AEIR 2022


28
Dec
2021

Enhancing Intraregional Cooperation Could Help Build a More Prosperous, Resilient, and Peaceful Asia

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Subregional initiatives in Asia, such as ASEAN, GMS, CAREC and SASEC need to overcome economic and political stumbling blocks to extend cooperation more broadly and not miss opportunities for economic recovery and greater resilience.

Over the last half century, Asia has been one of the most economically vibrant regions in the world. Asian countries have worked together to build strong and resilient economies that have lifted millions out of poverty.

These efforts have included the creation of economic cooperation initiatives within the region. Often called “subregions,” these areas brought together neighboring countries bound by close historical, cultural, or ethnic ties to collectively respond to common needs and challenges. These include the Association of Southeast Asian Nations (ASEAN), Greater Mekong Subregion (GMS), Central Asia Regional Economic Cooperation (CAREC), South Asian Association for Regional Cooperation, and the South Asia Subregion Economic Cooperation (SASEC) initiatives.

The proliferation of such initiatives reflects Asia’s multi-track, multi-speed approach to cooperation. It also reflects Asia’s “bottom-up” approach to integration as opposed to Europe’s “top-down” or “institution-led” approach. Given the diversity in the region, these initiatives have proceeded at their own pace and focused on what they consider to be the more important challenges facing their specific groupings.

Over the last two decades. CAREC and SASEC have mobilized almost $40 billion and $14 billion, respectively, in investments for transportation networks, trade facilitation, economic corridor development, and energy trade and security. Since its establishment in 1992, the GMS has mobilized over $20 billion for regional projects in agriculture, energy, environment, health, tourism, and transport and trade facilitation, among others.

Trade between GMS countries has risen from $26 billion in 2000 to $639 billion in 2020. Significant progress has been made in communicable disease control, biodiversity protection, and climate change impact mitigation in the subregion. While CAREC and SASEC countries are less integrated regionally, constraints such as high trade costs and delays at the borders are being addressed through enhanced customs cooperation, coordination of border crossing clearance procedures, and improved infrastructure for border-crossing points. In these three subregions, energy security and reliability has improved through enhanced cross-border power transmission connectivity.

More recently, countries in the region have made efforts to cooperate with those outside of their own subregions to explore economic opportunities. The Act East Policy of India, the upgraded version of its Look East Policy launched in the early 1990s, aims to develop connectivity and trade links between Southeast Asia and India’s North Eastern region, serving as a gateway for tourism, foreign investments, and natural resource exports to Southeast Asia. Efforts are also being made to enhance maritime and digital connectivity between South Asia and Southeast Asia.

Cooperation in transport and energy infrastructure connectivity has been complemented by trade and investment agreements, trade facilitation measures, and sharing of best practices. The Regional Comprehensive Economic Partnership agreement, the world’s biggest trade agreement, covering ASEAN plus Australia, the People’s Republic of China, Japan, Republic of Korea, and New Zealand is set to take effect in January 2022. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, signed in 2018, is another mega free trade agreement covering Asian countries and beyond.

The COVID-19 pandemic has underscored the importance of cooperation beyond one’s immediate neighbors.

By extending cooperation beyond one’s own subregion, Asian countries are able to tap more markets especially in times of global recessions when domestic, regional, and inter-regional market demand is crucial for sustained economic growth. More efficient regional value chains are developed through expanded sources of lower priced inputs. Economic corridors which serve as growth points by lowering transport costs are extended across the region.

Trade and investments and labor mobility between subregions could also help reduce inequalities in Asia. And through sharing of experiences and best practices, countries are able to help other parts of the region to fulfill their commitments to global treaties, goals, and standards such as the United Nation’s Sustainable Development Goals, WTO’s Trade Facilitation Agreement, the World Custom’s Organization’s Revised Kyoto Convention, the Paris Agreement, and the Conference of the Parties to the UN Framework Convention on Climate Change.

The COVID-19 pandemic has underscored the importance of cooperation beyond one’s immediate neighbors to ease movement of food and medical goods (including vaccines), help revive the vibrancy of regional value chains, and hasten tourism revival through increased cooperation in health monitoring and surveillance and harmonizing health protocols, for example.

Cooperation between subregions facilitates more open regionalism that serves the Asian region well and promotes peace and stability which is crucial for sustained regional growth and development.

Countries in the region should explore such extended cooperation, given its potential benefits. Formalizing cooperation between subregions, however, may be challenging. The hesitation of groups of countries or countries that are non-homogenous to engage formally in such cooperation stems from various economic and political reasons. Participating countries and subregions have to be convinced that extending cooperation could bring net economic gains to all. Trust is crucial. 

Notwithstanding these challenges, countries in Asia can initiate efforts to cooperate beyond their own subregions. For starters, members of different subregional programs could get together for dialogues and experience sharing to identify areas where they could benefit most from cooperation. Such areas may include tourism, health, small and medium sized-enterprise trade, digital trade, and migration-areas that need focus to help countries recover from the COVID-19 crisis.

Assessments of the benefits of cooperation between subregions need to be encouraged as they would provide strong justification for pursuing cooperation.

Countries in the region need to be more open and willing to overcome economic and political stumbling blocks to extending cooperation beyond one’s own subregion so as not to miss opportunities for economic recovery, greater resilience, and prosperity and peace in Asia in the years to come.

Original article was published at the Asian Development Blog and duplicated here with permission from the author.
*Wilhelmina T. Paz is an Economist at the Regional Cooperation Team, Sustainable Development and Climate Change Department, ADB

The views expressed in this blog post are the views of the author and do not necessarily reflect the views or policies of ARIC, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ARIC does not guarantee the accuracy of the information and data included in this blog post and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with official ADB terms.