New Dimensions of Connectivity in the Asia-Pacific by Christopher Findlay and Somkiat Tangkitvanich

1

Infrastructure connectivity 
and regional integration 
in Asia and the Pacific: 
Evidence from a new index 
of economic integration
 Cyn-Young Park and Racquel Claveria
 Introduction
 Regional integration, especially through open trade and investment 
regimes, has been a prominent driver of economic growth that has lifted 
more than a billion people out of poverty in Asia and the Pacific. During 
the period 1990–2018, Asia’s trade volume growth averaged 7.3 per cent 
annually—higher than the world average of 4.7 per cent. With that 
robust economic expansion, real per capita gross domestic product 
(GDP) (in constant 2010 dollar terms) more than doubled, from $2,807 
to $6,557 over the same period. 
In this process, the development of an export-oriented manufacturing 
industry helped attract foreign direct investment (FDI) and contributed 
to the creation and expansion of regional value chains across many 
economies in the region. Along with acceleration of trade and investment 
liberalisation, the private-sector-driven vertical integration of production 
systems across these economies has provided considerable impetus to 
deepen regional economic integration (ADB 2006). The intraregional 

 share of Asia’s total trade steadily increased from just under 50 per cent 
in 1990 to nearly 60 per cent in 2018. In addition, the intraregional 
share of total inward FDI to Asia increased from 41 per cent in 2001 to 
48 per cent in 2018. 
The remarkable success of the region’s high-performing economies over 
the past several decades demonstrates how trade and participation in global 
value chains can drive industrialisation and economic growth. However, 
the level of regional integration varies widely across Asian economies, 
with geographically remote and low-income developing economies often 
struggling to access international markets and participate in global and 
regional value chains. 
Many studies have investigated the trade openness and economic growth 
nexus for the economic benefits of regional integration. Earlier literature 
shows that cross-border trade and investment promote information flows 
and technology transfers, increasing the stock of knowledge capital and 
lifting both levels and growth rates of long-run outputs (Romer 1990; 
Grossman and Helpman 1990, 1991; Rivera-Batiz and Romer 1991). Later 
studies further extend the endogenous growth models to embody the scale 
economies and spillover effects of economic integration on productivity 
and growth through better competition, financial intermediation, labour 
mobility and human capital development, among others.
 Recent research has highlighted the importance of infrastructure and 
seamless connectivity in promoting regional economic integration 
(UNESCAP 2017). This study suggested that regional economic 
cooperation and integration can support the attainment of the UN 
Sustainable Development Goals (SDGs), by ensuring that infrastructure 
projects have favourable social and environmental, as well as economic, 
impacts. Ensuring infrastructure projects connect small, low-income and 
geographically distant countries with the main markets of the region and 
placing a high priority on dealing with transboundary vulnerabilities and 
risks can help achieve the UN 2030 Agenda for Sustainable Development. 
An earlier ADB – Asian Development Bank Institute (2009) study 
estimated that the expected benefits of regional infrastructure projects for 
pan-Asian connectivity could be worth as much as US$13 trillion for 
developing countries in Asia during 2010–20 and beyond if the required 
investment was made.

New Dimensions of Connectivity in the Asia-Pacific by Christopher Findlay and Somkiat Tangkitvanich