Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 246
Globalization and Economic Growth in Southeast Asian Countries: The Role of
Trade Openness and Foreign Direct Investment
Globalización y Crecimiento Económico en los Países del Sudeste Asiático: El
Papel de la Apertura Comercial y la Inversión Extranjera Directa
Tan Huu Nguyen1* , Thuong Thu Nguyen2 and Duc Huu Luu3
1International Collaboration Department, Academy of Finance, Hanoi 100000, Vietnam
2Faculty of Corporate Finance, Academy of Finance, Hanoi 100000, Vietnam
3Training Management Department, Academy of Finance, Hanoi 100000, Vietnam
*Corresponding author: nguyenhuutan@hvtc.edu.vn
Received 2025-03-18. Approved 2025-10-28
DOI: https://doi.org/10.26754/ojs_ais/accionesinvestig.soc..20254711668
Abstract
This study explores the impact of trade openness and foreign direct investment (FDI) on economic
growth and sustainable socioeconomic development in Southeast Asian countries, considering their
diverse economic structures and policy frameworks. Utilizing panel ARDL methods, the findings
demonstrate that trade openness and FDI significantly drive economic growth, with differential effects
across the region. Advanced economies like Singapore and Brunei capitalize on robust financial
systems and global market integration to maximize economic benefits. Industrializing nations,
including Malaysia, Thailand, Indonesia, Vietnam, and the Philippines, leverage FDI and export growth
but face challenges from inadequate infrastructure and governance issues, limiting equitable
socioeconomic outcomes. Less-developed countries such as Myanmar, Laos, Cambodia, and Timor-
Leste struggle to harness globalization’s potential due to weak industrial bases and institutional
barriers, exacerbating vulnerabilities to market volatility. The study underscores the need for robust
economic policies, transparent governance, and sustainable strategies to balance economic growth
with social inclusion and environmental protection, contributing to resilient socioeconomic
development in Southeast Asia.
Keywords: Globalization, Trade Openness, Foreign Direct Investment, GDP Growth, Southeast Asia
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 247
Resumen
Este estudio explora el impacto de la apertura comercial y la inversión extranjera directa (IED) en el
crecimiento económico y el desarrollo socioeconómico sostenible de los países del Sudeste Asiático,
considerando la diversidad de sus estructuras económicas y marcos normativos. Mediante métodos
ARDL de panel, los resultados demuestran que la apertura comercial y la IED impulsan
significativamente el crecimiento económico, con efectos diferenciados en toda la región. Las
economías avanzadas, como Singapur y Brunéi, aprovechan sistemas financieros sólidos y la
integración del mercado global para maximizar los beneficios económicos. Las naciones en vías de
industrialización, como Malasia, Tailandia, Indonesia, Vietnam y Filipinas, se benefician de la IED y el
crecimiento de las exportaciones, pero se enfrentan a desafíos derivados de una infraestructura
inadecuada y problemas de gobernanza, lo que limita la equidad en los resultados socioeconómicos.
Los países menos desarrollados, como Myanmar, Laos, Camboya y Timor-Leste, tienen dificultades
para aprovechar el potencial de la globalización debido a la debilidad de sus bases industriales y a las
barreras institucionales, lo que agrava su vulnerabilidad ante la volatilidad del mercado. El estudio
subraya la necesidad de políticas económicas sólidas, una gobernanza transparente y estrategias
sostenibles para equilibrar el crecimiento económico con la inclusión social y la protección del medio
ambiente, contribuyendo así a un desarrollo socioeconómico resiliente en el Sudeste Asiático.
Palabras clave: Globalización, Apertura Comercial, Inversión Extranjera Directa, Crecimiento del PIB, Sudeste
Asiático
INTRODUCTION
Globalization, characterized by increased economic integration through trade liberalization, foreign
direct investment (FDI), and cross-border connectivity, has reshaped economic landscapes worldwide,
particularly in Southeast Asia, a region that has emerged as a dynamic hub in global markets (Dreher,
2006; Majidi, 2017). From 2000 to 2022, Southeast Asian nations achieved an average annual GDP
growth rate of 5.1%, with the region’s total GDP reaching $3.6 trillion in 2022, driven by robust trade
and FDI inflows (United Nations Conference on Trade and Development, 2024; World Bank, 2024).
This economic transformation, fueled by globalization, has positioned Southeast Asia as a key player
in global value chains, yet the benefits are unevenly distributed across countries due to varying
economic structures, institutional frameworks, and development levels (Huu, 2023; Samimi &
Jenatabadi, 2014).
Theoretical perspectives on globalization highlight its role in fostering economic growth through
enhanced market access, technology transfer, and resource allocation efficiency. Classical trade
theories, such as the comparative advantage model, suggest that open trade systems enable countries
to specialize, boosting productivity and economic output (Frankel & Romer, 1999). Modern economic
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 248
models further emphasize FDI’s contribution to growth by facilitating capital flows and industrial
development, particularly in economies with robust infrastructure and institutional quality (Alfaro et
al., 2004; Borensztein et al., 1998). However, critical literature points to globalization’s challenges,
including financial volatility, over-reliance on global markets, and widening income disparities, which
can undermine sustainable development, especially in less-developed nations (Doytch & Uctum,
2016). In Southeast Asia, these dynamics are evident, with countries like Singapore leveraging
advanced financial systems to achieve a GDP per capita of $90,674 in 2024, while Cambodia’s GDP per
capita remained at $2,628, reflecting structural and institutional constraints (World Bank, 2024).
