Introduction

Over the past decades of globalization, Asian economies have been growing rapidly. Most Asian economies have become part of growing international economic networks through exchange of goods, services, and capital. People in Asian countries by and large have benefited from this globalization process. Still, around 900 million people in the region are estimated to live in absolute poverty, living on less than US$1.25 a day (Bauer, Hasan, Magsombol, Wan 2008). This means that two thirds of the world's poor live in Asia and the Pacific (UNESCAP 2008a). On the other hand, with around four billion people in 2006, Asia is the most populous region in the world, accounting for 60% of world population. In production and trade, Asia accounts for about one fourth of world trade and world gross domestic product (GDP), respectively.² In spite of their rich resources, Asian countries have not been able to harness their vast potential.³ There are many reasons for this, but, in particular, infrastructure bottlenecks within countries and lack of regional infrastructure connecting countries, such as transport and energy networks, have been key barriers to Asia's integration.⁴

Regional transport infrastructure is typically seen as one of the major determinants of the economic integration process (Vickerman 2002; Kuroda, Kawai, and Nangia 2008). It enhances international and regional connectivity through the free flow of goods and factors across borders, allowing countries to benefit from a better relocation of resources. For example, transportation networks linking neighboring countries enlarge market size and help national economies to grow further through higher trade and production.

Recent studies in Asia show that the countries with geographical contiguity could potentially benefit substantially from higher trade, provided infrastructure and trade costs are improved (see De 2008a, 2008b; Brooks 2008b; Brooks and Hummels 2009). Another set of studies indicates that while the globalization process results in an increase in the number of international exchanges of products and services in both extensive and intensive margins, the identification and establishment of Asia's transportation networks (cross-border or otherwise) have become increasingly important (see Brooks 2008a, 2008b; Hummels 2009). Nevertheless, all unequivocally call for efficient and integrated transport and logistics networks for enhancing movement of goods and services, particularly when Asia has been witnessing rising fragmented production and economic networks across borders. The need for integrated transport and logistics networks is also quite pressing at a time when ongoing global financial turmoil is making it necessary for Asian countries to strengthen their regional infrastructure networks in order to enhance regional demand.

The ancient Silk Route that stretched from Asia to Europe was, until the 13th century, among the world's most important cross-border arteries. As trade and investment are once again flowing rapidly between Asia and other parts of the world, a modern or restored "Silk Road" is needed to help Asia meet its full potential.

The "Silk Road" or "Silk Routes" refers to an extensive pan-Asia interconnected network of trade routes across the Asian continent connecting Eastern, Southern, Central, and Western Asia to the Mediterranean world, including North Africa and Europe since the first century BCE (Elisseeff 1998). The so-called "Silk Routes" were not only conduits for silk, but for many other products and were also very important paths for cultural and technological transmission by linking traders, merchants, pilgrims, monks, soldiers, nomads, and urban dwellers from Asia to the Mediterranean Sea for thousands of years. Extending over 8,000 kilometers (km), the routes enabled people to transport trade goods, especially luxuries such as silk, satins, musk, rubies, diamonds, pearls, and rhubarb from the People's Republic of China (PRC), India, and other Asian countries to the Mediterranean and other parts of the world. Trade along the Silk Road was a significant factor in the development of the great civilizations of the PRC, Egypt, Persia, Arabia, India, Rome, and Byzantium and helped to lay the foundations for the modern world in several respects. Although the term "Silk Road" implies a continuous journey, very few travelers traveled the route from end to end. For the most part, goods were transported by a series of agents on varying routes and trade took place in the bustling mercantile markets of the oasis towns. Gradually, it became a confluence of culture, civilization, and trade and commerce.

Asia now faces a new world economy which bears little resemblance to the one that prevailed in the old Silk Route time. In the contemporary world, falling communication and transport costs coupled with technological development has reshaped the comparative advantages of economies (Krugman 1991, 1993). Putting it differently, the benefits of international comparative advantages of Asian economies may be wiped out if they are not complemented by regional advantages such as regional connectivity. Asia is standing at a juncture when regional connectivity has yet to take a true pan-Asian shape.

This paper considers the contemporary version of the Silk Route—namely, pan-Asian land transport networks, such as pan-Asian highways and pan-Asian railways. This paper attempts to understand the current profile of trade and transport integration among Asian countries and to deal with the issues and challenges that need to be addressed in order to establish Asia-wide transport connectivity. The rest of the paper is organized as follows: Section 2 discusses intra-Asian trade flows, their profile and level of integration, and transportation costs. Section 3 presents the intra-Asian transportation networks, particularly cross-border and overland links. Having discussed the profile of trade and transportation integration, Section 4 presents selected barriers to trade and transportation from the broader perspective of regional cooperation that need to be addressed in integrating Asia effectively and beyond. Finally, conclusions are drawn in Section 5.

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