The Role of Governance Quality in Increasing Intra-ASEAN Trade

ASEAN countries have liberalized intra-ASEAN trade over the last 20 years by establishing the ASEAN Free Trade Area (AFTA). Recently, they committed achieving the ASEAN Economic Community (AEC) with the timeline set at 2015. Policy measures are being implemented based on the AEC Blueprint agreed upon 2007. One of the several motives behind this implementation is that they thought that an expansion of intra-ASEAN trade would promote economic development of the ASEAN countries as the expansion of exports would result in output growth and the expansion imports would improve productive efficiency. In the other hand, countries have to strengthen institutions in order to promote economic and trade cooperation. This article focus on exploring the role of institutions (governance quality) in increasing exports between ASEAN countries during the period 2000-2015 using the augmented gravity model. We use data from DOTS (IMF), World Development Indicators (World Bank) and World Governance Indicators (World Bank). The result suggest that institutions of ASEAN countries, as well as the governance quality of the ASEAN countries have positive and significant effect in increasing exports between ASEAN Countries.