Regional Corridors Development in Regional Cooperation

Srivastava, Pradeep Working Paper Regional Corridors Development in Regional Cooperation ADB Economics Working Paper Series, No. 258 Provided in Cooperation with: Asian Development Bank (ADB), Manila Suggested Citation: Srivastava, Pradeep (2011) : Regional Corridors Development in Regional Cooperation, ADB Economics Working Paper Series, No. 258, Asian Development Bank (ADB), Manila, https://hdl.handle.net/11540/2029 This Version is available at: https://hdl.handle.net/10419/109405 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/3.0/igo ADB Economics Working Paper Series Regional Corridors Development in Regional Cooperation Pradeep Srivastava No. 258 | May 2011 ADB Economics Working Paper Series No. 258 Regional Corridors Development in Regional Cooperation Pradeep Srivastava May 2011 Pradeep Srivastava is Senior Regional Cooperation Specialist, Regional Cooperation and Operations Coordination Division, Southeast Asia Department, Asian Development Bank. Useful comments are acknowledged from R. Butiong, R. Castelo, G. Nepomuceno, F. Pante, I. Porter, and J. Tranquilino. The author accepts responsibility for any errors in the paper. Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org/economics ©2011 by Asian Development Bank May 2011 ISSN 1655-5252 Publication Stock No. WPS113616 The views expressed in this paper are those of the author(s) and do not necessarily reflect the views or policies of the Asian Development Bank. The ADB Economics Working Paper Series is a forum for stimulating discussion and eliciting feedback on ongoing and recently completed research and policy studies undertaken by the Asian Development Bank (ADB) staff, consultants, or resource persons. The series deals with key economic and development problems, particularly those facing the Asia and Pacific region; as well as conceptual, analytical, or methodological issues relating to project/program economic analysis, and statistical data and measurement. The series aims to enhance the knowledge on Asia’s development and policy challenges; strengthen analytical rigor and quality of ADB’s country partnership strategies, and its subregional and country operations; and improve the quality and availability of statistical data and development indicators for monitoring development effectiveness. The ADB Economics Working Paper Series is a quick-disseminating, informal publication whose titles could subsequently be revised for publication as articles in professional journals or chapters in books. The series is maintained by the Economics and Research Department. Contents Abstract v I. Introduction 1 II. Two Dimensions of Regional Corridors 3 A. National versus Regional Corridor 4 B. Narrow versus Broad Corridor 6 III. A Framework for Corridor Development 10 IV. Implications for the GMS Program 12 V. Monitoring Corridor Performance 17 A. Differing Contexts of CAREC and GMS 17 B. Corridor Development and Corridor Monitoring 18 C. Indicators for Monitoring GMS Corridors 19 VI. Conclusions 20 References 21 Abstract Regional corridors are popular components of regional cooperation initiatives and have been in use for several years. Yet discussion about development of these corridors tends to be relatively general in scope and difficult to pin down in terms of content and implications. This paper elaborates on a simple framework for regional corridors development in the context of regional cooperation, anchored on two dimensions of these corridors: the extent to which they are national or regional and the area of their utilization. The framework is subsequently applied to the Greater Mekong Subregion (GMS) regional cooperation program, yielding several implications for its future. The GMS program needs to redefine what constitutes a regional project and to formulate a regional master plan for further development of GMS regional corridors. The framework is also applied toward identifying an appropriate methodology for monitoring performance of regional corridors. for B. Presumably, CA (CB) depends upon the distance between A and the highway, the road conditions that will determine the fuel costs and costs of wear and tear as well as the speed or time to travel, the availability of transport vehicles appropriate for the road conditions, and other factors such as the extent of decentralization and local taxes/ surcharges. The choice of moving from A to B lies between going directly across versus going to the highway from A, traveling along the highway, and then getting off to reach B. If the cost of directly going from A to B is CAB and the cost of traveling on the highway is CH, then it is better to go from A to B via the highway if CA + CB + CH ≤ CAB (1) All points off the highway like A and B that satisfy the relationship above can also be deemed as part of the corridor, which would then constitute a broader view of the corridor than the dumb-bell connecting X and Y. The representation above is at the most basic level necessary for the present purposes. More complexity can be brought in to incorporate other features. For example, the end points/nodes A and B may be represented more realistically as larger, concentric rings of urbanization with the corridor opening up into a funnel shape