nep-sea New Economics Papers
on South East Asia
Issue of 2021‒12‒20
fourteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Taxing Profits From International Transport In Africa: Past, Present and Future of Article 8 (Alternative B) of the UN Model By Michel, Bob; Falcão, Tatiana
  2. Evolution of Embodied Renewable Energy Use in Indonesia By Noor Syaifudin; Yanrui Wu
  3. Financial behavior for status seeking purposes of consumers in emerging markets. A case study of suburban Jakarta, Indonesia. By A.R.S. Ibn Ali
  4. Rebound effect with energy efficiency determinants: a two-stage analysis of residential electricity consumption in Indonesia By Adha, Rishan; Hong, Cheng-Yih; Firmansyah, M.; Paranata, Ade
  5. Role of Individual Characteristics and Policies in Driving Labor Informality in Vietnam By Mr. Giovanni Ganelli; Anh Thi Ngoc Nguyen; Ms. Era Dabla-Norris
  6. Varieties of Capitalism and re-thinking the East Asian model of economic growth after the Covid-19 pandemic: Rebalancing shareholder and stakeholder capitalism By Lee, Keun
  7. Rising Political Populism and Outmigration of Youth as International Students By Murat Demirci
  8. Do Agricultural Intermediaries Contribute to Food Safety? a Case Study from Myanmar By Ebata, Ayako
  9. Macroprudential Policy, Bank Competition and Bank Risk in East Asia By E Philip Davis; Ka Kei Chan; Dilruba Karim
  10. Migration and Spatial Misallocation in China By Li, Xiaolu; Ma, Lin; Tang, Yang
  11. Financial And Legal Obstacles And Small And Medium Firm Performance: Evidence from Middle Income East Asian By Bui, Anh Tuan; Pham, Linh Chi; Ta, Thi Khanh Van
  12. The Transmission of External Shocks in Asia: Country Characteristics and Policy Responses By Mr. Shanaka J Peiris; Miss Sanaa Nadeem; Mr. Pragyan Deb
  13. Vulnerability to climate change and communal conflicts: evidence from Sub-Saharan Africa and South/South-East Asia By Sara Balestri; Raul Caruso
  14. Parental migration and the schooling of Cambodian children By Francesca Marchetta; Sokcheng Sim

  1. By: Michel, Bob; Falcão, Tatiana
    Abstract: International maritime shipping is an essential part of global business. Since the establishment of the current international tax regime in the 1920s, there has been a consensus that profits generated by this business are taxable only in the residence state –the state where the shipowners are located. Source states – the port states where business physically takes place – are generally expected to exempt income from international shipping. This standard is currently reflected in Article 8 of the OECD Model and Article 8 (Alternative A) of the UN Model, and is incorporated in the vast majority of bilateral tax treaties currently in force. Exclusive residence state taxation of shipping profits is problematic when the size of mercantile fleets and shipping flows between two states are of unequal size. This is often the case in relations between a developed and developing country. The latter often lack a substantial domestic mercantile fleet, but serve as an important revenue-generating port state for the fleet of the developed country. To come to a more balanced allocation of taxing rights in such a case, a source taxation alternative has been inserted in UN Model Article 8 (Alternative B). From its inception, Article 8B has been labelled impractical due to the lack of guidance on core issues, like sourcing rules and profit allocation. This gap is said to explain the low adoption rate of Article 8B in global tax treaty practice. In reality, tax treaty practice regarding Article 8B is heavily concentrated and flourishing in a handful of countries in South/South-East Asia – Bangladesh, India, Indonesia, Myanmar, Pakistan, the Philippines, Sri Lanka and Thailand. All these countries subject non-resident shipping income to tax in their domestic income tax laws. Except for India, all countries are able to exercise these domestic tax law rules in relation to shipping enterprises located in the biggest shipowner states, either because they have a treaty in place that provides for source taxation or because there is no treaty at all and thus no restriction of domestic law. None of the relevant tax treaties contain a provision that incorporates the exact wording of Article 8B of the UN Model. If other countries, like coastal countries in sub-Saharan Africa, are looking to implement source taxation of maritime shipping income in the future, they are advised to draw on the South/South-East Asian experience. Best practice can be distilled regarding sourcing rule, source tax limitation, profit attribution and method of taxation (on gross or net basis). In addition to technical guidance on tax, the South/South-East Asian experience also provides important general policy considerations countries should take into account when determining whether source taxation of maritime shipping profits is an appropriate target for their future tax treaty negotiations. Summary of Working Paper 133 by Tatiana Falcão and Bob Michel.
