Southeast Asia’s choices: Economic, political, and geopolitical integration face complications

Author: Satu Limaye

In light of the new developments in the Indo-Pacific region, heightened economic and political integration comes with multiple hurdles that will, in turn, impact the Southeast Asian countries

Southeast Asia’s importance internationally and to the United States (US) is under-appreciated. With 650 million people, a combined gross domestic product (GDP) of almost US $3 trillion, high economic growth rates, a middle class expected to double in the next decade, almost 400 million people under the age of 35, and navigating contested and uncertain geopolitics, Southeast Asia or the ten member countries of the Association of Southeast Asian Nations (ASEAN), is critical to the future of the Indo-Pacific region. The choices Southeast Asia is making regarding economic and political integration as well as regional security and diplomacy will help shape outcomes in a fast-changing and more tense Indo-Pacific region. Therefore, it is important to consider Southeast Asia’s major efforts on the economic, political, and international fronts; the challenges these efforts face; and what might be the impact on functional and multilateral cooperation as well as the management of strategic competition and securitisation.

Economic integration

A major feature of the past three or so decades has been Southeast Asia’s economic integration as well as economic growth (roughly doubling over 20 years). The ingredients of this dual-pronged integration and growth-performance have been multifold and complex. Factors often cited include domestic reforms and decisions; Japan’s critical role via the provision of capital, aid, and technical assistance, especially in the mid-1980s and 1990s; post-Cold War globalisation, China’s emergence as a manufacturing and supply chain powerhouse; and the United States’ largely open markets. China has risen as the major trade partner for nearly every regional country, while trade ties with the US, Europe, and Japan have seen a relative decline. One recent assessment argues that global value chains with China are highly beneficial to ASEAN. Trade, of course, is only one measure of commercial cooperation, and can obscure other patterns of functional cooperation. For example, one explanation for the trade decline amongst the US, Japan, and European Union in Southeast Asia is the increase in affiliate companies investing in ASEAN to take advantage of markets and production efficiencies. Amongst the questions facing the region in light of this broad situation is what factors will drive future commercial cooperation; the single most prioritised functional cooperation amongst regional governments.

China has risen as the major trade partner for nearly every regional country, while trade ties with the US, Europe, and Japan have seen a relative decline.

Southeast Asia faces a number of headwinds to its nearly 25 years of strong growth and increased regional integration. These headwinds come from such factors as US-China “decoupling”, post-COVID uncertainties, shifting and disrupted supply chains, and many other trends. If Southeast Asia is to continue its robust growth and integration witnessed over the past 30 years, key policy challenges will need to be addressed even as underlying structural change occurs. Major problems on ASEAN’s side include its diversity of economic development and available policy options. This can be seen in the fact that while the Regional Comprehensive Economic Partnership (RCEP) includes all Southeast Asian member countries, the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) does not. Both RCEP and the CPTPP are two mechanisms intended to contribute to regional economic integration and growth. But they co-exist with efforts at coercive economic behaviour by China, the US’ unwillingness so far to get involved in pan-regional trade agreements, and China, Taiwan, and the United Kingdom seeking to join the CPTPP. Moreover, uncertainties prevail at the global level too, such as on World Trade Organisation (WTO) reform. As Southeast Asia does not have the weight to be a rule-maker but relies on global rules to protect and facilitate the achievement of its interests, the lack of progress and a contested trade regime also creates complications for these countries. The point is that a number of complicating clouds and general uncertainties are building, which could reshape winners and losers in Southeast Asia and the past three decades’ positive pattern of regional integration and growth. 

Political integration

A second Southeast Asia regional effort has been its political integration. This year, 2021, marks three decades since the Cambodia Peace Accords were signed. Thirty years ago, the original founding ASEAN member states feared China’s revolutionary role and Vietnam’s influence; today, both countries are seen as integral to the region’s future, economically, diplomatically, and for reasons of security and defence. The settlement surrounding Cambodia facilitated ASEAN to embark on three regional political developments. First, the original ASEAN founding members were able to expand membership to include Cambodia, Laos, Myanmar, and Vietnam. Second, the “expansion” of membership to previous antagonists and suspect states laid the basis for the wider ASEAN-led multilateral groupings. And third, the geographic expansion of ASEAN has contributed in the view of many to its eroding coherence even as the “ASEAN project” aspires to create a community comprising politico-security, and economic and socio-cultural elements.

Thirty years ago, the original founding ASEAN member states feared China’s revolutionary role and Vietnam’s influence; today, both countries are seen as integral to the region’s future, economically, diplomatically, and for reasons of security and defence.

But many factors confront this political integration project. As ASEAN is seen by many countries as less directed, less capable of crafting solutions to regional challenges, and is not truly compelling to even its member-state governments and regimes, new groupings are beginning to emerge. The most recent and prominent are the Quad and AUKUS. While neither of these groups deliberately or explicitly seeks to replace or undermine ASEAN or ASEAN-led institutions such as the East Asia Summit or the ASEAN Defense Ministers Meeting Plus (ADMM Plus), the net effect, both optically and practically, is that other major states in and outside Southeast Asia will pursue mechanisms that serve a variety and combination of security, economic, and order interests.

But AUKUS and Quad are not the only or even the most important problems for Southeast Asian political integration and ASEAN’s weakness is not nested in inability to find solutions for Myanmar or the South China Sea. Rather, deeper trends of relative economic power, politico-security relationships with other major powers, and even domestic governance are changing the trajectories and fortunes of various Southeast Asian players. For example, one economic analysis posits that certain Southeast Asian countries such as Malaysia, Singapore, Thailand, and Vietnam are benefitting from supply chains while others are making fewer gains in this sector and depend much more on natural resource commodities extraction and trade. On the political-security and diplomacy front too there may be different emerging countries of focus for outside powers; for example, with the US, Japan, and others seeking to increase strategic ties to Vietnam. So, it is not just that ASEAN has challenges in the new operating environment, or that non-Southeast Asian countries are involved in new groupings affecting the region, but that the very trajectories of Southeast Asian countries may make political integration more brittle and fraught. 

International integration

Finally, there is Southeast Asia’s international integration project; not entirely unrelated to its “internal” political integration efforts. Southeast Asia has invited strategic internationalisation by taking on global dialogue partners and members into ASEAN-led organisations. On the one hand, Southeast Asia has gained many benefits from such engagement and been able to “mediate” the agenda and use of its various organisations. On the other hand, in a more contested international environment of great flux, Southeast Asia faces a certain amount of strategic exposure to various competitions—not just US-China, but Japan-ROK, etc. At this juncture, Southeast Asia still has considerable agency and navigating space to manage ASEAN and individual country member interests. But in the event that, for example, “strategic competition” intensifies, pressures on Southeast Asia may build.

In sum, Southeast Asia’s efforts of economic integration/development, regional political integration, and international integration have brought many benefits. But in a newly emerging, highly uncertain, and increasingly contested region, these endeavours face a number of challenges that will affect functional cooperation, multilateral cooperation, management of strategic competition, and securitisation.

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