The most iconic moment in the history of Shark Tank is when Aaron Krause, the inventor of Scrub Daddy, waltzed into the tank to pitch a highly engineered polymer foam sponge with a smiley-face design. The male investors dismissed it. Lori Greiner, the sole woman on the panel, did not. She understood the household economy in a way the men at that table simply did not, invested $200,000 for a 20% equity stake, and secured the show’s most successful deal in history. Scrub Daddy has since crossed $1.4 billion in lifetime sales. Lori made over $100 million dollars.

When women are absent from the pitching room, entire economies get written off. For Southeast Asia’s booming startup ecosystem, keeping the investors’ pool a boys’ club means the region is blindfolding itself to its next economic giants.

Southeast Asia does not need more women to pitch. It needs more women to write the checks.

The status quo: Funding is going down, not up

Southeast Asia’s startup ecosystem raised over $13 billion in venture capital in 2025, yet women-led ventures are receiving the thinnest slivers of that pie. All-women founding teams secured just 21 equity funding rounds in 2025, accounting for only 4.6% of total deal volume and a mere 3.2% of total capital raised, while all-male teams captured 83.7% of deal value. There is an obvious ceiling, and it is calcifying.

The popular rebuttal is that there are simply not enough women founders in the pipeline. Women own approximately a quarter of small and medium enterprises across the Philippines, Thailand, and Vietnam, which puts that argument to rest immediately. The sharper question to ask is who sits on the other side of the table deciding whether they are worth funding. Only 17.9% of investment decision-makers at Southeast Asia-headquartered venture firms are women, and that figure has barely moved since 2023. A pipeline cannot fix itself when the gatekeepers are almost uniformly male.

I. Women investors invest more in women founders

A 2023 study by INSEAD Knowledge found that women venture capitalists are twice as likely to fund female-led startups compared to their male counterparts. That statistic is worth sitting with. Doubling the probability of investment is a structural advantage. For a female founder navigating a funding environment where all-women teams secured only 3.2% of total capital in 2025, having a woman on the other side of the table is almost a lifeline.

The reason for this gap in investment behavior goes beyond individual sympathy or shared experience. Investors evaluate founders through a process called pattern-matching: they fund what looks like what they have funded before. Historically, the archetype of a “successful founder” is a young male technologist who dropped out of an elite university, and male investors have been replicating that archetype for decades. The result is a self-reinforcing loop. Male investors fund male founders, male founders build the reference cases, and the reference cases tell male investors what success looks like. Women never enter the pattern, so they never enter the portfolio.

Women investors break that loop. They carry a different set of reference points, different market intuitions, and crucially, a different ability to recognize value in sectors that male investors have historically dismissed. Lori Greiner did not invest in Scrub Daddy because of its smiley-face appearance. She invested because she understood the household economy at a level of granularity that no one else in the room possessed. The same logic applies to every women-led healthtech, femtech, consumer wellness, and financial inclusion startup in Southeast Asia that gets passed over at pitch day because the men around the table cannot map it onto a prior win. Women investors often offer a market intelligence upgrade.

The argument that female founders simply need to perform better collapses under the data. Female-founded ventures perform as well as male-founded ones when controlling for sector, market, experience, and hours worked. The performance record is established. The funding gap persists anyway, which means the variable that requires correction is not founder quality but investor composition. In venture capital, recognition is determined entirely by who holds the pen. That’s why women investors need to be at the forefront of the pitching room.

II. SEA’s venture capital’s “bro culture” is economically costly

Southeast Asia’s VC ecosystem has a cultural problem it has not yet been honest enough to name. Among firms based in the region, the average women-to-men ratio in senior investment roles stands at 0.25, or one woman for every four men. That ratio means the person deciding which startups get funded, which founders get a second meeting, and which sectors get labeled “too niche” is almost always male. While that is a fact, it also has economic consequences.

Harvard Kennedy School research describes a hypermasculine “bro” culture in venture capital whose symptoms include extreme competitiveness, low psychological safety, a reliance on tight, insular networks, and a near-total absence of accountability around gender bias. For female founders, this culture functions like an invisible tax. Before they even deliver a pitch, they are already navigating an environment designed around the comfort of men. Research shows that female founders are evaluated through a gendered lens, assessed as higher-risk than equivalent male founders, and required to prove themselves to a standard their male counterparts are not held to. Due to this, female-founded teams have secured alarmingly low late-stage deals in the past two years across Southeast Asia^.. This is because no one with the power to fund them chose to champion them.

The cost of this culture extends beyond the individual founders it chooses to sideline. When an ecosystem systematically defunds women-led companies, it is eliminating a category of economic actors that has proven its value. Globally, female-led businesses generate higher revenue per dollar invested and reinvest more in their communities. In Southeast Asia, where the household economy is vast and underserved by formal finance, defunding women-led ventures is a category error that the data has been flagging for years

The counterpoint that sometimes surfaces is that gender-lens investing will eventually correct the problem on its own, without requiring women to occupy the actual seats of power. That misunderstands how investment cultures change. A male-dominated firm that adds a gender-lens policy without adding women to its investment committee is hanging a sign on a door while keeping the door locked. Culture in venture capital flows from who is in the room. If bro culture is the disease, male monoculture in the partnership is the condition that allows it to thrive. Dismantling it requires presence, not just intention.

III. Gender-lens investing needs women investors to survive

Gender-lens investing has built a compelling business case. Private equity firms with at least one woman in a senior investment role have raised $29.36 billion across 72 funds since 2020, capturing 67.8% of PE capital raised in the region. All-male teams, by comparison, captured just 32.2%. Gender-diverse investment teams have built a track record that outperforms. The financial argument for including women in investment decision-making has already been written by the data.

But here is what that track record cannot do on its own: it cannot survive without women in the rooms where decisions are made. Gender-lens investing is a strategy that requires its practitioners to see what others miss, to identify the market opportunity in a women-led healthcare platform or a femtech startup that male pattern-matching writes off as niche. That kind of sight is not guaranteed by policy. It is cultivated by experience, by having operated in markets that male investors have never had to navigate, and by understanding the consumer behaviors that women-led businesses are built around.

Consider what happens when a fund adopts gender-lens principles without diversifying its investment team. The deal sourcing still runs through male networks. The due diligence still applies male-centric benchmarks of what traction looks like. The board seats still go to candidates who fit a profile the male partners recognize. Gender-lens investing without women investors is a framework without a practitioner. The strategy exists on paper, yes, but the judgment required to execute it faithfully is missing. Research on investor behavior shows that women VCs are twice as likely to fund female-led startups, precisely because they possess that judgment organically. To want the outcomes of gender-lens investing while refusing to build the investor base that makes those outcomes likely is a contradiction the data refuses to sustain.

Every check written by an investor is a vote for what the economy prioritizes next. The sectors that women build, such as consumer health, financial inclusion, caregiving technology, and education, form the infrastructure of Southeast Asia’s economic future, even when they are treated as peripheral by the investors who should be competing for them. Women will own 75% of global discretionary spend by 2028. The companies serving that market will be worth trillions. The investors who recognize that value early will have outsized returns. The investors who do not will be funding the equivalent of a room full of men who passed on Scrub Daddy.

IV. Economic empowerment requires women to control capital

Entrepreneurship alone cannot close the gender wealth gap. A woman can build the company, assemble the team, grow the revenue, and still find herself structurally excluded from the networks that decide who gets funded at scale. The ceiling in women’s economic participation sits at the capital table, where the decisions about who gets to grow are made by people who were never taught to see her potential.

Capital is power in the most literal sense available to an economy. It determines which ideas survive, which markets get served, and which founders build the companies that define the next decade. When women control a proportionate share of that capital, the decisions that flow from it shift. The sectors that get funded expand. The founders who get championed diversify. The reference cases that investors use to pattern-match begin to include women. The loop, finally, runs in a different direction.

This is why increasing the number of women investors is as urgent as increasing the number of women entrepreneurs. A female founder who clears every hurdle and builds a successful company without a single female investor in her cap table has proven that individual excellence can survive a hostile system. But she has not changed the system. Changing the system requires women on the investment side, women who can redirect capital, build new reference cases, and make the next generation of female founders marginally less likely to spend their best years pitching in rooms that do not believe in them.

