China to cut spending in Southeast Asia: report

The Asian Development Bank and the World Bank have overtaken China as the top source of development finance, say a group of experts.

China has cut development assistance to Southeast Asia as Beijing directs the money elsewhere, relinquishing its position as the region’s biggest source of finance, according to a report by an Australian think tank.

China was the largest single source of development assistance for Southeast Asia between 2015 and 2019, but was overtaken by the Asian Development Bank and the World Bank during the COVID-19 pandemic, the Lowy Institute said in the report published on Sunday. .

China’s contribution to the region fell from $7.6 billion in 2015 to $3.9 billion in 2021, according to the Sydney-based Lowy Institute.

In total, China disbursed $37.9 billion, nearly 20 percent of the region’s total financing, between 2015 and 2021, which is equivalent to $5.53 billion on average annually.

Southeast Asia received about $200 billion in total from general partners during the period.

Financing from China, consisting mainly of loans, has been used to support major infrastructure projects across the region, including high-speed rail projects in Malaysia, Indonesia and Thailand.

“The most striking trend in China’s (official development financing, ODF) in Southeast Asia between 2015 and 2021 is the decline in China’s relative importance as a partner,” the Lowy Institute said in the report, predicting that “lingering effects of the pandemic” would continue to disrupt Beijing’s development financing.

“In 2015, China provided about 24 percent of the region’s ODF. By 2021, this had fallen to 14 percent.

Instead of China, other countries and partners, including the United States, Australia and Japan, are ramping up aid as they vie for influence with Beijing, Lowy Institute chief economist Roland Rajah said.

“The intensification of geostrategic tensions between China and Western governments has also seen an increasing focus on the use of development finance, particularly in infrastructure, as a means to compete for influence,” Rajah said.

“This makes understanding the scale and contours of (ODF) in Southeast Asia of great interest to governments in the region and their development partners.”

New partners have also stepped up in the region, including the Saudi Arabia-based Islamic Development Bank, which has provided about $225 million a year in non-concessional loans, mostly to Indonesia, and India, which has focused about $ 70 million a year in subsidies in neighboring countries. Burma.

However, most of the region’s development funding, 80 percent, continues to come from traditional partners such as development banks, Japan, South Korea, the European Union, the US and Australia, according to the report. report.

After China, Japan was the largest non-institutional provider of development funds, spending $28.2 billion.

South Korea contributed $20.4 billion, followed by Germany, the United States, Australia and France with funding between $5.34 and $8.5 billion.

There was a significant gap between the spending promised by the partners and the amount of funds delivered.

Compared to the $298 billion committed to the region for more than 100,000 projects between 2015 and 2021, only about $200 billion was spent during the period.