Navigating Southeast Asia’s Commercial Landscape Amid Geopolitical Rivalries
Balancing strategic autonomy and economic growth requires protecting critical infrastructure and international trade rules.
1Record Investment Amid Volatility
In 2025, ASEAN successfully attracted a record $243.9 billion in foreign direct investment. Despite this influx, the region faces significant threats from U.S.-China strategic competition and rising economic nationalism. Maintaining this commercial momentum requires a proactive approach to protecting the security, supply chains, and international rules that currently underpin regional commerce.
2Maritime Security and Coercion Risks
The Strait of Malacca and Singapore carry nearly a quarter of global seaborne trade, yet they remain vulnerable. Recent events in the Strait of Hormuz demonstrate how strategic waterways can be used as instruments of coercion. While Indonesia, Malaysia, and Singapore reaffirmed their commitment to safety, the risk of disruption by state actors persists.
3Shifting Regional Power Dynamics
China’s recent expansion, including island-building at Antelope Reef and a new military aviation facility in Laos, alters the regional balance. These developments increase vulnerability to potential coercion. As China expands its presence near Taiwan and Japan, the rules governing trade and investment face new pressures, potentially impacting long-term regional stability and business operations.
4Impact of U.S. Trade Policies
U.S. economic nationalism, including tariffs and chip licensing requirements, creates complex challenges for regional manufacturers. Vietnam, which held a $178.3 billion goods surplus with the U.S. in 2025, faces particular scrutiny. Washington’s drive to rebuild domestic manufacturing and reduce trade deficits applies broadly, affecting even close partners like Singapore through temporary tariff powers.
5Energy Supply Chain Vulnerabilities
Southeast Asia remains acutely exposed to energy disruptions, particularly due to reliance on Middle Eastern oil and gas. The revised ASEAN Framework Agreement on Petroleum Security remains largely voluntary, offering limited protection during shortages. Consequently, nations are exploring nuclear energy, with Vietnam and Indonesia pursuing agreements with Russia to diversify their electricity generation sources.
6The Nuclear Dependency Trade-off
While nuclear power offers a path to reduce fossil-fuel dependence, it introduces new strategic risks. Agreements involving Russian reactors could create long-term dependence on Moscow for fuel, spare parts, and technical support. Similarly, Philippine-Chinese talks on joint oil and gas development must be weighed against the potential for compromising maritime rights and sovereignty.
7Strengthening Critical Infrastructure
Resilience serves as a form of deterrence by reducing the expected gains for hostile actors. Governments must collaborate with private operators to secure subsea cables, ports, and data centers. Implementing joint vulnerability assessments and standardized response planning is essential to maintaining the integrity of the region's physical and digital commercial infrastructure systems.
8Defending Rules for Prosperity
Maintaining commercial options requires a steadfast defense of international law, which provides predictability and constrains the use of force. Avoiding alignment with specific powers should not be an excuse for inaction. To ensure future prosperity, Southeast Asian nations must prioritize the rules that protect freedom of the seas and support regional economic stability.