nep-sea New Economics Papers
on South East Asia
Issue of 2020‒09‒14
nineteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The impacts of covid-19 on Indonesian poverty and unemployment By bahri, muhamad
  3. Monitoring the impact of COVID-19 in Myanmar: Yangon peri-urban poultry farmers – late July 2020 survey round By Fang, Peixun; Belton, Ben; Ei Win, Hnin; Zhang, Xiaobo
  4. Monitoring the impact of COVID-19 in Myanmar: Yangon peri-urban poultry farmers - Early July 2020 survey round By Fang, Peixun; Belton, Ben; Ei Win, Hnin; Win, Khin Zin; Zhang, Xiaobo
  5. The Beneficial Impacts of COVID-19 Lockdowns on Air Pollution: Evidence from Vietnam By Dang, Hai-Anh H.; Trinh, Trong-Anh
  6. Vietnam; Technical Assistance Report-Report on Residential Property Price Statistics Capacity Development Mission By International Monetary Fund
  7. The Philippine Economy During the COVID Pandemic By Joseph Anthony Lim
  8. A comparative study of performance of commercial banks in ASIAN developing and developed countries By Asima Siddique; Omar Masood; Kiran Javaria; Dinh Tran Ngoc Huy
  9. Evaluating sustainability performance in supply chain management: an empirical research of Vietnam producers coordinates suppliers By Nguyen, Phuoc Van
  10. In CEOs we trust: When religion matters in cross-border acquisitions. The case of a multifaith country By Diana W. P. Kwok; Pierre-Xavier Meschi; Olivier Bertrand
  11. The Effect of Parental Migration on the Schooling of Children Left Behind in Rural Cambodia By Francesca Marchetta Author-Name: Sokcheng Sim
  12. Quince años de conflicto Monitor vs Radio Centro By Jose Antonio, Villalobos Lopez
  13. IFAD IMPACT ASSESSMENT: The Coastal Community Development (CCDP) By Cavatassi, Romina; Mabiso, Athur; Brueckmann, Peter
  14. Lao People’s Democratic Republic; Technical Assistance Report-Report on National Accounts Statistics Mission By International Monetary Fund
  15. The Impact of COVID-19 on Small Business Owners: Continued Losses and the Partial Rebound in May 2020 By Robert W. Fairlie
  16. Exporting and Pollution Abatement Expenditure: Evidence from Firm-Level Data By Soumendra N. Banerjee; Jayjit Roy; Mahmut Yasar
  17. Economic Impact of Targeted Government Responses to COVID-19: Evidence from the First Large-scale Cluster in Seoul By Shin, Jinwook; Kim, Seonghoon; Koh, Kanghyock
  18. Oil price shocks against stock return of oil- and gas-related firms in the economic depression: A new evidence from a copula approach By Nguyen, Thu Thuy; Tran, T.N.; Nguyen, V.C.
  19. Government Support for SMEs in Response to COVID-19: Theoretical Model Using Wang Transform By Shaun Shuxun Wang; Jing Rong Goh; Didier Sornette; He Wang; Esther Ying Yang

  1. By: bahri, muhamad
    Abstract: This study estimates the negative impacts of the COVID-19 on poverty and unemployment in Indonesia. In doing so, this study develops and uses the SD model that reproduced similar patterns in terms of GDP, poverty, and unemployment. Estimated unemployment and estimated poverty under the COVID-19 are calculated for three different economic scenarios: the optimistic, the mid, and the pessimistic scenarios. This study concludes that Indonesia will experience rising unemployment and poverty in ranges (9-10) and (25-26) million people respectively by the end of this year – depending on projected economy growths. This study suggests that existing financial aids are sufficient to support rising unemployment and rising poverty level. However, if the Indonesia government cannot carefully slow the COVID-19 flow, higher financial supports are required to curb the negative impacts of the COVID-19.
