Since its establishment in 1967, the Association of Southeast Asian Nations (Asean) has gone through several phases in its bid for regional integration. From the 1992 Asean Free Trade Area, the 2002 Asean Economic Community, and finally the 2007 Asean Charter provision of three guiding pillars foremost of which was the Asean Economic Community, a thoroughgoing regional integration remains an elusive and imaginary goal.
As the Philippines prepares to assume chairship of Asean in 2026 under the theme “Navigating our Future Together,” it would be pertinent for all stakeholders to take stock of and evaluate where the avowed doctrine of economic integration has taken the regional bloc and why that vision has imploded and atrophied amid innate structural and logistical hurdles.
A major stumbling block is the huge economic disparities that characterize levels of development among Asean member-economies. These range from the more developed Singapore, Brunei, Malaysia and Thailand to the mid-developed Vietnam, Indonesia and the Philippines and to the poorly developed Laos, Cambodia and Myanmar. This uneven development highly restricts the objective of freely-flowing goods and services, marginalizing smaller economies and increasing the gap between rich and poor countries.
One measure commonly used to differentiate a rich from a poor country is that developed by the World Bank where a country’s gross national income (GNI) is divided by its population, thus the term “GNI per capita.” The World Bank Classification defines high-income countries as those with a per capita GNI greater than US$14,005. Upper middle countries are within the $4,516 to 14,001 range. Lower middle countries are in the $1,146 to $4,515 classification while low-income ones register less than $1,145.
The classification, however, has several limitations. For one, it does not show how the income is distributed within the country. Secondly, in many countries with a large informal sector, the measure could be underestimated. Thirdly, the World Bank developed the indicator in the 1980s and it has remained unchanged except for inflation-related adjustments.
Nevertheless, the 2023 figures for Southeast Asia show that seven of the region’s countries fall at the lower middle-income level — the Philippines, Vietnam, Papua New Guinea, Timor Leste, Laos, Cambodia and Myanmar (see Table 1). With respect to the Philippines and Vietnam, their inability to advance to “upper middle-income level” is often referred to as being caught in a “middle-income trap.” Three countries — Malaysia, Thailand, and Indonesia — are classified as upper middle. Only two — Singapore and Brunei — are high income level countries. Singapore is 58 times richer than Myanmar, 39 times more affluent than Cambodia, and 33 times wealthier than Laos and Timor Leste.
Benefits from economic integration through trade and investments are thus unequally distributed. Intra-Asean trade has been virtually stagnant, averaging a mere 24.1% of total trade from 2014 to 2023 (see Table 2). During this ten-year period, intra-Asean trade totaled US$6.7 billion compared with total trade at $27.7 billion. Except for the 30% registered in 2018, intra-Asean trade never crossed the 25% level, with the lowest level reached in 2021 (21.3%) and in 2023 (21.5%). This can be mainly attributed to the lack of complementarity among Asean economies, i.e., they compete with each other in terms of export goods. As I pointed out in a 2014 piece in Inquirer Opinion, “Of 15 major Asean export commodities, it is only in rice, coffee and palm/coconut oils that three to four Asean countries trade in. The rest of the export product lines have more than half of Asean countries engaging in trading activities. All Asean economies trade in wood and wood products and in textiles/clothing while nine of the 10 countries are in beverages, machinery/equipment, and fish and fish products. Eight Asean countries are engaged in exporting chemicals, metal and metal products, travel goods/bags, and fruits/vegetables. Seven Asean economies export oil and oil products while six are in the trading of food and live animals.”
Trade competition between Asean economies was recently highlighted with Vietnam cutting into the once Philippines-monopolized Japan market for export bananas, as reported by Nikkei Asia. The 2024 volume of Vietnam’s banana imports rose nearly 14 times their 2019 volume, while the Philippines’ share dropped from 90% to 75% in 2024. Vietnam’s bananas were seen as of higher and more consistent quality aside from costing 10% less and are taxed lower at 5.4% compared to the 8-18% tariff imposed on the Philippines’ bananas. Older plants, diseases, erratic weather and rising labor costs in Mindanao have also rendered the Philippines’ bananas less competitive. As a result, some Japanese importers have reduced their purchases of the Philippines’ bananas.
The intra-Asean trade figure could be misleading, however, because for the region’s No. 1 trading nation, Singapore, from 30% to 40% of its intra-Asean exports are actually re-exports originating from non-Asean economies. These consist of electronics and integrated circuits, machinery and equipment, petroleum and chemicals, pharmaceuticals, and consumer goods. If these data are factored in, total intra-Asean trade would be much smaller.
