Increasing Aid From the US in the Indo-Pacific Region: Can It Outperform China?

Increasing Aid From the US in the Indo-Pacific Region: Can It Outperform China?

In the Indo-Pacific area, aid politics have become essential to the US-China fight for influence. Both nations have greatly boosted their assistance to the area, demonstrating their strategic interests and geopolitical goals. The United States has provided significant money to nations such as Bangladesh, the Philippines, and Vietnam via projects sponsored by State and USAID, with an emphasis on areas such as healthcare, conservation, and sustainable development. This strategic strategy demonstrates America’s commitment to encouraging prosperity and stability in the Indo-Pacific.

Meanwhile, China’s involvement in the area has increased, thanks to building contracts, non-financial investments, and Belt and Road Initiative (BRI) projects. China’s investments, totaling in astonishing proportions, have changed the region’s economic dynamics and strategic ties, notably in industries such as technology and renewable energy. However, China’s assistance and investment raise concerns about debt sustainability, environmental damage, and geopolitical influence.

As the US and China compete for control in the Indo-Pacific, the competition for influence heats up. Despite China’s present lead in assistance volume, the US has a track record of transformational projects and strategic alliances. The future diplomatic efforts of both parties will determine the trajectory of assistance diplomacy in the area, deciding not just who outperforms whom, but also the larger geopolitical dynamics and strategic factors at work.

Showdown in the Indo-Pacific: US vs. China Aid Race

The USA’s Aid to the Region

The United States’ aid allocation in the Indo-Pacific area has increased significantly from fiscal year (FY) 2019 to FY 2023, with a strong emphasis on nations such as Bangladesh, the Philippines, and Vietnam. During this time, the State and USAID invested a total of $6.6 billion on regional programs ranging from healthcare analysis to biodiversity conservation and sustainable development. The distribution of funding follows a strategic approach, with the top three recipient countries Vietnam, Bangladesh, and the Philippines continuing to receive considerable amounts in FY 2023. Vietnam topped the pack with $206 million, closely followed by Bangladesh ($203 million) and the Philippines ($170 million). Notably, an extra $68.5 million was set aside to help the Association of Southeast Asian Nations (ASEAN) and oppose the influence of the People’s Republic of China (PRC), highlighting larger geopolitical factors influencing aid distribution in the area. While some nations received steady financing throughout time, others had swings in allocations, reflecting shifting priorities and strategic imperatives. Furthermore, the inclusion of Taiwan in FY 2023 funding indicates a significant change in diplomatic dynamics, perhaps indicating attempts to strengthen relations with the island country despite rising regional tensions. This effort, combined with ongoing assistance for ASEAN and measures opposing PRC influence, highlights the complicated geopolitical backdrop that shapes US aid plans in the Indo-Pacific.

USAID aid in the region (2019- 2023)
Country/Territory/Region FY 2019 Actual FY 2020 Actual FY 2021 Actual FY 2022 Actual FY 2023 Estimate
Bangladesh 200,411 206,680 206,521 212,279 202,550
Bhutan 0 0 0 1,000 2,200
Myanmar 127,448 135,600 136,127 136,127 136,127
Cambodia 74,505 95,404 94,027 100,519 97,917
China 20,040 25,000 17,000 12,000 12,000
Fiji 196 138 538 318 2,500
India 121,609 102,344 100,052 116,354 120,392
Indonesia 146,192 135,638 139,130 152,641 151,815
Laos 58,167 81,824 90,020 91,001 93,000
Malaysia 1,084 295 1,239 999 1,300
Maldives 4,350 4,990 5,050 8,671 9,500
Marshal Islands 450 950 450 650 700
Micronesia 450 450 450 450 600
Mongolia 9,993 13,060 15,264 13,225 12,500
Nepal 129,941 127,995 144,330 125,693 132,995
North Korea 4,000 4,000 5,000 5,000 5,000
Papua New Guinea 7,091 3,148 12,692 16,097 25,845
Philippines 163,143 174,123 291,932 155,196 169,536
Sri Lanka 47,125 36,432 37,787 42,887 40,250
Thailand 29,436 33,363 31,862 39,542 30,073
Timor-Leste 18,355 20,081 19,590 18,222 19,450
Tonga 184 53 51 279 400
Vietnam 151,984 174,732 185,707 185,314 206,147
Pacific Islands Regional 30,770 25,000 28,500 46,939 34,000
State East Asia & Pacific 111,900 106,060 87,072 67,301 122,295
State South & Central Asia 34,466 33,050 32,079 37,990 49,740
USAID Asia Regional 21,250 20,250 36,000 25,000 25,800
USAID Regional Development Mission for Asia 26,850 26,694 32,000 63,950 47,000
USAID South Asia Regional 484 1,000 1,000 1,000 1,000
ASEAN 0 0 0 0 25,000
Countering PRC Influence Fund (CPIF) 0 0 0 0 43,500
Total 1,541,874 1,588,354 1,751,470 1,676.644 1,821,238

Source: Compiled from https://www.usaid.gov/ and https://www.gao.gov/assets/870/865719.pdf

China’s assistance to the area

The development finance and investment environment in the Indo-Pacific region is experiencing significant changes, with China’s involvement playing a crucial role. China has greatly increased its footprint in recent years by securing building contracts and making non-financial investments, notably in industries like as infrastructure, technology, and renewable energy. The increased Chinese presence is fundamentally altering the economic dynamics and strategic relationships of the area.

