One of the world’s most open regions trades surprisingly little with itself
ANDREW STANLEY is on the staff of Finance & Development.
Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.
Southeast Asia is coming into its own. The 11 ASEAN economies now form a $4.5 trillion bloc, the world’s fourth-largest economy, home to about 700 million people and growing at over 4.5 percent annually, among the fastest growth rates globally. As firms hedge their reliance on China, ASEAN has become the world’s factory of choice. Carmakers, chipmakers, and electronics giants are all expanding there. Foreign investment reached $244 billion in 2025, climbing 10 percent, and manufacturing investment jumped by nearly 50 percent.
Yet the region trades very little with itself. Only about 22 percent of what ASEAN exports goes to its own members, against 61 percent for example within the European Union. The pattern is starkest among two of the most open economies: Singapore and Vietnam trade enormously with the world, yet relatively little with their neighbors. What does cross internal borders is mostly intermediate goods, the parts and components feeding factories that sell to the rest of the world. ASEAN has built a shared production line, but not a shared market. Its prosperity depends on outside demand, which leaves it exposed when that demand wobbles.
That untapped market is an opportunity. IMF estimates show that dismantling the region’s nontariff barriers could raise ASEAN’s output by 4.3 percent over the long run, equivalent to adding over a third of Malaysia’s economy. As trade flows grow less certain, a deeper home market offers ASEAN another avenue for growth and resilience. As finance ministers gather in Bangkok, a key question is how the region can build it.
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