US-China AI Race Turning ASEAN Neutrality Into A Liability

Recent export-control developments illustrate the stakes. On October 16, China proposed adding 23 AI technologies to its export-control catalog as part of a broader revision covering 40 technologies across AI, biotechnology and solar energy.

The proposal includes restrictions affecting the overseas deployment of certain AI models involving sensitive technologies. This followed years of US restrictions on advanced semiconductor exports to China. The policies are not identical, but both treat access to strategic technology as an instrument of state power.

Consider a Southeast Asian company operating a data center with American chips, foreign cloud software and services connected to Chinese technology suppliers. Such an arrangement may be commercially efficient.

But any change in export rules, licensing requirements or security restrictions could disrupt access to components or services, even if the company has no dispute with either government.

Technology systems are interconnected, and replacing one component may require changes to software, data architecture, cybersecurity arrangements and employee training. Once these systems are embedded in public administration or industrial production, switching suppliers can be expensive and disruptive.

An initial decision to adopt a technology may therefore constrain future choices long after the original investment is made. This is how economic interdependence can become geopolitical leverage: not necessarily by forcing another country to obey, but by making certain choices prohibitively costly. ASEAN's challenge is to recognize that exposure before it hardens into dependence.

Southeast Asia has good reasons to welcome the AI boom. A growing digital economy, strategic location and expanding infrastructure make it attractive to global technology companies.

Cushman & Wakefield reported in August that Asia-Pacific's data-center development pipeline reached 26.5 gigawatts in the first half of 2026, with Southeast Asia accounting for approximately half of the region's capacity under construction. Malaysia had 1,039 megawatts under construction, while Jakarta's development pipeline reached 1,699 megawatts.

These figures show the region's growing importance to the global AI economy. They do not, however, establish that Southeast Asia is gaining control over the technologies powering the expansion.

Data-center capacity is not the same as domestic technological capability; a country can host advanced computing infrastructure while relying on foreign suppliers for processors, software, intellectual property and specialized expertise.

This is especially relevant for Indonesia. Its participation in WAICO could widen opportunities for international cooperation and AI capacity-building, but it also needs a broad range of technologies, investment and expertise, including from American companies.

Its strategic interest is to ensure that cooperation with either side expands its options, not in swapping one dependency for another.

The same challenge applies across ASEAN, though national capacities differ considerably. Singapore has a sophisticated technology ecosystem, while Malaysia has become a major data-center hub.

Indonesia offers a large domestic market, but size alone cannot guarantee tech autonomy. Governments need skilled workers, research institutions, competitive domestic firms and the capacity to negotiate favorable investment terms.

Otherwise, the region could become indispensable to AI's physical buildout without capturing a comparable share of its intellectual property and higher-value economic returns.

Foreign investment would still create jobs and infrastructure, but the most strategic capabilities could remain elsewhere. The issue is not whether foreign technology should be used, but whether its use strengthens domestic capability or entrenches dependence.

ASEAN should not respond by choosing between Washington and Beijing. Such a strategy would forfeit the benefits of competition while ignoring the region's diverse economic and security interests.

Nor is technological self-sufficiency a realistic objective; even the most advanced economies rely on international supply chains. ASEAN should instead move from diplomatic hedging toward collective management of technological dependence.

First, governments should diversify critical suppliers wherever technically and economically feasible. That requires more than signing multiple agreements; it requires credible alternatives that can operate when access to a particular technology is restricted.