Southeast Asia Aid Map: 2024 Key Findings

Key Findings

• After a pandemic-related surge in support, total official development finance to the region fell to a new low of $26 billion in 2022.
• There has been a sharp decline in new Chinese development financing, though ongoing projects mean Beijing looks set to remain the dominant infrastructure financier in the region.
• Traditional development partners collectively continue to dominate total financing, accounting for nearly 90% of total ODF disbursements to Southeast Asia in 2022.
• The Asian Development Bank and Japan played the most substantive roles in supporting crisis management and recovery.
• Climate development finance dropped 15% in 2022 despite increased policy emphasis from the international community, leaving the region’s green transition at risk.
• More than 40% of ODF incorporates gender equality as a significant objective. The Asian Development Bank, Australia, and the United States are the top funders for projects with gender equality as their principal objective.
• Despite a political premium placed on “ASEAN centrality”, relatively little development support is directed through ASEAN rather than bilateral and other multilateral channels.
• Intra-regional development financing and assistance between ASEAN member states is growing, but from a low base. Thailand does the most (85%), followed by Vietnam (12%).

Overview

The role of official development finance in Southeast Asia

Southeast Asia, home to almost 700 million people, is one of the most economically dynamic regions in the world. It is also one of the most diverse. Levels of development in the region vary significantly. Per capita annual incomes in 2022 hovered around $5,000 in Myanmar and Timor-Leste to well over $120,000 in Singapore (calculated using the Purchasing Power Parity metric, or PPP).

Economic recovery from the Covid-19 pandemic and Russia’s invasion of Ukraine is underway, and the region has returned to relatively strong growth. Nonetheless, the impact from these global shocks and ongoing developments in the world economy, including China’s slowing growth, has been substantial. The costs have been high in terms of foregone growth, weakened investment, sharp learning losses, slower poverty reduction, and constrained policy space due to large budget deficits and still elevated inflation. While the region’s outlook for growth and development generally remains strong, it has become more difficult and is expected to proceed more slowly.¹

Official development finance (ODF) — encompassing grants and concessional loans (ODA), and other forms of assistance (OOF) from governments and multilateral bodies — plays an important role in supporting and accelerating Southeast Asia’s development. Though only accounting for about 1% of GDP in the region, ODF has in recent years been equal to around 10% of all government spending on infrastructure, health, education, and social safety nets. It is also equivalent to a third of total foreign direct investment inflows to the region.

However, outside of the pandemic crisis years, total development support has been declining in Southeast Asia. Given the importance of external support to financing key development priorities in the region, a continuation of this trend would bode ill for Southeast Asia’s recovery and future developmental progress.

The objective of the Southeast Asia Aid Map is to understand official development finance. The project, now in its second year, tracks and analyses all ODF in the region. At the Map’s core is a publicly accessible database tracking all ODF flowing to the region at the project level, incorporating not only financing through traditional aid, largely in the form of grants and concessional loans, but also other forms of government-backed development finance, most notably non-concessional loans.

Analysis

After a pandemic-related surge in support, total official development finance to the region fell to a new low of $26 billion in 2022.

Development finance to Southeast Asia — at $26 billion in 2022 — has been steadily decreasing outside the pandemic crisis years. Between 2015 and 2022, Southeast Asia received $255 billion in official development finance, averaging $32 billion annually (in constant 2022 US$). Likewise, ODF as a share of GDP fell to its lowest level recorded by the Map, accounting for 0.7% of regional GDP, down from 1.1% in 2020.

The lion’s share of ODF has targeted the region’s emerging and developing economies, excluding high-income Singapore and Brunei. Three-quarters of that ODF consists of loans (with 30% being concessional). Grants make up the remaining quarter of total development finance.

ODF disbursement in Southeast Asia reached a peak in 2020, driven by the swift response of traditional development partners, especially the multilateral development banks, to the pandemic. But in 2022, ODF decreased to its lowest point in the eight-year reporting period covered by this report. The decline was led by a fall in concessional and non-concessional loans, whereas grant funding remained broadly steady.

