IMF Working Papers

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

Author/Editor:

Nuri Baek ; Kaustubh Chahande ; Kodjovi M. Eklou ; Tidiane Kinda ; Vatsal Nahata ; Umang Rawat ; Ara Stepanyan

Publication Date:

September 15, 2023

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

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.

Series:

Working Paper No. 2023/191

Subject:

Digitalization Economic integration Exports Financial integration Financial markets Financial sector development International trade Technology Trade integration

Frequency:

regular