Fashion
Strait of Hormuz disruption ‘systemic shock’ threatening SE Asia: ERIA
Describing the closure of the vital shipping route as a ‘structural rupture’ in global energy trade, the ERIA issue paper said member countries of the Association of Southeast Asian Nations (ASEAN), including Cambodia, are particularly exposed due to their heavy reliance on imported energy.
The Strait of Hormuz disruption is a systemic shock threatening Southeast Asia’s energy security and economic stability, a report by Economic Research Institute for ASEAN and East Asia said.
Flagging cascading impacts across key sectors beyond energy markets, it cautioned that these combined pressures could lead to slower economic growth, rising inflation and financial instability across the region.
The ASEAN region imports about two-thirds of its crude oil, with some like Cambodia, Singapore and the Philippines almost entirely dependent on external supplies. This dependence, combined with concentrated sourcing from the Middle East, makes ASEAN highly vulnerable to prolonged supply disruptions, the report noted.
Flagging cascading impacts across key sectors beyond energy markets, it cautioned that these combined pressures could lead to slower economic growth, rising inflation and financial instability across the region.
Higher import bills are expected to widen current account deficits, while currency volatility and capital outflows may further strain economies, it said.
The situation also poses risks to migrant workers in the Middle East, potentially affecting remittances that many ASEAN households depend on, it observed.
As fragmented national responses are insufficient to address such a complex crisis, ERIA called for stronger regional coordination, arguing that unilateral actions like stockpiling or subsidy policies could worsen supply shortages and increase competition among countries.
To strengthen resilience, the report outlined several strategic recommendations. These include developing indigenous energy resources such as biofuels, expanding regional energy trade and enhancing infrastructure through initiatives like the ASEAN Power Grid and Trans-ASEAN Gas Pipeline.
It also called for the creation of shared strategic reserves and coordinated stockpiling mechanisms to ensure more stable access to energy during crises.
ERIA also stressed on the importance of diversifying supply sources, accelerating renewable energy deployment and improving energy efficiency.
The Hormuz disruption is a ‘stress test’ for ASEAN’s economic and energy systems, and long-term resilience will depend on deeper regional integration, coordinated policymaking and a shift towards a more secure and diversified energy architecture, the report concluded.
Fibre2Fashion News Desk (DS)