In search of a development plan for Asia

September 28, 2022 08:46
Image: Economic Research Institute for ASEAN and East Asia

Can a region as complex and fast-changing as Asia devise and implement a comprehensive development plan? The Jakarta-based Economic Research Institute for ASEAN and East Asia, which just released its third “Comprehensive Asia Development Plan” (CADP), thinks so.

The report deserves serious consideration. Drawing on the research and insights of experts from the ASEAN Secretariat and institutes from 16 countries, including Australia, New Zealand, and East Asian countries, it maps out how Asia could deepen regional economic integration, narrow development gaps, and advance sustainable development.

CADP 3.0 represents a major step forward from its predecessors. CADP 1.0, published in 2010, focused largely on transport infrastructure, from roads to airports. CADP 2.0, released in 2015, recognized that true connectivity – essential to regional integration – also depended on information and communications technology. CADP 3.0 takes this further, examining the role of digitization in supporting integration, innovation, inclusiveness, and sustainability.

This sequence mirrors the “three unbundlings” the economist Richard Baldwin has described, each of which defines a phase of globalization. The first – the separation of production and consumption – occurred when advances in transportation drastically lowered the costs of moving goods. The second – the separation of various parts of the production process – arose when information and communications technologies reduced the costs of moving ideas, enabling coordination across any distance.

The third unbundling is the separation of service delivery and use. From teleconferencing to telerobotics, technologies increasingly enable people to provide services without having to travel. This means that service workers in developing countries can increasingly do knowledge work for advanced-country customers, but at a much lower cost. As Baldwin points out, wage rates in the services sector represent the “greatest remaining global arbitrage opportunities.” At the same time, professionals in advanced economies can also provide services to developing-country clients at high rates.

CADP 3.0 seeks to seize the opportunities the third unbundling creates. It urges East and Southeast Asian countries to invest in artificial intelligence and industrial robots, expand 5G broadband networks, and build on the Regional Comprehensive Economic Partnership to improve data standards and digital rules. Ultimately, East and Southeast Asia would create a digital single market, underpinned by shared data infrastructure and common rules and standards.

It is difficult to argue with the logic behind this vision. But in a region as diverse as Asia, translating it into reality would be difficult, to say the least, especially at a time of deepening ideological and geopolitical fault lines. The main barrier to success is neither technological nor financial. Instead, it is the implementation capacity – or lack thereof – of local, national, and international institutions.

CADP 3.0 is a broad strategy to advance simultaneously a large number of complex and interconnected goals in areas ranging from rural poverty and population aging to water safety to pollution. The level of on-the-ground coordination this demands may well be beyond the capabilities of most developing-country bureaucracies, not least because of their siloed structures.

Multilateral development banks and aid agencies, for their part, are well equipped to handle large-scale projects and programs. But they have considerable operational weaknesses when it comes to managing large numbers of projects involving diverse micro, small, and medium-size enterprises.

No matter how elegant and compelling a top-down development plan for Asia might be, it is unlikely to be implemented. Instead, we must embrace a bottom-up approach.

Digital technologies should play a central role in such an approach, for example, by providing the data and processing power (through AI) to deliver bottom-up feedback and facilitate coordination. And connectivity hubs – from regional financial centers like Singapore and Hong Kong to new technology platforms – can improve the allocation of funding and knowhow. Direct engagement and consensus-building will be essential to avoid collective-action traps.

Narratives are vital here. Top-down plans often lack the appeal to emotion and sentiment that is needed to change human behavior. But bottom-up efforts reflect people’s ideas and aspirations. This supports the creation of narratives capable of inspiring and empowering social movements and triggering a huge number of small changes, thereby creating systemic change.

The relatively slow pace of ASEAN integration is probably frustrating to those who believe that a clear plan is the key to progress. But integration can never be a neat and efficient process in a region comprising highly diverse countries at vastly different stages of development. Actors need time to learn how to work with one another, build local and regional consensus, and develop the necessary design, implementation, and oversight capabilities.

Development is a complex adaptive process, and we are living in a time of profound geopolitical, technological, and environmental change. As attractive as top-down plans like the CADP 3.0 might be, they cannot deliver what Asian integration requires: bottom-up institutions that advance compelling narratives and can respond nimbly to new information and imperatives.

Copyright: Project Syndicate
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Andrew Sheng is a distinguished fellow at the Asia Global Institute at the University of Hong Kong; Xiao Geng is chairman of the Hong Kong Institution for International Finance