ADBI series on Asian Economic Integration and Cooperation
Edited by Biswa Nath Bhattacharyay, Masahiro Kawai and Rajat M. Nag
Chapter 7: Economic space for transnational infrastructure: gateways, multimodal corridors and special economic zones
The difficulties in determining investment priorities arise in large part from the problem of externalities, that is, large divergences between private and social costs/benefits. An important externality that is often overlooked in a narrow domestic calculus is the costs and benefits of improved transnational linkages. The Asian Development Bank (ADB) rightly sees potential for strengthening regional social and political ties within Asia through regional corridor development as a step towards building an Asian economic community (Kuroda 2006). Some would go further and suggest that regionalism is a matter of survival for Asia in a tri-polar world alongside Europe and the United States. There may be important non-economic benefits of regionalism beyond raising national income and reducing poverty. Thus greater weight may be given to regional cooperation and regional projects than would be consistent with purely economic goals. Nevertheless, there are pitfalls in taking a partial approach to externalities. A proper calculus for setting investment priorities must still take account of all large externalities, not merely those that happen to be in current fashion (for example air and water pollution, and congestion).
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