V. Limits: Women investors cannot do it alone

The case for more women investors is compelling, and the data that supports it is unambiguous. Intellectual honesty requires asking what this article does not resolve, because the structural barriers facing women in venture capital are not limited to the question of who writes the checks. They extend to who gets to build the career that eventually leads to writing them. Among Southeast Asia-based firms, 67.2% of regional venture investors still have no women in an investment decision-making role, a figure that has barely moved in three years despite mounting evidence that gender-diverse teams outperform. The persistence of that number points to a problem that sits upstream of the partner level: women are not entering the investment profession in sufficient numbers, and those who do are concentrated at junior levels with limited authority over final investment decisions. In many cases, women are the only female voice in predominantly male teams, with limited sway over investment decisions. Being present in a room and having the power to change its outcomes are two very different conditions, and conflating them flatters the progress that has been made.

The deeper problem is one of scale. Even where women investors exist and are actively championing female founders, female VCs do not yet control sufficient assets to continue investing in female-led firms as they scale. The concentration of women investors in early-stage and impact-focused funds means that female founders who clear the seed hurdle often encounter an all-male wall at Series A and beyond. That is precisely why all-women founding teams secured no late-stage deals across Southeast Asia in 2024 and 2025. The women investors who back them at the start do not have the fund size to follow through, and the male investors who do have that capacity remain unconvinced. According to a CrossBoundary analysis, Southeast Asia lags behind Sub-Saharan Africa and Latin America in adopting gender-lens investing at scale, despite having a larger and more developed startup ecosystem than either region. That gap is not explained by a lack of female founders or a shortage of financial instruments. It is explained by the absence of women at the senior levels of the funds, large enough to move the needle at the growth stage.

This matters for the article’s core argument because it means that calling for more women investors, without simultaneously addressing the structures that exclude women from investment careers in the first place, risks treating a systemic problem as though it has a compositional solution. More women at the table is necessary but not sufficient if those women remain outvoted, underfunded, or siloed in roles without full investment authority. Closing the gender finance gap requires a syndicated effort from investors, ecosystem builders, and policymakers working in parallel, not sequentially. The argument for more women investors is an argument for the transformation of the venture capital profession itself: in how investment careers are built, how fund managers are selected by LPs, how networks are accessed, and how the definition of a credible investor gets written and rewritten over time. Southeast Asia does not just need more women to enter the investment profession. It also needs the profession to change in ways that make women’s presence within it durable, powerful, and capable of compounding.

The way forward: The Philippines is already moving

The Philippines, long regarded as one of Southeast Asia’s more gender-progressive economies, is beginning to translate that reputation into infrastructure. Backed by Investing in Women, an initiative of the Australian Government that catalyzes inclusive economic growth through women’s economic empowerment across Indonesia, Vietnam, Myanmar, and the Philippines, two Philippine-based initiatives are doing the structural work that the market has consistently failed to do on its own.

Kerubin Capital, founded in 2021 with the support of Investing in Women and the Manila Angel Investors Network, is building the Gender-Smart Investing Map of the Philippines, which is the first and only initiative of its kind in Southeast Asia. At the helm is Tina di Cicco, whose work as a gender-lens investor and leader exemplifies exactly what the data prescribes: a practitioner who can read a market that male pattern-matching has systematically undervalued. Under her stewardship, Kerubin operates as a living ecosystem tool designed to make visible, in granular detail, exactly where capital flows and which women-led businesses are positioned to absorb it. The map aggregates founders, investors, accelerators, intermediaries, and policy bodies into a single intelligence layer, which turns what is an invisible market into a legible one. That matters because the gender financing gap in the Philippines persists partly as an information problem: capital that would move toward women-led businesses cannot find them, and businesses that deserve capital cannot find the investors equipped to evaluate them. In a region where gender-lens investing has lagged behind the rhetoric supporting it, Kerubin is building the connective tissue the ecosystem has always needed.

Meanwhile, ARQ SME BDC has launched SheSecure, a private debt fund developed under the leadership of female investor Abigail Tan, that does more than lend to women-led businesses. It financially rewards them for deepening their gender equity practices, offering financing of up to PHP 30 million per enterprise with interest incentives tied to measurable improvements in workplace gender equality. The instrument is designed for the most neglected segment of the Philippine economy: businesses with assets between PHP 35 million and PHP 100 million, the range where women’s ownership drops sharply from a majority to just 16%. SheSecure is proving that gender-smart capital structures are commercially viable. The “missing middle” of women-led businesses has gone unfunded because the right financial instruments were never built for it, which is a design failure, not a market one, and one that Abigail Tan’s work at ARQ is now actively correcting.

Investing in Women is the common thread behind both initiatives, and that is precisely a point to note. Without catalytic public funding willing to absorb first-loss risk and underwrite the cost of building new models, neither Kerubin Capital nor SheSecure would exist. The market did not produce these tools on its own. They required a female investor and an organization with a vision broad enough to see the structural problem and patient enough to fund the solution before it was profitable. That is what Investing in Women provides, and why its role in the Southeast Asian gender-investing ecosystem is foundational rather than supplementary.

Southeast Asia has enough women building extraordinary things. What it lacks is enough women and enough men who see and understand the data in the rooms where those things get funded. The billionaire girls’ club is not a fantasy. The only question is whether Southeast Asia is willing to build the investment ecosystem that gets us there.

This article reflects reporting and analysis made by The Southeast Asia Pacific Frontier. If you have additional context, a different take, or a perspective we’ve missed — whether you’re a researcher, a policy practitioner, or someone living with these realities on the ground — this is an evolving story and we’d like to hear from you. Drop a comment below or get in touch.

About Author

Samantha Reese Han is an undergraduate Political Science student of Adamson University whose advocacy work spans youth civic engagement, legal literacy, and women’s empowerment in entrepreneurship. Professionally, she is a builder operating in the intersection of policy, capital, and advocacy. She serves as an Events and Partnerships Intern for the Senate of the Philippines, a Venture Capital Intern for Kerubin Capital, and a Deputy Director for Justitia Lab currently. She loves seeing ideas transform into social impact.

When people call the Philippines a goldmine, they often think of its natural resources, 7,641 islands, vast coastlines, and rich biodiversity. That is true, but it is not the full picture. The more important goldmine for builders is the gap between what Filipinos need every day and the systems that still have not been built well enough to support them.

Those gaps are visible everywhere: uneven roads, flood-prone streets, unreliable infrastructure, slow public services, manual processes, and rising heat that makes daily life harder. These are not just inconveniences. They are signals of weak systems, poor data flow, and outdated infrastructure. From a developer’s perspective, that makes the Philippines a difficult but meaningful place to build. The opportunity is not to romanticize the country’s problems, but to recognize where technology is urgently needed and where better systems can create real public value.

As a computer science student learning artificial intelligence and machine learning, I see this clearly. Algorithms, data pipelines, and machine learning models are not just academic topics. At their core, they help make sense of messy information and support better decisions. In the Philippine context, that matters because many of the country’s hardest problems are also information and systems problems.

Digital access is one example. A PIDS broadband review notes that mobile network performance in the Philippines still lags behind ASEAN counterparts, with rural areas facing sharper drops in access and speed. In BARMM, the average mobile download speed is barely 10 Mbps. A World Bank-cited report also found that fixed broadband household penetration in the Philippines was only 33 percent in 2022, below Malaysia’s 50 percent, Thailand’s 58 percent, and Vietnam’s 76 percent. UNESCO’s Philippines AI readiness profile points to the same structural issue, citing poor digital infrastructure, siloed policymaking, bureaucratic inertia, and outdated frameworks as barriers to digital transformation.

Agriculture shows another gap. Farmers play a major role in the rural economy, but many still lack integrated weather, soil, advisory, and market tools that could help them make better decisions. PIDS notes that some digital agriculture tools are already widespread, but decision-support systems and data harmonization remain areas for expansion. In practical terms, this means the data exists in pieces, but it is not always connected in a way that helps farmers act with confidence.

Disaster response makes the need even clearer. PAGASA says an average of 20 tropical cyclones enter the Philippine Area of Responsibility each year, with around 8 or 9 crossing the country. The lesson from disasters like Typhoon Haiyan/Yolanda is blunt: when roads, power, communication lines, and local coordination break down, aid and information move more slowly than people need. Predictive models, flood-risk mapping, localized warning systems, and better logistics platforms cannot stop typhoons, but they can help communities prepare and respond faster.

