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

Using a computable general equilibrium model, this paper estimates the potential gains from deepening integration across South Asia and Southeast Asia. If the two regions succeed in dropping inter-regional tariffs, reducing non-tariff barriers by 50 percent, and decreasing inter-regional trade costs by 15 percent—which the paper suggests are ambitious but nevertheless attainable—welfare in South Asia and Southeast Asia would rise by 8.9 percent and 6.4 percent of GDP, respectively, by 2030. Hence, we conclude that deepening South Asian regional cooperation together with building links to Southeast Asia would pay off rich dividends.