    Date: 2020–08–08
  2. By: Dwina, Irma
    Abstract: Perekonomian merupakan sektor terpenting dalam pembangunan ekonomi berkelanjutan pada tatanan nasional. Tinggi rendahnya pendapatan negara pada sektor perekonomian dapat berpengaruh terhadap pembangunan nasional. Sejak awal tahun 2020 dunia digemparkan oleh kehadiran virus covid-19 (Corona virus disease), Covid-19 adalah penyakit menular yang disebabkan oleh virus yang baru di temukan belum lama ini. Kehadiran virus ini mengakibatkan melemahnya aktivitas berbagai sektor perekonomian. Di indonesia sendiri tidak bisa dipungkiri bahwa keadaan ekonomi sangat tidak stabil. Pembatasan sosial berskala besar secara tidak langsung membatasi pelaksanaan aktivitas perekonomian di masyarakat. kehadiran covid-19 ini merubah tatanan kehidupan dalam aspek global maupun nasional. Tulisan ini mengkaji dampak dari pandemi covid-19 terhadap sektor pariwisata di indonesia. Sejak awal maret, menyebarnya virus covid-19 di indonesia membuat aktivitas perekonomian melemah. Menurunnya aktivitas produksi dan distribusi serta menurunnya aktivitas kunjungan tempat wisata lokal di indonesia. Kata Kunci: Ekonomi, Pariwisata, dan Pendemi Covid-19
    Date: 2020–08–11
  3. By: Fang, Peixun; Belton, Ben; Ei Win, Hnin; Zhang, Xiaobo
    Abstract: The price of broilers continued to gradually decrease in the second half of July as supply increased – recent prices are close to the 2019 average. The skyrocketing rise in the price of broiler day-old-chicks stopped in July thanks to the Myanmar government having allowed since mid-May the importation of 3.8 million day-old-chicks. Egg prices continued to increase, growing by 14 percent from 2,300 MMK/viss in late June to 2,620 MMK/viss in late July. Cash flow is still very poor for broiler farms and worsened considerably in late July for layer farms. The PMI operational capacity indices for broiler and layer farms were much lower than those of 2019. The indices for June and July 2020 were very similar, suggesting that the operational capacity of both broiler and layer farms did not improve in July. The PMI revenue index for layer farms increased considerably in July but is still much lower than the revenue index for broiler farms. This finding suggests that COVID-19 has impacted the revenue of layer farms more significantly than the revenue of broiler farms. Supply shortages of day-old-chicks remain a bottleneck for both broiler and layer farms. Price increases for feed have become a new challenge.
    Keywords: MYANMAR, BURMA, SOUTHEAST ASIA, ASIA, Coronavirus, coronavirus disease, Coronavirinae, poultry, farmers, broiler chickens, prices, cash flow, peri-urban agriculture, Covid-19
    Date: 2020
  4. By: Fang, Peixun; Belton, Ben; Ei Win, Hnin; Win, Khin Zin; Zhang, Xiaobo
    Abstract: Some temporarily closed broiler farms reopened their businesses in early July to meet the recent increasing demand for chicken, but other temporarily closed farms shut down permanently. The share of closed layer farms further decreased by 2 percent, cumulatively by 17 percent compared to 2019. With very few new poultry farms established, the supply of broilers and eggs is likely to be significantly less in coming months compared to 2019. The price of broilers has gradually decreased from its peak of 5,350 MMK/viss in early June to around 3,300 MMK/viss in mid-July. Supply shortages of day-old broiler chicks continues to be the main problem preventing broiler farms from fully recovering their operational capacity. It was also the most important challenge reported in our open-ended question to poultry farmers. Cash flow worsened considerably for broiler farms in early July due to the recent price increase of day-old-chicks and the price decrease of broilers. The number of hired regular workers in operational poultry farms remained similar compared with June, which is still much lower than before the outbreak of COVID-19 . Since March, the total job loss among the 275 surveyed farms was 793 workers – 35 percent of the total labor on those farms. All recommendations in our first two policy notes still stand – temporary income support to poultry farms; participation in government credit guarantee schemes; temporary waiver of the import ban on day-old-chicks; tax exemptions or deferrals for poultry farmers; and further lifting of restrictions on transportation of livestock and livestock products. The temporary waiver of the import ban on day-old-chicks by the Myanmar government should be continued. However, to protect domestic breeder farms and related businesses, the total supply of day-old-chicks should be monitored and the import waiver phased out when domestic breeder farms return to normal production capacity. We estimate this should be in two to three months.