But infrastructure is only part of the picture. The people who would benefit most from these systems are often the least equipped to use them. PSA’s 2024 FLEMMS, as reported by GMA News Online, found that 93.1 percent of Filipinos aged 10 to 64 have basic literacy, but only 70.8 percent are functionally literate. The divide is sharper in some areas: Tawi-Tawi recorded a 33.2 percent functional literacy rate, while BARMM had the highest illiteracy rate at 14.4 percent. Digital readiness is also weak. UNESCO’s Philippines AI readiness profile cites a UNESCAP study stating that almost 90 percent of Filipinos lack basic ICT skills such as word-processing, internet, and email skills.

This is why AI and machine learning in the Philippines cannot be treated as tools only for the privileged. A technically impressive system is useless if the people it is meant to serve cannot access, understand, or trust it. Good solutions here must be designed around real conditions: uneven connectivity, multilingual users, underfunded institutions, and communities that are often left behind by technology.

The government has started moving in this direction. The National AI Strategy Roadmap 2.0, launched in July 2024, builds on the 2021 AI roadmap and focuses on Innovation and Implementation across research and development, digitization and infrastructure, workforce development, and AI governance and ethics. It also calls for data literacy, upskilling, support for AI startups, the Center for AI Research, and adaptive governance involving agencies such as the National Privacy Commission, Intellectual Property Office, and Philippine Competition Commission. Recent DICT planning around the Philippines AI+ Infrastructure Masterplan 2033 also points to AI-ready data centers, high-performance computing, digital connectivity, renewable energy, talent development, and regulatory reforms.

Still, roadmaps are not enough. The real test is whether builders can turn strategy into usable systems. Predictive flood tools, crop advisory platforms, public-service automation, traffic models, and decision-support systems for local governments are not distant possibilities. They are practical needs waiting for developers with the right skills, empathy, and patience.

This is why the Philippines can be seen as a developer’s goldmine. Its value is not only in natural resources, but in the space between what exists and what can still be improved. For developers willing to understand local problems deeply, there is no shortage of meaningful work to do.

This is an externally contributed piece. If you have additional context, a different take, or a perspective we’ve missed — whether you’re a researcher, policymaker, or practitioner — this is an evolving story and we’d like to hear from you. Drop a comment below or get in touch.

About Antonio Axellance H. Paco III

Antonio Axellance H. III Paco is a Computer Science student at the University of Santo Tomas and a DOST-SEI Merit Scholar. He is currently an ML Engineering Intern at FlyRank AI and serves as Director for Sponsorships at AWS Learning Club–UST. His interests include artificial intelligence, machine learning, and building technology solutions that create real-world impact.

When global companies started looking for alternatives to China, Southeast Asia seemed like the obvious answer. It was close, cost-competitive, and ready. The region is now producing more, exporting more, and hosting more of the world’s supply chains than ever. But producing more and capturing value from what you produce are different things — and that gap defines SEA’s real challenge

This is the tension at the center of the so-called “China Plus One” strategy, the practice among multinational corporations of maintaining operations in China while establishing a presence elsewhere to reduce geopolitical exposure. SEA has become the “elsewhere”. But becoming the “elsewhere” is not the same as transformation.

The uneven windfall

Southeast Asia did not suddenly become a prime destination. The region had spent years building conditions that made it an attractive alternative to China. So when MNCs started looking for alternatives, the infrastructure, trade agreements, and geography were already in place. In a 2025 investment report by the Association of Southeast-Asian Nations (ASEAN), it was noted that investments have surged $226 billion annually.

In 2022, ASEAN created the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement among all member states and dialogue partners, including mainland China, Japan, South Korea, Australia, and New Zealand. RCEP reduced costs for companies to establish production in the region by standardizing rules of origin, eliminating tariffs on most products, and liberalizing trade rules.

Moreover, RCEP deepened the integration between Chinese manufacturing and Southeast Asian production in ways that made the region more complementary to China than competitive with it. Much of the investment that followed arrived with Chinese inputs, Chinese capital, and Chinese supply chain logic embedded in it. SEA became a more efficient node in a China-centered network rather than an independent one. This matters for the value capture question because the terms of participation were largely set elsewhere.

Vietnam, in particular, has emerged as a major beneficiary in this expansion as it has captured investments amid economic transitions and disruptions in China. In 2025, the country recorded 8.2 percent GDP growth, the highest quarterly performance since 2011, excluding the post-pandemic rebound. According to investment consulting firm Dezan Shira & Associates, manufacturing drove the expansion, attracting over US$72.83 billion in newly registered foreign investment across 6,783 projects between 2019 and 2025.

“We are witnessing a clear strategic shift as global companies increasingly view Vietnam as a regional hub. We see more businesses relocating their supply chain focal points to Vietnam from other markets to handle export manufacturing and regional distribution services,” says Remco Enders, managing director of logistics company DSV Solutions.

Much of Vietnam’s expansion has concentrated on export-oriented assembly such as electronics, garments, and footwear. This is where the margins are thin, and the value flows back to the brand owners, the chip designers, and the IP holders elsewhere. Vietnam’s growth is also heavily tied to a handful of large anchor investors; Samsung alone accounts for a substantial share of Vietnamese exports, over 13% - 25%, which means the headline numbers may be masking concentration risk as much as they are reflecting broad industrial development.

Malaysia’s economy, on the other hand, accelerated to 5.2 percent growth in the third quarter of 2025 due to a strong performance in electronics. Investments, however, increased with data centers, advanced manufacturing, and semiconductors attracting more MNCs. Combined with Thailand, the two countries recorded approximately US$43.9 billion in reported investments, though Thailand’s economic picture was considerably less encouraging, growing at just 1.2 percent in the third quarter, its slowest rate in four years, as manufacturing contracted and export growth decelerated despite investments.

The Philippines is a stark contrast. In the same quarter, the Philippine economy expanded by just 4 percent, its slowest growth since the COVID-19 lockdowns. Foreign investment approvals fell by 48.7 percent year on year, extending a sharp decline that had run through all three quarters of 2025.

This was not for lack of trying. Philippine Economic Zone Authority Director General Tereso Panga reported fruitful investment meetings in Xiamen, Chongqing, Shenzhen, and Dongguan, pointing to concrete wins

”The Aoxing group, based in Dongguan, an OEM for projector equipment, projector screen, and audio-visual products for global brands like HP, Epson, and Skyworth, has chosen the Philippines for its redundant manufacturing facility intended for the US export market,” Panga said.

The causes were compounding as corruption scandals involving public infrastructure projects damaged investor confidence at precisely the moment the country needed to project stability, while a succession of typhoons disrupted harvests, consumer spending, and economic activity more broadly.

The limits of relocation

When a factory moves from Shenzhen to Ho Chi Minh City, the production moves. The next question is what follows after?

The honest answer, so far, is not much of the value. Much of the investment redirected into Southeast Asia remains concentrated in mid-level segments of global value chains such as assembly, component manufacturing, and testing. These are not trivial roles as they employ millions of people and generate real economic activity. But they are also the segments where the margins are thinnest. The segments where the highest returns are, such as research and development, remain elsewhere.

For example, Malaysia has carved out a genuinely significant position in the global chip industry, commanding 13% of the global market share and ranking as the 6th largest exporter. Yet the founder market, where chips are actually designed and fabricated at the highest levels of precision, remains dominated by the United States, Taiwan, South Korea, and Japan, with over 63% of global market share. This is because semiconductor manufacturing has a distinct value hierarchy: design and IP at the top, fabrication in the middle, and assembly, testing, and packaging at the bottom. The firms that own chip designs, such as Nvidia, Qualcomm, and AMD, capture the largest margins because intellectual property is infinitely replicable at near-zero marginal cost.

Moreover, when it comes to who captures the revenue from semiconductor sales, the United States accounts for 46 percent of the global market, South Korea 21 percent, Japan 9 percent, Taiwan 8 percent, and China 7 percent. The rest of the world, Southeast Asia included, shares the remaining 9 percent.

This middle layer position offers opportunity but also limits, as it attracts capital, creates employment, and capacity that can serve as a base for upgrading. Economies that stabilize as assembly and intermediate manufacturing hubs without developing deeper technological capabilities can find themselves locked into roles that are difficult to escape.

