Regional support up modestly but remains below pre-Covid levels

In 2023, total ODF to Southeast Asia grew slightly to reach $29 billion, up marginally from $26.5 billion in the previous year. However, the region’s ODF remains well below pre-pandemic levels. The uptick in ODF during 2023 was largely driven by the region’s largest development partners. China ramped up disbursements by almost 50% compared to 2022, accelerating the implementation of major infrastructure projects such as the Jakarta–Bandung High-Speed Rail in Indonesia and the East Coast Rail Link in Malaysia. The multilateral development banks (MDBs) also increased their ODF disbursements, providing substantial budget support especially to the region’s major economies to assist with managing the longer-term economic fallout of the Covid-19 pandemic. The United States and France increased their contributions as well, though on a smaller scale. Meanwhile, contributions from other donors declined as a group, led by a steep 28% drop in funding from Germany, the largest bilateral European development partner in the region.

The modest year-on-year lift in total ODF in 2023 was driven by an increase in non-concessional loans. These loans make up more than half of the region’s development finance and primarily benefit the larger regional economies that are better equipped to absorb them. In 2023, they were heavily directed towards infrastructure — from China and the MDBs — but also increasingly used to promote financial sector reform and inclusive post-pandemic recovery. Funding for banking and financial services — that is, activities that support the development, regulation, and accessibility of financial systems and institutions — surged by 84% in comparison to 2022, reaching a record $3.4 billion, largely driven by the MDBs and Germany. Over the longer term, however, non-concessional lending has been trending down since 2015, the first year covered by the Southeast Asia Aid Map, reflecting shrinking Chinese financing as Beijing reined in its Belt and Road Initiative and adopted a more targeted approach.

Grants and concessional loans (ODA) have been largely stable since 2015, outside of a spike during the pandemic. However, ODA is set to decline amid sharp cuts to foreign aid by major Western donors.