Cheltenham, UK; Northampton, MA: Edward Elgar in association with the Asian Development Bank Institute and Asian Development Bank, 2012. xviii, 498 pp. (Figures, tables.) £120.00, cloth. ISBN 978-1-78100-312-1.
The need to boost regional trade to integrate communities, provide employment and lessen poverty is paramount and well recognized. Also acknowledged is that greater regional trade is a function of quality infrastructure. But the state of infrastructure in Asia is still below par, and so is the ensuing degree of economic integration. It is in this context that this well-researched book must be read, as it provides meticulously collected data that will help economists and policy makers interested in Asia and regional infrastructure.
The first part of the book takes up the commendable task of quantifying the infrastructural demands of the region from 2010 to 2020 and the likely benefits of having the desired infrastructure. This also includes sub-regional findings (impact on the Greater Mekong Sub-region (GMS) and South Asia in chapters 3 and 4) and country-specific estimates within chapters. The demand for infrastructure in Asia is calculated in the first chapter using an econometric model (termed as the “top-down” approach) as well as by actually assessing the 1202 infrastructural projects that are underway (“bottom-up” estimation) by way of calculating the cumulative cost of implementing these projects. The top-down approach led to an estimated demand of Rs 2.17 trillion for India in 10 years. This chapter also breaks down infrastructural needs (ICT, water, electricity, transport, etc.) by sector and raises the question of financing, which is addressed in chapter 10.
Updated, modified versions of the Global Trade Analysis Project (GTAP) model were used to measure the impact of improvements in transport infrastructure on trade in the Asian sub-regions. The results firmly indicate that trade facilitation, helped by improved physical connectivity between countries, will have positive impacts on poverty alleviation and income in GMS. While the positive welfare impacts of a reduction in regional transportation costs in South Asia are identified in the following chapter—and more recent studies seem to confirm these impacts (Tsunehiro Otsuki, Keiichiro Honda, John S. Wilson, “Trade facilitation in South Asia,” South Asian Journal of Global Business Research 2 no. 2 (2013): 172–190)—the centrality of political logjams in issues surrounding trade facilitation in the sub-continent cannot be understated.
The second part of the book will particularly interest policy formulators and implementers, as it highlights the policy imperatives of evaluating infrastructural projects. It offers a qualitative exercise that brings to the fore the do’s and don’ts of project implementation, which might, for one, help avoid cost and time overruns. Chapter 7, which deals with inter-country infrastructure in Asia, speaks of a need to address issues of governance, as local capital is not too scarce to fund infrastructure. Governance and the institutional aspects of infrastructure building are an important thrust area of the book. Chapter 8 deals with the environmental impacts of the energy sector. Chapter 9 has lessons for the Asia-Pacific region from the EU, whose cross-border institutions (regulatory, legal, etc.) and infrastructure are of high quality—as a result of which 71 percent of its total exports are intra-regional. The EU, however, doesn’t come across as a perfectly politically integrated region, and there is not much that Asia can learn from the EU in that respect.
The last part of the book contends with addressing infrastructure financing needs—a difficult and relatively less traveled terrain in the literature. The first chapter in this section suggests financing tools for infrastructure building in Asia, including a common central bank for Asia, regional infrastructure companies, and other already-in-use tools like PPP and MDBs. Importantly, it talks about how Asian savings and surpluses are tucked away in US bond markets or used up in non-productive activities like stock market speculation and real estate investments. An important policy implication of this narrative, one that the author draws, is that Asian economies should develop deeper financial markets back home. But their attractiveness as an investment choice needs to be looked into.
Chapter 11 deals with the role of FDI in regional infrastructure, a crucial area of study in the given area, but stops short of either analyzing the determinants of FDI or mapping the FDI trends in the region per se. Instead, the chapter comprehensively looks at the FDI-financed regional infrastructural projects across the world as a possible blueprint for Asia. Chapter 12 demonstrates how the PPP model was used to fund EU regional infrastructure and accommodates a project-wise tabulation of PPP projects in all individual EU countries, which is commendable. The challenges of the PPP model, including risk allocation, in very large and long-gestation projects are pointed out. While India has warmed up to the PPP model in the past few years, these chapters will have an important bearing on India’s infrastructure policy making.
This book raises a question future research might address through the lens of public policy: why do some regions not manage to integrate well despite the known benefits to regional trade? One hopes this book will prompt policy makers to give Asian integration serious thought. This prescriptive, highly fact-intensive, forward-looking and econometrically strong yet policy-oriented book is an important addition to the literature on trade infrastructure, economic integration and trade policy in Asia. Thus, it will benefit a wide range of specialist audiences, including economists and policy makers.
Pravakar Sahoo
University of Delhi, Delhi, India