Discussion Paper
2012-01
Posted: January 2012
How Did the Japanese Exports Respond to Two Crises in the International Production Network?:
The Global Financial Crisis and the East Japan Earthquake
Mitsuyo ANDO
Faculty of Business and Commerce, Keio University, Japan
Fukunari KIMURA
Faculty of Economics, Keio University, Japan
Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia
Abstract: This paper analyzes the impact of two massive shocks, the 2008-2009 Global Financial Crisis and the 2011 East Japan Earthquake, on Japanese exports, focusing on the characteristics of domestic/international production networks in machinery industries. Using monthly data of Japanese bilateral exports at the most disaggregated level, we decompose the fall and recovery of Japanese exports into intensive and extensive margins and also examine the exits and re-entries by applying logit estimation and survival analysis. Episodes of both shocks confirm the stability and robustness of production networks and the enhancing link with East Asia. On the other hand, differences between two shocks seem to generate differential impacts on corporate behavior.
Discussion Paper
2011-10
Posted: December 2011
Interactive Learning-driven Innovation in Upstream-Downstream Relations: Evidence from Mutual Exchanges of Engineers in Developing Economies
Tomohiro Machikita
Institute of Developing Economies, Inter-disciplinary Studies Center, Japan
Yasushi Ueki
Institute of Developing Economies, Bangkok Research Center, Thailand
Abstract: This paper presents a simple model of the innovations that result from face-to-face communication and mutual learning in upstream-downstream relations. To examine the framework, we empirically investigate the impact of mutual knowledge exchanges on product and process innovation using a survey of manufacturing firms in Indonesia, the Philippines, Thailand and Vietnam. Evidence from interconnected firms in developing economies suggests that firms with mutual exchanges between engineers and customers achieved product innovations with new technologies and new markets. However, this is not true for simple improvement of products or process innovation. Mutual exchanges with engineers can be expected to play an important role in the case of costly innovation and in situations unknown situation to the firms.
Discussion Paper
2011-09
Posted: December 2011
Foreign Output Shocks and Monetary Policy Regimes in Small Open Economies:
A DSGE Evaluation of East Asia
Joseph D. ALBA
Nanyang Technological University, Singapore
Wai-Mun CHIA
Nanyang Technological University, Singapore
Donghyun PARK
Asian Development Bank (ADB), The Philippines
Abstract: East Asia’s small open economies were hit in varying degrees by the sharp drop in the output of major industrial countries during the global financial and economic crisis of 2008-2009. This highlights the role of monetary policy regimes in cushioning small open economies from adverse external output shocks. To assess the welfare impact of external shocks on key macroeconomic variables under different monetary policy regimes, we numerically solve and calculate the welfare loss function of a dynamic stochastic general equilibrium (DSGE) model. We find that CPI inflation targeting minimizes welfare losses for import-to-GDP ratios from 0.3 to 0.9. However, welfare under the pegged exchange rate regime is almost equivalent to CPI inflation targeting when the import-to-GDP ratio is one while the Taylor-type rule minimizes welfare when the import-to-GDP ratio is 0.1. We calibrate the model and derive welfare implications for eight East Asian small open economies.
Discussion Paper
2011-08
Posted: November 2011
Impacts of Incoming Knowledge on Product Innovation:
Technology Transfer in Auto-related Industries in Developing Economies
Tomohiro MACHIKITA
Institute of Developing Economies, Inter-disciplinary Studies Center, Japan
Yasushi UEKI
Institute of Developing Economies, Bangkok Research Center, Thailand
Abstract: This paper studies two questions on the role of networked sources of knowledge influential to product innovation. First: What is the extent of technology transferred through vertical linkages and public-private alliances, including university-industry linkages, in the phase of product improvement and development? Second: What types of knowledge are transferred from external technology sources? In a sample of ASEAN firms’ self-reported partner data restricted to automotive related industries, we found that direct linkages with MNC customers in foreign countries resulted in a lower propensity of product innovation. Indeed, incoming knowledge from MNC customers relating to the management of quality of existing products especially explained the lower propensity of product innovation. We also found that production linkages with MNC suppliers in foreign countries resulted in a higher propensity of product innovation. Incoming knowledge from MNC suppliers about quality controls explained a lower propensity of product innovation. These findings empirically indicate that networked sources of knowledge have a significant influence trade-off between maintaining existing operations and developing new products. The impacts of public-private alliances on innovation are sizable compared with the impacts of vertical linkages. Public-private alliances and vertical linkages offer knowledge with different effects on product innovation.
Discussion Paper
2011-07
Posted: November 2011
Gas Market Integration:
Global Trends and Implications for the EAS Region
Yanrui WU
UWA Business School, University of Western Australia
Abstract: East Asia is already the main destination of the world's commercial liquefied natural gas (LNG). However, the gas markets in the EAS area are either underdeveloped or fragmented. The objectives of this study are twofold, namely, i) to present a review of the trends in global gas market integration and ii) to draw implications and make recommendations for gas market development in the EAS area. To achieve the goal of an integrated gas market in the EAS region, governments in member economies must work together to implement a plan. Specifically, four recommendations are made to the EAS states: adopt a formal program to promote and nurture the development of gas markets in member states and phased sectoral reforms in relatively mature markets; set targets to gradually harmonise regulatory and technical standards in the gas sector; coordinate better to promote their "gas" causes; and boost cross-border connectivity and trading within the area and eventually achieve regional gas market integration.
Discussion Paper
2011-06
Posted: November 2011
Energy Market Integration in East Asia:
A Regional Public Goods Approach
Philip ANDREWS-SPEED
Chatham House, UK
Abstract: This study applies a regional public goods approach to the study of energy market integration (EMI) in East Asia, with a view to clarifying the outlook for such integration and the likely obstacles to be encountered. In addition to drawing on theoretical ideas relating to regional public goods, the paper will also draw on the experience of the European Union in its attempts to develop a single energy market. The study shows that many services are needed in order to develop and sustain a regional integrated energy market and that some of these services have characteristics of regional public goods, though some may also be trans-regional or global in nature as well. The study recommends that: EMI in East Asia should be pursued in an incremental manner and mainly at a sub-regional scale; and the specific steps taken towards EMI should be chosen on the basis of their likely positive economic impacts and their likely ease of delivery.
