AEIR 2021

Highlights

A snapshot of ARCII results

Regional cooperation and integration is a multifaceted and multidimensional process in which neighboring economies expand linkages and coordinate policies to attain common objectives. As channels of regional cooperation and integration evolve, the framework of the Asia-Pacific Regional Cooperation and Integration Index (ARCII) was reviewed and strengthened. New dimensions and indicators were added to the ARCII framework to better capture underlying dynamics in regional integration.

Excerpt from Asia-Pacific Regional Cooperation and Integration Index: Enhanced Framework, Analysis, and Applications. Access the full report here.

Figure 1:
Overall ARCII and Dimensional Indexes—Asia and the Pacific
Figure 2:
Distribution of ARCII by income group - World, 2018
Figure 3:
Indicator Contribution to the Overall ARCII Estimate—Asia and the Pacific, 2018
Figure 4:
Dimensional Contribution to the ARCII in Asia and the Pacific
Figure 5:
Spatial Distribution of the ARCII in Asia and the Pacific, 2018
Table 1:
Dimensions and Indicators in the Enhanced ARCII Framework




image/svg+xml 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Trade and Investment Integration Money and Finance Integration Regional Value Chain Infrastructure and Connectivity People and Social Integration Institutional Arrangements Technology and Digital Connectivity Environmental Cooperation Overall Index

ARCII = Asia-Pacific Regional Cooperation and Integration Index.

Notes: Worldwide normalization is used for all estimations, where the indicators are normalized using global maximum and minimum values across all regions. Higher values denote greater regional integration.

Source: ADB. Asia-Pacific Regional Cooperation and Integration Index Database. https://aric.adb.org/database/arcii (accessed May 2021).

  • The gradual uptrend in the enhanced ARCII results show that regional integration trends in Asia remain positive, with a moderate 7% increase in the index from 2006 to 2018.
  • The rise is explained by progress in trade and investment, better infrastructure, and stronger digital connectivity within the region.
  • ARCII results increase with income per capita, suggesting a possible link between regional integration and economic development.
  • High-income countries report considerably higher ARCII estimates, with an average close to 0.6 against 0.4 for other income groups.

image/svg+xml I n c o m e C l a s s 0 . 2 0 . 3 0 . 4 0 . 5 0 . 6 0 . 7 0 . 8 O v e r a l l I n d e x H i g h i n c o m e U p p e r m i d d l e i n c o m e L o w e r m i d d l e i n c o m e L o w i n c o m e

ARCII = Asia-Pacific Regional Cooperation and Integration Index.

Note: Higher values denote greater regional integration. Worldwide normalization is used for all estimations, where the indicators are normalized using global maximum and minimum values across all regions.

Source: Asian Development Bank. Asia-Pacific Regional Cooperation and Integration Index Database. https://aric.adb.org/database/arcii (accessed May 2021).


image/svg+xml Deposit rates I. Trade and Investment Integration Exports Imports FDI inflows FDI inflows plus outflows II. Money and FinanceIntegration Equity liabilities Bond liabilities Capital account openness Exchange rate correlation III. Regional Value Chain Trade concentration index Intermediate goods exports Intermediate goods imports Value-added contribution IV. Infrastructure and Connectivity Trade costs LSBCI Flight passenger capacity Logistics Performance Index Doing Business Index V. People and Social Integration Migration Tourists Remittances Cultural goods trade Trademark applications VI. Institutional Arrangements FTA signed BIT signed DTT signed IGO membership Embassy presence VII. Technology and Digital Connectivity ICT goods trade Research outputs Patent appications Internet penetration Mobile subscriptions VIII. Environmental Cooperation IEA ratified Environmental health score Ecological footprint Trade complementarity index Environmental goods trade Cultural Proximity Trade intensity International internetbandwidth Liner Shipping Bilateral Connectivity Index

ARCII = Asia-Pacific Regional Cooperation and Integration Index, BIT = bilateral investment treaty, DTT = double taxation treaty, FDI = foreign direct investment, FTA = free trade agreement, ICT = information and communication technology, IEA = international environmental agreement, LSBCI = Liner Shipping Bilateral Connectivity Index.

Notes: The contribution of indicators to dimensional indexes is calculated for each region as the product of indicator’s weight and indicator normalized value. The contribution of dimensional index to overall ARCII estimate is calculated as the product of dimension’s weight and dimension’s normalized values.

Source: Asian Development Bank.

  • An important feature of the ARCII approach is that the relative contribution of the dimensions and indicators that form the framework is determined by a principal component analysis (PCA).
  • This approach uses the data structure and extracts maximum common information from individual indicators, shedding light on the driving factors explaining trends in dimensional and overall level of regional integration.

image/svg+xml 0.000 0.100 0.200 0.300 0.400 0.500 0.600 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Trade and Investment Money and Finance Regional Value Chain Infrastructure and Connectivity People and Social Integration Institutional Arrangements Technology and Digital Connectivity Environmental Cooperation

ARCII = Asia-Pacific Regional Cooperation and Integration Index.

Note: Dimensional contribution is computed as the weight of the dimension multiplied by the dimensional index.

