Southeast Asia’s shifting geopolitics: A challenge for India’s Act East policy

18 July 2025

As Southeast Asia navigates a shifting geopolitical landscape, it has become an increasingly significant arena for regional and international strategic engagement. Straddling the East Indian Ocean and the Western Pacific, the region commands vital sea lanes, including the Malacca Strait and the contested South China Sea. While the strategic rivalry between the United States and China — characterised by militarisation and competition for influence — remains a significant contextual factor, it is the evolving economic relationships within and beyond the region that are more decisively reshaping Southeast Asia’s geopolitical landscape.

This is underscored by the fact that defence spending across most Southeast Asian countries, measured as a percentage of GDP, has remained stagnant or even declined in recent years, reflecting a greater emphasis on economic development over militarisation. Vietnam stands as a modest exception, with its defence spending increasing only marginally from approximately 2.0 per cent to 2.3 per cent of GDP. The region’s focus on economic engagement, trade diversification, and integration into global value chains highlights the centrality of economic considerations in its strategic calculus.

Amid these regional shifts, India’s Act East Policy (AEP) — launched in 2014 as an evolution of the earlier Look East Policy — seeks to deepen its strategic and economic engagement with Southeast Asia. While notable progress has been made in strengthening diplomatic and defence ties with ASEAN countries, the policy’s economic dimension reveals stark imbalances. Although trade volumes have expanded, India's investment footprint in the region remains heavily skewed, with over 95 per cent of its outward FDI concentrated in Singapore, raising concerns about the depth and diversification of its economic engagement. Furthermore, the connectivity pillar of India’s Act East Policy remains underdeveloped. It is impeded by political instability in Myanmar — highlighted by the 2021 military coup and ongoing ethnic conflicts that have delayed approximately 30 per cent of the India–Myanmar–Thailand Trilateral Highway — and by India’s bureaucratic bottlenecks, land-acquisition challenges, and infrastructure delays in its Northeast.

Southeast Asia’s strategic significance and emerging faultlines

Southeast Asia holds a central and indispensable position in the Indo-Pacific due to its unique geographic location, dynamic economic growth, and crucial maritime connectivity. As the geographic centre of the India–ASEAN–China golden arc of opportunity, ASEAN acts as a vital economic and strategic bridge between the Pacific and Indian Oceans. This positioning makes the region not only a conduit for trade and investment but also a focal point of geopolitical competition and cooperation. Economically, Southeast Asia is set to experience robust growth, with the Asian Development Bank projecting a 4.7 per cent expansion in 2025 as compared to 4.5 per cent in 2024, despite global uncertainties and recent slowdowns due to trade tensions and policy volatility.

Crucially, reinvigorating key connectivity initiatives such as the India–Myanmar–Thailand Trilateral Highway would serve as both a symbolic and practical demonstration of India’s commitment to regional integration.

Over the longer term, Southeast Asia is expected to grow at an average annual rate of 5 per cent from 2024 to 2034, underscoring its potential as the world’s largest rising consumer market. Furthermore, the region's maritime routes are of global importance — over one-third of world trade flows through Southeast Asian waters, especially the Strait of Malacca and the South China Sea, making the security and openness of these sea lanes critical for global commerce. This combination of economic vitality, centrality to global trade, and geographic importance firmly establishes Southeast Asia as a strategic linchpin in the Indo-Pacific, requiring focused policy attention, economic partnerships, and security cooperation from regional and extra-regional powers alike.

As regional states navigate shifting power dynamics, they increasingly find themselves under competing pressures from China and the United States. Though "gravitational pulls" may suggest a natural or balanced attraction, in reality, China's influence has grown disproportionately — driven by its expansive Belt and Road Initiative and assertive posture in the South China Sea. Beijing’s land reclamation, militarisation of disputed features, and rejection of international legal rulings have not only intensified concerns over sovereignty and resource access but also undermined the principles of freedom of navigation that underpin regional stability.