Based on statistics from the Chinese Ministry of Commerce (MOFCOM), investment in the Belt and Road Initiative (BRI) had a significant 35% growth in 2020 compared to the previous year. Southeast Asian countries were particularly favoured as recipients of this investment. In the first quarter of 2022, there was ongoing progress, as investments in the Belt and Road Initiative constituted 20% of China’s overall outward direct investment (ODI). The Southeast Asia area continued to be highly prioritised as a top choice for Chinese investments, highlighting its significant role in China’s wider geopolitical and economic goals.

In 2023, the country’s total involvement in the area over the preceding ten years amounted to an astonishing USD 530 billion.  Chinese investments in the Indo-Pacific region have remained strong and have even grown, despite a worldwide decrease in foreign direct investment (FDI) in developing nations. The increase in investments is being propelled by both private sector firms and state-owned enterprises (SOEs), highlighting the varied involvement of China in the area.

In the future, Chinese assistance and investments in the Indo-Pacific region are set to grow much more, with a particular focus on renewable energy, mining, and infrastructure that facilitates commerce. These strategic aims are in line with China’s overarching goals of promoting economic interconnection, bolstering regional influence, and ensuring access to vital resources. When examining the growing Chinese assistance and investments in the Indo-Pacific, it is important to take into account the wider consequences for regional development, governance, and geopolitical dynamics. Chinese involvement offers prospects for infrastructure expansion and economic advancement, but it also prompts concerns over the capacity to manage debt, environmental consequences, and geopolitical influence. In order to protect the long-term interests and sovereignty of Indo-Pacific states, policymakers and stakeholders need to adopt a balanced approach in using Chinese investments.

Chinese total aid and investments in the Indo-Pacific region
Year Total Investment (USD Billion) Increase from Previous Year (%)
2020 $29 billion
2021 $37 billion 27.6%
2022 $41 billion 10.8%
2023 $37 billion -9.8%
2024 (Projected) $45 billion 21.6% (Projected)

Source: Compiled by author  from https://pacificaidmap.lowyinstitute.org/ and https://pacificaidmap.lowyinstitute.org/

Chinese Aid to the pacific islands
Country 2020 ($USD) 2021 ($USD) 2022 ($USD) 2023 ($USD)
Cook Islands $10.41M $7.95M $1.74M
Fiji $13.86M $7.56M $9.34M $21.15M
Kiribati $4.58M
Micronesia $6.34M $16.36M $1.81M $11.29M
Niue
Papua New Guinea $159.23M $148.84M $164.63M $188.81M
Samoa $2.29M $34.79M $51.75M $35.30M
Tonga $61.33M $23.35M $23.07M $57.11M
Vanuatu $1.78M $1.77M $1.74M $1.71M
Grand Total $255.48M $240.61M $252.35M $315.93M

Source: Compiled by author  from https://pacificaidmap.lowyinstitute.org/ and https://pacificaidmap.lowyinstitute.org/

Can the United States surpass China in exerting influence in the Indo-Pacific region?

As the United States and China compete for supremacy in the Indo-Pacific region, the contest for power becomes more intense. Although China now provides more help in terms of numbers, the United States has a history of implementing impactful projects and forming strategic alliances. The next diplomatic efforts of both parties will have a significant impact on the direction of assistance diplomacy in the area. These efforts will not only determine which party succeeds better, but also affect the larger geopolitical dynamics and strategic factors at play.

Given the extraordinary difficulties confronting the global economy, the importance of gaining control in this crucial area has reached unparalleled levels. Considering this situation, the issue that emerges is whether the United States can surpass China in the Indo-Pacific region. Prior to exploring this subject, it is essential to comprehend the economic environment and the factors influencing aid diplomacy. Both the United States and China are now dealing with economic difficulties, which will have consequences for their approaches to providing help. Although China now provides more help to the area than the US, it is equally vital to analyse the kind of aid and its influence on critical development sectors. Geopolitical variables, including proximity, availability, location, and cultural linkages, are important influences in aid diplomacy. Although China has made significant contributions in terms of help, the United States has a well-documented history of implementing impactful aid efforts, such as the Marshall Plan after World War II.

This historical history indicates that the United States has the capacity to stimulate substantial progress in the Indo-Pacific area. Nevertheless, the assistance rivalry is not just determined by the quantity of help offered. Additionally, it includes tactical manoeuvres and a specific emphasis on certain sectors. China has formed strong connections and interdependencies in the area in the last 10 years, while the US is increasing its obligations and strategies, indicating a possible change in the assistance situation.

In the future, the Indo-Pacific area is expected to see increased rivalry between the United States and China. The competition for assistance resources is a manifestation of wider geopolitical tensions and power dynamics, where nations in the area are increasingly finding themselves in a difficult position. The next diplomatic efforts of both parties will have a significant impact on the direction of assistance diplomacy in the area. These efforts will not only determine which party succeeds better, but also the geopolitical dynamics and strategic forces that are involved.

In summary, the Indo-Pacific area is at the canter of global power struggle, where assistance plays a crucial role in influencing regional development and stability. The competition for power involves several aspects, including economic, geopolitical, and strategic factors. The future of the Indo-Pacific area depends on the diplomatic manoeuvres and aid policies of the United States and China. This highlights the need of successful assistance diplomacy in promoting regional development and security. The competition for power in the Indo-Pacific area is complex, including economic, geopolitical, and strategic factors. Although China now has a greater amount of assistance, the United States has the capacity to implement significant development projects that may bring about substantial changes. The future terrain of aid diplomacy and regional power dynamics in the area will depend on the diplomatic manoeuvres and strategies of both sides, which are always changing.

[Photo by United States Coast Guard, via Wikimedia Commons]

S. M. Saifee Islam is a Research Associate at the Centre for Bangladesh and global affairs (CBGA). The views and opinions expressed in this article are those of the author.

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