Malaysia’s decision to invite representatives from China and Arab Gulf states to the has made headlines beyond the Southeast Asian nation that currently holds the chairmanship of the 10-member trade bloc.
Malaysian Prime Minister Anwar Ibrahim has insisted though, that the presence of non-members at the summit is not intended as a move against the , nor does it signal that the Association of Southeast Asian Nations (ASEAN) is “choosing sides.” Rather, he told reporters in Kuala Lumpur, it was about “ensuring ASEAN’s strategic relevance in a multipolar world.”
However, Anwar’s plan for a trade alliance between ASEAN, China, and the resource-rich, investment-driven Gulf states may not sit well with Washington, says Sam Baron, a researcher at the Yokosuka Council on Asia-Pacific Studies in Japan.
“ASEAN nations, several Gulf states, and China all run significant trade surpluses with the US,” Baron told the South China Morning Post. “Trump isn’t afraid to use trade policy as a sledgehammer. Anwar needs to be cautious.”
Natural trading partners?
The combined gross domestic product (GDP) of the Arab Gulf states, comprising the so-called Gulf Cooperation Council (GCC), stood at around $2.1 trillion (€1.96 trillion) in 2023, according to the International Monetary Fund (IMF). Saudi Arabia and the United Arab Emirates (UAE) account for nearly three-quarters of the economic output of the bloc, which also includes Bahrain, Kuwait, Oman and Qatar.
ASEAN is one of the world’s fastest-growing economic regions, with a combined population of approximately 690 million. In 2023, its 10 member states reached total GDP of nearly $3.8 trillion, with Indonesia alone contributing a third of that as the group’s most populous nation.
For the , ASEAN countries are already key trading partners, ranking third after the US and China. ASEAN’s top trade partners, meanwhile, are China, the US, the EU, and Japan.
Despite its economic clout, It includes both low-income nations like Laos and wealthy, highly developed city states like Singapore. Malaysia’s per capita GDP, for example, is nearly twice that of Thailand.
“ASEAN countries have actually been benefiting from the US-China trade tensions over the past years, gaining global export market shares and attracting foreign investment,” said Francoise Huang, senior economist at Allianz Trade, in an interview with DW.
Beneficiaries of diversified global trade
Since the pandemic exposed vulnerabilities in global supply chains, many multinational companies have increasingly diversified their manufacturing investments away from China and into ASEAN nations.
Huang notes that foreign direct investment (FDI) in ASEAN countries from advanced economies within the has now doubled compared to investments in China. Back in 2018, the situation was reversed.
“ASEAN is also attractive for Chinese companies, with Chinese automakers having invested $5.4 billion there in 2023, nearly tripling the scale from 2015,” she said.
Sharon Seah, a senior fellow at the ASEAN Studies Center of Singapore’s ISEAS-Yusof Ishak Institute, believes closer cooperation between ASEAN and the Gulf states specifically makes strategic sense.
“Although ASEAN-GCC trade numbers are still relatively modest, there is much room for expansion,” she told DW, adding that for the Asians the key strategic imperative was a need to “diversify trade links and increase cooperation outside of the region.”
“By enhancing bloc-to-bloc cooperation with partners like the EU and the GCC, ASEAN is hopeful that it can keep multilateral trade open and free,” she said
Controlling the world’s most important trade route
ASEAN countries Malaysia, Indonesia, and Singapore hold a key advantage in global trade as they border the Strait of Malacca, through which over a quarter of the world’s total trade volume passes. Additionally, 80% of oil shipments from the Middle East to China and Japan transit through this narrow waterway.
US President Donald , unleashed for now , makes it difficult to predict how global trade will change, says Sharon Seah. But in light of this, Malaysia’s decision to invite China is “unprecedented.”
“It can be viewed as Malaysia wanting to expand ASEAN’s cooperation with both China and the GCC in a tripartite partnership to leverage each party’s strengths,” she said.
Allianz Trade’s Francoise Huang thinks that the Gulf states could bring substantial financial resources to the table, thanks to their huge oil and gas revenues. So strategic investments in technology and could benefit the Asian economies.
“ASEAN could tap on some of that investment for its own growth, positioning its technological sector to attract investment from GCC sovereign wealth funds,” said Huang.
ASEAN a future hub of global trade?
A recent study by Allianz Trade suggests that some ASEAN countries are well-positioned to expand their role in global trade.
Malaysia and Vietnam ranked second and third place in the analysis of what could become so-called next-generation trade hubs, exhibiting “high scores in efficiency and trade potential.” Indonesia came in at fifth place.
The number one spot in the ranking was claimed by one of ASEAN’s potential new Gulf partners — the United Arab Emirates.
Currently, about 20% of ASEAN exports go to the United States. Given Washington’s increasingly aggressive trade policies, it is unsurprising that some ASEAN nations are “clearly going towards a diversifying foreign policy approach,” says Huang. “For example, Indonesia has decided to join BRICS, while also advancing its roadmap to access the OECD.”
Malaysia is also striving to become a member of the group, which is named after the initials of its founding nations, Brazil, Russia, China, and South Africa.
However, and has threatened to impose 100% tariffs if the bloc attempts to “play games with the dollar.”
This article was originally written in German.
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