Discussion Paper
2011-05
Posted: October 2011
Energy Market Integration and Economic Convergence:
Implications for East Asia
Yu SHENG
Crawford School of Economics and Government,
The Australian National University, Canberra, Australia
Xunpeng SHI
Economic Research Institute for ASEAN and East Asia, Jakarta, Indonesia
Abstract: Energy Market Integration (EMI) has been pursued by East Asian countries in recent years, but how it could play a role in facilitating economic growth of countries in the region remains to be an empirical question. This paper uses the economic convergence analysis (including both the σ-convergence and β-convergence approaches) to examine the impact of EMI — measured by two newly constructed indexes (namely, the energy trade index and the energy market competition index) — at the country level, on dynamic economic growth path across countries, with a special interest to inform policy makings related to promoting EMI among East Asian countries. The result shows that a more integrated energy market may significantly reduce income disparity across countries and thus help poor countries to catch up with rich countries in economic development. Moreover, a comparison among the three regions including EU, NAFTA and EAS shows that EAS countries are more likely to achieve economic convergence along with the construction of EMI process. An important policy implication is that less developed countries in the EAS region can increase benefits from actively participating into the EMI process.
Discussion Paper
2011-04
Posted: August 2011
Why Does Population Aging Matter So Much for Asia?
Population Aging, Economic Security and Economic Growth in Asia
Sang-Hyop LEE
East West Center and University of Hawaii at Manoa, USA
Andrew MASON
East West Center and University of Hawaii at Manoa, USA
Donghyun PARK
Economics and Research Department, Asian Development Bank, Philippines
Abstract: Asia as a whole is experiencing a rapid demographic transition toward older population structures. Within this broader region-wide trend, there is considerable heterogeneity, with different countries at different stages of the demographic transition. In this paper, we document Asia’s population aging, describe the region’s old-age support systems, and draw out the regional socioeconomic implications of population aging and old-age support systems. Population aging gives rise to two fundamental challenges for the region – (1) developing socioeconomic systems that can provide economic security to the growing number of elderly and (2) sustaining strong growth in the face of aging over the next few decades. Successfully addressing those two challenges will be vital for ensuring Asia’s continued economic success in the medium and long term.
Discussion Paper
2011-03
Harmonizing Biodiesel Fuel Standards in East Asia:
Current Status, Challenges and Way Forward
Xunpeng SHI
Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia
Shinichi GOTO
Research Center for New Fuels and Vehicle Technology (NFV), National Institute of Advanced Industrial Science and Technology (AIST), Japan
Abstract: This paper discusses the development of and policy towards biodiesel fuel (BDF) in the East Asia Summit (EAS) Region (hereafter East Asia), with a focus on activities related to harmonizing BDF standards. It finds that the EAS countries have actively promoted the development of BDF for a variety of reasons. To minimize problems with engines arising from the use of BDF, most EAS countries have established their national BDF standards. However, these diverse standards cause barriers for BDF trade and act against the regional interest in maximizing benefits from BDF production and utilization. Therefore, the EAS policy makers decided to harmonize BDF standards, and a regional benchmark standard has been published. Through a comparative review of existing national standards against the benchmark, it finds that the harmonization is beneficial economically and environmentally, and is technically feasible but practically stalled due to the lack of political determination. Therefore, among a few policy implications, the key message to deliver is a call for political determination to implement the harmonization in the EAS region. Since harmonization of BDF standards has been tried in other regions, the findings of this paper may supplement the literature, enhance understanding of the EAS case, and provide lessons and implications that may be helpful in advancing similar harmonization elsewhere.
Discussion Paper
2011-02
Liberalization of Trade in Services under ASEAN+n:
A Mapping Exercise
Hikari Ishido
Faculty of Law and Economics, Chiba University, Japan
Abstract: This study maps out the degree of liberalization of trade in services under four ASEAN+n frameworks. After constructing a database showing the existence of limitations on market access and/or national treatment by each service sector, the study finds that the commitment level differs greatly between sensitive and less sensitive sectors, and that the commitment level under the ASEAN Framework Agreement (AFAS) is the highest among the four FTAs studied. It also finds that there are cross-country and sector-wide similarities in the pattern of service sector commitment under and across each of the FTAs; this implies that the shared domestic sensitivities can be overcome by a shared economic cooperation scheme for enhancing competitiveness (through FTA provisions). The study further highlights that, overall, Mode 4 (movement of people) gains least commitment, whereas Mode 2 (consumption abroad) gains most commitment under all the four FTAs studied. Turning to policy implications, there are two possibilities on the sequence of further streamlining the four FTAs: (1)Start within the same “clusters” among similarly committed countries under a particular FTA; then harmonize the level of commitments across all the signatory countries to the FTA; or (2) Start with harmonizing rather dissimilar countries from different “clusters” of commitments under a particular FTA, which provides small-scale “social experimenting”; then scale up this line of effort at an acceptably later stage to the level of the whole FTA, then eventually attempt to harmonize across all the FTAs centering on ASEAN. Further study along these lines is needed.
Discussion Paper
2011-01
Location Choice of Multinational Enterprises in
China: Comparison between Japan and Taiwan
Kuo-I CHANG
Department of Applied Economics, National Chung Hsing University, Taiwan
Kazunobu HAYAKAWA
Inter-disciplinary Studies Center, Institute of Developing Economies, Japan
Toshiyuki MATSUURA
Institute of Economic and Industrial Studies, Keio University,Japan
Abstract: This paper explores the location choice of MNEs in China, shedding special light on the role of agglomeration of same-nationality firms. In particular, we examine how its role differs according to investors’ productivity. Furthermore, we compare the location choice of Japanese and Taiwanese MNEs in China, because Taiwanese MNEs are expected to experience less uncertainty in investing in China than Japanese MNEs, due to Taiwan’s linguistic and cultural advantages in China. We find that, less productive Japanese firms prefer to locate close to larger same-nationality agglomerations, there are no differences in location according to firms’ productivity in the case of Taiwanese firms.
