The year 2004 was a relatively good one for Southeast Asia on both economic and political fronts. The region experienced robust growth of 6.3 per cent, driven by economic rebounds in the United States, Japan, and the European Union and the rapid economic expansion of China. It was also a year in which elections and political transitions took place in a number of countries. They were on the whole positive for the region and in most cases generated hopes for a better future.

Nevertheless, the region continued to have security concerns. Its external security environment was marked by greater uncertainty, in view of concerns that Iraq might become an expanding base for jihad with implications for other regions; as well as concerns relating to the Korean peninsula, the Taiwan Straits and the downturn in Sino-Japanese relations. Within Southeast Asia some countries faced threats from terrorism associated with radical Islamic groups, especially Indonesia and the Philippines. These two countries also had to deal with separatist rebellions and, in the case of the Philippines, a continuing communist insurgency. A troubling new development was the outbreak of violence in the Muslim provinces of South Thailand.

The region was drawing increased attention from the major powers, with signs of keener competition for influence between the United States and China. America's security relations with allies and friends intensified but Southeast Asians felt that America's attention was too narrowly focused on the war on terrorism and that its “soft power” had declined. There were signs towards the end of the year of the United States adopting a broader-based and politically more nuanced policy to the region, in part to meet the competition from China which, through sophisticated diplomacy (some would call, a charm offensive predicated on its message of “peaceful rise of China”) and economic leverage (e.g. signing of important agreements on trade and dispute settlement with the Association of Southeast Asian Nations (ASEAN) at the November 2004 summit and targeting an ASEAN-China FTA by 2010), had sought to address Southeast Asian governments' reservations about its emerging role as a major power.