Published daily by the Lowy Institute

ASEAN’s new developmental divide

The admission of Timor-Leste will recall quarter-century-old unease about the development gap within the association.

A fish vendor on the street in Dili, Timor-Leste, on 11 September 2024 (Yasuyoshi Chiba/AFP via Getty Images)
A fish vendor on the street in Dili, Timor-Leste, on 11 September 2024 (Yasuyoshi Chiba/AFP via Getty Images)
Published 28 Jan 2025 

Since Cambodia, Laos, Myanmar and Vietnam (CLMV for short) joined the Association of Southeast Asian Nations (ASEAN) in quick succession in the late 1990s, the region’s peak organisation has held serious concerns about what came to be termed the “ASEAN developmental divide” – the yawning gap between the economic strength of the wealthier established members and the new additions.

Timor-Leste is likely to acquire full ASEAN membership imminently, having been accepted as an in-principle member in late 2022. With Timor-Leste’s accession, the gap between ASEAN’s richest and poorest members is set to widen. Twenty-six years since the last new member joined (Cambodia in 1999), it might be time for a new abbreviation.

Initially a shorthand reference to the ASEAN latecomers, first used in the 1990s, the term CLMV is now the label for a more formalised grouping, with yearly CLMV Economic Ministers’ Meetings and an annual work plan.

But in economic terms, Vietnam[ has virtually broken free of the bloc, with a 2023 GDP per capita higher than the Philippines and very close to Indonesia. Indeed, Vietnam’s GDP per capita is more than double that of Laos, the next most successful CLMV member. Timor-Leste, meanwhile, slots in neatly among CLM, below Laos and Cambodia but above war-ravaged Myanmar. So, the less fortunate side of the new developmental divide in ASEAN would be more appropriately labelled CLMT. It even rhymes.

Timor-Leste has made remarkable development strides since independence in 2002, but still performs poorly against key development metrics. A shocking 42 per cent of the population live below the national poverty line, and just under half are classed as “multidimensionally poor” (taking into account health, education and living standards). The rate of child malnutrition and stunting is among the highest in the world at 47 per cent, boding disastrously for human capital and economic productivity  in future decades. That will be compounded by the country’s youth bulge, with the region’s lowest median age and highest fertility rate.

Another constraint on future stability and development will be the exhaustion of Timor-Leste’s sovereign wealth fund, expected in around a decade because successive governments have drawn down on its capital at an average of 2.5 times sustainable withdrawals. Resolution of long-running and tense negotiations between Canberra and Dili regarding the development of the US$50 billion Greater Sunrise gas field could change the game. But the question of where to process the gas has so far proved intractable.

Another significant consequence of Timor-Leste’s accession will be its liberation from administrative exile.

Timor-Leste will need plenty of help, including from its new ASEAN peers. In 2000, after Cambodia’s accession, the Initiative for ASEAN Integration (IAI) was launched to reduce the development gap. As well as receiving contributions from international donors, it channels funds for capacity building and technical assistance from ASEAN’s wealthier members to the poorer CLMV countries. The IAI work plan is due for renewal this year, and Timor-Leste should be added to the list of eligible countries once it joins ASEAN. There may even be a case for Vietnam to graduate from the IAI, given its level of development relative to CLMT.

Another significant consequence of Timor-Leste’s accession will be its liberation from administrative exile. Bridging Southeast Asia and the Pacific, and sharing both structural economic similarities as well as ethnic ties with Pacific nations, it has long been denied neat inclusion in either geographic category, contributing to a bureaucratic blindness. Australia, Timor-Leste’s biggest aid provider, often treats it more as a Pacific than Southeast Asian nation, currently including Timor-Leste in both the Australian Infrastructure Financing Facility for the Pacific and the Pacific Australia Labour Mobility Scheme. Australia also groups Timor-Leste as a Pacific country in its defence policy. The Asian Development Bank classified Timor-Leste as a Pacific country until 2019 when the Timor-Leste government requested it be transferred to the Southeast Asian department.

Once Timor-Leste becomes an official ASEAN member, the matter should be put to rest. That will come with other benefits – for example, access to ASEAN-specific funds such as the ADB’s ASEAN Catalytic Green Finance Facility or China’s ASEAN-China Cooperation Fund, and inclusion in programs such as the EU-ASEAN Strategic Partnership. That’s not to mention the various Free Trade Agreements and market access arrangements that Timor-Leste will work towards with ASEAN’s support, especially since Timor-Leste finally joined the World Trade Organisation last year.

With other pressing issues such as the South China Sea and civil war in Myanmar contributing to some ASEAN paralysis, Dili will be hoping that Malaysia, as ASEAN’s 2025 chair, can maintain focus to facilitate the accession. Timor-Leste will need all the help it can get from its ASEAN peers to bridge the development divide.


IPDC Indo-Pacific Development Centre



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