Despite Southeast Asia’s economic progress, significant disparities in growth outcomes persist.
Advanced economies like Singapore and Brunei benefit from globalization through strong trade and
FDI inflows, while industrializing nations such as Malaysia, Thailand, Indonesia, Vietnam, and the
Philippines face challenges in sustaining growth due to infrastructure deficits and governance issues
(Bhujabal et al., 2024). Less-developed countries, including Myanmar, Laos, Cambodia, and Timor-
Leste, struggle to capitalize on globalization, constrained by weak industrial bases and institutional
barriers, which exacerbate socioeconomic vulnerabilities (Hamdi, 2013; Samimi & Jenatabadi, 2014).
Moreover, globalization’s environmental impacts, particularly from sectoral FDI, pose risks to
sustainable development, necessitating policies that balance economic gains with social and
environmental priorities (Doytch & Uctum, 2016).
This study addresses the problem of uneven economic growth across Southeast Asian countries,
driven by varying impacts of trade openness and FDI. The objective is to analyze how these
globalization drivers influence economic growth, considering diverse economic structures and policy
frameworks, and to identify strategies for sustainable socioeconomic development. Using panel ARDL
methods, the study examines data from 11 ASEAN countries from 2000 to 2023, testing hypotheses
on trade openness and FDI’s effects on GDP growth. The contribution lies in providing empirical
insights into the differential impacts of globalization, offering policy recommendations to enhance
economic resilience, reduce income disparities, and promote sustainable development in Southeast
Asia, aligning with global discussions on equitable growth.
The paper is structured as follows: Section 2 reviews the theoretical and empirical literature on
globalization, trade openness, and FDI, developing hypotheses. Section 3 details the research
methodology, including the panel ARDL model, variables, and data sources. Section 4 presents the
results, analyzing globalization’s impacts across Southeast Asian countries. Section 5 concludes with
key findings and policy recommendations for sustainable development.
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 249
LITERATURE FRAMEWORK AND HYPOTHESES
Literature Review
Globalization serves as the primary catalyst for economic development in Southeast Asian, with trade
openness and foreign direct investment (FDI) fostering growth through enhanced market access,
technology transfer, and industrial expansion (Dreher, 2006; Majidi, 2017). Classical economics
theories highlight the benefits of free trade, which enables nations to specialize based on comparative
advantages, improving economic outcomes (Frankel & Romer, 1999). Modern economic models
emphasize trade’s role in enhancing efficiency, innovation, and knowledge sharing, positioning
Southeast Asia as a dynamic participant in global markets (Samimi & Jenatabadi, 2014).
Empirical studies confirm that open trading systems significantly boost economic growth in Southeast
Asia. Frankel and Romer (1999) demonstrate that countries with open trade systems achieve higher
per capita income growth through improved resource allocation and technology acquisition. Sachs et
al. (1995) argue that open economies grow faster than closed ones, with Southeast Asian nations like
Singapore and Malaysia leveraging trade liberalization to strengthen their positions in global value
chains. For instance, Vietnam’s export-led growth contributed to a 9.5% annual increase in agricultural
and manufactured exports from 2010 to 2022 (United Nations Conference on Trade and Development,
2024). The KOF Globalization Index indicates that Southeast Asia’s trade openness, averaging 56-57%
from 2020 to 2022, is a key driver of economic performance (KOF Swiss Economic Institute, 2024).
However, benefits vary based on institutional quality, infrastructure, and labor market systems
(Bhujabal et al., 2024).
FDI, a critical component of globalization, complements trade by facilitating technology transfer,
capital flows, and workforce skill development. Borensztein, De Gregorio, and Lee (1998) show that
FDI accelerates economic growth, particularly in countries with skilled labor and robust infrastructure,
such as Singapore and Malaysia. Alfaro et al. (2004) find that FDI in manufacturing and services sectors
yields greater economic benefits than resource-extraction investments, with ASEAN’s FDI inflows
reaching $224 billion in 2022 (see also United Nations Conference on Trade and Development, 2024).
Effective utilization of FDI requires sufficient absorptive capacity, including trained personnel and
advanced infrastructure (Bhujabal et al., 2024). FDI significantly contributes to Southeast Asian
economic growth, with countries like Singapore, Malaysia, and Vietnam attracting substantial
investments through business-friendly policies and trade agreements. FDI promotes industrial
development, productivity gains, and regional supply chain networks, with Singapore’s FDI-to-GDP
ratio among the highest in the region (World Bank, 2024). However, over-reliance on FDI can lead to
vulnerabilities, such as dependence on foreign investors and rising domestic inequality, particularly in
less-developed nations like Cambodia and Laos (Hamdi, 2013).