Infrastructure has also compounded this constraint. Research on Vietnam and Malaysia’s seaports has noted that while there has been increased demand even during the pandemic, bottlenecks have stalled recovery due to inadequate infrastructure, equipment, and low loading/unloading productivity. Cat Lai in Ho Chi Minh City has faced severe congestion due to a 30% surge in cargo volumes.

According to research from the Universiti Teknologi in Malaysia, identified port congestion, hinterland connectivity, and uneven FDI distribution as systemic threats to the region’s competitiveness. The ASEAN secretariat separately noted that the member states have varying customs procedures and standards for warehousing, making cross-border logistics difficult.

Infrastructure matters because these constraints act as a ceiling on how much value the region can capture from the investment flowing in. A factory can relocate, but if goods cannot move efficiently, cost competitiveness can prove to be difficult. More critically, moving up the value chain requires attracting more sophisticated industries, and those industries are more sensitive to logistics reliability than low-cost assembly is.

Then there are the tariffs. Despite producing more, Southeast Asia has not been exempt from the US reciprocal tariffs. Major trading partners such as Malaysia, Indonesia, the Philippines, and Thailand have had tariffs set at 19 percent, and Singapore has 10 percent. Other products from the region, such as coffee and bananas, have been exempted because the US does not grow them.

“Southeast Asia’s tariff advantage over China persists for now, but depends on shifting US–China dynamics. Pending US Supreme Court rulings on tariff authority may further entrench uncertainty, leaving businesses to brace for continued trade volatility in 2026,” says John Goyer, Vice President for Southeast Asia and Oceania, at the U.S. Chamber of Commerce.

What would a real benefit look like?

The middle position is not a permanent sentence. One could argue that it is a starting position, and a few states in the region have already decided they do not intend to stay there.

For example, Indonesia, being the world’s largest producer of nickel, had for years exported raw ore at low prices while the value-added processing happened outside the country. In 2020, the government made a deliberate and costly decision to ban the export of unprocessed nickel ore entirely, forcing companies to process domestically if they wanted access to Indonesian nickel.

Vietnam is taking a different path towards the same destination. Hanoi has aggressively been investing in workforce development to transition its electronics industry from low-cost assembly to higher-value-added activities, targeting a significant role in the global semiconductor and tech supply chain by 2030. In 2024, the Vietnamese government issued Decision No. 1017/QĐ-TTg, which outlines the Program on Semiconductor Industry Workforce Development to 2030, with a vision to 2050 to train between 30,000 and 50,000 engineers by 2030.

These are not guarantees. Indonesia’s downstream strategy depends on sustained political will and global commodity demand that can shift. Vietnam’s engineering pipeline will take years to produce results, and the gap between training engineers and building a domestic semiconductor design industry is significant.

Both countries are making bets. But the bets matter, because they mean that Indonesia and Vietnam are making active choices about what kind of economy they want to be on the other side of this disruption, rather than simply receiving whatever the disruption sends their way.

The rest of the region faces the same choice, with less time than it might appear. The tariff environment is volatile, and infrastructure gaps are becoming wider. And the window in which Southeast Asia can leverage its current strategic relevance to move up the value chain, rather than simply consolidate its position within it, will not stay open indefinitely.

This article reflects reporting and analysis made by The Southeast Asia Pacific Frontier. If you have additional context, a different take, or a perspective we’ve missed — whether you’re a researcher, a policy practitioner, or someone living with these realities on the ground — this is an evolving story and we’d like to hear from you. Drop a comment below or get in touch.

About Matthew Parra

Matthew is a student at the University of Santo Tomas and the founder and Executive Director of The Southeast Asia Pacific Frontier — an independent analytical platform dedicated to rigorous, evidence-grounded analysis of Southeast Asia and the Pacific across economics, society, and geopolitics.

On April 21, Coins.ph announced that Filipinos could pay for Jollibee using USDT. The Bangko Sentral ng Pilipinas had authorized the move, allowing the local cryptocurrency exchange to route dollar-pegged stablecoins through QRPh, the national QR payment system it created and manages. At checkout, stablecoins convert automatically to pesos. Merchants receive pesos. The transaction completes on the domestic payment infrastructure.

Coins.ph described it as “game-changing,” noting how 700,000 QRPh-enabled merchants are now reachable via USDT and USDC. The framing was correct as far as it went, but it missed the structural question underneath the announcement: what happens when foreign-currency instruments operate inside its own sovereign payment infrastructure?

Why the Philippines?

Overseas Filipino workers remit approximately $37 billion each year, accounting for about 8 percent of the country’s GDP. This sizable group regularly manages dollar transactions, compares transfer costs, and responds to fluctuations in the peso’s value. These conditions have made dollar-linked instruments practical for Filipinos, even before Coins.ph integrated with QRPh.

The announcement met an audience already familiar with digital finance. GCash and Maya have introduced many Filipinos to mobile-first payments, making them comfortable transacting outside traditional banks. Between 7 and 12 million Filipinos now use cryptocurrency, with stablecoins gaining popularity among families receiving remittances, freelancers paid in dollars, and traders moving funds between crypto investments. According to Coins.ph, families of overseas workers have begun using USDT to protect against peso depreciation and avoid high bank transfer fees.

When the peso reached a record low of PHP 61.72 to the dollar on May 15, its second consecutive record low, the incentive to retain dollars rather than convert to pesos increased significantly. These factors are not merely background conditions but active mechanisms. The integration did not create demand for stablecoins in the Philippines; instead, it provided an entry point into the formal payment economy.

The dollar question

The BSP has been operating under an explicit policy of non-internationalization of the peso. Without control over domestic currency circulation, a central bank’s ability to set monetary conditions and manage inflation is diminished. BSP Circular 922 (2016), which regulates cross-border currency transfers under the Manual of Regulations on Foreign Exchange Transactions, states that outward transfers of legal tender exceeding PHP 50,000 require prior BSP authorization to safeguard “control of liquidity and overall monetary conditions.”

Dollar use has always existed informally in the Philippines. But the BSP could tolerate informal dollar exposure because it was fragmented, structurally outside the official payment system, and therefore outside the liquidity dynamics it was actively managing. For example, In practice, traders use stablecoins to park funds between crypto positions.

However, the Coins.ph integration ends the BSP’s ability to look past informal dollar exposure. Dollar-pegged assets now flow through infrastructure that the BSP created, governs, and explicitly maintains as the mechanism for a “safe, convenient, and interoperable payment system” nationwide. That QRPh converts stablecoins to pesos at the point of sale is technically significant, but it does not resolve the upstream question: households and merchants now have an institutionally sanctioned pathway to hold, transact with, and in periods of peso weakness, prefer dollar-linked instruments within the formal economy.

This is the line the IMF has been tracking. It’s 2025 departmental paper on stablecoins identifies currency substitution facilitated by stablecoins as categorically different from informal dollar use. Traditional dollarization requires physical cash or bank accounts denominated in foreign currency, which entails opening a foreign-currency bank account that requires documentation, minimum balances, institutional access, and often physical proximity to a branch. But foreign currency-denominated stablecoins face none of those constraints as they reside entirely on smartphones and the internet, operate continuously, and settle near-instantly at potentially low cost. The IMF further notes that network effects accelerate the replacement of local currencies once adoption begins. Local alternatives struggle to compete unless they provide similar utility and integration, and if a significant portion of economic activity shifts to foreign-currency-denominated stablecoins, the central bank’s control over domestic liquidity weakens, and seigniorage income declines as demand for the local currency decreases.

BSP’s position

What makes the BSP’s posture particularly difficult to read is that five months before the Coins.ph integration went live, its own leadership was articulating exactly the opposite position. Speaking in Hong Kong in November 2025, BSP Deputy Governor Zeno Abenoja confirmed the central bank was maintaining a “cautious approach” to stablecoin proposals, that regulatory work remained at an “early stage,” and that the BBSP was limiting stablecoin entry to controlled channels, insisting on licensed intermediaries and regulated frameworks before permitting broader integration. Most of the proposals being reviewed, Abenoja noted, involved dollar-backed stablecoins rather than peso-backed alternatives.