In 2022, Indonesia was the largest recipient of ODF in the region, accounting for 34% of ODF to Southeast Asia, trailed by the Philippines (22%) and Vietnam (12%). Smaller low-income economies experienced a more significant contraction in development finance. However, ODF still counts for far more in these countries relative to their GDP — Timor-Leste (13%), Laos (9%), and Cambodia (8%). On a per capita basis, Timor-Leste receives nearly six times the amount of development finance ($183 per person) than Indonesia. While in Cambodia, for example, development finance is equivalent to 80% of public development spending.

Myanmar received the least ODF of any Southeast Asian country in 2022 due to the withdrawal or scaling back of activities by traditional donors, and obstacles to the delivery of humanitarian and development assistance, amid the country’s worsening civil war.

There has been a sharp decline in new Chinese development financing, though ongoing projects mean Beijing looks set to remain the dominant infrastructure financier in the region.

In 2022, Chinese development finance to Southeast Asia reached its lowest level in eight years. This was mirrored by a collapse in the signing of new Chinese ODF projects. Disbursements of $3 billion in 2022 were only a third of what the country spent on development projects across the region in 2015. Likewise, new agreements signed in 2022, amounting to $1.4 billion, were well below China’s historical average of $19 billion in ODF commitments made to the region annually since 2015.

Care must be taken not to over-interpret annual changes in Chinese ODF commitments or disbursements as its funding of infrastructure megaprojects has generated large swings in financing from year to year. Development finance data for China is also challenging to interpret due to a lack of transparency. Beijing has no official ODF reporting obligations, nor does it voluntarily disclose detailed ODF information.

President Xi Jinping’s signature Belt and Road Initiative (BRI) has been undergoing a gradual recalibration, shifting away from megaprojects towards smaller programs. This shift to more targeted initiatives further complicates the assessment of China’s regional ODF activities. It coincides with Beijing’s decreasing reliance on policy banks — owned or controlled by the government and operating with the primary objective of implementing its economic and social policies — such as the Export–Import Bank of China and China Development Bank, while increasing its use of state-owned commercial banks, such as ICBC and Bank of China, for new investments in the region.²

However, the BRI seems likely to continue to play a significant role in infrastructure development in the region. China has projects worth some $70 billion still under implementation and is involved in 24 out of 34 infrastructure megaprojects in Southeast Asia — those costing $1 billion or more.

China’s current implementation rate for infrastructure projects, as assessed by the Southeast Asia Aid Map, is relatively low at 37%, reflecting both the cancelling or downsizing of projects but also delays and slow implementation for those still proceeding.³ Applying this rate to Beijing’s outstanding infrastructure commitments of $67 billion suggests China might disburse an additional $25 billion in Southeast Asia in the coming years. To put this in perspective, even if Japan were to implement all its current commitments while China maintained its existing pace of delivery, Japan would still fall short of catching up with China’s infrastructure disbursements in Southeast Asia.

Despite a sharp decline in new financing in recent years, Beijing looks set to remain the dominant infrastructure financier in the region.

Traditional development partners collectively continue to dominate total financing, accounting for nearly 90% of total ODF disbursements to Southeast Asia in 2022.

The bulk of official development finance in Southeast Asia still originates from traditional development partners. In Southeast Asia, these include the major multilateral development banks, Japan, South Korea, European countries, the United States, and Australia. Taken together, these Organisation for Economic Cooperation and Development (OECD) member states, and the institutions funded largely by them, are the main source of development finance in all Southeast Asian countries except for Brunei, Malaysia, and Laos, where China dominates.

Whereas China’s financing is heavily concentrated in certain countries and on infrastructure, traditional development partners provide more diversified support across the region and across sectors, with a particular focus on governance and human development. They also played a much larger role in providing pandemic-related assistance to the region in 2020 and 2021.