    Keywords: MYANMAR, BURMA, SOUTHEAST ASIA, ASIA, farmers, poultry, Coronavirus, coronavirus disease, Coronavirinae, food prices, food consumption, poultry farming, urban farmers, broiler chickens, cash flow, livestock products, economic recovery, Covid-19
    Date: 2020
  5. By: Dang, Hai-Anh H.; Trinh, Trong-Anh
    Abstract: Little evidence currently exists on the effects of COVID-19 on air quality in poorer countries, where most air pollution-linked deaths occur. We offer the first study that examines the pandemic’s impacts on improving air quality in Vietnam, a lower-middle income country with worsening air pollution. Employing the Regression Discontinuity Design method to analyze a rich database that we compile from satellite air pollution data and data from various other sources, we find the concentration of NO2 to decrease by 24 to 32 percent two weeks after the COVID-19 lockdown. While this finding is robust to different measures of air quality and model specifications, the positive effects of the lockdown appear to dissipate after ten weeks. We also find that mobility restrictions are a potential channel for improved air quality. Finally, our back-of-the-envelope calculations suggest that two weeks after the lockdown, the economic gains from better air quality are roughly $0.6 billion US dollars.
    Keywords: COVID-19,air pollution,mobility restriction,RDD,Vietnam
    JEL: D00 H00 O13 Q50
    Date: 2020
  6. By: International Monetary Fund
    Abstract: A technical assistance (TA) mission was conducted during July 9–13, 2018 to assist the General Statistics Office of Vietnam (GSO) with the development of a residential property price index (RPPI). This was the first mission conducted to Vietnam under the auspices of the multi-annual STA Data for Decisions (D4D) trust fund. The main objective of TA provided to Vietnam under the D4D will be to assist the GSO to develop an RPPI. The GSO recently launched two initiatives to collect potential source data for the RPPI since taxation data are unreliable in respect of reported transaction prices, and the State Bank of Vietnam (SBV) does not collect loan level mortgage data.
    Keywords: Technical assistance missions;Price indexes;Housing prices;Statistics;Technical Assistance Reports;Consumer price indexes;Asset bubbles;Real estate prices;Producer price indexes;Economic sectors;GSO,data source,source data,SBV,property list
    Date: 2019–01–10
  7. By: Joseph Anthony Lim (Economics Department, Ateneo de Manila University)
    Abstract: This paper describes and analyzes the impact of the COVID pandemic and the subsequent hard and mild lockdowns on the Philippine economy at various stages from March, 2020 to early September, 2020. The COVID pandemic and resulting hard lockdown (Enhanced Community Quarantine) from March 17, 2020 to May 31, 2020 had resulted in the highest unemployment and biggest fall in Philippine GDP on the second quarter of 2020. The paper shows 90% of the labor force was affected by this hard lockdown. Bayanihan Acts 1 and 2 are the biggest Social Amelioration Program (SAP) ever legislated and implemented by the Philippine government. The paper discusses the need for a bill to prevent the danger of massive loan defaults, bankruptcies and potential financial crisis resulting from the deep recession. The paper goes on to discuss the debate between more conservative economic managers, on one hand, and legislators and NGOs who want a stronger and more encompassing fiscal stimulus to the distressed economy, on the other. It ends with a discussion on the crux of the debate, which is financing the fiscal deficits that will arise due to the pandemic and the economic stimuli.
    Keywords: COVID19; Philippines, recession, COVID pandemic, fiscal stimulus
    JEL: E60 E62
    Date: 2020–09
  8. By: Asima Siddique (COMSATS University Islamabad); Omar Masood (University of Lahore); Kiran Javaria (University of Lahore); Dinh Tran Ngoc Huy (International University of Japan)
    Abstract: The main focus of this study is to investigate the impact of non-performing loans (NPLs) and other bank specific factors on the financial performance of commercial banks in Asian developing and developed countries due to an alarmingly high ratio of non-performing loans.The bank specific factors that are used in this study are cost efficiency ratio (CER), capital adequacy ratio (CAR), size of the bank, sales growth (SG) and proxies of financial performance (FP) are return on equity (ROA) and return on asset (ROE). Secondary Panel data of ten years (2006-2015) has been used for this empirical analysis and 19 commercial banks from developing countries of Asia (Pakistan and India), while 17 commercial banks from developed countries of Asia (Japan and Saudi Arabia) are selected. Generalized method of moment is used for the coefficient estimation to overcome the effects of some endogenous variables. NPLs and CER are significantly negatively related to the financial performance (ROA and ROE) of developing and developed countries commercial banks. There is a negative relationship of bank size with most of financial performance variables. Sale growth and capital adequacy ratio has significant positive relationship both measures of financial performance (ROA and ROE) in both pools. Due to the importance of commercial banks in the overall economy of a country, there is a need for management of commercial banks and regulatory authorities to undertake policies that ensure efficiency in banking operations.
