Showing papers in "Journal of The Asia Pacific Economy in 2009"

Infrastructure development and economic growth in India

Abstract: In this study, we investigate the role of infrastructure in economic growth in India for the period 1970–2006 on the basis of the empirical framework developed by D.A. Aschauer (Is public expenditure productive? Journal of monetary economics, 23 (2), 1989, 177–200). In this context, we develop an index of infrastructure stocks and estimate growth-accounting equations to investigate the impact of infrastructure development on output. Overall, the results reveal that infrastructure stocks, labour force and total investment play an important role in economic growth in India. More importantly, we find that infrastructure development in India has a significant positive contribution toward growth than both private and public investments. Further, causality analysis shows that there is unidirectional causality from infrastructure development to output growth. From a policy perspective, there should be greater emphasis on infrastructure development to sustain the high economic growth which the Indian economy has ...

The automobile industry of Southeast Asia: Malaysia and Thailand

Abstract: With the exception of countries with huge potential markets like China and India the dominant academic view on establishing and sustaining viable national automobile projects in Asian developing countries is pessimistic, but still pursued by some developing country governments in Asia. Where do these contradicting views leave the Association of Southeast Asian Nations (ASEAN) automobile industry a decade after the East Asian financial crisis of 1997–1998, and at a time of a new global financial crisis emanating in the US and a downturn of the global economy? And how has automobile manufacturing in Thailand and Malaysia – two countries with sizable automobile markets that pursued different automobile policies and strategies since the early 1980s – adjusted and developed in a context of economic globalisation and emerging regionalisation of the ASEAN auto market in the twenty-first century? What are the lessons to be learned by Thailand's automobile policy that is oriented towards foreign direct investment ...

An empirical analysis of Korea's trade imbalances with the US and Japan

Abstract: This paper investigates the macro-determinants of Korea's persistent bilateral trade deficit with Japan but her trade surplus with the US using Johansen's cointegration-error correction model, which includes bilateral trade balance and real exchange rate, domestic and foreign incomes and relative money supply. The empirical results show that all variables included affect bilateral trade balances and there exists a long-run equilibrium among them. Especially, Korean won depreciation improves Korea–US trade balance according to the Marshall–Lerner condition while the J-curve effect between Korea and Japan exists with a little improvement of deterioration of trade balance followed by Korean won depreciation. In addition, domestic economic growth is found to improve persistent trade deficits against Japan and mitigate trade surplus with the US. The short- and long-run effects of monetary policy on Korea–US trade balance are opposite to those on Korea–Japan. The exogenous US income contributes to increase Kore...

Factors influencing women's empowerment on microcredit borrowers: a case study in Bangladesh

Abstract: In recent years, microcredit programmes have received wider global attention targeting the poor in developing countries. Study conducted by United Nations (2004)1 shows that more than one billion people around the world live below the poverty line, which particularly includes women and children of developing countries. They further emphasise that women’s empowerment is a critical factor in eradicating women’s poverty. Abed (2000) argues that women’s economic emancipation is pivotal for alleviating poverty. In Bangladesh, over the last few decades, both microcredit institutions and non-government organisations (NGOs) have been contributing to break the cycle of poverty. One of the main features of both microcredit institutions and NGOs has been the overwhelming representation of women.

Expansion and slowdown in Southeast Asian electronics manufacturing

Abstract: This paper examines the growth and slowdown in the electronics industry in Southeast Asia. American, Japanese and European multinational corporations relocated operations in Singapore, Malaysia and Philippines in the late 1960s and early 1970s to begin electronics assembly, packaging and testing, which was followed in the late 1980s and 1990s by the relocation of electronics manufacturing from Japanese, European, American, Korean, Singaporean and Taiwanese multinationals to the above Southeast Asian countries as well as Thailand and Indonesia. Whereas Singapore has managed significant upgrading to designing and development activities through the provision of grants, incentives, labs and strong infrastructure coordination, electronics production in the remaining countries has largely remained entrenched in assembly, packaging and testing activities. The failure of Malaysia and Thailand to support technological upgrading has undermined the capacity of these economies to sustain rapid growth of the industry ...

Garment Manufacturing in Cambodia and Laos

Abstract: This paper uses the systemic quad to examine the strength of the embedding support and firm-level technological capabilities of garment firms in Cambodia and Laos. Although garment exports have surged in both countries, it is argued in the paper that its sustenance will require institutional capacity building. Laos is the more disadvantaged of the two countries as it is landlocked and endowed with too small a labour force. The paper argues that unless the institutional and firm-level technological capabilities are developed further, both countries will find it difficult to retain a significant presence of garment firms once the preferential trade privileges are withdrawn.