Discussion Paper
2010-11
Firm Characteristic Determinants of SME Participation in Production Networks
Charles HARVIE
Centre for Small Business and Regional Research
School of Economics, University of Wollongong, Australia
Dionisius NARJOKO
Economic Research Institute for ASEAN and East Asia (ERIA)
Sothea OUM
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract: This paper provides an empirical analysis of small and medium enterprise (SME) participation in production networks. It gauges firm characteristic determinants of SME participation in production networks. The empirical investigation utilizes results obtained from an ERIA Survey on SME Participation in Production Networks, conducted over a three month period at the end 2009 in most ASEAN countries (i.e., Thailand, Indonesia, Malaysia, Philippines, Vietnam, Cambodia, and Laos PDR) and China .
The results suggest that productivity, foreign ownership, financial characteristics, innovation efforts, and managerial/entrepreneurial attitudes are the important firm characteristics that determine SME participation in production networks. The paper extends the analysis to identify the determinants that allow SMEs to move from low to high quality or value adding participation in production networks. The results suggest that size, productivity, foreign ownership, and, to some extent, innovation efforts and managerial attitudes, are the important firm characteristics needed by SMEs to upgrade their positions in production networks. The finding suggests that SMEs really exploit competitiveness from economies of scale only when they are able to engage in production networks.
Discussion Paper
2010-10
Machinery Trade in East Asia, and the Global Financial Crisis
Mitsuyo ANDO
Faculty of Business and Commerce, Keio University, Japan
Abstract: The global financial crisis since Q3 2008 has influenced the world economy, including that of East Asia. This paper focuses on international production/distribution networks, mainly observed in the machinery sectors in East Asia, and attempts to examine patterns of machinery trade movements during the crisis to explore how and to what extent it has affected trade. More specifically, the paper analyzes these trade patterns, with distinctions between machinery intermediate goods and machinery final products, among trading partners (regions), between intra-regional trade and inter-regional trade, and among machinery sectors, so as to investigate whether there were any differences in reactions to the crisis. Moreover, in order to consider possible seasonality in trade, the paper also attempts to apply the X-12 model and discusses features of trade patterns based not only on actual trade values but also on estimated trade values with seasonal adjustment.
Our results demonstrate that effects of the global financial crisis on international production/distribution networks in East Asia do indeed exist but, at the same time, that East Asia’s trade has rapidly recovered through the regional production/distribution networks. In particular, East Asia itself is the major contributor to such a rapid recovery, not only for machinery parts and components trade but also for the machinery final goods trade. This suggests that the existence of dense production/distribution networks in East Asia helps industries to avoid becoming destabilized. It also suggests that East Asia is increasingly gaining importance not only as the production site but also as the consumption site for final products that are produced in the production/distribution networks in the region, implying that [further] activation and expansion of intra-regional demand are essential
Discussion Paper
2010-09
International Production Networks in Machinery Industries:
Structure and Its Evolution
Fukunari KIMURA
Faculty of Economics, Keio University, Japan
Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia
Ayako OBASHI
Faculty of Economics, Keio University, Japan
Abstract: This paper intensively employs annual international trade statistics obtained from the UN Comtrade and examines to what degree East Asian countries have participated in global production networks in comparison with countries in other regions and whether East Asia’s intra-regional trade in machinery is different from extra-regional trade and transactions by other regions. It provides strong evidence of the formation of East Asian production networks, particularly in the form of expansion of exports and imports of parts & components, often ICT-related. It also traces the development of intra-regional markets of both parts & components and finished products since 2000.
Discussion Paper
2010-08
Detecting Effective Knowledge Sources in Product
Innovation: Evidence from Local Firms and MNCs/JVs
in Southeast Asia
Tomohiro MACHIKITA
Inter-Disciplinary Studies Center, Institute of Developing Economies,
Japan
Shoichi MIYAHARA
School of Economics, Aoyama Gakuin University, Japan
Masatsugu TSUJI
Graduate School of Applied Informatics, University of Hyogo, Japan
Yasushi UEKI
Bangkok Research Center, IDE/JETRO, Thailand
Abstract: This paper examines the effects of internal and external sources of knowledge on the introduction of new products based on new technologies or information at firms which responded to a questionnaire survey conducted in four Southeast Asian countries. The results confirm that local firms make full use of locally available sources of new technology or information to achieve product innovation. On the other hand, foreign-owned firms depend mainly on internal R&D capacities and also possibly upon cooperation with local universities. These findings highlight the fact that local firms complement their lack of internal resources for product innovation with external knowledge sources. Foreign-owned firms utilize their international production networks to concentrate their resources on innovative activities.
Discussion Paper
2010-07
How ICTs Raise Manufacturing Performance:
Firm-level Evidence in Southeast Asia
Tomohiro MACHIKITA
Inter-Disciplinary Studies Center, Institute of Developing Economies,
Japan
Masatsugu TSUJI
Graduate School of Applied Informatics, University of Hyogo, Japan
Yasushi UEKI
Bangkok Research Center, IDE/JETRO, Thailand
Abstract: This paper examines the effects of information and communication technologies (ICTs) on business performance, using firm-level data obtained through a questionnaire survey in four ASEAN countries (Indonesia, The Philippines, Thailand and Vietnam). Sources of information and new technologies exchanged via ICTs by firms are also explored to investigate the mechanism behind ICT adoption. Empirical results verify that the introduction of ICT to reorganize business processes is significantly correlated with business performance, in particular the development of export markets and improvement of production management. ICTs facilitate access to information and technologies accumulated in in-house departments and joint-venture (JV) affiliates of the respondent firms. There are considerable differences between multinational companies (MNCs)/JVs and local firms. MNCs/JVs make use of information and technologies obtainable via ICTs from their own R&D departments, JVs established with local partners and foreign-owned suppliers/customers to improve factory management, mostly for product quality improvement and production cost reduction. In contrast, local firms interconnect their own R&D departments via ICTs to enhance their business performance in broader areas than MNCs/JVs, including the development of export markets.
Discussion Paper
2010-06
Carbon Footprint Labeling
Activities in the East Asia Summit Region:
Spillover Effects to Less Developed Countries
Xunpeng SHI
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract: This paper discusses carbon footprint (CFP) labeling activities in the East Asia Summit (EAS) region with a focus on their spillover effects on less developed countries (LDCs). Due to increased and increasing economic integration, implementation of CFP labeling schemes in one country will have significant impact on others. The impact is particularly significant for LDCs in the EAS region because: the EAS production networks are highly integrated, which provide necessary condition for the spill-over effects to be generated; LDCs generally lack the capacity to measure and label CFP of their products; and exports from LDCs often produced by relatively small producers. However, the effective inclusion of LDCs in labeling schemes may offer more and cost-effective opportunities for carbon emission reductions. The presence of spillover effects means that countries that are implementing carbon labeling schemes need to take stakeholders outside of their boundaries into consideration. The disadvantages of LDCs can be reduced by well designed carbon labeling schemes, by innovative solutions to low cost data collection and certification, and by technical transfer, training and capacity building.
