Chapter 15

Strengthening
Regional Cooperation
and Integration in Asia

15.1 Introduction
Regional cooperation and integration (RCI) refers to policies and
initiatives of countries in a region to engage in close economic
cooperation and promote the integration of their economies, especially
through trade and investment. RCI has played an important role in
supporting Asian development over the past half century. It contributed
to the region’s peace and stability, promoted intraregional trade and
investment, and supported the provision of regional public goods—
in particular, controlling transboundary environmental pollution
(for example, in rivers and the haze), combating communicable disease,
and preventing financial contagion.
RCI in developing Asia has evolved significantly since World
War II in terms of country coverage and the scope of cooperation.
It was initially motivated by the need to ensure peace and security after
years of war and conflict in the region, and to move beyond former
colonial links. It was also influenced by the United Nations (UN),
initially through the establishment of the Economic Commission for
Asia and the Far East (ECAFE) in 1947.
470 | Asia’s Journey to Prosperity—Chapter 15

Over time, RCI became homegrown and expanded to more

areas, including research, education, and capacity development;
development financing; trade and investment; money and finance; and
responding to common regional challenges. The Asian Development
Bank (ADB) continues to promote RCI across many subregions.
This chapter discusses the institutional evolution of RCI in
Asia and the Pacific. Section 15.2 looks at the key motivating factors.
Section 15.3 traces the changing drivers that influenced RCI’s evolution
in East Asia and Southeast Asia—the subregions that benefited most thus
far from regional cooperation and market-driven integration. It shows
how the Association of Southeast Asian Nations (ASEAN) emerged as a
successful example of RCI. Section 15.4 discusses RCI across different
subregions. Section 15.5 discusses the establishment of ADB as a prime
example of RCI. Finally, section 15.6 highlights the future of RCI,
including megaregional free trade agreements (FTAs) consistent with
the region’s brand of “open regionalism,” and addressing the challenges
of inclusive and sustainable development.

15.2 Why regional cooperation and integration?

RCI, together with private-sector, market-led actions, promotes
integration among economies in trade, investment, finance, and other
areas. There are different motivations and reasons for countries to
undertake RCI in Asia and the Pacific.
First, RCI can contribute to peace and stability, creating an
environment of mutual trust that allows countries to deepen economic
cooperation and interdependence. Looking back, the 1950s–1970s was
an era characterized by tensions between countries. As a result, they
sought security cooperation with neighboring countries. In addition,
some countries sought to promote the Non-Aligned Movement, which
contributed to binding ties among 120 developing countries within the
Asian region and beyond.
Regional groupings such as ASEAN, which was established in
1967, had their original motivation based on concerns over security.
As political stability took root, security gradually took second place
to economic cooperation. For ASEAN, this evolution was seen in
the creation of the ASEAN Preferential Trading Arrangements in
1977 and the ASEAN Free Trade Agreement in 1992. ASEAN played
a critical role in nurturing mutual trust at the time Cambodia,
the Lao People’s Democratic Republic, Myanmar, and Viet Nam began
market-oriented reforms.
Strengthening Regional Cooperation and Integration in Asia | 471

Second, RCI enhances cross-border economic opportunities.

It can provide a wide range of opportunities to increase trade and
investment by helping lower tariff barriers and removing obstacles
to free trade, promoting open investment regimes, and fostering
infrastructure connectivity between countries.
The resulting regional integration allows countries to exploit
economies of scale by expanding markets for their goods and services.
It can better allocate resources as inputs are sourced beyond national
boundaries, leading to cost reductions and the introduction of new
products. It also enables technology and skills transfers. This facilitates
the narrowing of development gaps between countries in the Asia and
Pacific region and participation in regional and global value chains for
some parts of the region.
RCI also allows countries to cooperate to mitigate
macroeconomic and financial risks through regional policy dialogue
and mechanisms that enhance financial stability. This became evident
in East Asian and Southeast Asian countries after the 1997–1998 Asian
financial crisis and the 2008–2009 global financial crisis.
In addition, RCI offers a forum, through peer influence, to
promote good policies on prudent macroeconomic management,
open trade and investment regimes, sound financial regulations,
environmental protection, and stronger governance and institutions.
Third, RCI provides for regional public goods. Increasingly, the
region’s economies are vulnerable to a range of new cross-border risks
arising from health and environmental issues such as the spread of
communicable disease, transboundary pollution, and natural disasters
triggered by cross-border natural hazards. Many of these issues need
to be addressed not only nationally and globally, but also regionally.
RCI can support collective action on climate change mitigation and
adaptation.
RCI is also needed to combat illegal cross-border activities
such  as drug trafficking and money laundering by coordinating laws,
policies, regulations, standards, and/or institutional mechanisms.
These issues require collective effort because of the possible large
harmful spillovers these illegal activities can have on neighboring
countries.
Fourth, RCI can be a platform for a stronger Asian voice.
Asia’s contribution to the global economy is increasing, and more
Asian countries are participating in global forums such as the Group of
472 | Asia’s Journey to Prosperity—Chapter 15

