EU, ASEAN
European leaders seeking deeper engagement with Southeast Asia
(16 June 2025) European leaders are seeking deeper engagement with Southeast Asia, hoping to position themselves as an alternative partner to the region’s traditional dependency on China and the U.S. amid renewed geopolitical and economic uncertainty. At the 2025 Shangri-La Dialogue, French President Emmanuel Macron urged stronger ties, citing mutual concerns over China’s military presence in the South China Sea and the global implications of Russia’s invasion of Ukraine. Despite these overtures, analysts noted persistent barriers to Europe’s influence, such as geographic distance, divergent political priorities, and stalled EU-ASEAN trade agreements. Europe currently maintains free trade agreements with only Singapore and Viet Nam, while its total 2024 goods trade with Southeast Asia (EUR 258.7 billion) lags behind China (USD 982.3 billion) and the U.S. (USD 476.8 billion). Experts argue that Southeast Asia remains primarily motivated by economic interests, and that without meaningful trade reform or market access Europe will struggle to compete. However, the EUISS suggested Europe can still play a strategic role by offering transparent, non-zero-sum partnerships in energy security, green infrastructure, and digital governance. These could help Southeast Asia diversify and resist hegemonic pressures, especially in territorial disputes with China, by raising diplomatic and reputational costs of escalation.

MALAYSIA, UK
UK eyes strengthening bilateral cooperation in semiconductors, clean energy, and education
(29 June 2025) Ajay Sharma, the United Kingdom’s new High Commissioner to Malaysia, has prioritised strengthening bilateral cooperation in semiconductors, clean energy, and education. He outlined plans to align UK efforts with Malaysia’s National Semiconductor Strategy by supporting integrated chip design and advanced manufacturing, noting SMD Semiconductor’s new facility in Wales as a case of Malaysian outbound investment. Sharma also proposed collaboration between universities to create specialised semiconductor courses, with the intention of expanding such programmes to Malaysia. In clean energy, he emphasised Malaysia’s potential in carbon capture, green technology, and energy transition, and expressed interest in boosting two-way investment in this sector. Citing examples such as YTL’s Brabazon project and Wessex Water, Sharma encouraged further Malaysian investment in the UK while aiming to raise UK business awareness of opportunities in Malaysia. On trade, he highlighted the importance of maximising benefits from the UK’s recent accession to the CPTPP and stressed simplifying administrative processes to ensure accessibility. With current UK-Malaysia trade at GPB 6 billion (MYR 34.8 billion), he sees significant room for expansion in sectors including technology, healthcare, life sciences, and defence. Sharma stated that a simplified, cooperative approach is essential to sustaining free trade amid global pressures on the WTO and rising protectionism.

MALAYSIA
Malaysia launches landmark lithium-ion battery separator facility in Penang
(30 June 2025) Malaysia has launched INV New Material Technology Sdn. Bhd.’s lithium-ion battery separator facility in Penang, marking the country’s first commercial operation of its kind and the largest in Southeast Asia. The MYR 3.2 billion investment, aligned with the New Industrial Master Plan 2030 and the Chemical Industry Roadmap 2030, will produce up to 1.3 billion square metres of wet-processed and coated separators annually, a critical input in electric vehicle battery manufacturing. The facility is expected to create over 2,000 jobs, including 550 high-skilled technical roles with starting salaries above MYR 3,000 per month. The project includes structured workforce training and collaboration with international experts to build domestic capacity in high-value sectors. According to the Malaysian Investment Development Authority, the facility strengthens Malaysia’s EV ecosystem and industrial transformation goals. The INV New Material Technology CEO emphasised the plant’s role in sustainability, innovation, and long-term talent development. Incorporating Industry 4.0 technologies such as automation and digital systems, the facility aims to enhance operational efficiency and environmental performance. The launch positions Malaysia as a regional leader in the EV supply chain and high-tech manufacturing.

