girls. The paper also identifies priorities for public policy while seeking new directions in addressing several transformational issues to attain gender equality and women empowerment in the country.
    Keywords: gender, Philippines, , gender equality, equality of human capabilities, women’s economic empowerment, women’s political voice and leadership, violence against women and girls
    Date: 2017
  12. By: Mishra, SK
    Abstract: In this study we have made an attempt to investigate into the relationship between political regime type (that ranges from authoritarian to democratic) and the extent of globalization, which of late has been considered as a path to development. We have made use of the Democracy index (and its constituent indicators) provided by the Economist Intelligence Unit and the globalization index (and its constituent indicators) of the KOF. Applying canonical correlation analysis on the data we have made an attempt to look into the response of globalization to the quantitative measures of democratic (versus authoritarian) practices of the governments in 116 countries distributed over Asia, Africa, Australia/Oceania, Europe and the Americas. We have also tested the Lee thesis in the context of globalization as a path to development. Our findings indicate that the empirical support to Lee’s thesis if extended to globalization as a path to development is superficial and does not withstand critical analysis. Contrary to Lee’s thesis, democracy promotes globalization. In African countries political discordance (at the national as well as international level) is not much favourable while in the Asian countries, political will, irrespective of regime type, is more or less in concordance with globalization. Therefore, rather illusively, it so appears that democracies thwart development as well as globalization as a means to development by implication, while the reality is very different.
    Keywords: Globalization; democracy; authoritarian regime; Lee thesis; canonical correlation; Asia; Africa; Australia; Europe; the Americas
    JEL: O51 O52 O53 O54 O55 O56 O57
    Date: 2017–12–17
  13. By: Cyn-Young Park (Asian Development Bank); Rogelio Mercado Jr. (South East Asian Central Banks (SEACEN) Research and Training Centre)
    Abstract: This paper introduces a new index of financial inclusion for 151 economies using principal component analysis to compute weights for aggregating 9 indicators of access, availability, and usage. It then assesses the impact of financial inclusion on poverty and income inequality. The results provide evidence that high and middle-high-income economies with high financial inclusion have significantly lower poverty, while no such relation exists for middle-low and low-income economies. The nonlinearities in the cross-country determinants and impacts of financial inclusion on poverty and income inequality across income groups are important to choosing the appropriate policies for achieving inclusive growth in different development stages.
    Keywords: financial inclusion, poverty, income inequality
    JEL: G18 O11 O16
    Date: 2018–01
  14. By: Alvin Ulido Lumbanraja (Researcher, Institute for Economic and Social Research, Faculty of Economics, University of Indonesia, Jakarta)
    Abstract: This paper extends the key findings of Kruger & Dunning (1999), which shows that people who are unskilled in a given domain tend to be unaware of their lack of skills, to government circle that is supposed to be filled by professionals. This paper compared individual government officials’ self-assessment of their offices’ ability to perform certain tasks related to green budgeting with their responses to questions that implicitly assess their actual ability to perform such tasks. Consistent with Kruger & Dunning (1999), individuals who have sufficient knowledge and expertise in a given domain tend to have more accurate self-assessment when asked to rate their own expertise, and vice versa. This paper also discusses the theoretical underpinning of how compensation structure is related with Dunning-Kruger effect on policy design and how tying the outcome with compensation can promote learning and better metacognitive abilities, even for less knowledgeable individuals
    Keywords: Dunning-Kruger Effect — Green Budgeting — Government Officials
    JEL: D86 H10 J30 J45 M52
    Date: 2017–11
  15. By: Kostadis J. Papaioannou (London School of Economics)
    Abstract: The effects of colonial policies on the living standards of smallholder farmers have been widely debated. The ‘dependency’ view of local farmers becoming increasingly vulnerable due to exposure to international market volatility has been contrasted with the neo-classical view that suggests that this exposure was counteracted by an increase in surplus revenues generated by export crop specialization. The controversy becomes even fiercer when the debate is centred around the impact of the Great Depression on the material conditions of rural households. This article addresses this controversy by studying the most important agricultural policy in the British Malay Peninsula around the years of the Great Depression (1924-1937), using new fine-grained data on harvest yields, mortality and hospitalization rates at the district level. On March 1, 1931, the colonial government enacted the New Rice Policy, encouraging local farmers to substitute rubber cultivation with rice fields. This new policy was not implemented at the same time throughout the Malay Peninsula, nor was it enacted in all districts. We build our empirical approach around this temporal and spatial variation of the new law, and compare the mortality and morbidity responses to harvest failures before and after the New Rice Policy was in effect. The adverse effects of harvest failures were reduced in districts where the new rice policy was enforced, and remained largely unaffected in districts where the new rice policy was never implemented. Our findings underscore the decisive impact of the New Rice Policy in achieving widespread food security for local farmers while securing the general health of the population. To address potential endogeneity concerns, we also use rainfall variability as an instrumental variable to proxy for harvest fluctuations and harvest failures.
