Thematic Evaluation Study: ADB Support for Regional Cooperation and Integration, Linked Document 3 STATUS OF GLOBAL, REGIONAL AND SUBREGIONAL INTEGRATION EFFORTS1 A. Data and Applied Methods 1. Overall regional cooperation and integration (RCI) performance is based on each subregion’s performance along RCI pillars 2 and 3 as well as a cross-pillar performance, and constructed as shown in Figure 1. On each aggregation level, equal weights are assigned to the respective subindicators and all variables are normalized such that the range of possible values is set equal between 0 and 1 for all variables. Most of the variables used come from the International Monetary Fund and World Bank data sets and are also available in the Asian Development Bank’s (ADB) Asian Regional Integration Center’s Integration Indicator Database. In order to keep the data comparable, intrasubregional shares of directed flow variables are used as a single measure for all pillars (i.e., other possible measures such as intra-subregional correlation coefficients are not used). RCI pillars 1 and 4 (cross-border infrastructure and regional public goods) are not included, since no bilateral data sets could be identified. Further descriptions and sources of the data used are shown in Table 1. Figure 1: Composite Index of Overall RCI Performance Source: D. Naeher. 2015. An Empirical Estimation of Asia's Untapped Regional Integration Potential using Data Envelopment Analysis. ADB Economics Working Paper Series: No. 445. Manila: Asian Development Bank. B. Regional and Subregional Groupings 2. Table 1 shows the extent of coverage across the regions, subregions and countries. The Asian region is composed of six subregions consisting of the 48 regional member countries of ADB plus Macao, China. The table omits one Asian subregion (West Asia), consisting of 15 countries, because these 1 This linked document is based on D. Naeher 2015. An Empirical Estimation of Asia's Untapped Regional Integration Potential using Data Envelopment Analysis. ADB Economics Working Paper Series. No. 445. Manila: ADB. 2 Linked Document 3 countries are not ADB members. Nevertheless, these unlisted countries for which data are available are included in the calculation of total flows between individual subregions and the world. Note that, because of missing data, in some cases subregions comprise only a subset of corresponding countries. Table 1: Extent of Coverage Across the Regions, Subregions, and Countries Asia (49) America (37) . Central Asia (8): Armenia, Azerbaijan, Georgia, . North America (3): Canada, Mexico, United States Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, . Central America (7): Belize, Costa Rica, El Salvador, Uzbekistan Guatemala, Honduras, Nicaragua, Panama . East Asia (7): People’s Republic of China (PRC), Hong . Caribbean (15): Antigua and Barbuda, Aruba, Kong, China; Japan; Republic of Korea; Macao, China; Bahamas, Barbados, Cuba, Curacao, Dominican Mongolia; Taipei,China Republic, Grenada, Haiti, Jamaica, Puerto Rico, . South Asia (8): Afghanistan, Bangladesh, Bhutan, India, Saint Lucia, Saint Vincent and the Grenadines, Maldives, Nepal, Pakistan, Sri Lanka Trinidad and Tobago, United States Virgin Islands . Southeast Asia (10): Brunei Darussalam, Cambodia, . South America (12): Argentina, Bolivia, Brazil, Chile, Indonesia, Lao People’s Democratic Republic, Malaysia, Colombia, Ecuador, Guyana, Paraguay, Peru, Myanmar, Philippines, Singapore, Thailand, Viet Nam Suriname, Uruguay, Venezuela . The Pacific (14): Cook Islands, Fiji, Kiribati, Republic of Africa (43) the Marshall Islands, Federated States of Micronesia, . Western Africa (15): Benin, Burkina Faso, Cote Nauru, Palau, Papua New Guinea, Samoa, Solomon d’Ivoire, The Gambia, Ghana, Guinea, Guinea Islands, Timor-Leste, Tonga, Tuvalu, Vanuatu Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, . Oceania (2): Australia, New Zealand Senegal, Sierra Leone, Togo Europe (32) . Northern Africa (6): Algeria, Egypt, Libya, Morocco, . Western Europe (12): Austria, Belgium, France, Sudan, Tunisia Germany , Ireland, Italy, Luxembourg, Netherlands, . Eastern Africa (14): Burundi, Djibouti, Eritrea, Portugal, Spain, Switzerland, United Kingdom Ethiopia, Kenya, Madagascar, Malawi, . Northern Europe (8): Denmark, Estonia, Finland, Mozambique, Rwanda, Somalia, Tanzania, Uganda, Iceland, Latvia, Lithuania, Norway, Sweden Zambia, Zimbabwe . Eastern Europe (12):, Belarus, , Bulgaria, Croatia, Czech . Middle Africa (8): Angola, Cameroon, Central Republic, Hungary , Moldova, , Poland, Romania, African Republic, Chad, Democratic Rep. of the Russian Federation , Slovak Republic, Slovenia, Ukraine Congo, Congo, Equatorial Guinea, Gabon Source: D. Naeher. 