Industrial Transformation in ASEAN A Cluster-Driven Model for Regional and Global Collaboration 2026

Infrastructure barriers –Infrastructure gaps: The region needs to roughly double84 the transmission expansion to meet clean energy targets, but it is constrained by ageing grids, under-planned expansion, persistent misalignment between power generation and transmission planning, and fragmented regional cooperation. Countries lack cluster-level directives such as shared renewable systems or utilities, limiting economies of scale and slowing industrial transition. –Gas lock-in: Gas plays an important bridging role in ASEAN’s transition. ASEAN’s gas lock-in stems from substantial infrastructure investments that create entrenched dependencies. This could limit governments’ ability to pivot to cleaner alternatives. Proactive strategies are needed to ensure gas development remains supportive to the energy transition targets. –Digital infrastructure gaps: ASEAN countries show uneven digital maturity, e.g. deployment of digital twins, AI and energy. Financing barriers –Financing and investment gaps: ASEAN will need $11.9 trillion85 by 2050 to fully transition across energy sectors. A major barrier is ASEAN’s high cost of capital for green projects, compounded by limited private investment, reliance on public funds, restricted financing options and policy uncertainty.86 De-risking instruments and blended finance mechanisms are limited, while inconsistent sustainability disclosures raise investor due diligence costs to industrial players. Immature tokenization and digitalization of asset classes87,88 further limit access to public spreads. –Market and regulatory constraints: Most regional grids still transmit mixed green and brown electrons (restricting access to green finance) and require transition financing. Many ASEAN countries have liberalized electricity generation to allow private participation, but grid transmission, distribution and retail largely remain state-controlled, constraining broader private investment and competition.89 These barriers highlight the need for targeted solutions, and industrial clusters offer the most effective platform to overcome them by integrating efforts. ASEAN’s energy transition will not hinge solely on technology availability, but on the credibility and predictability of its financial and policy architecture. Investors are ready to deploy capital, but policy and market signals remain too uncertain to anchor capital at scale. The region’s next leap requires moving from project-by-project deals to coordinated, system-level investment – where grids, industrial clusters and supply chains work in sync to make low-carbon growth bankable. If ASEAN gets this right, it could show that development and decarbonization can scale side by side. Christina Ng, Managing Director, Energy Shift Institute As industrial output is concentrated in manufacturing hubs, industrial estates and port zones, industrial clusters become critical platforms. Clusters provide a powerful lever to address ASEAN’s systemic challenges, as they are deeply embedded across all dimensions of the economy – from energy production and consumption to supply chains, workforce development, innovation and infrastructure. They host both the highest-emitting facilities and are key GDP and job contributors. For instance, five Thailand industrial provinces – Ratchaburi, Chon Buri, Rayong, Saraburi and Samut Prakan – contribute heavily to both economic growth and emissions.90 Clusters can only function effectively within a strong enabling environment. Supportive policies, governance structures, clean energy investments, infrastructure and cross-border harmonization are critical to the success of industrial clusters. The eight interventions below outline what is required for clusters to serve as engines of ASEAN’s energy transition. 1Promote cluster decarbonization roadmaps to advance national targets: Clusters can support national targets by publishing structured decarbonization roadmaps. Singapore’s Jurong Island shows early progress, while the UK’s Humber91 cluster offers a strong reference with its Net Zero by 2040 plan.2.4 Strengthening industrial clusters’ role in ASEAN’s transition ASEAN will need $11.9 trillion by 2050 to fully transition across energy sectors. Industrial Transformation in ASEAN: A Cluster-Driven Model for Regional and Global Collaboration 13