Asean must catch up in the global race for regional economic integration

As Malaysia prepares to host the historic Asean-Gulf Cooperation Council-China Summit and the Asia Zero Emissions Community (AZEC) in 2025, it finds itself at the epicentre of a strategic shift in global trade diplomacy. These summits are not just symbolic. They offer a rare opportunity to assess Asean’s economic cohesion at a time when the world is moving toward regionalisation rather than globalisation.

Intra-regional trade has become a crucial measure of resilience. From pandemic supply chain disruptions to geopolitical fault lines, regions that trade more within themselves have proven more stable and adaptable.

This raises a fundamental question: how much trade stays within Asean, and how does it compare to other major regional groupings such as the European Union (EU), the US-Mexico-Canada Agreement (USMCA), China-Japan-South Korea (CJK), South Asia, Central Asia, and the increasingly assertive Gulf Cooperation Council (GCC).

In 2023, Asean’s total trade reached approximately US$3.5 trillion (RM15 trillion), but only US$850 billion — about 24% — was intra-regional. For a region that has, since 2003, aspired to build an "Asean Economic Community", this figure is underwhelming. Asean’s intra-regional trade has hovered in the low twenties for over a decade, showing little upward trajectory despite bold declarations and deepening external trade links.

Asean’s problem lies not in its global trade performance — which is impressive — but in its inward economic cohesion. Vietnam’s export engine points toward the US and EU. Malaysia trades more with China and the EU than with Indonesia or Thailand. The Philippines is wired into North America and Japan. Meanwhile, Singapore functions primarily as a global financial and trade hub.

The Asean Free Trade Area (AFTA) and Common Effective Preferential Tariff (CEPT) scheme have eliminated tariffs on almost 99% of goods. Yet, non-tariff barriers, poor logistics connectivity, weak digital harmonisation, and uneven industrial complementarities have blunted Asean’s potential.

The European Union (EU-27) is the global benchmark. In 2023, intra-EU trade surpassed US$5.2 trillion, amounting to 61% of the bloc’s total trade volume of US$8.5 trillion. This internal circulation of value is the lifeblood of the EU’s resilience.

The EU single market operates on harmonised standards, legal equivalence, mutual recognition, and a customs union that ensures frictionless cross-border flows. During Covid-19 and the war in Ukraine, intra-EU trade helped member economies stay afloat even as global links frayed.

Asean, by contrast, lacks mutual regulatory recognition, faces fragmented digital economies, and suffers from a trust deficit in institutional enforcement. These structural gaps prevent it from emulating the EU's depth.

In North America, intra-regional trade between the US, Canada, and Mexico hit US$1.8 trillion in 2023 — about 44% of their combined total trade of US$4.1 trillion. The industrial synergy between these three economies, particularly in automobiles, agriculture, and energy, exemplifies the power of institutionalised, rules-based integration.

The success of the USMCA, formerly the North American Free Trade Agreement (NAFTA), lies in its sectoral integration and infrastructure connectivity. For example, vehicles produced in North America often contain parts that cross the US-Mexico border six to seven times before final assembly.

Even under protectionist impulses from the Trump and Biden administrations, North America has remained economically interwoven. This proves that when regional supply chains are deeply embedded, they become politically resilient.

Trade among China, Japan, and South Korea reached US$1.3 trillion in 2023 — about 27% of their collective trade of US$4.8 trillion. Despite historical animosities and the absence of a trilateral free trade agreement, these East Asian giants are increasingly economically intertwined.

Their supply chains — particularly in semiconductors, consumer electronics, and automotive components — demonstrate a pragmatic integration shaped more by corporate strategy than government policy.

Unlike the EU or USMCA, there is no institutional spine underpinning CJK trade. However, the Regional Comprehensive Economic Partnership (RCEP), which includes all three alongside Asean, may accelerate integration over time — especially if it expands into digital trade and investment liberalisation.

The South Asian Association for Regional Cooperation (SAARC) presents a cautionary tale. Intra-regional trade among its eight members (India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, Maldives and Afghanistan) was only US$85 billion in 2023, accounting for a meagre 5% of total South Asian trade.

India’s dominance and persistent India-Pakistan tensions have paralysed SAARC’s trade ambitions. Despite geographic proximity and cultural affinities, tariff and non-tariff barriers remain high. Transport logistics is weak, cross-border infrastructure is underdeveloped, and political trust is low.

Intra-regional trade within South Asia ranks among the lowest globally. By contrast, South Asia trades 20 times more with the rest of the world than with itself. Asean’s 24% looks robust by comparison — but not enough when viewed against its potential.

Central Asia — comprising Kazakhstan, Uzbekistan, Kyrgyzstan, Turkmenistan, and Tajikistan — holds promise due to its strategic location at the heart of Eurasia. However, intra-regional trade remains at approximately US$7 billion, or just 7%-8% of the region’s total trade of US$90 billion in 2023.

Soviet-era infrastructure, over-dependence on Russia and China, weak logistics, and divergent regulatory systems have hampered trade among Central Asian republics. Initiatives like the Central Asia Regional Economic Cooperation (CAREC) and new rail links to Europe and South Asia may change this, but progress is slow.

Asean, while more advanced, risks a similar fate of under-integration if it continues to neglect trade facilitation and regulatory harmonisation.

The GCC — comprising Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain, and Oman — posted intra-regional trade worth US$130 billion in 2023, about 11% of its total trade of US$1.2 trillion.

Historically dominated by hydrocarbon exports to the West and Asia, the GCC has made deliberate moves to diversify trade and regionalise value chains, especially in finance, construction, services, and logistics. The introduction of a GCC Customs Union and attempts to establish a common market have shown some progress, though far from EU levels.

Intra-GCC trade is rising due to economic diversification plans (such as the Saudi Vision 2030), investments in infrastructure and logistics, and political rapprochement (notably the Al-Ula Declaration in 2021 that ended the Qatar blockade). The GCC is now actively engaging Asia — not just bilaterally, but inter-regionally, as seen in its dialogue with Asean and China.

The upcoming Asean-GCC-China Summit in Kuala Lumpur in May 2025 could mark a turning point — where three regions, all in varying stages of integration, explore synergies in energy, green technology, and digital connectivity.

The global trend is clear: regions that trade more within themselves are more resilient, sovereign, and competitive. ASEAN, with a combined gross domestic product of US$3.9 trillion and a population nearing 700 million, should be punching far above its intra-regional weight.

To match even half of the EU’s intra-regional trade share, Asean would need to double current intra-regional trade to US$1.7 trillion. This is achievable — but only if Asean commits to:

• Harmonising digital and customs procedures
• Building cross-border logistics and payment systems
• Removing non-tariff barriers and regulatory mismatches
• Developing regional champions in AI, fintech, and green tech
• Institutionalising enforcement mechanisms beyond consensus diplomacy

As Malaysia hosts the Asean-GCC-China Summit and AZEC, it must ask a hard question: will these summits produce only glossy memoranda, or will they catalyse real economic integration?

Asean has proven it can engage the world. Now it must prove it can engage itself.

Intra-regional trade is no longer a peripheral goal—it is central to regional resilience. If Asean is to be more than a geopolitical meeting ground, if it is to be an economic community in the truest sense, it must turn ambition into architecture and diplomacy into commerce.

This article is also published on The EDGE Malaysia. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.