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251. Tracking the Ups and Downs in Indonesia’s Economic Activity During COVID-19 Using Mobility Index: Evidence from Provinces in Java and Bali

Author:
Yose Rizal Damuri, Prabaning Tyas, Haryo Aswicahyono, Lionel Priyadi, Stella Kusumawardhani, and Ega Kurnia Yazid
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
A timely and reliable prediction of economic activities is crucial in policymaking, especially in the current COVID-19 pandemic situation, which requires real-time decisions. However, making frequent predictions is challenging due to the substantial delays in releasing aggregate economic data. This study aims to nowcast Indonesia’s economic activities during the COVID-19 pandemic using the novel high-frequency Facebook Mobility Index as a predictor. Employing mixed-frequency, mixed-data sampling, and benchmark least-squares models, we expanded the mobility index and used it to track the growth dynamics of the gross regional domestic product of provinces in Java and Bali and performed a bottom-up approach to estimate the aggregated economic growth of the provinces altogether. Our results suggested that the daily Facebook Mobility Index was a considerably reliable predictor for projecting economic activities on time. All models almost consistently produced reliable directional predictions. Notably, we found the mixed data sampling-autoregressive model to be slightly superior to the other models in terms of overall precision and directional predictive accuracy across observations.
Topic:
GDP, Economy, Mobility, Pandemic, and COVID-19
Political Geography:
Indonesia, Asia, and Southeast Asia

252. Is the COVID-19 Pandemic Recasting Global Value Chains in East Asia?

Author:
Nobuaki Yamashita and K. Fukasaku
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper assesses how the current COVID-19 pandemic is shaping global value chains in East Asia after the formidable disruptions inflicted by the health crisis. Some have expressed the view that global value chains would readjust and production processes would move home, i.e. reshoring, facilitated by the recent movement of protectionism measures in the post-pandemic world. We evaluate such concerns and examine the role of policy with a focus on non-tariff measures in East Asia.
Topic:
Globalization, International Trade and Finance, Pandemic, Global Value Chains, and COVID-19
Political Geography:
East Asia and Asia

253. Impacts of COVID-19 on the Energy Demand Situation of East Asia Summit Countries

Author:
Shigeru Kimura, Ikarii Ryohei, and Endo Seiya
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The coronavirus disease (COVID-19) pandemic has brought us a ‘New Normal’ life style and the lockdown has severely harmed economic growth, with many countries estimated to record negative economic growth in 2020. Due to the high correlation between energy demand and economic growth, energy demand is also affected. Against this background, ERIA analyses how energy demand has decreased as a result of the COVID-19 pandemic using East Asia Summit (EAS) energy outlook models that are regularly updated by ERIA and apply an econometric approach. The outlook models cover the Association of Southeast Asian Nations (ASEAN) 10 countries plus seven countries – Australia, China, India, Japan, Republic of Korea, New Zealand, and the United States. According to gross domestic product (GDP) growth estimates for EAS countries in 2020, only three countries – China, Lao PDR, and Viet Nam – show positive growth, though less than 2%, and the others show negative growth. Total Final Energy Consumption (TFEC) of the EAS countries fell in 2020, but it is expected to rebound in 2021 and projected to return to the originally forecast trend of energy demand up to 2050. Once official energy statistics become available, a comparison between model results and actual statistics will be made to understand how the energy outlook models trace the impact of the pandemic on energy demand.
Topic:
Energy Policy, Pandemic, COVID-19, and Models
Political Geography:
East Asia and Asia

254. Feeling the Pulse of Global Value Chains: Air Cargo and COVID-19

Author:
Christopher Findlay, Hein Roelfsema, and Niall Van De Wouw
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper focuses on air cargo market development, with special attention to the connections between countries in Asia, the European Union, and the United States. Before the coronavirus disease (COVID-19) crisis, we show that participation in global value chains played a crucial role in how countries in Asia increased their exposure to the European Union market, which was hit hardest by the COVID-19 crisis. Analysing the effects of the crisis in 2020- using a fuzzy set complexity approach and recent high-frequency data on air cargo transport - we show that such demand effects, together with domestic contraction conditions, explain a large share of variation in air cargo dynamics across countries in Asia. However, we also show that implementing best practices in pandemic control positively impacts air cargo recovery for countries that cannot rely on export market rebounds. After reviewing the convergence in air cargo business models since 2010, the paper continues to assess recovery options. The main conclusion is that business models will converge on long haul point-to-point models that combine passengers and cargo, moving away from the current hub and spoke system.
Topic:
Globalization, International Trade and Finance, Pandemic, Global Value Chains, and COVID-19
Political Geography:
Asia and Southeast Asia

