A Turning Point for Global Aid
Welcome back to Clickable Insights – where the Clickable Impact team shares our perspectives on the nuclear bomb that U.S. President Donald Trump’s administration has dropped into the international aid system.
Today’s newsletter examines how the U.S. foreign funding freeze and radical reform of USAID impacts development in Southeast Asia, who can fill the gap left by the U.S., and what this means for stakeholders in the field.
The global aid and development community is reeling following the recent decision by the Trump administration to suspend all United States foreign aid for 90 days.
The administration is also attempting to radically transform USAID, a process that is now being challenged in court.
It can be difficult to follow this fast-moving process, but here are the main facts as they currently stand: USAID’s website is offline. All overseas USAID missions have been ordered to shut down. Most USAID direct hires have been placed on administrative leave from Friday, February 7. And according to The New York Times, the administration plans to scale USAID’s workforce down from over 10,000 to about 290.
Meanwhile, a whole ecosystem of NGOs, community partnerships, private companies, and market systems are pondering how to survive the sudden evaporation of USAID funding and assistance.
The development community is reacting and adapting in real-time. That’s why we are devoting this week’s newsletter to what comes next. What are the knock-on effects and follow-on decisions that may continue to roil our industry in the coming months and years?
Aid and Project 2025
One potential guidepost comes from the Heritage Foundation’s highly controversial, 900-page ‘playbook’ known as Project 2025. There is close alignment between the authors of this document and key members of the Trump administration, meaning many of its ideas could turn into action.
This ‘project’ is the source of much consternation in the U.S., though here we are only going to focus on the USAID chapter, written by Max Primorac, a former USAID adviser.
Primorac outlines several ‘key issues’ facing American aid generally, not just USAID as an organization, including: Aligning U.S. Foreign Aid to U.S. Foreign Policy; Countering China’s Development Challenge; Diversity, Equity, and Inclusion Agenda; Refocusing Gender Equality on Women, Children, and Families; and Protecting Life in Foreign Assistance.
Some of these are reflective of America’s ongoing culture wars, most notably the anti-abortion stance and the battle against DEI – both of which have been Republican causes for years.
Others reflect more of a structural reorientation in how the US relates to the world that, if addressed, may even represent opportunities for some countries in our region.
This is explicitly laid out in the chapter’s section on Asia, which argues that “USAID should intensify its bilateral relationships with pro-free market Japan, Australia, South Korea, and India so that they can jointly advance private-sector solutions to secure financing for power generation, infrastructure, digital connectivity, investment and trade expansion, and other economic activities.”
Primorac goes on: “USAID enjoys a strong in-country presence in India, buttressed by recent coordination on the global response to COVID-19 as India is a global leader in vaccine production. Those ties should be expanded. So too should development cooperation with Taiwan, which boasts effective pandemic response capacity that should be shared with developing countries.”
A crucial takeaway here is that Project 2025 does not call for USAID to be eliminated, something a few high-profile Trump allies appear to want. Rather, it calls for a reorientation and reprioritization of USAID’s investments, partnerships, and thematic program areas.
Southeast Asia’s development aid positioning
Some administration officials want to fold USAID into the State Department. In fact, Secretary of State Marco Rubio was appointed acting administrator of USAID by Trump.
In theory, this would “better align” ODA more directly with U.S. foreign policy and trade interests. This isn’t unprecedented and may portend good things for geopolitically important countries like Vietnam, the Philippines, and Indonesia.
These countries, and ASEAN more broadly, are seen as critical in the deepening economic competition between China and the U.S. While Southeast Asia is diverse ideologically, almost nobody in the region wants to explicitly align with either superpower in part due to the economic (and potentially military) damage this could cause in the future.
Vietnam is a particular standout in splitting the middle between China and the U.S., maintaining robust trade with both countries while ensuring it can receive aid and support at the same time.
This geopolitical importance should ensure that even an administration as allergic to supposed “freeloaders” as Trump’s will remain engaged.
Furthermore, a USAID-State merger has some international precedence. In 2013, Australia’s development policy and aid organization – AusAID was merged with the Department of Foreign Affairs and Trade.
While the results were reportedly mixed for several years afterward, DFAT released a new International Development Policy in 2023 underpinned by a new performance and delivery framework.
The other players in the American aid ecosystem
It’s also important to keep in mind that USAID isn’t the only part of the U.S. government development ecosystem.
