ASEAN Economic Integration through Trade and Foreign Direct Investment: Long-Term Challenges
Kawai, Masahiro; Naknoi, Kanda | October 2015
Abstract
This paper explores the long-term challenges for trade and foreign direct investment (FDI) of the Association of Southeast Asian Nations (ASEAN). The region has emerged as an important production base for multinational corporations by joining East Asia’s supply chains. While proceeding to establish the ASEAN Economic Community (AEC) by the end of 2015, ASEAN has also forged five major free trade agreements (FTAs) with its dialogue partners (People’s Republic of China, India, Japan, Republic of Korea, and Australia–New Zealand) and is currently negotiating the Regional Comprehensive Economic Partnership (RCEP). In addition, four ASEAN member states are working on the Trans-Pacific Partnership (TPP) negotiations. Econometric evidence suggests that (i) trade flows and inward FDI mutually reinforce each other, i.e., an increase in trade flows stimulates inward FDI and vice versa; (ii) a larger market attracts more inward FDI; (iii) FTAs tend to help stimulate inward FDI; and (iv) strong institutions, good physical infrastructure, and low costs of doing business are critical in boosting inward FDI. The paper concludes that in the long run ASEAN should aim to further integrate itself with the rest of Asia and the world (through a Free Trade Area of the Asia-Pacific and an Asia–Europe FTA), while substantially deepening its internal integration (by moving from the AEC to a customs and economic union) and thereby maintaining ASEAN centrality.
Citation
Kawai, Masahiro; Naknoi, Kanda. 2015. ASEAN Economic Integration through Trade and Foreign Direct Investment: Long-Term Challenges. © Asian Development Bank Institute. http://hdl.handle.net/11540/9663.Keywords
Regionalism
Regional Economy
Regional Trading Arrangements
Regional Trade Integration
Regional Economic Integration
Regional Cooperation
Interregional Cooperation
Trade Disputes
Trade Barriers
Free Trade
Trade
Trade Agreements
Intraregional Trade
Government Policy
Regional Organization
Regional Plans
Economic integration
Regional Development Bank
Preferential tariffs
International negotiation
Protectionist measures
Access to markets
Economic agreements
International trade law
Regional integration
Trade relations
Exports
Economic integration
Distribution
Economic integration
Development Bank
Trade policy
Small Business
Regional economics
Regional planning
Regional disparities
Interregionalism
Regional economic disparities
Regional economic blocs
Industrial arbitration
Euro
Inflation
Business
Finance
Free trade
Show allCollapse