“We’re anticipating a 20 percent decrease in bilateral foreign aid to this region by 2026,” she noted.

China favours infrastructure, loans

After reducing its annual Southeast Asian development spend by 68 per cent over five years, China boosted its financing in 2023.

Source: Supplied

The regional superpower is still favouring market-rate loans for infrastructure projects, with rail ventures in Indonesia and Malaysia accounting for most of the annual increase.

China is on course to surpass long-standing partners in infrastructure investment, expanding its commitments significantly from 2022 to 2023 with the relaunch of the Kyaukphyu Deep Sea Port Project in Myanmar.

Infrastructure spending commitments by both China and traditional partners to Southeast Asian nations have decreased since 2015. Source: SBS News

It’s the loans to the region’s poorest countries — like Myanmar, Laos, and Cambodia — that have some concerned.

“In the absence of viable alternatives, there might be reduced pressure for reform as China’s development finance becomes more dominant,” she observed.

“That’s a huge problem if countries can’t provide the services that they need to their citizens because they’re paying back debt,” she said.

Further cuts expected

The Lowy Institute says that will result in the “centre of gravity” shifting in Southeast Asian development financing.

A bar chart shows the shifts in development funding from various nations since 2019. Source: SBS News

Australia’s response

“Some 75 cents in every dollar that Australia provides in development assistance is directed to our broader region,” Wong said. “We will continue to prioritise that.”

Source: SBS News

Conley-Tyler said it’s critical for Australia to maintain that focus.