Southeast Asia keeps a tariff-slashing pact with the Gulf Cooperation Council on its agenda as a feasibility study heads for a year-end deadline and Indonesia races to conclude its own bilateral deal.
JAKARTA, September 28, 2026
The Association of Southeast Asian Nations is keeping a prospective free trade agreement with the Gulf Cooperation Council on its agenda while it works out whether such a pact is practical, according to an ASEAN statement issued after foreign ministers from the two blocs met on the margins of the United Nations General Assembly debate in New York.
“The meeting noted the ongoing work to advance discussions on ASEAN’s feasibility study for the ASEAN-GCC Free Trade Agreement, targeted for completion by end-2026,” the statement said.
The two groupings have not begun formal negotiations. Discussions remain at the feasibility study stage, which in ASEAN practice is the step that precedes a decision to launch talks rather than the talks themselves.
The prize, if the process runs its course, is substantial. The Gulf Cooperation Council comprises Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman, with a combined gross domestic product of 2.4 trillion dollars. A conventional free trade agreement between the two blocs would aim to bring tariffs on members’ goods toward zero, though the eventual coverage would depend on what the negotiations produce.
The numbers on the table
A joint declaration issued when the two groupings’ leaders met in Kuala Lumpur last year recorded ASEAN-GCC trade at 130.7 billion dollars in 2023, with Gulf foreign direct investment into ASEAN of around 390.2 million dollars over the period. The two sides forecast average growth of 30 percent in export and import figures and expressed openness to a trade agreement. The Gulf grouping has set a target of lifting annual two-way trade to 180 billion dollars by 2032.
The gap between the 130.7 billion dollar trade figure and the 390.2 million dollar investment figure is the most telling pair of numbers in the file. Goods trade between the two regions is already substantial, driven overwhelmingly by Gulf hydrocarbon exports into energy-importing Southeast Asian economies. Direct investment is negligible by comparison, roughly three tenths of one percent of the trade value.
That imbalance shapes what each side wants. For the Gulf states, the interest in a trade agreement is less about tariffs on oil, which face low duties almost everywhere, and more about securing long-term offtake relationships, opening downstream petrochemical and fertiliser markets, and building the investment channels that a sovereign wealth deployment strategy requires. The statement’s language about creating an “enabling and favorable environment” for mutually beneficial investments reflects that.
For ASEAN members, the interest runs the other way. Southeast Asian manufactured goods, processed foods, palm oil derivatives, electronics and agricultural products face Gulf tariffs that are modest by global standards but not zero, and Gulf markets have been growing rapidly as diversification programmes in Saudi Arabia and the United Arab Emirates expand non-oil consumption and construction.
Indonesia is moving faster on its own
The regional process is running behind a bilateral one. Indonesia is negotiating its own trade agreement with the Gulf Cooperation Council and is seeking to conclude the talks no later than November.
Jakarta’s stated expectation is an increase of up to 17.4 percent in export numbers if the agreement is concluded. Indonesia recorded 15.45 billion dollars of trade with the grouping between January and November 2025.
Indonesia’s interest has a dimension that is specific to it. As the world’s largest Muslim-majority country, Indonesia wants ASEAN and Gulf economies to recognise each other’s halal certification, which would remove a significant non-tariff barrier for Indonesian food and consumer goods exporters and would be worth more in practice than several percentage points of tariff.
There is also an energy calculation. Gulf states are predominantly oil exporters, and Indonesia has been working to reduce its Middle Eastern crude imports following supply constraints arising from the conflict involving Iran. An agreement that deepens commercial ties while energy sourcing diversifies away from the region is a delicate balance to strike, and it explains some of Jakarta’s emphasis on investment and non-oil trade rather than on hydrocarbons.
President Prabowo Subianto noted at the Kuala Lumpur leaders’ meeting that ASEAN trade with the Gulf still had ample room for growth, a formulation that is diplomatic shorthand for underperformance relative to potential.
Why a bloc-to-bloc deal is hard
Feasibility studies are not a formality in ASEAN practice, and there are concrete reasons this one has taken time.
The first difficulty is that ASEAN negotiates as a bloc but its members have divergent interests and widely different levels of development. Singapore, Brunei, Malaysia and Thailand have different sensitivities from Cambodia, Laos and Myanmar. ASEAN’s existing external agreements, with China, Japan, Korea, India, Australia and New Zealand, and the Regional Comprehensive Economic Partnership, were each slow to negotiate for this reason, and several include long phase-in schedules and extensive exclusion lists to accommodate the range.
The second difficulty is symmetrical. The Gulf Cooperation Council is a customs union with a common external tariff, but its members have historically found joint external negotiation difficult. The grouping’s agreement with the European Free Trade Association took years, and its long-running talks with the European Union have never concluded. Several Gulf states have preferred bilateral deals, which is precisely what Indonesia is exploiting.