    Keywords: Non-Performing Loans,micro economic variables,Pakistan & India,Japan & Saudi Arabia,GMM approach
    Date: 2020–06–30
  9. By: Nguyen, Phuoc Van
    Abstract: Our research dissects the adequacy of sustainability performance in supply chain management (i.e., evaluation and coordinated effort). Based on survey result from 96 Vietnam producers, the paper determines the effect that the two practices have on the producer company’s and the provider’s social performances. SmartPLS was utilized to test the hypothesized connections among practices and execution. Our outcomes propose that while surveying providers adds to improve the purchasing company’s social execution, teaming up with them upgrades the providers’ social execution. However, the paper gives some extra of knowledge on the most proficient method to evaluate sustainability performance.
    Date: 2020–06–10
  10. By: Diana W. P. Kwok (Humanis - Hommes et management en société / Humans and management in society - UNISTRA - Université de Strasbourg); Pierre-Xavier Meschi (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon); Olivier Bertrand (Brazilian School of Public and Business Administration [Rio de Janeiro])
    Abstract: This paper examines the emergence of trust by multifaith target-firm personnel in foreign acquirer CEOs during early post-acquisition integration, a decisive period for acquisition success, yet considerably under-researched. Combining self-categorization and similarity-attraction theories, we argue that religious similarity with the foreign acquirer's CEO represents shared values to the personnel, from which trust in the CEO arises. Further, we scrutinize the moderating effects of the personnel's religiosity and prior alliance success between the acquirer and target firm. We test our model using field-experimental data from 411 multifaith Malaysian personnel. The findings show that personnel-leader trust occurs more readily with religious similarity than religious dissimilarity, and that the personnel's religiosity strengthens this relationship. However, a successful prior alliance does not weaken the religious similarity–trust relationship. Our research encourages acquisition managers to consider religion, a factor beyond the traditional acquisition playbook, as a trust antecedent during early post-acquisition integration.
    Keywords: Interpersonal trust,Cross-border acquisitions,Religion,Malaysia,Multifaith employee,Experimental methods
    Date: 2020
  11. By: Francesca Marchetta Author-Name: Sokcheng Sim
    Abstract: Growing rural-to-urban and international migration flows have sparked concerns about investments in the education of left-behind children in Cambodia. We drew on a panel household-level survey conducted in rural villages in 2014 and 2017 to analyze the relationship between parental migration and schooling of children. The analysis revealed that children of migrant parents lag significantly behind in terms of years of completed schooling. We used the longitudinal dimension of the data to estimate a placebo test, which greatly reduced concerns related to the possible confounding effect of unobserved heterogeneity. The negative effect that we uncovered appeared to be driven largely by reduced parental input in children’s education rather than by an increase in child labor.
    Keywords: Cambodia, parental migration, remittances, education, children’s schooling
    JEL: F22 R23 I25
    Date: 2020
  12. By: Jose Antonio, Villalobos Lopez
    Abstract: On May 7, 2002, there was a legal dispute between Infored and Grupo Radio Centro, arising from a contract they concluded four years earlier, a dispute that leads to arbitration before the International Chamber of Commerce. The arbitral tribunal issued its final award, declaring the termination of the contract and ordering Grupo Radio Centro to pay $21 million to Infored. The arbitration clause of the contract would result in a fierce struggle of legal and judicial battles between these two radio groups, for more than fifteen years. Once the arbitral award is lost, Grupo Radio Centro does not recognize it and claims that the arbitrators did not prove to be experts in the matter, even with the arbitrator themselves that they chose and proposed for arbitration. Gutierrez Vivó, together with analysts and journalists imply that the former was very uncomfortable for the rulers of that time, who seek and manage to block it economically, through pressure not to buy advertising where he broadcast their radio programs. Gutierrez Vivó expresses that the public characters who harassed and pressured him would be: Vicente Fox and Martha Sahagún in the first instance. Upon taking office, Felipe Calderón, Maximiliano Cortázar, Head of Social Communication of the Presidency, Javier Lozano Alarcón, Secretary of Labour, Ricardo Acedo, Secretary of the Radio and Television Industry Union (STIRT), Jaime Daniel Cervantes Martínez, Judge 63rd of the Civil in the Federal District and Eduardo Henkel, Consul of Singapore. Desperate Gutierrez Vivo for the tactics and legal remedies he used and that allowed the members of the Judiciary to Grupo Radio Centro, in 2008 he made the decision to sue For moral damages and damages to Grupo Radio Centro and the members of the Aguirre Gómez family, the owners of the broadcaster. Decision you would surely regret for a long time. The lawsuit for moral damage is lost by Infored-Gutiérrez Vivó and sentenced to pay more than 757 million pesos, for court costs in 2013. For more than four years it sought protection and technical resources to combat this legal claim, but finally on November 10, 2017, the First Chamber of the Supreme Court of Justice of the Nation dismissed its review appeal as inappropriate and unfounded, with unanimous decision of ministers. This terminates his pilgrimage and torment in courts.