Twenty (G20).1 It is necessary to represent the region’s views in global

discussions on macroeconomic policies, coordination on taxation,
financial regulations on banks and securities, and global agendas such
as the Sustainable Development Goals and climate change.
For Asia to be effectively represented in global forums as well
as to ensure Asian views influence the global agenda, there is a need
for closer regional dialogue to understand how global issues affect
the countries in the region and how Asia can contribute to setting the
global agenda and pursuing it.
Finally, some regional forums provide platforms to draw in
countries from outside the region. For instance, ASEAN provided
impetus for the establishment of the Asia-Pacific Economic Cooperation
(APEC) in 1989, and the basis for ASEAN+3—ASEAN plus the People’s
Republic of China (PRC), Japan, and the Republic of Korea (ROK)—
in the late 1990s after the Asian financial crisis, and for ASEAN+6
(including Australia, India, and New Zealand) more recently.
In addition, ASEAN facilitated the establishment in 1994 of
the ASEAN Regional Forum, which fosters dialogue and consultation
on peace and security with countries far beyond ASEAN, including
many countries in Asia and the Pacific (such as the Democratic
People’s Republic of Korea), Canada, the European Union, the Russian
Federation, and the United States (US). In all these initiatives, the
ASEAN Plus framework provides the anchor for cohesive cooperation.

15.3 Early movers of regional cooperation and integration in East Asia

and Southeast Asia
Asia and the Pacific saw many forms of RCI after World War II. At the
time, most Asian countries were trying to rebuild after the devastation
of war. The UN ECAFE was established in 1947 to provide research and
advice on economic issues faced by the region’s developing countries.
It was later renamed the Economic and Social Commission for Asia and
the Pacific (ESCAP), broadening its focus to social issues such as labor
and human development.2

1
Six countries from the region are G20 members—Australia, India, Indonesia, Japan,
the PRC, and the ROK.
2
United Nations Economic and Social Commission for Asia and the Pacific. 2014. Asia and
the Pacific: A Story of Transformation and Resurgence. Bangkok.
Strengthening Regional Cooperation and Integration in Asia | 473

In 1950, the Colombo Plan for Cooperative Economic

Development in South and Southeast Asia3 was established as the
region’s first multilateral initiative to provide finance for development.
It was designed as a cooperative venture, channeling bilateral capital
and technical assistance from developed countries (including Australia,
Japan, the United Kingdom, and the United States) to countries in
South Asia and Southeast Asia.4
Newly independent states in the region also sought to
develop their economies beyond their colonial ties, building national
identities and aspirations, and forging cooperation with other
developing regions in the world—such as Africa and Latin America.
These were central themes in some Asian conferences organized by
developing countries in the early years.5
The most prominent was the 1955 Asian–African Conference
in Bandung, Indonesia. The Bandung Conference was a high-water
mark in propounding the notion of the “Third World” and the “South.”
During the conference, Asian and African leaders enunciated the
principles of cooperation, self-determination, mutual respect for
sovereignty, nonaggression, noninterference in internal affairs, and
equality.6 These principles paved the way for developing countries in
Asia to establish the Non-Aligned Movement in 1961.7
In 1954, some countries in Southeast Asia and Pakistan, along
with Australia, France, the United Kingdom, and the US, created a
regional collective security organization, the Southeast Asia Treaty
Organization (SEATO), to address the expanding communist influence
in the region. However, SEATO had limited  active support from the
region and was dissolved in 1977.

