Growing Together: Economic Integration for an Inclusive and - escap

Three
Building
seamless connectivity
Economic integration depends critically on the
development of infrastructure that will strengthen
connectivity both within and between countries,
freeing up the flows of goods and services,
investment, people and ideas.
Growth in Asia and the Pacific has been strongly
influenced by the quality of infrastructure. Economies that
develop better infrastructure grow faster. 1 Investment
in infrastructure not only increases an economy’s capital
stock but also broadens the reach of economic activities
and trade, creating opportunities for the realization of
economies of scale. This, in turn, lowers production and
distribution costs, which allows more goods to reach more
people across greater geographic areas. The gains appear
to be greatest for large-scale civil engineering projects,
such as those related to transport and utilities. 2 But even
small, low-cost investments can have significant impacts,
especially when they reach out to remote or poorer areas.
Though more difficult to quantify, countries also gain
further benefits from infrastructure development through
network externalities, which contribute to growth by
allowing economies of specialization, encouraging the
clustering of businesses and facilitating information
exchanges. Moreover, in the Internet age, connectivity
expands in many dimensions beyond physical links to
encompass more complex and dynamic relationships that
affect how networks operate. 3 Even small connections
between one network and another can quickly create
wider, more valuable networks. 4 That is why the issue of ICT
infrastructure development is quickly gaining importance
in discussions about regional connectivity. The region
also has vast potential to utilize its energy resources more
efficiently through the interconnection of producers and
consumers of energy by oil and gas pipelines and electricity
grids. Such interconnection could be cost-effective and
offer opportunities in reducing the cost of energy, which is
a critical input for development.
62