**Introduction** The Association of Southeast Asian Nation (ASEAN)’s digital economy is strengthening regional integration by expanding cross-border digital trade, anchoring cooperation through region-wide digital economy rules, improving functional connectivity via payment interoperability, and reinforcing regional production networks through digitally enabled investment. Together, these channels are integrating ASEAN economies more through services, platforms, and routine cross-border transactions, alongside traditional goods trade[1][2][3]. **How ASEAN’s digital economy is reshaping regional integration** **1.** **Digital economy scale is deepening intra-ASEAN trade** By 2025, Southeast Asia’s digital economy is projected to exceed US$300 billion in gross merchandise value, with e-commerce alone accounting for roughly US$185 billion[1]. The expansion of platform-based commerce is closely linked to cross-border logistics, digital payments, and regionally integrated digital services that operate across multiple ASEAN markets. Unlike traditional trade, which is concentrated in large manufacturing exporters, platform-based commerce supports high-frequency, small-value cross-border transactions involving small and medium enterprises and consumers, embedding regional integration into routine commercial activity and broadening participation in intra-ASEAN trade[1]. **2.** **DEFA is anchoring regional digital economy integration** The ASEAN Digital Economy Framework Agreement (DEFA) reached substantial conclusion on October 24, 2025, following negotiations launched in September 2023 and 14 negotiating rounds[2]. DEFA establishes a region-wide framework for rules governing the seamless and secure flow of goods, services, and data, reducing regulatory fragmentation costs associated with cross-border digital activity[2]. By improving predictability and interoperability across diverse domestic digital trade regimes, DEFA strengthens ASEAN’s capacity to support region-wide digital commerce without requiring full regulatory harmonization[3]. **3.** **Payment interoperability is strengthening functional integration** Cross-border payment interoperability is deepening ASEAN integration through improved operational connectivity. Southeast Asia has developed a dense network of bilateral payment linkages, including 13 person-to-merchant (P2M) QR payment connections and 4 person-to-person (P2P) linkages as of May 2024, indicating rapid progress in cross-border retail payment integration[4]. By 2025, digital payment adoption is sufficiently widespread that over 60% of payments are digital region-wide, supporting frequent, low-value cross-border transactions linked to tourism, e-commerce, and services trade[1]. These payment linkages strengthen functional integration by reducing frictions in everyday cross-border economic activity, even in the absence of deeper financial market integration. **4.** **Digital investment is reinforcing regional production networks** Investment flows linked to digital infrastructure and digitally enabled services are reinforcing regional production networks by strengthening cross-border coordination among firms. In ASEAN, foreign direct investment (FDI) inflows increased by 8% to US$226 billion, while manufacturing FDI rose by nearly 150% to US$44 billion, reflecting renewed investment in supply-chain-intensive activities[5]. These investment patterns expand intra-firm and inter-firm networks that depend on data connectivity, cloud computing, and digital logistics systems, supporting more integrated regional production and services networks across ASEAN economies[5]. **Conclusion** ASEAN’s digital economy is shaping regional integration through scale-driven digital trade, region-wide rulemaking under DEFA, payment interoperability, and digitally enabled investment that strengthens production networks. Together, these channels are embedding integration more deeply into services, platforms, and everyday cross-border transactions, complementing ASEAN’s traditional manufacturing-based integration model.
