Southeast Asia Global Relations Outlook Part 1: Malaysia’s ASEAN Chairmanship

Introduction 

On January 1st, 2025, Malaysia took up the Chairmanship of ASEAN from Laos under the theme of “Inclusivity and Sustainability.” The country aims to host over 300 ASEAN-related meetings, programs, and summits, with a complete agenda to be announced in January or February this year.

In the first of a short series analyzing Southeast Asia’s Global Relationship Outlook for 2025, we provide an overview of Malaysia’s ASEAN Chairmanship this year, as well as the key issues facing ASEAN as the region navigates increasing geopolitical and economic tensions while seizing opportunities for greater regional cooperation and growth.

Myanmar and the South China Sea 

One key issue that Malaysia will face under its chairmanship is the ongoing civil conflict in Myanmar. As a bloc, ASEAN has faced persistent criticism for its inadequate response to Myanmar’s political and humanitarian crisis, particularly the junta’s refusal to abide by the Five-Point Consensus agreed in April 2021. Malaysia has advocated for a stronger stance in ending the conflict compared to many of its neighbors and may offer to play a stronger mediating role as ASEAN Chair. It has been suggested that Malaysia could champion a ‘minilateral’ approach, involving a coalition of concerned ASEAN member states to negotiate a peace process outside of ASEAN’s traditional consensus-based model.

Another major issue in ASEAN will be the South China Sea dispute. As both a claimant state and ASEAN’s coordinator for China relations, Malaysia will need to balance its national interests with regional concerns regarding China. In October 2024, Prime Minister Anwar called for accelerating Code of Conduct negotiations, aiming for completion by 2026.

Towards a New Community Vision 

This year will also mark the final year of the ASEAN Community Vision 2025 and the corresponding ASEAN Economic Community (AEC) Blueprint 2025, with the latter representing the Community Vision’s economic pillar. This moment will provide an opportunity for member states to analyze the progress ASEAN has made in achieving the end goals of the AEC – the creation of a single market and production base within ASEAN. Under Malaysia’s chairmanship, ASEAN will adopt the ASEAN Community Vision 2024, which will set the region’s strategic vision for the next two decades. Malaysia played a notable role in drafting the successor Community Vision, having served as co-chair of the high-level task force for the ASEAN Community Vision 2045 since its establishment in 2022.

Future Turbulence in Global Trade 

ASEAN will also face some turbulence in the global trading system this year due to the second Trump presidency in the United States and escalating U.S.-China tensions. During Trump’s presidential campaign, he had promised to implement 60% tariffs on Chinese imports and between 10% and 20% on all imports entering the United States. Many ASEAN economies are particularly vulnerable to Trump’s tariff plans and punitive measures – five of the six largest ASEAN economies have trade surpluses with the U.S., which means their exports rely heavily on the U.S. market. Should Trump go ahead with placing 60% tariffs on Chinese imports, we can expect many Chinese firms to divert their exports to Southeast Asia instead. This may engender a backlash in many ASEAN economies due to a possible flooding of cheap Chinese imports. However, many ASEAN economies may also benefit from the ongoing reconfiguration of global supply chains away from China as part of the ‘China Plus One’ strategies adopted by multinational firms.

Under Malaysia’s chairmanship, the conclusion of several ongoing trade negotiations is also expected, including the ASEAN-China FTA (ACFTA) upgrade negotiations as well as the upgrade of the ASEAN Trade in Goods Agreement (ATIGA).

Fostering ASEAN Economic Integration

In response to turbulent geopolitical configurations and the potential economic impact from a second Trump presidency, Malaysia is looking to further intra-ASEAN economic integration, primarily through digitalization and power grid. One mechanism it seeks to pursue is enhancing ASEAN’s digitalization efforts to establish the bloc as a strategic and competitive digital hub. This could be achieved, among other measures, through the conclusion of the ASEAN Digital Economy Framework Agreement (DEFA). The DEFA is a regionwide framework setting the ground rules on cross-border digital services, with key themes that include digital trade (in which member states aim to facilitate trade with electronic documents and interoperable processes) and cross-border e-commerce (with member states hoping to create a more efficient and fairer digital environment).

Other areas which member states are negotiating as part of DEFA include big data, data flows, data privacy, and cybersecurity. ASEAN Secretary-General Kao Kim Hourn has expressed hopes that the bloc could conclude DEFA negotiations in 2025. Given that digital readiness is uneven across the region, it is hoped that DEFA can help digital businesses in less-prepared countries. It is also hoped that establishing a dependable rule-setting framework can unlock some US$2 trillion for ASEAN’s digital economy.^[1]

Malaysia is also looking to further ASEAN economic integration through prioritizing the ASEAN power grid, which involves the transmission of power from Laos and Thailand. In August 2024, negotiations over the Laos-Thailand-Malaysia-Singapore Power Integration Project, which involves the supply of up to 100 megawatts of electricity from Laos via Thailand and Malaysia, were reported to have reached a halt. Malaysia’s Prime Minister, Anwar Ibrahim, has hinted at pushing for a conclusion in the negotiations during its chairmanship.

Limitations to Malaysia’s Ambitions

Ultimately, ASEAN’s consensus-driven model entails limitations to how much Malaysia can hope to achieve under its chairmanship in one year. Anwar’s recent decision to appoint former ASEAN political figures and heads of states, including former Thai premier Thaksin Shinawatra, as advisors for Malaysia’s chairmanship, suggests that Anwar may stick with tried-and-tested strategies when it comes to confronting the challenges that ASEAN faces.The second part of the series will delve into the key political and economic trends in member states of the ASEAN-6 countries: Malaysia, Vietnam, Thailand, Indonesia, the Philippines, and Singapore.

About the Southeast Asia Public Policy Institute

The Southeast Asia Public Policy Institute is a research institute based in Bangkok and Singapore, working across the region. Our mission is to support the development of solutions to the most pressing public policy challenges facing Southeast Asia in the 21st century. The Institute undertakes in-depth research to develop actionable policy solutions on a range of issues across sustainability, technology, public health, trade, and governance. We convene dialogues with stakeholders and decisionmakers to drive discussion on the challenges and opportunities facing markets across the region. The Institute draws on a network of in-market researchers, advisors, and partners to provide insights and recommendations for governments, policymakers, and businesses.

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^[1] Yuichi Shiga (December 2024), ‘ASEAN aims to conclude digital economy pact negotiations in 2025,’ in Nikkei Asia.

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