By David Abonyi and George Abonyi, October 21, 2025
Introduction
Canada faces an increasingly complex and volatile global landscape. As the return of geoeconomics reshapes international relations, highlighted by the “Trump Shock” and a shift from economic policy to an earlier tradition of economic statecraft, Canada must rethink its economic strategy to strengthen national competitiveness in turbulent times.
While the United States will remain central to Canada’s strategy, diversifying trade and investment is essential. An evolving Indo-Pacific region can play an important role.
A recent Macdonald-Laurier Institute roundtable brought together ASEAN representatives, Canadian policymakers, business leaders and academics to explore lessons from Canada’s past and explore new ways to strengthen and diversify ties with the Indo-Pacific region in general, and ASEAN in particular. This article is inspired by the roundtable discussions.
Rethinking Canada in the Indo-Pacific: past lessons and looking to the future
The Indo-Pacific remains a region of world-leading economic growth and strategic importance, even amid global turbulence. Canada has steadily deepened its engagement with the region, with the 2022 Indo-Pacific Strategy (IPS) marking the most extensive effort yet.
The IPS treats the Indo-Pacific region as a strategic arena for foreign policy, emphasizing economic ties, stronger bilateral relations with India and Japan, and a careful balancing of China’s role. The Association of Southeast Asian Nations (ASEAN) occupies a central role in the region, and in the IPS, given its pivotal position in global manufacturing, investment, and trade.
Since the IPS launch, however, regional and global dynamics have shifted. There is a growing need for both Canada and Indo-Pacific partners to rethink traditional relationships and pursue more diverse, innovative economic partnerships.
This article explores key themes for reimagining Canada’s engagement – drawing on past lessons and proposing fresh ways of thinking about the region’s future.
Lessons from experience
The Indo-Pacific region is diverse, with ASEAN countries varying greatly in size, level of development, business sectors, institutional frameworks, and national interests. Yet, as a bloc, ASEAN offers significant opportunities for economic and business collaboration, as reflected in the recent groundbreaking ASEAN Digital Economic Framework Agreement (DEFA). Canada’s approach should balance both country-specific and regional engagement, with individual countries acting as “regional gateways” to broader opportunities.
The Indo-Pacific’s major countries of China, India, Japan, as well as Korea, have often taken the spotlight in Canada. But there are real opportunities elsewhere in the region, in particular ASEAN. These are often given substantially less attention. The IPS clearly recognizes the central position of ASEAN in the Indo-Pacific. But there has often been a gap between policy and practice in Canada’s engagement with the region. This leads to deeper concerns in the region about Canada’s present and future role.
Canada’s interest and commitment in engaging with the Indo-Pacific Region
Canada is often seen as inconsistent in its economic involvement with the Indo-Pacific and ASEAN. Initiatives are announced and launched but frequently lack follow-through or are abandoned, leading to perceptions of Canada’s lack of sustained commitment – especially beyond the large economies of China, India, Japan and Korea.
Past “third options” to diversify economic linkages to the Indo-Pacific region have been underwhelming. This is further complicated by Canada’s deep dependence on the US. This raises doubts about the longevity of Canada’s Indo-Pacific focus, particularly as its relationship with the US changes and the current policy shift toward Europe intensifies. What then is the real longer-term role of the Indo-Pacific and its recognized potential opportunities, high-level trade missions notwithstanding?
The IPS represents a “whole of government” strategy, central to implementing several public sector initiatives. The government’s role is crucial in creating conditions for engagement at the sector and firm level – an essential resource for small- and medium-scale enterprises (SMEs) that lack the resources and capabilities of big firms.
This role has included significant government-to-government arrangements that present potential opportunities for business involvement and collaboration. For example, they include promising bilateral arrangements such as the recent Canada-Indonesia Comprehensive Economic Partnership Agreement (CEPA); and regional agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), with Canada as a member.
Government’s role as the primary “driver” of Canada’s engagement with the Indo-Pacific region may be framed as “Phase 1” of the country’s involvement. However, success depends on the effective and sustained efforts of enterprises, both large and small. The challenge now is to expand and accelerate initiatives at the enterprise level, as a practical “Phase 2.” But this requires a well-prepared business community.
Readiness of Canadian enterprises for Indo-Pacific (ASEAN) engagement
It is not clear whether Canadian enterprises, small and large, understand how the Indo-Pacific, and ASEAN in particular, fit into competitive business strategies. Follow-up from government agreements, such as free trade deals, has been limited, and it’s unclear if Canadian enterprises are prepared to take advantage of such initiatives. To succeed, companies need knowledge of local industries, value chains, and market demands, and must recognize opportunities that align with capabilities and interests.
SMEs, in particular, often lack the capacity, information, and resources for doing business in the region. Efforts at engaging SMEs have led to limited results. While large Canadian companies are typically better positioned, they can create supply chain opportunities for smaller firms. This aligns well with the changing nature of regional value chains in the Indo-Pacific and ASEAN, offering opportunities for collaboration between large enterprises and SMEs in complementary value chains.
