Gemma Bolotaulo Estrada

An Input-Output Analysis of the Philippine BPO Industry

This paper provides a profile of the Philippine business process outsourcing (BPO) sector, makes comparisons with India and other BPO providers, and summarises the results of an input - output analysis of the Philippine BPO industrys inter-sectoral linkages and its potential impact on compensation and employment. The input - output analysis shows that the BPO industry is not a key sector in terms of stimulating production in other sectors of the Philippine economy. Growth in the sectors revenues, however, can have a significant impact on compensation and employment. If appropriate policies are enacted and human capital improved, it is estimated that the Philippine BPO sector may become an important employment-generating sector. Copyright

Financial Development and Economic Growth in Developing Asia

Economic theory suggests that sound and efficient financial systems - banks, equity markets, and bond markets - which channel capital to its most productive uses are beneficial for economic growth. Sound and efficient financial systems are especially important for sustaining growth in developing Asia because efficiency of investment will overshadow quantity of investment as the driver of growth in the region. The data indicate that the region’s financial systems have become deeper and more diversified since the early 1990s. A more formal econometric analysis on a panel data of 125 countries confirms that financial development has a significant positive effect on growth, especially in developing countries. The results also indicate that the impact of financial development on the region’s growth is not noticeably different than elsewhere, and the impact has weakened since the Asian financial crisis. Overall, our evidence supports the notion that further development of the financial sector matters for sustaining developing Asia’s growth in the postcrisis period. However, the primary role of financial sector development in growth is likely to shift away from mobilizing savings, thus augmenting the quantity of investment toward improving the efficiency of investment, and thereby contributing to higher economywide productivity.

Are Developing Asia’s Foreign Exchange Reserves Excessive? An Empirical Examination

Developing Asian countries have accumulated foreign exchange reserves on an unprecedented scale in recent years. There is a growing consensus that Asia’s reserves now substantially exceed the levels required for precautionary purposes or for self-protection against currency crisis. The central objective of our paper is to informally and formally test whether reserves in developing Asia have in fact reached excessive levels. Informal tests of reserve adequacy based on widely used rules of thumb such as the Greenspan-Guidotti rule unambiguously indicate the presence of sizable excess reserves. To test for excess reserves more formally, we use panel-data econometric analysis based on Edison (2003). Our estimation results indicate the presence of large and growing excess reserves since 2002. The results of both informal and formal tests thus confirm the popular belief that developing Asia now has excessive foreign exchange reserves. Therefore, the short-run policy challenge for Asian governments is to manage the region’s burgeoning excess reserves more actively and use them more productively. One promising area of future research, brought to the fore by the global financial crisis, is to develop more nuanced measures of reserve adequacy that take into account the possibility of severe negative shocks.

Developing the Service Sector as Engine of Growth for Asia: An Overview

The maturing of the manufacturing sector in many Asian countries, combined with the relative backwardness of its service sector, has made service sector development a top priority for developing Asia. Our central objective is to broadly survey and analyze the current landscape of the region’s service sector so as to assess its potential to serve as an engine for inclusive economic growth. Our analysis indicates that services are already an important source of output, growth, and jobs in the region. However, its productivity greatly lags that of the advanced economies, which implies ample room for further growth. The impact of service sector on poverty reduction is less clear but we do find some limited evidence of a poverty reduction effect. One key challenge for all Asian countries is to improve the quality of service sector data. Overall, while service sector development is a long and challenging process, creating more competitive services markets by removing a wide range of internal and external policy distortions is vital for improving service sector productivity. As important as such policy reforms are, complementary investments in physical infrastructure and human capital will also be necessary to achieve a strong service sector.

Prospects for ASEAN–China Free Trade Area: A Qualitative and Quantitative Analysis

The current global financial and economic crisis is giving new life to initiatives that promote closer economic integration among East Asian countries. A significant example is the ASEAN–China Free Trade Area (ACFTA), which is set to come into effect around 2010. ACFTA aims to boost trade between two economies that are partners as well as competitors: ASEAN and China. In the present paper, we use insights from customs union theory in a qualitative analysis considering whether ACFTA would benefit both sides. We also apply a computable general equilibrium model to perform a quantitative analysis of the same issue. Both our qualitative and quantitative analyses provide grounds for guarded optimism regarding ACFTAs prospects as a vehicle for strengthening the economic partnership between ASEAN and China.

