ASEAN is one of the world’s most dynamic economic regions, with deep integration into global value chains. Yet intra-regional trade has stagnated at around 22 percent of total trade for two decades – well below levels observed in ASEAN+3 and the EU.
This paper argues that the persistence of modest intra-ASEAN integration reflects structural constraints – including diverse development levels, limited production sophistication, and shallow intra-regional investment – that trade liberalization initiatives alone cannot resolve. Using gravity model analysis, trade complementarity indices, and global value chain network mapping, the paper shows that ASEAN’s outward orientation toward China and other Asian partners is structurally consistent with its stage of development, and that these external linkages can serve as a foundation for deeper regional integration rather than a substitute for it.
Two reinforcing policy pathways are identified to complement ongoing integration initiatives: first, leveraging existing global value chain linkages and maximizing FDI spillovers to build domestic productive capabilities; and second, promoting intra-regional investment and the internationalization of ASEAN firms to create durable production and demand linkages across the region. Model simulations suggest that progress across these pathways could raise the intra-ASEAN trade share to nearly 40 percent by 2050.
In an era of global fragmentation, deeper regional integration offers ASEAN a critical complement to – not a substitute for – the external openness that has long underpinned its economic transformation.