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1、ASIAN DEVELOPMENT BANKAsian Economic Integration Report 2025Harnessing the Benefits of Regional Cooperation and IntegrationThe Asian Economic Integration Report 2025 analyzes how regional integration has driven growth in Asia and the Pacific over the past 2 decades.This integration has significantly

2、 impacted trade,global value chains,foreign direct investment,finance,migration,remittances,and tourism.Amid global fragmentation,a renewed focus on regional cooperation could cushion external shocks.Modernizing free trade agreements,enhancing regional financial arrangements,and advancing digitaliza

3、tion could help drive economic prosperity,bridge the digital divide,and navigate geopolitical and economic challenges in the coming decades.About the Asian Development BankADB is a leading multilateral development bank supporting sustainable,inclusive,and resilient growth across Asia and the Pacific

4、.Working with its members and partners to solve complex challenges together,ADB harnesses innovative financial tools and strategic partnerships to transform lives,build quality infrastructure,and safeguard our planet.Founded in 1966,ADB is owned by 69 members49 from the region.HARNESSING THE BENEFIT

5、S OF REGIONAL COOPERATION AND INTEGRATIONASIAN ECONOMICINTEGRATIONREPORT 2025ASIAN ECONOMIC INTEGRATION REPORT 2025Harnessing the Benefits of Regional Cooperation and IntegrationASIAN DEVELOPMENT BANK6 ADB Avenue,Mandaluyong City1550 Metro Manila,Philippineswww.adb.orgASIAN DEVELOPMENT BANKHARNESSIN

6、G THE BENEFITS OF REGIONAL COOPERATION AND INTEGRATIONASIAN ECONOMICINTEGRATIONREPORT 2025Creative Commons Attribution 3.0 IGO license(CC BY 3.0 IGO)2025 Asian Development Bank6 ADB Avenue,Mandaluyong City,1550 Metro Manila,PhilippinesTel+63 2 8632 4444;Fax+63 2 8636 2444www.adb.orgSome rights reser

7、ved.Published in March 2025.ISBN 978-92-9277-251-2(print);978-92-9277-252-9(PDF);978-92-9277-253-6(ebook)Publication Stock No.SGP250106-2DOI:http:/dx.doi.org/10.22617/SGP250106-2The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies oft

8、he Asian Development Bank(ADB)or its Board of Governors or the governments they represent.ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use.The mention of specific companies or products of manufacturers does no

9、t imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned.By making any designation of or reference to a particular territory or geographic area inthis document,ADB does not intend to make any judgments as to the legal or other status of

10、any territory or area.This publication is available under the Creative Commons Attribution 3.0 IGO license(CC BY 3.0 IGO)https:/creativecommons.org/licenses/by/3.0/igo/.By using the content of this publication,you agree to be bound bytheterms of this license.For attribution,translations,adaptations,

11、and permissions,please read the provisions andterms of use at https:/www.adb.org/terms-use#openaccess.This CC license does not apply to non-ADB copyright materials in this publication.If the material is attributed toanother source,please contact the copyright owner or publisher of that source for pe

12、rmission to reproduce it.ADB cannot be held liable for any claims that arise as a result of your use of the material.Please contact pubsmarketingadb.org if you have questions or comments with respect to content,or if you wish toobtain copyright permission for your intended use that does not fall wit

13、hin these terms,or for permission to use theADB logo.Corrigenda to ADB publications may be found at http:/www.adb.org/publications/corrigenda.Notes:In this publication,“$”refers to United States dollars,“”refers to euros,“B”refers to baht,“NZ$”refers to NewZealand dollars,“SLRs”refers to Sri Lanka r

14、upees,“SUM”refers to sum,and“Tk”refers to taka.ADB recognizes“China”as the Peoples Republic of China,“South Korea”as the Republic of Korea,“USA”as the United States,and“Vietnam”as Viet Nam.Cover design by Erickson Mercado.All masthead photos are from ADB.Printed on recycled paperiiiCONTENTSTables,Fi

15、gures,and Boxes.vForeword.ixAcknowledgments.xAbbreviations.xiHighlights.xiiiExecutive Summary.xv1.OVERVIEW 1Trends in Regional Integration in Asia and the Pacific.1Asia-Pacific Regional Cooperation and Integration Index:Subregional Initiatives.8Subregional Cooperation Initiatives in Asia and the Pac

16、ific.13References.30Annex 1a:ADBs Bilateral Economic Integration IndexEconomy and Regional Coverage.312.TRADE AND GLOBAL VALUE CHAINS 34Introduction.34The Evolving Nature of Preferential Trade Agreements.35Recent Drivers of Preferential Trade Agreements.41Trade Within Preferential Trade Agreements.4

17、5Trade Effects of Preferential Trade Agreements.49Rising Complexity and Compliance Costs of Trade Agreements.53Challenges and Opportunities for Regional Cooperation and Integration.56References.58Annex 2a:Directional Analysis of Drivers of Preferential Trade Agreements in Asia and the Pacific.603.CR

18、OSS-BORDER INVESTMENT 63Updates on Foreign Investment in Asia and the Pacific.63A Decade of Foreign Investment in Asia.63Structural Trends in Foreign Investment in Asia.73Leveraging FDI Through Regional Cooperation.78Geopolitical Fragmentation and Foreign Direct Investment.83Policy Recommendations.8

19、5References.86Annex 3a:Foreign Investment Linkages in Selected SectorsFirm-Level,Asia and the Pacific,20132017.89Annex 3b:Subregional Cooperation Initiatives and Foreign Direct Investment Policy in Asia and the Pacific.90Contentsiv4.FINANCIAL INTEGRATION 92Financial Integration Fosters Prosperity.92

20、Regional Financial Integration Remains Robust to Volatility.97Regional Financial Cooperation as a Key Pillar of Macrofinancial Stability.99Benefits Outweigh the Costs of Well-Managed Financial Integration.102Regional Cooperation Is the Engine of Financial Integration.104Strengthening the Regional Fi

21、nancial Safety Net Is Key for Deeper Integration.105Biodiversity-Proofing Regional Financial Cooperation.110Options for Cooperation on Financial Integration to Rise to New Challenges.114References.1165.MOVEMENT OF PEOPLE 121Migration.121Remittances.133International Tourism.141References.1556.STATIST

22、ICAL APPENDIX 163 Regional Groupings.163 Table Descriptions.163vTABLES,FIGURES,AND BOXESTABLES 2.1 New Regional Trade Agreements in Asia and the Pacific,2024 44 2.2 Panel Logistic Regression on Preferential Trade Agreeement Formation Drivers,Economy-Pair,45 and Year Fixed Effects 3.1 Support of Asia

23、s Subregional Initiatives to Foreign Direct Investment Policy 80 5.1 Remittance Inflows to Asian Subregions 134 5.2 Framework for Leveraging Remittances to Enhance Financial Inclusion 138 5.3 International Arrivals and Receipts in Asia by Subregion,2023 144FIGURES 1.1 Regional Integration Index by D

24、imensionAsia and the Pacific Versus Other Regions 1 1.2 Trends in Regional Integration Index by DimensionAsia and the Pacific Versus Other Regions 4 1.3 Regional Integration Index by DimensionAsian Subregions 5 1.4 Network Representation of Intraregional and Extraregional Integration LinkagesAsia an