as it comes closer to each. Similarly, existence of another node near or in-between A and B, or of other corridors in the vicinity, is also abstracted from for purpose of simplicity in illustration. To formalize the discussion above, let the distance between A and B along the highway be denoted by D, and let D also be the distance between A and B if traveling directly, without using the highway. Let CH, the cost along the highway, be proportional to D, i.e., CH = θ(w). D (2) where w = (wi, i = 1,2,… ) denotes various determinants of θ and thus the cost of transport along the highway, such as road quality, road congestion, and other such factors. Similarly, the cost of traveling from A to the highway can also be written as proportional to the distance traveled (to the highway), denoted as δ. CA = λ(w). δ (3) where w again denotes factors determining the cost. We can also assume without any loss that the distance and cost of transport from B to the highway is the same as that for A, i.e, CB = CA = λ(w). δ. Regional Corridors Development in Regional Cooperation | 7 Finally, let φ(v).D be the cost for traveling directly from A to B without using the highway (CAB), where the factors determining costs of transport, v, are assumed for simplicity to be distinct from those in w. Since the highway has lower costs of transportation, by definition φ> θ. For the highway to be preferred in use, equation (1) above can be rewritten as 2 λ (w). δ + θ(w). D ≤ φ(v).D, and if δ* is the value that results in equality then δ*(w,D; v) = [φ(v) - θ(w)]. D/ 2 λ (w) (4) where δ* is the distance off the highway that defines the limit of areas that are integral users of the corridor’s connectivity. It can thus be interpreted as the (one-sided) width of the transport corridor given the nodes A and B. Equation (4) provides straightforward and intuitive relationships between the corridor width and the parameters w and D, namely,10 (i) ∂δ*/∂D > 0, or the width of the corridor is positively related to the distance between A and B. The greater the distance necessary to be traveled on the (lower cost) highway, the more worthwhile it is for farther points to use it despite having to travel extra to reach the corridor; (ii) ∂δ*/∂wj > 0 if ∂θ(w)/∂wj < 0, implying increase in any parameter wj that reduces costs of transport on the corridor will widen the corridor; and conversely, (iii) ∂δ*/∂wk > 0 if ∂θ(w)/∂wk < 0, implying a factor wk results in a narrower corridor if its increase results in higher costs along the corridor. Thus, if there is an increase in stoppages for toll charges of various kinds along the highway, the width of the corridor will be decreased, while investment in upgrading the highway will imply a widening of the corridor. We can also look at situations where a factor affects costs on the corridor but not on the link from A (or B) to the corridor, and vice versa, i.e., (iv) A factor k such that ∂θ(w)/∂wk ≠ 0 while ∂λ(w)/∂wk = 0. Thus, factor k affects costs on the highway corridor but not between points A or B and the corridor. This will result in widening (narrowing) of the corridor if the effect on θ is inverse. For example, introducing trade facilitation measures to 10 From total differentiation of (2), ∂δ*/∂wj = -( θ’ + 2δ*λ’)/2 λ, where θ’ and λ’ are derivatives with respect to wj. θ’ and λ’ have the same sign (unless one of them is zero), implying ∂δ*/∂wj < (>) 0 if θ’ and λ’ > (<) 0. 8 | ADB Economics Working Paper Series No. 258 lower costs on the highway will increase corridor width, even though costs of traveling from A (or B) to the corridor are unaffected. (v) Conversely, consider a factor j such that ∂θ(w)/∂wj = 0 while ∂λ(w)/∂wj ≠ 0. This represents a factor that affects costs of transportation from A (or B) to the corridor, but not costs along the corridor. For example, a rural roads project that reduces costs of linking points like A and B to the highway without affecting costs on the highway itself. This again would result in widening of the corridor. Finally, note that the analysis of corridor width above applies specifically to the stretch between points A and B. Outside that range, the corridor would not have any width, unless there are other such points. This would imply that greater presence or density of points like A and B—essentially urban or semi-urban nodes off the corridor—would also contribute to widening of the corridor.11 These relationships can be used to consider various determinants of costs of transportation as shown in Table 1 below, which shows the impact of specific factors and types of regional projects on development of the corridor. Table 1: Corridor Effect of Selected Factors/Projects Factor/Project Relationship to Corridor Effect θ (direct) λ (indirect) Highway/corridor upgrading Inverse Inverse Widening Road safety improvement Inverse Inverse Widening Increased costs at borders Inverse Nil Narrowing Increased transport costs due to lack of sector competitiveness Inverse Inverse Narrowing Logistics development Inverse Inverse Widening Rural road improvement Nil Inverse Widening Corridor town development Nil Nil Widening* Value chain and SME development Nil Nil Widening* Tourism infrastructure Nil Inverse Widening* SME = small and medium enterprise. * Corridor widening impacts either by bringing into existence more nodes off the corridor (points such as A or B), or by developing the existing ones. Improved tourism infrastructure in assets off the corridors may lead to corridor widening through improved secondary roads and also through increased nodes off the corridor (even if secondary road improvement is not included in tourism infrastructure). SME development and integration of such firms into value chains will also increase density of off-corridor nodes, thus leading to corridor widening. Source: Author‘s representation. 