Preparing the ASEAN Economic Community for a Securitised World

As the ASEAN Economic Community (AEC) prepares for a post-2025 strategic plan, questions loom over how far it can manage the implications of a world order that is starkly different from the one that underpinned its origin and development. In an increasingly securitised world, so-called “non-traditional” security issues, such as climate and economic security, are increasingly framed as national security concerns. Moreover, governments use economic power as leverage to advance their foreign policy agendas. Thus, economic and security affairs are becoming more intensively intertwined.

This has repercussions for multilateral rules which are typically developed within the realms of economy and national security, and their growing intersection with climate and technological considerations. As a community of small and middle powers exposed to these risks, the AEC cannot afford to maintain business as usual where its economic and security agendas are developed or considered separately (respectively under the AEC and ASEAN Political Security Pillar, APSC).

Securitisation affects the AEC through trade and investment. On trade, the pursuit of supply chain de-risking by industrialised nations has benefitted some ASEAN Member States (AMS), at least in the short term. As US imports from China have fallen, AMS like Vietnam, Thailand, and Cambodia have increased exports to the US. In some cases, this still involves importing inputs from China, followed by some value-addition in the country before export. However, with the incoming Trump administration expected to take a more mercantilist approach to trade, including through tariffs, AMS with considerable trade surpluses with the US or sourcing significantly from “countries or entities of concern” (such as China and Russia) may come under more scrutiny.

In the European Union (EU), another major market for ASEAN, there has been a rise in environmental, social, and cybersecurity-related trade measures. In theory, these rules should be applicable equally to all without pre-emptively targeting certain countries, but resource-rich AMS with substantial ties to China-led supply chains may suffer disproportionately from compliance costs and indirectly from reduced EU demand from China-led supply chains. ASEAN does not have FTAs with the US or EU, giving it little leverage in negotiating existing and emerging trade barriers.

Working with like-minded partners is equally critical to defend rules-based multilateralism and to better manage national security exceptions.

Simultaneously, ASEAN should not be complacent about the risks that come from its economic dependency and entanglement with China. For example, AMS with overlapping claims with China on the South China Sea might face greater vulnerability to China’s use of economic statecraft as in the past.

Increasingly, countries including the US and EU (to China) are erecting trade barriers around raw materials or technology critical for digital transformation and green transition on national security grounds. Whilst there may be legitimate security concerns, this interplay with economic statecraft may further enmesh economic and security considerations. Arguably, international economic institutions are not currently sufficiently equipped to protect smaller countries and to find solutions to the spillover effects of geopolitical tensions. The AEC needs to be more proactive in considering the impact of growing securitisation and its response, while ASEAN and individual AMS should engage in the reform of international economic institutions.

The same countries implementing security-related trade barriers are introducing similar measures through investment screening for inflows and outflows. For inward investment, they impose restrictions on sectors deemed too critical for competitors or non-allies to influence (for instance, energy and telecommunications). For outward investment, restrictions focus on dual-use technologies (like advanced computing and semiconductors). This higher scrutiny may affect third countries, including those in ASEAN. Several AMS may witness more restrained foreign direct investment, even if they possess assets like critical minerals and renewable energy resources.

Amid greater securitisation, investment decisions will be based on financing, infrastructure, human resources, and domestic regulatory environments but also on geopolitical alignment. Where the US-China rivalry is concerned, those AMS that one superpower deems as being too close to the other may be excluded from opportunities to benefit from investment inflows to support digital transformation and green transition.

Rising securitisation may also undermine ASEAN’s region-based economic community-building agenda. The AEC’s challenge is to convince AMS and their external partners of the continued value of ASEAN’s economic agenda. While the AEC has prolifically produced statements, strategies, and frameworks, how successful AEC initiatives are depends on how much regional businesses have benefitted from them. While some AMS have joined initiatives such as China’s Belt and Road Initiative (BRI) and the US-led Indo-Pacific Economic Framework (IPEF) and are eyeing other plurilateral groupings, ASEAN-led initiatives may lend AMS increased bargaining power when dealing with their largest markets and trading partners. While each AMS has the right to pursue an independent foreign policy, the AEC still holds value for the AMS; member states should in turn retain if not redouble their focus on and give resources to the AEC.

A start in preparing AMS for this new playing field would be to ensure that AEC political leaders and bureaucrats are well-versed on the impact of greater securitisation on ASEAN’s future economic agenda. The authors recommend periodic briefings on geopolitical developments and their economic implications by the ASEAN Secretariat or appropriate experts. Such briefings should ideally include policy officials dealing with digital, mineral industry, foreign affairs and defence, not just trade officials.

Working with like-minded partners is equally critical to defend rules-based multilateralism and to better manage national security exceptions. For this to work, the AMS need to be convinced about the merits of ASEAN-related institutions in safeguarding the region’s economic resilience. For instance, AMS could better utilise the Regional Comprehensive Economic Partnership (RCEP) to provide business certainty for regional supply chain development. The ASEAN Digital Economic Framework Agreement (DEFA) — as the world’s first regional digital economy agreement — will set the baseline for ASEAN’s engagement with other partners on digital economy. Last, the effective mainstreaming of the ASEAN Outlook on the Indo-Pacific (AOIP) into relevant sectoral work can facilitate practical cooperation and policy coordination with external powers.

As the AEC supports the ASEAN Community Vision 2045, it should comprehensively anticipate and manage the impact of the broadening and shifting global security agenda and rival powers’ use of economic statecraft to gird their security. The successful navigation of this growing securitisation of the global and our region’s economy will help the AEC — and ASEAN — to emerge stronger after the storm.

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