Between 2015 and 2022, traditional partners accounted for nearly 80% of development finance contributions in the region. In 2022, this grew to 87% of total ODF and 95% of total official development assistance (grants and concessional loans) — the highest ever relative shares of total ODF and ODA disbursements in Southeast Asia by traditional partners in the timeline covered by the Map.

The Asian Development Bank and Japan played the most substantive roles in supporting crisis management and recovery.

The Southeast Asia Aid Map now provides a complete picture of the roles ODF and different donors played in providing countercyclical and emergency support during the Covid-19 pandemic. Between 2020 and 2022, $31 billion was pledged, and $27 billion spent, on activities explicitly earmarked for pandemic management and recovery in the region.

The Asian Development Bank (ADB), Japan, Asian Infrastructure Investment Bank (AIIB), and Australia did much of the heavy lifting. By contrast, other major development partners, including China, the United States, and South Korea, provided relatively little additional ODF during the pandemic.

Total ODF to the region ramped up by 55% in 2020 on the previous year. Much of this additional financial assistance came in the form of direct budget support programs. At least $10 billion in Covid-related budget support was disbursed in the first year of the pandemic by Japan, the ADB, Australia, and the European Union, with an additional $5 billion delivered over 2021 and 2022. By 2021, total ODF flows were still about 25% higher than the pre-Covid level. Indonesia was the biggest recipient of Covid-related ODF, followed by the Philippines and Thailand.

The ADB more than doubled its pre-Covid support to Southeast Asia in 2020 and 2021, before falling back in 2022. Nonetheless, between 2020 and 2022, the ADB accounted for more than a third of overall pandemic-related support to the region. Japan contributed a further 13%, while the AIIB and Australia each contributed a further 10%. The latter stands out among mid-sized bilateral development partners, notably by tripling the scale of its ODF to the region in 2020 through a $1.1 billion budget support loan to Indonesia for social protection initiatives and the health system. The World Health Organization and targeted donor initiatives such as the Covid-19 Response and Recovery Multi-Partner Trust Fund, a UN mechanism, also played significant roles.

By 2021, Covid-19 vaccine donations began arriving in Southeast Asia. China, Australia, and Japan were among the largest donors of vaccines, followed by South Korea and Team Europe — encompassing major contributions from France and Germany, along with those from other EU members and institutions. But it was through multilateral mechanisms that vaccines were delivered in greatest numbers. Gavi, the vaccine alliance, delivered approximately $2 billion worth of vaccines through its Covid-19 Vaccines Global Access (COVAX) initiative.

By 2022, vaccine deliveries decreased, while new Covid-related ODF commitments dropped to just over a quarter of 2020 levels as regular development programming resumed.

Climate development finance dropped 15% in 2022 despite increased policy emphasis from the international community, leaving the region’s green transition at risk.

As pandemic-related support was wound back in 2022, climate development finance declined by a troubling 15% on the previous year (though its share of total ODF rose modestly).

The outlook is decidedly mixed. For a second year in 2022, development finance for renewable sources of energy exceeded spending on non-renewable energy projects in Southeast Asia. However, this primarily reflects the decline in spending on fossil fuel projects, rather than increased renewable energy investments, which have instead also been declining. Moreover, there are at present few signs that ODF is being successfully mobilised to the extent required to support the region’s transition to resilient low carbon development.

Southeast Asia’s climate change adaptation needs, and renewable energy transition, will require some $210 billion per year in climate financing through to 2030, according to estimates by the ADB. The Southeast Asia Aid Map finds an average of $8.1 billion per year in climate-related development finance was disbursed annually in Southeast Asia between 2015 and 2022.

Tracking climate-related ODF is difficult due to differing accounting approaches and limited reporting, even among traditional development partners. The Southeast Asia Aid Map nonetheless attempts to capture this, relying on climate finance reporting to the OECD where this exists and otherwise seeking to identify projects that would appear to qualify using similar criteria. This approach identifies whether projects have climate-related objectives (i.e. mitigation or adaptation) as their “principal” purpose or as a “significant” objective within a project otherwise focused on other development objectives.