Source: Asian Development Bank. Asia-Pacific Regional Cooperation and Integration Index Database. https://aric.adb.org/database/arcii (accessed May 2021).

  • Regional value chain, infrastructure and connectivity, and people and social integration dimensions continue to sustain regional integration in Asia, as seen in their high contributions to the overall ARCII estimate.
  • Money and finance integration remains the weakest aspect of regional integration in Asia, having the lowest weight and contribution among the dimensions.
Dimension
IndicatorSource of Raw DataRaw Data AvailabilityNumeratorDenominatorImputation method
I. Trade and Investment Integration (5)I-aProportion of intraregional goods exports to total goods exportsDirection of Trade, International Monetary Fund (IMF)2000-2019intraregional goods exportsTotal goods exportsN/A
I-bProportion of intraregional goods imports to total goods importsDirection of Trade, IMF2000-2019intraregional goods importsTotal goods importsN/A
I-cintraregional trade intensity indexDirection of Trade, IMF2000-2019Share of the country's intraregional trade to its total tradeShare of the region's total trade to world tradeN/A
I-dProportion of intraregional foreign direct investment (FDI) inflows to total FDI inflowsGreenfield FDI: FDI Markets,  Mergers and acquisitions (M&A) FDI: Zephyr2003-2018intraregional FDI inflowsTotal FDI inflowsN/A
I-eProportion of intraregional FDI inflows plus outflows to total FDI inflows plus outflowsGreenfield FDI: FDI Markets,  Mergers and acquisitions (M&A) FDI: Zephyr2003-2018intraregional FDI inflows plus outflowsTotal FDI inflows and outflowsN/A
II.  Money and Finance Integration (5)II-aProportion of intraregional cross-border equity liabilities to total cross-border equity liabilitiesCoordinated Portfolio Investment Survey, IMF2001-2018intraregional cross-border equity liabilitiesTotal cross-border equity liabilitiesN/A
II-bProportion of intraregional cross-border bond liabilities to total cross-border bond liabilitiesCoordinated Portfolio Investment Survey, IMF2006-2018intraregional cross-border bond liabilitiesTotal cross-border bond liabilitiesN/A
II-cPair-wise dispersion of deposit rates averaged regionally relative to that averaged globallyADB using various sources2006-2019Average intraregional pair-wise dispersion of deposit ratesAverage pair-wise dispersion of deposit ratesN/A
II-d*Capital account openness: Chinn-Ito Index (de jure)http://web.pdx.edu/~ito/chinn-ito_website.htm1970-2018Chinn-Ito IndexN/A
(Denominator = 1)
N/A
II-eCorrelations of exchange rates vis-à-vis US dollar averaged regionally minus those averaged globallyADB using various sources2006 - 2019Pairwise correlations for monthly exchange rate with respect to the US dollar exchange rate of all other Asia-Pacific countriesPairwise correlations for monthly exchange rate with respect to the US dollar exchange rate of all other countriesN/A
III. Regional Value Chain (5)III-aRatio between the averaged trade complementarity index over regional trading partners and the averaged trade complementarity index over all trading partnersUnited Nations Conference on Trade and Development (UNCTAD); UNComtrade2006 - 2019Average trade complementarity index over regional trading partnersAverage trade complementarity index over all trading partnersN/A
III-bRatio between the averaged trade concentration index over regional trading partners and the averaged trade concentration index over all trading partnersUnited Nations Conference on Trade and Development (UNCTAD); UNComtrade2006 - 2019Average trade concentration index over regional trading partnersAverage trade concentration index over all trading partnersN/A
III-cProportion of intraregional intermediate goods exports to total intraregional goods exportsUNComtrade2000-2018Total intraregional intermediate goods exportsTotal intraregional goods exportsN/A
III-dProportion of intraregional intermediate goods imports to total intraregional goods importsUNComtrade2000-2018Total intraregional intermediate goods importsTotal intraregional goods importsN/A
III-eRatio between the sum of the value-added contributed by regional trading partners and that contributed by all trading partnersUNCTAD-EORA or ADB-MRIO2006-2018Sum of the value-added contributed by regional trading partnersSum of the value-added  contributed by all trading partnersN/A
IV.  Infrastructure and Connectivity (5)IV-aRatio between the averaged trade cost over regional trading partners and the averaged trade cost over all trading partnersWorld Bank/UNESCAP2000-2018Average trade cost over regional trading partnersAverage trade cost over all trading partnersN/A
IV-bRatio between the averaged liner shipping connectivity index over regional trading partners and the averaged liner shipping connectivity index over all trading partnersUNCTAD2006, 2008-2018Average liner shipping connectivity index over regional trading partnersAverage liner shipping connectivity index over all trading partnersSet values for 2007 to equal to the average of 2006 and 2008.
IV-cProportion of passenger seats sold on regional flights relative to those sold on all international flightsICAO1995-2018Number of passenger seats sold on regional flightsNumber of passenger seats sold on all international flightsN/A
IV-d*Logistics Performance index (overall)World Bank2007, 2010, 2012, 2014, 2016, 2018Logistics performance index (overall)N/A
(Denominator = 1)
Set values for 2006 to equal to 2007. For other missing years, set values equal to average of previous year and following year.
