ASEAN Poised to Become World’s Fourth-Largest Economy
Regional Bloc Must Deepen Integration, Adapt to Global Shifts
Southeast Asia’s Association of Nations (ASEAN) is on track to become a major global economic force, potentially ranking as the world’s fourth-largest economy within decades. However, realizing this potential requires accelerated integration, institutional strengthening, and proactive adaptation to evolving global dynamics.
Emerging Industries Fuel Growth
Currently valued at $3.8 trillion, ASEAN’s economic expansion will be largely driven by technological advancements, particularly artificial intelligence within the service sector, according to Mohd Munir Abdul Majid, chairman of CARI ASEAN Research and Advocacy. He also serves as president of the ASEAN Business Club and a senior fellow at LSE IDEAS.
“ASEAN, presently with an economic size of 3.8 trillion U.S. dollars, could become the fourth-largest economy on an aggregated basis but of a smaller world.”
—Mohd Munir Abdul Majid, Chairman of CARI ASEAN Research and Advocacy
E-commerce is expected to be a key catalyst for increased trade within the region, necessitating a robust digital infrastructure encompassing telecommunications and smart devices. Efficient logistics, including advanced warehousing, and accessible payment systems like QR code networks are also crucial for supporting micro, small, and medium enterprises (MSMEs) seeking international expansion, noted Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Berhad.
While high-tech sectors should be prioritized, traditional commodities such as palm oil and petroleum will remain important to the region’s economy as it develops more advanced industries, stated Oh Ei Sun, principal adviser at the Pacific Research Center of Malaysia.
Steady Integration, Institutional Challenges
ASEAN’s economic integration has progressed steadily since the establishment of the ASEAN Free Trade Area in 1992 and the subsequent launch of the ASEAN Economic Community (AEC). The current roadmap is guided by the Kuala Lumpur Declaration on ASEAN 2045, adopted in May. Despite this progress, Mohd Munir believes the pace is not optimal.
According to the United Nations Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) inflows to ASEAN reached $151 billion in 2023, demonstrating the region’s growing attractiveness to investors. (UNCTAD, 2024)
However, Mohd Munir also pointed to institutional limitations, including a slow decision-making process and an under-resourced secretariat, despite the ambitious goals outlined in the ASEAN 2045 vision. Non-tariff barriers, driven by member states protecting domestic industries, also remain a significant obstacle. Continuous dialogue between governments and businesses is vital to address these issues, according to Mohd Afzanizam.
Strengthening Ties with China
ASEAN-China relations are evolving, characterized by increasing investment and strategic collaboration. Mohd Munir suggests deepening this relationship could be mutually beneficial, particularly amidst global trade tensions. Li Yuqing, assistant professor at Tsinghua University, noted that ASEAN’s economic integration provides China with a stable regional trade environment.
Cooperation in infrastructure development, the digital economy, and the green transition could further strengthen ties between ASEAN and China, Oh Ei Sun suggested.
A Call for Greater Global Influence
Regardless of its ultimate economic ranking, ASEAN’s current size warrants a more assertive role in global affairs. Experts urge the bloc to proactively contribute ideas and solutions to address global challenges. Deeper economic integration would enhance ASEAN’s bargaining power and its ability to act as a regional coordinator, according to Li Yuqing.
Mohd Afzanizam believes the shift towards a multipolar world presents opportunities for diplomatic solutions and peaceful resolutions, aligning with ASEAN’s long-standing commitment to regional stability.