ASEAN-5: Further Harnessing the Benefits of Regional Integration amid Fragmentation Risks

Nuri Baek, Kaustubh Chahande, Kodjovi Eklou, Tidiane Kinda, Vatsal Nahata, Umang Rawat and Ara Stepanyan

No 2023/191, IMF Working Papers from International Monetary Fund

Abstract: The ASEAN-5 region, which comprises Indonesia, Malaysia, the Philippines, Singapore, and Thailand, has benefited substantially from its integration to the world economy, particularly through trade. Rising risks of geoeconomic fragmentation could reverse some gains reaped from globalization over the past decades. In this context, advancing regional integration among ASEAN-5 members has the potential to enhance the region’s resilience against external headwinds. This paper shows that despite sizeable progress, particularly in regional trade integration, there is room to advance financial integration, which also lags trade integration in ASEAN-5. Empirical findings from the paper illustrate that a higher degree of regional financial integration could generate sizeable output gains for the region. Using firm-level data, the paper highlights that digitalization, an area where the region is thriving, can support regional integration by helping firms better integrate into global value chains, with the benefits being stronger for small and medium sized enterprises. The results also suggest that digitalization can help firms move up the value chain through the production of more sophisticated products, often coined as higher export sophistication.

Keywords: Trade integration; financial integration; digitalization; fragmentation risks; goods export sophistication; firm level result; firm growth; firm Growth; external finance dependence; Financial sector development; Exports; Global; Asia and Pacific (search for similar items in EconPapers)
Pages: 46
Date: 2023-09-15
New Economics Papers: this item is included in nep-fdg, nep-int and nep-sea
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