Pascha, Werner

Abstract
While market integration has progressed steadily in Northeast Asia, government-backed cooperation is still lacking, which makes the region vulnerable to shocks and does not fully exploit the potentials of regional integration. In this paper, we will discuss the potential role of cooperation in development finance to counter cross-border external economies, e.g. environmental pollution and to overcome cooperation failure for cross-border investment projects like infrastructure development. Earlier attempts to create a Northeast Asian Development Bank are surveyed and alternatives discussed. It is argued that cooperation in development finance can be a sensible mechanism to promote cooperation and realise welfare gains for the region, provided that organisational issues like a clear agenda, private sector participation, and appropriate membership levels can be managed appropriately. Such a mechanism may also be helpful to support the integration of North Korea into the regional economy at a later stage.
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