25、d the Pacific 6 1.5 Overall Regional Integration by Subregional Initiative 8 1.6 Central Asia Regional Economic Cooperation Program Intrasubregional Integration 10 1.7 Intrasubregional InitiativesSouth Asia 11 1.8 Intrasubregional InitiativesSoutheast Asia 12 1.9 Relevant Operational Regional Cooper

26、ation and Integration Areas of Subregional Initiatives 12 1.10 ADB Commitments in Regional Cooperation and Integration,by Sector 29 2.1 Developments in the Number of Preferential Trade Agreements 35 2.2 Depth of Intra-Asian,Extra-Asian,and Other Trade Agreements 36 2.3 Average Number of Preferential

27、 Trade Agreement Provisions in New Trade Agreements 37 2.4 Average Share of 52 Provisions in Cumulative Trade Agreements for Asian 37 and Non-Asian Trade Agreements 2.5 Estimated Association Between the Breadth of Trade Agreements and Potential Determinants 37 2.6 Estimated Association Between the P

28、resence of Preferential Trade Agreement Provisions and the 38 Geographic Scope of the Agreement 2.7 Share of Preferential and Nondiscriminatory Provisions in Trade Agreements,2022 39 2.8 Bilateral Versus Plurilateral Trade Agreements in Asia and the Pacific 40 2.9 Share of Agreements with Services 4

29、0 2.10 Estimated Association Between the Depth of Preferential Trade Agreement Provisions 41 and the Geographic Scope of the Agreement 2.11 Newly Effective Free Trade AgreementsAsia and the Pacific 43 2.12 Contribution of Trade Flows and Trade Restrictions to the Log-Odds of Preferential Trade Agree

30、ment Formation 45 2.13 Share of Merchandise Trade Within Trade Agreements in Asia and the Pacific 48 2.14 Share of Services Trade Within Trade Agreements in Asia and the Pacific 49Tables,Figures,and Boxesvi 2.15 Estimated Impact of Preferential Trade Agreements on Merchandise Trade 50 2.16 Estimated

31、 Impact of Preferential Trade Agreements on the Intensive and Extensive Margins 51 of Merchandise Trade 2.17 Estimated Impact of Preferential Trade Agreements on Merchandise Trade by Sector 51 2.18 Services Trade and Components Associated with Asian Economies 52 2.19 Structural Gravity Estimates of

32、Effects of Trade Agreement Presence on Services Trade 52 2.20 Estimated Impact of Preferential Tariffs and PTA Breadth on MFN Tariffs 53 (The Open Regionalism Hypothesis)2.21 Trade Values and Trade Shares Using Regional Comprehensive Economic Partnership in Japan 56 2.22 Shares of Japanese Imports E

33、ntering Through Regional Comprehensive Economic Partnership,56 by Economy of Origin 2.23 Trade Values Using Regional Comprehensive Economic Partnership in Japan,by Economy of Origin 57 3.1 Global Foreign Direct Investment Inflows,Balance of Payments 64 3.2 Top Destinations of Foreign Investment,Asia

34、 and the Pacific 64 3.3 Investment in Asia and the PacificFirm-Level Activity,Total Greenfield and Mergers and Acquisitions 65 3.4 Greenfield Investment in Asia and the Pacific,by Destination and Sector 66 3.5 Merger and Acquisition Deals in Asia and the Pacific,by Destination and Sector 67 3.6 Gree

35、nfield Investment in Asia and the Pacific,by Business Activity 67 3.7 Investment in Strategic SectorsAsia and the Pacific,Firm-Level Activity,69 Total Greenfield and Mergers and Acquisitions 3.8 Foreign Direct Investment OutflowsBalance of Payments 72 3.9 Top Sources of Foreign InvestmentBalance of

36、Payments,Asia and the Pacific 72 3.10 Average Annual Share in Total Investment by SectorFirm-Level 74 3.11 Investment Versus Exports in Selected SectorsFirm-Level,Asia and the Pacific 75 3.12 Foreign Investment by MotiveFirm-Level,Asia and the Pacific 76 3.13 Foreign Investment Linkages in Selected

37、SectorsFirm-Level,Asia and the Pacific,20182023 77 3.14 Investment Facilitation Index 79 3.15 FDI Composition in Selected Regional Economic Blocs by SourceBalance of Payments 81 3.16 Overview of International Investment Agreements 82 3.17 Overview of Domestic Policies on Foreign Investment 82 3.18 G

38、lobal,Regional,and Domestic Foreign Direct Investment Policies in Asia and the Pacific 83 3.19 Greenfield Foreign Direct Investment Projects From High Income Economies to Low 85 and Middle Income Economies 4.1 Monetary Policy Rates 93 4.2 InflationSelected Advanced Economies 93 4.3 Policy Rate Diffe

39、rential with the US Policy RateSelected Asian Economies 94 4.4 Nonresident Capital FlowsSelected Asian Economies 95 4.5 Year-to-Date ChangeSelected Asian Economies 96 4.6 Cross-Border AssetsAsia and the Pacific,by Type 97 4.7 Cross-Border LiabilitiesAsia and the Pacific,by Type 98 4.8 Cross-Border I

40、nvestmentAsia and the Pacific,by Type 99 4.9 Average ChinnIto IndexAsia and the Pacific 99 4.10 Nonresident Financial Flows to AsiaBy Type 100 4.11 External Financial Assets and Liabilities 101 4.12 Variance Decomposition of Equity and Bond Returns 101 4.13 Trade in Merchandise and Services and Cros

41、s-Border Assets and Liabilities of Asia and the Pacific,101 by Partner Tables,Figures,and Boxesvii 4.14 Intraregional Shares,2023ASEAN+3 Versus Euro Area 102 4.15 Financial Development IndexSelected Asian Economies 102 4.16 The Financial Trilemma 107 4.17 Transmission Channels of Geopolitical Fragme

42、ntation to Macrofinancial Stability 108 4.18 Living Planet Index by Region 111 4.19 Decline in Selected Global Insect Populations,20092019 111 4.20 Investment Fund Inflows into Economies with High Versus Low Biodiversity Risk 113 4.21 Biodiversity Financing from Global Investment Funds After the Kun

43、ming Declaration 113 5.1 Number of International Migrants 121 5.2 Outbound Migrants from Asia and the Pacific 122 5.3 Asian Migrants by Destination Regions 122 5.4 Sources of Asian Out-Migrant Stock by Subregion 123 5.5 Outflow of Migrant Workers from Selected Asian Economies 123 5.6 Major Extraregi

44、onal Hosts of Asia and Pacific Migrants in 2021 123 5.7 Intraregional Migration by Asian Subregion 124 5.8 Specific Provisions in Bilateral Labor Agreements 125 5.9 Number of Bilateral Labor Agreements 126 5.10 Number of Labor Migrants in Major Host Economies in Asia Under Bilateral Labor Agreements

45、 127 5.11 Regional Trade Agreements with Labor Provisions 128 5.12 Regional Trade Agreements with Migration Provisions 129 5.13 Remittance Inflows to Asia and the Pacific,and the World 133 5.14 Top 10 Remittance Recipient Economies in Asia and the Pacific,2024 134 5.15 Average Total Cost of Remittin

