Rethinking Green Industrial Policy Towards a sovereign and people-centred Justice for a Strong Regionalism

ASEAN, as a region with diverse economic development trajectories, currently exhibits structural vulnerabilities and mounting tensions between national interests and global pressures. The region stands at a crossroads, confronting two major and simultaneous pressures, namely China’s dominance over green-technology production chains, and the US’s deployment of tariffs as an instrument to reshape global trade governance. Faced with these pressures, member states have tended to pursue bilateral pathways in search of short-term gains, which in turn weakens ASEAN’s collective position, deepens regional fragmentation, and ultimately contradicts several agreed regional agendas. ASEAN’s limited political cohesion and weak institutional mandate render the region structurally vulnerable to external pressures.

The realization of a just energy transition in ASEAN countries will certainly depend on the extent to which governments provide industrial policy support for the development of domestic industries, particularly infant industries in the new green sector. However, in practice, industrial policy is applied unevenly, where advanced economies operate with few restrictions, developing countries continue to face marginalization. There is a structural injustice whereby developed countries have historically been free to implement broad industrial policies, while developing countries are constrained by rules of liberalization, privatization, and deregulation (such as IMF/World Bank structural adjustment programs). 

A study by Thrasher et al. (2025) shows that developing countries are disproportionately targeted in trade and investment disputes, both within the WTO framework and through Investor-State Dispute Settlement (ISDS), as a consequence of the implementation of industrial policies, particularly those related to green industries. In contrast, industrialized countries have a much higher volume of industrial policies, with 740 policies currently in effect, three-quarters of which consist of subsidies and state aid measures, including financial assistance in foreign markets, grants, and government loans. Developing and emerging-market countries, by comparison, have implemented 230 policies, nearly half of which are export and import measures as well as local content requirements designed to support nascent industries.

In the green transition agenda, ISDS mechanisms are increasingly being used by fossil fuel companies to hinder the energy transition, while the scramble for critical minerals is increasingly limiting ASEAN countries’ ability to unlock and utilize their resource wealth for domestic purposes. An UNCTAD report (2025) documents an increase in ISDS cases throughout 2024, particularly in the mineral and extractive sectors, driven by rising demand for critical minerals in the energy transition. A total of 58 cases were documented related to extractive activities and energy supply, with approximately 55% filed against developing countries and 80% of the claimants originating from developed countries. These dynamics pose significant challenges for ASEAN, where approximately 85% of the investment agreements signed by member states are older-generation treaties.

Efforts by developed industrial nations to limit the imposition of export taxes or local content requirements on critical minerals—as seen in various negotiations—restrict ASEAN countries’ ability to increase the value added of their own industries. This gives rise to the risk of “Green Colonialism,” where the integration of environmental issues into the global economic order often creates new double standards that risk turning climate mitigation into a tool for the expropriation of resources from peripheral countries. 

The Green Industrial Policy in ASEAN generally adopts a state-led top-down model through fiscal incentives and local content requirements. Each country has a different focus based on its resource endowment: Indonesia on nickel downstream processing and EV batteries, Malaysia on semiconductors, and Singapore on high-tech services. There is also a risk of a “Race to the Bottom”. Fierce competition among ASEAN members to attract green investment risks triggering a decline in labor and environmental standards in pursuit of short-term competitive advantage.

In the context of global geopolitical challenges means that ASEAN’s GIP strategy can no longer be pursued using old methods; instead, it must be achieved through the strengthening of solid regionalism to protect shared interests. Strengthening regionalism is therefore an urgent and collective strategic imperative. Only by acting in concert can ASEAN enhance its bargaining power, secure the policy space necessary for a just green industrialisation and prevent new forms of dependency and resource exploitation that would reinforce green colonialism. Strong regionalism would enable ASEAN to position itself not merely as a market or resource supplier, but as an active and consequential participant in the restructuring of global production chains. This is not a defensive response to immediate crises; it is a long-term political project to build the foundations of sovereign, inclusive, and sustainable development.

Rethinking GIP in Southeast Asia from a Global South perspective, therefore, entails a twofold imperative: redefining developmental objectives, especially on regional integration, and identifying practical pathways for implementation. Effective GIP requires more than regulatory flexibility. It demands moving beyond ‘one-size-fits-all’ global templates towards regionally grounded strategies that prioritise structural transformation, technological learning, and inclusive development, while guarding against new forms of green dependency amid intensifying geopolitical rivalry. In this context, ASEAN itself needs to advocate for flexibility rules that open policy space for developing countries within its regional trade rule framework, addressing the phenomenon of regulatory chill.

Therefore, ASEAN needs to redefine GIP in order to restructure the industrial development pathways of each member state, directed towards a structural green economic transformation grounded in sovereignty, self-reliance, community-centred justice, and the strengthening of collective regionalism. This includes building a platform for economic and political cooperation based on the principle of South— South solidarity that opens equitable policy space for member states to achieve development equality, such as more substantive special and differential treatment rules for LMICs, including greater flexibility to implement industrial subsidies, local-content requirements, and technology-transfer policies.

ASEAN needs to establish a collaborative upgrading framework for green industrial strategy. This requires shifting member states’ green industrialisation strategies from fragmented competition toward integrated cooperation, leveraging the region’s institutional diversity and complementary economic structures as the foundation of collective strength.

Another important element is to institutionalize people-centred regionalism within ASEAN’s governance architecture. Realizing a just energy transition requires member states to commit to reforming ASEAN institutions so that the region moves beyond formal consultations toward genuine strategic negotiations that account for structural power asymmetries and protect local livelihoods. ASEAN must go beyond formal consultations. Moving from mere one-way policy dissemination toward genuine strategic negotiations that involve civil society and affected communities in decision-making. People-centred interests must not be limited solely to the Social-Cultural Pillar (ASCC), but must be integrated into the Economic Pillar (AEC) to prioritize people and the planet over mere capital accumulation. It should also ensure a fair distribution of benefits and costs, reskilling programs for workers, and protection for marginalized groups and indigenous peoples. Lastly, the needs on Democratic Ownership to define the GIP in terms of “by whom, for whom, and by whom,” recognizing communities as active agents in the governance and implementation of green industrial policies.