Deeper regional integration — especially in terms of trade, investment, and migration — has been the key driver of growth in the Asia-Pacific region for the past 20 years but such gains are being threatened by geopolitical tensions that constrain global trade, according to the latest report launched by the Asian Development Bank (ADB).
According to the Asian Economic Integration Report 2025, published on March 24, the degree of trade integration in Asia is comparable to that of the European Union plus the United Kingdom.
The annual publication was launched at the Hong Kong University of Science and Technology (HKUST) Business School Central. The event was jointly organized with the HKUST Business School, HKUST Greater Eurasia Asia Center, and the HKUST Institute for Emerging Market Studies.
The ADB report said that while financial integration has lagged, regional integration in foreign direct investment (FDI) has advanced significantly while that of “movement of people” — which covers migration, remittances, and tourism — has remained steady.
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Regional cooperation and the development of transport and economic corridors have advanced integration in the region, the report noted.
Albert Park, ADB’s chief economist, said the advancement in regional economic integration also “reflects the fact that we have many governments that maintain a very pragmatic economic management outlook, trying to find benefits from staying open and working with other countries in the region”.
However, Park said he was concerned that a constrained global trade environment would hurt less developed economies in the region.
“Although, one thing that has also been happening, both in the region and globally, is a deepening of, or increasing specialization in the local value chain,” he said.
However, Park said that it is still important for countries to be part of the global value chain to access leading technologies.
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Jong Woo Kang, ADB’s principal economist, said that the service, digital, and green industries are major investment areas in the region.
The report said FDI in services is the main driver of foreign investment inflows in Asia, accounting for 58 percent of the total FDIs.
Climate-related FDIs have also increased their share — from 8 percent in 2013 to 27 percent in 2023 — on the back of the expansion of renewable industries and the deployment of electric vehicle supply chains across Southeast Asia.
“On the horizon, there are looming risks of geopolitical friction and challenges, which will require stronger efforts to ensure the policy coherence and further efforts to improve the investment climate at large across the region,” Kang said.
He said regional finance cooperation can serve as the backbone of macrofinance stability and mobilize the financial resources needed to promote regional growth.
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However, he added that financial safety and security have to be strengthened to mitigate possible risks.
Kang said migration and remittances are also a “crucial part” of the region's development story, noting that digital tools can promote cross-border flows and lower remittance costs.
Kang said creating digital infrastructure and promoting financial literacy needs to be a priority among Asian governments.
William Fung, group deputy chairman of the Fung Group, a Hong Kong-based supply chain management conglomerate, discussed how geopolitical uncertainty is impacting businesses in the region.
“I think in the next year or two, (regional economic integration) will be driven primarily by trade changes,” Fung said.
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He mentioned the punitive tariffs imposed by the United States against its major trading partners and how the second term of US President Donald Trump is focused on “rectifying what they consider trading balances around the world”.
“One of the most important drivers of (economic) integration of Asia is … in response to the pressure, the geopolitical pressure,” Fung said, adding that China “is now diversifying their manufacturing base at a much more rapid pace”.
“The (higher) tariffs are actually not a trade measure. It's actually a domestic consumption measure. It's a tax on US domestic consumption. Because nobody makes 20 percent margins in this business,” Fung said.