3
Later renamed as Colombo Plan for Cooperative Economic and Social Development in
Asia and the Pacific.
4
Oakman, D. 2004. Facing Asia. A History of the Colombo Plan. Canberra: The Australian
National University Press.
5
Acharya, A. 2005. Why Is There No NATO in Asia? The Normative Origins of Asian
Multilateralism. Weatherhead Center for International Affairs Working Paper Series.
No. 05-05. Cambridge, MA: Harvard University.
6
CVCE.eu. Final Communiqué of the Asian–African Conference of Bandung Signed on
24 April 1955. http://franke.uchicago.edu/Final_Communique_Bandung_1955.pdf.
7
Timossi, A. J. 2015. Revisiting the 1955 Bandung Asian–African Conference and Its Legacy.
South Bulletin. 85. 15 May. Geneva: South Centre. https://www.southcentre.int/question/
revisiting-the-1955-bandung-asian-african-conference-and-its-legacy/.
474 | Asia’s Journey to Prosperity—Chapter 15

Other efforts such as the Association of Southeast Asia in

1961 and Maphilindo (Malaysia, the Philippines, and Indonesia) in
1963 were short-lived, primarily due to political tensions between
members.8 However, these efforts led to the creation of ASEAN in
1967. ASEAN’s establishment was successful because of its strict
adherence to noninterference and its adoption of informal and
consensus-oriented cooperation (Box 15.1).

Box 15.1: The Successful Evolution of ASEAN

into the ASEAN Economic Community

The Association of Southeast Asian Nations (ASEAN) was established in

1967 by five countries—Indonesia, Malaysia, the Philippines, Singapore,
and Thailand—to overcome conflict in the Southeast Asian region.
Its form of regional cooperation was based on informality, consensus
building, and nonconfrontational bargaining.
During its first decade, ASEAN’s agenda was dominated by
political and security issues with the backdrop of the Cold War. As
peace and stability were nurtured gradually, greater trust between
countries facilitated economic cooperation.a This was embodied in the
ASEAN Concord, agreed at ASEAN’s first Leaders’ Summit in Bali in
1976. The ASEAN Concord started cooperation on basic commodities,
particularly food and energy, and industrial production in the form
of technical cooperation and preferential trading arrangements.b It
became the harbinger for subsequent agreements such as the ASEAN
Preferential Trading Arrangements in 1977, ASEAN Free Trade Area
(AFTA) in 1992, ASEAN Framework Agreement on Services in 1995,
and ASEAN Investment Area in 1998.
Together with unilateral country policies to liberalize trade and
investment, AFTA and ASEAN’s other trade and investment frameworks
attracted foreign direct investment and knowledge transfer, and fostered
emerging regional production networks. Data show that after AFTA’s
creation, United States multinational activity in the subregion increased
faster than in other Asian countries.c

continued on next page

8
Acharya, A. 2014. Foundations of Collective Action in Asia: Theory and Practice of
Regional Cooperation. In Capannelli, G., and M. Kawai, eds. The Political Economy of
Asian Regionalism. Tokyo: Asian Development Bank Institute and Springer.
Strengthening Regional Cooperation and Integration in Asia | 475

Box 15.1 continued

In 2003, ASEAN leaders agreed to establish the ASEAN Economic

Community to consolidate ASEAN as a single market and production
base  and allow it to become more globally competitive. The ASEAN
Economic Community was formally launched in 2015. It  entails further
economic liberalization; labor mobility; and the promotion of connectivity
in transport, energy, and information and communication technology.
It also aims at narrowing the development gap between members and
strengthening ASEAN’s relationship externally. To address financing gaps
in building needed infrastructure, the ASEAN Infrastructure Fund was
established in 2011 with equity investments from ASEAN members and
the Asian Development Bank.
ASEAN’s steadfast support for open regionalism in trade and
investment is embodied in its ASEAN Plus framework. It has been central
in wider regional initiatives such as ASEAN+3 (for monetary and financial
cooperation) and the proposed megaregional ASEAN+6 free trade
agreement—the Regional Comprehensive Economic Partnership (RCEP). d
a
 Acharya, A. 2014. Foundations of Collective Action in Asia: Theory and Practice of Regional
Cooperation. In Capannelli, G., and M. Kawai, eds. The Political Economy of Asian Regionalism.
Tokyo: Asian Development Bank Institute and Springer.
b
 ASEAN. The Declaration of ASEAN Concord. Bali, Indonesia. 24 February 1976. https://asean.
org/?static_post=declaration-of-asean-concord-indonesia-24-february-1976.
 Antras, P., and C. Foley. 2011. Regional Trade Integration and Multinational Firm Strategies.
c