    Keywords: Governance,
    Date: 2021
  2. By: Noor Syaifudin (Center for Climate Finance and Multilateral Policy, Fiscal Policy Agency, Ministry of Finance of Republic of Indonesia); Yanrui Wu (Economics Department, Business School, The University of Western Australia)
    Abstract: This paper extends the literature on energy sustainability by presenting empirical evidence of the evolution of embodied renewable energy in Indonesia. By employing the environmental input-output analysis, the paper reveals that there was an increasing trend in direct and indirect embodied renewable energy consumption among Indonesia’s 16 industrial sectors. However, the analysis also finds that indirect embodied renewable energy consumption was greater than direct embodied renewable energy use. The findings also show that renewable energy was mainly used to support the manufacturing capacity of various industries. It is surmised that appropriate national regulations and standards should be enacted to promote sustainable energy in Indonesia. The observations in this paper also show that relevant government policies are expected to attract more investment into the Chemical and Other Services as well as Other Industry and Mining sectors as these are the core renewable energy transfer and terminal sectors respectively for the period of observations.
    Keywords: Indonesia; sustainable energy; embodied energy; renewable energy; environmental input-output analysis
    Date: 2021
  3. By: A.R.S. Ibn Ali (Graduate School of Economics, Osaka University)
    Abstract: This study addresses the influencing factors on financial behavior of consumers in emerging markets. In particular, we examine the role of psychographic variables (i.e., lifestyle, brand loyalty, and personality) and demographic variables (i.e., age, income, education, family size, and occupation) in affecting individual decisions to use several types of consumer loans. A survey was conducted to collect data from 447 Indonesian consumers, and a probit model analysis was used to measure the effect of the variables. The results revealed that the effect of psychographic and demographic variables varies depending on financial product types (i.e., housing loans, car loans, and motorbike loans). Saving is positively associated with the use of car loans, but is negatively associated with the use of motorbike loans. The findings could be useful for marketers of financial products to improve market segmentation and target their offerings more effectively.
    Keywords: Microcredit, status consumption, emerging markets, psychographic variables, demographic variables, financial behavior.
    JEL: G21 G41 G51 G53
    Date: 2021–11
  4. By: Adha, Rishan; Hong, Cheng-Yih; Firmansyah, M.; Paranata, Ade
    Abstract: This study aims to estimate the economy-wide rebound effect using the determinants of household energy demand in Indonesia. Identifying the size of the rebound effect is essential for the government's energy efficiency and carbon emission reduction programs. The estimation of the rebound effect uses a two-stage analysis with panel data of every province in Indonesia from 2002 to 2018. We employ the Input Demand Function of the Stochastic Frontier Analysis to measure the energy efficiency of residential aggregate in Indonesia. In the second stage, we adopt the dynamic panel data model to estimate the economy-wide rebound effect. The estimated dynamic panel data model reveals that the magnitudes of the short-run and long-run rebound effects were 87.2% and -45.5%, respectively. In other words, a 1% increase in household energy efficiency results in a reduction in energy consumption of 0.13% in the short term and 1.45% in the long term. Our research also discovers that a backfire rebound effect exists in provinces with high energy efficiency. Therefore, we prove to backfire claims that improving energy efficiency will increase energy use. Henceforth, energy efficiency programs in the household sector still need to be implemented, followed by increasing technological innovation and improving housing policy.
    Keywords: Electricity demand, energy efficiency, rebound effect, stochastic frontier analysis
    JEL: C23 Q41 Q43
    Date: 2021–03–30
  5. By: Mr. Giovanni Ganelli; Anh Thi Ngoc Nguyen; Ms. Era Dabla-Norris
    Abstract: Using data from the Vietnam Labor Force Survey, this paper takes a granular look at the most salient drivers of labor informality in Vietnam by examining: (i) the nature of labor informality and transitions from formal to informal employment status and the role of worker characteristics; (ii) the empirical likelihood of being in informal employment and the policy determinants of informality using within-in country variation in the business climate and governance; and (iii) whether different policy reforms have a differential impact on workers. Our analysis sheds light on how individual characteristics and policy impediments contribute to high levels of informality and points to the need for a comprehensive agenda to tackle informality.