Japan is the largest provider of climate-related finance to the region, spending $14.7 billion or 43% of its total ODF budget on climate-related projects. The two major multilateral development banks — the ADB and World Bank — spent $23.3 billion combined on climate-related objectives, or 30% of their total ODF to the region. Specialised green multilateral funds such as the Global Environment Facility, Green Climate Fund, Climate Investment Funds, and the Adaptation Fund contributed a further $1 billion to the region between them.

Despite the apparent prioritisation of climate-related ODF by a host of development partners, there remain several negative signs.

First, the increase in climate development finance over the past decade has only been through projects rated as having a “significant” climate objective. By contrast, projects with a “principal” climate objective have remained flat in volume terms and declined as a share of total climate-related ODF.

Second, among this “principal” climate financing, China has been the leading source of ODF, particularly through its long-standing hydropower investments in Laos. However, there are significant concerns regarding the secondary impacts of these large-scale projects, notably adverse effects on local ecosystems, food security, and social equity as well as debt sustainability. At present, Laos remains engulfed in an acute debt crisis, with China as by far its largest creditor. China also invests in wind farms in Thailand, along with hydropower projects in Indonesia and Cambodia.

Third, in terms of financing the energy transition, the Map finds that while financing for non-renewable energy projects (fossil fuel and waste fired) has declined significantly, so too has financing for new renewable energy projects. To the extent that there has been a switch in financing focus, this has to date simply been achieved through a sharp reduction in overall energy support, at odds with the region’s need for both cleaner and more energy.

Related to this, a fourth issue is that rising climate-related ODF has occurred within a broader context of relatively stable total ODF over the entire 2015–22 period, indicating that climate amounts have not been additional to existing development support. Commitments for future climate-related spending went up in 2022, but are lower than they were in 2020. The Just Energy Transition Partnerships (JETPs) in Indonesia and Vietnam may unlock additional renewable energy financing in those countries, but implementation has been slower than hoped for.

Overall, the trajectory of climate development finance therefore appears far from the dramatic scale-up needed to support the region’s transition to resilient low carbon development.

More than 40% of ODF incorporates gender equality as a significant objective. The Asian Development Bank, Australia, and the United States are the top funders for projects with gender equality as their principal objective.

Gender discrimination in Southeast Asia remains high compared with the rest of the world,⁴ and the economic cost of discriminatory social institutions in the region will amount to around $200 billion to 2030, according to the OECD.

Between 2015 and 2022, ODF spending with gender-related objectives in Southeast Asia reached $59 billion. A peak in 2020 is attributable to large ADB loan programs to Indonesia and the Philippines for inclusive recovery from the pandemic. As a proportion of total ODF, gender equality finance averages 41% across Southeast Asia. Of that amount, only 11% is spent on projects that target gender equality as a “principal” objective, with the rest going to projects that incorporate gender equality as a “significant” objective. Levels of gender-related ODF in 2021 and 2022 remained relatively stable as a proportion of total ODF spending.

Timor-Leste, the Philippines, and Myanmar are the top recipients of gender equality finance as a proportion of total ODF received. Across the region, the ADB is the primary provider by a large margin, spending $27 billion or 64% of its total ODF budget on projects with gender objectives, accounting for 45% of total gender equality finance supplied to the region. Japan ($11b) and Germany ($3.5b) are also major providers of gender-related ODF. The ADB, Australia, and the United States are the top funders for projects with gender equality as their “principal” objective.

In 2015, most gender equality finance was supplied in the form of grants. The volume of grants has stayed consistent, however non-concessional loans have grown since 2019 and now outstrip grant financing. This reflects increased integration of gender equality considerations into more ODF projects, including as part of large loans from the ADB to Indonesia, Thailand, and the Philippines in 2020.