The third difficulty is the composition of trade. When one bloc’s exports are overwhelmingly hydrocarbons and the other’s are overwhelmingly manufactures and agricultural products, a tariff-elimination agreement is asymmetric in its effects. Tariffs on crude and refined products are already low in most ASEAN markets, so the Gulf gains relatively little from tariff elimination and must be compensated in investment protection, services, procurement or energy security commitments. Those are harder chapters to negotiate than goods schedules.
The fourth is competition from other suitors. Both blocs are negotiating widely. The Gulf states have been pursuing agreements with India, the United Kingdom, Turkey, South Korea and others. ASEAN has its own crowded agenda. Negotiating capacity is finite, and files compete for it.
Background: two blocs with very different trade machinery
The asymmetry between ASEAN and the Gulf Cooperation Council as negotiating counterparties is not merely one of economic structure. It is institutional, and it explains much of the slow pace.
ASEAN has been negotiating external trade agreements as a bloc since the early 2000s. Its agreements with China, Korea, Japan, India, and Australia and New Zealand were concluded sequentially over roughly a decade, and the Regional Comprehensive Economic Partnership, which brought most of those partners into a single instrument, took eight years from launch to signature. The grouping has an established secretariat process, a familiar template and a body of precedent for handling member sensitivities through exclusion lists and differentiated phase-in schedules.
What ASEAN does not have is supranational negotiating authority. Its agreements are concluded by consensus among ten members, now eleven with Timor-Leste’s accession, and each member retains the ability to slow a file. Where the European Commission negotiates on behalf of member states with a mandate, ASEAN negotiates as a coordinated group of sovereign negotiators. That produces agreements that are broader in membership and shallower in commitment.
The Gulf Cooperation Council has the opposite profile. It is a customs union with a common external tariff, which in principle makes joint external negotiation straightforward, since there is one tariff schedule to negotiate. In practice its external trade negotiating record is thin. The agreement with the European Free Trade Association took many years. Negotiations with the European Union, launched in 1990, have never concluded. Bilateral agreements by individual members, which the grouping has at times discouraged, have proliferated anyway, with the United Arab Emirates in particular concluding a rapid series of comprehensive economic partnership agreements with partners including India, Turkey, Indonesia and others.
That record suggests where this file is most likely to land. The bilateral route works and is being used. The bloc-to-bloc route is the one that has historically stalled.
What the feasibility study has to answer
An ASEAN feasibility study of this kind is not a formality, and its conclusions shape whether and how negotiations proceed.
The study has to establish whether the economic gains from an agreement would be positive and reasonably distributed across members. That is harder than it sounds when members range from Singapore, with a per capita income among the world’s highest and a near-zero tariff schedule already, to Cambodia, Laos and Myanmar, where tariff revenue remains a meaningful share of government income and where liberalisation carries fiscal cost.
It also has to identify the sensitive sectors. In ASEAN-Gulf trade the obvious candidates are petrochemicals and fertilisers, where several ASEAN members have domestic industries that compete directly with highly cost-advantaged Gulf producers using feedstock at prices no importer can match. Malaysia, Indonesia, Thailand and Vietnam all have petrochemical capacity that would face pressure from full liberalisation, and those are exactly the sectors where the Gulf side would push hardest.
Third, it has to assess whether the agreement would deliver anything the members do not already have. Several ASEAN states already have or are negotiating bilateral arrangements with Gulf partners. If the regional agreement would merely replicate those with added complexity, the case for it weakens.
The year-end target for completing the study is therefore a target for answering those questions, not for reaching a conclusion in favour.
Reaction and positioning
Business reaction in Southeast Asia has been cautiously positive and focused on the practical. Exporters in Indonesia, Malaysia, Thailand and Vietnam have been steadily building Gulf market positions in food, halal-certified consumer goods, automotive components, electronics and construction materials, and an agreement that harmonised certification and reduced duties would consolidate positions already being built commercially.
Gulf business interest is concentrated on the investment side. Sovereign and quasi-sovereign investors from the region have been increasing allocations to Southeast Asian infrastructure, logistics, data centres and energy transition assets. An investment chapter with meaningful protections and dispute settlement would matter more to those investors than any goods schedule.
Analysts in the region have pointed out that the feasibility study’s year-end deadline is a soft one and that ASEAN deadlines of this kind frequently slip. The more meaningful signal will be whether the two sides announce a launch of formal negotiations, which requires political decisions in eleven capitals on one side and six on the other.
Economic impact analysis
Assessing the potential value of an agreement that has not been negotiated requires caution, but the structure of the trade points to where the effects would land.
The largest measurable gains would accrue to ASEAN manufactured and processed goods exporters. Gulf applied tariffs are generally modest, with a common external tariff of five percent on most goods and higher rates on a protected minority, so the tariff margin from an agreement would be real but not transformative on its own. The larger gains would come from non-tariff work: mutual recognition of halal certification, alignment of standards and conformity assessment, customs procedures and services access.