46、g$200 136 5.16 Form of Receipt of Domestic Remittances in Asia,2014 and 2021 139 5.17 Tourism Performance by Region of Destination 142 5.18 Tourism Performance of Asia by Subregion 142 5.19 Top Recipients of Tourism Receipts 145 5.20 Share of Arrivals by Mode of Travel 148 5.21 International Air Con

47、nectivity Growth,20092019 148 5.22 Port Calls in Asia and the Pacific per Year 149 5.23 Number of Subscription to Information and Communication Technology Infrastructure per 100 People 151BOXES 1.1 Methodology and Data in Estimating the Regional Integration Index Based on ADBs 2 Bilateral Economic I

48、ntegration Index 1.2 Connecting Regional Integration to a Global Integration Framework 9 2.1 Developments in Regional Value Chain Integration 42 2.2 Recent Developments in Trade in Goods and Services 46 2.3 The Overlapping Trade Agreements Challenge in Asia:The Noodle Bowl Effect 54 3.1 Critical Min

49、eral Production and Foreign Direct Investment for Electric Vehicle Batteries in Asia and the Pacific 70 4.1 ASEAN Regional Financial Cooperation Initiatives 106 4.2 Methodological Note on Portfolio Capital Flows and Biodiversity Risk 114 5.1 Examples of Labor Mobility Partnerships 131 5.2 Migration,

50、Aging Populations,and Climate Change 132 5.3 Recent Trends of Remittance Inflows and/or Money Transfers to Central Asia 135 5.4 Financial Inclusion in Asia by Subregion 137Tables,Figures,and Boxesviii 5.5 Association of Southeast Asian NationsAn Opportunity for the Republic of Korea 143 5.6 Tourism

51、Inflow Interlinkages with Merchandise ExportsThe Case of Pacific Island Economies 145 5.7 The Role of Infrastructure Connectivity on International Tourism Development in Asia and the Pacific 147 5.8 ADB Commitments in Tourism and Infrastructure Connectivity 153ixFOREWORDAsia and the Pacific is expec

52、ted to continue its relatively strong economic performance despite waning global growth momentum post pandemic.Nonetheless,the region must continue to adjust to changes in the environment for international trade and investment caused by evolving geopolitical tensions.While forecasts vary by subregio

53、n and economy,continued strong domestic demand has been supplemented by the semiconductor upcycle,in particular strong demand for higher-end products associated with artificial intelligence.Shifts in supply chain structure will likely continue to be fueled by political shifts and trade policies in a

54、dvanced economies.The regions ability to attract new foreign investment(including intraregional)remains high.The Asian Economic Integration Report 2025:Harnessing the Benefits of Regional Cooperation and Integration explains and analyzes how regional integration has deepened over the past 2 decades,

55、influenced by both long-term trends and recent global events.It examines changes in cross-border activities in trade and global value chains,foreign direct investment,finance(or portfolio investment),migration,remittances,and tourism.While trade integration in the region now rivals that of the Europ

56、ean Union plus the United Kingdom,foreign direct investment and people mobility remain steady with financial integration lagging behind.Among subregions,Southeast Asia continues to lead in regional integration,with East Asia relatively strong as well.The Peoples Republic of China,despite its own dom

57、estic economic issues,continues to expand its economic integration across the region,particularly with Southeast Asia and South Asia.The region continues to shift toward more resilient,regional supply networks,particularly in upgrading its supply and value chains.Rising geoeconomic fragmentation due

58、 to continuing global policy shifts,while posing growing challenges,nonetheless offers new opportunities for the region to strengthen integration by facilitating intraregional flows of goods and services,capital,people,and knowledge.Unlocking the great potential economic integration holds for the re

59、gion requires further efforts to strengthen regional economic cooperation and partnerships in the areas of trade,investment,macroeconomic and financial stability,and cross-border connectivity.This report hopefully will stimulate dialogue and discussion on how deeper regional cooperation and economic

60、 integration can help the region navigate challenges posed by the evolving geopolitical landscape without losing sight of the long-term vision of a more green,inclusive,and sustainable Asia and the Pacific.Albert ParkChief Economist and Director GeneralEconomic Research and Development Impact Depart

61、mentAsian Development BankThe Asian Economic Integration Report(AEIR)2025 was prepared by the Regional Cooperation and Integration Division(ERCI)of ADBs Economic Research and Development Impact Department(ERDI),under the overall supervision of ERCI Director Jong Woo Kang.Kijin Kim coordinated the ov

62、erall production,assisted by Mara Tayag.ERCI consultants under Technical Assistance 10136:Asian Economic Integration:Building Knowledge for Policy Dialogue,20232025(Subproject 3)contributed data compilation,research,and analysis.Contributing authors include Sanchita Basu-Das,Rolando Avendano,Paulo R

63、odelio Halili,Lovely Ann Tolin,and Rainiel Aquino,with data support from Pilar Dayag(Chapter 1:Overview);Neil Foster-McGregor,Pramila Crivelli,Joshua Anthony Gapay,Carlos Cabaero,and Pia Medrano(Chapter 2:Trade and the Global Value Chains);Rolando Avendano and Clemence Fatima Cruz(Chapter 3:Cross-Bo

64、rder Investment);Alexander Raabe and Rainiel Aquino,with data support from Carlos Cabaero and Clemence Fatima Cruz(Chapter 4:Financial Integration);and Kijin Kim,Sanchita Basu-Das,Ma.Concepcion Latoja,and Ma.Veronica Domingo,with data support from Zemma Ardaniel(Chapter 5:Movement of People).The sec

65、tion on“Regional Cooperation Initiatives in Asia”in Chapter 1 was consolidated by Paulo Rodelio Halili based on contributions by regional departments in ADB:Lyaziza Sabyrova,Dorothea Lazaro,and Carmen Maria Garcia Perez of the Central and West Asia Department;Thiam Hee Ng,Dongxiang Li,Masato Nakane,

66、Pia Reyes,Lani Garnace,and Esnerjames Fernandez of the South Asia Department;Alfredo Perdiguero,Maria Josephine E.Duque-Comia,Jason Rush,Asadullah Sumbal,and Sophia Castillo-Plaza of the Southeast Asia Department;Hsiao Chink Tang of the East Asia Department;and Kaukab Naqvi,Rustam Ishenaliev,Maria M

67、elei,and Kayleen Gene Calicdan of the Pacific Department.Melanie Pre of the RCI and Trade Division,Climate Change and Sustainable Development Department provided data on RCI-related commitments.Background papers were provided by Manuel Albis,Mara Tayag,and Jong Woo Kang for Chapter 1:Overview;Emily

68、Blanchard,Will Olney,Amelia Santos-Paulino,Claudia Trentini,and Rolando Avendano,with data support from Camille Reverdy for Chapter 3:Cross-Border Investment;Josef Yap as well as Daniel te Kaat and Alexander Raabe for Chapter 4:Financial Integration;Isaacs Leon,Jon Capal,and Maria Cherry Lyn Rodolfo

69、 for Chapter 5:Movement of People.The report benefited from comments and suggestions provided by the participants of“AEIR 2025 Workshop:Harnessing the Benefits of Regional Cooperation and Integration”held on 20 September 2024.Helpful comments were also provided by ADBs regional departments.The overa