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 250
While globalization offers significant opportunities, it also presents challenges for Southeast Asia,
including market dependence, financial volatility, and unequal benefits across countries. The 1997
Asian Financial Crisis and the 4.2% export decline during the 2020 global recession highlight the
region’s vulnerability to global economic disruptions (United Nations Conference on Trade and
Development, 2024). Disparities in institutional frameworks, infrastructure, and workforce expertise
lead to uneven globalization benefits, with high-income countries like Singapore outperforming low-
income nations like Myanmar (Bhujabal et al., 2024). Additionally, sectoral FDI can have adverse
environmental impacts, necessitating sustainable policies (Doytch & Uctum, 2016). Adaptive
management strategies are crucial to navigate inflation, unemployment, and growth dynamics,
ensuring equitable and sustainable development (Huu, 2023; Nguyen, 2025). Further research is
needed to fully understand globalization’s impact on regional GDP growth, particularly in addressing
governance and infrastructure gaps.
Hypotheses Development
This study develops three hypotheses to examine the impact of globalization, through trade openness
and foreign direct investment (FDI), on economic growth in Southeast Asian countries
Classical trade theories, such as the comparative advantage model, posit that open trade systems
enhance economic growth by improving resource allocation efficiency and enabling specialization
(Frankel & Romer, 1999). Frankel and Romer (1999) provide empirical support, demonstrating that
trade openness boosts per capita income growth through access to global markets and technology
acquisition. Recent studies, such as Samimi and Jenatabadi (2014), confirm that trade openness,
averaging 57.91% in Southeast Asia from 2012 to 2017, drives economic performance by integrating
countries like Singapore and Malaysia into global value chains (Samimi & Jenatabadi, 2014). However,
the benefits of trade openness are not uniform. Bhujabal et al. (2024) highlight that institutional
quality, including transparent trade policies and regulatory frameworks, significantly influences the
effectiveness of trade liberalization in Southeast Asia (Huu, 2023). For instance, Vietnam’s export
growth of 9.5% annually from 2010 to 2022 reflects successful trade integration, while Myanmar’s
reliance on volatile primary commodity exports limits gains (United Nations Conference on Trade and
Development, 2024).
H1: Trade openness has a positive and significant impact on GDP growth in Southeast Asian countries.
FDI facilitates economic growth by providing capital, technology transfer, and industrial development,
as established by Borensztein et al. (1998), who emphasize its role in economies with sufficient
absorptive capacity - defined as the ability to adopt and utilize foreign technologies through advanced
infrastructure and skilled human capital. Alfaro et al. (2004) further note that FDI in manufacturing
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 251
and services sectors, prevalent in countries like Malaysia and Thailand, yields greater economic
benefits than resource-extraction investments. Recent evidence from Bhujabal et al. (2024)
underscores that FDI inflows, reaching $224 billion in ASEAN in 2022, significantly boost growth in
countries with robust institutional frameworks, such as Singapore, but have a limited impact in less-
developed nations like Cambodia due to weak governance and infrastructure (Huu, 2023; United
Nations Conference on Trade and Development, 2024). Absorptive capacity in Southeast Asia varies,
with Singapore’s advanced financial systems enabling effective FDI utilization, while Laos faces
constraints from limited human capital and infrastructure deficits (World Bank, 2024).
H2: FDI has a positive and significant impact on GDP growth in Southeast Asian countries.
Globalization’s impact on economic growth is heterogeneous, shaped by country-specific factors such
as economic diversification, institutional quality (e.g., governance transparency, regulatory efficiency),
and policy frameworks (Huu, 2023; Samimi & Jenatabadi, 2014). Sachs and Warner (1995) argue that
open economies grow faster, but recent studies, such as Majidi (2017), highlight that less-developed
nations face challenges in capitalizing on globalization due to structural and institutional barriers.
Hamdi (2013) notes that globalization exacerbates income disparities and socioeconomic
vulnerabilities in less-developed economies like Myanmar and Laos, where weak governance and
over-reliance on primary commodity exports hinder sustainable growth. Additionally, Doytch and
Uctum (2016) emphasize that sectoral FDI, particularly in resource-heavy industries, can lead to
environmental degradation, necessitating policies for sustainable development.
H3: The combined effects of trade openness and FDI on GDP growth vary across Southeast Asian
countries due to differences in economic structures, institutional quality, and policy frameworks.
RESEARCH DATA AND METHODOLOGY
Research Model
The study assessed GDP growth variations in Southeast Asian countries through the implementation
of the panel Autoregressive Distributed Lag (ARDL) model. The research model demonstrates excellent
performance because it tracks immediate and prospective globalization impacts through the essential
factors of trade openness and FDI on economic growth.
The general form of the panel ARDL model is as follows:
GDPit = αi + p=0PpΔGDPi,t-p + q=0QqΔXi,t-q + λi + εit
Where:
GDPit is the real gross domestic product growth rate of country i at time t.
Xi,t represents the independent variables (trade and FDI as proxies for globalization).
αi is the country-specific intercept.
