ASEAN continues to stand out as the preferred region for long-term economic opportunities among European businesses, with companies showing stronger expectations for trade, investment and regional expansion despite persistent uncertainty surrounding tariffs and global supply chains.
According to the 12th EU-ASEAN Business Sentiment Survey 2026 by the EU-ASEAN Business Council (EU-ABC), 61 per cent of European business leaders identified ASEAN as offering the strongest economic opportunities, ahead of other major emerging markets including China and South Asia. The figure increased from 56 per cent in 2025 and places ASEAN in the leading position for the fourth consecutive year.
The findings reinforce Southeast Asia’s growing importance as companies reassess investment strategies and diversify supply chains in response to geopolitical and trade uncertainty.
Stronger Expectations for ASEAN Trade and Investment
Around 150 European business leaders participated in the annual survey, which examines business sentiment towards Southeast Asia.
Nearly four in five respondents, or 78 per cent, expect their companies’ trade and investment in ASEAN to increase over the next five years, compared with 71 per cent in 2025. The same proportion intends to expand operations in at least one ASEAN market.
EU-ABC Executive Director Chris Humphrey said European companies continue to demonstrate a firm commitment to Southeast Asia despite a difficult global environment, with investment appetite increasing as businesses reconsider their operational and investment strategies.
The stronger outlook suggests ASEAN is increasingly viewed not simply as a short-term alternative production location, but as a core part of companies’ longer-term Asian growth strategies.
Vietnam and Indonesia Lead Expansion Plans
Among individual ASEAN markets, Vietnam emerged as the leading destination for planned European business expansion, with 64 per cent of respondents intending to increase operations or investment there over the next five years.
Indonesia followed at 57 per cent, while Malaysia and Thailand ranked joint third at 49 per cent. Singapore attracted expansion intentions from 44 per cent of respondents, followed by the Philippines at 43 per cent.
Malaysia’s position is particularly notable because more than 70 per cent of surveyed companies already operate in the country, while 20 per cent of businesses not currently present in Malaysia are considering entering the market.
Together, these figures demonstrate that investors are pursuing opportunities across multiple ASEAN economies rather than concentrating on a single regional hub.
ASEAN Gains Ground as a Supply-Chain Diversification Hub
Supply-chain diversification has become another major factor supporting ASEAN’s attractiveness.
Among businesses adjusting their supply chains amid global trade uncertainty, 67 per cent are considering ASEAN, compared with 29 per cent looking towards South Asia and 24 per cent considering China.
ASEAN’s appeal is supported by a combination of manufacturing capabilities, growing domestic markets, expanding digital economies and its strategic position between major Asian trade routes.
Different Member States also offer complementary strengths. Vietnam has developed into a major manufacturing and export base, Indonesia provides scale and a large domestic market, Malaysia combines advanced manufacturing with established electrical and electronics capabilities, while Singapore remains a major financial, logistics and regional headquarters centre.
This diversity allows multinational businesses to develop regional networks rather than depending entirely on a single production location.
Global Trade Uncertainty Still Weighs on Confidence
The positive long-term outlook does not mean companies are free from concern.
The survey found that 81 per cent of respondents said uncertainty surrounding US tariff policies had weakened their confidence in ASEAN to some degree.
Businesses are therefore balancing two competing realities: confidence in ASEAN’s structural growth potential remains strong, but short-term investment decisions are increasingly influenced by changes in tariffs, trade policy and geopolitical relationships.
Expansion plans have moderated from 2025, when 87 per cent of businesses expected to expand in at least one ASEAN market, to 78 per cent this year. However, the proportion planning to contract operations has also declined, from 39 per cent in 2025 to 29 per cent in 2026.
EU-ABC said this combination suggests a stabilising European business presence rather than a withdrawal from Southeast Asia, supported by stronger overall investment expectations.
Regulatory Fragmentation Remains a Key Challenge
Despite ASEAN’s attractiveness, European companies continue to identify significant barriers to operating seamlessly across the region.
The survey found that 73 per cent of respondents believe there are too many non-tariff barriers for efficient supply-chain use, while 67 per cent identified insufficient regulatory harmonisation as a major challenge.
Differences in standards, licensing requirements, customs procedures and other regulations can increase the cost and complexity of operating across multiple ASEAN markets.
Reducing these obstacles could therefore become increasingly important as ASEAN seeks to transform its combined market size into a more integrated regional economy.
Greater harmonisation would particularly benefit companies seeking to establish cross-border manufacturing, logistics, digital and services networks rather than operating separately in individual national markets.
Europe Deepens Its Economic Engagement With Southeast Asia
The survey findings also arrive amid stronger economic ties between ASEAN and Europe.
According to the EU-ABC, the European Union overtook the United States to become ASEAN’s largest external source of foreign direct investment in 2025, highlighting Europe’s growing commercial stake in the region.
Trade negotiations are also progressing between the EU and several ASEAN economies, including Malaysia, Thailand and the Philippines, while Singapore and Vietnam already have free trade agreements with the European Union.
European businesses are also calling for deeper region-to-region integration. A separate analysis of the survey found that nearly three-quarters of respondents believe an EU-ASEAN regional free trade agreement would offer greater benefits than relying solely on bilateral agreements.
Such an agreement could eventually provide businesses with more consistent rules across Southeast Asia while strengthening trade and investment flows between the two regions.
ASEAN’s Long-Term Opportunity Remains Strong
The survey ultimately presents a picture of a region whose economic attractiveness remains resilient despite a more difficult global operating environment.
European companies are navigating tariff uncertainty, changing supply chains and regulatory complexity, yet ASEAN continues to outperform competing emerging regions when businesses assess future opportunities.
The fact that 78 per cent expect trade and investment to increase and 61 per cent continue to rank ASEAN as the strongest economic opportunity indicates that confidence in the region’s longer-term fundamentals remains substantial.
The challenge now is ensuring that ASEAN can translate this investor interest into sustained economic activity.
Reducing non-tariff barriers, improving regulatory consistency and strengthening regional connectivity could make it easier for companies to treat Southeast Asia as a genuinely integrated market rather than a collection of separate economies.
Looking Ahead
ASEAN’s position as the preferred emerging region for European businesses for a fourth consecutive year sends an important signal at a time when companies are reassessing where they invest, manufacture and build future supply chains.
Vietnam and Indonesia currently lead expansion intentions, while Malaysia, Thailand, Singapore and the Philippines remain important investment destinations within a broader regional strategy.
At the same time, ASEAN’s growing role in supply-chain diversification shows that businesses increasingly value the region not only for its consumer growth, but also for its ability to provide multiple interconnected locations for production, investment and regional operations.
Maintaining that momentum will require ASEAN to continue deepening economic integration while addressing regulatory fragmentation and external trade uncertainty.
If those challenges can be progressively reduced, Southeast Asia could further consolidate its position as one of the world’s most attractive regions for long-term investment, supply-chain development and international business expansion.
