Over the past 50 years, Southeast Asia has been one of the most economically vibrant regions in the world. Together, Southeast Asian countries have worked to build strong and resilient economies that have lifted millions out of poverty.
These efforts have notably resulted in Southeast Asian countries extending assistance to one-another, bilaterally as well as multilaterally, to collectively address common needs and challenges.
Despite its importance, intraregional development finance in Southeast Asia is still a relatively small component of the region’s overall development narrative. In 2021, the amount of financing flowing within the region was US$86 million, representing less than 0.3% of the total overseas development finance flows (ODF) received by Southeast Asia that year. But intraregional development finance is growing steadily, by 14% on the 2015–2021 period. Disbursements associated with Covid-19 support and the execution of significant infrastructure projects in the region have notably led to a significant 45% surge in 2020 to US$106 million.
All of the ODF given within the region was in the form of ODA grants, except for the significant infrastructure projects undertaken by Thailand, which were funded through concessional loans. These loans accounted for 35% of the aid financing within the region.
About one-third of the intraregional development funding was allocated to infrastructure projects, with a particular emphasis on road transportation and coal-fired power plants. This emphasis on infrastructure aligns with the development priorities of Thailand and Vietnam, the two primary providers of intraregional ODF between 2015 and 2021. However, when excluding these two countries, development financing within Southeast Asia is mainly focused on health and humanitarian aid.
Indeed, each ASEAN member state contributes an equal amount annually to the ASEAN Coordinating Centre for Humanitarian Assistance on Disaster Management (AHA), an intergovernmental centre that aims to promote coordination and collaboration among ASEAN member states for disaster management and emergency response in the region. Those contributions — totalling US$4.3 million — account for the majority of intraregional financing from Brunei, Malaysia, Myanmar and the Philippines.
In addition, ASEAN members, including Timor-Leste, contribute further ad hoc funding to the AHA when natural disasters strike the region. For instance, large disbursements by Southeast Asian countries were channelled to Indonesia through the AHA when a 7.5-magnitude earthquake hit Central Sulawesi Island in 2018, triggering a tsunami as high as 6 meters that left many casualties.
Intra‑regional official development finance to Southeast Asia by partner Spent, constant 2021 US$
Thailand is by far the largest regional development partner in Southeast Asia. In 2015, 2016, and 2017, Thailand accounted for approximately 98% of intraregional development finance and was responsible for 82% of total flows over the entire period.
Nonetheless, Thailand’s share of total intraregional financing has declined over time, as other countries have begun to provide more financial assistance. For example, Vietnam has invested significantly in large governance and education projects in Laos, while Singapore has made a considerable contribution to intraregional support in 2021 by providing a significant number of Covid-19 vaccines and related financial support, accounting for 15% of intraregional aid that year.
In volume terms, Laos (61%), Myanmar (21%) and Cambodia (11%) are the main recipients of intraregional ODF disbursements, which differs significantly from the ODF proportions provided by the rest of the international community. When looking at allocations from external development partners, most of ODF is directed to Indonesia (35%), Vietnam (18%) and the Philippines (16%).
This divergence can be explained by the fact that regional economic integration is a key commitment of the ASEAN charter and its members. ASEAN has articulated an explicit aim to reduce poverty and narrow the development gap amongst members through mutual assistance and cooperation. To achieve this, the acceleration of economic development in Cambodia, Laos, Myanmar and Vietnam (CLMV countries) has been identified as a top priority for all ASEAN members. This is particularly important as Myanmar, Cambodia and Laos currently have the lowest GDP per capita in the region, exacerbating the economic divide in Southeast Asia.
In this vein, intraregional development co-operation primarily focuses on CLMV countries, and thus complements development co-operation activities of other international partners.
Geographic distribution of ODF to Southeast Asia Spent, constant 2021 US$
- ASEAN+1
- International Community (excl. ASEAN+1)
Thailand’s development cooperation program is the oldest and largest in Southeast Asia. Created in 1963, it targets primarily neighbouring developing countries, through collaboration with bilateral and multilateral aid agencies. According to the OECD, Thailand’s global concessional development finance (ODA) reached US$72 million in 2021, with the majority (93%) directed to Southeast Asia.
Excluding Singapore and Brunei, the two high income countries in the region, Thailand is the most generous Southeast Asian country in terms of ODF given compared to ODF received.
