China is poised to fill the void in aid funding to South-East Asia as the United States, under the Trump administration, dismantles its development programs globally. The Lowy Institute’s latest South-East Asia aid map highlights the potential impact on some of the region’s most impoverished nations, including Myanmar, Cambodia, Laos, and Timor-Leste, which face the consequences of a staggering $US60 billion ($92 billion) reduction in US aid.
Grace Stanhope, a research associate with the Lowy Institute’s Indo-Pacific Development Centre and co-author of the report, noted that China would “continue to play a really big role as the region’s infrastructure provider.” The Chinese-built high-speed rail project between Jakarta and Bandung in Indonesia exemplifies China’s influence and popularity in the region.
China’s Expanding Influence in Infrastructure
Stanhope emphasized that infrastructure serves as a “soft power tool” for China, not only in South-East Asia but across the Pacific, South Asia, and globally. The Lowy report cites projects like China’s construction of high-speed rail between Jakarta and Bandung and funding for Malaysia’s East Coast Rail Link as key examples of its expanding footprint.
Australia’s aid program, according to Stanhope, remains crucial in areas such as gender, climate, and disability in South-East Asia. However, the report’s focus on 2023 highlights significant geopolitical shifts, including the return of US President Donald Trump to the White House, which have reshaped the aid landscape.
US and European Aid Withdrawal
Following his return to office in early 2025, President Trump moved to abolish the US Agency for International Development (USAID), which previously accounted for over 40 percent of global humanitarian funding. Major European donors, including Germany, France, the Netherlands, and Sweden, along with the European Union, have also retracted approximately $US25 billion ($38 billion) from their aid budgets.
Despite Cambodia’s enduring poverty and reliance on external aid, Sweden ended its bilateral aid program in 2024. The Lowy analysis indicates that while humanitarian aid for natural disasters in South-East Asia has increased, support for long-term climate adaptation remains inadequate.
“South-East Asia has not been responsible historically for a lot of emissions but they are bearing the brunt of climate effects at the moment,” said Ms. Stanhope. “If that support is not being delivered, we’re at political risk of being perceived as not following through on our promises.”
Shifts in Global Aid Dynamics
The global aid and development system has been “rewritten and rebuilt” over the past six months, according to Stanhope. The dismantling of USAID, which previously provided significant funding, has ripple effects on institutions like the World Bank and Asian Development Bank, as noted by Jessica Mackenzie, head of policy and advocacy at the Australian Council for International Development.
The abrupt cessation of US funding has forced many projects, including those in collaboration with Australia’s Department of Foreign Affairs and Trade (DFAT), to halt. The ABC reported that the US returned $1.5 million to DFAT, originally intended for a clean water project in Indonesia.
Regional Partnerships and Australia’s Role
Despite these challenges, South Korea and Japan remain significant aid donors to South-East Asia. Stanhope highlighted that these East Asian democracies possess larger development programs than Australia and can lend public finance for developing sectors like energy, transport, and communications.
Australia, although providing only 19 cents for every $100 of national income in 2024 for overseas development assistance, continues to play a pivotal role in the region. The nation is the largest development provider to Timor-Leste and runs specialized programs focusing on gender, climate, and disability.
“Outside of the OECD, Australia trails behind countries like Malta and Croatia, who give more as a proportion of their economies,” stated Chrisanta Muli, acting head of Oxfam Australia.
In conclusion, while China’s influence in South-East Asia grows, the withdrawal of US and European aid presents both challenges and opportunities for regional partnerships. As the geopolitical landscape evolves, nations like Australia, Japan, and South Korea are positioned to redefine their roles in supporting sustainable development in the region.