In Barro, R., and J.-W. Lee, eds. Costs and Benefits of Economic Integration in Asia. Oxford and
New York: Oxford University Press and Asian Development Bank (ADB).
d
 ASEAN+6 comprises ASEAN+3, Australia, India, and New Zealand.
Sources: McCawley, P. 2017. Banking on the Future of Asia and the Pacific: 50 Years of the Asian
Development Bank. Box 12.3. Manila: ADB; ADB website. https://www.adb.org; and Central Asia
Regional Economic Cooperation Program. https://www.carecprogram.org.

Technical and research institutions in the region were

established to cater to specific priority areas—the Asian Institute
of Technology in Thailand (1959) for technology, the International
Rice Research Institute in the Philippines (1960) for agriculture, the
Asian Productivity Organization in Japan (1961) for productivity,
and the Asian Institute of Management in the Philippines (1968) for
executive education.
Trade liberalization started gaining traction in the 1970s
and 1980s. The spread of an open market environment, combined
with declining transport costs for outsourced production, attracted
multinational companies to locate to East Asia and Southeast Asia.
Against the backdrop of slow-moving negotiations on the General
476 | Asia’s Journey to Prosperity—Chapter 15

Agreement on Tariffs and Trade, APEC was created in 1989.9 Leaders

saw APEC as a useful informal group for supporting the General
Agreement on Tariffs and Trade Uruguay Round, which was concluded
in 1994.
The 1997–1998 Asian financial crisis was a turning point for
East Asian and Southeast Asian regionalism. It led to further regional
cooperation on monetary and financial issues, spurring innovative
mechanisms built on previous initiatives such as the ASEAN Swap
Arrangement.10 ASEAN+3 developed several initiatives to strengthen
resilience against financial instability, such as the Chiang Mai Initiative
(2000) as a network of currency swap arrangements and the Asian
Bond Markets Initiative (2002) to promote long-term financing within
the region.
Asian countries weathered the 2008–2009 global financial
crisis better than most because they pursued prudent macroeconomic
policies, implemented comprehensive structural and financial sector
reforms, and increased their foreign reserves after the Asian financial
crisis. To collectively strengthen their preparedness for future crises,
ASEAN+3 launched the Chiang Mai Initiative Multilateralization
(CMIM) in 2010 (currently $240 billion in size) and the ASEAN+3
Macroeconomic Research Office in 2011 to monitor CMIM economies,
support implementation of the CMIM, and provide technical assistance
to CMIM members (Chapter 10).

15.4 Regional cooperation and integration in other subregions

RCI developed in Asian subregions at different speeds. Those outside
East Asia and Southeast Asia faced challenges from their political
and economic environments. They lagged behind in terms of their
intrasubregional trade shares (Figure 15.1). East Asia and Southeast
Asia, after adopting open trade and investment regimes, faced new
9
Founding members were Australia, Brunei Darussalam, Canada, Indonesia, Japan,
Malaysia, New Zealand, the Philippines, the ROK, Singapore, Thailand, and the US.
Hong  Kong, China; the PRC; and Taipei,China joined in 1991. Mexico and Papua New
Guinea joined in 1993; Chile acceded in 1994; and Peru, the Russian Federation, and
Viet Nam joined in 1998, leaving APEC with its current 21 members.
10
Central banks and monetary authorities of the original five ASEAN members—Indonesia,
Malaysia, the Philippines, Singapore, and Thailand—agreed to establish reciprocal
currency or swap arrangements in August 1977. The ASEAN Swap Arrangement was
created primarily to provide liquidity support for those with balance of payment
problems (see Asia Regional Integration Center. https://aric.adb.org/initiative/asean
-swap-arrangement). It was the historical forerunner of the Chiang Mai Initiative and
the Chiang Mai Initiative Multilateralization.
Strengthening Regional Cooperation and Integration in Asia | 477

Figure 15.1: Intrasubregional Trade Share, 1992–2018

(% of a subregion’s total trade)
30

25

20

15

10

0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
ASEAN Central Asia SAARC
Pacific (developing) Pacific (with AUS, NZL)

ASEAN = Association of Southeast Asian Nations, AUS = Australia, NZL = New Zealand,
SAARC = South Asian Association for Regional Cooperation.