    Keywords: Agricultural History; Living Standards; Health Outcomes; Rice; Commodity Trade; Colonial History; Southeast Asia; Colonial policies; Food Security.
    JEL: N55 Q17 F18 N35 Q18 N15
    Date: 2018–01
  16. By: Domingo, Sonny N.
    Abstract: Ensuring the realization of the full potential of the incumbent disaster risk reduction and management (DRRM) policy requires appropriate sectoral and institutional translation of its espoused principles; reflecting more refined institutional arrangements and policy and resource support. Strengthening institutional structures and crafting the appropriate platform for DRRM require important decisions, particularly on the issue of mandate, jurisdiction, and response capability. A functionally superior platform would help address issues on institutional capacity and leadership, expediency of disaster response, stakeholder participation, and community preparedness and protection. DRRM tenets have to be internalized, imbedded, and exactingly practiced within institutions inside and outside of the bureaucracy. This study aims to contribute to the current policy debate on the appropriate legislative vehicle toward institutional augmentation and reform.
    Keywords: Philippines, disaster risk reduction and management, DRRM, DRRM institutional platform, institutional analysis
    Date: 2017
  17. By: Domingo, Sonny N.; Olaguera, Ma. Divina C.
    Abstract: Traditional interventions during and after major disaster events usually focus on the welfare of individuals and households, often at the expense or neglect of local economic recovery. The Price Act (Republic Act or RA 7581) establishes a mechanism that supposedly protects consumers from inadequate supply of goods and unreasonable price increase in occasions of disasters and emergencies. RA 7581 is an example of a double-edged policy which protects a section of the populace (consumers) and holds back another (local enterprises). This study focuses on the implications of RA 7581 during disaster events and answers issues on the effects of price control on consumer protection and local economic recovery as well as provides discourse on the effects of price control imposition during occasions of calamities, emergencies, and like occurrences.
    Keywords: Philippines, disaster risk reduction and management, DRRM, price control, Price Act, welfare issues
    Date: 2017
  18. By: Liu, Haoming (National University of Singapore); Salvo, Alberto (National University of Singapore)
    Abstract: Little is known about how children of high-income expatriate families, often from rich nations, adapt to temporary residence in a severely polluted city of the developing world. We use a six-year panel of 6,500 students at three international schools in a major city in north China to estimate how fluctuation in ambient PM2.5 over the preceding fortnight impacts daily absences. Our preferred estimates are based on the exclusion restriction that absences respond to atmospheric ventilation such as thermal inversions only through ventilation's effect on particle levels. A large and rare 100 to 200 μg/m3 shift in average PM2.5 in the prior week raises the incidence of absences by 1 percentage point, about one-quarter of the sample mean. We find stronger responses for US/Canada nationals than among Chinese nationals, and among students who generally miss school the most. Overall responses are mod-est compared to the effect on absences from more moderate in-sample variation in pollution estimated for the US using aggregate data. Using school absence patterns as a window into short-run health and behavior, our study suggests that high-income families find ways to adapt, likely by moving life indoors, even if temporary residence in north China comes at the expense of long-term health.
    Keywords: environmental valuation, environmental damage, environmental health, atmospheric ventilation, thermal inversions, heterogeneous effects, longitudinal study, acute exposure, PM2.5, particulate matter, air pollution, school absences, avoidance behavior, distributed lags, instrumental variables
    JEL: I18 J24 Q51
    Date: 2017–11

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