The BSP’s regulatory record does complicate the picture somewhat. The BSP’s regulatory record does complicate the picture somewhat. Since Circular 944 in 2017, the BSP has pursued a consistent strategy of bringing digital assets inside the regulatory perimeter rather than pushing them out. Licensing requirements for virtual currency exchanges, expanded oversight of Virtual Asset Service Providers under Circular 1108 in 2021, and a regulatory sandbox for fintech and crypto pilots under Circular 1153 in 2022 all follow the same logic: if an activity is happening regardless, regulate it rather than ignore it. The Coins.ph integration fits that pattern. Stablecoin flows through QRPh are now subject to anti-money laundering (AML) and know your customer (KYC) requirements. The BSP gains visibility over dollar exposure it previously could not measure, which is a policy benefit in a country where informal dollar circulation has always outrun official data.

With 7 to 12 million Filipinos already using crypto and stablecoin adoption accelerating through informal channels, the BSP faced a choice between two forms of dollar exposure: unregulated and invisible, or regulated and observable. Controlled integration, on that logic, is preferable to an offshore ecosystem that grows without generating any domestic data, regulatory handle, or policy leverage.

What visibility does not solve

Visibility is not control, and the distinction matters enormously when the peso is under pressure. The BSP can observe USDT moving through QRPh, but observation ends at the blockchain. Tether makes its reserve decisions from El Salvador, and US monetary policy is set in Washington. And when the peso depreciates, adjusting BSP rates does nothing for the share of retail transactions settling in these financial instruments.

When a currency depreciates, the rational household response is to hold dollar-linked assets rather than convert back. In this context, the QRPh integration does not merely accommodate existing stablecoin holdings - it also creates an institutionally sanctioned mechanism for that holding behavior to persist through the formal payment system. Monetary policy can still affect peso-denominated credit conditions, but its transmission weakens at the margin as more of the retail transaction economy touches instruments that do not respond to BSP rate decisions.

The IMF’s April 2026 working paper on stablecoin stability notes this: when stablecoin issuers hold risky or illiquid reserve assets, confidence shocks can trigger runs originating entirely outside Philippine monetary conditions, on a blockchain in another jurisdiction, with consequences that land on QRPh-connected merchant terminals the next business morning. Moreover, once a sufficient share of retail transactions migrates to foreign-currency instruments, the central bank loses traction on domestic liquidity, interest rate decisions in Manila stop transmitting to the parts of the economy settling on dollar-pegged rails, and seigniorage income falls.

The BSP’s FX Manual grants broad authority over cross-border currency flows, but stablecoin transactions through QRPh convert to pesos at the point of sale, which likely places them outside the Manual’s existing definitional perimeter. This gap between what the BSP can observe and what its existing tools can directly address was always theoretical. Now it can be seen as practical, with the peso at an all-time low and dollar-linked instruments now embedded in the national payment infrastructure.

The harder question

What the Coins.ph integration into QRPh ultimately depends on a question the BSP has not publicly answered. By accepting some short-term monetary friction, the BSP gains long-term regulatory oversight over a trend it realized it could not prevent. Features like peso-at-checkout conversion, KYC requirements, and a traceable ledger give regulators policy tools that peer-to-peer stablecoin use never offered.

However, the IMF’s 2025 paper explains what happens next. Once stablecoins are widely used for domestic payments, local options have a hard time competing because network effects support whatever is already built into the system.

But this integration also brings up a question the BSP has not addressed yet. Can a central bank expand its payment system to include dollar-linked instruments without eventually encouraging dollarization?

This article reflects reporting and analysis made by The Southeast Asia Pacific Frontier. If you have additional context, a different take, or a perspective we’ve missed — whether you’re a researcher, a policy practitioner, or someone living with these realities on the ground — this is an evolving story and we’d like to hear from you. Drop a comment below or get in touch.

About Matthew Parra

Matthew Parra is a student at the University of Santo Tomas and the founder and Executive Director of The Southeast Asia Pacific Frontier — an independent analytical platform dedicated to rigorous, evidence-grounded analysis of Southeast Asia and the Pacific across economics, society, and geopolitics.

As Kuala Lumpur prepares to host SEMICON Southeast Asia 2026, Malaysia appears positioned to lead the regional semiconductor industry. However, persistent structural wage challenges and the misconception of a surplus in STEM talent threaten to undermine this ambition. If these foundational issues remain unresolved, Malaysia risks losing the competition for elite talent to established centers such as Singapore and emerging, state-driven competitors like Vietnam.

Malaysia’s wage vulnerability

With Kuala Lumpur hosting SEMICON Southeast Asia 2026, the conference is more than an industry gathering — it is a declaration of Malaysia’s intent to dominate the regional semiconductor boom. The National Semiconductor Strategy (NSS) has already drawn a staggering RM59.85 billion, over USD 15 billion, in realized investments as of late 2025. Coupled with a bold target to cultivate 60,000 highly skilled engineers by 2030, the government is making a calculated push to shift Malaysia from “back-end” assembly to “front-end” high-value activities, such as integrated circuit (IC) design.

But behind the billions in capital influx lies a critical vulnerability: Malaysia is bleeding the very human capital required to execute this transition.

With the global semiconductor race is now about who can retain the smartest minds to run them, Malaysia’s ambition to ascend the technological value chain will fail unless it fundamentally dismantles its structural low-wage economy. By relying on a massive but severely underpaid STEM pipeline, Malaysia is attempting to build a high-tech future using a cheap-labor framework. If it cannot correct this wage mismatch, Malaysia risks losing its regional talent to aggressive, state-subsidized challengers like Vietnam and its heavily funded Strategy 1018.

The Malaysian reality: The illusion of the STEM surplus

On the surface, the national STEM talent appears robust. According to UNESCO Institute for Statistics data, Malaysia remains one of the world’s top STEM producers, with 40.2% of its tertiary graduates holding STEM degrees. This high yield is the legacy of long-term policy measures, most notably the government’s 60:40 initiative, which aims to steer the majority of students toward the sciences.

However, volume does not equal industry readiness, particularly for the rigorous demands of high-value IC design. Malaysia is suffering from the illusion of a STEM surplus. The domestic pipeline produces thousands of graduates annually, yet the semiconductor sector faces a crippling deficit of specialized talent. The shortage is so acute that the then-Investment, Trade, and Industry Minister Datuk Seri Tengku Zafrul Abdul Aziz publicly acknowledged the severity of the gap, going so far as to propose allowing foreign STEM graduates from local universities to work in the country to plug the immediate leaks.

The root of this disconnect is not solely educational; it is also fundamentally economic. While the government frequently highlights that salaries for senior tech and C-suite roles in Malaysia are now rivaling those in Japan, the entry-level landscape—where the talent begins—remains remarkably grim. A sobering metric from the Board of Engineers revealed that 35% of surveyed electrical engineers earned a starting salary of less than RM2,000 per month (roughly $450 USD).

This is an active deterrent. A multibillion-dollar technological pivot cannot be executed while offering top-tier technical minds wages comparable to the local gig economy. Consequently, Malaysia is caught in a persistent cycle of brain drain. Elite graduates either abandon the sector for more lucrative roles in finance and general software, or they simply cross the causeway to Singapore, where starting engineering salaries easily triple those offered in the tech hubs of Penang or Kulim.

A policy error or the “OSAT trap”?

Industry veterans might rightfully push back on this critique. One could argue that the depressed wage ceiling for electrical and electronics (E&E) engineers in Malaysia is not a sudden policy failure, but a deeply entrenched structural reality.

For the past forty years, Malaysia has built its technological empire on Outsourced Semiconductor Assembly and Test (OSAT). This is the “back-end” of the industry—essential, but notorious for its razor-thin profit margins. From an economic standpoint, the argument goes, local tech companies simply do not have the margin to pay Silicon Valley or even Singaporean wages for back-end packaging and testing. The low salaries are a feature of the OSAT economy, not a bug.

While this was true for Malaysia of the 1990s, it is a fatal mindset for Malaysia of 2026. The entire premise of the NSS is a pivot to “front-end” dominance—specifically IC design and advanced wafer fabrication, which carry massive profit margins. The crisis Malaysia faces today is that it is attempting to hire highly specialized, front-end IC design talent using legacy, back-end OSAT salary scales.

A paradigm shift cannot be executed while clinging to the economics of the past. Malaysia’s historic success as an assembly hub has become a trap; the legacy industry structure is cannibalizing the nation’s high-tech future.

