ASEAN Economic Bulletin Vol. 28/3 (Dec 2011)

Contents

• ASEAN Economic Bulletin Vol. 28/3 (Dec 2011)
  [Whole Publication]
• Preliminary pages

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• ARTICLES
• Petroleum Prices and Poverty in Laos, by Peter Warr, author see abstract
  Laos depends heavily on imported petroleum for its fuel requirements. The volatility of international petroleum prices has raised concerns about its implications for poverty, but the linkages between petroleum prices and poverty are complex. This study examines the effect that petroleum prices have on the poor of Laos, using a general equilibrium modelling approach, which emphasizes the way transport costs impact on different categories of households. The results indicate that higher petroleum import prices raise transport costs and thereby harm rural people, among whom poverty incidence is highest, more severely than urban people, because rural people are more vulnerable to increases in transport costs.
• An Analysis of Thailand's Net Capital Inflows Surges After the 1997 Crises, by Paitoon Wiboonchutikula, Polpat Kotrajaras, Bundit Chaivichayachat, authors see abstract
  The paper analyses the nature, the determinants, and the impacts of net capital inflows surging in Thailand after the 1997 currency and financial crises. After the crises, the composition of the net capital inflows was changed from the ones dominated by short-term flows to direct foreign investment. However, in recent years, huge net inflows of short-term loans and portfolio investment have returned. While direct foreign investment found mostly in the manufacturing export sector gains from real depreciation of domestic currency, short-term loans and foreign investment in debt and equity were attracted by real exchange rate appreciation together with high returns on investing in Thailand as well as in the emerging Asian region as a whole. As a result of the surge of total net capital inflows, asset prices increased somewhat, foreign reserves grew rapidly as domestic currency appreciated both in nominal and real terms. The study suggests policies which seek to balance the impacts of capital inflows on real exchange rates and the accumulation of foreign reserves. An attempt should also be made to allow for capital to flow out more freely mitigating the adverse effects of the net capital inflow surges.
• Sources of Singapore's Economic Growth, 19652008: Trends, Patterns and Policy Implications, by Khuong Vu, author see abstract
  This paper analyses the sources of Singapore's GDP and labour productivity growth in 19652008 and reveals insights into related trends and patterns. The study documents four main findings. Firstly, both GDP and average labour productivity (ALP) growth in Singapore tended to decline during this period, and the contribution of ALP growth to GDP growth tended to decrease over time. Secondly, the contribution of labour to GDP growth was rather stable at approximately 1.5 to 2 percentage points per year, of which an increasing share came from foreign labour. Thirdly, total factor productivity growth improved substantially after the mid-1980s and has become a healthy source of GDP and ALP growth since that time. Finally, Singapore's ALP low growth and its declining trends has become notable recently, of which the main reason was a sharp decrease in the contribution of capital deepening. The study discusses the challenges facing Singapore's sharply declining ALP growth rate and proposes policy approaches that might help boost the country's ALP growth in the future.
• Do Minimum Wage Increases Cause Inflation? Evidence from Vietnam, by Nguyen Viet Cuong, author see abstract
  It is often argued that minimum wage increases can lead to increased inflation. This paper examines the impact of minimum wage increases on inflation in Vietnam during the 19942008 period. Inflation is measured by a monthly overall Consumer Price Index (CPI) and a monthly food CPI. It is found that the minimum wage increases did not increase inflation. Since the minimum wage increases often took place one or two months before the Vietnamese New Year festivals, observed increases in monthly inflation after the minimum wage increases were caused by increased consumption demand during the New Year festivals, not by the minimum wage increases.
• The Malaysian Path to Sustainable Development in the Manufacturing Sector, by Renuka Mahadevan, author see abstract
  This paper examines the two sources of total factor productivity growth (TFP), namely technological progress (TP) and technical efficiency (TE) in the Malaysian manufacturing sector. This sectors TFP growth was found to be below 1.5 per cent over 19702002, and while TE was negative, TP although positive was decreasing over time. Factor accumulation resulted in some TP but this was at the expense of TE. Other factors such as foreign direct investment and market power influenced TP and TE in opposing directions, highlighting the need to consider the impact of various policies on the trade-offs and dynamics underlying TP and TE for optimal TFP growth. Thus, policy coordination is crucial for sustainable growth but at the same time leapfrogging into advanced sectors without sufficient learning-by-doing need to be avoided.
• RESEARCH NOTES
• Natural Gas Export Revenue, Fiscal Balance and Inflation in Myanmar, by Koji Kubo, author see abstract
  While natural gas exports have brought a large amount of foreign currency revenue to the Government of Myanmar, their contribution to reducing monetization of the fiscal deficit and disinflation has been obscure. The immediate reason is that under the country's dual exchange rate system, the revenue is converted at the grossly overvalued official rate which undervalues it in terms of the local currency. However, without sterilization, devaluation would only improve the fiscal balance and not reduce the excess money supply. Furthermore, given the ongoing sharp appreciation of kyat, unifying the foreign exchange markets might further aggravate the appreciation and cause damage to the export industries. As a policy reform,this study proposes the unification of foreign exchange markets along with the deregulation of the strict controls on imports.
• Banking and Capital Market Reforms in Malaysia, by Dipinder S Randhawa, author see abstract
  Over a short span of thirty years, Malaysia has made a remarkable transition from a predominantly agrarian to a successful middle-income economy on the threshold of a final push towards "developed economy" status. The financial sector played an important role in facilitating growth - initially as a passive concomitant of the development strategy, subsequently taking on a proactive role as the economy deregulated and grew. Until the onset of the Asian financial crisis of 2007, macroeconomic stability and a gradualist approach to financial liberalization helped insulate the economy from the vicissitudes of global financial markets. Since then the challenges of transforming into a developed economy have manifested themselves. The Malaysian experience appears to epitomize the "middle income" economy trap. Despite several policy initiatives to develop venture capital industry, knowledge based firms are yet to gain traction. The banking sector is still fragmented, with foreign banks demonstrating superior performance. Bank holding companies are yet to realize the benefits of consolidation of commercial banking, investment banking, finance companies and insurance firms. The falling rate of capital formation has stalled growth of capital markets. While there have been improvements in corporate governance, reforms of government linked enterprises is a work in process. Reforms in the political economy of finance, especially portfolio restrictions and directed credit resulting from the Bumiputera policy could yield considerable dividends.
• BOOK REVIEWS
• BOOK REVIEW: Emerging Asia: Essays on Crises, Capital Flows, FDI and Exchange Rates, by Ramkishen S. Rajan., by Robert L Curry, Jr., author

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• BOOK REVIEW: Investment Management (5th ed.), by Saw Swee-Hock., by G Sivalingam, author

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• BOOK REVIEW: Economic Democracy through Pro-poor Growth, edited by Ponna Wignaraja, Susil Sirivardana, and Akmal Hussain., by Sasidaran Gopalan, author

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• BOOK REVIEW: The Globalization Paradox: Democracy and the Future of the World Economy, by Dani Rodrik., by Jiawen Cheong, author

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