It is expected that Malaysia’s chairmanship will demonstrate its “soft diplomacy skills” based on alliance building to address these contentious issues through making practical resolutions.
ASEAN member states have always had high regard for Malaysia whenever the country takes on the chairmanship.
The Malaysian government administration is well prepared and geared up to assume the role of Asean chair in 2025 for the fifth time. Malaysia hosted the Asean chairmanship in 1977, 1997, 2005 and 2015.
Malaysia’s ability to be an effective chair will be tested as it balances securing the interests of the region and maintaining the centrality of Asean in ensuring the stability of regional architecture while preserving its own national interests.
It carries a significant meaning for Malaysia and the unity government in particular, to reaffirm its role as a key regional player after experiencing years of political upheaval since 2018.
It is perfectly timed for Prime Minister Datuk Seri Anwar Ibrahim, under Malaysia’s chair, to showcase his strategic and economic statecraft as well as quiescent diplomacy skills to raise Asean’s profile and relevance on the global stage.
The global economy is in a constant state of flux. There are many unresolved issues and problems with major-power tensions rising, and more difficulties likely lie ahead.
The immediate focus is on Donald Trump’s second presidency and its Trumponomics impact on the world economy. Additionally, the developing countries are facing the disruptive impact of rapid new technology development and climate change.
Anwar has been making frank comments and outspoken stances on key Asean, regional and global issues. These include territorial disputes involving conflicting island and maritime in the South China Sea, the Myanmar quagmire, escalation in the Middle East crisis and the ongoing US-China rivalry.
Building alliance
It is expected that Malaysia’s chairmanship will demonstrate its “soft diplomacy skills” based on alliance building to address these contentious issues through making practical resolutions.
It is generally acceptable that China and Asean have concurred with Anwar’s assertion that all sensitive issues surrounding the South China Sea should be discussed either bilaterally or multilaterally, and behind closed doors.
Asean will keep a non-confrontational approach with China over South China Sea, which is deemed as effective in ensuring security stability in the region and to the freedom of global commerce and navigation.
Any tensions and attempts to destabilise this region not only risk overshadowing China’s trade and investment ties with South-East Asia but also will not benefit China either.
On the addition of new members to 10 member states of Asean, Malaysia anticipates recommendations for facilitating Timor-Leste’s early full membership, which was granted official observer status during the 40th and 41st Asean Summits in Cambodia in 2022.
Timor-Leste’s official inclusion into Asean would bolster the region’s economy and contribute to its resilience.
Malaysia has historically played a key role in pushing Asean to deal with emerging realities in the region.
Ten years ago, when Malaysia assumed the chair in 2015, it was instrumental in developing the Asean Economic Community (AEC) blueprint to enhance economic integration across the region – characterised by free movement of goods, services, and investments as well as freer flow of capital and skills. The blueprint will end in 2025.
This time round, there are high expectations on Malaysia’s capability to craft a framework to deepen economic, financial and social integration of the Asean community, particularly for securing stronger trade and investment linkages.
Malaysia has announced three core strategies for Asean. First, bolstering regional value chains and regulatory cooperation as well as connecting to the global economy.
This is crucial for expanding trade and investment linkages and fostering digital transformation within the region. Asean needs to secure the regional supply chains and strengthen its connections to the global economy.
The second and third strategies include strengthening member countries’ fundamentals and reinventing, restructuring and recalibrating their economies while leveraging each other’s strengths.
Deepening intra-Asean’s financial and trade integration remains a top priority given the expected intensification of the United States-China rivalry, and hence, the need for ensuring global supply chain security.
Hence, Malaysia’s chair must review and refine the strategic approach to expand intra-Asean cooperation in all pillars, and more importantly, continue to strengthen relations with dialogue partners, especially China and the United States.
Despite efforts by member economies to promote intra-regional trade, intra-Asean trade currently is about 23% to 25%, and most Asean trade was with extra-regional countries in 2023.
