One Way to Measure Regional Integration
An index that measures the degree of regional integration in Central Asia will help identify policy gaps and measures to enhance economic cooperation.
It is challenging to do an economic analysis of the Central Asia Regional Economic Program (CAREC) because the sizes of its member economies vary widely. The largest economy, the People’s Republic of China (PRC), accounts for more than 94% of the region’s gross domestic product and foreign trade, and more than 80% of its population. In contrast, the Kyrgyz Republic, Mongolia, and Tajikistan each account for about 0.1% of the region’s GDP.
The CAREC Regional Integration Index is designed to measure the depth and breadth of regional economic cooperation among the 11 member countries. It will compare the intra-CAREC state of integration vis-a-vis regional and the global integration index rankings. It will help identify policy gaps and provide policy recommendations to enhance regional integration.
The index will filter out the asymmetries that exist in their economies’ structure, size, and scope. It is a weighted index comprised of six dimensions of integrations: trade and investment; monetary and financial; regional infrastructure and connectivity; institutional and social; regional value chain integration; and other indicators, including free movement of people/labor. There will be 26 indicators, which will be calculated subject to the availability of data for the whole of CAREC and for CAREC excluding the PRC.
The CAREC Regional Integration Index indicates a low level of integration in the six key dimensions of regional economic cooperation for the CAREC member countries, excluding the PRC. The index assigns a value of zero (low) to 1 (full) for economic integration.
Research indicates that the CAREC Regional Integration index rankings are lower than the Asia Pacific Regional Integration Index’s (APRII) average of 0.473. The average for CAREC is 0.316 and for CAREC (excluding the PRC), 0.299.
CAREC countries with a higher value (approaching 1) appear to have integrated value chains and higher trade competitiveness.
Data is based on 2013 APRII. The updated data for CAREC’s index will be available by December 2017.
The CAREC Regional Integration Index is a dynamic index that will constantly track initiatives and efforts of member countries in the six dimensions of integration.
A low score on the index signifies that an economy is less open and less integrated regionally and globally. Policy makers may pursue an open and inclusive regionalism policy, which gives nondiscriminatory treatment to most competitive products, sectors, and trade partners, to spur economic growth. However, these policies may factor in trade adjustment costs and other noneconomic development objectives.
Asia Regional Integration Center. Integration Indicators Database
Central Asia Regional Economic Cooperation. Trade Policy Strategic Action Plan: Where Are We? Presented by the CAREC Trade Policy Coordinating Committee at its 24th meeting in Tblisi, Georgia. 19 June 2017.
H. Huh and C.Y. Park. 2017. Asia-Pacific Regional Integration Index: Construction, Interpretation, and Comparison. Mandaluyong City: Asian Development Bank.
J Felipe and U Kumar. 2010. The Role of Trade Facilitation in Central Asia: A Gravity Model (October 3, 2010). Levy Economics Institute of Bard College Working Paper Series. No. 628. New York: Bard College.
K. Schwab, ed. 2016. The Global Competitiveness Report 2016-2017. Geneva: World Economic Forum.
World Trade Organization. 2015. World Trade Report 2015: Speeding Up Trade—Benefits and Challenges of Implementing the WTO Trade Facilitation Agreement. Geneva.
The views expressed in these articles are those of the authors and do not necessarily reflect the views of the Asian Development Bank, its management, its Board of Directors, or its members.