A faster pace of integration in realising the Asean Economic Community's (AEC) goal of creating a single production and market base will raise the region's growth potential.
Sunway University Business School Professor of Economics Dr Yeah Kim Leng said the additional sources of growth will come from increased output and efficiency through greater economies of scale.
Yeah said this includes higher productivity through market liberalisation, competition and technology transfer and full utilisation of resources across the region.
"The 10 economies under the AEC has recorded an average weighted growth of 4.7% over the last three years from 2014-2016," Professor Yeah told The ASEAN Post.
The ASEAN member states is projected to rise to 5.0% this year and inched up to 5.1% next year with the less developed and smaller economies in the region like Lao, Cambodia and Myanmar, which are forecasted to grow between 7.0-7.5% in 2017.
The Philippines and Vietnam is expected to expand at 6.0-6.5%, Malaysia and Indonesia are forecasted to grow between 5.0-5.5%, followed by Thailand at between 3.0-3.5% and Singapore at 2.0-2.5%.
A closer integration under the AEC will lead to trade and economic efficiency gains through better allocation of resources and specialisation arising from the exploitation of individual country's comparative advantages.
Importantly, with a market base of 650 million people and the seventh largest region in the world, it is expected to attract considerable foreign investors' interest especially from China and the advanced economies such as the US, Japan and Europe.
Since the implementation of the ASEAN Free Trade Area (AFTA) in 1993, tariffs have been reduced substantially to almost zero but significant non-tariff barriers still exists.
The slow progress in reducing non-tariff, market liberation especially in the services sector and still strong protectionist tendencies prevailing among the countries have increased skepticism about the success and future direction of the AEC.
Yeah said further liberalisation of the services sector, especially in finance and banking, logistics, construction, healthcare, education and professional services is needed to speed up integration and reap the benefits envisaged under the economic grouping.
Fear of loss of jobs and markets to competitors from member countries, erosion of control over regional market forces and nationalistic tendencies due to political and cultural differences as well as the wide development gap among member countries are some of the challenges restricting AEC integration.
The member countries are, however, united in their pursuit of market-friendly policies to spur economic development.
"A key lesson of the EU integration is to be wary of single currency or monetary union when member countries vary widely in economic and financial market development," Yeah said.
Similar to the EU, there is a need for stronger and better developed economies to support the lesser developed members.