Determinants of foreign direct investment and volatility in South East Asian economies

Abstract: The objective of this paper is to identify and examine the determinants of barriers to foreign direct investment (FDI) in South East Asian economies. Based on our theoretical groundings, we identify potential barriers under four categories, namely macroeconomic policy factors, political factors, institutional factors and socioeconomic factors. Using cross-sectional time-series data for 17 South East Asian economies from 1996 to 2005, we test these set of barriers against per capita FDI inflows and volatility in FDI inflows using fixed effects pooled regression analysis. In the process, we also check as to how fragile our results are to the small but important changes, which we bring in the conditioning information set using robustness check. Our empirical evidence suggests that all the possible set of barriers identified have significant negative effect on per capita FDI and positive impact on volatility in FDI inflows. We therefore suggest that there is an urgent need to find the solutions to break these...

The Cambodian clothing industry in the post-MFA environment: a review of developments

Abstract: The period 2005–2008 provides an opportunity to examine the impact of ending the Multi-Fibre Arrangement's system of quotas on the development of Cambodia's clothing industry and the wider Cambodian economy. The question is particularly interesting because (1) Cambodia has incorporated independently monitored labour standards and trade union rights into its labour law and (2) the clothing industry plays a centrally important role in growth of exports, GDP and employment. The paper shows that with the exception of the EU market, the increasingly competitive environment did not undermine expansion of the industry prior to the onset of global recession in 2008. The reason for continued success lay mainly in improved price competitiveness through exchange rate movements and the shift of China towards more upmarket production. Productivity gains seem an unlikely source of continued rapid growth. Finally, an examination of monitoring reports indicates that labour standards did not decline as a result of increas...

Charter value and risk-taking: evidence from Indian banks

Abstract: The article examines the determinants of banks' charter value and its disciplining effect on bank risk-taking since the mid-1990s. The analysis indicates that deposit and loan market concentration exert a significant effect on charter value, suggestive of a strong link between competition and charter value. Among the traditional banking activities, bank size and efficiency are found to be important determinants of charter value. The disciplining effect of charter value is robust across several measures on bank risk.

Fiscal decentralisation in Vietnam: lessons from selected Asian nations

Abstract: In this paper, fiscal decentralisation in Vietnam is examined using a new fiscal decentralisation index, which accounts for both the fiscal autonomy and fiscal importance of subnational governments as developed in the work by D. Vo (Fiscal decentralisation indices: a comparison of two approaches. Rivista di diritto finanziario e scienza delle finanze LXVII, 3 (I), 2008, 295–323). The degree of fiscal decentralisation in Vietnam and China is then compared to that of three selected ASEAN nations, namely Indonesia, the Philippines and Thailand. This is intended that some policy implications from selected ASEAN nations and China's fiscal and economic experience are drawn for Vietnam.

What is the extent of exchange rate pass-through in Singapore? Has it changed over time?

Abstract: This paper estimates the extent and evolution of exchange rate pass-through into import prices in Singapore for the period 1980 to 2005. Our results indicate that exchange rate pass-through into Singapore's import prices is 25% in the short-run and slightly higher at 29% for the long-run. There is evidence to suggest that the pass-through elasticity has trended downwards from 0.4 in 1983 to around 0.3 by 1987, after which it has remained fairly stable. The paper also examines the macroeconomic determinants of Singapore's exchange rate pass-through.

Money supply behaviour in emerging economies: A comparative analysis

Abstract: This paper reports new evidence consistent with the post-Keynesian hypothesis of money endogeneity for hitherto unexplored 10 emerging economies. These results were obtained using a vector error correction model to test for long-run and short-run causalities with data from 1996 to 2007. The evidence suggests that money supply is endogenous in five countries, namely China, the Czech Republic, India, Malaysia and Turkey; it is exogenous in Mexico, while there was no causality found in Indonesia, Russia and Taiwan. Thailand showed endogeneity in the long-run causality. Some suggestions are made to explain the mixed results, and we also discuss the limitations arising from our narrow specifications of the money supply and the models.