For the Gulf, the gains would be concentrated in downstream petrochemicals, fertilisers, aluminium and plastics, where ASEAN duties are more meaningful than they are on crude, and in the investment and services chapters.
The 180 billion dollar target for 2032 implies roughly 38 percent growth from the 2023 base over nine years, which is a little over three and a half percent compound annual growth. That is an unambitious target for two fast-growing regions, and it suggests the figure was set as a floor rather than a stretch.
The wider strategic effect is the one that matters most. Both blocs are pursuing diversification away from dependence on a small number of large partners, and both are operating in a trading environment where the major economies are increasingly using unilateral tariff instruments. A South-South agreement between two blocs that between them span the energy supply and the manufacturing base of a large part of the world is, whatever its specific tariff schedules, a hedge against that environment.
The wider context of South-South agreements
The ASEAN-Gulf file belongs to a category of trade negotiation that has grown markedly over the past three years and that receives far less attention than agreements involving the United States, the European Union or China.
India has begun free trade talks with the Gulf Cooperation Council this month. Mercosur has concluded an agreement with Singapore and is pursuing others in Asia. The African Continental Free Trade Area continues its phased implementation. Indonesia, Vietnam, Thailand and Malaysia are each running multiple bilateral negotiations outside the ASEAN framework.
The common driver is the same in each case. Economies that have historically organised their external trade around access to North American and European markets are hedging against a period in which access to those markets has become less predictable and more conditional. Building a lattice of agreements among themselves does not replace the large consumer markets, but it reduces the proportion of trade that is exposed to any single policy decision taken elsewhere.
The limitation of this lattice is that South-South agreements typically link economies whose exports are complementary in a narrow band and competitive across a wide one. Two manufacturing economies with similar cost structures gain less from mutual liberalisation than either would gain from access to a high-income consumer market. The ASEAN-Gulf pairing is unusual in that the complementarity is genuine, with energy and petrochemicals flowing one way and manufactures, food and labour services the other. That is a better basis for an agreement than most South-South pairings offer, and it is a reason to take this file more seriously than the slow pace might suggest.
Implications for importers, exporters and supply chains
Businesses should treat this file as a medium-term planning input rather than a near-term commercial event.
The immediate opportunity is bilateral, not regional. Indonesia’s talks with the Gulf grouping are targeted for conclusion by November, and a concluded agreement there would take effect years before any bloc-to-bloc arrangement. Exporters with Indonesian operations, or the option of establishing them, should be watching that file closely, including its rules of origin, which will determine whether goods assembled in Indonesia from regional inputs qualify.
Halal certification is the variable to watch most carefully in the food and consumer goods sectors. Mutual recognition, if it is achieved, would remove duplicative certification costs that frequently exceed the tariff burden. Companies exporting into Gulf markets should be documenting their current certification costs now, because that is the baseline against which any agreement’s value will be measured.
Rules of origin will determine who actually benefits. In a region where a large share of manufacturing is assembly of imported components, an agreement with demanding origin rules delivers less than its tariff schedule implies. ASEAN’s existing external agreements vary considerably in this respect, and the regional value content thresholds negotiated will decide whether Southeast Asian exporters or their upstream suppliers in China, Japan and Korea capture the benefit.
Energy buyers should note the direction of travel separately. Indonesia’s stated intent to reduce Middle Eastern crude imports following supply constraints is a reminder that commercial agreements and physical supply strategies can move in opposite directions. A trade agreement does not lock in energy flows, and the security-of-supply calculations driving refinery sourcing decisions in Southeast Asia are being made on different criteria.
Finally, businesses should not discount the possibility that the feasibility study concludes against a bloc-to-bloc agreement, or that it concludes in favour and the launch decision is deferred. The realistic base case is a continuing patchwork of bilateral agreements between individual ASEAN members and either the Gulf grouping or individual Gulf states, with the regional framework arriving later if at all. Planning around the patchwork is more useful than planning around the framework.
What to watch
Three markers will indicate whether this file is moving.
The first is the completion of the feasibility study against its end-2026 target, and more importantly whether its conclusions are published or merely noted. A study that recommends launching negotiations, and says so publicly, is a different signal from one that is quietly absorbed.
The second is the Indonesia-Gulf bilateral. Jakarta is aiming to conclude by November. A concluded Indonesian agreement would provide a template and would demonstrate that the substantive issues, including halal recognition and petrochemical sensitivities, can be resolved. A stalled one would suggest they cannot.
The third is whether other ASEAN members follow Indonesia’s bilateral route. If Malaysia, Thailand or Vietnam announce their own negotiations with the Gulf grouping or with individual Gulf states, the regional agreement becomes progressively less necessary and correspondingly less likely.