As pointed out by Shaun Narine in a Cambridge Review of International Affairs article, Asean has yet to create a single market as non-tariff barriers (NTBs), regulatory differences, and protectionism remain predominant. NTBs include import bans, bureaucratic import requirements, subsidies, quotas, sanitary and phytosanitary measures, technical trade barriers, state aid measures, export taxes, and public procurement requirements. Trade disputes between member-countries have been noted.
Inequalities are glaringly evident in the distribution of intra-Asean exports, as SEASIA reports (see Table 3). Singapore alone corners 32.9% of the market given “its strategic position as a key gateway for regional and global trade.” But as pointed out above, only 60% of Singapore’s exports are produced in the country. In any case, 86% of intra-Asean trade is controlled by only four economies – Singapore, Malaysia, Thailand and Indonesia. The remaining six have only a 14% share. The last four — Myanmar, Brunei, Cambodia and Laos — have a minuscule 3.4% share. What is significant from the 2023 figures is Vietnam (8%) overtaking the Philippines (2.8%) and dislodging it from the fifth position.
The track record of intra-Asean foreign direct investment (FDI) flows is even more bleak. From 2014 to 2023, Intra-Asean FDI averaged a measly 14.7% of total FDI into the region (see Table 4). Within this ten-year period intra-Asean investments totaled US$239 billion compared to total FDI of $1.6 trillion. The highest level was 23.3% in 2016 but in all the rest of the decade, FDI flows never crossed the 20% level. The lowest point was in 2023, when intra-Asean FDI flows reached a dismal 9.6%.
Intra-Asean FDI flows remain insignificant due to market fragmentation, competition over complementarity, regulatory hurdles, and the dominance of global transnational corporations, as revealed by the Asean Investment Report 2024 produced by the UN Conference on Trade and Development (Unctad). Obviously, most of the hurdles against intra-Asean trade are also evident in the intra-Asean FDI traffic.
Lastly, institutional and structural weaknesses of Asean prevent it from fully implementing the goals of regional integration. Financial and human resources are limited, with its Jakarta-based Secretariat seen as weak and lacking regional clout. Analysts regard the Asean Secretariat as under-resourced and under-funded. Moreover, bureaucratic processes are often slow and cumbersome.
A case in point of regional ineffectiveness is the much-touted and ambitious Asean Infrastructure Fund (AIF) established in 2011. Requiring US$60 billion a year to finance infrastructure projects under the Master Plan on Asean Connectivity, an AIF Primer reports that the Fund managed to secure only $4 billion (1.7%) in lending commitments by 2020. The AIF is to provide loans for projects in the transport, energy, water and sanitation, environment, rural development and social infrastructure.
Lacking the capacity to manage the Fund or raise the needed resources, Asean relies entirely on the Asian Development Bank (ADB) to administer it and act as co-financier under the ADB’s Regional Cooperation and Operations Coordination Division, Southeast Asia Department. The AIF, therefore, has to comply with ADB’s own regulations and conditionalities regarding loan approvals, thus rendering Asean’s autonomy inutile. The stipulation that funding will be provided only to “sovereign or sovereign-guaranteed projects” in Asean risks exacerbating the already fragile debt status of some of its economies such as Singapore, Laos, Myanmar, Thailand, Malaysia, and the Philippines. In an April 2025 article, the New Straits Times reported that 14 years after its establishment, the AIF had by 2025 generated only US$500 million in actual contributed funds, with $460 million disbursed to 15 projects in only six Asean countries.
It’s been 33 years since economic integration became an overriding Asean policy imperative. But barriers appear unmovable. Noncomplementary export products, the supremacy of national sovereignty concerns over matters of regional harmonization, ineffective or nonexistent governance structures, and overall lack of political will continue to render Asean economic integration an inaccessible pipe dream. Despite a market size of US$2.3 trillion and almost 700 million people, Asean’s goal to achieve a single integrated market through the strategy and mechanism of regional economic integration remains unachievable.
This piece is extracted and revised from Eduardo C. Tadem (2025) “Introduction: As Southeast Asia flounders, the search for alternatives becomes imperative” in the soon to be published Volume 3 of Alternative Practices Across Southeast Asia, Program on Alternative Development, UP Center for Integrative and Development Studies.
Read more: Amid extreme inequalities, 306 million Southeast Asians languish in poverty and low incomes
