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Connecting South Asia and Southeast Asia

Connecting South Asia and Southeast Asia

Asian Development Bank Institute
Copyright Date: 2015
Pages: 318
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  • Book Info
    Connecting South Asia and Southeast Asia
    Book Description:

    This report analyzes how closer regional connectivity and economic integration between South Asia and Southeast Asia can benefit both regions, with a focus on the role played by infrastructure and public policies in facilitating this process. It examines major developments in South Asian-Southeast Asian trade and investment, economic cooperation, the role of economic corridors, and regional cooperation initiatives. In particular, it identifies significant opportunities for strengthening these integration efforts as a result of the recent opening up of Myanmar in political, economic, and financial terms. This is particularly the case for land-based transportation-highways and railroads-and energy trading. The report's focus is on connectivity in a broad sense, covering both hardware and software, including investment in infrastructure, energy trading, trade facilitation, investment financing, and support for national and regional policies.

    eISBN: 978-4-89974-048-3
    Subjects: Business
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Table of Contents

Export Selected Citations
  1. Front Matter (pp. i-ii)
  2. Table of Contents (pp. iii-v)
  3. List of Figures, Tables, and Boxes (pp. vi-ix)
  4. Foreword (pp. x-xi)
    Bindu N. Lohani and Naoyuki Yoshino

    The success story of economic growth in Southeast Asia over the past few decades is well known. It resulted from an outward-looking strategy of export-oriented growth, coupled with openness to foreign direct investment by more developed economies both within Asia and outside, generally market-friendly policies, and extensive investment in infrastructure. It led to deep economic integration of Southeast Asian economies, especially the most developed ones, with those of East Asia, manifested most notably in the rapid expansion of regional and global supply chain networks.

    South Asia has also emerged more recently as a dynamic growth region as a result of...

  5. Acknowledgments (pp. xii-xiii)
  6. Abbreviations (pp. xiv-xvi)
  7. Executive Summary (pp. xvii-xxiv)

    The economies of South Asia and Southeast Asia are growing and forging closer economic ties in a fragile world economy beset by risks. This growth process has been fueled by factors including falling trade and investment barriers, expanding production networks and supply chains, a commodity boom, and heightened demand from a rising middle class. However, integration of trade, investment, and financial flows between these two regions, while making progress, has been limited, hindered by bottlenecks and gaps in trade infrastructure, financial markets, trade facilitation, trade barriers, and limited regional cooperation. In particular, South Asia still lags in its participation in...

  8. CHAPTER 1 Introduction and Overview (pp. 1-34)

    South Asian and Southeast Asian economies have grown rapidly during an era of a fragile world economic growth beset by risks and uncertainties. This progress has been fueled by expanding regional production networks, integration with the global economy, foreign direct investment (FDI), falling trade and investment barriers, a commodity boom, and heightened demand from a rising Asian middle class. The results have been positive; the South Asian and Southeast Asian regions are among the most dynamic in the world and have produced impressive socioeconomic improvements.¹ While challenges remain, these regions are on the right path.

    However, trade and investment between...

  9. CHAPTER 2 Current State of Cross-Regional Economic Ties (pp. 35-52)

    This chapter describes the evolution of trade, investment, and financial relations between South Asia and Southeast Asia, including trade values, foreign direct investment, and portfolio investment. It gives focus to the development of supply chain networks that are highly developed in Southeast Asia, but less so in South Asia, and to the role of Myanmar as the link between the two regions. Section 2.2 describes trade links, while Section 2.3 looks at supply chains. Sections 2.4 and 2.5 describe investment links, and Section 2.6 concludes. Box 2.1 at the end of the chapter describes in more detail the current situation...

  10. CHAPTER 3 Cross-Border Transport Infrastructure (pp. 53-112)

    The link between improved transport infrastructure and greater potential for trade and investment between South Asia and Southeast Asia is clear. Despite progress, road and rail links between Bangladesh, India, Myanmar, and Thailand are patchy, with many sections below standard and with many missing links. In the case of rail transport, this is compounded by differences in gauges and rolling stock, among others. Interior areas such as northeast India have limited or long access to borders or major seaports. Many seaports in the Bay of Bengal suffer from deficiencies of draft, capacity, operational efficiency, and road and rail access. Improving...

