Better connectivity between South Asia and Southeast Asia, through hardware and associated software, can unlock the full benefits of closer economic ties between the two sub-regions, according to an interim study report by the Asian Development Bank (ADB).
The connectivity would also help re-balance Asian growth toward domestic and regional markets, said ‘Connecting South Asia and Southeast Asia’, a study interim report by the ADB and ADB Institute (ADBI) released at a seminar at ADB’s 46th Annual Meeting.
The study shows that South and Southeast Asian economies have grown rapidly during an era of fragile world economic growth beset by risks.
This process has been fuelled by expanding regional production networks, integration into the global economy, foreign direct investment (FDI), falling trade and investment barriers, a commodity boom, and heightened demand from a rising Asian middle class.
However, integration of trade and investment between the two sub-regions, while having made progress, has been relatively limited, hindered by various bottlenecks in trade infrastructure, residual trade barriers and insufficient regional cooperation.
The time is ripe for a study of South and Southeast Asia connectivity, said Dr Masahiro Kawai, Dean and CEO of ADBI. He added the political reform process in Myanmar made it possible to connect South and Southeast Asia, something which was not feasible a few years ago.
This is particularly the case for land-based transportation, both highways and railroads, and the energy infrastructure, he said. The prospect of further liberalisation between ASEAN and major regional economies exists with the start of negotiations on a Regional Comprehensive Economic Partnership (RCEP).
Connectivity and associated software refers to physical infrastructure related to transport and energy as well as the linked issue of trade facilitation.
Apart from a focus on connectivity particularly cross-border infrastructure and trade facilitation, the study also covers the critical issues of infrastructure financing, trade and investment reforms, and institutions for coordination.
The interim report sets out key issues in relation to improving connectivity between South and Southeast Asia and traces their implications.
It first reviews evolving economic ties between the two sub-regions and identifies benefits and costs of greater connectivity, then identifies key issues and constraints to greater economic integration. Finally, it explores implications for fostering better connectivity and closer economic integration, as well as the next steps for the study.
Key preliminary findings and recommendations include identifying specific gaps in road, railroad, and economic corridor links between the two sub-regions; Myanmar’s potential as an important source of energy trading with South Asia; promoting more automated approaches to trade facilitation; identifying options to expand regional capacity to finance cross-border infrastructure projects; promoting trade and investment liberalisation; and supporting closer cooperation among regional forums related to transport and energy infrastructure.
Improved intra-Asia connectivity key to boosting trade, re-balancing economy
