Indonesia Hosts ASEAN Summit Focused on South China Sea Code of Conduct and Economic Integration

Background

The ASEAN Code of Conduct for the South China Sea has been in negotiation since 2002, when ASEAN and China agreed on a Declaration on the Conduct of Parties in the South China Sea that was intended as a precursor to a binding code. The negotiations have proceeded in fits and starts across the intervening two decades, with China repeatedly slowing the process during periods of assertion and expressing willingness to accelerate when diplomatic costs of the slow approach became inconvenient. The fundamental barriers to a substantive Code of Conduct have been consistent throughout the negotiations: China insists that the code cover only waters within ASEAN member states' territorial seas and exclusive economic zones, excluding areas where China claims sovereignty including the Paracel and Spratly Islands, while ASEAN members including the Philippines, Vietnam, Malaysia, and Brunei insist that the code must apply to the areas where their sovereign rights are most at risk. A second barrier has been China's insistence that the code explicitly prohibit ASEAN members from conducting joint activities with non-ASEAN parties, a provision that the Philippines and Vietnam reject as inconsistent with their right to seek defence cooperation with extra-regional partners. Indonesia's ASEAN chairmanship in 2026 was the fourth time Indonesia has held the position since the Code of Conduct negotiations began, and Jakarta entered the year with an explicit strategy of accepting partial progress on the code in exchange for accelerating economic integration as the summit's headline achievement.

Summit Outcomes

The South China Sea Code of Conduct negotiations produced a joint statement acknowledging that the 'third reading' of the draft code had been completed and that negotiations would enter a 'consolidation phase' aimed at resolving the remaining substantive differences, language that ASEAN diplomatic sources described as essentially unchanged from the 2025 summit communiqué. The Philippines circulated a paper at the working level proposing that ASEAN adopt a statement affirming the binding character of UNCLOS in the South China Sea regardless of Code of Conduct progress, but China successfully pressed Cambodia, Laos, and Myanmar to block the statement from reaching the plenary agenda. Indonesia's economic agenda produced more tangible results. The ASEAN Digital Economy Framework Agreement, which Indonesia has been developing since its previous ASEAN chair role, was endorsed by all ten members and commits the bloc to harmonising cross-border data flow rules, creating an ASEAN payment interoperability framework connecting the national QR payment systems already operational in Thailand, Singapore, Malaysia, Indonesia, and the Philippines, and establishing mutual recognition of digital financial services licences for qualifying firms. The Critical Minerals Cooperation Framework creates a secretariat within the ASEAN Economic Community structures to coordinate member states' engagement with demand-side partners, principally the EU, US, Japan, South Korea, and Australia, who are seeking diversified critical mineral supply chains. Indonesia's nickel, the Philippines' nickel and copper, and Myanmar's rare earths are the primary resources the framework will seek to position in global supply chains under value-adding conditions.

• South China Sea Code of Conduct entered 'consolidation phase' with no substantive breakthrough.
• ASEAN Digital Economy Framework Agreement endorsed: cross-border data flows, payment interoperability, digital finance licences.
• Critical Minerals Cooperation Framework creates secretariat for coordinating supply with demand-side partners.
• Cambodia, Laos, Myanmar blocked Philippine UNCLOS statement from reaching plenary.

Strategic Assessment

Indonesia's chairmanship strategy of pursuing economic deliverables while managing the South China Sea impasse reflects Jakarta's assessment that ASEAN's institutional credibility is better preserved by demonstrating economic relevance than by forcing an unresolvable Code of Conduct confrontation with China. Indonesia's 'ASEAN centrality' doctrine holds that the grouping's strategic value lies in its ability to maintain collective engagement with all major powers, including China, rather than in alignment with any particular bloc, and that this engagement function is best preserved by demonstrating ASEAN's economic and governance relevance in areas where consensus is achievable. The digital economy and critical minerals outcomes are genuine achievements in this frame, though critics argue that they represent incremental coordination around issues where most member states' bilateral arrangements with extra-ASEAN partners are already more advanced than the ASEAN framework. The South China Sea impasse continues to test the limits of ASEAN centrality as a doctrine, because the absence of progress on the Code of Conduct and the documented escalation of Chinese grey-zone actions against Filipino and Vietnamese vessels make it increasingly difficult for ASEAN to maintain the pretence that the South China Sea situation is being managed through the regional framework. Philippine President Ferdinand Marcos Jr. used a bilateral meeting with Prabowo during the summit to secure Indonesia's explicit support for the Philippines' right to conduct resupply missions to Second Thomas Shoal, a statement that Indonesian officials subsequently softened in their public communications to avoid Chinese diplomatic pushback but which signalled a degree of Indonesian solidarity with Manila that had not been publicly expressed previously.

Sources

• ASEAN Secretariat
• Reuters
• South China Morning Post
• Nikkei Asia
• East Asia Forum