SINGAPORE has much to gain from tighter regional integration but needs to be aware of the challenges presented by cost normalisation, according to a report by Citi Research which looks into Asean's long-term prospects for economic growth.

With the impending implementation of the Asean Economic Community (AEC) by end-2015, intra-regional trade and foreign direct investment (FDI) are expected to increase, especially in services.

Singapore's GDP gains through regional integration are likely to stem from services liberalisation, given its status as a net services exporter. Singapore accounted for nearly 65 per cent of services FDI inflow into Asean in 2010-11.