By Dr Mohd Safar Hasim
How Indonesia’s CEPA sets the benchmark—and why ASEAN must unify its trade posture to unlock deeper EU engagement, regulatory convergence, and long-term economic resilience.
A Strategic Vision Beyond Bilateralism
As global trade realigns under the weight of protectionism, supply chain fragmentation, and shifting geopolitical allegiances, ASEAN must look beyond fragmented bilateralism. The prospect of a region-wide ASEAN–EU Free Trade Agreement (FTA) is no longer a distant ambition—it is a strategic necessity.
The European Union, long reliant on transatlantic and intra-European trade, is recalibrating its global partnerships. Pressured by US tariff shocks and China’s internal market tightening, Brussels is looking eastward.
ASEAN, with its demographic scale, digital ambitions, and strategic geography, offers a compelling alternative.
Yet progress toward a region-wide FTA remains slow. The EU’s preference for high-standard, enforceable agreements often clashes with ASEAN’s consensus-based, flexible approach. Still, the recent Indonesia–EU Comprehensive Economic Partnership Agreement (CEPA), signed in Bali on Sept 23, 2025, offers a viable path forward—phased, inclusive, and sustainability-driven.
Indonesia’s CEPA: A Blueprint for ASEAN
Indonesia’s CEPA sets a new benchmark. It eliminates 98% of tariffs within five years, liberalises investment across strategic sectors, and embeds enforceable sustainability clauses covering deforestation, labour rights, and environmental governance. It also facilitates digital trade, intellectual property protection, and regulated labour mobility.
For Indonesia, the agreement is more than a trade win—it is a strategic hedge against market volatility and a catalyst for domestic reform. It positions the country not just as a supplier, but as a co-architect of high-standard, inclusive trade frameworks.
The CEPA’s structure—balancing national priorities with global norms—could serve as a blueprint for other ASEAN economies.
EU’s Strategic Recalibration in Southeast Asia
Kuala Lumpur has emerged as a diplomatic crossroads for the EU’s outreach to ASEAN. At the 57th ASEAN Economic Ministers’ Meeting (AEM), European Commissioner Maroš Šefčovič signalled Brussels’ renewed commitment to ASEAN centrality and inclusive growth.
Šefčovič’s engagements included the 21st AEM–EU Trade Commissioner Consultation and the 11th ASEAN–EU Business Summit. His agenda: revive the Malaysia–EU FTA, stalled since 2012, and promote sustainable value chains in green technology, carbon capture, and digital trade.
Negotiations are set to resume in November, with ESG-linked manufacturing, semiconductor diplomacy, and sustainable palm oil certification among the key priorities.
The EU’s presence in Kuala Lumpur reflects a broader strategic recalibration. ASEAN is no longer a peripheral player—it is a regulatory interlocutor and a co-author of the next chapter in global trade governance.
Malaysia’s Role in Shaping the Framework
For Malaysia, the CEPA offers both inspiration and caution. To remain competitive, Malaysia must accelerate its EU negotiations with clear deliverables: ESG alignment, inclusive palm oil diplomacy, and positioning as a hub for EU investment in solar, hydrogen, and EV components.
The revival of the Malaysia–EU FTA presents an opportunity to align national priorities with regional momentum. But it also demands strategic clarity, institutional agility, and stakeholder coordination—especially in navigating EU regulatory expectations and sustainability benchmarks.
Malaysia must also invest in entrepreneurship platforms that empower youth, women, and rural innovators, and align its digital and environmental standards with EU norms to unlock deeper integration.
From Fragmented Deals to Unified Strategy
ASEAN’s diversity is its strength—but also its challenge. While Singapore and Vietnam have tailored EU agreements, and Indonesia now leads with CEPA, the region risks fragmentation without a coherent framework.
A region-wide FTA would enhance ASEAN’s negotiating clout in global forums, integrate its manufacturing base with Europe’s technology networks, and promote regulatory convergence in areas like digital trade, ESG standards, and dispute resolution.
It would also support SMEs and youth entrepreneurship through EU-funded capacity-building and market access programmes—ensuring that trade benefits are inclusive and future-facing.
ASEAN’s Moment to Lead
The Indonesia–EU CEPA proves that high-standard, inclusive, and forward-looking trade agreements are possible—even amid global fragmentation. The EU’s diplomatic choreography in Kuala Lumpur adds weight to ASEAN’s evolving trade posture and signals a readiness to engage the region not just as a market, but as a strategic partner.
For ASEAN, the challenge is not merely to replicate Indonesia’s success, but to scale it. A region-wide FTA would transform ASEAN from a collection of bilateral actors into a coherent, strategic bloc—capable of negotiating with ambition, not caution.
As the world reconfigures its economic alliances, ASEAN–EU trade momentum offers a rare opportunity: to build bridges, not walls; to foster cooperation, not competition; and to ensure that Southeast Asia remains not just a participant, but a shaper of global trade.
The views expressed here are entirely those of Dr Mohd Safar Hasim, a Council Member of the Malaysia Press Institute (MPI).
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