70、ll guidance and comments of ADB Chief Economist Albert Park are gratefully acknowledged.Guy Sacerdoti and James Unwin edited the manuscript.Joseph Manglicmot typeset and produced the layout.Erickson Mercado created the cover design and assisted in typesetting.Tuesday Soriano proofread the report.Cle

71、mence Fatima Cruz,Rainiel Aquino,Carol Ongchangco,and Joshua Anthony Gapay assisted in proofreading and page proof checking.Support for AEIR 2025 printing and publishing was provided by the Printing Services Unit of ADBs Corporate Services Department and by the Publishing and Dissemination Unit of t

72、he Department of Communications and Knowledge Management.Carol Ongchangco,Amiel Bryan Esperanza,Angel Love Roque,Nanette Lozano,and Arielle Fajardo provided administrative and secretarial support and helped organize the AEIR workshops,launch events,and other AEIR-related webinars and briefings.ACKNO

73、WLEDGMENTSxiADB Asian Development BankABF Asian Bond FundABMI Asian Bond Markets InitiativeAPEC Asia-Pacific Economic CooperationARCII Asia-Pacific Regional Cooperation and Integration IndexASEAN Association of Southeast Asian NationsBIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and

74、Economic CooperationBLA bilateral labor agreementCAREC Central Asia Regional Economic CooperationCMIM Chiang Mai Initiative MultilateralisationCPIS Coordinated Portfolio Investment SurveyPRC Peoples Republic of ChinaEU European UnionFDI foreign direct investmentFTA free trade agreementGCAP green cit

75、y action planGDP gross domestic productGMS Greater Mekong SubregionGMSKN GMS Knowledge NetworkGVC global value chainHS Harmonized SystemICT information and communication technologyIFD Investment Facilitation for DevelopmentIMF International Monetary FundIMT-GT IndonesiaMalaysiaThailand Growth Triang

76、leKYC know-your-customerM&A merger and acquisitionMFN most-favored nationMNE multinational enterpriseABBREVIATIONSMOU memorandum of understandingMRA mutual recognition arrangementMTR midterm reviewOECD Organisation for Economic Co-operation and DevelopmentPNG Papua New GuineaPPP publicprivate partne

77、rshipPRIF Pacific Region Infrastructure FacilityPSDI Private Sector Development InitiativePTA preferential trade agreementRCEP Regional Comprehensive Economic PartnershipRCI regional cooperation and integrationRoO rules of originRTA regional trade agreementRVC regional value chainsSAARC South Asian

78、Association for Regional CooperationSASEC South Asia Subregional Economic CooperationSDG Sustainable Development GoalSMEs small and medium-sized enterprisesTA technical assistanceUK United KingdomUN United NationsUNCTAD United Nations Trade and DevelopmentUS United StatesWTO World Trade Organization

79、AbbreviationsxiixiiiHIGHLIGHTSEconomic integration has been pivotal in Asia and the Pacifics remarkable economic growth and rapidly rising global clout over the past 2 decades Asian Development Bank(ADB)estimates indicate that the degree of Asias trade integration is comparable to that of the Europe

80、an Union plus the United Kingdom(EU+UK).1 Regional integration in foreign direct investment(FDI)has also advanced significantly,although less than trade integration.Migration,remittances,and tourismor“movement of people”have remained steady.Financial integration has been the lowest,being lower than

81、in trade,investment,and movement of people,and has lagged behind that of the EU+UK.This progress in regional integration has been supported by various projects,programs,and policy dialogue.Cooperation through trade facilitation,along with the development of transport and economic corridors,has helpe

82、d advance integration across the region.Expanding digital connectivity and efforts to address climate changesupported by shared national and regional commitmentsare strategic areas for future cooperation and integration in regional public goods.Although the expansion of preferential trade agreements

83、(PTAs)across the region underscores its strong commitment to regional integration and global connectedness,its PTAs remain relatively narrow and shallow and have had limited impact The significant rise in PTAs,now comprising 45%of all global PTAs,underscores Asias drive for expanding market access a

84、nd deepening economic partnershipseven amid slow multilateral progress.However,estimated average exports increased by 3%among Asian PTA members compared with 20%in the more comprehensive agreements outside Asia.PTAs primarily intensify existing trade flows(intensive margin)without significantly broa

85、dening the diversity of traded goods(extensive margin).This trend is seen across intra-Asian PTAs,where the impact on manufacturing is modest compared to agreements outside Asia.Consequently,trade gains under Asian PTAs tend to be concentrated in specific sectors,particularly primary sectors,rather

86、than producing broad-based trade expansion.The low utilization rates across PTAs often result from complex administrative requirements,stringent rules of origin,and limited understanding of PTA benefits,particularly for small and medium-sized enterprises.Services,digital,and green industries have be

87、come major areas for foreign investment in Asia,while economies should embrace policy options to mitigate the impact of geopolitical risks Asia continues to show strong intraregional linkages,with FDI among Asian members accounting for an average 52%of regional FDI from 2013 to 2023.FDI in services

88、is now the main driver of foreign investment in Asiaits average share grew to 58%during the past decade from 46%over the previous decade.Digital and green FDI continues to redefine Asias investment landscape.Climate-related greenfield investments as a share of regional greenfield investment rose fro

89、m 8%in 2013 to 27%in 2023.This was in part possible due to the expansion of renewable industries and deployment of electric vehicle supply chains across Southeast Asia.Global investment patterns have been influenced by geopolitical tensions as well as major industrial developments and changing polic

90、y environment in host economies.ADB estimates suggest that greenfield investments in trade-exposed sectors experienced sharper declines than other sectors during periods of increased geopolitical tensions,while ASEAN economies attracted significantly higher FDI primarily driven by the PRC.Regional e

91、conomies need to continually work to improve the overall business climate and ease restrictions to FDI.1 Asia refers to the 49 members of ADB in Asia and the Pacific,which include Australia,Japan,and New Zealand in addition to 46 developing economies.Global monetary easing could increase capital inf

92、lows into the region,bringing with it important macroeconomic and policy implications The global monetary easing since mid-2024 can help strengthen capital inflows due to smaller policy rate differentials between the US and the euro area on the one hand,and Asian economies on the other.While this al

93、so expands room for monetary policy easing across the region,each economy must remain vigilant against the risks of potential swings in capital flows and exchange rate volatility in case of unexpected economic shocks.It is vital to use regional cooperation to boost financial integration and maximize

94、 its benefits while minimizing costs due to vulnerabilities from any negative regional spillovers.Stronger regional cooperation can also harmonize disclosure standards and promote targeted financial instruments to help develop regional capital markets and promote sustainable finance when coping with

95、 the risks of climate change and environmental degradation.The growth and ease of Asian labor migration has benefited from increased regional cooperation The increasing use of digital platforms in channeling remittances enhances access to the formal financial system and promotes financial inclusion.