Benchmarking developing Asia's manufacturing sector

Purpose - The purpose of this paper is to document the transformation of developing Asias manufacturing sector during the last three decades. Design/methodology/approach - The paper briefly discusses the transformation during the last 30 years and benchmarks the sector by estimating a regression based on the logistic pattern of growth. It then summarizes the main findings. Findings - It is found that: the share of developing Asia in world manufacturing output has increased significantly since the 1970s; the increase is concentrated in a number a countries, mostly the NIES, China, Indonesia, Malaysia, and Thailand; and there has been an important technological upgrading as the share of more technologically advanced manufacturers has increased. However, the increase is also concentrated in a reduced group of countries. Originality/value - The findings in the paper should be of value to both other researchers and policy makers trying to understand industrialization.

China's Free Trade Agreements with ASEAN, Japan and Korea: A Comparative Analysis

The role of China in East Asias recovery from the recent global financial and economic crisis highlights Chinas position as an engine of growth for this region. From the viewpoint of China, there are many potential gains from entering into free trade agreements (FTAs) with its neighbors, who collectively form a large and fast-growing market. In this paper, we qualitatively and quantitatively assess the four main permutations of Chinas FTAs with East Asian major economies: China–ASEAN, China–Japan, China–Korea and ASEAN+3. We compare the effects of these FTAs on Chinas output and welfare. Our comparative analysis shows that China will gain from all three bilateral FTAs, while gaining the most from the ASEAN+3. Because forming a region-wide FTA, such as the ASEAN+3, is expected to be gradual and difficult, China should continue to engage in bilateral FTAs as a medium-term and alternative strategy. However, in the long term, China should pursue a region-wide FTA.

Taper Tantrum and Emerging Equity Market Slumps

ABSTRACT In the post-global financial crisis period, the central banks of the advanced economies pursued unconventional monetary policies, such as the United States (U.S.) Federal Reserve’s quantitative easing (QE). Those policies and their unwinding may significantly affect cross-border capital flows and thus destabilize the financial systems of emerging markets. For example, emerging markets experienced substantial financial instability during the taper tantrum triggered by U.S. Federal Reserve Chairman Ben Bernanke’s May 2013 announcement of the potential unwinding of QE. In this article, we examine the spillovers from the taper tantrum on emerging markets more rigorously by using econometric analysis to empirically assess the effect on equity markets in emerging markets. Our central finding that virtually all emerging-market equity markets were affected by the taper tantrum highlights the need for emerging-market authorities to remain vigilant about the effects of advanced-economy monetary policies on their financial stability.

Developing Asia’s Pension Systems and Old-Age Income Support

Old-age income support is becoming an issue of growing importance throughout Asia. This is especially true in East and Southeast Asia where the population is aging. This paper provides a broad overview of the current state of pension systems in the People’s Republic of China, Indonesia, Republic of Korea, Malaysia, Philippines, Singapore, Thailand, and Viet Nam; analyzes the pension systems; and identifies their major structural weaknesses. The paper concludes with some specific policy directions for pension reform to strengthen the capacity of Asian pension systems in delivering economic security for the large and growing population of elderly looming on the region’s horizon.

Financing Asia's Growth

Developing Asia has exhibited rapid growth while saddled with relatively backward financial systems. One might conclude that the coexistence of sustained rapid growth and financial underdevelopment in developing Asia implies that an efficient financial sector is not indispensable for economic development. A more considered view would be that developing Asia grew rapidly despite, not because of, financial underdevelopment. With a stronger and better financial system, it might have grown even faster or achieved the same level of growth with lower savings and investment (and hence a lower cost in terms of forgone consumption). Strengthening the regions financial sectors was made more difficult by the global financial crisis, which gave financial development a bad name. However, in developing Asia financial sector development refers less to the introduction of esoteric products than to the more basic task of building efficient banks and capital markets. There is clearly a positive relationship between financial development and growth up to a certain level of financial development. Although it is possible that the relationship turns insignificant or even negative beyond some threshold, developing Asia is well short of that possible turning point.