Why Economic Nationalism Was the Biggest Story of 2024 in Southeast Asia – The Diplomat

2024 was an eventful year in ASEAN. Clean energy had its ups and downs across the region, tourism and travel continued their slow recovery to pre-pandemic levels, and countries like Thailand have progressed with great success packages of fiscal spending. Even so, if we look back to 2024 and try to pinpoint the most prominent events, it really boils down to one story: protectionism and economic nationalism are on the rise and don’t seem like they’re going away anytime soon.

This story actually has two parts. The first includes states that try to stimulate domestic production by directly intervening in the market through fiscal and tax policies. Thailand was quite active hereoffering generous subsidies to consumers who buy electric vehicles and attractive terms to foreign companies investing in local production of electric vehicles. In fact, the policy has been so successful that the Thai market is now in danger becoming oversaturated with electric vehicles, mostly from Chinese companies.

Another is the expanded use of trade tools, such as tariffs and embargoes, to protect domestic industry and undermine foreign competition in the pursuit of industrialization. This year we have seen an increase in this type of protectionism, with Indonesia leading the way. In 2024, the ban on nickel ore exports to encourage downstream industrialization continued apace, and the state now wants acquire more direct ownership nickel smelter.

Indonesia has also aggressively used market access to try to secure better investment and trade conditions from foreign partners. The Ministry of Trade is blocking the latest iPhone from the Indonesian market unless Apple relents on investment commitments. Chinese e-commerce platforms have received the same treatmentand Indonesian regulators keep low-cost traders like Temu out of the market. Vietnam also banned Tema a few weeks ago, showing that the use of trade and market access in this way is becoming more normalized across the region.

This is clearly not a unique Southeast Asian phenomenon. The United States implements its own industrial policy with CHIPS and the Inflation Reduction Acts. The re-election of Donald Trump should remove any doubt that the general momentum of American politics is now bending toward domestic interests to the detriment of a free and open global trading system. And China has apparently used a variety of trade and industrial policy levers for many years to boost economic growth, recently trying to boost production to help offset weaknesses in other sectors.

Rising protectionism and economic nationalism in Southeast Asia should be seen as a response to this broader global trend. In both Indonesia and Vietnam, for example, the reason for banning Temu is that Chinese consumer goods enter the market at such low prices that local companies cannot compete. By banning Temu, Indonesia and Vietnam say they will no longer absorb excess Chinese production if it comes at the expense of domestic economic interests. The message is clear: local businesses and consumers are a priority and the state will use a wide range of tools to protect them.

Economic nationalism is it is hardly a new trend. For several years now, Indonesia and others in the region have been leaning towards greater state intervention in markets, particularly when it comes to commodities, natural resources and strategic industries. The writing is on the wall that the global economy and the region are moving towards a more open transactional and internal approach to economic development.

Despite this, there are still commentators who will argue that Southeast Asia remains fundamentally committed to free trade and that the rise of economic nationalism is short-lived. It is true that countries in the region are open to trade and investment when it suits their goals, but it is also true that they are willing to intervene in markets, if necessary and forcefully, when they believe it is in the national interest. 2024 is the year, in my opinion, where it became impossible to ignore this reality, and that’s why I think it was the biggest story this past year.