Asia-Pacific’s financial integration lags its trade strength, IMF paper shows

ASIA-PACIFIC, 22 JULY 2026 —

The International Monetary Fund (IMF) has found that Asia-Pacific's financial integration has not kept pace with its economic transformation, according to a new Working Paper.

The region's stock of international financial assets and liabilities remains relatively low compared to the size of its economy, the researchers said.

The IMF study examined three key forms of financial integration, foreign direct investment (FDI), foreign portfolio investment (FPI) and cross-border banking, and found significant differences in their development, said the report's authors.

Foreign direct investment has grown steadily, but portfolio investment and banking integration remain relatively limited, creating a situation where economies are connected through trade but less connected through financial markets, the report noted.

The report identifies a growing gap between advanced and emerging economies, with financial centres such as Singapore and Hong Kong SAR having built sophisticated international financial networks, while fast-growing economies including India and Indonesia continue to lag behind, according to the IMF.

For Malaysian businesses, deeper financial integration in the region could unlock long-term funding for infrastructure development and other projects, said the report.

The IMF concludes that expanding trade alone is not enough to build an integrated regional economy, and that countries must combine sound macroeconomic policies with strong financial institutions and well-developed domestic capital markets to attract international capital, the researchers said.

The report's findings have significant implications for policymakers and private-sector stakeholders in Malaysia, as the country seeks to attract larger and more stable investment flows, said the IMF.

International development partners, including multilateral development banks, also have a role to play in supporting financial sector reforms and promoting regional capital market cooperation, the report noted.

Overall, the IMF report highlights the need for Asia-Pacific economies, including Malaysia, to prioritize financial integration as a central pillar of economic development, said the researchers.

Related: Maybank · IMF · Asia-Pacific