Devex recently examined the U.S. International Development Finance Corporate (DFC) and the Millennium Challenge Corporation (MCC).
The DFC was created during Trump’s first term and is funded from a part of the state and foreign operations funding bill not directly named in the State Department’s ongoing stop-work order. This bodes well for immediate operations, though some confusion remains over how Trump’s executive order pausing all foreign aid for 90 days will apply to DFC.
The MCC, to quote Devex, is “a 20-year-old agency that tries to unlock countries’ economic growth with large-scale grant agreements in exchange for good governance and other reforms.”
In 2024, Primorac – author of the Project 2025 USAID chapter – told Devex, “we should give more money to MCC. They do a great job.” He also argued for a greater focus on good governance over “social re-engineering.”
What might that look like for MDBs?
One certainty is less U.S. funding for climate-related programs, given that Trump withdrew from the Paris Accords for a second time (after Joe Biden re-joined following Trump’s first term).
This is already playing out within the U.S., as Trump’s funding freeze has hit climate- and environment-related grants under Biden’s Inflation Reduction Act and the Infrastructure Investment and Jobs Act. Those blocks are also being contested in court, but similar moves from the administration can be expected on the global state.
The administration’s relentless focus on ‘diversity’ as a catch-all enemy bodes poorly for programs focused on gender or race. The Project 2025 chapter on USAID calls out the organization’s previous policies toward women, arguing: “USAID now aggressively promotes abortion on demand under the guise of “sexual and reproductive health and reproductive rights,” “gender equality,” and “women’s empowerment” and advocates for those who claim minority status or vulnerability.”
Abortion is a third rail in domestic American politics, but this ideological expansion beyond U.S. borders will concern MDB working on programs related to reproductive health, gender equality, and women’s empowerment.
While Trump’s shift on aid and development assistance is particularly dramatic, it represents a broader inflection point in foreign aid, especially in the developed Western world.
USAID has dominated recent headlines, but, as Benjamin Bellegy wrote in Alliance Magazine, “The Netherlands announced cutting their aid by €2.4 billion, Germany by €2 billion, France by close to 40 percent, and similar announcements were recently made by Switzerland and Belgium.”
To be sure, western-aligned democracies aren’t the only sources of international aid and assistance, but this raises the question of who – and what – can fill that gap. Bilateral aid within Asia will take on even greater prominence in this context.
Relevant to our region, aid from South Korea and Japan remains robust, though it’s important to note that these countries often focus on hard infrastructure and security issues over health or social programs.
According to the Lowy Institute’s Southeast Asia Aid Map, from 2015 through 2022, Japan distributed US$34.3 billion in development aid and finance across the region, with Vietnam as the top recipient, followed by the Philippines and Indonesia.
Japan was the fourth-largest source of such aid in Southeast Asia during this period, after China, the ADB, and the World Bank, most notably through the Japan International Cooperation Agency (JICA). While JICA alone cannot make up for the current loss of USAID, in its 2023 annual report, the Japanese organization noted that the countries of ASEAN “are more important economic partners than ever to Japan in terms of trade and investment.”
South Korea follows, having provided US$22.8 billion in aid and finance. The Korea International Cooperation Agency, for example, is involved in de-mining programs in Vietnam and other forms of aid often associated with USAID.
China, as ever, is the proverbial elephant in the room. The country has already invested heavily in highways, railways, airports, and other major infrastructure projects across Southeast Asia. While it, too, does less in terms of ‘softer’ aid, some regional observers are already arguing that Trump’s aid freeze gives China the “upper hand.”
Beyond bilaterals
This is an evolving situation. No matter what happens, we're being forced to imagine a world without - or with less - bilateral American support.
For now, it is "wait and see." More will be clear when and if the Trump administration follows through with its February 4th Executive Order to review participation in all international organizations.
However - and optimistically - other forms of development aid are stepping in to fill the hole. Philanthropy is one example, with Michael Bloomberg’s January pledge to cover some key Paris Agreement obligations for the U.S. following Trump’s withdrawal.
The private sector will have to get even more involved, while national and local governments impacted by the funding freeze will be called upon to step up once they recover from their shock.
Join us next month for more updates on climate action, transformative innovation, and sustainable tourism.
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Clickable Impact is an Asia-based consultancy committed to climate action and sustainable development. We have three practice areas: public affairs and communications, sustainable tourism, and transformative innovation. Across our work, Clickable Impact favors projects that urgently mobilize private sector engagement, policy action, and investment.
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