THE PHILIPPINES
Tourist arrivals in 2024 falls short of government’s 7.7 million target
(30 June 2025) The Philippines ranked seventh in Southeast Asia for tourist arrivals in the first four months of 2024, attracting 2.1 million visitors, behind Malaysia (13.4 million), Thailand (12.09 million), and Viet Nam (7.67 million), according to Outbox Company and official data. The full-year total of 5.9 million arrivals fell short of the government’s 7.7 million target and trailed Cambodia’s 6.7 million, prompting public criticism over high travel costs, poor infrastructure, and weak internal and external connectivity. Visitor numbers from South Korea dropped 18 percent year-on-year to 468,337, while Chinese arrivals were significantly below the 2 million target, partly due to geopolitical tensions and the suspension of e-visas. Despite reduced volumes, tourism receipts reached an all-time high of PHP 760 billion (USD 13.2 billion) in 2024, reflecting a shift toward higher-value and sustainable tourism. Researchers have indicated the government is repositioning its strategy to focus on responsible and community-oriented tourism. Key challenges remain, including limited international and domestic flight capacity, inadequate airport infrastructure, and complex transit logistics. Experts stressed the need for systemic improvements in connectivity, destination management, and human capital to strengthen competitiveness and enable inclusive sectoral growth.

THE PHILIPPINES
Central bank revises its 2025 current account deficit forecast to 3.30 percent
(30 June 2025) The Philippine central bank has revised its current account deficit forecast to 3.30 percent of GDP in 2025 and 2.50 percent in 2026, down from the earlier projection of 3.90% for both years. The balance of payments deficit is now projected at 1.30 percent of GDP for 2025 and 0.50 percent for 2026, compared to the prior estimate of 0.80 percent for both years. These adjustments account for global uncertainties affecting investor confidence, although the bank maintains the country has adequate liquidity buffers. Gross international reserves are expected to decrease to USD 104 billion in 2025 from USD 106.30 billion in 2024, before rising to USD 105 billion in 2026. Forecasts for overseas remittances remain unchanged, with growth of 2.80 percent in 2025 to USD 35.50 billion and 3.00 percent in 2026 to USD 36.50 billion. Separately, the government has revised its GDP growth targets downward, now expecting 5.50–6.50 percent for 2025 (from 6–8 percent), and 6–7 percent for 2026 to 2028 (from 6–8 percent), citing geopolitical risks in the Middle East and changes in U.S. trade policies.

INDONESIA
Indonesia inaugurates USD 5.9 billion electric vehicle battery plant
(30 June 2025) On 29 June, Indonesian President Prabowo Subianto inaugurated a USD 5.9 billion electric vehicle battery plant project by Chinese-Indonesian consortium Contemporary Amperex Technology Indonesia Battery (CATIB) project in Karawang, West Java. The project is backed by China’s Contemporary Amperex Technology (CATL), and will see the establishment of a lithium-ion battery plant with an initial capacity of 6.9 GWh, targeted to begin operations by end-2026, and to expand to 15 GWh by 2028. The plant will supply battery cells for electric vehicles and energy storage systems, with 30 percent of production intended for export to Japan, the U.S., and India. The venture, part of China’s Belt and Road Initiative, also saw the launch of an integrated USD 4.7 billion battery industrial complex in East Halmahera, North Maluku, covering 3,023 hectares and set to include nickel mining, two smelters (completion by 2027–28), a 30,000-tonne NCM cathode factory (2028), and a 20,000-tonne battery recycling facility (2031). The North Maluku site will employ 10,000 workers and supply raw materials to Karawang until it reaches full operational capacity. Electricity supply issues that delayed construction have been resolved, with 24 MW of solar power for Karawang and 400 MW, including coal-fired plants, for North Maluku. Prabowo emphasised the project’s role in enhancing Indonesia’s EV value chain and economic growth through higher value-add compared to raw material exports.

