Revival of the Silk Roads in Asia

This chapter focuses on infrastructure connectivity issues that are required for providing efficient service links between production blocs. It argues that after enjoying a rich history of about 1,600 years, the Silk Roads (land connectivity) went into disrepair. Now, for various reasons, land connectivity is once again making a comeback in Asia. First, is the growing importance of supply chain trade or parts and component trade which require efficient service links. The second is the ‘Go West’ policy and the ‘One Belt, One Road’ policy in China. The third is the opening of Myanmar, the node between SA and EA. This chapter also reviews bilateral, regional, and Asia-wide efforts to revive land connectivity including the ASEAN–India Connectivity projects and the recently initiated Bangladesh–China–India–Myanmar Economic Corridor. The chapter then proposes several new Trans-Himalayan Economic Corridors for seamless Pan-Asian connectivity between South Asia, Central Asia, and East Asia.

Policies to Increase Production Network Participation Rates

This chapter identifies the production network participation gap of the ‘PNP gap’ between South Asia and East Asia and within South Asia. It argues that although the newer theories of international trade associated with production networks and supply chains have both costs as well as benefits, the latter outweigh the former and there are significant dynamic network externalities associated with participating in supply chain trade. The chapter then argues that South Asian countries should implement the second round of ‘Look East’ Policies (LEP2) to (i) link themselves to production networks in East Asia and (ii) develop production networks in manufacturing and services within their region. An econometric analysis performed in this chapter helps us to identify the key determinants of supply chain trade and the components of the LEP2 that South Asian countries should implement. These are (i) improving the business environment by completing the reform process begun in the early 1990s, (ii) reducing logistics cost including promoting trade facilitation, (iii) joining and participating in various ongoing regional trade and financial cooperation efforts in East Asia, (iv) reducing communication and coordination costs in managing supply chains by improving Information Communication Technology (ICT), and (v) enhancing regional physical connectivity mainly through transport hardware.

Economic Relations between South Asia and East Asia

This chapter reviews the ‘Look East’ policies implemented, either formally or informally, by the South Asian countries. It argues that these policies have had a number of positive impacts. Efforts are also being made to improve connectivity to reduce trading costs between the two regions. The chapter then assesses the potential for South Asia–East Asia trade. It also reviews the literature on how greater SA–EA economic linkages especially through SA joining production networks will lead to a win-win situation for all countries in both South Asia and East Asia. South Asian economic integration will also be reinvigorated.

Monetary Integration in ASEAN+3

One of the key recommendations of Chapter 3 is that India (and subsequently other South Asian countries as appropriate) should be invited to participate in the monetary integration efforts in East Asia (ASEAN+3) and that this would help enhance Asia’s voice in the G20. These include the possible participation of India in the ASEAN+3 Economic Review and Policy Dialogue and the Chiang Mai Initiative Multilateralization. The survey of stakeholders in Chapter 5 supported this recommendation. A similar survey whose results are presented in Chapter 7 finds that the introduction of a regional monetary unit (RMU) or regional currency basket could also facilitate regional surveillance in East Asia and facilitate macroeconomic policy coordination in the region.

ICT Development and Digital Divide between South Asia and East Asia

Linking production hubs in various countries within the region and globally requires efficient service links including well developed ICT so that the production hubs can be managed efficiently. This chapter focuses on the ‘digital divide’ between SA and EA using various indicators of ICT development and recommends policies and actions required to close the gaps and link the two regions. These policies are grouped as national, regional, and Pan-Asian.

Introduction, Overview, and Policies

This chapter analyses macroeconomic trends in South Asian countries. It argues that the high economic growth rate that these countries had achieved due to macroeconomic reforms of the 1980s and 1990s has started to soften once again. A major reason for this is the slowing pace of economic reforms in these countries. The chapter then highlights the key objectives of the book. The first objective is to argue that in order to jumpstart economic growth and deepen economic integration, South Asian countries need to adopt a two-pronged strategy. First, South Asian countries need to complete the economic reform process that they had begun. Second, they need to implement the second round of ‘Look East’ policies (LEP2). The second objective of the book is to identify the unfinished policy reform agenda for South Asian countries and the components of LEP2 that they should implement. The chapter also summarizes the major findings of the book.

Perception Survey of Asian Opinion Leaders

This chapter presents the results of an online perception survey of South Asian and East Asian opinion leaders defined as representatives of the academia, government officials, business, and media. The objective of the survey was to assess the views of the stakeholders in SA and EA on the relative strengths of the key findings of the earlier chapters of the book. A sample of 5,300 respondents was selected and the survey was undertaken to assess the views of opinion leaders on findings and recommendations of the above chapters. Are the findings and recommendations robust? Among the questions asked were: What are the benefits and costs of SA/EA integration? What are the respective roles of market-led versus regional cooperation policies? Could SA/EA integration be an example of ‘open’ regionalism? What are the policies that SA should adopt under their LEP2 to link themselves with production networks in EA? What is the role of connectivity? What are the factors that have led to the revival of land connectivity or old South-western Silk Road in Asia? Should efforts to promote ASEAN–India connectivity be supported? Should the membership of East Asian institutions be expanded to cover South Asian countries or should South Asia establish its own institutions? In particular, should India be invited to join the various ASEAN+3 initiatives for financial cooperation? Should South Asian countries (other than India) be invited to join the negotiations for the Regional Comprehensive Economic Partnership? Why is the level of economic integration in SA low and can SA–EA integration reinvigorate economic integration in South Asia?

Policy Reforms in South Asia

This chapter focuses on issues related to designing and sequencing policies and argues that South Asian countries have completed the easy part of the reform exercise and plucked the ‘low-hanging’ fruits. They now need to focus on implementing sectoral reforms and the ‘second generation’ reforms, mainly governance and institutional reforms which are designed to improve the operation of markets, enhance competition, and improve economic efficiency and competitiveness. These include reforms of institutions for good governance, reforms of institutions to create human capital—education and health, and the environment for private sector—flexible labour markets, legal reforms, and property rights. As we have already witnessed, implementation of these reforms will pose significant challenges for South Asian countries as it requires a strong political consensus. Yet, without these reforms, high growth rates of the recent past will be difficult to attain. The chapter also identifies the unfinished policy reform agenda for South Asian countries.