Despite a political premium placed on “ASEAN centrality”, relatively little development support is directed through ASEAN rather than bilateral and other multilateral channels.

The ten-member Association of Southeast Asian Nations (ASEAN) has been the region’s primary intergovernmental organisation since its establishment in 1967. Timor-Leste received in-principle approval to become its newest member state in 2022.

ASEAN member states and external partners alike frequently stress the importance of “ASEAN centrality” and of multilateralism for addressing Southeast Asia’s shared challenges. Nonetheless, the Southeast Asia Aid Map reveals that ODF dispersed through ASEAN to support the grouping’s objectives and operations represents less than 1% of total ODF delivered to the region.

From 2015 to 2022, the Map identifies $1.75 billion spent on ASEAN-related projects, consisting mostly of grants. As ASEAN does not publicly disclose data on finance received from its partners, this figure may be an underestimate. Regardless, the relatively low sum likely reflects the fact that ASEAN is still a modest organisation, with limited operational capacity or ability to coordinate substantial regional development initiatives. Despite ASEAN’s political significance in regional affairs, its stretched Secretariat has a budget equivalent to that of a large university department.⁵

Many development partners such as Australia, China, the United States, the European Union, Japan, and South Korea have Dialogue Partnerships and asso- ciated funding arrangements with ASEAN. These partners often support ASEAN’s facilities, including the ASEAN Coordinating Centre for Humanitarian Assistance on Disaster Management, and the nascent ASEAN Agreement on Disaster Management and Emergency Response.

A third of ASEAN-related ODF is directed to government and civil society sectors, with projects ranging from regional counter-trafficking programs to English language training, mostly financed by the European Union and Australia. Australia also emerges as the primary financier for health and education projects — combined in the Human Development category — managed by ASEAN. Germany is the leading ASEAN partner in financing environmental protection initiatives, funding the bulk of projects focused on climate change and biodiversity conservation.

Intra-regional development financing and assistance between ASEAN member states is growing, but from a low base. Thailand does the most (85%), followed by Vietnam (12%).

As Southeast Asian countries experience strong growth and development, some have transitioned from recipients to providers of development finance. But even those with lower incomes are increasingly embracing dual recipient-donor roles to express solidarity with fellow ASEAN member states.

Official development funding from Southeast Asian governments to other countries within the region constitutes a very small percentage (0.25%) of total ODF. Between 2015 and 2022, $633 million was disbursed intra-regionally, with an annual average of $79 million. Levels peaked in 2020 during the global pandemic, with $115 million disbursed mostly on vaccine donations and grants.

The dominant provider of intra-regional assistance is Thailand, responsible for 85% of the total. The Thailand International Cooperation Agency (TICA) was established in 2004 and is especially active in the Mekong sub-region. Vietnam is the second-largest partner to its neighbours, accounting for 12% of intra-regional assistance. The region’s two wealthiest countries and only high-income economies — Singapore and Brunei — contribute just 0.9% and 0.1% of intra-regional ODF, respectively.

Laos is the biggest recipient of intra-regional ODF, absorbing 64% of the total. One-fifth goes to Myanmar and 11% goes to Cambodia, which is simultaneously the third-largest recipient and donor of intra-regional ODF.

Interestingly, Timor-Leste, the region’s smallest economy, has been the largest provider of intra-regional humanitarian ODF. This speaks to the dual roles that most Southeast Asian nations play in this space, with even the poorest countries contributing to regional humanitarian assistance and disaster relief, especially in the event of natural disasters.

Two-thirds of intra-regional ODF is provided as grants, while the remaining portion is distributed in the form of concessional loans. Almost 40% is spent on infrastructure, largely by Thailand on road construction in Laos and Cambodia, and by Vietnam on a hydroelectric dam project in Laos. Just 3% is directed to education and health, and a similar amount of intra-regional financing is recorded as having climate-related objectives.