Concept And Challenges Facing Asian Connectivity

The concept and benefits of Asian connectivity has the following dimensions:

• A Seamless Asia—a physically, economically, and financially integrated region connected by world-class, efficient, and environment-friendly infrastructure networks in transport, energy, water, and telecommunications that promote trade and investments within the region and with global markets, widen access to markets and public services and thereby promote inclusive and sustainable economic growth and reduce poverty;
• Expanding, deepening, and increasing the efficiency of regional production network and supply chains by streamlining policies, systems and procedures such as customs procedure and other bureaucratic impediments;
• Developing efficient regional financial markets that channel savings from around Asia and the rest of the world in to productive investments, notably infrastructure throughout the region; and
• Efficient and seamless connections across Asia and with the rest of the world to create a more competitive, prosperous, and integrated region, and to take advantage of Asia's enormous untapped economic potential.

Asia is the world's largest and most populous region, covering 26 million square kilometers, and with 3.77 billion habitants, accounts for about 60% of the world's population and 30% of the world's total land area. Asia's economic size today is almost equal to that of Europe and North America. The region consists of some archipelagic subregions such as Southeast Asia with more than 24,000 islands and the Malay Peninsula. Connecting such large and diverse economies is a big challenge. A survey conducted in 2008 by ADB of 600 Asian leaders' opinions found that they saw great potential for developing regional or cross-border infrastructure such as transport and energy, but they acknowledged little progress had been made thus far (ADB 2008).¹

There are many challenges facing increasing regional integration through regional connectivity in Asia. Among these is the challenge of building regional infrastructure that will support the continuing growth and development of Asian economies by both linking them together, particularly with large markets like PRC and India, and linking Asia with the rest of the world. To achieve this will require the proper coordination and integration of existing national, subregional, and regional infrastructure programs.

Another challenge in the coming decades will be how connectivity can address the pressing basic human needs (or basic services) of over two billion people for road and rail transportation, clean water, sewage treatment, electricity, health facilities, communications, etc. Nearly two-thirds of the world's poor live in developing Asia, with over 620 million people in the region living on US$1 or less a day and about 1.9 billion people living on less than US$2 a day (ADB 2007). Regional integration through greater infrastructure connectivity would allow Asian economies to share scarce resources, such as energy and water, to meet these basic needs.

Achieving inclusive growth through connectivity is another major challenge. Rural populations, landlocked or small or less developed countries, villages in mountainous and remote areas, islands, etc., are often left behind. Such regions may have special demands not faced by other regions, such as port and communications facilities for islands, for example. Appropriate regional infrastructure can benefit such special groups by connecting them to the centers of business activities, making physical connectivity crucial for landlocked, island, and small countries.

The main challenge, however, is to find ways to finance the huge infrastructure investment needs. According to a recent study, “Infrastructure for a Seamless Asia” (ADB/ADBI 2009), during 2010–2020 Asia needs an average US$750 billion per year in national and regional infrastructure projects (see Box 1 [ PDF 17.8KB | 1 page ] for definition) in energy, transport, telecommunications, and water and sanitation (including new capacity and replacement) to meet current and future demand. This US$750 billion represents spending that exceeds the available resources of many Asian countries. The shrinking of international and regional financial markets means a corresponding decline in infrastructure and trade financing. It is essential that Asia finds ways and means to mobilize its huge savings to fund its infrastructure development.

Dealing with the negative externalities of infrastructure development, including the social and environmental consequences; and asymmetric distribution of cost and benefits to participating countries, is yet another challenge. Finding “win-win” solutions for all related parties or stakeholders, managing Asia's diversity, and avoiding or mitigating costs from negative externalities would allow the benefits of infrastructure development to be widely shared and are essential measures to create and sustain effective regional integration. Asia needs to create a green connectivity with minimal adverse impact on environment and climate change.

The present institutional structure is neither adequate nor effective in addressing the above challenges (see a review of existing institutions in Section 2.4). If regional integration is to succeed, it is essential to build or strengthen national, subregional and regional institutions involved in infrastructure development within an effective institutional framework.

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Comment(s)

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1. Sritanu Chatterjee
   (posted 29 June 2010 / 12:13:47 PM)
   
   Dear Sir,
   
   I much appreciate the effort to write this well thought-out paper. It is true that most of the Asian integration has been market driven with a bottom up approach unlike that of NAFTA or EU. But it would have been better as to think about how market driven approach can transform the thinking of national governments to implement the soft infrastructure. Some of the top-down projects that have faced eternal delays are mostly due to changes in market condition. One of the examples is the India-Pakistan-Iran gas pipe line project. The project seemed very attractive and feasible till crude was trading 140 USD and projected to reach 200 USD. But now the whole project is lying in shambles. So I think it is very important to have the soft infrastructure in place and that will expedite the process of regional integration.
   
   The institutional framework presented in the paper is quite elaborate. Some timelines or for the formation of each the teams could have been provided.
   
   Is there any forum still now where the premiers of Asian countries can meet? What I think missing in the papers is the process of initiation of talks for the formation of PAIF Summit Steering Committee.
   
   As crisis helps in creating successful institutions that can change the destiny of nations, I hope that the Asian Connectivity program of ADBI would help in changing the future of 60% of the world population.
   
   Thanks & Regards,
   Sritanu