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

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

September 15, 2023

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Nuri Baek, Kaustubh Chahande, Kodjovi M. Eklou, Tidiane Kinda, Vatsal Nahata, Umang Rawat, and Ara Stepanyan. ASEAN-5: Further Harnessing the Benefits of Regional Integration amid Fragmentation Risks, (USA: International Monetary Fund, 2023) accessed December 30, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

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

Keywords: Asia and Pacific, Digitalization, Exports, External finance dependence, Financial integration, Financial sector development, Firm growth, Firm Growth, Firm level result, Fragmentation risks, Global, Goods export sophistication, Trade integration

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/191
Stock No:

WPIEA2023191
ISBN:

9798400253706
ISSN:

1018-5941

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