Western Aid Cuts Risk Fracturing Asean Unity

As the wealth gaps between its members widen, Asean risks becoming a two-speed bloc, making consensus on core economic issues harder to achieve.

- Alexandre Dayant and Grace Stanhope

A casual scan of the gleaming skylines of Bangkok, Jakarta, or Ho Chi Minh City, and it's easy to believe that Southeast Asia is thriving. But a mounting challenge lurks beneath the surface bustle of these cities. As Western powers pull back from global development, billions in foreign aid are vanishing, placing the region's poorest countries and Asean's unity at risk.

The scale of the aid pullback is striking. Earlier in 2025, the Trump administration suspended nearly all American overseas assistance—amounting to around US$60 billion (S$77 billion). The UK soon followed, cutting US$7.6 billion from its annual aid budget.

Meanwhile, the European Union and seven of its member states announced a combined US$17.2 billion in aid reductions to be rolled out between 2025 and 2029.

The impact for Southeast Asia could be acute. For most of the past decade, the US, EU, and UK collectively accounted for one-third of all foreign aid to the region, with a strong focus on human development—health, education, civil society, and environmental protection. Based on current pledges and budget estimates, foreign aid to Southeast Asia could shrink by nearly a fifth by 2026.

While all countries will experience the effects, it is the region's poorest and most fragile states—Cambodia, Laos, and Myanmar—that are most exposed. In these economies, aid is a vital source of funding for health and education.

In Laos, for example, education aid from Western donors is equivalent to nearly 25 percent of the national education budget, while health aid accounts for over 10 percent of public health spending. Cuts to these lifelines will weaken already strained institutions and services.