Population Growth and Job Creation in Timor-Leste

Abstract: Timor-Leste began its independence as one of the poorest nations in the world Substantial progress has been made thereafter but the challenges for future development are numerous High population growth and modest growth of GDP means that per capita income is declining and that the extent of poverty is increasing For this situation to change, income opportunities other than those provided by subsistence agriculture are needed Considering the low level of education and the keen competition for skilled personnel this, however, is difficult So far, it seems that most skilled workers are being absorbed by the public sector and that this is pushing up the already high skilled wage level That, in turn, affects the competitiveness of the private sector negatively and acts as an obstacle to the creation of employment opportunities outside agriculture

Dynamic demographics and economic growth in Vietnam

Abstract: This paper is an empirical study of the effect of age-structure of population on economic growth in Vietnam. The statistics show that in recent years, Vietnam's demographics have been changing remarkably with an increase in the labor force as well as a decrease in the dependency ratio. This change offers a great opportunity for the economy to enhance its economic growth at least in the short and medium terms. Our estimated results from regression models also indicate that Vietnam has utilized this opportunity: The change in demographics has contributed up to 15% of economic growth during the last five years. Another finding is that while being categorized as dependent, the aged population seems to have no negative impact on Vietnam's economic growth, but the young population does. Vietnam's population will probably shift from a demographic dividend to demographic debt in about 10 years. Therefore, it is very important for Vietnamese government to take advantage of this dividend period in order to improve ...

Industrializing Southeast Asia

Abstract: This paper introduces the state of industrialization in Southeast Asia, rationale used to promote industrialization, the timing of policy emphasis on export orientation and the different outcomes enjoyed by the market and transition economies. Although a number of economies have experimented with import substitution policies, industrialization in the Southeast Asian economies is largely driven by export markets. The paper ends by providing the setting for a deeper scrutiny of manufacturing issues selectively by industry in Southeast Asia.

Failure to launch: industrialisation in metal-rich Philippines

Abstract: This paper is an inquiry into the failure of the Philippines to utilise its rich endowment of metallic minerals in pursuing industrialisation tracing it to the absence of a clear and coherent industrial vision and programme, policy inconsistencies, weak political will and poor government–private sector cooperation using illustrations from a four-decade-old steel integration project that failed to take off. Moreover, the post-war growth of the mining industry developed not on the basis of the long-term industrial requirements of the country but around the raw material requirements of an emergent Japan. Even the sintering and smelting projects came about on the initiative of Japan based on the latter's narrow development agenda for the host country. The paper, however, argues that present-day globalisation realities dictate that the Philippines and other similarly situated developing countries should focus on activities with the highest potentials for value addition, job creation and sustained development i...

Profits, supply and HYV adoption in Bangladesh

Abstract: The adoption of HYVs (High Yielding Varieties), for increased farm profitability, and the accelerated supply of cereals are important objectives for Bangladesh agriculture. In this paper, we have investigated the manner in which price and non-price factor affect these three criteria, based upon a model of rational variety choice. The model is empirically implemented using translog profit functions and a switching regression framework, and applied to a cross-sectional farm-level dataset of Bangladeshi farms for the 1996 crop year. Results indicate that rice prices, land availability, irrigation, rural infrastructure, labour wages and prices of animal power services are important factors, while fertilizer price plays a marginal role. Given these results, the policy of liberalization of agricultural inputs (particularly fertilizers) and reforms to maintain high rice prices during harvest seasons appear sound since these allow producers to receive rice prices close to world levels without burdening the govern...

Garment exports from Vietnam: changes in supplier strategies

Abstract: This paper looks at Vietnam's changes in export performance and supplier strategies in the global garment value chains as a result of shift in international trade arrangements. Trade and competitive theories are used to analyse supplier reactions to the shifts. After the changes the Vietnamese garment industry has sustained its high level of export growth and gained import market share at its main US market although not as much as China. However, the growth export performance appears to be a mere volume expansion. There is little evidence that the suppliers are pursuing functional upgrading strategies besides the fact that they are flexible serving several customers at different markets.

Capital mobility in Asia: evidence from bounds testing of cointegration between savings and investment

Abstract: This paper explores the international capital mobility in North Asia (South Korea and Taiwan), South Asia (Indonesia, Malaysia, the Philippines, Singapore and Thailand) and India. In particular, the Feldstein–Horioka puzzle, which states domestic investment and savings are highly and positively correlated, was examined for cointegration using an autoregressive distributed lag bounds testing procedure. The results did not show a positive correlation between savings and investment. There was essentially no relationship at level between savings and investment in all eight cases. Thirteen out of 16 structural break tests or 81.25% indicate no structural breaks. The analysis concluded with certain limitations that there is high capital mobility in the economies under study.

The Indonesian wood products industry

Abstract: This paper analyses the development of Indonesia's wood products industry, particularly the plywood industry, which from a small base emerged in the 1980s as one of Indonesia's major manufacturing industries. This account is of interest since it provides a good example of ‘export substitution’, that is, the enforced development of the wood products industry by limiting the exports of logs through prohibitive export taxes and subsequently by a partial and later by a total ban on log exports. However, because of the difficulties which the wood products industry, particularly the plywood industry, has experienced over the past decade, the question arises whether export substitution provides the proper incentives to develop an efficient manufacturing industry.

