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Adwaith Sankar
12 August 2026 |
In the second quarter of 2026, Southeast Asia navigated internal and external conflicts while grappling with global economic headwinds.
1. Min Aung Hlaing’s Presidency and the institutionalisation of military rule
Min Aung Hlaing officially assumed Myanmar’s presidency on 10 April. This marked a turning point after an election process between December 2025 and January 2026. The following events institutionalised military rule in the country. The vast majority of parliamentary seats belong to the pro-military bloc including the USDP. Soon after assuming the presidency, Min Aung Hlaing offered armed groups talks. However, the National Unity Government, the primary group opposing military rule, dismissed this offer. Ethnic armed groups including the Karen National Union and Chin National Front rejected this offer. Subsequently, the government renewed martial law in 60 townships for a further 90 days, their administration vested in commander-in-chief Ye Win Oo. The armed conflicts have yet to subside. The army managed to retake three areas using conscription and drones between April and May. From May, the Arakan Army pushed deeper into the Ayeyarwady Region.
In terms of foreign policy, the president has been attempting to normalise relations with ASEAN and build closer ties with neighboring states. The president made his first foreign visit to India on 30 May and met senior leaders including the Prime Minister. A clear diplomatic success for the administration was the president’s state visit to China in June that included the signing of several deals including cooperation on transport and disaster relief. Although ASEAN foreign ministers met Myanmar’s foreign minister for the first time since the coup, at an informal meeting in Bangkok on 12 July after the quarter, Naypyidaw’s normalisation goal has not been achieved. ASEAN has continued to push its five-point plan, which Min Aung Hlaing rejected in a 31 July address.
2. Thailand-Cambodia conflict frozen as engagement remains limited to lawfare
The border conflict that took place in December has resulted in a tense relationship between the two countries this quarter. Prime Minister Anutin’s second cabinet was sworn in on 6 April after a snap election that gave the Bhumjaithai party the largest share of seats. In May, this conservative-nationalist administration terminated the 2001 MOU with Cambodia regarding overlapping maritime claims. Cambodia, in response, initiated compulsory conciliation under UNCLOS. In turn, Thailand agreed to the 12-month non-binding process in June. Separately, Cambodia brought back the conscription law that enforced two-year service. For the first time since October 2025, PM Anutin and PM Hun Manet met in Cebu in May. This meeting did not result in the reopening of the border but did involve talks about de-escalation and trust-building. No armed clashes between the countries occurred this quarter but the Thai army alleges that explosions have occurred.
3. Economic shocks of Hormuz and Tariffs produce economic challenges
The ASEAN Regional Forum, held in July just after the quarter, featured the Hormuz crisis prominently. For ASEAN, the crisis has had economic impacts because of maritime trade and energy imports being vital to the region. The Philippines, which purchases 98 per cent of its crude oil from the Middle East, saw inflation reach 7.2 per cent in April. Thailand, economically reliant on tourism, cut its foreign arrivals target citing energy-price volatility among other reasons. The Indonesian rupiah fell to record lows in June. Indonesia’s central bank subsequently increased interest rates, with turmoil from the war in the Middle East being named as a reason. At the 48th ASEAN Summit in May, leaders called for the expedited ratification of the ASEAN Petroleum Security Agreement.
Apart from the Hormuz crisis, US tariffs have resulted in economic uncertainty in the region. Many Southeast Asian countries have had changes to bilateral trade deals made with the US in 2025. Malaysia’s deal was terminated. Indonesia’s deal has not been implemented. Vietnam’s deal remains under negotiation, and US talks with Thailand are still active. In June, the USTR proposed tariffs on 60 trading partners including ASEAN states. Indonesia, Cambodia, and Malaysia would face 10 per cent. Vietnam, Singapore, the Philippines, and Thailand would face 12.5 per cent. The duties took effect on 24 July, after the quarter.
4. South China Sea sees greater tension between the Philippines and China
The high points of tension in the South China Sea occurred between the Philippines and China. The Chinese Coast Guard’s presence at the Scarborough Shoal increased in May and remained elevated in June. The Asia Maritime Transparency Initiative described the CCG’s activity this year as being beyond any levels previously observed. During May, a US Coast Guard vessel joined the Philippines’ forces for a joint patrol activity near Scarborough Shoal for the first time. In June, a Philippine frigate encountered four PLA Navy warships. Similarly, there was a clash in July, after the quarter’s end, around the Second Thomas Shoal in which the Philippine military asserted that the CCG injured one of its sailors. A 15-year communications-security arrangement between the Philippines and the US was announced at a ministerial-level meeting on 30 May. Vietnam protested China’s annual fishing ban that took effect in May. In the disputed Spratly island chain, Vietnam has been building infrastructure. According to Radio Free Asia, Vietnam is building maritime and military infrastructure at 27 sites across reefs in the islands.
5. Contrasting domestic politics in the region
In Vietnam, domestic politics remained relatively stable with To Lam assuming Vietnam’s presidency while remaining the General Secretary of the Communist Party of Vietnam. Le Minh Hung was confirmed as Prime Minister with a unanimous vote from the National Assembly. On the other hand, Malaysia witnessed federal coalition partners contest against each other in state elections. Federal partner blocs Pakatan Harapan and Barisan Nasional contested against each other in Johor and Negeri Sembilan. In polls held after the quarter, BN won Johor with an overwhelming majority on 11 July and won the highest number of seats in Negeri Sembilan in early August. In the latter state, the BN formed a coalition with PN, which the federal coalition aimed to keep out. In Indonesia, President Prabowo executed his fifth cabinet reshuffle in eighteen months. In June, Indonesian students protested against a fuel-price increase, the rupiah’s fall, and the management of the free school-meals program. In the Philippines, Vice-President Duterte was impeached for a second time in May.
To conclude: Southeast Asia in the second quarter (April-June 2026)
The second quarter saw certain governments consolidating power and other governments facing political hurdles. The region continues to deal with land and maritime territorial disputes with lawfare becoming increasingly relevant. Global economic headwinds produced outside the region continue to add to uncertainty and challenges.