Hence, there is room to increase the trade volume, backed by enhanced trade facilitation and infrastructure as well as streamline trade compliance regulations and restrictions. Asean is the third-largest economy in Asia and the fifth-largest in the world, providing considerable potential for sustaining robust consumption and investment opportunities.
Amidst the shifting global economic dynamics, the redirection of investment flows and the reconfiguration and diversification of supply chains to mitigate geopolitical risks, Asean has sustained its resilience and appeal as a leading destination for foreign direct investment (FDI).
In 2023, FDI inflows to Asean reached another historical level of US$230bil, maintaining its position at the top of FDI recipients among developing regions for three consecutive years.
Asean offers strong investment opportunities in renewable energy, electric vehicles, digital economy, and food security in addition to its competitive advantages as a global hub for financial and digital services as well as manufacturing.
Trade expansion
Besides the Regional Comprehensive Economic Partnership, Asean signed an upgraded Asean-Australia-New Zealand Free Trade Area and almost concluded negotiations to upgrade China-Asean Free Trade Agreement (FTA) 3.0.
Nevertheless, it is observed that individual Asean member states such as Thailand and Indonesia have also negotiated FTAs with the European Union and Eurasian Economic Union, respectively in 2023. This suggests an exploration of further trade expansion beyond their existing FTAs.
With the ending of the AEC blueprint in 2025, the year 2025 will mark another significant milestone as Malaysia will launch the new Asean Community Vision (ACV) 2045, which will chart the Asean strategic pathway in the next twenty years.
The Asean leaders will adopt the 1,830-word ACV 2045, a follow-up on the declaration of the development of strategic plans to implement a forward-looking blueprint – an ambitious document addressing a wide range of issues and scenarios based on input from the bloc’s top bureaucrats and thinkers who understand Asean.
The blueprint seeks to position Asean as a dynamic, resilient, innovative and people-centric regional organisation, emphasising sustainability, economic integration, human capital development and technological innovation as future pillars.
The strategic plans will outline three pillars, connectivity and improvement of the Asean secretariat to ensure its future success. Malaysia is looking forward to the upgrading and conclusion of some of the FTAs with certain countries such as China, India and Asean member countries.
The Asean region is Malaysia’s biggest trading partner, accounting for 29.6% of the country’s exports and 24% of imports in January to September 2024.
Recognising the importance of facilitating more intra-Asean trade and services, member states have to streamline the harmonisation and efficiency of trade and standardisation of regulatory trading regimes to remove technical barriers to trade.
Asean member states have to accelerate digital integration and put in place reliable physical infrastructure and favourable trade policies to facilitate seamless trade flows across Asean.
Malaysia also proposes to explore economic partnerships beyond the Asean region, proposing the Asean-Gulf Cooperation Council (GCC) + China Summit in 2025 to broaden these partnerships. The Asean-GCC is a partnership between Asean and GCC. The GCC includes six countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Asean, the GCC and China can collectively result in creative partnership for furthering interregional cooperation or pursue bilateral relations through their individual member states.
It is believed that this new path of interregional cooperation is a positive force in the midst of a divided and multipolar world.
Hopefully, further integration cooperation will contribute to a more sustainable global future as it demonstrates the value of diversity and dynamics of two regional organisations and China to share their common goals when pursuing global relations.Finally, Malaysia can play the driver seat to revive the Asian Monetary Fund and de-dollarisation agenda, starting with Asean and in BRICS+ as Malaysia is now a partner country into the BRICS alliance.
Malaysia has won the backing of China to revive the plan for an Asia-centred multilateral finance institution, which was mooted 26 years ago in the aftermath of the 1997-1998 Asian Financial Crisis.
Amid facing the hurdles, Malaysia’s campaigning for the de-dollarisation also aligns with China, Russia, Brazil and the European Union are already trying to shift away from a reliance on the dollar.
Lee Heng Guie is Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.