2015. An Empirical Estimation of Asia's Untapped Regional Integration Potential using Data Envelopment Analysis. ADB Economic Working Paper Series. No 445. Manila: ADB. C. Missing Data 3. For most variables, data on some countries are missing and so the affected subregions are incomplete. The average coverage across all pillars is 82% of each subregion’s countries and, with the exception of pillar 3, the coverage is never below 50% for any variable or subregion. For pillar 3, data are available for only about 40% of the countries (no data are available for the Pacific subregion and for most of the Caribbean island countries) and only two African countries are included (Egypt and South Africa). In order to correct for the bias that would occur for subregions without any available data if pillar 3 was simply excluded from the computation of the respective overall RCI performance for these subregions, an attempt was made to impute the missing values for these cases. This was done by using the average of the available two African countries for the African regions that do not have any observations, and the average of the two least financially integrated Asian subregions for the Pacific. Although this procedure represents only a very rough approximation, it is likely to reduce the otherwise occurring bias significantly. When overall RCI performance is computed without taking into account RCI pillar 3 at all, the resulting ranking differs only slightly and none of the imputed subregions is severely affected. This indicates that the imputed values are not driving the results for these subregions. Table 2 provides a description of the data set and the sources for each of the indicators. Status of Global, Regional, and Subregional Integration Efforts 3 Table 2: Data Description and Sources for Overall RCI Performance Indicator Indicator Description Data source RCI Pillar 2 Intrasubregional Intrasubregional imports (% of total imports) Direction of Trade import share Statistics (2014), IMF Intraubregional Intrasubregional exports (% of total exports) Direction of Trade export share Statistics (2014), IMF Intrasubregional Intrasubregional FDI inflows, net (% of total FDI FDI database (2012), FDI share inflows, net) UNCTAD RCI Pillar 3 Intrasubregional bond Intrasubregional cross-border bond holdings (% of Coordinated Portfolio holdings total cross-border bond holdings) Investment Survey (2013), IMF Intrasubregional equity Intrasubregional cross-border equity holdings (% of Coordinated Portfolio holdings total cross-border equity holdings) Investment Survey (2013), IMF Cross-pillar Intrasubregional Intrasubregional outbound migration (% of total Trends in International migration outbound migration) Migrant Stock (2013), UN Intrasubregional Intrasubregional remittances inflows (% of total Bilateral Remittances remittances remittances inflows) Matrix (2012), World Bank Intrasubregional tourism Intrasubregional outbound tourists (% of total Outbound Tourism (2012), outbound tourists) World Tourism Organization FDI = foreign direct investment, IMF = International Monetary Fund, UN = United Nations, UNCTAD = United Nations Conference on Trade and Development. Source: D. Naeher. 2015. An Empirical Estimation of Asia's Untapped Regional Integration Potential using Data Envelopment Analysis. ADB Economic Working Paper Series. No 445. Manila: ADB. D. Results by Individual Pillars 4. Figures 2, 3, and 4 show results of the data envelopment analysis across RCI pillars 2 and 3 as well as cross-pillar results (migration and tourism). Figure 2: Global Comparison of Trade and Investment Integration Western Europe Northern Europe Eastern Europe North America South America Central America Caribbean East Asia Southeast Asia Central Asia Oceania South Asia Pacific Eastern Africa Western Africa Northern Africa Middle Africa 0 0.2 0.4 0.6 0.8 1 Source: Dominik Naeher. 2015. An Empirical Estimation of Asia's Untapped Regional Integration Potential Using Data Envelopment Analysis. ADB Economics Working Paper Series. No. 445. Manila: Asian Development Bank. 4 Linked Document 3 Figure 3: Global Comparison of Monetary and Financial Integration Western Europe Northern Europe Eastern Europe North America Central America South America Caribbean East Asia Southeast Asia Oceania South Asia Central Asia Pacific Northern Africa Eastern Africa Middle Africa Western Africa 00.20.40.60.81 Source: Dominik Naeher. 2015. An Empirical Estimation of Asia's Untapped Regional Integration Potential Using Data Envelopment Analysis. ADB Economics Working Paper Series. No. 445. Manila: Asian Development Bank. Figure 4: Global Comparison of Cross-Pillar Integration (Migration and Tourism) Western Europe Eastern Europe Northern Europe North America South America Central America Caribbean East Asia Southeast Asia Oceania South Asia Central Asia Pacific Western Africa Eastern Africa Northern Africa Middle Africa 0 0.2 0.4 0.6 0.8 1 Source: Dominik Naeher. 2015. An Empirical Estimation of Asia's Untapped Regional Integration Potential Using Data Envelopment Analysis. ADB Economics Working Paper Series. No. 445. Manila: Asian Development Bank. .