Economic Implications of Deeper South Asian–Southeast Asian Integration: A CGE Approach

The paper estimates the potential gains to be large, particularly for South Asia, assuming that the policy- and infrastructure-related variables that increase trade costs are reduced via economic cooperation and investment in connectivity. As Myanmar is a key inter-regional bridge and has recently launched ambitious, outward-oriented policy reforms, the prospects for making progress in these areas are strong. If the two regions succeed in dropping inter-regional tariffs, reducing non-tariff barriers by 50%, and decreasing South Asian-Southeast Asian trade costs by 15% — which this paper suggests is ambitious but attainable — welfare in South Asia and Southeast Asia would rise by 8.9% and 6.4% of gross domestic product, respectively, by 2030 relative to the baseline.