Discussion Paper
2010-05
Firm-level Analysis of Globalization:
A Survey of the Eight Literatures
Kazunobu HAYAKAWA
Inter-Disciplinary Studies Center, Institute of Developing Economies,
Japan
Fukunari KIMURA
Economic Research Institute for ASEAN and East Asia, Faculty of Economics, Keio
University, Japan
Tomohiro MACHIKITA
Inter-Disciplinary Studies Center, Institute of Developing Economies,
Japan
Abstract: This paper presents an extensive review of empirical studies that analyze the various impacts of the globalization phenomenon on corporate activities, using micro data. First, we set up a flow chart describing how globalization leads to national productivity enhancement. Secondly, we summarize the hypotheses and the methods explored in eight lines of literature on globalization, which this flow chart maps. Thirdly, we illustrate rich implication for economic consequences of trade liberalization and then discuss possible avenues for micro-data analyses
Discussion Paper
2010-04
The Impacts of Face-to-face and Frequent Interactions on Innovation:
Upstream-Downstream Relations
Tomohiro MACHIKITA
Inter-Disciplinary Studies Center, Institute of Developing Economies,
Japan
Yasushi UEKI
Bangkok Research Center-Japan External Trade Organization, Thailand
Abstract: This paper proposes a new mechanism linking innovation and networks in developing economies to identify explicit production and information linkages and investigates the testable hypotheses of these linkages using survey data gathered from manufacturing firms in East Asia: Indonesia, Thailand, the Philippines, and Vietnam. We found that firms that dispatched engineers to customers achieved more innovations than firms that did not. Just-in-time relationship is effective for dealing with process innovation. We found that such strong complementarities are not effective for product innovation. These findings support the hypothesis that face-to-face communication and strong complementarities among buyer-seller networks have different roles in product and process innovation.
Discussion Paper
2010-03
Innovation in Linked and Non-linked Firms:
Effects of Variety of Linkages in East Asia
Tomohiro MACHIKITA
Inter-Disciplinary Studies Center, Institute of Developing Economies,
Japan
Yasushi UEKI
Bangkok Research Center-Japan External Trade Organization, Thailand
Abstract: This paper proposes a new mechanism linking innovation and networks in developing economies to detect explicit production and information linkages. It investigates the testable implications of these linkages using survey data gathered from manufacturing firms in Indonesia, Thailand, the Philippines, and Vietnam. In-house R&D activities, internal resources, and linkages with local and foreign firms play a role in reducing the costs of product-and process innovation, and the search costs of finding new suppliers and customers. We found that firms with more variety of information linkages achieve more types of innovation. Complementarities between internal and external sources of knowledge are also found.
Discussion Paper
2010-02
Search-theoretic Approach to Securing New Suppliers:
Impacts of Geographic Proximity for Importer and Non-importer
Tomohiro MACHIKITA
Inter-disciplinary Studies Center, Japan External Trade Organization
Yasushi UEKI
Bangkok Research Center, Japan External Trade Organization
Abstract: This paper empirically examines whether firms consider geographic proximity as they seek for a new supplier. While addressing the difference between importers and non-importers, we estimate the effects of geographic proximity on the dynamic process of procurement, using survey data gathered from manufacturing firms in Indonesia, Thailand, and Vietnam. We find that the firms procuring intermediate goods from nearby suppliers and locally owned firms are more likely to form new trade relationships with suppliers. The more sensitive they are about the geographic proximity of their suppliers, the more likely it is that locally dependent firms will seek out new sources of supply of raw materials. This relationship disappears for firms which import some of their inputs.
Discussion Paper
2010-01
Spatial Architecture of the Production Networks in Southeast
Asia
Tomohiro MACHIKITA
Inter-disciplinary Studies Center, Japan External Trade Organization
Yasushi UEKI
Bangkok Research Centre- Japan External Trade Organization, Thailand
Abstract: The main purpose of this paper is to provide empirical evidence on the inter-firm production networks in Southeast Asian developing economies. Using firm-level data obtained from a questionnaire survey of manufacturing firms in Indonesia, the Philippines, Thailand, and Vietnam in 2008, this paper presents the regional distribution of main customers and suppliers and their geographical proximity. Firm-level capabilities and transaction costs associated with specific inter-firm relationships would influence the distances between customers and suppliers. Ordered logistic estimations are carried out to examine factors affecting the spatial architecture of the production networks in the region.
Discussion Paper
2009-23
Foreign Presence Spillovers and Firms’ Export Response:Evidence from the
Indonesian Manufacturing
Dionisius Narjoko
Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia
Abstract: This paper examines the existence of spillovers associated with the presence of multinational enterprises (MNEs) on a firm’s decision to export, and on export intensity. It utilizes data from Indonesian manufacturing for the census years 1996 and 2006. Channels through which MNEs can affect other firms’ export behavior are considered and tested. The econometric analysis suggests that the contribution of MNEs in improving technological knowledge raises the likelihood that domestic firms will enter the export market, and improves export performance. The analysis finds weak evidence to support the hypothesis that competition, created by the operation of MNEs, facilitates entry into export markets. Further analysis however shows that the impact of competition depends on the level of productivity of the domestic firms. In particular, the more productive firms are suggested to have been able to benefit more than the less productive ones. The overall analysis suggests that given the mixed evidence, policies to promote MNEs are still worth pursuing. The most obvious justification comes from the positive impact of the increased pool of technological knowledge. Other than this, strengthening trade facilitation seems to be a positive proposition, given the finding that many of the new domestic exporters seem to have been constrained in increasing their exports.
