The European Union is ASEAN’s third largest trading partner after China and the United States and its third largest source of direct foreign investment, with last year’s total merchandise trade reaching about $320 billion.

It’s a formidable number, which both sides would like to improve upon and the EU is negotiating free trade agreements (FTAs) with Thailand, Malaysia, The Philippines after successfully signing such deals with Indonesia, Singapore, and Vietnam.

Chris Humphrey, executive director of the EU-ASEAN Business Council, spoke with The Diplomat’s Luke Hunt about the status of current FTA negotiations and issues including counterfeit goods, labor rights, environmental standards, and protectionism.

In regards to counterfeit goods, he noted that ASEAN’s top six economies – Singapore, Malaysia, Indonesia, Thailand, Philippines, and Vietnam – lost as an estimated $13 billion to illicit tobacco products over the past two years.

Indonesia accounted for more than $5 billion of those losses while more than half of cigarettes sold in Malaysia were illicit – making it the only market where illicit cigarettes outnumbered legal sales.

“So there are things that need to be resolved. But to be fair to the ASEAN member states, they are working to resolve them,” he said.

Negotiations with Myanmar for an FTA were initiated in 2014 but are on hold amid the civil war and Humphrey also points to organized crime and scam compounds as damaging its image abroad, in a similar way to Cambodia and Laos.

But he remains optimistic about Cambodia and its plans to leave the ranks of the least developed countries by the end of the decade, if it can purge the country of scam compounds and human trafficking networks.

“Cambodia has got one of the fastest growing economies in Southeast Asia. It will naturally start to attract more foreign direct investment going forward. But companies will be wary of dealing with a country that has reputational damage,” he said.

Humphrey, who has run the EU-ASEAN Business Council since its formal inception in 2014, also spoke about the impact of the conflict between Cambodia and Thailand, the closure of their border, and its impact on trade.

He also talks about the disproportionate affects the Israel-U.S. war in Iran is having on the region, particularly in terms of inflation and its impact on the broader economies from the price of energy to food costs.

Marcus Tantau, a senior associate at Templeton Research, returns to Beyond the Mekong for an update on the outlook for ASEAN economies as the crisis in the Middle East persists with the costs of the Israel-U.S. war on Iran hitting government expenditure across the region.

Tantau spoke with The Diplomat’s Luke Hunt about ASEAN’s outlook for 2026 in January. For this update he has revised his numbers.

The cost of oil and shipping remains key. The World Bank had cut around one percentage point off regional GDP forecasts for the year, but this could rise substantially in the event of a severe, long term blockade of the Strait of Hormuz. That, combined with inflationary costs, has raised the prospect of stagflation, a significant problem for economists and politicians attempting to steer economies through turbulent times.

Chris Catto-Smith is a logistics specialist, a career that began with the Royal Australian Air Force in the 1970s. He then moved into the private sector and used his experiences in Southeast Asia and the Pacific Islands, helping farmers and small businesses in getting their goods to market.

It’s a difficult job made harder by the U.S.-Israeli war in Iran that has upended oil deliveries through the Straits of Hormuz, which Catto-Smith says has led to “vessel bunching” out of ports like Singapore resulting in supply chain disruptions and lengthy delays.

As a result, perishable goods are rotting before they can be delivered and that is punishing financial returns for farmers at the gate and leading to higher prices in Southeast Asian markets where people by their food.

Catto-Smith, managing director of Freshport Asia, returns to Beyond the Mekong where he spoke with The Diplomat’s Luke Hunt in Kampot, Cambodia, about the issues confronting supply chains and what can be done to mitigate the impact of the war in Iran.

This is in addition to his usual work which aligns with Corporate Social Responsibility, or CSR, where he focuses on cold storage and the logistics needed in remote areas, where crops are grown but infrastructure and post-harvest skills required for market are lacking.