11 The simplified formalization here does not address the issues of corridor congestion and demand or benefits of traveling from A to B. Presumably, at initial stages of corridor development, congestion would not be a significant constraint, and can thus be ignored. Expanding the analysis to bring in the benefits of traveling can be done but is beyond the scope of the immediate analysis. Regional Corridors Development in Regional Cooperation | 9 Projects such as creating 2–4-lane highways or reduction of highway hazards would lead to corridor widening through reduced transportation costs. Increased competitiveness of the transport sector, often characterized by monopolistic practices and other distortions, is another cost-reducing factor that can contribute to corridor widening. Improved logistics similarly can lead to corridor widening by reducing transport costs along major routes. III. A Framework for Corridor Development The two dimensions of corridors in the previous section—national/regional and narrow/ broad—provide a useful framework to assess the components for development of corridors and their interrelations. The framework is presented in Figure 3 below, where the x-axis shows the national/regional characterization of corridor, representing increased regionality of the corridor as one moves to the right, and the y-axis represents the narrow/ broad dimension, with increased widening of the corridor moving up the axis. Together these two dimensions divide into four quadrants or zones. Zone I, representing the national and narrow stage of the corridor, is a useful starting point, marked by the corridor or highway’s initial construction, or by upgrading of existing (lower-quality) roads. This phase is obviously intensive in infrastructure investments, and by the nature of such investments, can last over several years. In terms of sequencing, Zone II (National, Broad) and Zone III (Regional, Narrow) are interchangeable (i.e., either or both may be pursued at any time), but the two are quite distinct in content. In particular, the locus of actions for promoting Zone II development lies primarily within national governments (discussed further in the next section), while Zone III development requires regional cooperation. Another substantive difference between the two zones relates to the level of investments required. Zone III is relatively “investment-light”, with the focus being on strengthening and developing the software for the physical infrastructure already in place, while Zone II is “investment-intensive” due to the continued need for developing diverse infrastructure. 10 | ADB Economics Working Paper Series No. 258 Figure 3: Four Zones of Regional Corridors Development National Regional Zone II National + Broad (Area development, SMEs, rural roads) Zone IV Regional + Broad (Cross-border economic zones) Zone I National + Narrow (Construction, upgrading) Zone III Regional + Narrow (Trade facilitation, logistics) Narrow -----> Broad Source: Author‘s representation. For Zone II, as noted previously, there are several initiatives that may be undertaken for widening the corridor. These include activities that may broadly be termed “area development plans” through a variety of methods such as urbanization, improving urban infrastructure, promoting industrial development, enhancing business climate and capacities for SMEs, and investing in tourism infrastructure. Within the national context, approaches promoting integrated rural development for corridor-linked rural areas are another example of Zone II development of corridors. Other initiatives such as developing secondary or rural roads that link to the corridors, improving road safety, and enhancing competition in the transport sector would also contribute to corridor widening. While the interventions above refer to role of the public sector, clearly substantial private investment would need to complement the public sector. This will require government policies that encourage crowding in of private investment, and also utilize public–private partnership as appropriate. Zone III is the transformation of the (narrow) national into a regional corridor through extension beyond national boundaries. This may take the form of linking national corridors, but is more usefully viewed as the subsequent stage of diminishing the height and density of the barriers at national boundaries through increasing trade, combined with enhanced transport and trade facilitation. The focus of the “narrow” corridor is on moving goods and people at fast speed and least cost from “point to point”. The “points” are usually urban centers, which may now be in more than one country along the corridor. These centers may be dominated by