Source: Asian Development Bank calculations using data from International Monetary Fund.
Direction of Trade Statistics. https://www.imf.org/en/Data (accessed 27 December 2019).

challenges that required a deepening of RCI, particularly in financial

cooperation.
In South Asia—which for a long time struggled to secure
stability,  peace, and security in the subregion—RCI progress was
hampered by geopolitical tensions. The South Asian Association for
Regional Cooperation (SAARC) was established in 1985.11 It launched
RCI initiatives such as the SAARC Preferential Trading Arrangement
(SAPTA) and the Agreement on South Asian Free Trade Area (SAFTA)
signed in 1993 and 2004, respectively. However, they have had limited
impact on intraregional trade thus far.12
Central Asia, following the collapse of the Soviet Union in
1991, began several cooperation arrangements to recover and maintain
economic connectivity. The most recent is the Eurasian Economic
11
Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
12
Desai, V. V. 2010. The Political Economy of Regional Cooperation in South Asia. ADB Working
Paper Series on Regional Economic Integration. No. 54. Manila: Asian Development Bank.
478 | Asia’s Journey to Prosperity—Chapter 15

Union (2015), which includes a customs union.13 These arrangements

did not include all Central Asian countries, and they represent a work
in progress, with full impact on regional integration still to be assessed.
In 1971, the South Pacific Forum was initiated to foster regional
cooperation, particularly on trade and economic issues. It became the
Pacific Islands Forum in 1999 to denote its membership of both the
north and south Pacific island countries.14
South Asia, Central Asia, and Pacific subregions need
continued efforts to boost RCI.
South Asia needs to deepen connectivity through transport,
energy, and trade facilitation. It is also important to pursue broad-
based, market-oriented reforms unilaterally and collectively to further
integrate the subregion economically, and integrate more with other
Asian subregions and the global economy.
Central Asia needs to move beyond basic transport and energy
connectivity to develop economic corridors that attract private sector
participation and build value chains. To promote inclusive growth,
these corridors should allow lagging border and remote areas,
agriculture, and small and medium-sized enterprises to participate
in private sector-led value chains. Central Asian countries should
also expand regional cooperation on economic policy and structural
reforms and explore working together on development of financial and
capital markets.
While Pacific island countries are challenged by their small
size, geographic remoteness, and vulnerability to natural hazards
and climate change, RCI can help mitigate and help resolve these
challenges. Examples include encouraging maritime and digital
connectivity, tackling ocean health and managing shared ocean
resources, promoting sustainable tourism, and fostering human
capacity development. The University of the South Pacific, owned by
12 Pacific governments, was founded in 1968 and currently operates
an online education platform.

13
The Eurasian Economic Union came into force on 1 January 2015 with Armenia, Belarus,
Kazakhstan, the Kyrgyz Republic, and the Russian Federation. It incorporates previous
treaties covering the Eurasian Customs Union (2010) and the Eurasian Economic Space
(2012). Uzbekistan is working toward joining the Eurasian Economic Union.
14
Membership includes Australia, the Cook Islands, the Federated States of Micronesia,
Fiji, Kiribati, the Marshall Islands, Nauru, New Zealand, Niue, Papua New Guinea, Samoa,
Solomon Islands, Tonga, Tuvalu, and Vanuatu.
Strengthening Regional Cooperation and Integration in Asia | 479

