The great disparity between regional integration in East Asia and that in Central Asia
is because East Asia’s integration results from market-based resource allocation and
vigorously developed manufacturing through constantly upgrading industry structures.
Because the manufacturing chain of industry is longer and is able to foster intra-industry
trade, it can promote economic integration of the countries. It is different in Central
Asia. While they were part of the Soviet Union, the Central Asian countries established
a close system of industrial division of labor; such a division was not based on the market
but on planned resource allocation, which was quickly broken after independence. The
new market-based manufacturing division of labor was not accomplished in the Central
Asian countries due to their weak industry and improper industry structures. They are
now depending only on their strengths in natural resources to develop the economy,
but their export of preliminary products is challenged through various trade structures.
Russia became the core power to promote integration (Russia boasted an economy far
larger than other member countries), but it has not created a market economy based on
advanced knowledge and technology. Its economic structure and economic growth are
still dependent on natural resources, as in developing countries. It could not create more
external effects for other countries. Therefore, such integration is low level and import
substitutable. It cannot promote spillover of technology, knowledge, and policies. Latin
America has proven that import substitution policies violate the comparative advantage
principle and cannot maintain constant and healthy economic growth.