255. Domestic Tourism as a Pathway to Revive the Tourism Industry and Business Post the COVID-19 Pandemic

Author:
Jennifer Chan
Publication Date:
07-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This research aims to explore the potential of domestic tourism as a means to revitalise the tourism industry from the perspectives of local residents and tourism players. A quantitative online survey focused on domestic travel behaviour, motivation, places of interest, travel preferences, and willingness to travel within Malaysia; it was answered by 219 Malaysians. Interview data were collected using structured, open-ended interview questions through emails to eight respondents from tourism associations, five from the hotel sector, and two from the travel and tour sector. Data collection was carried out from 10 January to 15 February 2021. The findings reveal that domestic tourism has the potential to revive the tourism industry. A high percentage of respondents indicated the desire to travel domestically and being motivated by attractive tour packages at discounted prices. COVID-19 has impacted tourist behaviour and attitudes towards travelling, and people prefer to travel domestically rather than overseas. Furthermore, tourism players acknowledged the potential to revive the tourism industry and business via domestic tourism. Despite this, declarations of health, safety issues, flight availability, travel restrictions, and quarantine durations are key barriers to stimulating domestic tourism and rebuilding the tourism industry.
Topic:
Tourism, Public Health, Pandemic, and COVID-19
Political Geography:
Malaysia and Asia

256. A Firm-level Analysis of the Impact of the Coronavirus Outbreak in ASEAN

Author:
Wasim Ahmad, Rishman Jot Kaur Chahal, and Shirin Rais
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study examines the impact of the coronavirus pandemic on economic integration in the ASEAN-6 region. The study finds that the pandemic’s impact can be easily traced using stringency, bilateral exports, and tourist arrivals, indicating significant implications for the economic integration process. The firm-level analysis suggests that although the coronavirus outbreak’s uniformly impacted firms, the extent of the effect varies across ASEAN-6 nations. Large firms are strongly impacted by the pandemic. Overall, the findings of this study are relevant for policymakers and academia.
Topic:
Tourism, Global Markets, Public Health, Pandemic, and COVID-19
Political Geography:
Asia and Southeast Asia

257. Central Banks' Responses to COVID-19 in ASEAN Economies

Author:
Charan Singh and Panitra Kumar Jena
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The effect of the COVID-19 pandemic on public health, social life, economic conditions, and financial markets has been significant for Association of Southeast Asian Nations (ASEAN) economies. The main objective of this study is to understand the response of central banks to COVID-19 in 10 ASEAN economies, i.e., Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. In this study, panel data as well as time-series data have been used to see the impact of COVID-19 on macroeconomic variables and financial variables. The period of the study ranges from 23 January 2020 to 11 December 2020. The first part of the study shows the trend analysis of macroeconomic variables of ASEAN economies and a descriptive analysis of various measures taken by the central banks of ASEAN economics. Further, a comparative analysis of monetary measures with advanced countries is depicted. Further, empirical findings of ARCH and GARCH indicate that recent as well as past COVID-19 news has a significant impact on stock market volatility in select ASEAN countries.
Topic:
Banks, Fiscal Policy, Pandemic, COVID-19, Financial Institutions, and Banking
Political Geography:
Asia and Southeast Asia

258. COVID-19 and Regional Solutions for Mitigating the Risk of Small and Medium-sized Enterprise Finance in ASEAN Member States