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 252
βp and γq are the coefficients capturing short-term dynamics.
λi represents the long-run equilibrium relationship.
εit is the error term.
To estimate the long-run relationship, we use the error correction representation of the ARDL model:
∆GDPit = ϕ(GDPi,t-1 - θXit-1) + p=1P-1pΔGDPi,t-p+ q=1Q-1qΔXi,t-q+ εit
Where:
ϕ is the speed of adjustment coefficient. A significant negative value indicates convergence toward a
long-run equilibrium.
θ represents the long-run relationship between globalization and economic growth.
Variables and Data Sources
The dataset in Table 1 consists of annual panel data from 2000 to 2023 for 11 Southeast Asia countries:
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam,
and Timor-Leste. The selection of variables in the panel ARDL model is grounded in theoretical and
empirical literature on globalization and economic growth, ensuring relevance to the study’s focus on
trade openness, foreign direct investment (FDI), and their socioeconomic impact. Specifically, trade
openness is selected based on its established role in enhancing economic growth through market
access and resource allocation efficiency, as demonstrated by Frankel and Romer (1999) and Sachs
and Warner (1995). FDI is included due to its contributions to capital accumulation, technology
transfer, and industrial development, as highlighted by Borensztein et al. (1998) and Alfaro et al.
(2004). Additional variables, such as inflation and government spending, are incorporated to control
for macroeconomic stability and fiscal policy impacts, following the frameworks of Dollar and Kraay
(2002), which emphasize their relevance in growth models.
Control variables, such as inflation and government spending, are incorporated to account for
macroeconomic stability and fiscal policy impacts, which are critical in growth models. Inflation is
included as it influences purchasing power, investment decisions, and economic stability, potentially
moderating the effects of trade openness and FDI on GDP growth (Barro, 1996). Government spending
is included to capture the role of fiscal policy in fostering economic growth, either through
infrastructure investment or social programs that enhance absorptive capacity for FDI and trade
benefits (Dollar & Kraay, 2002). These control variables ensure the model accounts for confounding
factors, providing a more robust analysis of globalization’s impact on economic growth in Southeast
Asia. Their inclusion aligns with empirical studies that emphasize macroeconomic stability as a
prerequisite for sustainable development (Dollar & Kraay, 2002; Barro, 1996).
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 253
Table 1.
Variables in the model
Variable
Definition
Source
GDP
Annual GDP growth rate (%)
World Development Indicators
(World Bank)
Trade
Total trade volume as a percentage of GDP
World Development Indicators
(World Bank), UNCTAD
FDI
Net inflows of foreign direct investment (%
of GDP)
World Development Indicators
(World Bank)
Inflation
Consumer Price Index (CPI) annual change
(%)
World Development Indicators
(World Bank)
Government Spending
(Gov_Spending)
General government final consumption
expenditure (% of GDP)
World Development Indicators
(World Bank), IMF
Methodology
Unit Root Tests
Given that the panel ARDL model accommodates variables that are stationary at levels (I(0)) as well
as those requiring first differencing to achieve stationarity (I(1)), it is essential to first examine the
stationarity properties of the data. To this end, we employ a series of panel unit root tests to
ascertain the time-series characteristics of the variables. The following tests are conducted:
- The Levin-Lin-Chu (LLC) test, which assumes a common unit root process across all panels,
thereby testing the null hypothesis of non-stationarity under a homogeneous
autoregressive parameter.
- The Im-Pesaran-Shin (IPS) test, which offers greater flexibility by allowing for
heterogeneous autoregressive parameters across panels, thus accommodating individual
unit root processes.
These tests ensure that the data are appropriate for analysis within the panel ARDL model,
mitigating the risk of spurious regression results that could arise from non-stationary series.
Panel ARDL Estimation
The analysis moves ahead after verifying data stationarity to determine the relationships between
dependent and independent variables through panel ARDL estimations. The panel ARDL estimation
consists of multiple steps to reach results that include:
Optimal Lag Selection: The optimal lag length for the model is determined using the Akaike
Information Criterion (AIC) and Schwarz Criterion (SC). This combined approach ensures an
appropriate model fit while minimizing unnecessary complexity, with the selected lags balancing
accuracy and simplicity.
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 254
Short-Run Estimation: The immediate effects of trade openness and FDI on GDP growth are assessed
using the ARDL model, capturing short-term dynamics and their contributions to economic
performance.
Long-Run Estimation: The ARDL model yields long-run coefficients that reveal equilibrium
relationships among variables. These results provide evidence of how trade openness and FDI
influence Southeast Asian economic development over extended periods.
Error Correction Model (ECM): The ECM is employed when long-term relationships are identified,
measuring the speed at which Southeast Asian economies return to equilibrium following external
shocks. The ECM coefficient indicates the resilience of these economies, reflecting their capacity to
recover from economic disruptions.