INDONESIA
Indonesia to relax import restrictions on 10 groups of commodities
(30 June 2025) Indonesia will relax import restrictions and requirements on 10 groups of commodities, including fertilisers, forestry products and plastics, to improve business conditions and address regulatory overlap. The policy aims to reduce red tape and provide greater regulatory certainty, in response to longstanding concerns from traders and findings in a recent U.S. Trade Representative report. Indonesia’s Deputy Industry Minister stated the move will benefit industrial players seeking simplified access to raw materials. The announcement comes ahead of the 9 July deadline for U.S. tariff negotiations, following the imposition of a 32 percent tariff on Indonesian goods by the Trump administration. In 2024, the U.S. recorded a goods trade deficit of USD 17.9 billion with Indonesia.

RCEP Monitor

SOUTH KOREA
South Korea hopes to use trade talks with the US to establish broader framework for future cooperation
(28 June 2025) During his first official visit to Washington, South Korea’s new trade minister Yeo Han-koo met with U.S. Commerce Secretary Howard Lutnick, Trade Representative Jamieson Greer, and Interior Secretary Doug Burgum, alongside multiple lawmakers, to negotiate a mutually beneficial trade agreement ahead of the 9 July deadline to reinstate suspended 25 percent tariffs. Yeo presented President Lee Jae Myung’s trade policy and emphasised South Korea’s intention to use the talks to establish a broader framework for future cooperation. He highlighted the economic risks of renewed tariffs, particularly to key sectors such as semiconductors, cars and batteries, amid a slowing domestic economy and a recent downward revision of the 2025 GDP growth forecast from 1.5 percent to 0.8 percent by the central bank. Yeo also raised concerns about U.S. export controls affecting technology transfers. Lutnick stated the U.S. is aiming to finalise trade deals with 10 countries before the deadline but did not identify them, and mentioned that an extension by Trump is possible to allow negotiations to continue. However, South Korean officials confirmed they have received no assurance of such an extension and remain uncertain about the outcome.

NEW ZEALAND
Filled jobs rises marginally by 0.1 percent to 2.35 million in May 2025
(30 June 2025) New Zealand’s filled jobs rose marginally by 0.1 percent to 2.35 million in May 2025 but remained near the lowest levels since January 2023, reflecting continued employer caution amid global uncertainty. This follows economic indicators such as manufacturing contraction and declining consumer spending, leading economists to forecast higher unemployment in Q2 and Q3. ASB Bank projects weak hiring throughout 2025, citing ongoing global instability and lingering effects from last year’s recession, despite a 0.8 percent GDP growth in Q1. ASB forecasts Q2 GDP growth at 0.3 percent, while the Reserve Bank of New Zealand’s estimates 0.1 percent. New Zealand’s Finance Minister attributed declining business confidence and investment to trade tariff uncertainty and geopolitical instability. Despite a rebound in business confidence in June, ANZ Bank highlighted recent declines in actual activity and employment. Economists suggest easing wage pressures could support future rate cuts, though the RBNZ is expected to hold the Official Cash Rate at 3.25 percent on 9 July. Market data indicate a 25 basis-point cut in August is likely, but the probability of further reductions this year remains below 40 percent.

AUSTRALIA
Australian unicorns face funding shortfall compared to US and China
(29 June 2025) Australia has produced 1.22 unicorns per USD 1 billion invested since 2000 — the highest ratio globally and nearly double that of the US — yet continues to face a funding shortfall compared to the US and China, according to a report by Side Stage Ventures, Dealroom.co and Amazon Web Services. In 2024, Australian startups raised USD 3.4 billion, significantly below the 2021 peak of USD 6.5 billion, with only USD 1 billion directed toward early-stage firms. Software dominates the sector, with leading firms such as Canva, Atlassian, WiseTech Global and Afterpay achieving multibillion-dollar valuations. Growth areas include energy, health, and creative industries, supported by regional demand for renewables. Challenges include limited domestic capital and geographic isolation, with 39 percent of early-stage funding sourced internationally, compared to 21 percent in the US and 27 percent in Europe. Despite low capital availability, smaller fund sizes and valuations offer opportunities for investors, with industry leaders noting the shift in focus from startup survival to performance.