The regional challenger: Vietnam’s strategy 1018

Malaysia’s hesitation to aggressively restructure its talent economics is particularly dangerous given the regional landscape. Southeast Asia does not exist in a vacuum, and the “China Plus One” strategy has emboldened aggressive new players—most notably, Vietnam.

In September 2024, Hanoi launched its own master plan, Strategy 1018. Vietnam’s target is nearly identical to Malaysia’s, aiming for 50,000 highly skilled semiconductor personnel by 2030. However, their approach to the quality problem is starkly different.

Malaysia has largely relied on broad-stroke educational policies, like the aforementioned 60:40 ratio, hoping that the free market and incubation initiatives like SemiconStart will naturally absorb and refine this raw talent pool. Vietnam, conversely, is treating semiconductor talent as a state-led infrastructure project. Hanoi is not just hoping students choose technical sciences; the state is actively subsidizing specialized faculties, building state-of-the-art national laboratories, and directly underwriting the training of elite IC designers to jumpstart its ecosystem.

By aggressively bridging the gap between raw graduates and industry-ready specialists, Vietnam is bypassing the free-market wage friction that is currently stalling Malaysia. If a global tech giant is looking to establish a high-value IC design center in 2026, they are weighing Malaysia’s experienced but underpaid (and therefore shrinking) talent pool against Vietnam’s state-funded, hyper-targeted engineering pipeline. In the battle for front-end dominance, Vietnam’s fiscal intervention may prove far more effective than Malaysia’s reliance on historical momentum.

Escaping the assembly line

The road to becoming a semiconductor superpower requires more than silicon and foreign direct investment; it requires the human capital to design the architecture of tomorrow.

Malaysia possesses the capital, evidenced by the NSS’s early victories, and it possesses the raw numbers, validated by its UNESCO-topping STEM graduation rates. But hardware cannot function without software.

If Malaysia cannot fundamentally restructure the wage ceilings created by its OSAT history and fails to adopt a more targeted approach to elite talent retention, the narrative will shift. SEMICON Southeast Asia 2026 will not be a celebration of Malaysia’s technological ascension, but rather a high-profile showcase of a nation destined to remain the world’s assembly line, while its neighbors design the future.

This is an externally contributed piece. If you have additional context, a different take, or a perspective we’ve missed — whether you’re a researcher, policymaker, or practitioner — this is an evolving story and we’d like to hear from you. Drop a comment below or get in touch.

About Bijaksabara Hikmawan

Bijaksabara Hikmawan is an international human development specialist and regional education strategist with extensive experience across ASEAN’s higher education ecosystem. A former International Affairs Associate at Southeast Asia’s largest university, he currently consults for international development agencies on the intersection of technology, mobility, and inclusive governance.

Pax Silica is an unequal arrangement. The US gets supply chain security, mineral access, and a compliant jurisdiction insulated from the pressures of cross-strait uncertainty. The Philippines gets development infrastructure, foreign expertise, and a seat in the global tech ecosystem. That asymmetry is the architecture of the deal. And the Philippines has been here before.

On April 16, 2026, the US and Philippine governments announced the creation of an Economic Security Zone (ESZ) in New Clark City, Tarlac, centered on the development of Artificial Intelligence (AI). According to the US Embassy fact sheet:

“Under Secretary of State for Economic Affairs Jacob Helberg today announced the United States’ and the Philippines’ plans to establish a 4,000-acre industrial hub to secure inputs vital to American and global supply chains. The site is located in the Luzon Economic Corridor of the Philippines. The site — the first of its kind — is being designated by the Philippines as an Economic Security Zone, a new model for AI-native investment acceleration hubs being developed under the Pax Silica Initiative.”

Current cross-strait tensions have made it vital for the US to look for alternatives in technological development. The Philippines, rich in critical earth minerals like cobalt, nickel, chromite, and copper, and home to a proven semiconductor workforce, fits. Policymakers like Philippine Department of Finance Undersecretary Frederick Go view Pax Silica as an opportunity to leverage domestic resources, secure critical nodes in global supply chains, and pioneer next-generation industries.

Domestic opposition, led by groups like the Makabayan bloc, views the alignment as a strategic liability by contending that tethering Philippine industrial policy to Washington’s defense sector risks Chinese economic or military retaliation, characterizing the move as a capitulation of state interests. The more productive question is: on what terms does the Philippines engage?

What the Philippines stands to gain

The Philippines is no stranger to semiconductors, with the sector making up 63–65% of its merchandise exports. However, because of corruption and insufficient power capacity, the industry has stagnated, focused on assembly, testing, and packaging (ATP) rather than fabrication. Pax Silica, if negotiated well, could be the mechanism that breaks that stagnation.

The ESZ would encourage international companies to establish operations in the Philippines, bringing expertise to advance and propel local industries. The Philippines would not only extract its critical mineral endowments but also process them domestically for semiconductor manufacturing — positioning itself as a vital hub in the global tech ecosystem. This would boost the national economy and expand job markets at a moment of rising unemployment, affecting even college graduates. Investments by the US and corporations could create infrastructure that can be taxed, and a wider job market for graduates in the IT and engineering sectors.

The US Embassy fact sheet notes this ambition:

“The Economic Security Zone is intended to fuse American expertise in institutions and legal regimes – internationally enforceable contracts, transparent regulatory standards, and expert dispute resolution – with enhanced access to the Philippines’ outstanding workforce and talent, mineral endowments, energy resources, and strategic position at the crossroads of Indo-Pacific trade.”

What the critics get right

Progressive and leftist groups, columnists, and everyday people online have raised legitimate concerns. Dan Somera has written that the US would have a two-year free lease of the ESZ, renewable for 99 years, as an “in-kind contribution” from the Philippines. The Makabayan bloc and Kilusang Magbubukid ng Pilipinas, progressive groups, have compared the ESZ to America’s former military bases in Clark and Subic, pointing to its diplomatic immunity provisions and the practice of US common law within its boundaries.

They fear the amplification of unsustainable mining, land grabbing, and militarization within the Luzon Economic Corridor. Critical discussion online has also centered on the power and water consumption demands of AI infrastructure and the environmental costs of expanded mining. Some analysts warn that job creation could be minimal, with American experts filling skilled positions while Filipinos are left with lower-value work.

The precedent that matters

The Clark and Subic bases offer the most instructive and most complicated precedent. For decades, the US military presence generated significant local economic activity: employment, commercial ecosystems, and infrastructure that became structurally embedded in the surrounding communities of Angeles and Olongapo.

At their peak, the bases employed tens of thousands of Filipinos directly, with estimates of total dependent employment, including service industries, running considerably higher. When Mount Pinatubo accelerated the American withdrawal and the Philippine Senate voted against lease renewal in 1992, the economic dislocation was severe enough that both cities faced prolonged depression before reinvention as the Subic Bay Freeport Zone and Clark Freeport Zone eventually took hold.

The infrastructure the Americans left behind, runways, port facilities, and utilities, became the foundation for post-base economic development. The arrangement had been asymmetric throughout: the US got strategic Pacific positioning, the Philippines got an economy built substantially around foreign military expenditure. The harm was real. Documented labor exploitation, environmental damage, and the social costs of base economies are part of the historical record and should not be minimized.

The argument here is narrower. Asymmetric arrangements, even extractive ones, can deposit durable infrastructure and economic capacity that outlasts the arrangement itself. Pax Silica can operate on a similar structural logic. The question for policymakers and civil society is not whether the arrangement is equal, it isn’t, but whether the Philippines can negotiate terms that maximize what remains after the Americans’ strategic interests have been served.

The window that remains open

The ESZ’s legal framework is still a work in progress. According to the US Embassy fact sheet, the Philippine and American governments are still discussing and finalizing the legal and development framework for long-term development. That unfinished status is leverage, not a red flag.

Jurisdiction, local hiring requirements, mineral processing terms, and environmental standards are all still on the table. Civil society groups and policymakers who oppose the ESZ’s current trajectory would do more by engaging that process than by opposing the zone’s existence outright. Outright rejection risks foreclosing the development pathways the Philippines needs. Proactive negotiation for parity, even if it means allowing Washington to claim the political win, could be the more strategically sound position.

The Philippines is at a crossroads. Pax Silica could represent a meaningful step in its economic development, but only if the Philippines enters the arrangement with clear-eyed awareness of what it is, what it is not, and what still remains to be determined. The government and Filipinos just need to pay attention.