    Keywords: Monitor; Infored; Monitor vs Radio Centro
    JEL: K20 K4
    Date: 2020–09–10
  13. By: Cavatassi, Romina; Mabiso, Athur; Brueckmann, Peter
    Abstract: The Coastal Community Development Project (CCDP), implemented between 2013 and 2017, was designed to reduce poverty and achieve sustainable economic growth in 12 coastal districts of Indonesia. The project took a comprehensive approach, combining sustainable marine and coastal natural resource management with economic and livelihood development in coastal and small island communities where poverty was endemic. It invested in fisheries, aquaculture, and related marketing and support structures. Project participants were provided with fishing gear and motorized engines for their fishing boats, enabling them to fish further from the coast, and thus catch a more diverse array of higher-value fish. They were linked to profitable markets, and fish processing groups were established that primarily enabled local women to process and market fish. Infrastructure groups were created to construct village information centers, fish smokehouses, processing warehouses and marketplaces. Additionally, the project provided cooler boxes to store fresh fish and reduce post-harvest losses. It also offered support for food-safety certification. Steps were taken to improve the governance and management of marine resources, including through village-based integrated coastal management plans and the designation of marine protection areas. An impact assessment of CCDP was conducted in 2018. The assessment used a mixed-methods approach that combined quantitative household-level and community-level surveys and a qualitative survey (focus groups discussions and key informant interviews).
    Keywords: Food Security and Poverty, Marketing
    Date: 2019–08–01
  14. By: International Monetary Fund
    Abstract: A technical assistance mission was conducted during July 2–13, 2018 to support measurement of Lao PDR’s national accounts statistics. The mission assisted with the development of a quarterly GDP time series, reviewed the published annual GDP time series, and developed recommendations to continue improving national accounts statistics compiled by the Lao Statistics Bureau (LSB). The mission built upon previous national accounts statistics missions conducted in April 2017 and January 2018.
    Keywords: Technical assistance missions;National accounts;Statistics;Time series;Gross domestic product;Technical Assistance Reports;National income;Price indexes;Balance of payments;Development;intermediate consumption,Lao PDR,source data,LSB,ministry of energy
    Date: 2019–01–10
  15. By: Robert W. Fairlie
    Abstract: Social distancing restrictions and demand shifts from COVID-19 shuttered many small businesses and entrepreneurs in the first month of widespread shelter-in-place restrictions. Fairlie (2020) finds that 22 percent of small business owners were inactive in April 2020 with disproportionate impacts on African-American, Latinx, immigrant, and female business owners. What happened in the second month of social distancing restrictions? Were there further closures or a rebound? This paper provides the first analysis of impacts of the pandemic on the number of active small businesses in the United States using nationally representative data from the May 2020 CPS – the second month capturing effects from mandated restrictions. The number of active business owners in the United States is down by 2.2 million or 15 percent from February 2020, but up 7 percent since the low in April. The continued losses in May and partial rebound from April were felt across nearly all industries and were not sensitive to using alternative restrictions on hours worked and measures. African-American business owners continue to be the hardest hit by COVID-19 experiencing a drop of 26 percent in business activity from pre-COVID-19 levels. Latinx business owners fell by 19 percent, and Asian business owners dropped by 21 percent. Immigrant business owners experienced substantial losses of 25 percent. Simulations indicate that industry compositions partly placed black, Latinx and immigrant businesses at a higher risk of losses. All of these demographic groups, however, experienced partial rebounds in business activity from April lows. These findings of the continued early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality.
