Globalization and the opening up of economies have led to greater transnational movement of commodities and factors of production. This has fostered many kinds of spillovers across borders.

Some, including technology and skills transfer, are welcome, while others are negative impacts such as disease outbreaks, financial contagion, natural disasters, challenges of managing common resources, and others. Such development challenges are of a scale and complexity that are best dealt with through international responses. Their transnational nature has increased demand for regional public goods (RPGs).

By definition, RPGs produce public benefits that extend beyond a country’s borders but are limited to a subset of the world. Just like typical (domestic) public goods, they are characterized by varying degrees of nonexcludability and nonrivalry. Nonexcludability refers to it being costly to prevent nonpaying parties from consuming a good’s benefits, while nonrivalry implies that consumption can be extended to another user at no increase in spending (zero marginal cost). This gives rise to the “free-rider” problem of who pays for provision. In a national setting, governments can easily tax citizens to provide these goods. In a regional context, the absence of a supranational entity makes this difficult—a basic problem of achieving collective action for RPGs. Therefore, a third property of RPGs is so-called aggregation technology, or how various arrangements can be formed to elicit collective responses. For “best-shot” public goods, for instance, the largest contribution determines the available level. A case in point is vaccines, which are usually best developed by technologically advanced countries who pass on the innovation to other nations. For “weakestlink” public goods, the smallest contribution determines the appropriate level of the good. Disease outbreaks are most likely to occur in countries with the poorest disease-controlling capacity. In this case, policy intervention would be most efficient when directed to vulnerable economies in need of funding and capacity building. A fourth property of RPGs is the scope of their benefits. Whereas the benefits of national and global public goods are more easily determined, this is more challenging for RPGs because the beneficiary and providers may not be always the same. On the other hand, the presence of fewer parties than for global public goods can smooth the path to reaching agreement.

Case studies for Asia and Europe are instructive on how various arrangements are formed to tackle regional development challenges, including the role of regional institutions. In Asia, the Boxing Day Tsunami in 2004 that killed over 230,000 people and affected multiple countries eventually led to a regional approach in adopting an early warning system for disasters. The system adopted a best-shot approach in investing in monitoring equipment, led by the more advanced countries around the Indian Ocean. A key challenge was in maintaining the system for natural hazards such as tsunamis that rarely occur. Besides the RPGs of detection and warning, the national public good of rescue and evacuation is also needed to help communities at risk.

A second case study on preventing overfishing of tuna in the Pacific Ocean highlights the need to monitor the locations of fishing vessels and limiting their time at sea. This proved a second-best approach as monitoring their harvests was too costly. The third case features the serious health risk posed by malaria in Asia, and highlights that control or reducing its incidence is a national public good, while its elimination to zero cases can be both a national and a regional public good. It can also mitigate the spread of the disease globally, especially to sub-Saharan Africa. Regional institutions like Asian Development Bank (ADB) have provided resources toward a trust fund to combat the disease. The latest example of health-related RPG is ADB’s Greater Mekong Subregion (GMS) Health Security Project for the GMS countries to address health threats from the coronavirus disease (COVID-19) pandemic. Similarly, the case on cooperative management of the Mekong River Basin suggests that the ADB-led GMS Economic Cooperation Program can provide a forum for addressing conflicting uses by different countries.

The first European case study discusses how the goal of exchange rate stability led to the push toward monetary integration by the European Union (EU). Periodic financial crises led to the creation of supranational institutions to safeguard financial integration and enhance macroeconomic and financial stability. The second case study discusses energy market integration to improve access and secure supplies. This has resulted in common legislation to liberalize markets and harmonize regulations, and funding mechanisms that support infrastructure in the region. The third case study on mitigating overpricing in international mobile roaming shows that a regional approach was needed since no national regulator could address issues in both home and visited networks.

A comparative analysis of RPG provision in the two regions suggests some lessons for Asia. In the successful drive toward malaria elimination in Eastern Europe and Central Asia, World Health Organization (WHO) Europe adopted a regional approach to employing dedicated staff and technical expertise. This contributed to developing national malaria strategies, initiating crossborder and regional coordination, and obtaining funding from donors such as the Global Fund to Fight AIDS, Tuberculosis and Malaria.

This also improved expertise in disease management, epidemic preparedness and response, integrated vector control, malaria surveillance, and other areas. Asia, including the GMS, follows this provision of weakest-link RPGs and is learning from WHO’s success in Europe. In energy integration, an important lesson from European experience is that developing software for an integrated energy market needs both political will and technical cooperation. This requires progress in the adoption of legislative packages and harmonized laws.

The European experience also suggests that integration should be pursued first at the subregional level, where delivery of services supports the development of an integrated energy market. On regional financial stability, experience from Europe shows that coordination is easier to achieve than voluntary cooperation. While Europe relied on supranational institutions, this approach may not be suitable for Asia. The formation of financial stability networks highlights the importance of regional institutions in coordinating provision of RPGs. Experiences in the Association of Southeast Asian Nations and the EU influenced both the creation of the Chiang Mai Initiative and its ensuing financial mechanism in Asia, and the European Financial Stability Fund, the European Financial Security Mechanism, and the European Stability Mechanism.

The provision of RPGs is closely related to regional cooperation and integration. European experiences in malaria elimination, energy market integration, and regional financial stability have highlighted the important role of regional institutions in promoting regional cooperation and integration, and in the provision of RPGs. The case studies for Asia show that provision can be initiated and supported by agreements and declarations, rather than the formal institutions established in Europe. The case studies also illustrate the superior benefits from forging a regional approach rather than countries initiating policies on their own. This underscores the role of regional institutions in drawing countries toward the advantage of regional cooperation.

Multilateral development banks can provide needed “strong pressure” and can help increase provision through narrowing knowledge and financing gaps, providing a permanent platform for continuous dialogue, and by being honest brokers to enhance mutual trust concerning RPGs.

Moreover, coordination among global, regional, and subregional institutions