Effect of Energy Price Increase on East Asian Region’s Food Industries’ Interconnectedness and Integration

Khalid A. Hamid, Zakariah A. Rashid and R. Zarina R. Mohammad
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Khalid A. Hamid: Malaysian Institute of Economic Research (MIER)
Zakariah A. Rashid: Malaysian Institute of Economic Research (MIER)
R. Zarina R. Mohammad: Malaysian Institute of Economic Research (MIER)

from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: The most immediate effects of energy price increase ripples in many production systems is traceable from the intermediate demand sector of an economy. In particular, the production of agriculture, manufacturing, services and several other sectors portray significant energy utilization in their inter industry relationship. We focus our study on the effect of an energy price increase on interconnectedness and integration of the East Asia (EA) region’s economy with emphasis on food industries. It draws together findings from selected EA countries in three different approaches. These approaches mainly employs an input-output (I-O)-based methodology with the latest extended version to examine the effect of rising energy prices onto food and non-food sectors’ energy intensity, sectoral performance as well as retail price. We find that developed EA countries had demonstrated consistent performance having lower energy intensity, higher generating capacity and resilient to price changes in times of higher energy prices. Based on these findings, the East Asian Summit is hopeful to deliberate on closing their gaps by increasing interconnectedness and integration under the framework of gradual and systematic energy market reform. This will enhance activities in stimulating energy efficiency, output generating capacity and firmer energy market to price volatility especially in developing EA countries. Regional governments can also adopt sectoral energy investment plans to bolster economic growth and consumption of more efficient and cleaner fuels.

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