ASEAN Economic Integration Principles: Open, Inclusive, and Convergence

Kiki Verico

Chapter Chapter 7 in Indonesia's International Economic Strategies, 2023, pp 185-212 from Springer

Abstract: Abstract Referring to the original theory of regional economic integration (Balassa, The theory of economic integration. Richard D. Irwin, 1961), ASEAN is currently in the process of structural transformation from free flows of trade (AFTA) to free flows of investment (ASEAN Plus Frameworks). Given this objective, the study of (Verico, The future of ASEAN economic integration, Palgrave Macmillan, 2017) proves that ASEAN, with its soft and open principles, is fitted to adapt to the economic community. It allows ASEAN to increase FDI inflows from non-member states by establishing the ASEAN Plus Frameworks, such as FTA Plus One and RCEP. Indonesia supports ASEAN with its centrality spirit to adopt another necessary principle entitled the inclusive principle. This principle helps secure economic stability amidst geopolitical uncertainty. This inclusive principle emphasizes ASEAN as an inclusive region and is free to choose economic cooperation with any partner regardless of their political system. ASEAN is guaranteed to adopt, implement, and enhance its regional plus frameworks. This inclusive principle comes from ASEAN's internal and original values. In ASEAN, economic cooperation is based on free and fair economic cooperation regardless of domestic political system of the member state. Open and inclusive principles are the necessary conditions for ASEAN. ASEAN needs open regionalism principle to attract Foreign Direct Investment (FDI) inflows from any country. Furthermore, ASEAN requires inclusive principles to secure its trade and investment relations both within ASEAN member states and between them and non-ASEAN member states. This chapter confirmed that structural economic transformation requires open and inclusive necessary principles and economic convergence as a sufficient condition. It assessed the Bali Concord Three commitment of the FDI inflows as a proxy for openness and the GDP per capita gap to the highest member state's GDP per capita as the economic convergence variable. It finds that being open and inclusive is only enough to positively impact the decrease of the economic gap—the more integrated the economic level, the stronger the economic integration. As for the digital economic transformation, this chapter confirmed that ASEAN inclusive principle also fits digital economic empowerment. This chapter applied the inference regression in assessing the open and convergence principles and the qualitative approach for analysing inclusiveness impacts on economic stability and digital economic integration.

Date: 2023
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DOI: 10.1007/978-981-99-8458-9_7

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