This article reflects reporting and analysis made by The Southeast Asia Pacific Frontier. If you have additional context, a different take, or a perspective we’ve missed — whether you’re a researcher, a policy practitioner, or someone living with these realities on the ground — this is an evolving story and we’d like to hear from you. Drop a comment below or get in touch.

About Rocco Carmine B. Paragas Jr.

Rocco Carmine B. Paragas Jr. is a graduating Asian Studies student at UST, specializing in history and geopolitics. A versatile generalist with internship experience spanning HR to Knowledge Management across corporate and NGO sectors, he is currently writing his thesis on intergenerational gaps in Thailand.

When the Strait of Hormuz effectively closed in late February 2026, four ASEAN members - the Philippines, Malaysia, Thailand, and Indonesia - negotiated with Iran for safe passage of their vessels.

The Philippines was the first among these four, negotiating on the 2nd of April with Tehran to be recognized as a non-hostile country and to ensure the safe passage of Philippine-flagged vessels. Malaysia followed five days later, securing safe passage and reiterating its commitment to freedom of navigation and the safety of maritime passages. Indonesia and Thailand are currently in the midst of their own negotiations with Tehran to secure the safe passage of their ships.

While the region seems to be inching toward dialogue, Singapore refused to do so. Singapore’s Foreign Minister, Vivian Balakrishnan, stated, “As a matter of principle, and not because we’re taking sides, I cannot engage in negotiations for safe passage of ships or negotiate on toll rates.” Malaysian politicians were quick to respond to Singapore’s stance. Nurul Izzah Anwar, Deputy President of Parti Keadilan Rakyat (PKR), asserted that Malaysia would not be lectured on its engagement with Iran, defending the country’s preference for dialogue over disengagement.

This exchange was presented as a principled disagreement. But it revealed that during crises, states prioritize the protection of their economic foundations and subsequently invoke principles to justify their actions. The country able to maintain the strongest principled stance did so because neighboring states absorbed costs it did not incur, costs that ultimately became irrelevant when Washington imposed its own blockade on the strait weeks later.

Three economic structures, three responses

The Philippines had the least room to maneuver in this crisis. Importing 98 % of its crude oil from the Middle East, with confirmed fuel reserves of roughly 51 days at the point of crisis, Manila’s negotiation was less a foreign policy decision than a fiscal emergency. Manila had already declared a State of National Energy Emergency on March 24, making negotiating with Tehran paramount.

Malaysia’s situation was also similar. Despite being an oil-producing country, it still imports 70% of its crude oil to meet domestic demand. However, Kuala Lumpur presented the security of safe passage as the outcome of high-level diplomatic engagement, emphasizing its commitment to freedom of navigation in accordance with international law. The underlying circumstances mirrored those of Manila, but the official narrative differed.

Singapore’s refusal was based on fundamentally different considerations. Unlike its neighbors, Singapore’s economy relies on the uninterrupted movement of ships through the Strait of Malacca rather than on oil imports. The maritime sector contributes approximately 7 % of Singapore’s GDP, and its trade-to-GDP ratio is about 320 %, among the highest globally. When Foreign Minister Vivian Balakrishnan stated in Parliament that transit passage “is a right, not a privilege,” he was correct in legal terms and was also safeguarding a critical national asset. For Singapore, the legal framework supporting freedom of navigation is not abstract; it is essential to the port economy.

Thailand and Indonesia are also in negotiations, making Singapore the sole outlier against a near-unanimous regional response. Every country whose economy depended on energy imports reached the same conclusion, and the one whose economy depended on something else reached a different one.

What was actually being paid

Reports of confirmed toll payments for the Philippines or Malaysia were never substantiated, and Manila’s foreign department explicitly denied that any fees were paid to Iran. However, the absence of a financial transaction does not imply that no cost was incurred. Each country implicitly accepted that passage through the strait required negotiation rather than being exercised as a right under international law. Every government that entered negotiations treated access as conditional, a legal position that Singapore refused to validate.

The objection here, of course, is that negotiating under duress, without formally acknowledging Iran’s legal right to condition passage, doesn’t constitute legal precedent in any strict sense. International law requires both state practice and opinio juris, the belief that the behavior is legally required, before a norm shifts. Countries like the Philippines, which are acting in an emergency, don’t necessarily signal legal acceptance.

But of course, legal norms don’t only erode through formal acknowledgment. They can also erode through accumulated behavior. When enough states treat passage as something to be negotiated rather than exercised as a right, the reality shifts regardless of what anyone formally concedes.

Singapore recognized this cost explicitly. The Philippines and Malaysia were unable to do so, not due to flawed reasoning, but because their circumstances precluded long-term considerations. A government facing only 51 days of fuel reserves lacks the capacity to prioritize the erosion of behavioral norms over immediate supply security. And with the Philippines already became the first country globally to declare a State of Emergency, the calculus is inherently asymmetric: the consequences of fuel shortages are immediate, tangible, and politically severe for these states. In such a context, the cost of contributing to a shift in the treatment of maritime passage under international law becomes secondary and is not reflected in any single national account.

This perspective was available to Balakrishnan, whereas his counterparts in Manila and Kuala Lumpur could not afford such clarity. However, this insight does not equate to moral superiority. The point is not that Singapore acted in bad faith, its position is consistent with decades of historical doctrine, but that consistency is far easier to maintain when the costs are diffuse and borne by others.

Singapore’s position also contains an unacknowledged contingency. Its principled refusal to negotiate with Tehran remained viable because neighboring states adopted pragmatic approaches. Had every ASEAN member maintained the legal position, the regional energy crisis would have intensified, and Singapore’s principle would have entailed significant costs. Singapore benefited from both legal consistency and regional energy stability without incurring the associated costs. Its unblemished stance was, in part, sustained by the compromises of its neighbors.

Then Washington did the same thing

Following the failed negotiations by the United States (US) and Iran in Pakistan, US President Donald Trump announced a naval blockade of the Strait of Hormuz, targeting vessels entering or departing Iranian ports. By April 16, US Central Command confirmed that the blockade was fully implemented and that no vessels had passed in the first 48 hours.

The Philippines maintains that its agreement with Iran remains in effect. Foreign Affairs Secretary Theresa Lazaro publicly confirmed the arrangement, noting that coordination with Iranian authorities continues and that the Iranian ambassador personally contacted her regarding Philippine-flagged vessels scheduled to transit the strait. Manila is thus simultaneously upholding its agreement with Iran while operating under the military protection of the United States, its treaty ally, which is now enforcing a blockade on the same waterway.

Moreover, in the same negotiations, the US and Iran brokered a 10-day ceasefire, with Iran recently announcing that the Strait would be open to commercial vessels for the remainder of the ceasefire.

The blockade rendered the bilateral agreements operationally moot, but the accumulated behavior of states treating passage as conditional rather than inherent will persist beyond this crisis, available as precedent the next time a chokepoint closes (Singapore’s Strait of Malacca, for example). By the time Iran declared the strait open and Washington maintained the blockade, diplomatic assurances secured by the region had become irrelevant in the face of a situation far beyond the influence of any Southeast Asian country.

This was always the deeper truth of the episode: small states do not set the terms of access to global chokepoints. Rather, they negotiate within the margins that great powers leave them - and when those powers act, the margins disappear.

This article reflects reporting and analysis made by The Southeast Asia Pacific Frontier. If you have additional context, a different take, or a perspective we’ve missed — whether you’re a researcher, a policy practitioner, or someone living with these realities on the ground — this is an evolving story and we’d like to hear from you. Drop a comment below or get in touch.

About Matthew Parra

Matthew Parra is a student at the University of Santo Tomas and the founder and Executive Director of The Southeast Asia Pacific Frontier — an independent analytical platform dedicated to rigorous, evidence-grounded analysis of Southeast Asia and the Pacific across economics, society, and geopolitics.

When Philippine President Ferdinand Marcos Jr. announced that the Philippines had approximately 60 days of reserve gasoline, fuel oil, and kerosene following the closure of the Strait of Hormuz, the countdown began - at least in the headlines. The figures have inspired fear, calls to stockpile, and pointed questions about government mismanagement and preparedness.