RESEARCH RESULTS AND DISCUSSION
Descriptive statistics
The data, presented in Table 2, comprise annual panel data from 2000 to 2023 for 11 Southeast
Asian countries. GDP growth rates across these nations exhibit significant variation, with an average
annual growth rate of 5.14%. However, this figure masks pronounced regional disparities, with some
countries achieving growth rates as high as 58.08%, while others have experienced declines as steep
as -20.58%. These stark contrasts highlight the diverse developmental trajectories in Southeast Asia,
driven by differences in economic structures, external shocks, and national policies.
Trade openness also varies widely across Southeast Asian countries. Singapore and Malaysia, for
instance, boast exceptionally high trade-to-GDP ratios, reflecting their deep integration into global
markets. In contrast, less outward-oriented economies like Myanmar exhibit trade-to-GDP ratios
ranging from -32.96% to 34.95%, underscoring varying degrees of dependence on trade and capacity
to capitalize on global market opportunities.
Foreign Direct Investment net inflows, measured as a percentage of GDP, further reveal the region’s
economic diversity, with an average inflow of 125.24% across Southeast Asian countries. However,
the distribution is highly uneven, with some nations attracting substantial FDI exceeding 437.33%,
while others secure minimal investments as low as 11.86%. These disparities stem from differences
in investment climates, encompassing policy frameworks, infrastructure quality, and political
stability, which collectively determine the attractiveness of individual economies to foreign
investors.
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 255
Table 2.
Descriptive statistics of variables in the model
Variables
Mean
Std. dev.
Min
GDP
5.1422
5.9474
-20.5842
Trade
4.6738
6.7540
-32.9552
FDI
125.2359
84.8139
11.8554
Inflation
4.8701
6.6244
-2.3150
Gov_Spending
17.7288
22.3846
4.8093
Unit Root Tests
Table 3 presents the results of panel unit root tests, confirming that some variables are stationary at
levels (I(0)) while others require first differencing to achieve stationarity (I(1)). Given these properties,
the panel ARDL model is suitable for analyzing both short-run and long-run relationships between
globalization variables and economic growth in Southeast Asian countries.
Table 3.
Panel unit root tests
Variables
Level
First difference
T-Statistics
p-value
T-Statistics
p-value
GDP
-5.9310
0.0000
Trade
-0.6663
0.2526
-7.2606
0.0000
FDI
-4.2001
0.0000
Inflation
-5.2949
0.0000
Gov_Spending
-1.3311
0.0916
-7.0676
0.0000
ARDL Panel Estimation Results
Cointegration Test
The results from both Pedroni and Kao cointegration tests in Table 4 confirm the existence of a long-
run relationship between GDP growth and key variables (Trade, FDI, Inflation, and Government
Spending). All test statistics are highly significant (p < 0.01), rejecting the null hypothesis of no
cointegration. This indicates that the variables move together over time across Southeast Asia
countries, supporting the use of an ARDL panel model to analyze both short-run and long-run effects.
Table 4.
Panel cointegration tests
Pedroni
Statistic
p-value
Phillips - Perron t
-6.1525
0.0000
Augmented Dickey - Fuller t
-6.2727
0.0000
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 256
Kao
Statistic
p-value
Modified Dickey-Fuller t
-10.0126
0.0000
Dickey - Fuller t
-7.3715
0.0000
Augmented Dickey - Fuller t
-5.9769
0.0000
Lag Selection
The optimal lag length for each variable in the model is determined using standard lag selection
criteria. As presented in Table 5, GDP and Government Spending require one lag, whereas Trade, FDI,
and Inflation are optimally modeled without lags. These choices ensure the panel ARDL model
effectively captures both short-run dynamics and long-run relationships.
Table 5.
Optimal lags of variables in the model
Variables
Optimal lags
GDP
1
Trade
0
FDI
0
Inflation
0
Gov_Spending
1
Estimation Results
Table 6 presents the regression results of the panel ARDL model, comparing the Pooled Mean Group
and Mean Group estimators to assess the impact of globalization variables on GDP growth in
Southeast Asian countries. The error correction term (ECT) in both models is negative and statistically
significant at the 1% level, confirming robust evidence of cointegration. However, the Hausman test
produces a significant result, leading to the rejection of the PMG estimator in favor of the MG
estimator. This suggests that the MG model, which accounts for country-specific heterogeneity, is
better suited to capturing the data’s dynamic relationships.
Table 6.
Regression results of the model
GDP
PMG
MG
Coef.
p-value
Coef.
p-value
Long run
Trade
.0328
0.000
.0057
0.006
FDI
.0420
0.161
.3881
0.059
Inflation
.1478
0.058
.1121
0.042
Gov_Spending
-.0594
0.061
-.4425
0.058
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 257
Short run
ECT
-.6807
0.000
-.9478
0.000
Trade
.0557
0.057
.0401
0.019
FDI
.11482
0.094
.1682
0.090
Inflation
-.1418
0.156
-.1052
0.084
Gov_Spending
-1.1404
0.038
-1.5775
0.011
Hausman test
Prob > chi2 = 0.0001
Long-run Effects
The findings demonstrate that trade openness has a positive and statistically significant impact on
GDP growth, reflecting the export-oriented strategies prevalent in Southeast Asia. Countries like
Singapore, Vietnam, and Malaysia have effectively integrated into global value chains, leveraging
trade to boost industrial output, create jobs, and drive economic expansion. This is supported by trade
liberalization policies, participation in free trade agreements, and robust regional supply chain
networks. However, the modest coefficient suggests limited marginal gains, potentially due to trade
imbalances, reliance on low-value-added exports, or exposure to global economic volatility.
