New research indicates that the United States, China, and Japan are all reducing foreign aid to Southeast Asia, resulting in development finance flows to the region dropping to their lowest levels in a decade. According to the latest South-East Asia Aid Map from the Lowy Institute, official development finance to the region decreased by nearly 10% to $26 billion in 2024, even prior to anticipated aid cuts from the Trump administration beginning in 2025.
Rahul Nath, a lead author of the Aid Map, described the findings as presenting “a pretty grim picture” that is “not getting any rosier.” He noted that traditional donors are retreating from Southeast Asia, with China also reducing its aid instead of compensating for the decreasing contributions from other donors.
The report reveals that Japan cut its financial support to Southeast Asia by $1.5 billion in 2024. This reduction was influenced by the conclusion of major COVID-era financing initiatives and a winding down of substantial infrastructure projects.
China’s development finance to the region similarly fell nearly 25% in 2024, amounting to $5.3 billion. Dr. Nath suggested that China is adjusting its spending approach following past overexuberance in lending for infrastructure projects in Southeast Asia. Beijing is shifting towards funding smaller projects and exercising caution in its investment decisions.
Dr. Nath explained that China’s caution is partly due to experiences of loss from debt relief, and that a slowdown in domestic growth is impacting its funding behavior. He also observed that Southeast Asian governments are increasingly selective regarding large Chinese loans, following domestic backlash over major projects that failed to benefit local labor or caused environmental harm.
US Aid Cuts Not Yet Fully Seen
The Aid Map indicates that U.S. development finance to Southeast Asia was already declining under the Biden administration, prior to the proposed cuts from the Trump administration set for 2025. Dr. Nath remarked that the full impact of these future cuts is yet to be realized but are projected to significantly affect aid in the region.
He mentioned that the Organization for Economic Cooperation and Development (OECD) predicts a 23% decline in aid from developed countries, which will likely impact Southeast Asia further.
As bilateral donors pull back, multilateral institutions are increasingly vital, now providing almost half of all development finance to the region in 2024. Dr. Nath noted that organizations such as the World Bank and the Asian Development Bank offer stable funding options that do not fluctuate with political cycles, but they face the challenge of being stretched thin as demands increase amidst reduced bilateral aid.
He warned that the ongoing reduction in aid could leave vulnerable countries in Southeast Asia more exposed to climate change and other crises, highlighting that future aid flows may continue to decline and put added pressure on social systems in these nations.