    JEL: J0 J15 J16 L26
    Date: 2020–07
  16. By: Soumendra N. Banerjee; Jayjit Roy; Mahmut Yasar
    Abstract: The relevance of analyzing whether exporting firms engage in greater pollution abatement cannot be overemphasized. For instance, the question relates to the possibility of export promotion policies being environmentally beneficial. In fact, the issue is especially relevant for developing countries typically characterized by ineffective environmental regulation. However, despite the significance of the topic, the extant literature examining the environmental consequences of firm-level trade is skewed toward developed countries. Moreover, the existing contributions rarely attend to concerns over non-random selection into exporting. Accordingly, we employ cross-sectional data across Indonesian firms as well as a number of novel identification strategies to assess the causal effect of exporting on abatement behavior. Two of the approaches are proposed by Millimet and Tchernis (2013), and entail either minimizing or correcting for endogeneity bias. The remaining methods, attributable to Lewbel (2012) and Klein and Vella (2009), rely on higher moments of the data to obtain exclusion restrictions. While we largely find exporting to encourage pollution abatement, the estimated impacts are more pronounced after accounting for selection into exporting.
    Keywords: Treatment Effect; Pollution Abatement; Instrumental Variables; Environment; Exporting
    JEL: C26 F18 F23 Q41
    Date: 2020–07–17
  17. By: Shin, Jinwook (Seoul National University); Kim, Seonghoon (Singapore Management University); Koh, Kanghyock (Korea University)
    Abstract: We estimate the economic impact of South Korea's targeted responses to the first large-scale COVID-19 cluster in Seoul. We find that foot traffic and retail sales decreased only within a 300 meter radius of the cluster and recovered to its pre-outbreak level after four weeks. The reductions appear to be driven by temporary business closures rather than the risk avoidance behavior of the citizens. Our results imply that less intense, but more targeted COVID-19 interventions, such as pin-pointed, temporary closures of businesses, can be a low-cost alternative after lifting strict social distancing measures.
    Keywords: COVID-19, pandemic, information disclosure, risk avoidance, foot traffic, retail sales, cell phone signal data, card transaction data
    JEL: E2 H12 I12 I18
    Date: 2020–08
  18. By: Nguyen, Thu Thuy; Tran, T.N.; Nguyen, V.C.
    Abstract: This research examines the influence of world crude oil price shocks on the financial performance of Vietnamese oil- and gas-related firms. Based on copula approach and the sample data of domestic giant oil- and gas firms from 2009 to 2019, in particular in the situation of oil price steadily going up and economic depression of 2011–2012; approximately nine copulas including Gauss, Clayton, Rotated-Clayton, Plackett, Frank, Gumbel, Rotated-Gumbel, Student, Symmetrized-Joe-Clayton have been focused. A new evidence could be found that the oil price shocks have not impacted on the stock return of oil- and gas-related firms in the wave of increasing oil price, but a lagged period of time oil- and gas-related firms could receive more stock returns. The results further demonstrate that world oil price fluctuations have significantly impacted on the financial performance of some firms as PVS, PVG, and PET in the pre-depression period. In respect to the economic depression of 2011–2012, the study reveals no evidence in the relationship between world oil price fluctuations and stock returns of oil- and gas-related firms. In other words, results in the post-depression period suggest that world oil price shocks can affect stock returns of selected giant oil- and gas-related firms.
    Date: 2020–07–30
  19. By: Shaun Shuxun Wang (Southern University of Science and Technology); Jing Rong Goh (Risk Lighthouse International, Singapore); Didier Sornette (ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute); He Wang (Southern University of Science and Technology); Esther Ying Yang (Risk Lighthouse, USA)
    Abstract: Many governments are taking measures in support of small and medium-sized enterprises (SMEs) to mitigate the economic impact of the COVID-19 outbreak. This paper presents a theoretical model for evaluating various government measures, including insurance for bank loans, interest rate subsidy, bridge loans and relief of tax burdens. Our paper distinguishes a firm’s intrinsic value and book value, where a firm can lose its intrinsic value when it encounters cash flow crunch. Our model highlights the importance of providing bridge loans to SMEs during the COVID-19 disruption to prevent massive business closures. Wang Transform is applied to (i) calculating the appropriate level of interest rate subsidy payable to incentivize banks to issue more loans to SMEs and to extend the loan maturity of current debt to the SMEs, (ii) describing the frailty distribution for SMEs, and (iii) defining banks’ underwriting capability and overlap index in risk selection. This paper makes policy recommendations of establishing policy-oriented banks or investment funds dedicated to supporting SMEs, developing risk indices for SMEs to facilitate refined risk underwriting, providing SMEs with long-term tax relief and early-stage equity-type investments.
    Keywords: COVID-19, SME, Bank Loan, Government Subsidy, Wang Transform
    Date: 2020–08

This nep-sea issue is ©2020 by Kavita Iyengar. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.