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

Executive summary The Association of Southeast Asian Nations (ASEAN) – comprising Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Viet Nam and Timor Leste – is home to over 670 million people5 and generates a combined gross domestic product (GDP) of $3.8 trillion, making it the world’s fifth-largest economy6 in 2023. ASEAN now stands on the cusp of a major industrial transformation. To sustain its growth trajectory and global competitiveness, the region must evolve towards a diversified, high-value and low-carbon industrial model. Indeed, ASEAN is undergoing a profound energy transition. Total energy demand is rising by approximately 3%7 annually, representing some of the fastest growth rates globally. Yet nearly 80%8 of this demand is met by fossil fuels, deepening dependence on volatile imports and increasing fiscal strain. By the late 2020s, ASEAN is expected to become a net gas importer, while oil import bills could exceed $200 billion by 2050.9 These pressures highlight the urgent need for a more resilient and sustainable energy model. ASEAN countries have set bold renewable and net-zero targets not just to cut emissions but to strengthen energy and fiscal resilience. Implementation, however, remains uneven. Fragmented governance, high financing costs and divergent national priorities continue to slow progress, leaving a gap between regional ambition and tangible outcome. Closing this gap requires greater alignment, coordination and practical mechanisms for collective action. Industrial clusters – geographic concentrations of interconnected industries, infrastructure and innovation – offer a powerful solution for transformation at both national and regional levels. For ASEAN, industrial clusters offer scale, cost efficiency and innovation, accelerating clean technology deployment, creating green jobs and strengthening global competitiveness through sustainable, low-carbon growth. This white paper introduces a playbook that serves as a practical guide to translate strategic intent into tangible outcomes and accelerate ASEAN’s industrial transformation. Complemented by real-world case studies, it provides both the direction and instruments to turn ambition into action. ASEAN has made significant strides in advancing its energy and industrial transformation agenda. Achieving its ambitions will demand deeper and more coordinated regional collaboration. The World Economic Forum welcomes joint action for policy-makers, clusters and financiers across three key priorities: Align policies and markets to accelerate transition Achieving ASEAN’s energy transition requires stronger policy alignment and market coherence across member states. Harmonizing technical and market standards such as grid codes, tariff structures and renewable energy credit (REC) mechanisms while gradually rebalancing fossil fuel incentives and developing a common carbon pricing and disclosure framework will strengthen investor confidence. Build collaborative ecosystems Industrial clusters can serve as collaborative ecosystems and testbeds for clean technologies like renewables, hydrogen and shared carbon capture networks reducing risks and cost. Pooling capital across public, private and financial partners enables shared infrastructure. Meanwhile, integrating offtake partners secures demand, reduces risk and enhances project bankability. These ecosystems can span national, regional and global networks. Mobilize finance to scale the transition ASEAN’s transition demands large-scale capital mobilization through stronger collaboration and innovative financing from multilateral development banks (MDBs), international financiers, investors and governments. Progress through sustainable finance tools and funds is notable, yet financing levels remain insufficient for both green and transition finance. Governments can play a key role in strengthening de-risking through, for example, concessional finance, guarantees, tax incentives, viability gap funding, tripartite/contract for difference (CfD) contracts and public-private partnership (PPP) models, which are essential to attract private investments.South-East Asia requires coordinated, low- carbon industrial transformation through aligned policies, collaborative clusters and innovative finance for sustainable, resilient growth. 1 2 3 Industrial Transformation in ASEAN: A Cluster-Driven Model for Regional and Global Collaboration 4