Southeast Asia’s Social Bargain Is Under Strain
Behind the veneer of development, events around the region hint at the increasing strain facing the social compact that has provided stability for the states in Southeast Asia
Southeast Asia’s recent developments show a region that is growing, modernising, and attracting strong strategic attention. At the same time, they also show that the social foundations behind this stability are facing pressure. Youth anxiety, shrinking middle classes, housing shortages, technology competition and maritime tensions all point to one shared knowledge for ASEAN governments: “how to make sure economic growth still supports public confidence.
The main question is not only whether Southeast Asia will continue to grow. The more important question is whether people still believe that education, hard work and discipline can help them build a secure life. This belief has long supported the region’s political and economic order. But today, rising living costs, insecure jobs, limited career opportunities and weak channels for public participation are making this old bargain less convincing, especially for the younger generation.
Recent cases of school violence in Thailand and the Philippines should not be overstated as a regional youth crisis. These incidents are still rare. However, they show some deeper pressures facing young peopleacross Southeast Asia. Many young people are entering adulthood with higher expectations but fewer guarantees. They face competitive education systems, uncertain labour markets, housing pressure and doubts about whether formal politics can really respond to their concerns. For this reason, youth policy should go beyond education, and employment only. Jobs and skills remain very important, but they are no longer enough by themselves. Governments need to invest more seriously in mental health, civic participation and trusted institutions where young people can raise their concerns before frustration becomes disengagement. Business also has an important role by offering clearer career path, better management and skills development that can lead to real wage growth.
The same pressure can be seen among middle-income groups in the region. Indonesia’s shrinking middle class is especially important because domestic consumption, entrepreneurship and social mobilitydepend on households that feel secure enough to spend, save and invest. If middle-income families become more vulnerable to inflation, job insecurity and limited savings, the effects will go beyond household welfare. It could also weaken confidence in the state’s ability to provide inclusive development.
The Philippines gives a similar lesson. Its poverty rate fell to 9.7 percent in 2025, compared with 15.5 percent in 2023. This means around 6.5 million Filipinos moved above the official poverty line. This is an important achievement. However, many households are still only slightly above the poverty threshold. They can easily fall back into hardship because of health, inflation, job loss or other shocks. Poverty reduction must therefore be supported by stronger protection for vulnerable households, assistance for the poorest while housing is also becoming a major test for social stability. In Vietnam, demand for rental housing has gone beyond one million units, much of it coming from workers and employees in industrial parks. Malaysia’s National Housing Policy 2026-2035 also shows a more data-based approach to vacant units, income levels and transport planning. These examples show that housing is no longer only a welfare issue. It is connected to labour mobility, industrialisation and the ability of workers to live near economic opportunities.
Economic upgrading will also depend on how well countries connect industrial policy with human development. Malaysia’s target to produce its first “Made by Malaysia” chips using Arm technology by 2030 shows its ambition to move higher in the value chain. But the more important point is the link between semiconductor policy and skills. Training 10,000 people over four years, with starting salaries around RM5,500 and the possibility of higher earnings, connects technology policy with middle-income job creation, while Vietnam also faces a different but related challenge. Vietnam’s economy also has high savings and strong investment, but domestic firms still face difficulties in accessing long-term capital. The Foreign-invested sector continues to generate large surpluses, while local businesses still face financing constraints. This reflects a deeper challenge for ASEAN economies. Foreign investment is important, but it should also help strengthen local firms, workers and institutions.
Strategic competition in Southeast Asia is also adding another layer of pressure. The US continues to present the region as a priority, and American investment remains an important advantage. However, Washington’s tariff language has created concerns about predictability. For ASEAN, the issue is not only whether the United States remains present. It is also whether its engagement is stable and sensitive to the region’s economic realities while China also remains central to the regional trade, infrastructure and industrial networks. Indonesia’s expanding cooperation with China in defence, minerals, energy and technology show how deeply connected the region is with Beijing. At the same time, Jakarta continues to frame its foreign policy through a “free and active” approach. This is not alignment with one side, but careful balancing.
The same pattern can be seen in other parts of the region. Cambodia’s possible revival of joint military exercises with the United States should not be seen as a shift away from China. It is better understood as pragmatic diversification. Cambodia remains closely linked to Beijing, but reengaging Washington gives Phnom Penh more diplomatic space while having a border dispute with Thailand, another regional power and a close ally of the US in ASEAN. In the same way, Cambodia’s deepening relations with Japan also widen its choices without forcing the country to choose between major powers.
Likewise, maritime security is another area where sovereignty, economics and strategic pressure meet. Vietnams reported new oil discovery shows the difficulty of developing offshore resources while facing Chinese pressure in the South China Sea. The Straits of Malacca and Singapore also remain very important for regional and global trade, carrying almost a quarter of global seaborne trade and nearly a third of global oil and gas supplies. Indonesia, Malaysia, and Singapore’s commitment to keeping these waterways open and safe shows the continued importance of practical regional cooperation.
When discussing Southeast Asia, Myanmar should not be also forgotten, though it’s isolating itself from the bloc. In Myanmar, recovery cannot be built only on politics, macroeconomic targets or infrastructure promises. It must put people at the centre. The recent trips of so-called president Min Aung Hlaing to India, China, Thailand and Russia while planning to visit Vietnam and Cambodia in September might affect ASEAN unity and spirits soon since his administration becomes ignoring ASEAN demands for Myanmar reforms by using support from regional powers and some ASEAN member states.
Southeast Asia’s stability has always depended on more than growth figures. It depends on whether people believe that tomorrow can be better than today. ASEAN’s challenge is to renew that belief by building economies that are not only open and competitive, but also fair, resilient and trusted by agency and society.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of IIPA and this platform.
Author
Wai Yan Phyo Naing is a visiting scholar at the Institute of Modern History, Academia Sinica in Taipei, Taiwan, and an Associate Research Fellow at the Centre for Peace and Reconciliation (CPR-Myanmar). He has a Ph.D. in History with a focus on International Affairs and International Regional Studies from the National Research University – Higher School of Economics, Moscow and his research areas include Myanmar studies, Asia-Pacific studies, Myanmar foreign policy, Myanmar-China and Myanmar-Russia relations, Taiwan studies, and Myanmar migrant issues in Thailand.