manufacturing and, within manufacturing, Regional Corridors Development in Regional Cooperation | 11 by large and medium enterprises. Areas between the centers do not have high priority. Consequently, there is less focus on SME development, which typically is common in the rural or semi-urban areas between the centers served by the regional corridor. Enhancing the regionality of narrow corridors may also be supported by developing and strengthening the larger logistics companies,12 and by improving vehicles and standardization of procedures on the corridor. The private sector again has a critical role in Zone III development, particularly in the strengthening of the logistics sector that can reduce the costs and increase the flow of internodal exchange of goods and services across the corridor. The private sector also has to take the lead in enhancing transport and trade facilitation as the lead stakeholder. Finally, Zone IV marks the last stage of corridor development, wherein the transformation of the corridor from a narrow, national entity into a broad and seamless regional entity is completed. This is an advanced stage that is neither inevitable, nor easy to achieve in the short run. Movement toward Zone IV corridors may require joint regional plans, or joint plans for cross-border area development by the concerned countries or, at the least, coordination of national plans. Clearly, the former option is not trivial, and may not be feasible for a long time if it will need mechanisms for fiscal or other transfers to be effective. The alternative, of coordinating national plans (including private-sector investment and activities) is a more viable option. This framework is relatively static in the sense it does not delve into issues of sequencing and dynamics within a specific zone. Yet there is a sequence across the four zones, with Zone I clearly preceding Zones II and III, which in turn are necessary as prerequisites for Zone IV development. Successful implementation of Zone II and Zone III is not only chronologically prior, but the quality of Zone II and III implementation will also fundamentally affect the quality of Zone IV development and growth. IV. Implications for the GMS Program The GMS program is a flagship regional cooperation initiative of the ADB, started in 1992. It includes Cambodia, People’s Democratic Republic of Lao (Lao PDR), Myanmar, Thailand, Viet Nam and two provinces of the People’s Republic of China (PRC), Yunnan Province and Guangxi Zhuang Autonomous Region.13 Three regional corridors have been promoted in the GMS program: (i) the East–West Economic Corridor (EWEC), the only direct and continuous land route between the Andaman Sea and the South China Sea; (ii) the North–South Economic Corridor (NSEC) with three subcorridors, namely, Kunming to Bangkok via the Lao PDR or Myanmar; Kunming to Ha Noi and on to Hai Phong, and 12 Logistics development in principle can be within Zone I also, if there is adequate demand for value chains within the domestic economy. 13 See http://www.adb.org/gms/ for more details on the GMS program. 12 | ADB Economics Working Paper Series No. 258 Nanning to Ha Noi; and (iii) the Southern Economic Corridor (SEC), which includes three subcorridors including the route linking Bangkok to Phnom Penh to Ho Chi Minh City. The GMS program adopted the economic corridor approach to regional development in 1998, and has anchored regional projects and initiatives on these corridors. Continuing its emphasis on development of the regional corridors, the GMS countries established the Economic Corridor Forum (ECF) in Kunming, PRC, in June 2008. The ECF is a ministerial-level multisector platform for coordination, networking, and facilitating initiatives to develop the GMS corridors. With almost $12 billion worth of investment projects completed or under implementation, and entering its third decade, the GMS program is one of the more advanced regional cooperation initiatives. Given the centrality of corridor development in GMS cooperation, the simple framework presented here has some direct implications for the GMS program. (i) National/regional dichotomy has little relevance to the GMS program. A clear implication of the framework presented here is the rejection of the strict national/regional dichotomy for corridor development. The logic for rejecting explicit regional/national dichotomy in the context of GMS corridors is reinforced when second-generation projects are examined: once the larger national/regional corridors are already in place, the forced dichotomy of national versus regional project becomes further diluted. A project linking other parts of the country (urban or semi-urban) to the regional corridor is legitimately as much a regional project as it is national. As shown in Table 1, a wide variety of projects have direct impact on regional corridors, through either increasing their regional characteristic or widening their area of influence. In this sense, a criterion for relevance of national/ regional dichotomy may be the extent to which the early, national projects (Zone I) have been completed. Thus, it is necessary in the GMS context to reject the strict national versus regional dichotomy, which is administratively useful but conceptually less