Opinion ASEAN is an economic powerhouse that must resolve its contradictions

Much of this recalls the origin of ASEAN itself. The group was formed in 1967 after the Konfrontasi, the bitter three-year conflict between the two Southeast Asian neighbours Indonesia and Malaysia, ended in 1966 with the two countries concluding a peace agreement. Indonesia, Malaysia, the Philippines, Singapore and Thailand became founding members of ASEAN on August 8, 1967, with the signing of the Bangkok Declaration. Over the years, five more countries joined as members. Timor-Leste, which became independent in 2002, joined as a full member of ASEAN after completing the longest accession process of any new member, a process that was protracted due to questions over its institutional preparedness.

When ASEAN was established, while some saw it as the last act of decolonisation of Southeast Asia, it was also regarded as a bastion against communist ideology that was rapidly spreading in the region and, thus, a pro-American grouping. In fact, for long, Southeast Asia had been an arena of geopolitical contestation. In the 19th century and early years of the 20th century, France and Britain were rival colonial powers in mainland Southeast Asia. In the post-World War II era, the US became the dominant power. In the last decade, confronted by the rise of an assertive China, ASEAN countries have been hedging against both the US and China.

Why is ASEAN important? Its combined population is nearly 700 million. As a bloc with a collective GDP of over $4 trillion, it is growing at 25 per cent faster than the global average rate. Its economic resilience is attributable to improved policy fundamentals, private sector dynamism and the fact that it has significant potential for next generation policies to deepen trade, financial and technological integration. ASEAN also has a unique convening capacity that straddles several continents – take the ASEAN Regional Forum and the East Asia Summit, for instance. When the concept of the Indo-Pacific began to gain salience from 2017, all major stakeholders, including India, underlined their belief in ASEAN centrality.

For more than 15 years, ASEAN’s largest trade partner has been China (followed by the US and the EU). The US is the largest source of foreign direct investment (FDI) into ASEAN at $74.4 billion in 2023 (followed by the EU at $24.9 billion and China at $17.3 billion). More than 6,000 US companies are present in ASEAN. The US is also its biggest export market while ASEAN mainly imports from China intermediates needed for its manufacturing sector.

Given that most of its members have export-led economies, the new US tariffs, hitting both American allies in the region and others, have been severely disruptive for ASEAN members. Further, the sudden USAID funding cuts have also impacted public health projects and research and development. While China’s economic footprint in the region is on an upward trajectory (a new ASEAN–China FTA has been signed), security and defence links with the US continue to be important.

On the flip side of ASEAN’s remarkable progress is its uneven economic growth, with wealthy countries far outstripping the newer member states. And, there is an internal crisis in Myanmar since 2021 that ASEAN efforts have been unable to resolve.

It is against this backdrop that we must view the border conflict between Cambodia and Thailand that erupted this summer. The century-old dispute is the consequence of French colonial expansion and arbitrary map-making. There have been military flare-ups from time to time along the 817-kilometre-long border, over the disputed 11th century Preah Vihear Khmer Shaivite temple claimed by Thailand but awarded by the ICJ to Cambodia and some other un-demarcated areas. From 2011, there was a period of calm and bonhomie between the two countries prior to the recent conflict.

A five-day intense border conflict in July 2025 resulted in more than 40 deaths, around 3,00,000 civilians displaced, exchanges of rocket fire and air strikes, preceded by a leaked phone conversation at the highest levels by Cambodia that cost a young Thai PM her job. Nevertheless, with the proactive facilitation of ASEAN chair Malaysia, under pressure from the US and with China as an observer, the two sides entered into an initial ceasefire agreement on July 28 that was further expanded on October 26.

The two-page “peace deal”, called a “declaration” by Thailand, lists the steps to be taken by both sides including setting up of ASEAN Observation Teams (AOT) to better verify the withdrawal of heavy weapons, landmine clearance, suppression of scam-related crimes and creation of a framework for joint border area management. On Monday, the actual process of heavy weapons withdrawal began. Both sides have to deal with “ultranationalists” that are truculent and demanding, while also trying to ensure that their economies do not suffer. The timeline for total withdrawal of weapons is till the end of the year.

On the sidelines of the summit, the Cambodian Prime Minister nominated US President Trump for a Nobel Peace Prize, while Thailand signed a rare earths agreement with the US.

For India, ASEAN rightly continues to be the cornerstone of its Act East policy — central to its vision of the Indo-Pacific and rich with potential for regional economic integration and political convergence.

The writer is former Ambassador of India to Thailand