Regional Economic Cooperation and Integration in Asia and the Pacific

Asia's rising economic integration experienced over the last three decades has been mostly a market-led development. At present, robust regional demand is contributing to the region's economic growth, cushioning Asia from softening external markets. Here are 12 things to know about regional economic cooperation and integration.

  1. Regional integration is not new to Asia and the Pacific, as centuries of economic and cultural exchanges shaped the region's distinct identity.  During the first half of the 20th century, Asia had an intra-regional trade ratio of over 50%.
    Source: Kumar, Nagesh. 2007. Towards Broader Regional Cooperation in Asia. UNDP Discussion Paper
  1. Increased intraregional trade as well as trade with other emerging markets are some of the driving forces behind the relative strength of the Asian economy, especially during the Global Financial Crisis that begun in 2007.
    Source: ADB. 2011. Asian Development Outlook 2011 Update.
  1. In 2011, Asia's intraregional trade share increased to 55.5% from 45.2% in 1990, although the degree of trade integration varies across the region. East Asia's intra-subregional trade share reached 35.4% in 2011, reflecting the presence of a strong production network, while South Asia lags far behind at 4.6%. The degree of integration measured by intraregional trade is likely to increase in the coming years.
    Source: ADB OREI estimates using data from Direction of Trade Statistics, IMF
  1. From 2001 to 2011, the Central Asia Regional Cooperation (CAREC) has implemented 121 priority projects worth over $17.7 billion, including the improvement of 4,000 km of roads and 2,240 km of railways.
    Source: CAREC Program
  1. As of December 2011, 56 priority Greater Mekong Subregion (GMS) projects worth around $15 billion have either been completed or are being implemented.
    Source: GMS
  1. In 2010, Asia invested 16.6% ($899 billion) of its assets in the region, up from $154 billion in 2001 (9% of total assets).
    Source: ADB OREI estimates using data from Coordinated Portfolio Investment Survey, IMF
  1. Between 2005 and 2011, the share of Asian economies on Japanese banks’ cross-border claims increased steadily from 6.2% to 11.1%, cushioning the impact of European banks deleveraging on the region.
    Source: ADB OREI estimates using data from Bank for International Settlements
  1. Remittance inflows to Asia rose five-fold in the last decade. Between 2000 and 2010, net remittances to Asia rose five-fold from about $31 billion to about $154 billion.
    Source: ADB OREI estimates using data from Balance of Payments Statistics Yearbook 2011, IMF
  1. Labor mobility in Asia is growing, albeit it remains low. From 2000 to 2010, the number of Asian migrants increased by 11 million to reach 62.6 million. However, over the same period the ratio of Asia's migrant population to total population only increased from 1.5% to 1.7%, remaining below the world average of 3.0%. Moreover, Asian migrants are increasingly favoring markets outside Asia.
    Source: ADB OREI estimates using data from Global Bilateral Migration Database, World Bank
  1. While closer regional economic linkages may have helped reduce income disparities across countries, there are concerns about widening inequality and rising polarization within countries. Over the past 30 years, 11 countries, representing 82% of Asia's developing population, experienced rising inequality in either per capita expenditure or income.
    Source: ADB OREI estimates using data from World Development Indicators, World Bank
  1. Income disparities among Asian economies—as measured by the Gini coefficient—have fallen substantially in the last 2 decades, outpacing the decline in the world as a whole. However, most of the improvement in Asia is attributable to rapid growth in the People's Republic of China (PRC) and India.
    Source: ADB OREI estimates using data from World Development Indicators, World Bank
  1. Since economic integration carries risks such as that of a contagion-driven financial crisis, regional cooperation is needed to minimize them. An effective regional financial safety net, such as the Chiang Mai Initiative Multilateralization (CMIM) Agreement, serves this purpose. The CMIM fund was doubled to $240 billion in 2012 in response to growing global economic uncertainty and financial volatility. Another example is the Reserve Bank of India offering to finance a South Asian Association for Regional Cooperation (SAARC) swap arrangement totalling $2 billion.
    Sources: ASEAN+3 Macroeconomic Research Office; SAARC

More 12 Things to Know in 2012