Canada’s knowledge and capacity for sustained engagement with the Indo-Pacific, and particularly ASEAN, is limited. A well-informed public, including a business sector with a realistic understanding of the region, is important for an effective, long-term strategy. This is essential for mobilizing resources effectively and responding to the region’s evolving needs and interests.
The IPS addresses the need for greater education and knowledge about the region. But more is needed, and faster. Strengthening Asia-related competency across business, government and educational and research institutions is vital. Enhancing “people-to-people” links between Canada and the region can also help foster sustained engagement with the Indo-Pacific region.
Rethinking Canada’s approach to ASEAN in the Indo-Pacific
Times have changed and so has the Indo-Pacific region. Canada’s approach to the region, and particularly ASEAN, needs to also evolve. We need to move beyond focusing on exports and sales to incorporating investment, collaboration, and partnership for mutual benefit – recognizing the existing and emerging significant and diverse capacity in the region for such co-operation. This approach sees ASEAN countries as complementary peers in key areas of mutual interest, such as the digital economy.
The IPS of 2022 can be seen as a “phase 1.” Moving to “phase 2” requires a shift in how Canada views the region and its role within it. It should reflect opportunities and benefits of investment in long-term partnerships. This requires a deeper understanding of the region as the basis for informed, focused, and sustained commitment. This entails, in turn, investment in knowledge and related capacity building both by government and the business community. Based on this, effective policies and initiatives by both government and enterprises can then lead to successful engagement with the region in the form of sustained partnerships for mutual interest. Government may not always need to play a leading role, and should be prepared to allow the private sector to lead where it can execute more quickly and efficiently.
An example: digital economy and AI
While there are several areas of high demand in ASEAN where Canada can serve as a traditional trade partner, such as energy and food, the tech space offers great potential for collaborative partnership. Digital technology and services (including related digital infrastructure and the required energy capacity) and AI applications are especially promising areas to explore.
The ASEAN region is investing heavily in digital technology and services. It is building capacity at the level of enterprises and governments, with significant financing being put in place. For example, the ASEAN countries attracted more digital-economy-related cross-border venture capital investments from 2020 to 2023 than the rest of the world. In 2023, the growth rate of ASEAN’s digital economy investment was three times the global average.
ASEAN, when compared against countries, would be the world’s third-largest digital services exporter after the US and United Kingdom. Much of this digital services trade is within the region. It is also a significant importer of digital products and services. There is strong interest in technology and knowledge acquisition, and related international collaboration, with supporting policies and programs in the region. This provides significant opportunities for Canadian enterprises.
However, while Canada has demonstrated globally competitive research and development strengths in AI, the country lags its peers in application and commercialization. This is an issue that goes beyond AI. Canada has many startups, but companies often do not survive the necessary scaling for growth. This is partly a financing constraint, but also a function of market size. It often leads to the acquisition of Canadian startups, particularly by large US firms.
The 2023 ASEAN Digital Economic Framework Agreement (DEFA) provides a unique framework to address both Canada’s and the region’s interests. DEFA provides opportunities for both Canadian and regional enterprises for scaling up by expanding opportunities to access the ASEAN regional market for digital services. Furthermore, collaboration through digitalization offers significant spin offs for a wide variety of industries and sectors of mutual interest.
The broader economic impact of digitalization is reflected in the changing concept of infrastructure that blurs traditional boundaries. Data centers, including for development and application of AI, bring together digital technology with extensive demands on power grids, and on water infrastructure for cooling. Furthermore, increasingly this involves cross-border initiatives, as reflected in DEFA. The expanding concept of infrastructure requires increasing private sector participation. These developments provide growing opportunities for new types of collaboration between Canadian and regional enterprises.
Conclusion
If Canada hopes to increase collaboration with Indo-Pacific/ASEAN nations, it will need to fundamentally rethink its approach to the region. It needs to view these countries both individually and collectively as potential partners in addressing shared risks and responding to emerging opportunities.
This requires a shift in perspective and approach to the region by Canada’s public and private sectors. It also entails significant investment in preparation for such collaboration by both government and business, and new types of public-private partnerships. Furthermore, given a turbulent global environment, and continuing changes and uncertainty in the region and for Canada, we will need to continue engaging in informed and focused dialogue that can lead to effective policies and programs for mutual interest.
David Abonyi, founder and CEO of Lomtara, is director of the project “Strengthening Thai-Canada Business Linkages,” originally an initiative of the Thailand Economic Cooperation Foundation in Bangkok.
George Abonyi, resident of Ottawa, is a senior research fellow and visiting professor at the Sasin School of Management of Chulalongkorn University and senior adviser to the Fiscal Policy Research Institute, affiliated with the Ministry of Finance, Royal Thai Government.
They are the authors of Geoeconomics and the Trump shock—Implementing Canada’s Indo-Pacific Strategy in turbulent times, and Paths forward in a changing region—Implementing Canada’s Indo-Pacific Strategy in turbulent times, a special two-part MLI series on Canada’s relationship with the Indo-Pacific.