96、The regions bilateral labor agreements are increasingly being used to provide access to work opportunities for low-skilled and semiskilled migrant workers.In addition,regional trade agreements,along with mutual recognition arrangements,have supported high-skilled labor mobility.However,these have ha

97、d limited impact on high-skilled Asian migrants due to their minimal coverage for developing Asian economies,narrow occupational scope,and high implementation costs.Digital remittances,supported by an efficient regulatory environment,can help bring down remittance costs,which currently average 5.9%p

98、er transaction in Asiaabove the 3%target of the United Nations 2030 Sustainable Development Goals.Regional cooperation should focus on leveraging digitalization in cross-border payments while narrowing the digital divide.Continuous financial and digital education,alongside best practice exchanges,wo

99、uld also help reduce barriers to financial access and enhance digital financial literacy.Accelerating regional cooperation on improving physical and institutional connectivity will increase tourism competitiveness and resilience,unlocking the industrys potential for economic development Internationa

100、l arrivals in Asia grew at an average annual rate of 7.6%from 2010 to 2019,outpacing the global annual average of 5.1%increasing the intraregional tourism share from 73.1%to 77.3%.As at least 60%of tourists to Asia arrive by air,good infrastructure and logistics are essential to support the flow of

101、tourists.Land transportation is important for destinations that share common international borders.For institutional connectivity,visa policies are strongest in Southeast Asia,followed by Central Asia and East Asia.ADB research shows the important role connectivity plays in promoting tourism.Transpo

102、rtation infrastructure,in addition to other tourism infrastructure,positively influences international tourist flows and boosts the attraction of Asian destinations.Regional connectivity can help attract long-haul travel from outside the region and strengthen intraregional tourism as well.Priority i

103、nvestments in airport infrastructure and logistics,along with liberalizing and harmonizing policies on cross-border travel requirements,are crucial to increase tourist flows and foster the industrys contribution to growth.HighlightsxivxvRegional integration across Asia and the Pacific has progressed

104、 steadily over the past 2 decades,led by integration in trade and investment The Asian Development Bank(ADB)estimates indicate the degree of Asias trade integration is comparable to that of the European Union plus the United Kingdom(EU+UK).2 Regional integration in foreign direct investment(FDI)has

105、also advanced significantly,although less than trade integration.Migration,remittances,and tourismor“movement of people”have remained steady.Financial integration had the lowest level of integration among the four dimensions,also lagging behind the level in the EU+UK.Economic integration varies acro

106、ss Asian subregions.Southeast Asia leads with greater integration in trade,finance,and movement of people,while East Asia is strong in FDI and movement of people,with the Pacific and Oceania well integrated in trade and FDI.Over the past 2decades,the Peoples Republic of China(PRC)has become a key dr

107、iver of regional integration on cross-border trade and a significant partner in investment and financial flows with Southeast Asia and South Asia.In addition,FDI and financial flows have driven closer connectivity between Asian and non-Asian economies.ADBs Asia-Pacific Regional Cooperation and Integ

108、ration Index(ARCII)highlights the dynamics of integration across Asian subregional initiatives.These efforts to deepen regional integration among members have grown through various projects,programs,and policy dialogues.Cooperation through trade facilitation,along with transport and economic corrido

109、r development,have helped advance integration across the region.Expanding digital connectivity and the increased efforts to address climate change and environmental issuessupported by shared national and regional commitmentsare strategic areas for future cooperation in strengthening cooperation and

110、integration in areas of regional public goods.Trade and Global Value Chains Asias increasing integration into regional value chains(RVCs)underscores a shift toward more resilient,regionally focused supply networks RVCs have gained importance across the region as economies rely more on regional sourc

111、ing to enhance supply chain resilience and mitigate global trade risks.Asias intraregional trade value also increased by an annual average of 8.2%from 1990 to 2023,faster than the growth of extraregional trade at 6.8%.As of 2023,Asias intraregional trade share stood at 56.1%,lower than in the Europe

112、an Union but substantially higher than in Africa and Latin America.An indicator of RVCs,which measures the share of trade in value-added attributed to regional trade,reveals a high dependency on RVCs for backward global value chain integration in economies like Bhutan,Cambodia,the Lao Peoples Democr

113、atic Republic(PDR),Malaysia,Nepal,the Philippines,and Viet Namall with RVC shares above 70%.By contrast,economies like the PRC,India,and Kazakhstan have RVC shares below 40%,indicating a lower degree of regional integration.This pattern of RVC dependence also extends to forward linkages,where econom

114、ies such as Bhutan,Brunei Darussalam,Indonesia,the Lao PDR,Malaysia,and Mongolia maintain high RVC shares.Between 2000 and 2023,RVC integration generally increased,with forward linkages growing faster,2 Asia refers to the 49 Asia and Pacific members of the Asian Development Bank(ADB),which includes

115、Japan and Oceania(Australia and New Zealand)in addition to 46 developing Asian economies.EXECUTIVE SUMMARYsuggesting a gradual shift toward regionalization.In particular,the PRC has become a leading supplier of intermediates within Asia,with its forward RVC share rising from 0.31 in 2016 to 0.47 in

116、2023,a shift likely influenced by heightened geopolitical tensions.The expansion of preferential trade agreements(PTAs)across the region underscores the regions strong commitment to regional integration and global connectedness The number of intra-Asian PTAs surged from 4 in 1990 to 77 by 2023.In ad

117、dition,there were over 100 agreements with economies outside the region.This significant rise in PTAs,comprising 45%of all global PTAs,underscores Asias drive for expanding market access and deepening economic partnerships even amid slow multilateral progress.Several factors contribute to the increa

118、se in PTAs in Asia.While high most-favored nation(MFN)tariff rates decrease the likelihood of forming PTAsreflecting complementarity between multilateral and preferential trade liberalizationthe relationship is nonlinear.When trade volumes are substantial,very high MFN tariffs can increase the likel

119、ihood of negotiating PTAs,reflecting efforts to mitigate trade barriers.Trade volume between partners positively correlates with PTA formation,driven by motives to stabilize and formalize existing trade ties.This effect initially decreases as MFN tariffs rise,while extremely high MFN rates combined

120、with high trade volumes increase the likelihood of PTA formation.Asian PTAs now include emerging areas such as services and investment,but they remain narrower than non-regional agreements with shallower goods-related commitments,limiting their impact on trade flows and diversification Although intr

121、a-Asian PTAs increasingly cover areas such as trade-related investment measures,visas and asylum,investment,education and training,and consumer protection,they remain narrower than the agreements outside Asia.Holding the(average)level of gross domestic product(GDP)per capita and distance between tra

122、de partners constant,an intra-Asian agreement is expected to include 10%less of the 18 core PTA provisions relative to agreements signed between non-Asian economies.While Asian PTAs cover services,investment,and movement of capital relatively wellreflecting the regions focus on deepening economic in

123、tegrationmany agreements remain shallow in areas directly impacting goods trade market access such as rules of origin(RoO),export restrictions,technical barriers,and trade facilitation.In terms of intra-Asian PTAs,36%include comprehensive trade-facilitating RoO provisions compared to 48%in agreement

124、s involving non-Asian economies.PTAs between Asian economies also tend to have fewer members than those signed by the economies outside of the region.These lead to differences in the impact of PTAs,with average exports estimated to increase by 3%among Asian PTA members compared with 20%in more compr

125、ehensive agreements outside Asia.PTAs primarily intensify existing trade flows(intensive margin)without significantly broadening the diversity of traded goods(extensive margin).This trend is seen across intra-Asian PTAs,where the impact on manufacturing is modest compared to agreements outside Asia.

