With newly opened Myanmar providing a land link, South Asia and Southeast Asia now have a greater opportunity to build closer economic ties and channel growth toward domestic and regional markets through better connectivity, an Asian Development Bank (ADB) report says.
ADB and ADB Institute’s “Connecting South Asia and Southeast Asia” shows that the two economic subgroups have grown rapidly during an era of fragile world economic growth beset by risks. This process has been fueled by expanding regional production networks, integration into the global economy, foreign direct investment (FDI), falling trade and investment barriers, a commodity boom, and heightened demand from a rising Asian middle class.
However, the two subregions have had relatively limited integration of trade and investment, hindered by trade infrastructure bottlenecks, residual trade barriers, and insufficient regional cooperation.
“The time is ripe for a study of South and Southeast Asia connectivity,” said Dr. Masahiro Kawai, dean and CEO of ADBI.
This is in light of new developments that prove favorable to improving connectivity, the study says. One is the political reform process in Myanmar that makes it possible to connect the two blocs where it was not feasible a few years ago.
Another is the current liberalization negotiations between ASEAN and major regional economies linked to the Regional Comprehensive Economic Partnership. India has adopted a “Look East” policy, and many South and Southeast Asian economies are contemplating second-generation economic reforms to sustain inclusive growth.
The study makes recommendations on ways to improve connectivity, largely through cross-border infrastructure development and trade facilitation. These include identifying specific gaps in road, railroad, and economic corridor links between the two subregions, looking at Myanmar’s potential as an important source of energy trading with South Asia, and promoting more automated approaches to trade facilitation.
It also suggests expanding regional capacity to finance cross-border infrastructure projects, promoting trade and investment liberalization, and supporting closer cooperation among regional forums on transport and energy infrastructure.
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