Context and opportunity1 Rapid industrial growth and fossil fuel dependence heighten energy security risks; industrial clusters can drive resilient, competitive and low-carbon transformation. South-East Asia stands at a pivotal inflection point, driven by robust economic growth, with gross domestic product (GDP) expected to expand around 4.7% annually in 2025 and 2026.10 Prosperity has brought rising energy demand, with the Association of Southeast Asian Nations (ASEAN) now being the fourth-largest energy consumer worldwide.11 Nearly 80% of supply still comes from fossil fuels.12 Meanwhile, coal provided 44% of electricity in 2023.13 Fossil fuel subsidies reached $105 billion in 2022 alone,14 domestic gas production is declining, and ASEAN is expected to become a net liquefied natural gas (LNG) importer by 2032, with demand forecast to surge 182% over the next decade.15 South-East Asia’s remarkable growth is increasingly constrained by its energy model. The energy trilemma, balancing security, affordability and sustainability, has become the defining challenge for both individual countries and the region. ASEAN members share a common direction in the energy transition, but each starts from a unique baseline. While national strategies must reflect local realities, energy security and deep decarbonization will demand regional collaboration across interconnected grids, gas networks and emerging low-carbon value chains such as hydrogen, ammonia and carbon capture.At the regional level, ASEAN has established clear long-term ambitions, setting targets to reach 30% renewable energy in total primary supply, 45% renewable power capacity and a 40% reduction in energy intensity by 2030.16 Overall, eight member states now have net zero commitments – most by 2050, with Indonesia targeting 2060.17 There has been encouraging progress. The Lao People’s Democratic Republic–Thailand–Malaysia– Singapore Power Integration Project delivered the region’s first multilateral, cross-border electricity trade.18 Building on this momentum, by 2022 the region had achieved a 24.5% energy intensity reduction from 2005 levels; renewable energy reached 15.6% of total primary energy supply and 33.6% of installed power capacity.19 Yet the region remains off-track to meet its 2016–2025 ASEAN Plan of Action for Energy Cooperation (APAEC) goals. Energy intensity reduction lags the 32% target, and renewables’ share in total supply is below the 23% mark. Meanwhile, fossil fuel consumption continues to grow.20 Amid these challenges lies a shared opportunity to align the energy transition with industrial transformation. Industry is the economic engine of ASEAN, the largest energy consumer among the end use sector and the second-largest CO2 $105 billion in fossil fuel subsidies in 2022 alone from ASEAN. 5 Industrial Transformation in ASEAN: A Cluster-Driven Model for Regional and Global Collaboration

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