Strategic thrust 1: Enhancing trade and investment — a necessary step, but not without risks —Phar Kim Beng and Luthfy Hamzah 

SEPTEMBER 29 — As Malaysia carries the Asean Chairmanship into 2025, one of its proudest deliverables has been the tangible progress in trade and investment. Under the theme of “Strategic Thrust 1”, four important outcomes have been tabled: the conclusion of the Asean Trade in Goods Agreement (Atiga) upgrade, the signing of the Asean-China Free Trade Area 3.0 Upgrade Protocol, the substantial conclusion of the Asean-India Trade in Goods Agreement (Aitiga) review, and the declaration of Asean-Gulf Cooperation Council (GCC) economic cooperation.

Taken together, these achievements underscore Asean’s enduring faith in economic integration and connectivity. They also show that Malaysia, under Prime Minister Anwar Ibrahim, is determined to situate Asean not only at the heart of Asia-Pacific, but also as a fulcrum linking the Gulf, South Asia, and East Asia. This is no small feat, considering the turbulence in global trade caused by Donald Trump’s new tariff regime, European uncertainty over industrial competitiveness, and Beijing’s own struggles with slower growth and supply chain pressures.

Trade upgrades as confidence signals

The Atiga upgrade is particularly significant. It signals that Asean has not stood still while global trade regimes falter. By updating the framework for freer movement of goods, Asean demonstrates that its internal market is still central to its future, even if intra-regional trade levels remain relatively modest. The same is true for the Asean-China FTA 3.0 upgrade, which is meant to deepen tariff reductions and address newer areas such as digital economy, sustainability, and the proliferation of non-tariff barriers.

Similarly, the Asean-India Aitiga review matters for rebalancing. India has long been a hesitant economic partner, often pulling back from deeper integration — as its refusal to join the Regional Comprehensive Economic Partnership (RCEP) in 2020 showed. To have reached substantial conclusion in this review, even if final details remain pending, sends a message that Asean still has convening power in South Asia. The review, if implemented sincerely, could open avenues for Asean exporters and service providers to tap into India’s enormous and increasingly urbanised middle class.

Finally, the declaration with the GCC is emblematic of Asean’s ambition to stretch its economic diplomacy westward. In an era of energy transition, rare-earth competition, and new supply chains, having GCC as an economic partner strengthens Asean’s hand. The Gulf economies are eager to diversify beyond oil, and Asean offers them a market of 660 million consumers as well as opportunities in renewable energy, halal industries, and infrastructure development.

Caveats and cautions

Yet, these milestones cannot be celebrated without important caveats. First, the reality of Asean integration remains sobering. Despite tariff reductions since the 1990s, intra-Asean trade has stagnated at around 23–25 per cent of total trade for decades. Non-tariff barriers, customs inefficiencies, lack of harmonised standards, and poor transport infrastructure blunt the impact of any agreement. Unless Atiga’s upgrade addresses these implementation hurdles in concrete terms, it risks being more aspirational than practical.

Second, deeper ties with China bring undeniable benefits but also carry risks. While Asean-China FTA 3.0 expands economic opportunities, it also increases exposure to Beijing’s economic leverage. Trade interdependence can be a strength, but it can also become a vulnerability if Asean member states remain fragmented in their economic strategies. Asean must guard against a lopsided dependence that limits its ability to diversify supply chains or negotiate fairly with other partners.

Third, India’s hesitance has not disappeared. While Aitiga’s review is nearly complete, Delhi’s protectionist instincts and its “Atmanirbhar Bharat” (self-reliant India) policy may still slow real market access. India has often delayed tariff cuts or introduced new duties that offset trade concessions. Asean must prepare for the possibility that India’s commitments remain partial, heavily qualified, or backloaded, which could dilute the review’s eventual benefits.

Fourth, while the GCC declaration is promising, Asean should remember that Gulf states are simultaneously deepening ties with China, Russia, and even the BRICS grouping. Unless Asean offers consistency, credibility, and a clear pathway for investment flows, the GCC may not prioritise South-east Asia in its diversification strategy. Asean must prove that it can deliver stability, predictable markets, and enforceable rules if it is to be taken seriously as a long-term partner.

The chair’s balancing act

Malaysia’s chairmanship deserves recognition for driving these deliverables forward. It has kept Asean’s economic agenda alive amid global uncertainties and demonstrated that even in an era of protectionism and geopolitical contestation, regional integration remains possible. Still, the Chair must be careful not to oversell. Agreements are only as good as their enforcement, and Asean’s record of narrowing the gap between rhetoric and reality has been patchy.

Malaysia must also resist the temptation of presenting these outcomes as ends in themselves. They are instruments, not guarantees. The ultimate test lies in whether small and medium-sized enterprises (SMEs) across Asean actually feel reduced costs, easier customs clearance, better market access, and improved supply chain resilience. Without tangible results on the ground, the legitimacy of these agreements will be questioned not just by scholars but by citizens who expect real benefits.

The other danger lies in allowing “summit triumphalism” to dominate headlines while structural weaknesses persist. Tariffs are only one part of the story. Infrastructure gaps, weak financial connectivity, inconsistent legal frameworks, and digital divides remain formidable barriers. If Asean leaders do not confront these, even the most ambitious agreements will not deliver the promised prosperity.

Conclusion

Strategic Thrust 1 illustrates Asean’s instinct to double down on trade integration when the world economy looks shaky. That instinct is correct, but the risks are real. Malaysia’s chairmanship has shown that Asean can still deliver consensus and progress on paper. The challenge is to ensure that these agreements translate into resilience for Asean’s societies and sustainability for its future.

Otherwise, Asean risks repeating an old pattern — grand declarations at the summit table, but little impact on the factory floor, the shipping lane, or the digital marketplace. The credibility of Asean depends on narrowing that gap.

Malaysia has set a high bar with its chairmanship, but the hard work lies ahead: ensuring that words turn into deeds, and that Strategic Thrust 1 truly enhances the prosperity of all Asean peoples.

* Phar Kim Beng, PhD, is professor of Asean Studies at the International Islamic University of Malaysia and director of the Institute of International and Asean Studies (IINTAS). Luthfy Hamzah is a research fellow at IINTAS.

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.