Economic Corridor Development for Inclusive Asian Regional Integration

1 January 2014

This publication examines the experience of economic corridor development in different regions across continents and shares detailed models that assess the economic impact of corridor investments. Important lessons are learned from European Union and South Asia Subregional Economic Cooperation (SASEC) experiences in modeling. The SASEC model highlighted the regionally inequitable impact of corridor projects and incorporated non-trivial value chains into a model of production and transportation. The value chains were mapped out, significant bottlenecks identified, and necessary investments to ensure goods reaching international markets at competitive prices were determined.

The SASEC study simulated a national economy using a simple general equilibrium model and focused on the incremental effects of infrastructure investments in terms of gains in per capita income. The evidence-based analysis devised optimal policies to ensure shared benefits of infrastructure investment projects across stakeholder countries.

The various simulations established that

  • Average incomes increase overall due to Aid for Trade (AfT) investments, but there are regional winners and losers;
  • "Hard" and "soft" investments are important for welfare;
  • Benefits from AfT transport and trade investments vary significantly across regions;
  • Well-connected regions due to infrastructure investment gain most.
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