126、Consequently,trade gains under Asian PTAs tend to be concentrated in specific sectors,particularly primary sectors,rather than producing broad-based trade expansion.The growing network of agreements has created significant complexity and administrative challenges The rapid expansion of PTAs across A

127、sia shows a strong commitment to regional integration.But their overlapping“noodle bowl”effect increases complexity and administrative burdens.Compliance requirements,particularly for small and medium-sized enterprises and the developing members in agreements at various levels of economic advancemen

128、t,limit PTA utilization,especially where multiple agreements overlap.The Regional Comprehensive Economic Partnership(RCEP)is a good example.Only 0.67%of Vietnamese exports to RCEP members were covered by an RCEP certificate of origin in 2022,as opposed to 34.7%for the Association of Southeast Asian

129、Nations(ASEAN)Japan and Viet NamJapan Economic Partnership Agreements combined.Low utilization rates across PTAs often result from complex administrative requirements,stringent RoO,and limited understanding of PTA benefits,particularly for small and medium-sized enterprises.Strengthening negotiating

130、 capacities,especially in plurilateral agreements Executive SummaryxviExecutive Summaryxviicovering many partners and non-trade areas,can help increase the depth of commitments and provide better clarity in legal texts,reducing ambiguity in interpretation and implementation.Targeted technical assist

131、anceparticularly in new areas such as digital trade and sustainable trade,along with streamlined RoO and reduced nontariff barrierscan further improve utilization rates,unlocking greater trade benefits,and supporting global value chain resilience.Cross-Border Investment Services,digital and green in

132、dustries have emerged as main areas for foreign investment in Asia The region continued to show strong intraregional linkages,with FDI among Asian members accounting for an average of 52%of regional FDI from 2013 to 2023.As in other emerging regions,FDI in services is now the main driver of foreign

133、investment,with its average share growing to 58%in the past decade from 46%in the previous decade.The expansion of FDI in digital industries has also been a major shift,with investments in digital infrastructure,e-commerce,and digital services expanding rapidly.Regional investments in telecommunicat

134、ions and IT industries,particularly in South Asia,have stood out.Green FDI continues to redefine the investment dynamics in Asia.Climate-related greenfield investments as a share of total greenfield investment rose from 8%in 2013 to 27%in 2023.This is supported by major industrial developments,such

135、as the expansion of renewable industries and deployment of electric vehicles supply chains in Southeast Asia.While Asias position as a global manufacturing hub has favored foreign investment,regional efforts remain important.Various subregional initiatives are driving investment facilitation efforts

136、,such as the ASEAN Investment Facilitation Framework and investment facilitation mechanisms in the Brunei DarussalamIndonesiaMalaysiaPhilippines East ASEAN Growth Area(BIMP-EAGA)and the Central Asia Regional Economic Cooperation(CAREC)Program.Asian economies should strengthen policy efforts to mitig

137、ate the impact of geopolitical risks Despite persistent shocks,FDI inflows to Asia have remained resilient.Investments from multinationals remained robust,with the value in greenfield projects growing on average by 14%from 2013 to 2023 and mergers and acquisitions by 16%over the same period.Global i

138、nvestment patterns have been influenced by geopolitical tensions as well as major industrial developments and changing policy environment in host economies.ADB estimates suggest that greenfield investments in trade-exposed sectors experienced sharper declines than other sectors during periods of inc

139、reased geopolitical tensions,while ASEAN economies attracted significantly higher FDI flows driven primarily by the PRC.Strengthening regional trade linkages through free trade agreements and other policy measures could support regional FDI flows,in particular efficiency-seeking investments.Ensuring

140、 investment policy coherencewhether international,regional,or domesticis critical for economies to benefit from FDIs and support broader development objectives Investment policies continue to develop across the region at all levels of government.Internationally,the modernization of Asias investment

141、treaty network is gradually moving forward,with economies terminating or upgrading old agreements to introduce stronger provisions on the definition of investment,public interest obligations,and dispute mechanisms,and including more robust investment chapters or provisions in trade agreements.Invest

142、ment facilitation has gained traction as an effective FDI inducement strategy.However,according to the German Institute of Development and Sustainability(IDOS)and the World Trade Organization(WTO)Investment Facilitation Index,Asias investment facilitation score remains on average 14%lower than Europ

143、es and 23%lower than North Americas,suggesting much room for improvement.Ensuring coherence across investment policy instruments and convergence with other policy areas will be critical for enhancing the quality of FDI in the region.Regional economies need to continually work toward improving the ov

144、erall business climate along with easing restrictions to FDI.Financial IntegrationGlobal monetary easing will likely increase capital inflows into the region,bringing with it important macroeconomic and policy implications Cross-border assets increased from 55%to 83%of regional gross domestic produc

145、t(GDP)from 2010 to 2020 before settling at 75%in 2023.Cross-border liabilities followed a similar path.Over the same period,intraregional asset and liability exposures rose from 27%to 36%,and from 30%to 37%,respectively.On balance,the intraregional share of cross-border exposures remained unchanged

146、over 20222023.Specifically,on the asset side,the intraregional share of the inward portfolio equity and debt stocks fell slightly to 21%each,while the intraregional shares for FDI rose to 51%.On the liability side,the intraregional shares of the portfolio debt stock were 30%,and the stock of portfol

147、io equity and bank liabilities were 20%and 44%,respectively.The global monetary easing since mid-2024 can help strengthen capital inflows due to larger policy rate differentials between the US and the euro area on the one hand,and Asian economies on the other.While this also expands room for monetar

148、y policy easing in the region,each economy in the region must remain vigilant against the risks of potential capital flow swings and exchange rate volatility in the case of unexpected economic shocks.Regional financial cooperation has been a key driver of economic stability and prosperity in Asia Cr

149、oss-border financial flows benefit growth and prosperity in Asia through lower cost of capital,expanded resource pools for investment,and enhanced international risk sharing,helping reduce income and consumption volatilities.Increased openness supports economic competitiveness,with knowledge transfe

150、rs nurturing regional capital markets.Regional cooperation was paramount following the 19971998 Asian financial crisis in driving integration as it led to major advances in deepening the regions capital markets,expanding safety nets as buffers against global shocks,and creating effective communicati

151、on channels during crises.The Chiang Mai Initiative Multilateralisation(CMIM)and the ASEAN+3 Macroeconomic Research Office(AMRO)grew to become the institutional backbone of regional financial stability.Several other initiatives launched under the auspices of the ASEAN Economic Community solidified A

152、SEAN as the key anchor for financial cooperation in Asia.Reinvigorating regional cooperation can help realize the full potential of regional financial integration Financial integration in Asia has decelerated over the past decade,both relative to other regions and other integration dimensions such a

153、s trade.It is vital to harness the potential of regional cooperation to boost integration and maximize its benefits while minimizing costs due to vulnerabilities from negative regional spillovers.Primarily,this includes strengthening regional financial safety nets in addition to prudent domestic mac

154、roeconomic and financial management.Key steps include(i)increasing the pool of emergency funding available from the CMIM,(ii)broadening the scope of its lending instruments such as the new Rapid Financing Facility,(iii)improving governance of regional financing arrangements in association with“(i)”a

155、nd“(ii)”,and(iv)continuously improving regional surveillance.In addition,regional cooperation must live up to new policy challenges,such as geoeconomic fragmentation,technological innovations,public health emergencies,climate change,and biodiversity loss.These new frontiers require improved macroeco

