With closer regional integration there is increasing interest within the Association of Southeast Asian Nations (ASEAN) and on the part of the ASEAN’s dialogue partners in the potential gains of closer connections between Southeast Asia and South Asia. The strategic positions of India, Myanmar and Thailand provide the basis and scope for implementing multi-modal connectivity projects, for building upon and improving existing infrastructure and processes for cross-border connectivity in trade. With outward-looking policies in the various subregions that seek to link their economies closer than ever, the ASEAN and South Asian countries are presented with a wide array of options at the bilateral, subregional and regional levels that can be pursued in partnership under the different frameworks for cooperation. The role of regional entities such as the Asian Development Bank is also important to consider. This chapter assesses the political economy and other implications of cross-border connectivity between South and Southeast Asia, and suggests practicable options for moving forward.
Moe Thuzar, Rahul Mishra, Francis Hutchinson, Tin Maung Maung Than and Termsak Chalermpalanupap
Ganeshan Wignaraja, Peter J. Morgan, Michael G. Plummer and Fan Zhai
This chapter estimates the potential gains from South Asian–Southeast Asian economic integration using an advanced computable general equilibrium (CGE) model. It estimates the potential gains to be large, particularly for South Asia, assuming that the policy- and infrastructure-related variables that increase trade costs are reduced via economic cooperation and investment in connectivity. As Myanmar is a key inter-regional bridge and has recently launched ambitious, outward-oriented policy reforms, the prospects for making progress in these areas are strong. If the two regions succeed in dropping inter-regional tariffs, reducing non-tariff barriers by 50 percent, and decreasing South Asian–Southeast Asian trade costs by 15 percent – which this chapter suggests is ambitious but attainable – welfare in South Asia and Southeast Asia would rise by 8.9 percent and 6.4 percent of gross domestic product, respectively, by 2030 relative to the baseline. These gains would be driven by rising exports and competitiveness, particularly for South Asia, whose exports would rise by two-thirds (64 percent relative to the baseline). Hence, the chapter concludes that improvements in connectivity would justify a high level of investment. Moreover, it supports a two-track approach to integration in South Asia, that is, deepening intra-regional cooperation together with building links to Southeast Asia.
Hector Florento and Maria Isabela Corpuz
This chapter examines the road and railway links in Myanmar connecting northeast India on the one side with the rest of Southeast Asia on the other. It also discusses the importance of new deepwater ports in creating alternative shipping routes, essential for Myanmar’s international links. It reviews the country’s external trade patterns, and analyzes issues related to trade facilitation, exchange rate policy, financial sector reform and private sector development. The extent to which these gaps can be addressed will depend on the costs and benefits. South Asia–Southeast Asia connectivity can only be accomplished if Myanmar improves the hard and soft infrastructure aspects of connectivity.
This chapter describes India’s trade and investment relations with Southeast Asia and its policies to increase integration. India’s regional integration with Southeast Asia has been advancing well and several projects are being implemented currently. India’s regional connectivity with Southeast Asia has been evolving on two pillars: Northeast India for multimodal and intermodal operations and Southern India for multimodal operation. It presents India’s broad proposals on connectivity projects with Southeast Asia and policy recommendations to strengthen connectivity in Asia in general and that between ASEAN and India in particular. Enhancing connectivity between South and Southeast Asia is a multifaceted task that will require the implementation of strong policy initiatives. Development of the Southeast Asia and South Asia connectivity would throw up significant opportunities to industrial development in India and its trade potential with South and East Asian countries.
Suthiphand Chirathivat and Kornkarun Cheewatrakoolpong
Thailand’s increasing importance as a regional co-production base, and growing intra-regional trade and border trade, are mainly due to recent changes in its economic structure, namely, lack of operational workers, rise in wages, and increase in outward FDI, together with a change of regional policies in Southeast Asia. As a result, improvements in physical connectivity, trade facilitation, energy cooperation and financing infrastructure play an important role. Extending such connectivity to South Asia could also complement the current promotion of regional trade and regional production networks. This chapter reviews the current stages of Thailand’s intra-regional trade, physical connectivity, trade facilitation, energy cooperation and infrastructure funding, as there are planned projects in all these areas which could have a tremendous impact on Thailand and its linkages to the whole Southeast Asian region and beyond, such as the South Asian region. However, Thailand’s political instability impedes the progress and implementation of such projects. The chapter also examines the current financing mechanism of Thailand’s infrastructure projects, which relies heavily on public spending. Suggestions for strategies are provided in order to promote physical infrastructure, trade facilitation and energy cooperation of Thailand with the mainland of Southeast Asia and South Asia.
Mustafizur Rahman, Khondaker Golam Moazzem, Mehruna Islam Chowdhury and Farzana Sehrin
This chapter identifies cross-border initiatives with Bangladesh’s involvement particularly at the bilateral, subregional and regional levels. Some of these initiatives are also integrated with Asia-wide broader connectivity particularly through the Asian Highway and Trans Asian Railway initiatives. Ongoing initiatives include construction and upgrading of multi-lane highways and railways, road and rail bridges, procurement of locomotives and wagons, and construction of internal container river ports. A consensus among the concerned countries is needed with regard to standard operating procedures, harmonization of standards and customs procedures, and service charges and user fees for transit facilities. Additionally, significant investment will be required for trade facilitation and to upgrade border trade facilities at land ports, inland waterways and sea ports. The chapter identifies five key areas where concrete action from major stakeholders is required: (1) mobilizing the necessary funds for building physical infrastructure; (2) identifying and sequencing of priorities; (3) cross-border coordination; (4) building human resources to manage cross-border mega projects; and (5) building supply-side capacities to benefit from connectivity-driven regional market opportunities.
Pradumna B. Rana and Binod Karmacharya
Nepal’s economic performance during the post-conflict period has been driven by remittances from the export of labor services and the improved performance of the agricultural sector, which is still very much weather dependent. The chapter makes the case for a connectivity-driven development strategy for the country. It argues that improved connectivity within Nepal and cross-border connectivity with its neighbors in South Asia, the Association of Southeast Asian Nations (ASEAN), and the People’s Republic of China (PRC) could be important ‘engines of growth’ for the country. Nepal has adopted a multi-track approach to promoting regional cooperation and integration in connectivity with its neighbors. However, a lot more needs to be done, especially in the context of the difficult political situation in the country, and donors have an important role to play in this regard. Ten priority projects to convert Nepal into a land-linked state are identified, but a detailed impact analysis of these projects is beyond the scope of this chapter.
Dushni Weerakoon and Nipuni Perera
As an island economy, Sri Lanka’s regional connectivity has been mainly through its main seaport in Colombo, a transshipment hub port for South Asia. Investments to expand capacity at Colombo port are under way as part of Sri Lanka’s renewed efforts to develop its infrastructure following the long internal separatist conflict that ended in 2009. Despite significant improvements in physical infrastructure connectivity, Sri Lanka has made only limited headway in strengthening its trade and investment links with the rest of the region. Moreover, the country has seen a sharp decline in its overall exports-to-gross domestic product (GDP) ratio, which is worrying in view of the growing external debt financing of many large infrastructure projects through state-led investment initiatives. Thus, Sri Lanka needs to focus on two priority areas: engaging private investment in infrastructure by strengthening the country’s institutional and regulatory environment; and implementing a more strategic trade policy geared to enhance regional integration efforts.