    Keywords: informality;Vietnam;Labor Force Survey;labor market segmentation;structural reforms;economic governance;PCI.;WP;wage worker;wage premium;FDI firm;wage employment;earnings gap;work experience
    Date: 2020–12–11
  6. By: Lee, Keun
    Abstract: East Asian economies had shown remarkable performance of high growth and low inequality, thereby forming a separate East Asian capitalism group within the VoC typologies. There are strong signs that these economies have recently been converging to the LME group, featuring low growth and high inequality, features shared by East Asian economies since the 2000s. Financialisation is arguably one cause for these outcomes of low growth and high inequality. This paper re-evaluates East Asian capitalism in the context of the Covid-19 pandemic, which has suddenly halted globalisation and further questioned the superiority of shareholder capitalism associated with financialisation and globalisation. It proposes rebalancing between shareholder and stakeholder capitalism. By doing so, East Asian economies can be reborn as a hybrid capitalism, with East Asian capitalism at its original core, to restore their growth momentum in an inclusive way. It is also argued that the post-pandemic retreat of globalisation is a good opportunity to restore autonomy in domestic economic policymaking over interest rates and exchange rates, while imposing some adjustments over formerly excessive capital mobility.
    Keywords: East Asian model; globalization; Covid-19; shareholder capitalism; stake-holder capitalism.
    JEL: F32 F59 O16 O19
    Date: 2020
  7. By: Murat Demirci (Department of Economics, Koç University)
    Abstract: Populism is on the rise, and democratic rights are deteriorating in many countries as a result of authoritarian policies adopted by populist leaders. This study analyzes how rising political populism in developing countries affects whether their citizens pursue higher education abroad. Applying the Synthetic Control Method, student migration patterns from Hungary, Ukraine, Venezuela, and Indonesia are explored as cases constituting early examples of populism. The estimates show that the rise of populism in these countries increases the number of citizens who attend universities in foreign countries. Limited evidence for worsening higher education options in the origin countries suggests that more students start pursuing foreign education to increase their chances of living abroad after graduation.
    Keywords: International Students, Outmigration of Skilled People, Political Populism, Synthetic Control Method.
    JEL: F22 I23 J24 O15
    Date: 2021–12
  8. By: Ebata, Ayako
    Keywords: Food Consumption/Nutrition/Food Safety
    Date: 2021–08
  9. By: E Philip Davis; Ka Kei Chan; Dilruba Karim
    Abstract: Studies of the effect of macroprudential policy on bank risk tend to disregard the potential complementary role of bank competition, which could influence policy's effectiveness in achieving its financial stability objectives. Accordingly, we assess the relation of macroprudential policy and competition to bank risk jointly from a sample of 1373 banks from 13 East Asian countries, using the latest IMF dataset of macroprudential policy from 1990 to 2018. Among our results, we have found that whereas macroprudential policies did commonly have a beneficial effect on risk at a bank level controlling for competition, there are a number of cases where policies were deleterious through increased risk. Notably in the developing and emerging East Asian countries and in the short term, the interactions between competition and macroprudential measures often show a lesser response in terms of risk reduction for banks with more market power, a form of "competition-stability". We suggest that this links in turn to ability of such banks to undertake risk-shifting in response to macroprudential policy. On the other hand, we find for banks in advanced East Asian countries some tendency in the long term for banks facing intense competition to take relatively more risks in face of macroprudential measures, i.e. "competition fragility". These findings provide important implications for regulators.
    Keywords: Macroprudential policy, bank risk, Z score, bank competition
    JEL: E44 E58 G17 G28
    Date: 2021–12
  10. By: Li, Xiaolu (Nanjing University of Posts and Telecommunications); Ma, Lin (Singapore Management University); Tang, Yang (Nanyang Technological University)
    Abstract: We structurally estimate the firm-level frictions across prefectures in China and quantify their aggregate and distributional implications. Based on a general equi-librium model with input and output distortions and migration, we show that the firm-level frictions are less dispersed and less correlated with productivity in richer prefectures. Counterfactual exercises show that reducing the within-prefecture mis-allocation increases the aggregate welfare, discourages migration towards large cities, and narrows the spatial inequality. Moreover, internal migration alleviates the impacts of micro-frictions on aggregate welfare and worsens their impacts on spatial inequality.
