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Panel 16. Corporate Governance and Economic Policy in Southeast Asia

Chair: Narae Choi (University of Oxford)

This panel examines the intersection between the public and private sector in Southeast Asia. In a region which has largely pursued a policy of state-directed capitalism, the economies of the Southeast Asian states are largely characterised by a continued intimacy of governments and businesses. This panel examines this issue from different approaches, including the capacity of the private sector to step in where the public sector fails to provide basic utilities and common goods; the political aspects of governmental economic policy and its impact on corporations; and transnational and comparative aspects of regulation and regulatory competition in Southeast Asia.

Paper 1: Minimum Wage and Wage Inequality in Thailand: A Failed Instrument?

Attakrit Leckcivilize (London School of Economics)

Most minimum wage literature in developing countries provides supporting evidence on its effectiveness in reducing wage inequality. Using the Thai Labor Force Survey from 1985 to 2009, I exploit variation of effective minimum wage among provinces. Mixed outcomes were found. Although minimum wage seems to help compress lower parts of wage distribution for employees in large businesses, the result is not robust. A compression effect vanishes during periods of declines in real minimum wage after the 1997 Asian financial crisis. In contrast with the lighthouse effect in Latin America, minimum wage in Thailand does not reduce informal wage inequality. Yet with available data, I cannot distinguish whether the high non-compliance rate among small businesses or a series of tiny increases in minimum wage is primarily responsible for such results.

Paper 2: Metro Manila’s Natural Experiment:
The Relevance of Management in Privatised Water Utilities

Ray Simon Roderos (King’s College London)

In the 1990s, developing countries in Southeast Asia embarked on a series of private-sector participation in water utilities. More than a decade has passed and there has been mixed results with some utilities returning to public-sector management while others have expanded their operations. Many studies on the subject exclusively focus on the political and institutional structure, design contract or bidding process. However, there is little information about the management practices of privatised companies in developing countries.

This paper addresses the key question: what is the impact and contribution of management practices to privatised water utilities? We adapt a framework which empirically correlates certain management practices with better performance of firms. We exploit a natural experiment in Metro Manila where the external factors for two privatised water utilities are effectively controlled. One water utility was successful while the other returned the concession to the government. The study includes longitudinal performance data and interviews of management officials of the privatised water utilities. The paper finds that management is a critical factor for success in privatisation.

Currently, Southeast Asia is turning to private-sector participation to accelerate the provision of public services. Many countries structure their privatisation deals based on the company able to deliver the most low-cost service. This study invites a re-examination of structuring privatisation deals and argues for incorporating the management practices aspect. Future research could expand the study to other privatised industries.

Paper 3: Transnational Retail In South-east Asia: Transformation And Regulation In The Retail Markets of Thailand And Malaysia

Alexandra Dales (University of Manchester)

The internationalisation of retailing since the early 1990s increasingly altered the activities of, and relationships between, retail firms and non-firm actors in host economies across the world. Across South-east Asia socio-economic change and increased urbanisation has fuelled investment into an array of new retail activities, from large scale hypermarkets to domestic sports equipment stores in newly built shopping malls. Thailand and Malaysia have both experienced rapid transformation and modernisation in their retail markets with the entry and expansion of international retailers a major source of change and upheaval to traditional and established market structures. Two distinct retail markets have emerged and a wide range of actors are involved, from foreign and domestic large format grocery retailers, brand-orientated franchises, to retail associations, shopping mall operators and consultative groups. The aim of this study is to examine how national retail markets are shaped and produced by regulation arising from the distinct political and institutional contexts of Thailand and Malaysia and the continual interplay between retail firm and non-firm actors. Regulation in this study refers to the range of legislative and policy based controls which are introduced by governments in host economies. Comparative institutional analysis in conjunction with the Global Production Network framework provides the theoretical and conceptual foundation for analysis of the changes and processes taking place across the two markets.

Paper 4: From Usaha to Pasrah – Indigenous concepts of Indonesian entrepreneurship- How do they deepen our understanding of organizations in developing countries?

Edward Buckingham (SOAS)

This paper describes and discusses a selection of indigenous Indonesian concepts for understanding entrepreneurship which we refer to as the Usaha-Pasrah conceptual framework. The following questions were addressed: How do Indonesian smallholder entrepreneurs set and achieve objectives? What concepts do they use to define opportunity? How do these concepts interrelate? Why, logically, is this conceptual framework relevant for understanding entrepreneurship in Indonesia? What contribution does this make to the entrepreneurship and organisation behaviour literatures? We focus on the institutional dualism of Indonesia’s socioeconomic environment and the importance of indigenous institutions in shaping entrepreneurial behaviour. The literature on traditional Indonesian institutions and company structures indicate a long history of autonomy in Indonesian entrepreneurship. Coalitions based on particularistic relationships and status rival and undermine Patron-client relations based on power. The fieldwork found that the interplay between indigenous entrepreneurial coalitions and Patron-client relations contribute to boundary permeability in modern bureaucracies such as plantations.

With this finding we propose an entropic variation on the Penrose effect: One of the administrative restraints on a firm’s growth is the firm’s institutional compatibility with indigenous institutions which determine its identity, boundary integrity and resource control.  We establish a link to the justice literature showing that fairness helps define boundaries through legitimation of organisational norms relative to external institutions.