This article first appeared in Forum, The Edge Malaysia Weekly on December 16, 2024 - December 22, 2024

A friendly comic book character once said, “With great power comes great responsibility”. As Malaysia assumes the Asean chairmanship in 2025, the weight of expectation will rest heavily on its shoulders. Asean faces a year of reckoning, shaped by intensifying external pressures and long-standing internal hurdles that challenge the region’s ability to speak and act as one. From mounting geopolitical tensions to constraints from consensus-building practices, Malaysia must steer Asean through turbulent waters to ensure the bloc remains relevant and united on the global stage.

The year 2025 marks not only Malaysia’s return as Asean chair, but also coincides with a world bracing for renewed turbulence. With Donald Trump entering his second term as US president, the spectre of protectionism once again looms large. His threats of sweeping tariffs on major trading partners could reverberate across Asia, throwing global trade flows into disarray. Against this backdrop, the need for Asean members to cooperate and leverage each other’s strengths becomes ever more critical.

The ability of the Asean chair to present the economic bloc as a unified collective voice will provide member countries more bargaining power on the global stage — after all, there is strength in numbers. Yet, even as the need for a cohesive Asean has never been greater, Malaysia will need to grapple with an important question: how much deeper can Asean integrate?

According to the Asean Secretariat, the bloc is virtually tariff-free, with tariffs on 98.6% of products fully eliminated under the Asean Trade in Goods Agreement as of 2020. Thus, the headroom for further tariff removal is limited.

While Asean’s diversity — spanning economies as advanced as Singapore’s and as emerging as Myanmar’s — has long been its strength, it is also its greatest constraint. Calls to emulate the European Union’s single market or currency union model have always been unrealistic for Asean. The region’s political systems, economic development levels and policy priorities vary too widely for such deep integration to be feasible or beneficial.

However, this does not mean Asean is without options. Malaysia can focus on pragmatic, achievable goals that deliver tangible benefits — chief among them being the reduction of non-tariff barriers (NTBs).

The economic benefits from the easing of NTBs are clear. Empirical estimates and model-based simulations published in an International Monetary Fund working paper (January 2022) indicate that reducing such barriers could potentially increase gross domestic product (GDP) by around 1.6%.

Despite significant progress in tariff reductions, NTBs such as inconsistent regulations, cumbersome customs procedures and technical standards remain a major challenge for Asean. Addressing these barriers could unlock new opportunities for businesses and strengthen regional supply chains, making Asean a more resilient economic bloc.

Malaysia should champion initiatives to standardise and simplify trade and customs procedures and reduce regulatory inconsistencies across member states. While less flashy than deep integration efforts, this approach is far more realistic and impactful for the region’s economic integration ambitions.

While internal hurdles persist, Asean’s greatest challenge in 2025 may come from outside the region. The intensifying US-China rivalry continues to test the bloc’s unity, particularly on issues like the South China Sea disputes. Simultaneously, Trump’s “America First” policies, including unilateral trade tariffs, threaten to fragment global markets and undermine the rules-based multilateral system. For Asean, this is both a challenge and an opportunity. If the bloc can act with unity and purpose, it can position itself as a credible middle power and advocate for open, rules-based trade.

This is where Malaysia’s leadership will be critical. As chair, Malaysia must reinforce Asean centrality — the principle that Asean remains the primary platform for dialogue and cooperation in Southeast Asia. Centrality, however, is only meaningful if Asean can demonstrate its ability to effectively address challenges.

One of Asean’s defining principles is consensus-based decision-making, but this model has increasingly become a double-edged sword. While it promotes inclusivity, it can also lead to gridlock, particularly on contentious issues. To overcome this, Malaysia can explore and champion more flexible mechanisms, such as the Asean Minus X (A-X) approach. First implemented in September 2003, the A-X formula allows some member states to move ahead on economic agreements without the consent of all 10 member states, with others joining later at their own pace. By championing this pragmatic approach, Malaysia can drive Asean to act decisively on critical issues like trade facilitation and climate change initiatives while respecting the region’s diversity.

Malaysia’s chairmanship comes at a time when regional cooperation is more valuable than ever. Protectionism, geopolitical rivalries and structural challenges threaten to undermine Asean’s unity and global relevance. Yet, this period of uncertainty also presents Malaysia with a rare opportunity to lead. The stakes are high, but with pragmatic leadership and a focus on achievable goals, Malaysia can help Asean navigate these challenges and reaffirm its relevance on the global stage.

Woon Khai Jhek, CFA, is a senior economist and head of the economic research department at RAM Rating Services Bhd

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