    Keywords: misallocation; regional trade; economic geography; welfare gain
    JEL: F12 O11 R12
    Date: 2021–09–01
  11. By: Bui, Anh Tuan; Pham, Linh Chi; Ta, Thi Khanh Van
    Abstract: This paper explores the impact of financial and legal obstacles that affect small and medium enterprises (SMEs) in middle-income East Asian countries by utilizing the most recent and unique dataset from the World Bank Enterprise Surveys. We particularly assess whether and at what level the effects on SMEs differ from those on large firms; We also examine how financial and institutional development levels contribute to firm performance. Our findings provide important guidance for regulators, including the authorities of middle-income nations, who seek to facilitate SMEs' development.
    Keywords: Sales Growth,Employment Growth,Financial Obstacles,Legal Obstacles
    JEL: G38 G01 G00
    Date: 2021
  12. By: Mr. Shanaka J Peiris; Miss Sanaa Nadeem; Mr. Pragyan Deb
    Abstract: Asian economies are increasingly integrated to the global economy through trade and financial linkages, exposing them to the international financial cycle. This paper explores how external shocks are transmitted to Asian economies and whether the use of policies, such as the monetary policy interest rate, foreign exchange intervention (FXI) and macroprudential measures (MPMs), can mitigate the impact of these external shocks. It uses panel quantile regressions on a sample of 14 Asian advanced and emerging economies (AEs and EMs) to assess the impact of financial and real shocks on investment and GDP growth at the median and 5th percentile tail. It finds that external financial shocks tend to have a larger effect on Asian economies than real shocks, and that the main transmission channels through which shocks are propagated are capital flows (particularly via corporate and bank balance sheets) for EMs, and credit for AEs. It also finds evidence that for Asian EMs, FXI may help dampen the capital flows and real exchange rate channels and mitigate financial shocks in the short run, and monetary policy transmission tends to be relatively weak; meanwhile MPMs can help mitigate the credit channel for both AEs and EMs.
    Keywords: Spillovers;international financial cycle;balance sheet;transmission channels;foreign exchange intervention;monetary policy;macroprudential measures;capital flows measures;WP;investment EMs;EM investment;transmission mechanism;exchange rate channel;EM growth
    Date: 2021–01–08
  13. By: Sara Balestri (Department of International Economics, Institutions and Development, and Cognitive Science and Communication research Centre, Università Cattolica del Sacro Cuore); Raul Caruso (Department of Economic Policy and CSEA, Universita Cattolica del Sacro Cuore CESPIC, Catholic University Our Lady of Good Counsel)
    Abstract: This research work provides new evidence about the effect of vulnerability to climate change on the likelihood of communal violence, by sorting out regional-specific path- ways. We focus on Sub-Saharan Africa and South/South-East Asia for the period 1995-2016, these regions being particularly exposed to climate effects and characterized predominantly by rain-fed agriculture and climate-sensitive economic activities. Relying on the ND-GAIN Vulnerability Index as a multidimensional measure for propensity of human societies to be negatively impacted by climate change, we found robust evidence that greater vulnerability is conducive to a higher risk of communal violence in Sub-Saharan Africa. On the other hand, in South/South-East Asia, results suggest that current climate variability, measured as rainfall deviations within the period, exerts a greater effect on communal violence outbreak than overall vulnerability to climate change. In both regions, greater access to productive means is associated to the reduction of conflict risk. Some policy implications were derived that suggest an integrated approach between climate policy-making and social stability efforts, given conditional effects of climate change over the likelihood of communal violence.
    Keywords: communal violence; vulnerability; climate change; conflicts; Africa; Asia
    JEL: D74 O13 Q54 Q56
    Date: 2021–07
  14. By: Francesca Marchetta (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Sokcheng Sim
    Abstract: Parental migration can influence schooling outcomes of their children left behind via two contrasting channels: the reduced parental input and supervision in children's education, and the resources that are generated (and shared via remittances) by migration. We analyze the relationship between parental migration and education for the Cambodian children left behind in rural areas.
    Abstract: La migration des parents peut influencer la scolarité des enfants qu'ils laissent derrière eux, par deux canaux : une moindre surveillance et un investissement réduit des parents dans l'éducation des enfants d'une part, et d'autre part, des ressources générées par la migration qui peuvent être investies dans l'éducation des enfants. Nous analysons cette relation pour les enfants cambodgiens qui résident dans les zones rurales du pays.
    Keywords: Scolarisation,Education,Migration,Cambodge
    Date: 2021–11–24

This nep-sea issue is ©2021 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.