AEIR 2019/2020

Asian Economic Integration Report 2018

Toward Optimal Provision of Regional Public Goods in Asia and the Pacific

This publication is the annual report of the Asian Development Bank (ADB) on Asia’s progress in regional cooperation and integration. It covers ADB’s 48 regional members and analyzes regional and global economic linkages. This year’s special chapter, “Toward Optimal Provision of Regional Public Goods in Asia and the Pacific,” examines how collective action among countries can help find solutions to growing transnational development challenges. It discusses how to best provide regional public goods (RPGs) that transcend the so-called “collective action problem,” which occurs when individual interests are too weak on their own to drive cooperation on common issues. The chapter suggests that multilateral development banks should act as honest broker in enhancing mutual trust and facilitating regional cooperation for RPGs.

  • The Asia and Pacific region maintains healthy economic growth outlook.

  • The Asia-Pacific Regional Cooperation and Integration Index shows that infrastructure and connectivity are the key drivers of regional integration in Asia.

  • Asia continues to lead a recovery in global trade.

  • Asia’s trade integration remained strong, providing the region a shield from potential headwinds.

  • Despite a slowdown in inward FDI to Asia, intraregional FDI continues to rise.

  • Global outward FDI decreased 2.9% in 2017, primarily due to a drop in FDI from developed economies; outward investment from Asia weakened only 1.4%.

  • Asia remains the largest source of international migrants.

  • A record $275.5 billion in remittances were channeled to Asia in 2017.

  • Tourism is the main source of income for many economies in the Pacific and Southeast Asia.

  • Intraregional tourism continues to expand but a growing share of Asian tourists is heading to non-Asian destinations.

  • Asia’s local bond and equity returns have become more sensitive to global shocks since the US monetary policy normalization began.

  • Increasing sensitivity to global shocks highlights Asia’s strong global links and reflects uncertainties surrounding the changes in global financial conditions.

  • Multilateral development banks can help increase regional public goods via knowledge generation, financing, enhancing mutual trust, and facilitating regional cooperation for the provision of regional public goods.

  • More effort is needed in measuring spillover benefits of regional public goods and identifying potential beneficiary countries.


Cover and Highlights

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Regional Economic Outlook and Development Challenges

  • Economic Outlook and Risks
  • Development Challenges: Vulnerabilities to Economic, Environmental, and Social Shocks
  • Regional Integration as Development Strategy
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Trade and the Global Value Chain

  • Recent Trends in Asia’s Trade
  • Asia’s Intraregional Trade
  • Progress of Global and Regional Value Chains
  • Updates on Regional Trade Policy
  • Trade Remedies
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Foreign Direct Investment

  • Trends and Patterns of Foreign Direct Investment in Asia
  • Outward Foreign Direct Investment
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Financial Integration

  • Asia’s Cross-Border Financial Assets and Liabilities
  • Inward Portfolio Investment
  • Outward Portfolio Investment
  • Inter- and Intra-Subregional Portfolio Investment
  • Bank Holdings
  • Analysis Using Price Indicators
  • Financial Spillovers
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Movement of People

  • Migration
  • Remittances
  • International Tourism Receipts and the Movement of Tourists
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Subregional Cooperation Initiatives

  • Central and West Asia: Central Asia Regional Economic Cooperation Program
  • Southeast Asia: Greater Mekong Subregion Program
  • East Asia: Support for RCI Initiatives under CAREC and GMS Subregional Programs and Knowledge-Sharing Activities
  • South Asia: South Asia Subregional Economic Cooperation
  • The Pacific: Building Regional Disaster Resilience through Contingent Financing
  • Improving the Provision of Public Goods through Regional Cooperation
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Toward Optimal Provision of Regional Public Goods in Asia and the Pacific

  • Introduction
  • Concepts, Typologies, and Issues in Efficient Provision
  • Regional Public Goods in Asia
  • Measurement Issues and Case Studies on Provision Mechanisms
  • Conclusions and Policy Considerations
  • Background Papers
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Statistical Appendix

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Asia’s intraregional trade stays strong amid global uncertainties

Asia’s intraregional trade stays strong amid global uncertainties

Asia’s trade growth was sustained in 2018 despite external risks thanks to its robust intraregional trade. Deepening of regional value chains and the drive for free trade agreements continue to strengthen trade within the region.

Tourism in Asia and the Pacific continue to scale greater heights

Tourism in Asia and the Pacific continue to scale greater heights

International tourism in Asia continue to grow, driven by stronger pull in visitor arrivals (407.6 million) and higher tourism receipts ($368 billion) across the region.

Financial Integration: Asian Bond and Equity Markets

Financial Integration: Asian Bond and Equity Markets

Asia's financial linkages with the rest of the world remain strong. Domestic policies outside Asia are tied to Asia's financial markets.

Financial Integration: Asian Banks

Financial Integration: Asian Banks

Amidst the increasing trend in Asia's intraregional bank integration, Japan has been the largest foreign lender since mid-2015.

Trend in Cross-border Financial Assets and Liabilities

Trend in Cross-border Financial Assets and Liabilities

The growth in Asia’s cross-border assets and liabilities was driven by a surge in equity investment, boosted by global liquidity, favorable economic conditions, and investors’ appetite for positive equity returns.

Trend in Migration

Trend in Migration

Migration from Asia to outside regions is on the rise but intraregional migration remains significant.