rewarding, particularly for second-generation regional projects. In an advanced regional cooperation program like GMS, very often regional is national and national is regional. In terms of the operational definition used by ADB for defining regional projects as “national projects with regional implications”, it may be argued that for a program like GMS with second-generation projects, one should go further and look instead at “regional projects with national implications”.14 The difference is more than semantics, and is particularly relevant in the context of subsequent transition from Zone II toward Zone IV corridor development. The genesis and rationale of “national projects with regional implications” is national wherein the regionality is an addendum or a side benefit. In contrast, “regional 14 Or more strictly, “projects regional in scope but national in implementation”. This is just another way of phrasing the oft quoted maxim, “Think regionally, act nationally”. Regional Corridors Development in Regional Cooperation | 13 projects with national implication” have to be justified in a regional framework and logic, constrained by the requirement to meet adequate national development criteria.15 A good example of a mechanism in which this approach is operating may be the Mekong River Commission (MRC), an intergovernmental body whose program is intended to be “regional”, covering the countries and areas sharing the Mekong River and whose projects are “regional with national implications”. Despite some issues facing the MRC on the use of the Mekong River, it has a clear regional framework and mandate anchored on the Mekong River. In a sense, the members have defined the Mekong Basin as a regional entity for which planning and execution of (national) projects are envisioned to be coordinated by and through the MRC. (ii) The GMS program needs to transition into second generation. For much of the first phase of the GMS program comprising the 2 decades since its inception in 1992, the program has remained anchored on Zone I. Of the total investments made under the GMS program ($11.8 billion as of end-2010), more than 90% has gone into construction and/or upgrading of highways related to the three GMS corridors. The GMS corridors are not yet completed, with some segments yet to be developed. Nonetheless, the overwhelming proportion of Zone I development of GMS corridors is in the advanced stage of completion. (iii) The second generation will comprise Zone II and Zone III development. Given that the GMS program has to transition into other zones, the question is which zone(s), and in what sequence?16 As already noted, Zone II and III can be sequentially concomitant while Zone IV is operationally meaningful only at a subsequent stage of regional development and cooperation in the GMS. The movement to Zones II and/or III has to be the next stage of the GMS, constituting the second-generation of regional cooperation initiatives in GMS. (iv) Zone III activities are increasingly integrated into the GMS program. Reflecting the need for transition, there has been a clear and growing shift in the GMS program toward Zone III activities for development of the corridors. Transport and trade facilitation (Zone III) has been recognized as a high priority in recent years, and in 2010, the GMS countries agreed upon an Action Plan for Transport and Trade Facilitation. Development of logistics and freight forwarding 15 Put differently, the difference between “national project with regional implications” and “regional project with national implications” is not in the implementation, which in both cases is national, but in the objective function being maximized and the constraints. In one case, the objective would be to maximize national target (GDP or welfare) subject to a minimum benefit to regional countries. The alternative would be to maximize a regional target subject to minimum benefit to the country implementing the project. 16 The analysis here excludes another option, namely, to start other corridors, including railways. Development of railway corridors will likely grow over time, but the focus here is on development of existing regional corridors. 14 | ADB Economics Working Paper Series No. 258 services is also growing in priority. It is expected that these areas will be the center of considerable resources and efforts on the part of GMS stakeholders in the medium term. Several development partners have also embraced the enhancement of Zone III initiatives since these are consistent with requirements of the Association of Southeast Asian Nations Economic Community, and are also “investment-light”. Transport and trade facilitation issues are admittedly complex, requiring institutional changes and capacity building, but are relatively less resource-intensive since no major investments are necessary in infrastructure. Some investments may be required for equipment, border facilities, laboratories, etc. but the scale is modest compared to investments needed for developing or improving physical infrastructure. (v) ZoneIIdevelopmentremainslowkey,reflectingcomplexityandresource constraints. Unlike Zone III however, the shift into Zone II development is not as pronounced yet, although a few projects and initiatives are under preparation (such as rural roads project in Cambodia and a project on development of towns along corridors). The framework above suggests there is a need to greatly increase the resources and projects for Zone II development of the GMS corridors. Why is the shift toward Zone II not as pronounced? One possibility may be the fact that Zone III transition is less resource-intensive being “investmentlight”, while Zone II needs substantially more investment of resources. It is also possible that Zone II development is even more difficult (than Zone III) in terms of conceptualizing and implementing projects. For example, development of rural roads, even if linking to regional corridors, often faces difficulty within national programs due to constraints of unfavorable commercial cost–benefit ratios. To mitigate these, it may be necessary to package the roads with other infrastructure investments to increase not only the link to markets through rural roads, but also capacity and skills for producing for the markets. Developing and implementing such integrated rural development projects is inherently more complex than just building roads, and has often proved difficult in the past. However a generation spent in Zone I should not make it into a “comfort zone” for the GMS program, leading to inertia toward the complexity and different challenges of the investmentintensive Zone II. (vi) Greater integration of Zone II in GMS program is a necessity. Notwithstanding the difficulties, the challenges of Zone II actually are opportunities for the next stage of GMS corridor development. A shift toward investment-light Zone III alone would not be sufficient for the GMS program, and would actually intensify the pangs of the needed generational transition. The success of the GMS program in its first generation in Zone I has been defined by its essential characteristic as an investment-driven vehicle around which the member countries have coalesced to cooperate on other issues. Thus, a transition to Zone III minus Zone II risks draining the GMS program of its well-earned gravitas and the key ingredient to its Regional Corridors Development in Regional Cooperation | 15 success. It may also lead to growth that would be geographically imbalanced and less inclusive than desired. (vii) ZoneIItransitionshouldbeanchoredonaregionalmasterplan.The GMS countries straddle a dynamic region between large and fast-growing economies in East and South Asia, and it is easy to project economic activity of several trillions of dollars in the expanded region within the next decades. Growth nodes of today may be surpassed by new centers catering to the increasing trade flows accompanying the high levels of economic activity. This is a good time to do a regional master plan for the GMS subregion based on current trends and medium-term forecasts in regional economic activity, including trade and urban development. The regional master plan can ensure that increased channeling of resources in Zone II development is also based on good cost–benefit analysis from the start. The regional master plan can also serve as the launch pad for discussing higher-level cooperation in the GMS program in its third decade, including increased regional cross-border investments. The regional plan can and should incorporate issues that are increasingly and repeatedly being emphasized by the GMS member countries as critical going forward, namely, environment and climate change. This recognizes that Zone II development of corridors has to use them and build on them, and also sustain them over the long run. If we view Zone II development as enhancing or preserving the natural infrastructure along the corridors, then Zone II would be comparable to Zone I, (with the difference being replacement of “physical” by “natural” infrastructure).17 The GMS countries are quite vulnerable to climate change and the natural infrastructure of these countries is under great stress. Embedding the framework for Zone II development within climate change and environment management also has the benefit of encompassing several initiatives already under implementation among GMS countries with the same underlying motivation (i.e., sustainable development) under the rubric of disaster risk reduction, natural resource management, and climate change adaptation/ mitigation. At the same time, the regionality of environment and climate change approach is quite obvious. (viii) EconomicCorridorsForummayprovidetheseedsofZoneIVregional corridors development. The Economic Corridors Forum (ECF), which has already met twice and is seeking a well-defined role within the overall GMS framework, should be developed as the nascent platform for Zone IV development over the longer term. In the short term, the ECF should focus on coordinating Zone III initiatives (it has focused on transport and trade facilitation to date, and that should continue), but it should also incorporate within its active ambit Zone 17 It would also provide an apt development role for GMS development partners, including ADB, given the relative ease of financing hardware infrastructure today compared to 2 decades ago; at the same time, resources for enhancing natural infrastructure are more difficult to mobilize. 16 | ADB Economics Working Paper Series No. 258