  11. CHAPTER 4 Energy Infrastructure and Trading (pp. 113-138)

    This chapter discusses the potential for increased energy trading between South Asia and Southeast Asia, including prospective benefits and costs, and identification of specific candidate projects. Section 4.2 describes the rationale for increased energy trading and the scope of the study. Section 4.3 explains the current situation of energy demand, supply, and trading in the two regions, including programs and institutional arrangements, barriers for trading, opportunities for energy trading, and new institutional arrangements. Section 4.4 identifies potential projects, while Section 4.5 discusses the results of modeling scenarios for energy demand, supply, and trading. Section 4.6 concludes with recommendations.

    Energy trading...

  12. CHAPTER 5 Infrastructure Finance and Financial Sector Development (pp. 139-180)

    Financing infrastructure projects presents challenges, particularly for regional and cross-border projects¹ where spillover benefits can be substantial and unequal, and some countries involved are more constrained than others in financial capacity, institutional infrastructure, and governance levels. Countries with less developed financial markets face funding gaps in the size of potential savings and the maturity and currency of investment flows. Although savings in the region are more than adequate to finance needed infrastructure investment, there are disparities in the distribution of savings and financial development across countries that require cooperative measures and institutional development to attract needed funds for projects.


  13. CHAPTER 6 Trade Facilitation (pp. 181-226)

    Awareness levels regarding the importance of trade facilitation have increased dramatically over the last decade in both South Asia and Southeast Asia, with national governments and the major international financial institutions (IFIs) like the Asian Development Bank (ADB) becoming more active in formulating initiatives to help eliminate many of the non-tariff barriers (NTB) related to the physical movement of trade. The finalization of the Trade Facilitation Agreement at the Bali Ministerial Conference in December 2013 also focused attention on resolving many of these issues. Indeed, the development of trade facilitation in general has become “in vogue” in a manner not...

  14. CHAPTER 7 National and Regional Policy Reforms (pp. 227-240)

    Trade barriers, including tariff and non-tariff ones, constrain the scope for trade and investment between South Asia and Southeast Asia. Policy reforms at national and regional levels, chiefly those related to trade, can provide enhanced price signals for private sector activity and promote improved resource allocation through the market mechanism. Unilateral trade liberalization in both regions is desirable to reduce these barriers and promote greater trade connectivity. Expanding free trade agreements (FTAs) between the two regions offers another means of trade liberalization between them. Exchange rate regimes, to the extent that they depart from economic fundamentals, can also have a...

  15. CHAPTER 8 Risks to Connectivity and Institutional Arrangements (pp. 241-264)

    Constraints to deepening cross-regional integration can arise from “coordination gaps”— difficulties inherent in cooperative planning and implementation processes. Coordination across national ministries is challenging in virtually all countries but especially in developing ones. Forming agricultural policies and projects, for example, usually involves coordination across many ministries, including agriculture, environment, trade, health, and finance. Finding effective approaches to inter-ministerial coordination and implementation is an important part of the development planning process. Moreover, in many cases the private sector also needs to be involved.

    If bridging coordination gaps is so difficult at the national level, problems increase geometrically when policies need to...

  16. CHAPTER 9 Assessing Impacts of Regional Integration (pp. 265-292)

    This chapter first assesses how the potential effects of economic integration, including a free trade agreement (FTA) between South Asia and Southeast Asia, on the two regions’ economies might be estimated in theory and via empirical models of economic integration (Section 9.2). This is followed by estimates of the potential gains from South Asian– Southeast Asian economic integration developed using an advanced computable general equilibrium (CGE) model (Section 9.3). Section 9.4 considers various qualitative aspects of integration that need to be considered by policymakers as they examine deeper forms of South Asian– Southeast Asian integration. Section 9.5 concludes.

    The chapter...

  17. List of Background Papers for the Connecting South Asia and Southeast Asia Study (pp. 293-294)
  18. Back Matter (pp. 295-295)