SPECIAL FEATURE
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and between countries. One example is the uneven access to high quality broadband internet. Another example is the disparities in public health and healthcare provisions. Addressing these infrastructure constraints will facilitate greater regional integration. This is where AIIB will add incremental
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OFQ: Are some sectors more conducive to regional integration than others? Konstantin Limitovskiy: Generally, manufacturing is seen to be more conducive for integration – it has proven economically feasible for production to be broken up, with each country taking a slice of the value chain according to their comparative advantage. Of course, these sometimes lead to dislocations that result in the trade tensions we see today. The key for the manufacturing sector is to prevent trade tensions from disrupting the large gains in integration made over the past decades. Services on the other hand are seen
as more difficult to integrate. The need for coordination of standards and regulations is high. But with more ICT development, more services are now being traded across borders. During the pandemic, services trade that requires travel and face-to-face contact declined very sharply (tourism for example). The good news is that non-contact services trade, such as ICT and financial services, have remained very resilient. It is important to build on that.
OFQ: How important is human capital in terms of regional integration for development purposes? Konstantin Limitovskiy: Asia is the world’s largest and fastest-growing region representing 60 percent of the world’s population and 45 percent of the global economy. Asia’s role in connecting people, goods, services and markets worldwide is growing. However,
the development of its economies, human capital, and infrastructure has so far been uneven. Robotics, AI and 3D printing are changing manufacturing. Importantly, this will also allow some activities to be re-shored back to developed economies. The effects are being played out, but this trend could potentially mean less demand for low-skilled labor and some early studies are already pointing to that. Labor intensive, low- wage developing economies will need to invest to upskill their workforce to participate in this new digital world or risk being left behind. Most studies point to the potential of machines and workers complementing each other, providing the right investment on human capital is made. Investment into digital infrastructure is becoming ever more critical, and AIIB will prioritize this.
OFQ: What has COVID-19 taught us about regional integration? Konstantin Limitovskiy: Firstly, the global supply chain has been resilient throughout the crisis, notwithstanding some disruptions. To a large extent, it shows the strength of regional integration. Secondly, the pandemic also brought home the need to integrate disease surveillance, control, sharing of vaccine information, etc. This is particularly important given the rise of cross-border travel, which is an essential part of economic integration. The pandemic also highlighted the unevenness of infrastructure within
value in the post-COVID-19 recovery. While we have had to adjust our lending program to meet the changing needs of our members and clients during the pandemic, we have also increased our efforts in preparing for our mainstream business once the crisis is past. We think the opportunity will
be to invest in what we call the ‘Infrastructure for Tomorrow.’ This is green infrastructure with sustainability, innovation and connectivity – all intertwined at its core.
OFQ: What role can the international development community (DFIs, the UN, governments, NGOs) play in supporting regional integration? Konstantin Limitovskiy: Investing in connectivity or cross-border infrastructure is a priority across several initiatives and networks across Asia. ASEAN Connectivity 2025, the CAREC 2030, and the South Asian Association for Regional Cooperation (SAARC) are just a few examples of multilateral efforts to bring decision-makers together to facilitate better regional integration. It is within these fora that the right conversations and discussions can happen to develop the kind of policy frameworks necessary to decide on the most beneficial connectivity investments that will help the region as a whole. There are of course barriers to
accessing global markets, but none more so than obstacles at the political and policy level when it comes to cooperation and integration. When governments come to the table under a multilateral umbrella, with a regional rather than just a national view, it helps pave the path towards better mutual understanding of how benefits can be shared across borders.
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