Ten-Year Low: U.S., Japan and China Simultaneously Pull Back Aid to Southeast Asia, Multilateral Institutions Struggle Alone

Southeast Asia is experiencing the lowest level of development financing inflows in a decade. According to ABC News, the Lowy Institute's latest Southeast Asia Aid Map shows that official development financing flowing into the region in 2024 fell nearly 10% to about US$26 billion—a figure that does not yet include the full impact of the Trump administration's massive aid cuts in 2025.

The three traditional aid donors—the United States, Japan, and China—have moved in near-lockstep in this retreat.

Japan reduced its financing to Southeast Asia by about US$1.5 billion in 2024. The Lowy Institute noted that part of the reason was that its pandemic-era loans to Southeast Asia had been fully disbursed and major infrastructure projects were winding down. China's official development financing fell by nearly a quarter over the same period, to about US$5.3 billion.

Dr. Rahul Nath, one of the lead authors of the Lowy Institute's Aid Map, described the picture to ABC News as "rather bleak" and bluntly stated that "it will not get more optimistic."

"Traditional aid donors are retreating, and China is also cutting aid rather than filling the gap," Nath said.

China's adjustment has its own internal logic. Nath analyzed that Beijing, after lending heavily over the past decade, suffered losses on debt relief, combined with slowing domestic economic growth, prompting it to shift toward smaller, more selective projects. Southeast Asian governments are meanwhile also "selectively" accepting Chinese loans—some countries have become more cautious after major infrastructure projects faced domestic political backlash for ignoring local labor or causing environmental damage.

As bilateral aid retreats, multilateral institutions have become an increasingly critical source of funding. In 2024, development financing provided by multilateral institutions to Southeast Asia accounted for nearly half of the region's total.

Nath believes that institutions such as the World Bank, the Asian Development Bank, and the Asian Infrastructure Investment Bank are "not subject to political cycles" and can "provide stable financing as lenders of last resort." But he warned that these institutions are "being asked to do more, while institutional capacity has not expanded accordingly."

"As aid decreases and geopolitical pressures intensify, the key will be how much support they provide—whether they will be overstretched," he told ABC News.

The impact of the United States is already showing, but is far from fully visible. The Aid Map shows that U.S. development financing to Southeast Asia had already begun to decline during the Biden administration, and the full consequences of the massive cuts implemented by the Trump administration in 2025 will become clearer in future versions of the report.

"We haven't yet seen the full impact of Trump (cutting aid), but a large share of the spending cuts we project are driven by the United States," Nath said. He cited OECD projections pointing out that aid from developed countries to the world will fall by 23%.

Nath warned that as the United States and other aid donors continue to cut spending, the region is becoming increasingly vulnerable to crises such as climate change and energy shocks triggered by the Iran war. He expects Southeast Asian aid funding to decline further, which "will put enormous pressure on social protection systems and budgets in some of the poorest and most vulnerable countries."

As for Beijing's next move, Nath said it was difficult to predict, but that continued spending cuts by traditional aid donors are a certainty.