Foreign Direct Investment also stands out as a critical driver of long-term economic growth in
Southeast Asia, with a positive and significant effect. FDI enhances productivity, facilitates technology
transfer, and generates employment opportunities. Nations such as Singapore, Indonesia, and
Vietnam attract substantial FDI inflows by capitalizing on favorable investment climates, competitive
labor costs, and their roles in global production networks. The significant impact of FDI underscores
its role in promoting industrialization and infrastructure development. However, its contribution
varies across the region, shaped by differences in absorptive capacity - encompassing human capital,
institutional quality, and industrial policies—underscoring the uneven distribution of benefits among
Southeast Asian countries.
Short-run Effects
In the short run, trade openness significantly drives economic growth, highlighting the responsiveness
of Southeast Asian economies to fluctuations in trade flows. The region’s deep integration into global
production networks, particularly in electronics, automotive, and textile sectors, facilitates swift
economic adjustments to changes in international demand.
Foreign Direct Investment also positively influences short-term economic growth, demonstrating that
foreign investments not only foster long-term industrialization but also yield immediate benefits
through capital inflows, job creation, and business expansion. However, the modest statistical
significance suggests that FDI’s short-term impact depends on factors such as investment cycles,
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 258
sectoral allocation, and project implementation timelines.
Globalization’s impact on GDP Growth in Southeast Asia due to the differences in economic
structures and policies
Table 7 presents regression results illustrating the differential impacts of trade, FDI, and other factors
on GDP growth across three distinct economic groups in Southeast Asia: Highly Developed Economies,
Industrializing and Developing Economies, and Emerging and Less Developed Economies. Southeast
Asia countries can be grouped into three distinct categories based on their economic structures and
approaches to globalization: Highly Developed Economies, Industrializing and Developing Economies,
and Emerging and Less Developed Economies.
For highly developed economies, trade openness has a positive and significant long-run effect on GDP
growth, aligning with Frankel and Romer (1999), who emphasize trade’s role in enhancing resource
allocation efficiency. Singapore’s trade-to-GDP ratio, among the highest globally at over 140% in 2024,
reflects its role as a trade hub, while Brunei’s oil and gas exports drive its trade benefits (World Bank,
2024). FDI exhibits a stronger long-run impact, consistent with Borensztein et al. (1998), who highlight
FDI’s role in technology transfer in economies with high absorptive capacity, such as Singapore’s
advanced financial systems (Borensztein et al., 1998). In the short run, trade and FDI remain
significant, supported by Alfaro et al. (2004), who note FDI’s immediate benefits in service and
manufacturing sectors. The highly significant error correction term indicates rapid adjustment to
equilibrium, reflecting robust institutional frameworks and macroeconomic stability, as noted by
Bhujabal et al. (2024). These economies leverage globalization to sustain high GDP per capita and
promote socioeconomic stability, though they must address environmental impacts from FDI, as
highlighted by Doytch and Uctum (2016).
In industrializing economies, trade openness significantly drives long-run GDP growth, exceeding the
effect in highly developed economies, consistent with Sachs and Warner (1995), who argue that trade
liberalization boosts growth in export-oriented economies. For example, Vietnam’s 9.5% annual
export growth from 2010 to 2022 underscores its integration into global supply chains in electronics
and textiles. FDI also has a significant long-run effect, though slightly lower than in highly developed
economies, reflecting robust but less advanced absorptive capacity, as per Bhujabal et al. (2024). In
the short run, trade’s effect is weaker, suggesting limitations due to infrastructure deficits, while FDI
remains significant, supporting industrial expansion, as seen in Malaysia’s manufacturing hubs. The
ECT indicates strong resilience, but these economies face socioeconomic challenges, such as income
disparities, as noted by Hamdi (2013), requiring institutional reforms to ensure equitable growth.
Compared to Samimi and Jenatabadi (2014), who report trade openness as a key growth driver in
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 259
Southeast Asia, these findings highlight the need for infrastructure upgrades to sustain trade benefits.
In emerging economies, trade openness has a negative long-run effect on GDP growth, contrasting
with findings in more developed groups. This aligns with Majidi (2017), who notes that reliance on
primary commodity exports, subject to price volatility, limits growth in less-developed nations. For
instance, Myanmar’s trade-to-GDP ratio fluctuates significantly (-32.96% to 34.95%, 2000–2023),
reflecting weak market integration (United Nations Conference on Trade and Development, 2024).