The United States, in turn, has sought to deepen its presence through initiatives like the Indo-Pacific strategy and strategic cooperation with allies such as Japan, Australia, and the Philippines and direct initiatives with Southeast Asia. In 2024, the US strengthened these ties through the ASEAN Digital Workplan, over USD 8 billion in infrastructure support, USD 600 million in clean energy investments, and key trade advocacy, while also advancing defence cooperation via CARAT exercises, USD 17 billion in military sales, and high-level security dialogues.

These developments have placed Southeast Asia in a complex position: while many benefit economically from ties with China, they remain wary of Chinese dominance and seek to maintain autonomy by hedging between major powers. Strategic ambivalence continues to characterise Southeast Asia’s geopolitical stance, as regional states seek to balance competing powers without overtly taking sides. While a full-scale war in the South China Sea remains unlikely, the region faces escalating power projection and grey-zone tactics — such as the use of maritime militias, illegal fishing, artificial island-building, and coercive patrols by China — that collectively threaten regional peace and stability. In response, ASEAN littoral states (excluding landlocked Laos) are actively enhancing their maritime security through naval modernisation, increased joint exercises, and port infrastructure upgrades. Countries like Vietnam and the Philippines, for instance, are expanding defence cooperation with external partners, including the United States, Japan, and increasingly, India. These measures, although varying in scale and ambition, highlight a strategic recalibration that not only bolsters national resilience but also creates space for deeper engagement with like-minded external actors.

India’s Act East Policy: Progress and limitations

India’s Act East Policy (AEP) was framed as a more proactive iteration of the earlier Look East Policy, aiming to deepen connectivity, commerce, and cultural ties with Southeast Asia and the broader East Asian region. However, the common assertion that the Look East Policy lacked strategic and defence dimensions is historically inaccurate. The Indian Navy had already undertaken significant initiatives in Southeast Asia well before the formalisation of the Look East Policy in the early 1990s, partly to counter criticisms of its expanding regional footprint during the 1980s. These maritime engagements laid the groundwork for what became the most dynamic and successful aspect of India’s eastward outreach.

While the AEP rhetorically elevated strategic and defence cooperation, the past decade has witnessed limited tangible progress. Aside from the notable sale of BrahMos cruise missiles to the Philippines, India's defence ties with Southeast Asia have largely plateaued, with few substantive breakthroughs or sustained momentum in regional security partnerships. While Vietnam and the Philippines are often identified as India’s principal defence partners in Southeast Asia, this assessment requires nuance. The Philippines signed a USD 374.96 million BrahMos missile deal in 2022 — India’s first major weapons export — and has already received two of the three missile batteries, with its personnel trained in India for independent operation. This reflects tangible progress in strategic trust and maritime defence cooperation. Vietnam, on the other hand, though reportedly close to finalising a USD 700 million BrahMos purchase, continues to pursue a balanced approach by maintaining strong defence ties not only with India but also with China and Russia, underscoring its strategic hedging.

While maritime cooperation has helped build confidence, the assumption that shared concerns over China naturally lead to deeper alignment with India overlooks Southeast Asia’s strategic complexity. Not all regional states view China as an immediate threat; many adopt a multi-vector diplomacy approach (like Vietnam and Indonesia) to maintain strategic autonomy and regional balance, navigating relations with India, China, the US, and ASEAN simultaneously.

India is steadily sharpening its maritime diplomacy across the Indo-Pacific. It will soon assume the Chair of the Indian Ocean Naval Symposium (IONS) for 2025–2027, underscoring its growing role in regional naval dialogues. At the same time, India is deepening ties with ASEAN through forums like the ASEAN Defence Ministers’ Meeting Plus (ADMM+), where it co-chaired the first India–ASEAN Defence Ministers’ meeting in March this year. Operationally, India’s navy is building real-time partnerships: recent joint search-and-rescue drills with Malaysia, the ASEAN–India Maritime Exercise (AIME) co-hosted with Singapore, and India’s active participation in Indonesia’s International Fleet Review and Exercise Komodo 2025, all signal a commitment to shared regional security. Frequent port calls — to Kota Kinabalu, Bali, and Sabang — further demonstrate expanding interoperability with Southeast Asian partners.