The Philippines is not alone. Across the region, oil reserves of different countries are suddenly being measured against a number and found wanting at different degrees. Japan has 254 days, while Thailand has 61. China has 200 days, while Indonesia has 25. But reserves were never designed to measure how long a country can survive without energy imports. They exist to stabilize markets while global supply adjusts, specifically to prevent panic, smooth price volatility, and buy governments time. Essentially a strategic buffers against sudden supply chain disruptions such as the US-Iran war.

This is a misreading of the crisis. Focusing on counting down the days to which reserves last displaces the real issue because the crisis does not begin on day 61 when tankers run dry. It begins when prices move - and they already have.

How shock actually travels

When the Strait of Hormuz closed the immediate problem is not that the region ran out of fuel. It was that among the 3000 vessels stuck inside the Persian Gulf, 200 oil tankers are physically trapped with nowhere to go. Iraq has already begun shutting down operations at the Rumalia oil field because tankers cannot leave and onshore storage is reaching its capacity. According to Marine Insight, only three tankers carrying 2.8 million barrels of oil crossed the straight on early March, far below the usual daily average of about 19.8 million. This is an 86% decline.

But markets do not wait for the physical shortage to run out before reacting because of how oil is bought and sold. According to research from the Revenue Watch Institute, two-thirds of all traded oil moves through long term contracts between producers and refineries. These are agreements that give both sides predictability over supply and demand. The remaining third is sold on the spot market, where individual barrels are bought and sold in real time. That small share matters disproportionately because long term contracts don’t have fixed prices. They are rather written with formulas tied to whatever the spot market says oil is worth at delivery. This means spot prices set the benchmark for the entire system.

On top of this is the layer of futures trading. Futures contracts, or the agreement to buy or sell oil at a fixed price on a future date, are traded on exchanges in volumes the exceed physical supply. When traders anticipate a supply disruption, they bid up futures prices immediately, then spot prices follow, and because term contracts are pegged to spot, the reprice cascades across the whole market at once.

While this structure is designed to price risk in advance, it also means that he moment news of the Hormuz closure broke, markets were already repricing every barrel that would need to move through or around that strait in the weeks and months ahead.

On March 6, crude futures rose to their highest level in two and a half years, climbing 12% to $90 a barrel. International Brent crude followed the surge over 28% to above $86 a barrel in the days following the closure. JPMorgan Chase warned that prices could spike to $120 per barrel if disruption in the strait is sustained, estimating that Gulf producers can only sustain normal production for roughly 25 days.

Moreover, because oil is priced and settled in US dollars, the exchange rate matters as much as the barrel price for the Philippines and Southeast Asia. According to ING Think, even a brief oil price spike in June 2025 was enough to pull down the Philippine peso, Korean won, Thai baht, and Japanese yen by roughly 1.5 to 3%. The Philippine peso depreciated to around 59 per dollar in early march, a historical low, as risk sentiment deteriorated alongside the conflict. What this means in practice is that the the region pays more for oil in dollars at the exact moment its currency buys fewer dollars.

That double hit then travels through the economy in a chain that reaches ordinary households long before the supply of oil actually runs out. For example, transport costs rise first with fuel surcharges on trucking, fare increases on public transport, higher operating costs for fishing boats and delivery vehicles. According to ING Think Regional Head of Research for Asia Pacific, Deepali Bhargava, inflation in the Philippines could climb up to 0.4% for every 10% increase in oil prices. A price shock of this magnitude, coupled with peso depreciation, could push Philippine inflation to the upper end of the BSP’s 2-4% target range.

The picture is not unique to the Philippines. According to MUFG Research, Thailand, Vietnam, the Philippines, and South Korea are the most sensitive economies in Asia to oil price increases, with CPI inflation projected to rise by between 0.1 and 0.9 percentage points across the region. Under the assumption of a six-week Hormuz closure and oil prices rising from $70 to $85 a barrel, regional inflation across Asia could rise by 0.7 percentage points, with the Philippines and Thailand the most vulnerable.

Who was always going to be exposed?

That vulnerability did not begin with the Hormuz closure. When governments and analysts compare reserve levels across the region, it is easy to read these numbers as a performance table. Simply a ranking of which countries planned well and which didn’t. Japan at 254 days, South Korea at 208, China at 200. Thailand at 61, The Philippines at 60, and Indonesia at 25. The assumption is that these gaps reflects choices and that better choices would have produced better numbers, but that assumption misses something important.

The 90-day reserve standard that serves as the global benchmark was established by the International Energy Agency, whose membership obligation requires countries to hold stocks equivalent to at least 90 days of net oil imports and to be ready to collectively respond to severe supply disruptions.

It is a standard designed by and for IEA member countries, which in the region include Australia, Japan, South Korea, and New Zealand. However, most of the region are only Association countries in the IEA because in part because full membership requires holding oil stocks equivalent to at least 90 days of net imports. But according to the IEA’s Southeast Asia Energy Outlook, mandatory oil stockpile regimes across the region are generally only equivalent to fewer than 40 days of oil use and in some cases as few as six days.

According to an IEA-affiliated study on oil stockpiling options for Southeast Asia, financial constraints are among the most common factors slowing down oil stockpiling across the region. Crude purchases alone account for at least half the total cost of maintaining reserves, with significant capital and operational expenditures layered on top of storing and distribution. For example in Indonesia, the financial burden of oil stockpiling was estimated at over $1.1 billion in 2015 alone.

Storing oil is expensive and it ties up capital that developing economies cannot afford to lock away under normal conditions. According to the IEA’s report on energy security in ASEAN+6, developing emergency oil response capabilities and integrating them into global supply security mechanisms will take time and money, precisely the two things fiscally constrained economies have the least of. The result is a reserve gap that reflects not poor planning in the abstract, but constrained choices made under imitations.

The other constraint is where the oil comes from in the first place. Even if the region’s economies could build larger reserves, they would largely be filling them with Middle Eastern crude. Asia imports 60% of its crude oil from the Middle East, and the Philippines sources 90% of its oil imports from the region. Diversifying away from that dependence is not simply a matter of finding new suppliers, it requires retooling the refineries themselves.

“If you put a new crude into the refinery, you have to change the cutoff points. You have to change gasoline blending. There’s a lot of things you need to change. It’s hard work. This is why diversification has been so poor in a lot of countries,” Adi Imsirovic, director of consultancy at Surrey Clean Energy, explains.

The implication is that even the will to diversify runs into a physical ceiling. Refineries across the region were built and configured around Middle Eastern crude. This includes the specific density, sulfur content, and chemical composition of said crude - a product of decades of infrastructure built around a single supply corridor.

“Simply put, even replacing a modest share of the roughly 16 million barrels a day of Middle Eastern crude that arrives to Asia with Atlantic basin supply is not feasible,” Energy Aspects analyst Richard Jones said.

What energy security actually means here

According to a peer-reviewed study on global energy security, countries including the Philippines, Myanmar, and Cambodia were already in a precarious position before the strait closed, held back by poor energy resource endowments and limited domestic production capacity.

The panic about reserve levels treats that vulnerability as a policy problem, one that better preparation might have prevented. But the region was never fully inside the global energy architecture to begin with. The IEA’s 90-day benchmark, its emergency coordination frameworks are membership obligations, and most of Southeast Asia and the Pacific sits outside full membership precisely because meeting those obligations requires resources the region doesn’t have.

The 60-day countdown obscured all of that. It made a structural problem legible as a planning failure, which is a more comfortable story because planning failures have solutions. Structural ones are harder to sit with.

None of this fully excuses the choices made within those constraints. A 90% import concentration from a single region reflects fiscal limitation, but also decades of institutional inertia. Both are true at the same time, and both are part of what needs to change.

But the harder question, the one the Hormuz crisis leaves sitting with this region, is not simply how to build more reserves or diversify supply lines. It is what energy security actually means for economies that were never fully designed into the system meant to provide it. And whether that system, as currently built, is even capable of answering that question.

This article reflects reporting and analysis made by The Southeast Asia Pacific Frontier. If you have additional context, a different take, or a perspective we’ve missed — whether you’re a researcher, a policy practitioner, or someone living with these realities on the ground — this is an evolving story and we’d like to hear from you. Drop a comment below or get in touch.

About Matthew Parra

Matthew Parra is a student at the University of Santo Tomas and the founder and Executive Director of The Southeast Asia Pacific Frontier — an independent analytical platform dedicated to rigorous, evidence-grounded analysis of Southeast Asia and the Pacific across economics, society, and geopolitics.