Discussion Paper
2009-22
Abstract: It is noted that utilization of
ASEAN Free Trade Agreements (FTAs) is low by international standards. In
order to clarify the reasons for such low utilization, this paper investigates
what kinds of Japanese affiliates in ASEAN are more likely to use FTAs in their
exporting, by employing unique affiliate-level data. Our findings are as
follows. First, the larger the affiliate is, or the more diversified the
origins of its procurements, the more likely it is to utilize an FTA scheme in
its exporting. Second, affiliates that export actively to countries with
higher general tariffs are more likely to use FTAs. Third, there are clear
differences in FTA utilization depending affiliates’ locations and
sectors.
ERIA-DP-2009-22
Discussion Paper
2009-21
Resiliency of Production Networks in Asia: Evidence from the Asian
Crisis
Ayako OBASHI
Faculty of Economics, Keio University
Abstract: This paper presents the resiliency of international production networks stretched across the Asian region in face of the Asian financial and currency crisis back in 1997-98, as well as confirming its stability with consideration to adverse effects of the crisis. To examine the probability of survival once a trade relationship is established and the probability of revival after the transaction is broken off, survival analysis is conducted using the country-product level trade data. A series of survival analyses provide evidence supporting the view that transactions of intermediate goods within production networks are more likely to be stable and resilient to a temporary disruption compared to other transactions. First, even after considering the impact of the Asian crisis, machinery parts & components are more likely to be traded through long-lived trade relationships compared to finished products in intra-Asian trade. Second, machinery parts & components are no exception in that a non negligible portion of trade relationships was actually broken off amid the Asian crisis, but many of them were restored shortly afterward as compared to the others.
Discussion Paper
2009-20
Fragmentation in East Asia: Further Evidence
Mitsuyo ANDO
Faculty of Business and Commerce, Keio University, Japan
Fukunari KIMURA
Faculty of Economics, Keio University, Japan
Economic Research Institute for ASEAN and East Asia, Indonesia
Abstract: This paper analyzes the spatial pattern of production/distribution networks in East Asia. Two issues are investigated. The one is how the formation of networks has changed the intra- and inter-regional trade pattern. We find that an explosive expansion of intra-regional trade in machinery parts and components, in particular among developing countries, contributes to the current dense networking. The other is how corporate firms effectively organize fragmentation in terms of geographical distance and disintegration. The micro data of Japanese firms indicate that long-distance transactions are mainly intra-firm while transactions in local markets are predominantly arm’s-length (inter-firm), suggesting the formation of agglomeration.
Discussion Paper
2009-19
The Prospects for Coal: Global Experience and Implications for Energy
Policy
Xunpeng SHI
Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia
Crawford School of Economics and Government,
The Australian National University (ANU), Australia
Abstract: This paper argues that coal and its industry is promising. It is found that the Western European (including the British) case has been misunderstood and the US case shows a developing coal industry under increasing levels of environmental pressure. The demonstration of the declining emissions intensity of coal provides an additional mean of reconciling the development of the coal industry with the environment. In the long term the enforcement of environmental regulations can benefit the coal industry in several ways, and the alternatives to coal are not yet available in a sufficiently large scale. Based on the positive prospects of coal, issues related to climate change, clean coal technology and energy policy are discussed.
Discussion Paper
2009-18
Income Distribution and Poverty in a CGE Framework:A Proposed
Methodology
Sothea OUM
Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia
Centre of Policy Studies, Monash University, Australia
Abstract: The paper discusses methodologies addressing income distribution and poverty in a Computable General Equilibrium (CGE) model framework, by describing how to link CGE results with household survey data to analyze income distribution and poverty implications. The most basic approach is simply to fit the household income/expenditure to the survey data by suitable parametric distribution functions. The post-simulation poverty indices can be estimated by either assuming that the income of each individual household within the group moves proportionally with the group’s mean income, or by our proposed elasticity method. In our proposed method, we use the elasticity estimated from existing surveys to calculate the change in expenditure of each subgroup category in response to change in the household category’s mean consumption, supplied by the core model’s simulation, to derive post-simulation poverty indices. Our approach may better capture intra-group income distribution of households and moderate gains or losses in welfare from economic growths.
Discussion Paper
2009-17
ASEAN Rules of Origin:Lessons and Recommendations for Best
Practice
Erlinda M. MEDALLA
Jenny BALBOA
Philippine Institute for Development Studies (PIDS), Philippines.
Abstract: Rules of Origin (ROO) set the criteria in determining the nationality of a product and where a product was made. The importance of ROO has increased in the past years as more countries engage in Free Trade Agreements (FTAs) and begun treating goods differently according to where the product was made, along with trade-specific preferences or restrictions to the imported good once its origin is determined. This study is done to cull the lessons from ASEAN’s experience in determining and implementing the Rules of Origin. It draws the important lessons and makes recommendations for best practice that would contribute to the cooperation and integration efforts in the region. The paper examines the various design and implementation practice in ROO regimes, focusing on RTAs where the ASEAN is involved. The paper presents findings from recent studies on the cost of ROO compliance and the FTA utilization rates. It concludes with recommendations on simplification of ROO and some reforms on administrative procedures, bringing in the development country dimension, and some general guidelines to follow to improve ROOs.
Discussion Paper
2009-16
Special Economic Zones and Economic Corridors
Masami ISHIDA
Development Studies Center, Institute of Developing Economies,
Japan
Abstract: Various reports show that special economic zones (SEZ) have become a prime catalyst for regional development in developing countries such as China and the ASEAN countries. The SEZ can be defined as a specific geographical region with economic laws that are more liberal than a country's typical economic laws. Many SEZs have characteristics of bonded zones, export processing zone (EPZ) or free trade zones and provide special incentives, including tax exemption or reduction to investors. The purpose of the paper is to enumerate the candidates for SEZ in Cambodia, Laos, Myanmar, and Vietnam (CLMV countries) according to four types: "metropolitan areas," "ports and harbors," "border areas" and "junctions or intersections." The first two types are based on the experience of forerunning ASEAN countries and the latter two are based on the economic corridors of the Greater Mekong Sub region Economic Cooperation Program. The paper concludes by identifying locations for the questionnaire and flowchart approach-based surveys, and presenting country-specific strategies.
