This article first appeared in The Edge Malaysia Weekly on December 30, 2024 - January 12, 2025
As Asean solidifies its standing as a powerful economic bloc with a gross domestic product (GDP) of US$3.6 trillion (RM16.16 trillion) and a population of 679 million, Malaysia’s role within this vibrant community is increasingly critical. Positioned strategically within Asean, Malaysia has the unique opportunity to leverage its economic strengths to address regional disparities, promote inclusive trade and contribute to Asean’s shared prosperity. However, while the potential is vast, the challenges are equally significant. To achieve sustainable growth, Malaysia must adopt a proactive approach, one that not only champions regional integration but also addresses the very real hurdles hindering Asean’s development.
Asean is already Malaysia’s largest trading partner, accounting for 30% of Malaysia’s exports and 24% of imports as of mid-2024. Trade volumes have reached record highs, with Malaysia’s neighbours like Singapore, Indonesia and Thailand emerging as key partners. However, despite these strong figures, Asean’s trade environment is still marred by inconsistencies in regulations, logistical bottlenecks and persistent non-tariff barriers. For Asean to truly achieve economic integration, these challenges need to be systematically addressed.
Hence, Malaysia should take the lead in pushing for regulatory harmonisation and improving trade facilitation infrastructure across Asean. By championing policies that simplify trade requirements and reduce bureaucratic red tape, Malaysia can create a more conducive environment for small and medium enterprises (SMEs), which make up over 97% of businesses in Asean. Supporting these SMEs is vital; their growth will fuel regional economic resilience but only if cross-border trade is genuinely accessible.
The digital economy in Asean is projected to reach a staggering US$1 trillion by 2030. Malaysia is well positioned to lead this transformation, with its digital economy contributing around 23% to the national GDP in 2023 and robust plans to expand 5G coverage to 82% of populated areas by the end of 2024. Yet, as Asean’s digital footprint expands, so do its cybersecurity risks. According to a 2022 report, 68% of Asean businesses are planning to increase their cybersecurity budgets to address these challenges, a reflection of the region’s pressing need for a secure digital environment.
Therefore, Malaysia plays an important role in advocating Asean-wide cybersecurity standards and data privacy regulations to create a secure digital landscape. Such measures would not only attract tech investments but also boost consumer and investor confidence across Asean. In tandem, Malaysia should push for digital literacy programmes to ensure that the benefits of the digital economy are accessible to all, including underserved communities. A region-wide commitment to both security and inclusivity in the digital space could position Asean as a leader in digital innovation on the global stage, with Malaysia at the forefront.
One of Asean’s most complex issues is the brain drain phenomenon, particularly the movement of skilled workers to higher-paying countries outside the region. Malaysia itself faces this issue acutely, with nearly two million Malaysians working overseas in sectors like healthcare, engineering and finance. This exodus weakens Malaysia’s labour force, undermining its goal to become a high-income economy.
To counter this, Malaysia should work with Asean on creating an intra-regional talent mobility programme that makes it easier for skilled workers to find fulfilling opportunities within Asean. A collective focus on competitive wages, professional growth and work-life balance could help Asean retain its talent. Malaysia’s New Industrial Master Plan 2030, which aims to create 50,000 high-income jobs annually, could serve as a model for Asean, highlighting that regional growth and talent retention are achievable when economies prioritise quality over quantity in job creation.
Malaysia’s 2025 Asean chairmanship presents a unique opportunity for the country to lead the bloc in addressing some of its long-standing challenges. During its previous chairmanship in 2015, Malaysia played a central role in establishing the Asean Economic Community (AEC). Building on that foundation, Malaysia now has the chance to push for initiatives that deepen economic integration and reduce non-tariff barriers, a move that could boost regional GDP by an estimated US$45 billion annually.
To make meaningful progress, we should focus on harmonising trade policies and creating a more unified economic framework that enables easier cross-border transactions. However, the consensus-based nature of Asean decision-making can be a barrier, often slowing down the pace of change. To overcome this, Malaysia could advocate for flexible decision-making mechanisms within Asean, allowing the bloc to respond more swiftly to economic shifts without sacrificing its collaborative principles.
Asean’s infrastructure needs are massive, with projected investment requirements of US$2.8 trillion from 2016 to 2030. Malaysia has already made contributions through the East Coast Rail Link (ECRL) and the Malaysia-Singapore High-Speed Rail (HSR) project. However, the HSR has faced delays, highlighting the difficulties in executing large-scale, cross-border infrastructure projects in the region.
Hence, Malaysia should promote the use of public-private partnerships (PPPs) to accelerate infrastructure development across Asean. Such partnerships could provide the financial support and technical expertise needed to complete these projects efficiently. Moreover, sustainable infrastructure development, particularly in digital connectivity, should be a priority. This will ensure Asean’s economic growth is not just swift but also resilient, with Malaysia leading efforts to build a more cohesive regional transportation and digital network.
Asean’s position between major global powers like the US and China is both a blessing and a challenge. While China remains Asean’s largest trading partner, with over US$1 trillion in trade, the US is a significant investor, with investments totalling over US$338 billion. Asean countries must carefully manage these relationships to avoid being caught in great-power rivalries, particularly as US-China competition intensifies.
Therefore, Malaysia should champion Asean’s commitment to strategic neutrality, advocating for policies that emphasise Asean’s collective interests and independence. A focus on intra-Asean trade would reduce dependence on external powers, allowing Asean to maintain a more balanced and resilient position. Malaysia’s leadership could help Asean navigate this complex geopolitical environment, reinforcing the bloc’s stability and economic security.
In conclusion, Malaysia’s road map within Asean is ambitious and forward-thinking, with the potential to drive substantial progress for both the country and the region. However, success will require more than just visionary goals; it will demand tangible actions and collaborative solutions. By prioritising regulatory harmonisation, digital security, talent retention and strategic neutrality, Malaysia can help shape a more unified and competitive Asean.
The upcoming 2025 Asean chairmanship offers Malaysia a pivotal platform to lead by example, promoting policies that not only strengthen its own economy but also build Asean’s resilience against external pressures. This journey will be challenging but with dedicated leadership and a commitment to shared prosperity, Malaysia has the potential to guide Asean towards a future of sustainable, inclusive growth. In the end, Asean’s success will reflect Malaysia’s own, and the two are inextricably linked.
David Chang is a research officer at BranX-ON Marketing. Sean Thum is a policy officer at the Ministry of Communications.
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