ASEAN’s Economic Future in an Age of Geoeconomic Competition

ASEANFocus+ speaks with Professor Mari Elka Pangestu, 2025’s Expert Co-Chair of the ASEAN Geoeconomics Task Force (AGTF), about how ASEAN can navigate this changing environment and strengthen its economic position in the years ahead.

AF: ASEAN has long championed economic openness. But in today’s geopolitical climate, does it need a fundamentally different strategic approach to advancing its economic interests and resilience?

Professor Pangestu: In today’s geopolitical climate, what matters is how we respond to it. ASEAN does not need to abandon openness — openness has been the foundation of our growth and integration for decades. What we need is a more deliberate, strategic approach to managing the risks that come with openness in an era of heightened geopolitical competition. I would frame it as “openness with shock absorbers”.

The challenge today is that economic security has become a dominant theme in international discourse, but much of the framing is being driven by the major powers — the US, China, the EU — each with their own strategic logic. If ASEAN does not set its own terms on what economic security means for our region, others will define it for us. Their definitions may not align with ASEAN’s interests or development realities.

So the shift is not from openness to protectionism. It is from passive openness to managed resilience. ASEAN needs to be proactive — identifying where our vulnerabilities lie, where supply chain concentration creates risks and where we need collective action to build buffers. Think of it as strengthening the foundations of the house rather than building walls around it.

The good news is that ASEAN has done this before. The Regional Comprehensive Economic Partnership (RCEP) was a case where ASEAN defined the terms of a mega-regional agreement on its own, keeping ASEAN centrality intact. The ASEAN Outlook on the Indo-Pacific was another instance: rather than accepting externally imposed frameworks, ASEAN articulated its own vision. We need that same instinct now, applied to the economic security agenda.

AF: How best can ASEAN navigate rising geoeconomic pressures – including the use of tariffs, export controls and investment screening – whilst maintaining ASEAN centrality and inclusive development?

Professor Pangestu: The first thing to recognise is that the scale of disruption has intensified significantly. We are dealing not just with traditional trade frictions but also with a layered set of pressures — unilateral tariffs under emergency authorities, expanded export controls on critical technologies, new investment screening regimes and even sanctions that have secondary effects across supply chains. The Hormuz crisis earlier this year, the expansion of Section 301 tariffs, China’s export controls on critical minerals are not isolated events. They represent a structural shift in how major economies use economic tools for strategic purposes.

For ASEAN, the key is to avoid being pulled into a binary choice. We are not going to align wholesale with any single power’s economic security framework. But we cannot simply pretend these pressures do not exist and hope that openness alone will see us through.

ASEAN centrality in this context means being the convener, the platform where different interests can be mediated. But centrality without substance is just geography. We need to back it up with coordinated positions on the issues that matter — rules on digital trade, standards for supply chain resilience, investment facilitation frameworks. The ASEAN Economic Community Council’s statement on trade disruptions and the ASEAN Joint Foreign and Economic Ministers’ (AMM-AEM) Session in Cebu this year show that there is political will to move in this direction.

On inclusive development, the risk is real that geoeconomic competition benefits some member states — those with larger markets or more advanced manufacturing — while leaving others more exposed. Any ASEAN approach must be deliberately inclusive, which means building capacity in the less developed member states so they are participants in supply chain diversification, not bystanders. The “ASEAN Minus X” formula is useful here and can lead to pragmatic solutions — it lets willing members move ahead while keeping the door open for others to join when they are ready.

AF: What would greater economic coordination among ASEAN Member States (AMS) look like in practice? Can you give specific examples?

Professor Pangestu: Greater economic coordination does not mean harmonising every policy or creating a supranational authority — that is neither realistic nor desirable given ASEAN’s diversity. What it means is building shared situational awareness, aligning on priority areas, agreeing on framework and principles and creating mechanisms for collective action where individual action would be insufficient.

Take energy as an example — and I think energy is the gateway issue for ASEAN economic security cooperation. Southeast Asia faces a common set of energy challenges: dependence on imported fossil fuels, vulnerability to supply disruptions, potential for joint stockpiling and the urgent need for energy transition. No single ASEAN member can solve this alone. But collectively, ASEAN can develop regional energy grids, coordinate strategic reserves, facilitate cross-border investment in renewables and negotiate as a bloc with energy suppliers. The ASEAN Power Grid and the Trans-ASEAN Gas Pipeline are existing frameworks — what would be needed is political will and investment to move from aspiration to implementation and pragmatic approaches that can start with 2-3 AMS participating.

Maritime cooperation is another natural area. ASEAN sits astride some of the world’s most critical sea lanes. Ensuring supply chain resilience means thinking seriously about port infrastructure, logistics connectivity and maritime security in an integrated way.

Institutionally, the proposal that came out for an ASEAN Geoeconomics Group, building on the existing ASEAN Geoeconomics Task Force. It would provide a dedicated mechanism to coordinate responses to economic disruptions, conduct scenario planning and develop early warning systems. The key is to mainstream geoeconomic considerations across ASEAN’s three pillars, not treat them as a niche issue within the economic pillar.

AF: How can ASEAN position itself as a destination of choice for supply chain diversification and green investment?