156、nomic surveillance,smooth cross-border payments,and innovative financing to help cope with structural challenges.Stronger regional cooperation can also harmonize disclosure standards and promote targeted financial instruments to help develop regional capital markets and promote sustainable finance.E

157、xecutive SummaryxviiiMovement of People Migration has been integral to Asias development,with Asians accounting for one in every three cross-border migrants The number of out-migrants from the region reached 94.6 million in 2021 from 49.5 million in 1990.Led by migrants from South Asia and Southeast

158、 Asia,they have increasingly sought more opportunities beyond the region65%in 2021,up from 53.6%in 1990notably in the Middle East and North America.Meanwhile,persons from Oceania,East Asia,and Southeast Asia actively migrate within the subregion.The overall intraregional migration share remained at

159、an average of 39.5%during the period.Increased cross-border mobility of Asian labor migrants has benefited from increased regional cooperation over the last 2 decades In particular,Asian economies actively participated in bilateral labor agreements,serving as at least one of the parties in 58%of suc

160、h agreements from 1990 to 2020,underscoring Asias growing role as both a source and destination for low-and semiskilled migrant workers.In addition,regional trade agreements,along with mutual recognition arrangements,have supported high-skilled labor mobility.However,these measures have had limited

161、impact on high-skilled Asian migrants due to minimal coverage for developing Asian economies,narrow occupational scope,and high implementation costs.To maximize migrations development impact,models like Skills Mobility Partnerships,designed to benefit all stakeholdersmigrant workers,origin and desti

162、nation economiescould promote net gains from labor migration.Incorporating development aspects,such as remittance facilitation,into bilateral labor agreements could lead to more positive outcomes,including greater financial inclusion,in source economies.National and regional migration policies,for b

163、oth source and host economies,could take guidance from the Global Compact for Migration to promote safe,orderly,and regular migration.Remittance inflows to Asia,bolstered by out-migration,have gained increasing economic significance,rising from 19%of the global total in 1990 to 43%in 2024 During the

164、 same period,these inflows increased thirty-five-fold,making remittance inflows the largest and most stable source of external financing for many migrant-sending Asian economies,with inflows to Asia reaching$392.1 billion in 2024.Overall annual growth in remittances to Asia in 2024 increased to 7.5%

165、driven by the recovery of the job markets in major Organisation for Economic Co-operation and Development migrant host economies,particularly the US.By subregion,remittance inflows continued to grow in South Asia(11.8%)and Southeast Asia(3.6%)as migrant outflows from these subregions continued their

166、 prepandemic pace.Channeling more remittances using digital platforms could enhance access to the formal financial system for migrants and their families,paving the way for financial inclusion With improved financial system and institutional capacity,remittance-dependent developing economies can lev

167、erage remittance facilitation to drive further financial inclusion.Digital remittances,supported by efficient regulatory environments,can help bring down remittance costs in the region,which currently average 5.9%per transaction,above the 3%target of the United Nations 2030 Sustainable Development G

168、oals.Asia is rapidly adopting digital payments and remittances,driven by financial technology and enhanced digital infrastructure.Improved interoperability enables seamless cross-border remittances,such as between Indias UPI and Singapores PayNow,with more economies getting on board.Regional coopera

169、tion should focus on leveraging digitalization in the cross-border payment ecosystem while narrowing the digital divide.Continuous financial and digital education,alongside best practice exchanges,would also help reduce barriers to financial access and enhance digital financial literacy.Amid steady

170、growth in international tourism in Asia,Southeast Asia and East Asia led the regions recovery International arrivals to Asia grew by an average annual rate of 7.6%from 2010 to 2019,outpacing the global annual average of 5.1%,with the intraregional tourism share increasing from 73.1%to 77.3%during th

171、e period.Southeast Asia and East Asia collectively accounted for at least 80%of Asias arrivals before the pandemic.Although severely affected Executive Summaryxixxxby the pandemic,by the end of 2023,East Asia welcomed 38.9%of Asias tourists while 37.6%visited Southeast Asia.Southeast Asias relativel

172、y liberal policies toward cross-border connectivity(e.g.,air transport and visa policies)have helped boost tourism flows to the subregion.Meanwhile,other subregions retain more restrictive policies,with many lacking the domestic infrastructure needed to support tourism development.Accelerating regio

173、nal cooperation to improve physical and institutional connectivity will increase tourism competitiveness and resilience,unlocking the industrys potential for economic development As at least 60%of tourists to Asia arrive by air,good infrastructure and logistics are essential to support tourism flows

174、.Land transportation is important in destinations sharing common international borders,such as SingaporeMalaysia and GeorgiaTrkiye.For institutional connectivity,while visa policies are strongest in Southeast Asia,followed by Central Asia and East Asia,air service agreements are becoming more libera

175、l across Southeast Asia.Other subregions can adopt these policies to help boost their tourism industries.ADB research shows the important role connectivity plays in promoting tourism.Transportation infrastructure,in addition to other tourism infrastructure,positively influences international tourism

176、 flows and increases the attractiveness of Asian destinations.Regional connectivity can help attract long-haul travel from outside the region and strengthen intraregional tourism as well.Priority investments in airport infrastructure and logistics,along with taking a subregional approach to liberali

177、ze policies on cross-border travel,are crucial to increase tourism flows and foster the industrys economic contribution to growth.Executive Summaryxx1Overview1Trends in Regional Integration in Asia and the PacificAsia and the Pacific has made significant progress in regional integration,surpassing o

178、ther regions in most dimensions of the new Regional Integration Index of the Asian Development Bank(ADB).Over the past 2 decades,Asia has significantly tightened its regional economic integration,surpassing other regions in foreign direct investment(FDI)and the Figure 11:Regional Integration Index b

179、y DimensionAsia and the Pacific Versus Other Regions(a)2005 (b)2023 0.00.20.40.60.8FDIFinanceTradeAfricaAsia and the PacificEU+UKLatin America0.00.20.40.60.8FDIFinanceMovement ofPeopleMovement ofPeopleTradeAfricaAsia and the PacificEU+UKLatin AmericaEU=European Union(27 members),FDI=foreign direct i

180、nvestment,UK=United Kingdom.Notes:Based on ADBs Regional Integration Index estimates,the values for each dimension represent the ratio of the number of strong intraregional connections at the bilateral level relative to the sum of strong intraregional and extraregional connections.For the detailed m

181、ethodology,indicators used per dimension,and data sources,see Box 1.1.Source:ADB calculations using data from ADB.Bilateral Economic Integration Index Database.1 Asia refers to the 49 members of the Asian Development Bank(ADB)in Asia and the Pacific,which include Australia,Japan,and New Zealand in a

182、ddition to 46 developing economies.“movement of people”(Figure 1.1).1 For trade in goods and services,Asia led in 2005 but came in a close second to the European Union(EU)plus the United Kingdom(UK)in 2023.While the EU+UK continued to lead in financial integration,Asia is a close second.Latin Americ

183、a has advanced but still remains behind in financial integration.Despite improvements,Africa remains the least integrated in terms of trade,FDI,and movement of people.The methodology and data used to measure regional integration is based on ADBs Bilateral Economic Integration Index framework(Box 1.1

184、).2Asian Economic Integration Report 2025The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bil