Author:
Farhad Taghizadeh-Hesary, Han Phoumin, and Ehsan Rasoulinezhad
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
One of the significant challenges small and medium-sized enterprises (SMEs) face is their difficulty in accessing finance. One way to reduce the risk of lending to SMEs is through the credit guarantee scheme (CGS). In this paper, we assess the determining factors of the optimal credit guarantee ratio for the banking industry in four Association of Southeast Asian Nations (ASEAN) countries, namely Indonesia, Singapore, the Philippines, and Malaysia, by employing statistical techniques and econometric models. The empirical findings prove that the loan default ratio (nonperforming loan/loan, or NPL/L) is the optimal credit guarantee ratio’s main determining factor. Our empirical findings confirm that in the ASEAN region, to help SMEs survive in the emergency stage of COVID-19, the credit guarantee ratio needs to be increased. Gradually, when moving to the new normal stage, the ratio needs to be lessened. Our results show that the credit guarantee ratio should vary for different countries based on the macroeconomic climate and also for each bank or, in other words, for banks with similar financial soundness. Governments should give a higher guarantee ratio to sound banks, whilst less healthy banks should receive a lower guarantee ratio. The study also provides policy recommendations for establishing a regional credit guarantee scheme in ASEAN to promote regional economic cooperation at the SME level for greater economic integration.
Topic:
Finance, Public Health, Pandemic, COVID-19, and Credit
Political Geography:
Asia and Southeast Asia

259. Aviation Market Development in the New Normal Post the COVID-19 Pandemic: An Analysis of Air Connectivity and Business Travel

Author:
Xiaowen Fu, David A. Hensher, Nicole T. T. Chen, and Junbiao Su
Publication Date:
09-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study quantifies the effects introduced by the COVID-19 pandemic on air connectivity and passenger travel behaviour. Our analysis suggests that the pandemic has led to significant connectivity loss at all airports, especially at large hubs and tourism destinations. Low-cost carriers’ operations at these airports, whose main targets are price-sensitive, non-business travellers, have been significantly reduced, too. There is preliminary evidence that network carriers at hub airports played more important roles amid the pandemic, likely due to the benefits associated with their hub-and-spoke networks. Connectivity losses at the smallest airports tended to be temporary and limited. These airports had limited aviation services to start with and, thus, it was not too costly to maintain the minimum connectivity. Empirical results obtained from a passenger preference study indicate that traveller subgroups are impacted in different ways. When there is no online meeting option, nearly 80% of the respondents prefer, and are willing to pay for, pandemic control measures. These ‘pro-control’ passengers perceive such measures and the associated high costs/fares as valuable and necessary to lower the health-related risks during air travel. When there is an online meeting option, the share of such passengers decreases to 44.5%, with the remaining 55.5% exhibiting disutility for the increased price and time associated with pandemic control measures. The average willingness-to-pay for pandemic control measures decreases significantly, whereas the value of time saved at health checkpoints increases significantly. The aviation industry thus faces a ‘double-hit’ problem: operation costs will increase due to pandemic control measures, and the resultant inconvenience and extra time and costs further reduce travel demand. Unlike previous short pandemics, business travel is likely to suffer with an extended decline until the pandemic is fully controlled. These results call for financial and operational support for aviation services, especially at major airports and tourism destinations. Because these large airports are expected to be profitable post the pandemic, they may resort to low-cost finance from the capital market in the short term. Because the value of time saved at checkpoints is very high, it is more important for government agencies to make the pandemic control and health measures efficient and smooth. For operations such as vaccination records, stakeholders in different countries should cooperate to facilitate seamless control and pleasant air travel experiences.
Topic:
Development, Financial Markets, Business, Public Health, Pandemic, COVID-19, and Travel
Political Geography:
Asia and Southeast Asia

260. COVID-19, Air Transportation, and International Trade in the ASEAN+5 Region

Author:
Anming Zhang, Xiaoqian Sun, Sebastian Wandelt, Yahua Zhang, Shiteng Su, and Ronghua Shen
Publication Date:
09-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper provides an in-depth description of the coronavirus disease (COVID-19) pandemic and its interactions with air transportation in the Association of Southeast Asian Nations (ASEAN)+5 region, and then links the changes in air connectivity to trade using a gravity regression model. We find that almost all the countries probably reacted too late in their decision to reduce flights in the early stage of the pandemic. As the pandemic evolved, most countries have significantly cut the number of flight connections, especially international flights. The reduced connectivity is found to have a significantly negative impact on trade for time-sensitive merchandise that is essential to consumers and businesses. This points to the importance of the region seeking alternative arrangements to restore air connectivity. We offer a way to construct optimal travel bubbles by using risk indexes introduced here. Other policy issues such as uniform standards and regulations, and regional ‘open skies’, are also discussed.
Topic:
International Trade and Finance, Pandemic, COVID-19, and Travel
Political Geography:
Asia and Southeast Asia