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 a report of the Asian Development Bank.

The Asian Economic Integration Report 2025, published on Monday, said that the degree of trade integration in Asia is comparable to that of the European Union plus the United Kingdom.

While financial integration has lagged, regional integration in foreign direct investment has advanced significantly, while that of "movement of people" — which covers migration, remittances and tourism — has remained steady, The report said.

Regional cooperation and the development of transport and economic corridors have advanced integration in the region, it said.

Albert Park, the bank's chief economist, said the advances in regional economic integration also "reflect 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.

Jong Woo Kang, principal economist of the bank, said that service, digital and green industries are major investment areas in the region.

FDI in services is the main driver of foreign investment inflows into Asia, the report said, 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.

Regional finance cooperation can serve as the backbone of macro-finance stability and mobilize the financial resources needed to promote regional growth, he said.

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.

He cited the punitive tariffs imposed by the United States against its major trading partners. "One of the most important drivers of (economic) integration of Asia is… in response to the pressure, the geopolitical pressure," Fung said.

"The (higher) tariffs are actually not a trade measure. It's a domestic consumption measure. It's a tax on US domestic consumption. Because nobody makes 20 percent margins in this business," Fung said.

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