Since 2004, Thailand has had a dedicated agency called the Thailand International Cooperation Agency (TICA), which has shifted its focus from receiving aid to providing development cooperation. In its National Strategy 2018–2037, the Thai government frames the primary benefit of development cooperation as domestic and foreign security. In Southeast Asia, Thailand prioritises ODF in the Mekong sub-region first and then ASEAN more broadly, using development support as a vehicle for reducing poverty and increasing political and economic cooperation.
As a result, 96% of Thailand’s support to the region is primarily directed towards Laos (58%), Myanmar (25%), and Cambodia (13%). These countries have the lowest per capita incomes in the region as of 2021 and share borders with Thailand, which contribute to Bangkok’s twin goals of promoting regional prosperity and security.
Vietnam is the second largest Southeast Asian development partner and is responsible for 13 per cent (US$68 million) of intraregional ODF in 2015–21.
Hanoi’s foray into development co-operation is relatively recent. While the Foreign Economic Relations Department in the Ministry of Planning and Investment (MPI) was initially focused on coordinating incoming ODA to Vietnam, it has gradually expanded its role to provide development co-operation to neighbouring countries. Over the 2015–2021 period, Vietnam has strengthened its bilateral co-operation with Laos and Cambodia, where 99% of its ODF is directed, in a wide range of projects, including a hydroelectric dam in Laos, humanitarian aid in Indonesia, and Covid-19 assistance in Cambodia.
More from Vietnam is to be expected in the coming years, given Hanoi’s foreign policy agenda that places emphasis on regional cooperation and development. Notably, in its Five-Year Socio-Economic Development Plan for 2016–2020, Vietnam highlights its intention to expand its development cooperation as a means of engaging with the international community.
Cambodia and Timor-Leste are amongst the poorest economies of Southeast Asia, yet they rank fourth and fifth out of 11, respectively, in terms of ODF disbursed in the region. When looking at the ratio of ODF provided to ODF received, Timor-Leste is the second most generous Southeast Asian partner, while Cambodia is the fourth most generous.
Cambodia has been consistently providing humanitarian support to the region, particularly through its yearly contribution to AHA. On the other hand, Timor-Leste’s approach has been more reactive, providing emergency assistance to its ASEAN neighbours in times of crisis. For instance, Dili helped the victims of the 2018 earthquake in Indonesia and provided aid to those affected by floods in Laos that same year.
Indonesia created a dedicated development co-operation agency in 2019. Jakarta’s intraregional ODF nonetheless has remained minor, accounting for 0.3 per cent of intraregional financing. Between 2015 and 2021, Indonesia’s intraregional ODF averaged about US$200,000 a year, with the majority directed towards Myanmar (51%), the region (34%, through AHA) and Timor-Leste (15%).
Singapore and Brunei — Southeast Asia’s two high income countries — stand out as underperformers in terms of the provision of intraregional ODF, accounting for just 2.6 per cent of intraregional ODF combined.
Singapore, the larger of those two partners with US$13.5 million disbursed, has a consistent track record of providing minor amounts of ODF in response to natural disasters in the region. It was only with the advent of the coronavirus pandemic that the region’s wealthiest country expanded its aid program, by donating medical supplies as well as Covid-19 vaccines to the region.
Brunei’s intraregional ODF has been minor, providing less than US$600,000 in total to the region during the period. Most of Brunei’s assistance came in the form of its yearly donation to the AHA, but the country also provided support to Laos when it experienced flooding in 2018.
Overall, the pattern of intraregional ODF presents a nuanced picture. Despite being less prosperous than other economies in the region, Thailand and Vietnam are the primary contributors of intraregional ODF in Southeast Asia, leading to a concentration of development flows towards their immediate neighbours. While this approach has provided some degree of support to the neediest countries, it has left gaps, exemplified by the lack of attention given to Timor-Leste. On the other hand, the region’s wealthiest countries have demonstrated a lack of generosity both in absolute and relative terms.
The regional landscape suggests an increased focus on enhancing cooperation, especially since the Covid-19 pandemic. ASEAN, in particular, has engaged in extensive discussions regarding their responses to Covid-19, through the AHA and other regional initiatives. Those could potentially pave the way to more regional approach to development cooperation, alongside traditional bilateral approaches.