FDI has a positive but marginally significant long-run effect, constrained by low absorptive capacity
and resource-extractive investments, as per Alfaro et al. (2004). In the short run, trade (coefficient:
0.1102, p < 0.05) and FDI show positive effects, but the weaker ECT suggests slower recovery from
shocks due to poor infrastructure and governance, as emphasized by Bhujabal et al. (2024). These
economies face significant socioeconomic vulnerabilities, including income disparities and
environmental degradation from FDI, as noted by Doytch and Uctum (2016), necessitating policies for
diversification and sustainable development. Cambodia’s low GDP per capita underscores these
challenges compared to Singapore’s advanced systems.
Table 7.
Regression results of globalization’s impact on economic growth in Southeast Asia due to the differences in economic
structures and policies
GDP
Highly Developed
Economies
Industrializing & Developing
Economies
Emerging & Less
Developed Economies
Long run
Trade
.0134**
.0495***
-.0529*
FDI
.5668***
.5546**
.0904*
Inflation
.0176
.0378*
.2521**
Gov_Spending
-.6472*
-.0272
-.8594***
Short run
ECT
-.9934***
-1.0588***
-.7863***
Trade
.0423**
.0171*
.1102**
FDI
.1808**
.1057***
.2401*
Inflation
-.2844
-.0705
-.0589***
Gov_Spending
-1.9752***
-2.1846***
-.6198
Note: *, **, *** represent the significance levels at 10%, 5%, and 1%, respectively.
The results confirm that trade openness and FDI drive economic growth in Southeast Asia, but their
impacts vary significantly due to differences in economic structures and institutional quality,
supporting the hypotheses in Section 2. Highly developed economies benefit most due to robust
infrastructure and governance, as seen in Singapore’s high FDI-to-GDP ratio (World Bank, 2024).
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 260
Industrializing economies leverage trade and FDI for industrial growth but require reforms to address
infrastructure gaps and income inequalities, aligning with Hamdi (2013). Emerging economies struggle
with globalization’s benefits, facing negative trade effects and limited FDI gains, consistent with Majidi
(2017). These findings highlight the need for policies promoting equitable growth and environmental
sustainability to ensure globalization supports long-term socioeconomic development across
Southeast Asia.
CONCLUSION
This study investigates the impact of globalization, through trade openness and foreign direct
investment (FDI), on economic growth across Southeast Asian countries, with a focus on how diverse
economic structures and institutional frameworks shape these effects. The objective was to analyze
the differential impacts of trade openness and FDI on GDP growth in 11 ASEAN countries from 2000
to 2023, using panel ARDL methods, and to identify strategies for sustainable socioeconomic
development. The findings contribute to the literature by providing empirical evidence on how
globalization’s benefits vary across economic groups, offering targeted policy recommendations to
enhance equitable growth and sustainability.
The panel ARDL analysis reveals that trade openness and FDI significantly drive economic growth, but
their impacts differ across three economic groups: Highly Developed Economies (Singapore, Brunei),
Industrializing and Developing Economies (Malaysia, Thailand, Indonesia, Vietnam, Philippines), and
Emerging and Less Developed Economies (Myanmar, Laos, Cambodia, Timor-Leste). For Highly
Developed Economies, trade openness and FDI strongly support GDP growth, reflecting robust
institutional frameworks and global market integration. Industrializing Economies benefit significantly
from trade and FDI, driven by export-led growth and manufacturing hubs, though infrastructure
deficits limit short-run trade gains. In contrast, Emerging Economies exhibit a negative long-run trade
effect, due to reliance on volatile primary commodity exports, and a weak FDI impact, constrained by
low absorptive capacity and governance challenges.
The findings offer tailored policy recommendations for each economic group to maximize
globalization’s benefits while addressing socioeconomic and environmental challenges:
- Highly Developed Economies (Singapore, Brunei): Policymakers should continue leveraging open
trade policies and FDI in high-value sectors while prioritizing green growth strategies, such as low-
carbon technologies and sustainable investment standards, to mitigate FDI’s environmental impacts.
Strengthening regional cooperation through ASEAN frameworks can enhance resilience to global
shocks.
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 261
- Industrializing and Developing Economies (Malaysia, Thailand, Indonesia, Vietnam, Philippines):
These nations should invest in infrastructure upgrades to sustain trade-driven growth, as
Vietnam’s 9.5% export growth demonstrates. Policy reforms to improve governance transparency
and reduce income disparities are critical. Incentives for renewable energy and green
infrastructure can ensure sustainable industrialization, aligning with global sustainability goals.
- Emerging and Less Developed Economies (Myanmar, Laos, Cambodia, Timor-Leste):
Diversification strategies, such as developing light manufacturing and value-added agriculture, are
essential to reduce reliance on volatile commodity exports, which drive the negative trade effect.
Targeted infrastructure investments, supported by regional cooperation and governance reforms
to enhance transparency, can improve FDI absorptive capacity. Environmental safeguards, such
as stricter FDI regulations in extractive industries, are needed to protect natural resources.
While the study provides robust insights, it has limitations. The panel ARDL model relies on aggregate
data, potentially overlooking sector-specific dynamics. The focus on 11 ASEAN countries may not fully
capture sub-national variations, particularly in large economies like Indonesia. Missing data for some
countries (e.g., Timor-Leste) were imputed, which may introduce minor biases. Future research could
disaggregate FDI by sector to explore differential impacts and incorporate social indicators to further
align with social science perspectives. Extending the analysis to include post-2023 data could capture
recent global economic shifts, enhancing policy relevance.