Professor Pangestu: ASEAN already benefits from the structural shift underway. As firms look to diversify away from concentrated supply chains, Southeast Asia is a natural destination, with its large combined market, young workforce, improving infrastructure and strategic location between the Indian and Pacific Oceans. It is already hosting various regional value chains.

We should not take this for granted. Positioning ASEAN as a destination of choice requires deliberate effort on several fronts. First is regulatory coherence — investors need predictability. The gap between ASEAN’s commitments on paper and implementation on the ground remains our biggest vulnerability. If we can narrow that implementation gap, even incrementally, it sends a powerful signal.

Second, ASEAN needs to think about supply chain diversification not just in terms of attracting individual factory relocations but also in terms of building regional production networks. The value proposition should be: invest in one AMS and you gain access to a regional ecosystem through RCEP, bilateral arrangements and improving digital and physical connectivity. This is where agreements like the ASEAN Digital Economy Framework Agreement (DEFA) and the proposed Green Economy Framework Agreement (GEFA) become important — they set the rules for the next generation of investment, in areas where no international rules have been agreed on.

On green investment specifically, ASEAN has an enormous opportunity. The region’s energy transition needs are vast and there is significant global capital looking for green investment destinations. But capital follows credible frameworks. ASEAN needs a common taxonomy for sustainable finance, clear standards for green bonds and streamlined approval processes for renewable energy projects. The transition should not be seen as a burden but as an investment magnet, if we get the framework right.

The approach should be to start small, pilot initiatives in willing member states, demonstrate results, and then scale up. This is how ASEAN has always made progress — not through grand leaps but through practical, incremental steps that build confidence.

AF: Will ASEAN’s strategic push for stronger economic partnerships – both within the bloc and beyond – create an even more convoluted ‘noodle bowl’ of shallow agreements that lack substance and enforceability?

Professor Pangestu: This is a fair concern, and one we need to take seriously. ASEAN does have a history of producing frameworks and declarations that are long on aspiration and short on implementation. The risk of adding more layers — RCEP, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), bilateral free trade agreements (FTAs), DEFA, the proposed GEFA — without ensuring depth and coherence is real.

But I would push back on the characterisation of this as inevitably a ‘noodle bowl.’ The question is not whether we have multiple agreements — in today’s world, that is unavoidable and, frankly, can be an advantage. The question is whether these agreements are designed to be complementary rather than contradictory, aligned to the main trade rules and disciplines and whether they are implemented.

RCEP, for instance, was designed with ASEAN at its centre and with cumulation rules that create incentives for regional production networks. CPTPP sets a higher-standard benchmark that several AMS are pursuing. The DEFA and GEFA address new-generation issues that older agreements did not cover. If these are treated as a layered architecture, each serving a different purpose, with ASEAN as the connecting node — then the complexity becomes a strategic asset rather than a liability.

The real risk is not the number of agreements but alignment and the implementation gap. If ASEAN signs ambitious frameworks and then fails to follow through (on tariff commitments, regulatory reforms and dispute resolution) then yes, it becomes a noodle bowl of empty promises. The discipline must be on implementation, monitoring and honest assessment of where we are falling short. That is harder and less glamorous than signing new agreements, but it is where credibility is built.

AF: If you could name one economic priority that ASEAN should focus on in the next decade for greater agency in shaping the global economic order, what would it be?

Professor Pangestu: If I had to choose one, it would be this: ASEAN must build the institutional capacity to act collectively on geoeconomic issues — quickly, coherently and with credibility.

ASEAN’s individual member states, even the largest among them, are not big enough to shape global economic rules on their own. But collectively, ASEAN represents a market of nearly 700 million people, a combined GDP that would rank among the world’s largest economies and a geographic position that is indispensable for global trade and supply chains. The gap is not in ASEAN’s potential weight — it is in our ability to convert that weight into coordinated influence.

This means several things in practice. First, it means exploring the establishment of a dedicated ASEAN mechanism, potentially building on the ASEAN Geoeconomics Task Force, with a Track 1.5 format that brings together government, policy experts and the private sector. Rather than a task force that meets periodically, such a mechanism could provide a more sustained platform for analysis, scenario planning and policy dialogue, while supporting ASEAN members in identifying opportunities for coordinated responses to economic disruptions.

Second, it means developing a shared ASEAN understanding and potentially a framework on Economic Security and Resilience, under Singapore’s chairmanship in 2027. This could help articulate common principles, clarify areas for cooperation and provide a basis for practical collective action.

It also means investing in the connective tissue of regional cooperation: shared data, common standards, interoperable digital systems and people who can work across borders and across ASEAN’s three community pillars. The geoeconomic challenges we face are cross-cutting, simultaneously involving trade, technology, finance, energy and security. Our institutional architecture needs to match that reality.

The bottom line is this: to build not walls, but resilience; not fragmentation, but diversification; not choosing sides, but building the capacity to remain open and connected on our own terms. That is what ASEAN’s next decade should be about.

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Editor’s Note:
ASEANFocus+ articles are timely and critical insight pieces published by the ASEAN Studies Centre. The ASEAN@60 Special Edition series marks the organisation’s 60th anniversary in 2027 and highlights the key issues that will shape ASEAN and Southeast Asia as the organisation enters its seventh decade.