Southeast Asia’s export success has left its factories heavily dependent on customers outside the region, according to an analysis in the September issue of the IMF’s Finance & Development magazine.
About 22% of goods exports from the Association of Southeast Asian Nations, known as ASEAN, went to fellow members in 2024. The comparable share for the European Union was 61%, the magazine’s comparison of goods trade shows.
Singapore and Vietnam, for example, are highly open to international commerce but sell a relatively small share of their exports within ASEAN.
Much of the trade between members involves intermediate goods: parts and materials that another business uses to make a finished product. Those products often end up with buyers outside the region.
“ASEAN has built a shared production line, but not a shared market,” wrote Andrew Stanley, the magazine’s author.
For businesses, the implication is that spreading production across neighbouring countries does not necessarily spread the risk of losing customers. Several factories can still depend on the same overseas market.
Lower tariffs leave other obstacles
The IMF’s research identifies non-tariff barriers as one obstacle to selling more finished goods across the region. These are restrictions or costs beyond import taxes, including incompatible product standards and technical requirements.
Its analysis of Asia-Pacific trade agreements also points to overlapping rules and uneven legal coverage. Making regulations work together can reduce the cost of serving another market, even where tariffs are already low.
Payment systems matter too. In its 2026 assessment of Malaysia, the IMF argued that cross-border payments in local currencies could make regional trade easier by improving connections and reducing exchange-rate risks. It recommended building on existing payment links using scannable QR codes through more consistent regulations.
The September article cites a possible 4.3% increase in ASEAN’s economic output from reducing trade barriers. That estimate comes from IMF modelling published in October 2025, under an ambitious scenario in which economies across Asia-Pacific strengthen enforceable trade commitments and reduce non-tariff barriers.
It describes a higher level of output over the long run, not an extra 4.3% growth every year. Smaller reforms would produce different results.
National policies can pull against regional plans
Removing obstacles also requires political decisions. Ben Bland, director of Chatham House’s Asia-Pacific Programme, argues in a separate September article that economic nationalism and the interests of established businesses help explain why formal integration has not produced stronger regional trade.
He calls for clearer national industrial policies and better coordination between governments, so investors can commit to new factories with greater confidence about the rules.
Similar implementation problems feature in our recent coverage of the World Bank’s African trade report. There, customs procedures, transport and services restrictions limit what companies can achieve under existing agreements.
Opening markets would bring adjustment costs as well as opportunities. The IMF warns that some workers, particularly those with fewer skills, could lose out from stronger competition. It recommends retraining, help with job transitions and social protection alongside trade reforms.