185、ateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts be

186、tween economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the

187、regional integration indexes are generated from the BEI estimates.Estimation of Bilateral Economic IntegrationA BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice ve

188、rsa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or

189、population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B i

190、s a large economy.Network Representation of Two EconomiesBBEI A to BBEI B to AABEI=bilateral economic integration.Source:ADB,based on Albis,Tayag,and Kang(2023).Box 11:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration IndexThe DFM is used

191、to extract the BEIs from the normalized bilateral flows.Let RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Ind

192、ex Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relations

193、hips.This bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperati

194、on efforts between economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representat

195、ion.Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B

196、,or vice versa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic

197、product or population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the ca

198、se when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at t

199、ime =1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .Th

200、e(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2)be the RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without ap

201、propriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to AD

202、Bs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning

203、 the actual market-based interactions between economies.It does not cover regional cooperation efforts between economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two

204、economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and

205、movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A

206、 and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not co

207、mmutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized b

208、ilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is obser

209、ved,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2)integration indicator RESTRICTED.This information is accessible

210、 to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is

211、 a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how economies are integr

212、ated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts between economies.The methodology for estimating regional integration closely follows that

213、 of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Int

214、egration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an important economic

215、partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In contrast,the BEI from economy B to A is extracted from the same set of bila

216、teral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integrati

217、on.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant

218、term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Marko

219、vian structure,given in equation 2.=(),1+(2)A for the RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Bas

220、ed on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.T

221、his bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation eff

222、orts between economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Th

223、en the regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vi

224、ce versa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic produc

225、t or population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case whe

226、n B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1

227、,.The(),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),()

228、,and()are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2)directional economy-pair RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other partie

229、s without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It a

230、dds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto f

231、lows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts between economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration

232、between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),

233、finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flo

234、ws between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI

235、to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the

236、normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().On

237、ly()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2),at time RESTRICTED.This information is accessible

238、to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is

239、a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how economies are integra

240、ted with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts between economies.The methodology for estimating regional integration closely follows that

241、of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Inte

242、gration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an important economic p

243、artner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In contrast,the BEI from economy B to A is extracted from the same set of bilat

244、eral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integratio

245、n.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant t

246、erm(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Markov

247、ian structure,given in equation 2.=(),1+(2).The RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on

248、ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bi

249、lateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts b

250、etween economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the

251、 regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice ver

252、sa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or p

253、opulation).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is

254、 a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(

255、),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()

256、are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2),in equation 1,can be expressed in linear regression form being explained by a constant term RESTRICTED.This information is accessible to selected ADB Management,staff

257、,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the A

258、sian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within

259、and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts between economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),whic

260、h follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is deri

261、ved from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI

262、 from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by

263、the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Taya

264、g,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with

265、 its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation

266、2.=(),1+(2),the integration index RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral

267、 Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approa

268、ch provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts between economi

269、es.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional inte

270、gration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respec

271、t to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In

272、contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large econo

273、my.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation

274、1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters

275、 to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2)with its corresponding coefficient RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without

276、appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to

277、ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meani

278、ng the actual market-based interactions between economies.It does not cover regional cooperation efforts between economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between tw

279、o economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,an

280、d movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between

281、 A and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not

282、commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized

283、 bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is obs

284、erved,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2),and a random fluctuation RESTRICTED.This information is acce

285、ssible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)In

286、dex is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how economies are

287、integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts between economies.The methodology for estimating regional integration closely follow

288、s that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional integration indexes are generated from the BEI estimates.Bilateral Econom

289、ic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an important eco

290、nomic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In contrast,the BEI from economy B to A is extracted from the same set o

291、f bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Int

292、egration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explained by a con

293、stant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a

294、 Markovian structure,given in equation 2.=(),1+(2).Only RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index B

295、ased on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships

296、.This bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation e

297、fforts between economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.

298、Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or

299、vice versa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic prod

300、uct or population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case w

301、hen B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time

302、=1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),

303、(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2)is observed,and the regressor RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other

304、 parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integrati

305、on.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de

306、facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts between economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integ

307、ration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investmen

308、t(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilate

309、ral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for t

310、he BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs fr

311、om the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuati

312、on().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2)is a latent variable.RESTRICTED.This informa

313、tion is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integr

314、ation(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how ec

315、onomies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional cooperation efforts between economies.The methodology for estimating regional integration cl

316、osely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space representation.Then the regional integration indexes are generated from the BEI estimates.Bila

317、teral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from economy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an i

318、mportant economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gross domestic product or population).In contrast,the BEI from economy B to A is extracted from th

319、e same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which can be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral

320、Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-pair =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explai

321、ned by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed

322、 to follow a Markovian structure,given in equation 2.=(),1+(2)(1)where RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other parties without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Inte

323、gration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It adds on to ADBs existing measures by using a fully bilateral data structure to clarify economi

324、c relationships.This bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regiona

325、l cooperation efforts between economies.The methodology for estimating regional integration closely follows that of Rayp and Standaert(2017),which follows a two-step sequence.First,the degree of integration between two economies,the BEI,is estimated using the dynamic factor model(DFM)in state-space

326、representation.Then the regional integration indexes are generated from the BEI estimates.Bilateral Economic Integration Estimation A BEI is derived from four dimensions:trade,foreign direct investment(FDI),finance,and movement of people.A high BEI from economy A to B indicates a large flow from eco

327、nomy A to B,or vice versa,with respect to the total flows of economy A,implying that B is an important economic partner for A(box figure).The BEI from economy A to B is extracted from a pool of bilateral flows between A and B that are normalized relative to the total flows and size of economy A(gros

328、s domestic product or population).In contrast,the BEI from economy B to A is extracted from the same set of bilateral flows but is normalized by the total flows and size of economy B.This allows for the BEI to be not commutative,such that economy A may be more integrated to B than B is to A,which ca

329、n be the case when B is a large economy.Network Representation of Two Economies BEI=Bilateral Economic Integration.Source:ADB,based on Albis,Tayag,and Kang(2023).The DFM is used to extract the BEIs from the normalized bilateral flows.Let()be the integration indicator =1,for the directional economy-p

330、air =1,at time =1,.The(),in equation 1,can be expressed in linear regression form being explained by a constant term(),the integration index with its corresponding coefficient(),and a random fluctuation().Only()is observed,and the regressor is a latent variable.()=()+()+()(1)where()0,(),(),()=0 for

331、all and .The(),(),and()are parameters to estimate one set for each.The equation for is assumed to follow a Markovian structure,given in equation 2.=(),1+(2)for all RESTRICTED.This information is accessible to selected ADB Management,staff,and/or business groups.It may not be shared with other partie

332、s without appropriate permission.Box 1.1:Methodology and Data in Estimating the Regional Integration Index Based on ADBs Bilateral Economic Integration Index The Bilateral Economic Integration(BEI)Index is a new metric introduced by the Asian Development Bank(ADB)to measure regional integration.It a

333、dds on to ADBs existing measures by using a fully bilateral data structure to clarify economic relationships.This bilateral approach provides a clearer and more detailed picture of how economies are integrated with each other,both within and outside their regions.The index also focuses on de facto flows,meaning the actual market-based interactions between economies.It does not cover regional coope