The Economic Race in Southeast Asia – and why Europe is falling behind

Southeast Asia is the most significant arena in the global economic competition, where global and regional economic powers are vying for influence. While China, the United States, and Japan have strategically repositioned themselves in the region in recent years, Europe risks falling behind. The EU must finally turn its ambitious strategies into concrete action in the region. The key to this is aligning political measures more closely with the interests of European companies in Southeast Asia.

Europe should learn from the strategic adjustments of its competitors. What unites China, the USA, and Japan is that they employ different models of cooperation between government and business as part of a comprehensive strategy to support their companies' market entry into Southeast Asia. Due to its “going-out” economic strategy and its Belt-and-Road investment initiative, China has risen in recent years to become the region’s most important economic and trading partner. The Chinese government uses its state-owned enterprises and proactively supports its private industry and tech companies to access markets and supply chains in Southeast Asia. Japan, on the other hand, is trying to counterbalance China's growing influence with its own Free-and-Open-Indo-Pacific strategy. The Japanese government, in cooperation with Japanese businesses, is advancing regional economic corridors to secure access to resources and build new supply chains in Southeast Asia. Japan closely integrates its development aid with its foreign economic policy and provides substantial support to its companies in diversifying their supply chains. In contrast, the USA follows a sectoral approach in Southeast Asia, focusing on industries where American companies are particularly competitive. For example, well-capitalized investment funds, in cooperation with major American digital multinational corporations and backed by political support from the US government, are heavily investing in expanding the region's digital infrastructure.

Europe neither has the massive state-owned enterprises of China nor the financially powerful investment funds of the US economy. However, due to its vast internal market combined with world-leading, export-oriented industrial companies, the EU remains an attractive economic partner. To capitalize on these strengths in Southeast Asia, the EU must set the right course to support European companies in entering the region's markets and supply chains. A swift conclusion of EU trade negotiations in the region, free from non-trade-related demands, is crucial. Additionally, a closer dialogue between politics and business is needed, along with a foreign economic agenda that specifically promotes European investments in the region. Finally, the Global Gateway Initiative should be financially expanded in Southeast Asia and developed into a true European investment strategy.

In recent years, the EU has significantly lost economic influence in Southeast Asia compared to other economic powers. A loss of economic strength also means a loss of political leverage in the rapidly growing emerging markets of the region. Europe needs Southeast Asian countries to achieve its global goals in combating climate change and strengthening the multilateral order. However, if the EU does not make a strategic shift, it risks being permanently sidelined in the region, both politically and economically.

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