Discussion Paper
2009-15
Border Area Development in the GMS:Turning the Periphery into the
Center of Growth
Toshihiro KUDO
Area Studies Center, Institute of Developing Economies, Japan
Abstract: Border area development is neither an original nor a brand new idea of the author. It has long been discussed in a variety of words including border industries, growth triangles, growth areas and economic corridors. The Greater Mekong Subregion (GMS) Economic Cooperation revitalized the border area development as a new development strategy for less developed countries such as Cambodia, Lao PDR and Myanmar. This paper examines the location advantages of border areas, in particular of those between less developed regions and more developed ones. They include complementary factor endowment, cross-border infrastructure services and the degree of economic integration and border barriers. An industry located in border areas has a growth potential, as it can exploit the location advantages of the abundant and cheap labor force in less developed regions, while avoiding high service link costs and unstable utility services that accrue from underdeveloped infrastructure in less developed regions, by utilizing cross-border infrastructure services provided from more developed regions. Special economic zones (SEZs) located in the border areas can effectively exploit such location advantages and contribute to the formation of industrial clusters in border areas.
Discussion Paper
2009-14
Measuring Regulatory Restrictions in Logistics Services
Claire HOLLWEG
School of Economics, University of Adelaide, Australia
Marn-Heong WONG
Lee Kuan Yew School of Public Policy,
National University of Singapore (NUS), Singapore
Abstract: This study measures the extent of restrictions on trade in logistics services in the ASEAN+6 economies by constructing a logistics regulatory restrictiveness index for each economy that quantifies the extent of government regulations faced by logistics service providers. This is the first study of its kind to construct a regulatory index of the entire logistics sector, which includes the main modes of international transport and customs restrictions. The indices show that large differences exist in the logistics regulatory environment of ASEAN+6 economies. Many of these economies are open to trade in logistics services, while others are relatively restrictive. Malaysia, China, Indonesia, Lao PDR, the Philippines and Vietnam are the most restrictive economies of logistics services in this region. Relatively, Singapore and Australia are the most open economies for trade in logistics services, along with Japan and New Zealand. Preliminary investigations find evidence of negative relationships between logistics regulatory restrictiveness and logistics sector performance, as measured by the World Bank’s Logistics Performance Index and its sub-components. These findings support that notion that a less restricted trade environment results in better performance for the logistics sector.
Discussion Paper
2009-13
Business Views on Trade Facilitation
Loreli C. De DIOS
Center for the Advancement of Trade Integration and Facilitation
Abstract: Business views on the most important barriers to trade facilitation are taken from two region-wide surveys in 2006 covering the ASEAN priority integration sectors, namely: agro-based, fisheries, automotive, electronics, e-ASEAN, healthcare, rubber, textile and apparel, wood-based, air travel, tourism, and logistics. The data were reassembled into (1) border procedures, (2) individual barriers, (3) broad categories of barriers, and the results ranked in terms of incidence and significance. Border procedures such as unofficial facilitation fees, tedious goods declaration, poor information on procedures, difficult release of goods, and complex refund and appeals process were the most widespread and serious. Logistics businesses were similarly affected by lengthy documentation, burdensome inspection, varying goods nomenclature, facilitation fees, poor regional coordination, and inefficient clearance. Across all types of barriers, for the goods sector, Customs procedures and their manner of implementation were prevalent, while quantity control measures, official and unofficial fees, and technical standards were significant. For the services sector, the operator’s licensing requirement was the most common and severe, while high excise taxes, user fees, lengthy visa procedures, and market limits were further impediments. Logistics operators confirmed the singular importance of Customs procedures particularly time consuming documentation, followed by foreign ownership and transport-specific limitations. Time and monetary costs of complying were substantial.
Discussion Paper
2009-12
Monitoring Trade Costs in Southeast Asia
Patricia SOURDIN
School of Advanced International Studies (SAIS)
Johns Hopkins University
Richard POMFRET
School of Economics, University of Adelaide
Abstract: This paper develops an Index of Trade Costs for ASEAN Member Countries, 1990-2007 based on the gap between cif and fob values of ASEAN exports to Australia. The cif/fob gap is a commonly used aggregate measure of trade costs, and Australia is a useful benchmark for ASEAN countries because it is a large trading partner whose major ports of entry are roughly equidistant from the ASEAN countries. The case for using this Index as a measure of trade costs is set out in the first section. The second section examines the raw data for the ASEAN countries. The third section reports econometric analysis of the cif/fob measure to better understand why trade costs vary across countries and to compare the ASEAN members’ record to the global average during the period 1990-2007. The final section presents the two versions of the Index, discusses some reservations to using the cif/fob measure of trade costs, and suggests how the Index could be upgraded, maintained and extended.
Discussion Paper
2009-11
Barriers to Trade in Health and Financial Services in ASEAN
Philippa DEE
Huong DINH
Crawford School of Economics and Government,
The Australian National University, ANU, Australia
Abstract: The purpose of this paper is to give background information on current barriers to trade in four services sectors in the ASEAN region. The information was summarized in a companion paper (Dee 2009), which also laid out concrete proposals for achieving the liberalization targets for these sectors from the ASEAN Economic Blueprint. The four key services are medical services (medical, dental and paramedical services), health services (hospital, medical laboratory and ambulance services), banking services and insurance services. The medical and health sectors are priority sectors under the ASEAN Economic Community Blueprint. This paper describes the survey instruments that were used to collect information about current regulatory policy settings in these sectors in each of the ten ASEAN economies, gives a detailed presentation of results, and compares the results to other recent surveys of services trade barriers in these sectors. In the case of healthcare, there are few comparable cross-country studies, and none that have looked at the evolution of services trade barriers over time. In the case of banking and insurance, by contrast, there have been several previous studies, two of which have looked at how services trade barriers in these sectors have changed over time. In this paper, the most recent information on barriers to financial services trade in ASEAN is also made comparable to that in these other recent studies, so that the current situation in ASEAN can be compared with the recent situation in a number of other developed and developing countries. The findings of the other recent studies on the patterns of financial services liberalization over time are also summarized, as this can give insights into likely patterns of liberalization in ASEAN.
Discussion Paper
2009-10
The Impact of the US Subprime Mortgage Crisis on the World and East
Asia:Through Analyses of Cross-border Capital Movements
Sayuri SHIRAI
Faculty of Policy Management, Keio University, Japan
Abstract: The world economy is currently suffering a global
financial and economic crisis that has become severe since the second half of
2008. This global financial situation was triggered by the advent of the
subprime mortgage crisis in the United States that became apparent in mid-2007.
