Comment on “Economic Impacts of Improved Connectivity for ASEAN: An Application of the Geographical Simulation Model”

• Author: Jayant Menon
• Date: 01 July 2016
• Published date: 01 July 2016
• DOI: http://doi.org/10.1111/aepr.12149

Comment on “Economic Impacts of Improved

Connectivity for ASEAN: An Application of the

Geographical Simulation Model”

Jayant MENON†

Asian Development Bank

JEL codes: F15, O53, R12

Isono and Kumagai(2016) estimate the impacts ofAssociation of Southeast AsianNations’

(ASEAN) Master Planon ASEAN Connectivity (MPAC) andEconomic Research Institute

for ASEAN and East Asia’s Comprehensive Asia Development Plan 2.0 (CADP) using a

geographical simulation model (GSM). The paper provides an overview of the MPAC,

and the CADP describes the GSM and its specifications, presents the estimation results,

and concludes with some policy implications.

The estimation uses the IDE-GSM, which captures changes in the geographical distribution

of industries and population as a result of infrastructure development and trade and trade

facilitation policy measures. In the model, firms choose the route and transport mode that

minimizes costs in terms of money and time. To estimate the potential impacts of the MPAC

and CADP, Isono and Kumagai take the differences in gross domestic products (GDPs)/regional

gross domestic products between a baseline and an alternative scenario. The baseline scenario

assumes minimal additional policy measures by 2015. The alternative scenarios assume different

combinations of policy measures which are fully implemented by 2030.

The estimation results reveal that both the MPAC and CADP can have positive economic

impacts at the aggregate level, particularly when infrastructure projects are complemented by

other measures that reduce NTBs and promote industrial development. However, the

magnitude of this impact will differ greatly, both across and within countries. The results also

underscore how different combinations of policy measures can produce different results in

terms of economic growth and income distribution. Isono and Kumagai urge policymakers

to be more cognizant of any possible trade-offs between growth and equity and proposes a

more strategic approach to combining “projects for higher economic growth and projects

for narrowing development gaps.”

My first comment relatesto short-run versus long-run impactsas determined by factor

mobility. The overall analysis is described as “long-run”in nature, which is not surprising

given the time horizonsinvolved. An important determinant of the impact of infrastructure

†Correspondence: Jayant Menon, Asian Develop ment Bank, 6 ADB Avenue, Mandaluyong City 1550

Metro Manila, Philippines. Email: jmenon@adb.org

doi: 10.1111/aepr.12149 Asian EconomicPolicy Review (2016) 11, 309–310

©2016 JapanCenter for EconomicResearch 309

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