ETHICAL CONSIDERATIONS
Ethical approval is not applicable to this research.
AVAILABILITY OF DATA AND MATERIALS
Authors must indicate whether the data and materials used in the research are available for
consultation, either through a public repository, as supplementary material in the article, or upon
reasonable request to the corresponding author. If data cannot be shared due to legal, ethical, or
confidentiality reasons, a clear justification must be provided in the manuscript.
DECLARATION OF GENERATIVE AI AND AI-ASSISTED TECHNOLOGIES IN THE WRITING PROCESS
The authors confirm that artificial intelligence tools were used solely for grammar, spelling, and
language polishing during the writing process of this manuscript. No AI tools were used in the research,
data analysis, or generation of the manuscript’s content, and all intellectual contributions were made
by the authors.
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 262
CONFLICT OF INTEREST
The authors declare that they have no known financial or non-financial competing interests in any
material discussed in this paper.
FINANCING
No funding was received from any financial organization to conduct this research.
AUTHORS’ CONTRIBUTION
The contribution to the paper is as follows: Tan HN: study conception and design; Thuong TN: data
collection; Tan HN, Duc HL: analysis and interpretation of results; Tan HN: draft preparation. All
authors approved the final version of the manuscript.
ACKNOWLEDGENMENTS
The authors express gratitude to the Academy of Finance, Vietnam for their support and resources,
which significantly contributed to the completion of this research.
REFERENCES
Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2004). FDI and economic growth: the role of local
financial markets. Journal of International Economics, 64(1), 89–112.
https://doi.org/10.1016/S0022-1996(03)00081-3
Barro, R. J. (1996). Determinants of economic growth: A cross-country empirical study. NBER Working
Paper Series. https://www.nber.org/system/files/working_papers/w5698/w5698.pdf
Bhujabal, P., Sethi, N., & Padhan, P. C. (2024). Effect of institutional quality on FDI inflows in South
Asian and Southeast Asian countries. Heliyon, 10(5), e27060.
https://doi.org/10.1016/j.heliyon.2024.e27060
Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How does foreign direct investment affect
economic growth? Journal of International Economics, 45(1), 115–135.
https://doi.org/10.1016/S0022-1996(97)00033-0
Dollar, D., & Kraay, A. (2002). Growth Is Good for the Poor. Journal of Economic Growth, 7(3), 195–
225. https://www.jstor.org/stable/40216063
Doytch, N., & Uctum, M. (2016). Globalization and the environmental impact of sectoral FDI. Economic
Systems, 40(4), 582–594. https://doi.org/10.1016/j.ecosys.2016.02.005
Dreher, A. (2006). Does globalization affect growth? Evidence from a new index of globalization.
Applied Economics, 38(10), 1091–1110. https://doi.org/10.1080/00036840500392078
Acciones e investigaciones Sociales. Nº 47 (2026)
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial 4.0. 263
Frankel, J. A., & Romer, D. (1999). Does Trade Cause Growth? American Economic Review, 89(3), 379–
399. https://doi.org/10.1257/aer.89.3.379
Hamdi, F. M. (2013). The Impact of Globalization in the Developing Countries. Developing Country
Studies, 3(11), 142–144.
https://www.iiste.org/Journals/index.php/DCS/article/view/8180/8274
Huu, T. N. (2023). Adaptive Management Approaches in ASEAN Economies: Navigating Inflation,
Unemployment, and Economic Growth Dynamics. Revista Gestão & Tecnologia, 23(4), 396–
419. https://doi.org/10.20397/2177-6652/2023.v23i4.2724
KOF Swiss Economic Institute. (2024). KOF Globalisation Index. Https://Kof.Ethz.Ch/En/Forecasts-and-
Indicators/Indicators/Kof-Globalisation-Index.Html.
Majidi, A. F. (2017). Globalization and Economic Growth: The Case Study of Developing Countries.
Asian Economic and Financial Review, 7(6), 589–599.
https://doi.org/10.18488/journal.aefr.2017.76.589.599
Nguyen, T. H. (2025). Interest Rates and Economic Growth: Evidence from Southeast Asia Countries.
Economies, 13(8), 244. https://doi.org/10.3390/economies13080244
Sachs, J. D., Warner, A., Aslund, A., & Fischer, S. (1995). Economic Reform and the Process of Global
Integration. Brookings Papers on Economic Activity, 1995(1), 1.
https://doi.org/10.2307/2534573
Samimi, P., & Jenatabadi, H. S. (2014). Globalization and Economic Growth: Empirical Evidence on the
Role of Complementarities. PLoS ONE, 9(4), e87824.
https://doi.org/10.1371/journal.pone.0087824
United Nations Conference on Trade and Development. (2024). Trade and FDI Data.
Https://Unctad.Org/Statistics.
World Bank. (2024). World Development Indicators. Https://Databank.Worldbank.Org/Source/World-
Development-Indicators.