Europe was the first area affected, thereafter its contagion spread to the rest
of the world. East Asia did not escape. The nature of the current global
financial crisis is unprecedented in terms of (1) the scale of the problems in
the financial sector (particularly in the United States and Europe), (2) the
depth and speed of contagion worldwide (through financial sector and trade
linkages), and (3) the severity of the recession (particularly in emerging
market economics, small countries, and East Asia). This paper analyzes, mainly,
cross-border capital movements by looking at the pre-crisis features of the
United States as the crisis hypocenter and its relationships with other
countries. Detailed observations are presented on cross-border investment in
stocks and debt securities, as well as banking activities. The paper then sheds
light on the impact of the subprime mortgage crisis on cross-border capital
movements in the United States, the United Kingdom, and East Asia. Other
performance indicators such as exchange rates, economic growth and
international trade are also discussed in the case of East Asia. The paper
examines several challenges posed for East Asia by the crisis.
Discussion Paper
2009-09
International Production Networks and Export/Import Responsiveness to
Exchange Rates: The case of Japanese Manufacturing Firms
Mitsuyo ANDO
Keio University, Japan
Akie IRIYAMA
State University of New York at Buffalo
Abstract: This paper examines how international
production/distribution networks provide individual firms with
exporting/importing responsiveness to exchange rate movements. With the
micro-data of Japanese manufacturing firms from 1994 to 2004, we find that
firms’ exports tend to respond to exchange rate movements, in particular (1)
when firms are large in size, (2) when majority-owned affiliates are dominant
among their foreign affiliates, and (3) when their intra-firm trade ratio is
moderately high. Furthermore, these tendencies are more salient for machinery
firms, one of the major players in international production networks in East
Asia. The results suggest that Japanese manufacturing firms, particularly
machinery firms, with greater foreign operations under their own corporate
control would better absorb shocks of exchange rate movements by adjusting
intra-firm transactions more significantly. We do not find such tendencies for
imports, however. The study provides implications for international production
networks, which have developed drastically in East Asia.
Discussion Paper
2009-08
Vertical and Horizontal FDI Technology Spillovers: Evidence from Thai
Manufacturing
Archanun KOHPAIBOON
Faculty of Economics, Thammasat University, Thailand
Abstract: This paper examines Foreign Direct Investment (FDI)
spillover, using an unbalanced panel data set of the manufacturing survey of
Thailand during the period 2001-03. In this paper, not only are both horizontal
and vertical FDI technology spillovers examined, but the former is also assumed
to vary across industries. The key hypothesis is that horizontal FDI spillovers
depend on the trade policy regime as well as the absorptive capability of
locally owned plants. Our panel data econometric analysis highlights the
important role of the trade policy regime as a conditional gain of horizontal
FDI spillovers. In particular, positive horizontal FDI spillovers are found
only in an industry operating in a relatively liberal environment.
Interestingly, imposing an assumption of identical horizontal FDI spillovers
across industry could result in biased estimates of vertical FDI spillovers.
The key policy inference highlights the relative importance of the trade policy
regime in harnessing the gain from foreign presence. Liberalizing the foreign
investment regime thus has to go hand in hand with liberalizing the trade
policy to gain FDI technology spillovers. Our finding here gives a warning not
to overemphasize the role of linkages. It is the quality rather than magnitude
of linkages that should be used a proxy of the magnitude of vertical FDI
spillovers.
Discussion Paper
2009-07
Gains from Fragmentation at the Firm Level:Evidence from Japanese
Multinationals in East Asia
Kazunobu HAYAKAWA
Inter-disciplinary Studies Center, Institute of Developing Economies,
Japan
Fukunari KIMURA
Economic Research Institute for ASEAN and East Asia
Faculty of Economics, Keio University, Japan
Toshiyuki MATSUURA
The Institute of Economic Research, Hitotsubashi University, Japan
Abstract: The unprecedented development of production networks
in East Asia has been investigated, both theoretically and empirically,
employing the conceptual framework of fragmentation theory and its extensions.
However, the benefits of production fragmentation at the firm level,
particularly benefits deriving from different location advantages, have never
been directly measured empirically. This paper presents the very first attempt,
to the authors’ knowledge, to empirically capture the benefits of
fragmentation. Specifically, using Japanese firm-level data, we find that the
larger the gap in the capital-labor ratios between fragmenting firms’ home
and overseas activities, the more greatly their cost efficiency improves.
Discussion Paper
2009-06
Plant Entry in a More Liberalised Industrialisation Process: An Experience of
Indonesian Manufacturing during the 1990s
Dionisius A. NARJOKO
Centre for Strategic and International Studies, Indonesia
Abstract: Some major policy changes towards a more open trade
and investment regime occurred in Indonesia during the 1980s and 1990s. The
impact of these policy changes on the country’s industrialisation has been
generally favourable. However, little is known about the impact on the dynamics
of plant in the country’s manufacturing. This study addresses this subject,
examining the extent and determinants of plant entry in Indonesian
manufacturing over the period 1993-96, and asking how the policy reforms
affected plant entry. The key finding suggests that the policy reforms
increased the extent of competition within industry. This, however, does not
seem to be very strong, and the study puts forward some possible explanations.
The discussion reaches a consensus that maybe, during the period under this
study, the process of the reform had not really been completed and, at the same
time, the (predicted) positive impact of the liberalisation had not been fully
realised.
Discussion Paper
2009-05
Firm-level Analysis of Globalization: A Survey
Kazunobu HAYAKAWA
Inter-disciplinary Studies Center, Institute of Developing Economies,
Japan
Fukunari KIMURA
Economic Research Institute for ASEAN and East Asia
Faculty of Economics, Keio University, Japan
Tomohiko MACHIKITA
Inter-disciplinary Studies Center, Institute of Developing Economies,
Japan
Abstract: This paper extensively reviews empirical studies
that analyze the various impacts of the globalization phenomenon on corporate
activities by using micro data. First, we set up a flow chart describing how
globalization leads to national productivity enhancement. Secondly, we
summarize the hypotheses and the methods explored in 13 lines of literature on
globalization, which this flow chart maps. Thirdly, we discuss further possible
avenues for micro data analysis. Finally, we provide some suggestions on
statistics-related policies.
