ADB Adopts Regional Cooperation and Integration Strategy

MANILA, PHILIPPINES - ADB today adopted a strategy to guide its work with developing Asian nations on regional cooperation and integration (RCI). The strategy is designed to support ADB’s overarching goal of poverty reduction by promoting “open regionalism” in Asia and the Pacific.

“Regional cooperation and integration can be a powerful force in Asia’s fight against poverty and drive for sustainable economic growth and development,” says Masahiro Kawai, Head of ADB’s Office of Regional Economic Integration and Special Advisor to the President.

“Well-designed cooperation and integration programs can strengthen growth in a number of ways. They can help improve cross-border connectivity, increase regional trade and investment, mobilize regional savings for regional investment, enhance macroeconomic and finance resilience, facilitate cooperation in regional public goods, and improve governance standards across the region,” he says.

The promotion of regional cooperation and integration is one of ADB’s five strategic priority areas as defined in its Medium-term Strategy II (MTS II) for 2006-2008, which was adopted in May and seeks to strengthen the poverty-reducing impact of ADB assistance. The RCI strategy serves as a key platform to complement national development and poverty reduction programs.

The RCI strategy aims to build cooperation and deepen integration in four pillars: (i) regional and subregional programs on cross-border infrastructure and related software; (ii) trade and investment; (iii) money and finance; and (iv) regional public goods such as prevention of communicable diseases and environmental degradation.

“The aim of these four pillars is to reduce developing member countries’ poverty through regional collective action that leads to greater physical connectivity; an expansion of trade and investment; development of financial systems and macroeconomic and financial stability; and improved environmental, health, and social conditions,” the strategy states.

The strategy lays out the options and means of achieving the objectives and goals established in the Regional Cooperation Policy (1994), the Poverty Reduction Strategy (1999), the Private Sector Development Strategy (2000), the Long-term Strategic Framework (LTSF, 2001), ADB’s commitment to MDGs (2002), and Medium-term Strategy II (MTS II, 2006).

In the past decade, the global and regional economic landscapes have changed extensively and intraregional trade has increased significantly in Asia. Improved physical connectivity, the rapid growth of large emerging market economies such as the People’s Republic of China (PRC) and India, and the spread of vertically integrated production networks have brought Asian economies closer. Free trade agreements are proliferating and the initial conditions for greater monetary and financial integration in East Asia have emerged.

In 2004, intraregional trade accounted for 55% of East Asian trade, up from sharply from about 43% in 1990. This is higher than the 46% share of intraregional trade in the North American Free Trade Area (NAFTA), and only slightly below the 62% figure for the 15 European Union countries, according to the strategy.

Between 1980 and 2004, foreign direct investment (FDI) flows in East Asia increased substantially. Over this period, East Asia’s dynamism fueled an increase in FDI inflows from 7% to 21% of world inflows and FDI outflows from 5% to 13% of world outflows. Much of this investment was intraregional.

The strategy recognizes ADB’s previous support for RCI has been fragmented and of varying quality due to the lack of a coherent strategy and limited support for trade and investment integration. “It is time to transform ADB’s support for RCI in Asia and the Pacific from stand-alone programs to a coherent and strategically focused approach,” the strategy states.

ADB can play four distinct roles in supporting and promoting RCI:

• as money bank by providing financial resources for RCI projects, programs, and related technical assistance and helping developing countries mobilize additional funding and technical assistance;
• as knowledge bank by creating, consolidating, and disseminating knowledge and information on RCI;
• as capacity builder by helping countries and regional or subregional bodies build institutional capacity to manage RCI; and
• as honest broker by serving as catalyst and coordinator of RCI for developing nations.

“The trend toward greater economic cooperation and integration in Asia is clear and growing stronger,” says Mr. Kawai. “ADB is eager to help developing member countries maximize the opportunities that this trend presents to reduce poverty and access new paths toward sustainable economic growth and development in a more open regional and global environment.”

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