This paper discusses the struggle for the soul of Islam within the global Muslim community in the context of two major Muslim majority nations in Southeast Asia, Indonesia and Malaysia. An ongoing, unsettled debate between 'Liberal Islam' and 'Literal Islam' continues unabated. In its midst, evidence of terrorist networks in the region have surfaced. Some extreme proponents of Literal Islam harbour irredentist visions and are committed to establishing an Islamic state unifying the territories of Indonesia, Malaysia, Brunei, southern Philippines and Singapore. Such visions are not compatible with ASEAN cooperative arrangements to encourage increased and intra-regional communications, tourism and trade. This incompatibility raises questions about ASEAN's cohesion and highlights the inescapable reality in Southeast Asia that the state remains fragile and open to challenge in an era of political instability, economic stagnation and social disruption.