Discussion Paper
2009-04
Learning-by-exporting in Korean Manufacturing: A Plant-level
Analysis
Chin Hee HAHN
Korea Development Institute, Korea
Chang-Gyun PARK
College of Business Administration, Chung-Ang University, Korea
Abstract: The paper analyzes whether firms that start
exporting become more productive utilizing recently developed sample matching
procedures to control the problems from self-selection into the export market.
We use plant level panel data on Korean manufacturing sector from 1990 to 1998.
We find clear and robust empirical evidence in favor of the
learning-by-exporting effect; total factor productivity differentials between
exporters and their domestic counterparts arises and widens during several
years after export market entry. We also find that the effect is more
pronounced for firms that have higher skill-intensity, higher share of exports
in production, and are small in size. Overall, the evidence suggests that
exporting is one important channel through which domestic firms acquire
accesses to advanced knowledge and better technology. Also, the stronger
learning-by-doing effect for firms with higher skill-intensity seems to support
the view that “absorptive capacity” matters to receive knowledge spillovers
from exporting activity.
Discussion Paper
No.2009-03
Stability of Production Networks in East Asia:Duration and Survival of
Trade
Ayako OBASHI
Faculty of Economics, Keio University, Japan
Abstract: This paper sheds light on the stability of
international production networks in East Asia from the perspective of the
duration and survival of bilateral trade relationships at the product-line
level. Using highly disaggregated data for intra-East Asian machinery trade,
survival analysis is conducted as well as the examinations of the duration and
volatility of trade relationships. The product-level analyses reveal that,
compared to machinery finished products, machinery parts & components are
traded through longer-lived and more stable relationships among East Asian
countries. Once transactions are started, trade relationships of machinery
parts & components are more likely to be maintained between countries even
at a long distance, regardless of the exchange-rate fluctuations. The
probability of discontinuing trade relationships of machinery finished
products, on the other hand, are more likely to be sensitive to the level of
trading cost as well as the exchange-rate fluctuations.
Discussion Paper
No.2009-02
The Spatial Structure of Production/Distribution Networks and Its Implication
for Technology Transfers and Spillovers
Fukunari KIMURA
Faculty of Economics, Keio University, Japan
Economic Research Institute for ASEAN and East Asia, Indonesia
Abstract: This paper argues that a variety of firm specificity
supported by sophisticated inter-firm relationships is essential for
understanding the mechanics and spatial structure of international
production/distribution networks in East Asia. By mapping the two-dimensional
fragmentation framework (Kimura and Ando (2005)) into geographical space, the
paper proposes the concept of four layers of transactions in
production/distribution networks: (i) local, (ii) sub-regional, (iii) regional,
and (iv) the world. The concept effectively bridges geographical extensions of
production/ distribution networks and the nature of transactions in terms of
intra-firm vs. arm’s-length as well as technological/managerial conditions.
In addition, the paper discusses the implications of such geographical
structure of production/distribution networks for technology
transfers/spillovers from multinationals to local firms and claims its
importance in new development strategies.
ERIA-DP-2009-02
Discussion Paper
No.2009‐01
International Production Networks: Comparison between China and
ASEAN
Fukunari KIMURA
Faculty of Economics, Keio University, Japan
Economic Research Institute for ASEAN and East Asia, Indonesia
Ayako OBASHI
Faculty of Economics, Keio University, Japan
Abstract: Although East Asia experiences splendid economic growth with the development of international production networks, remaining development gaps across countries and regions are still large. This paper compares regions within China and countries in ASEAN in terms of the degree of participation in international production networks and discusses similarities and differences between China and ASEAN in the conceptual framework of extended fragmentation theory. Examining intra-East-Asian exports of machinery products by regions/countries, we find that China and ASEAN share a number of common features. However, China presents a hint of convergence in regional trade patterns while ASEAN seems to stagnate in its trickle-down effects on latecomers.
Discussion Paper
No.2008‐03
The Effect of Exchange Rate Volatility on International Trade in East
Asia
Kazunobu HAYAKAWA
Inter-Disciplinary Studies Center, Institute of Developing Economies,
Japan
Fukunari KIMURA
Faculty of Economics, Keio University, Japan
Economic Research Institute for ASEAN and East Asia, Indonesia
Abstract: In this paper, we empirically investigate the relationship between exchange rate volatility and international trade, focusing on East Asia. Our findings are summarized as follows: First, intra-East Asian trade is discouraged by exchange rate volatility more seriously than trade in other regions. Second, one important source for the discouragement is that intermediate goods trade in international production networks , which is quite sensitive to exchange rate volatility compared with other types of trade, occupies a significant fraction of East Asian Trade. Third, the negative effect of the volatility is greater than that of tariffs and smaller than that of distance-related costs in East Asia.
Discussion Paper
No.2008‐02
Predicting Long-Term Effects of Infrastructure Development Projects in
Continental South East Asia: IDE Geographical Simulation Model
Satoru KUMAGAI
Toshitaka GOKEN
Ikumo ISONO
Souknilanh KEOLA
Institute of Developing Economies, Japan
Abstract: It is important to develop a rigorous economic geography model for predicting changes in the location of population and industries across regions in the process of economic integration. The IDE Geographical Simulation Model (IDE-GSM) has been developed for two major objectives: (1) to determine the dynamics of locations of population and industries in East Asia in the long term, and (2) to analyze the impact of specific infrastructure of the IDE-GSM is introduced in the article and accompanied with results of test analyses on the effects of the East West Economic Corridor on regions in Continental South East Asia. Results indicate that border costs appear to play a big role in the location choice of populations and industries, often a more important role than physical infrastructures themselves.
Discussion Paper
No.2008‐01
Firm-level Analysis of Globalization: A Survey
Kazunobu HAYAKAWA
Inter-Disciplinary Studies Center, Institute of Developing Economies,
Japan
Fukunari KIMURA
Faculty of Economics, Keio University, Japan
Economic Research Institute for ASEAN and East Asia, Indonesia
Tomohiro MACHIKITA
Inter-Disciplinary Studies Center, Institute of Developing Economies,
Japan
Abstract: The aim of this paper is to extensively review empirical studies that analyze the globalization phenomena by using micro data. First, we set up a flow chart describing how the policy measures on globalization lead to national productivity enhancement. Second, we summarize the hypotheses and the methods explored in 12 literatures on globalization, which this flow chart is mapping. Last, we discuss further possible avenues in micro data analyses.
