JAKARTA—Southeast Asia is rapidly learning that a neutral stance is no longer a shield against global economic warfare. At a recent high-level roundtable in Jakarta, policymakers from Association of Southeast Asian Nations (ASEAN) member states were joined by their counterparts from Japan, the United States, and Europe to grapple with a harsh new reality: The region’s deeply integrated “just-in-time” supply chains are fracturing under the weight of US tariffs, Western investment screening, and Chinese overcapacity. For a bloc of 700 million people historically dependent on open global markets, the era of passive hedging is over. To survive the intensifying tech war between Washington and Beijing, ASEAN must pivot to coordinated resilience, leaving behind its fragmented economic neutrality to build its own defensive economic shields.
Coordinated resilience means building trusted, diversified, commercially viable supply chains that preserve national agency without forcing countries into rigid geopolitical blocs. Crucially, it means halting hyper-fragmented, unilateral approaches. ASEAN member states are already experimenting with their own resilience strategies: Indonesia has restricted exports of unrefined nickel ore to capture more value domestically, while the Philippines and Singapore have sought closer alignment with US-led technology-security initiatives such as Pax Silica. These steps are not misguided, but they are insufficient if they remain purely national or bilateral. To avoid becoming collateral damage in global great-power competition, ASEAN member states need a framework for collective action. This starts by reforming the current protectionist approach for domestic industries into a tool for proactive coordination. By evolving its consensus-based model toward flexible, plurilateral coalitions, ASEAN member states can dismantle stubborn internal trade barriers while signaling to their citizens that regional unity is a prerequisite for economic survival.
What would this look like in practice? Instead of taking more cues from Beijing and Washington, workshop participants noted that ASEAN member states must look in the mirror. ASEAN has a larger population than either the United States or the European Union, giving it substantial economic heft. Many ASEAN members’ economies are growing faster than the US and Chinese economies. The group is one of the fastest-growing markets globally, drawing sizeable parallel investments from Washington, Beijing, and Brussels. These qualities give it strength, and with this strength, agency.
To begin with, the region should harmonize its cross-border digital landscape by aggressively preparing for the implementation of the ASEAN Digital Economy Framework Agreement (DEFA). By establishing unified rules for cross-border digital payments, data governance, and cybersecurity cooperation, a fully enacted DEFA could double the region’s digital economy, reaching as much as two trillion dollars by 2030. With negotiations successfully concluded in May by senior economic officials in Manila, and a formal signing scheduled for the ASEAN Summit in November, DEFA is no longer a distant ideal. With Singapore, the region’s premier digital finance hub, and Malaysia, ASEAN’s rising semiconductor powerhouse, locking arms on shared digital rules under DEFA, coordinated resilience is already transitioning from policy theory to operational reality.
Second, instead of passing laws that restrict foreign ownership internally, ASEAN should allow multinational firms operating within the bloc to shift manufacturing components freely between member countries without complex administrative blockages. While this could prove difficult politically, it would bring substantial economic benefits. There are also ways to deepen economic integration within the Regional Comprehensive Economic Partnership (RCEP). With fifteen economies, roughly 30 percent of global economic output, and about a third of the world’s population, RCEP is the world’s largest free-trade agreement. It was explicitly designed to deepen regional economic integration, facilitate trade and investment, and help small and medium-sized enterprises participate in regional and global supply chains.
Streamlining RCEP’s rules of origin would act as an immediate economic accelerator. RCEP’s rules of origin, which determine whether a product qualifies for preferential tariff treatment, can be hard to document, especially in fragmented, cross-border supply chains, such as smartphones, electric-vehicle batteries, and garments. RCEP allows a cumulative approach: materials can qualify as originating in one RCEP country even as some inputs are produced in another RCEP country. Yet if firms—especially small and medium-sized enterprises—find the rules too complex, too costly, or too inconsistently applied to use, this tool languishes below its economic potential.
Third, instead of competing against one another for the same foreign direct investment, ASEAN countries should support each other and, where feasible, position themselves sequentially through Integrated Regional Industrial Clusters. A Philippines–Indonesia nickel corridor already exists in practice: Philippine ore is increasingly flowing to Indonesian smelters. But without a regional strategy, this approach risks reproducing a familiar pattern—one ASEAN member exports raw material while another captures the processing value, often through capital and technology ecosystems still dominated by China.
A coordinated resilience approach would not halt this trade; it would capitalize on growing US and European demand for alternatives to Chinese minerals and processing, pivoting to alternatives where ASEAN countries might be overexposed. While this would require upgraded traceability and environment, social, and governance standards, it could come with the benefits of allied offtake agreements, technology transfer, and shared value creation across ASEAN—outcomes that workshop participants were keen to achieve. Coordinated specialization would attract higher-value foreign direct investment and drive region-wide upskilling in an economy still overly dependent on low-skilled labor.
On the defensive side of coordinated resilience, ASEAN should establish collective investment screening mechanisms inspired by those the European Union has implemented. Such a mechanism would not be designed to block foreign capital, but to clarify who ultimately owns, finances, and controls investments in sensitive sectors, such as critical minerals, ports, energy infrastructure, digital networks, and strategic manufacturing. This is critical as firms may increasingly use ASEAN jurisdictions to obscure beneficial ownership, bypass tariffs, or route capital and goods through nominally local entities.
Going further, ASEAN could also establish a regional legal-support facility, modeled on the African Legal Support Facility, to help member states review complex contracts before signing major infrastructure, mining, energy, or digital agreements. These tools would strengthen sovereignty by helping governments distinguish between investment that builds domestic capacity and investment that creates long-term strategic dependency.
The political challenge, however, would be substantial. Transparency International’s 2025 Corruption Perceptions Index shows sharp variation across ASEAN, from Singapore near the top of global rankings, indicating less corruption, to several member states scoring in the lower third globally. In sectors such as mining, logging, construction, ports, and digital infrastructure, opacity is often not merely a technical weakness but part of the political economy of investment itself. Beneficial-ownership disclosure, contract review, and investment screening would threaten entrenched interests that benefit from discretionary licensing, politically connected concessions, and non-transparent partnerships with foreign firms. For that reason, ASEAN should frame these reforms not as an anti-China or anti-investment agenda, but as a market-access and sovereignty agenda: Cleaner ownership records, stronger contract terms, and credible screening would make ASEAN firms more attractive to US, Japanese, European, and South Korean partners. They would also reduce the risk that the region becomes a conduit for tariff evasion, resource exploitation, or strategic dependence.
