The period from 1979 to 1991 may be regarded as a distinctive phase in modern Southeast Asian history. It began with the most serious challenge to peace and stability in the region since the end of the Vietnam War — the Vietnamese invasion of Cambodia in December 1978. The ensuing crisis saw the polarization of Southeast Asia into two antagonistic political groups, one represented by ASEAN, the other by the three Indochinese states led by Vietnam. As the rivalry between the two groups intensified, ASEAN's concept of regionalism was opposed by that of Vietnam, which held Indochina to be a single strategic unit. The regional conflict in Southeast Asia reflected changes in the international security environment, especially the collapse of the superpower détente and the advent of the “second Cold War”. Renewed superpower tensions fuelled the stalemate in the Cambodian conflict and were manifested in heightened U.S.-Soviet strategic rivalry, part of which was played out in the form of naval competition in the Pacific. Sino-Soviet and Sino-Vietnamese ties too plunged to new lows during the period, with China putting military pressure on Vietnam on their common border and providing military support to the Cambodian rebels so as to impose a heavy cost on Hanoi's occupation of Cambodia.

But the crisis in regional relations was also in many respects a blessing in disguise, not only for ASEAN, but also arguably for the whole region of Southeast Asia. For it provided the ASEAN grouping with a new sense of unity and purpose, brought international recognition and support for its diplomatic and political role in finding a solution to the Third Indochina War, and strengthened the recognition among ASEAN regimes that economic development was the best guarantee of their political legitimacy and national stability. While the accelerated pace of economic liberalization and globalization in the non-communist part of Southeast Asia was due to a variety of factors, such as the southward movement of Japanese capital in the wake of the 1985 Plaza Accord and the spread of post-Fordist transnational production, it was also a response by ASEAN governments to the sense of insecurity and vulnerability in the wake of the ideological polarization of the region.