But to move from a visible presence to a lasting influence, India must go beyond symbolic gestures. The region’s priorities are clear: enhanced maritime domain awareness, collaborative mechanisms for non-traditional threats, and sustained institutional partnerships. To lead in the evolving maritime order, India must better align its efforts with these expectations.

India’s economic engagement with Southeast Asia has lagged behind its strategic initiatives. As of 2024, ASEAN–China trade stands at over USD 900 billion, whereas India–ASEAN trade remains comparatively modest at approximately USD 131.5 billion. This disparity reflects not merely a lack of ambition but the absence of a coherent investment strategy and persistent structural challenges. The issue lies more with limited outbound investment and capacity-building than with trade volumes per se. Regulatory complexity, tariff and non-tariff barriers, and inadequate infrastructure have all constrained India’s economic outreach. Vietnamese officials, for instance, have expressed concerns over India’s burdensome import procedures and high tariffs, especially on agricultural products. Among Vietnam’s fruit exports, only dragon fruit currently enjoys zero import duty in India. While such restrictions are often designed to protect vulnerable domestic sectors, they also undercut regional trade potential. In contrast, India’s imports from Southeast Asia are heavily driven by necessity, particularly palm oil — an essential commodity given India’s insufficient domestic production of vegetable oil for both household and industrial use. This transactional pattern underscores the limited depth of India’s trade integration with the region.

Act East 2.0: Delivering on the ground

Southeast Asia’s fluid geopolitics presents India with strategic opportunities but also highlights the persistent limitations of its Act East Policy. While defence and maritime cooperation have expanded, overall progress remains constrained by slow infrastructure development and weak economic integration. As regional states hedge between competing major powers, India risks strategic marginalisation unless it effectively aligns its evolving vision — from SAGAR to MAHASAGAR — with concrete regional priorities within the broader Indo-Pacific framework.

As the world’s fourth-largest economy and a preferred security partner and first responder in the region, India stands at a strategic crossroads in its engagement with Southeast Asia. The tenth anniversary of the Act East Policy offers a timely opportunity to translate strategic intent into tangible results. To do so, India must move beyond declaratory diplomacy and commit to outcomes-driven engagement, particularly in areas such as trade liberalisation, regulatory simplification, and timely infrastructure execution. Central to this shift is the need for a coordinated national effort — through the establishment of a dedicated task force — to address long-standing bureaucratic and logistical bottlenecks. These include inadequate physical infrastructure, sluggish customs procedures, land acquisition hurdles, and fragmented cross-border transport governance. Tackling these challenges in a systematic, priority-driven manner would not only improve connectivity but also enhance India’s credibility as a dependable partner in regional development.

Moreover, a strategic outbound investment policy focused on ASEAN — especially in agri-business, digital infrastructure, and manufacturing — would allow India to expand its economic presence beyond traditional partners like Singapore. This would help foster deeper supply chain integration and reinforce mutual trust. Crucially, reinvigorating key connectivity initiatives such as the India–Myanmar–Thailand Trilateral Highway would serve as both a symbolic and practical demonstration of India’s commitment to regional integration.

By connecting these efforts into a cohesive strategy, India can align its geopolitical ambitions with economic substance—shaping a more resilient, trusted, and forward-looking partnership with Southeast Asia. To play a more decisive role in the evolving Indo-Pacific, India must move beyond the limitations of its Act East Policy by institutionalising maritime cooperation, strengthening maritime domain awareness, and collaborating with Quad partners to address non-traditional security threats — while firmly upholding ASEAN centrality as a cornerstone of its regional engagement.

DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.

Author’s biography

Dr Apila Sangtam is a guest faculty at Dr. B.R. Ambedkar University at the School of Global Affairs, Non-Resident Fellow at the Indo-Pacific Studies Centre (IPSC), Melbourne, and Kautilya Fellow 2025 with India Foundation, New Delhi. She has previously served as an “Associate Fellow” and Head of the “ASEAN and South-East Asia” Cluster of the NMF over the two-plus-years. Her academic interests cover Maritime Security, India-US and Southeast Asia relations, Quad Partnership, and Indo-Pacific Defense Partnership. Image credit: Flickr/MEAphotography.