Evolution of the petrochemical industry in Singapore

Abstract: This paper examines the historical development of the petrochemical industry in Singapore. While it had its origins in an earlier political economy, the petrochemical industry emerged only during the industrialization of Singapore. In addition, throughout the ensuing post-industrialization process, the enterprise was at the forefront of the endeavours of the state at maintaining a viable manufacturing sector. In its development, the Petrochemical Corporation of Singapore (PCS) was crucial at encouraging investments and integration throughout the oil, petrochemical and chemical industries on Jurong Island. Consequently, the leading companies were able to garner the benefits of infrastructural and production synergies from this cluster.

New development of agro-food small business linkages between Southeast Asia and Western Africa 1

Abstract: The paper deals with agro-food trade promotion of small- and medium-sized enterprises (SMEs) in Southeast Asia and Western Africa and between the two regions. The discussion covers (1) the capacity of Southeast Asian and Western African agro-food SMEs to access domestic, regional and possibly global markets and (2) the role of international cooperation (public and private) to promote agro-food SME trade within and outside Southeast Asia and Western Africa, respectively. Two types of South–South trade emerging innovations are identified in the field of SME agro-business matching: (1) the promotion of existing and new business linkages between Southeast Asian and Western African agro-food SMEs (trade, finance and appropriate technology transfer) and (2) the promotion of public–private partnerships to facilitate agro-food SME business linkages between far distant Southeast Asia and Western Africa.

Performance of East Asian banking sectors under IMF-supported programs

Abstract: This paper reports the performance of the banking sectors of four crisis-hit East Asian economies, under IMF-restructuring programs, over the pre- and post-restructuring periods. Results from the widely used structural analysis model indicate that the four banking sectors have become moderately concentrated, resulting in a narrower reach of banking services to customers. Because of governments' re-privatization of banks and the relaxation for foreign bank entry, foreign ownership has increased. Our financial analysis shows significant improvements in financial intermediation, efficiency and soundness. More special efforts, however, need to be made to regain performance levels in credit provision to the private sector, and increase depositor confidence, operating efficiency, and profitability. Our results suggest that it is imperative for policy-makers to realize and balance the trade-off between achieving financial soundness and providing private credit access. In addition, although new policy (deposit in...

Rethinking the measurement of capital flight: an application to Asian economies

Abstract: This paper improves on the widely used residual method in order to estimate the magnitude of capital flight in eight Asian economies over the period of 1980–2004. The paper argues that as capital flight is a drain on financial resources for development, it is more appropriate to measure it against the size of the financial market, which can be proxied by money aggregate, in contrast to the common practice of measuring it as a percentage of gross domestic product. Using this more appropriate new measure, we find that capital flight is more severe in some financially underdeveloped countries than has been suggested previously. It is also found that while capital flight could be a dormant sideshow in a benign economic environment, it could have considerable impact on the availability of financial resources when activated.

Did capital controls decrease capital flows in Malaysia

Abstract: This article considers whether Malaysian capital controls were effective in reducing short-term capital flows, as the authorities intended. Although the controls began in September 1998, the effectiveness of Malaysian capital controls has not been demonstrated. This article analyzes the regressions using dummy variables and by constructing a profit rate differential index over the period of the changes in controls as an independent variable. These variables are composed of the profit rate differentials between Malaysia and the US and the levy on repatriation of profits after the introduction of the controls. This paper estimates the impact of the controls not only on gross capital flows but also on net capital flows in order to determine whether the controls were successful. The regression results suggest that gross and net capital flows were influenced by the introduction of the controls, and that they fluctuated because of changes in the controls. The net capital inflows continued to decrease after the ...

Indonesia's two deep economic crises: the mid 1960s and late 1990s

Abstract: This paper discusses the two deep economic crises experienced by Indonesia, namely the crisis of the mid 1960s and the crisis of the late 1990s. The two deep economic crises of the mid 1960s and late 1990s led to a serious economic contraction, −3.0% in 1963 and an even more serious −13.1% in 1998, and to a steep rise in poverty. The crisis of the mid 1960s was caused by internal factors, namely the utter neglect of sound economic policies. By contrast, the crisis of the late 1990s was triggered by external factors, namely a sudden shift in market sentiments among foreign creditors and investors, which led to panic Comparing these two deep economic crises is of interest since it indicates that an economy depending on only one (but unsustainable) institution, a strong president, is vulnerable to internal or external shocks. These crises in their different origins and manifestations show the importance of ‘good governance’ and strong, viable institutions.