15.5 ADB and its role in regional cooperation and integration

ADB’s founding in 1966 was itself an early example of RCI. Countries
in Asia and the Pacific wanted an institution that would support
Asian development. They also sought to bring in financial resources
and know-how from within and outside the region with the help of
nonregional members (Chapter 14).
RCI has always been an ADB priority. Its Charter mandates
ADB to “foster economic growth and cooperation in the region … and
to contribute to the acceleration of the process of economic
development of the developing member countries of the region,
collectively and individually.”
ADB promotes its RCI agenda through subregional cooperation
programs (Box 15.2). The first subregional program, the Greater Mekong
Subregion (GMS) Economic Cooperation Program, was established in
1992. This initiative was designed to foster economic linkages after
countries launched market-oriented reforms. The GMS Program was
followed by the Indonesia–Malaysia–Thailand Growth Triangle (IMT-
GT) Program in 1993, and later by the Brunei Darussalam–Indonesia–
Malaysia–Philippines East ASEAN Growth Area (BIMP-EAGA)
Program in 1994.
In 1997, the Bay of Bengal Initiative for Multi-Sectoral
Technical and Economic Cooperation (BIMSTEC) was created
to support economic ties between South Asia and Southeast Asia.
The Central Asia Regional Economic Cooperation (CAREC) Program
was formally launched in 2001 to facilitate trade, transport, and
energy linkages following the 1991 breakup of the Soviet Union.
In South Asia, the South Asia Subregional Economic Cooperation
(SASEC) Program was established in 2001.

15.6 Looking ahead

Asia and the Pacific have adopted RCI frameworks over the years to
promote trade, investment, infrastructure connectivity, and regional
public goods. These frameworks contributed to the pursuit of good
policies and a sense of cooperation between countries.
Looking ahead, there remain many areas where RCI can
further deepen and contribute to the welfare of the region and the
world at large.
480 | Asia’s Journey to Prosperity—Chapter 15

Box 15.2: ADB Subregional Cooperation Programs

Greater Mekong Subregion (GMS) Economic Cooperation Program:

In 1992, six countries—Cambodia, the Lao People’s Democratic
Republic, Myanmar, the People’s Republic of China (PRC) (Yunnan
Province), Thailand, and Viet  Nam—established the GMS Program.
The PRC’s Guangxi Zhuang Autonomous Region joined the program in
2004. The GMS Program focuses on (i) increasing connectivity through
sustainable development of physical infrastructure and economic
corridors; (ii) improving competitiveness through efficient facilitation
of cross-border movement of people and goods, market integration,
and enhancement of value chains; and (iii) building a greater sense of
community through shared concerns. The GMS Program pays particular
attention to building strategic alliances, especially with the Association
of Southeast Asian Nations (ASEAN), ASEAN+3 (ASEAN plus the PRC,
Japan, and the Republic of Korea), and the Mekong River Commission.

Indonesia–Malaysia–Thailand Growth Triangle (IMT-GT): The

program began in 1993 as a subregional framework for accelerating
economic cooperation and integration. The IMT-GT currently covers
14 provinces in southern Thailand, 8 states of Peninsular Malaysia, and
10 provinces of Sumatra in Indonesia. The strategic objectives are to
(i) facilitate trade and investment; (ii) promote agriculture, agro-industry,
and tourism; (iii) strengthen infrastructure linkages and support IMT-GT
integration; (iv) address cross-sector concerns such as human resource
development, labor, and the environment; and (v) strengthen institutional
arrangements and mechanisms for cooperation.

Brunei Darussalam–Indonesia–Malaysia–Philippines East ASEAN

Growth Area (BIMP-EAGA): The BIMP-EAGA Program was launched
in 1994 to address subregional development inequality. The program
includes Brunei Darussalam; the provinces of Kalimantan, Sulawesi,
Maluku, and West Papua in Indonesia; Sabah and Sarawak and the Federal
Territory of Labuan in Malaysia; and Mindanao and Palawan Province in
the Philippines. The Asian Development Bank has been BIMP-EAGA’s
regional development advisor since 2001. The program focuses on five
strategic pillars: (i) connectivity, (ii) a food “basket,” (iii) tourism, (iv) the
environment, and (v) sociocultural activities and education. Its long-term
goal is to ensure that non-resource-based industries are established in
the subregion. BIMP-EAGA cooperation aims to increase trade, tourism,
and investment within and outside the subregion, taking advantage of the
subregion’s resources and existing complementarities.

