In recent years, mounting volatility of the global system has underscored the growing importance of regional economic cooperation and integration. The European Union (EU), born from the ashes of World War II through initiatives like the European Coal and Steel Community (ECSC) and the European Economic Community (EEC), stands as a powerful example of how regional frameworks can foster both economic resilience and political stability. These mechanisms have helped preserve cohesion and growth within the region, even during periods of intense global instability.

A key challenge in regional integration lies in the frequent misalignment between formal legal frameworks and the reality of economic activities. Yet, ASEAN offers a compelling example. Despite diverse legal systems and varying stages of economic development, initiatives like the ASEAN Free Trade Area (AFTA) and ASEAN+3 financial cooperation have successfully propelled cross-border trade, investment, and capital flows across the region.

However, in today’s highly uncertain world, it is no longer sufficient for multilateral institutions to merely exercise delegated authority from national regulators and governments. Deepening regional collaboration, through robust agreements, comprehensive knowledge sharing, and seamless regulatory cooperation, is becoming increasingly vital.

Progress of regional economic and financial cooperation

The pace of regional economic and financial cooperation has been nothing short of transformative. Over the past few decades, key events have reshaped the landscape. The Chiang Mai Initiative Multilateralisation (CMIM), established in the wake of the Asian Financial Crisis, is a prime example. It has provided the ASEAN+3 economies with a crucial safety net, significantly contributing to regional financial stability. In Europe, the introduction of the euro and the establishment of the European Central Bank (ECB) have similarly fortified the eurozone against economic shocks.

At a recent visit to the Asian Development Bank (ADB), discussions with President Masato Kanda as well as ADB Executive Directors and department heads have reinforced my perception on how intricately ASEAN economies are linked through supply chains, trade, investment, and capital flows. Agreements such as Economic Partnership Agreements (EPAs) and the Regional Comprehensive Economic Partnership (RCEP) have played key roles in supporting economic growth and stability, both within and beyond the region. Against this backdrop, intra-ASEAN and broader East Asian cooperation has continued to deepen and its importance is only growing.

Two models of regional cooperation

Regional cooperation takes diverse forms across the globe. In Europe, integration has followed a long-term, strategic vision, built on shared economic realities and strong political will. From the ECSC and EEC to EURATOM, and ultimately the adoption of a common currency and the establishment of the ECB, the EU has steadily evolved toward a unified economic and monetary union. In Latin America, frameworks such as MERCOSUR (Southern Common Market) and the Latin American Reserve Fund (FLAR) illustrate varying approaches to cement regional cooperation, with countries forming alliances tailored to their specific needs.

Broadly, regional integration can be grouped into two types:

  • Type I: Flexible, market-driven cooperation

This form of integration arises organically from private-sector activity. As businesses configure new investments and supply chains, formal trade and financial agreements emerge to support them. Examples include AFTA, CMIM, and RCEP, which were developed in response to real economic activity and financial needs.

  • Type II: Vision-driven, politically anchored integration

This model begins with strong political commitment, followed by a shared medium- to long-term economic vision. The EU’s single market and monetary union are hallmark examples. Similar efforts can be seen in the African Continental Free Trade Area (AfCFTA) by the African Union (AU) and the Eurasian Economic Union (EAEU) in Central Asia, which aim to promote regional growth and stability through strategic cooperation.

The role of international institutions and future challenges

Since regional economic cooperation transcends national borders, multilateral institutions play a crucial role alongside sovereign states. In Europe, the ECB and the European Stability Mechanism (ESM) are central to anchoring economic stability and coordinating crisis response. In Asia, institutions like the ADB and AMRO serve as key actors, while in Latin America, institutions like FLAR are key regional actors. Globally, institutions such as the IMF have also collaborated closely with regional bodies, most notably during the Greek and Irish debt crises following the Global Financial Crisis.

Yet, today’s rapidly shifting global economy demands more than adherence to traditional mandates. To continuously evolve as integral parts of the regional economic ecosystem, these organizations must be capable of monitoring emerging risks with vigilance, identifying potential new equilibrium points, and sharing timely knowledge with relevant authorities.

Rather than operating as mere coordinators, these institutions should also act as innovators, working with regional peers to propose new frameworks and policies that support economic resilience and sustainable growth. This proactive stance is essential for enhancing the resilience and competitiveness of their respective regions amid the rapidly changing global economic landscape.

At AMRO, we are committed to deepening collaboration with both regional and international institutions in response to Asia’s increasingly complex and diverse economic environment. In particular, enhancing partnerships with regional institutions such as the ADB, global actors like the IMF, and leading regional organizations such as the ESM and FLAR will be critical to reinforcing the quality and effectiveness of regional economic cooperation in the years ahead.

Political will: The driving force behind regional cooperation

In the longer term, political will remains the linchpin for successful regional cooperation. The EU stands as a successful case: decades of shared interests and collective priorities have driven integration forward. Even post-Brexit, the UK has sought to rebuild closer ties with the EU, further underscoring the enduring value of political alignment. Meanwhile, major players like Germany and France continue to shape the direction of regional cooperation, especially as the bloc confronts new global challenges 75 years on from its founding.

Although the complex geopolitical dynamics are adding more challenges for its achievement, regional cooperation and integration presents a constructive alternative for countries to strike a balance between geopolitics and economic reality. The recent trend of reverse globalization and tariff turbulence have prompted ASEAN+3 to double down on regional cooperation, providing fresh impetus for organizations like the ADB and AMRO to support integration efforts wherever possible. This renewed dedication to regional cooperation offers a promising pathway for the future for not only responding to global uncertainty, but also creating a more stable and interconnected ecosystem for the world economy.