IV-e*Doing Business Index (overall)World Bank2009-2018Doing Business Index (overall)N/A
(Denominator = 1)
Set values for 2006-2008 equal to 2009.
V. People and Social Integration (6)V-aProportion of intraregional outbound migration to total outbound migrationUnited Nations Population Division2000, 2005, 2010, 2015, 2019intraregional outbound migrationTotal outbound migrationLinear interpolation
V-bRatio of intraregional tourists to total tourists (inbound plus outbound)World Trade Organization (WTO)2000-2018intraregional tourists (inbound plus outbound)Total tourists (inbound plus outbound)N/A
V-cRatio of intraregional remittances to total remittancesWorld Bank2006-2018intraregional outward remittancesTotal outward remittancesN/A
V-dCultural proximity with other countries in the region relative to that with all other countriesCentre d’Etudes Prospectives et d’Informations Internationales (CEPII)2000-2018Average sum of cultural indicators (dummies) across all partner countries in the regionAverage sum of cultural indicators (dummies) across all partner countriesVariable is time invariant. Same values across all years for each country.
V-eRatio of intraregional cultural goods trade (exports plus imports) to total cultural goods tradeUNCTAD, UNComtrade2006-2018intraregional cultural goods tradeTotal cultural goods tradeN/A
V-fRatio of trademark applications made with intraregional residents to trademark applications made with all foreign residentsWorld Intellectual Property Organization, WDI1980-2018intraregional trademark applicationsTotal trademark applicationsN/A
VI. Institutional Arrangements (5)VI-aProportion of intraregional countries that have signed free trade agreements withDesign of Trade Agreements (DESTA)2000-2018Number of partner countries in the region that have signed free trade agreementsNumber of countries in the regionN/A
VI-bProportion of intraregional countries that have signed bilateral investment treaties withUNCTAD, DESTA2000-2018Number of partner countries in the region that have signed business investment treatiesNumber of countries in the regionN/A
VI-cProportion of intraregional countries that have signed double taxation treaties withUNCTAD2000-2018Number of partner countries in the region that have signed double taxation treatiesNumber of countries in the regionN/A
VI-dNumber of international inter-government organizations in which a country is a memberCIA World Factbook2000-2018Number of international inter-government organizations in which a country is a memberN/A
(Denominator = 1)
N/A
VI-eProportion of intraregional countries that have an embassyEuropa World Yearbook2006, 2010, 2016Number of partner countries in the region that have an embassyNumber of countries in the regionSet values for 2007 - 2005 to equal to 2010. For 2017 to 2018, set values equal to 2016.
VII. Technology and Digital Connectivity (6)VII-aProportion of intraregional ICT goods trade (exports plus imports) to total ICT goods trade UNCTAD, UNComtrade 2006-2018intraregional ICT goods tradeTotal ICT goods tradeN/A
VII-bProportion of research outputs with intraregional collaborators relative to research outputs with all international collaboratorsWeb of Science (https://clarivate.com)2006-2018Number of research outputs with intraregional collaboratorsNumber of research outputs with all international collaboratorsN/A
VII-cProportion of patent applications made with intraregional residents to patent applications made with all foreign residentsWorld Intellectual Property Organization, WDI 1980-2018intraregional patent applicationsTotal patent applicationsN/A
VII-d*Proportion of persons using the internet International Telecommunication Union 2000-2018Internet penetration rateN/A
(Denominator = 1)
N/A
VII-e*Proportion of mobile subscriptions per 100 personsInternational Telecommunication Union 2000-2018Mobile subscriptions per 100 personsN/A
(Denominator = 1)
N/A
VII-f*International Internet BandITU/TeleGeography(https://www.telegeography.com) 2005-2019intraregional internet bandwidth trafficTotal international internet bandwidth trafficN/A
VIII. Environmental Cooperation (4)VIII-aProportion of intraregional environmental goods trade (exports plus imports) to total intraregional goods trade UNCTAD, UNComtrade 2006-2018intraregional environmental goods tradeTotal environmental goods tradeN/A
VIII-b*Number of international environmental agreements ratified CIA World Factbook2006-2018Number of international environmental agreements ratified N/A
(Denominator = 1)
N/A
VIII-c*Environmental health score Environmental Performance Index at http://epi.yale.edu 2006-2018Environmental health score N/A
(Denominator = 1)
N/A
VIII-d*Ecological footprint of production as a share of biocapacity Global Footprint Network 1961-2016Ecological footprint of productionBiocapacityAutoregressive process AR(1)

ARCII = Asia-Pacific Regional Cooperation and Integration Index, ICAO = International Civil Aviation Organization, UNCTAD = United Nations Conference on Trade and Development, UNESCAP = United Nations Economic and Social Commission for Asia and the Pacific, UN Comtrade = United Nations Commodity Trade Statistics Database, US = United States, WDI = World Development Indicators.

Notes: Highlighted rows in green indicate new indicators and dimensions included in the enhanced ARCII framework. Indicators marked with an asterisk are national-level indicators.

Source: Asian Development Bank.