continued on next page

Strengthening Regional Cooperation and Integration in Asia | 481

Box 15.2 continued

Central Asia Regional Economic Cooperation (CAREC) Program:

CAREC was formally established in 2001 to promote economic
cooperation  in Central Asian countries. Initial members included
Azerbaijan, Kazakhstan, the Kyrgyz Republic, Mongolia, the PRC
(the Xinjiang Uygur Autonomous Region; the Inner Mongolia
Autonomous Region joined later), Tajikistan, and Uzbekistan. Afghanistan
joined in 2005, and Pakistan and Turkmenistan in 2010, enabling a north–
south route to the Arabian Sea through Pakistan. Georgia joined in 2016.
The program includes a partnership between members and a group of
multilateral development partners. ADB serves as CAREC secretariat,
operational since 2000. CAREC has focused on transport, energy,
trade (both trade facilitation and trade policy), and economic corridor
development. The focus is now expanded under the CAREC 2030 strategy,
approved in 2017, to include support for economic and financial stability,
tourism, agriculture and water, and regional human capital development.

South Asia Subregional Economic Cooperation (SASEC) Program:

SASEC was established in 2001 as a project-based initiative that initially
promoted economic cooperation by enhancing cross-border connectivity
and facilitating trade between Bangladesh, Bhutan, India, and Nepal.
Sri Lanka and Maldives joined in 2014, and Myanmar in 2017. Priority areas
for cooperation include transport, trade facilitation, energy, and economic
corridor development.
Sources: McCawley, P. 2017. Banking on the Future of Asia and the Pacific: 50 Years of the Asian
Development Bank. Box 12.3. Manila: Asian Development Bank (ADB); ADB website.
https://www.adb.org; and CAREC. https://www.carecprogram.org.

First, trade and investment can be further liberalized and

trade  facilitated through subregional initiatives and multilateral
agreements. Streamlining and harmonizing customs border
procedures, for example, can ease cross-border flows. The World
Trade Organization (WTO) Trade Facilitation Agreement, which came
into force in February 2017, was the most recent global multilateral
trade agreement. Asia’s subregions should continue to work toward
implementing such global agreements.
Second, megaregional FTAs that can act as building
blocks for the  multilateral trading system need to be promoted.
The Comprehensive  and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) and the Regional Comprehensive Economic
Partnership (RCEP) (still under negotiation) are examples of this type
482 | Asia’s Journey to Prosperity—Chapter 15

of FTA. Megaregional FTAs can promote liberalization consistent

with WTO principles and simplify complexities from the proliferation
of bilateral and regional FTAs by rationalizing rules of origin.
Third, there is a need to complement hard infrastructure with
“soft” connectivity institutions to more efficiently use cross-border
connectivity, including digital communications. Examples in Central
Asia and the GMS include railway associations for cross-border rail
safety and gauge coordination, and regional power coordination
centers to make cross-border transmission more efficient and boost
power trade.
Fourth, greater cooperation is needed in conservation and
management of shared natural resources such as rivers, oceans, and
forests with large biodiversity. Collective effort is needed to achieve the
targets of the 21st Conference of the Parties (COP21) to the UNFCCC.
Managing transboundary rivers, as pioneered by the Indus Water
Treaty agreed between India and Pakistan in 1960, is critical.
Fifth, greater cooperation is needed in agriculture, including
policies, research on seed varieties, and land and water use. In
addition, with the increased cross-border flow of agricultural products,
cooperation should be strengthened in veterinary services to reduce
the spread of contagious disease among animals, and in coordination of
food quality and quarantine standards.
Sixth, a greater focus on people is required. Promoting
sustainable regional tourism is one priority. Subregional initiatives
can share country experiences on policies covering technical and
vocational education and training, universal health coverage, and social
protection, among others. Along with easing people’s mobility across
borders for work and tourism, enhanced cooperation on the prevention
of contagious diseases, including HIV/AIDS, is also needed.
Finally, Asia’s voice on global affairs should be amplified.
As the economies of Asia and the Pacific and its populations continue to
grow, the region becomes more important in addressing global issues,
whether on the environment and climate change, population aging,
or trade issues. Its voice should be commensurate with its increased
economic importance in the global community.