The Intel

I have many criticisms of USAID. Its program management is often rigid. It is nearly impossible for women’s organisations, minority groups, or community-based organisations to meet USAID’s restrictive funding requirements. USAID is caught between the need to be accountable to the last dime, to appease DC politicians with quick results and big USAID logos and its stated commitment to localisation. The latter has shown progress, as USAID’s former head Samantha Power reported, but USAID still favours partnerships with large contractors and INGOs, which then subgrant to smaller and/or local organisations.  

Despite these flaws, USAID has been the leading supporter of many development initiatives with significant impacts at the structural and community levels. The abrupt termination of US aid programs – without clear communication or transition plans – has been incredibly destabilising, leaving vulnerable populations without essential support. In Indonesia, the funding freeze has suspended programs critical for marginalised communities, including efforts to reduce stunting and support services for people living with tuberculosis and HIV. Even if temporary, these cuts have damaged US credibility.  

The pushback against diversity, equity, and inclusion in the US also risks having a ripple effect in Indonesia, where civic space for women and gender-diverse individuals is already precarious. Civil Society Organisations (CSOs) working on these issues face a double blow: losing both funding and moral backing. Indonesian politicians see little political gain in supporting minority groups, and ministerial budgets have been slashed to fund a poorly executed free school lunch program. Other donors are too few to fill the gap and Indonesian regulations make public fundraising unviable. Indonesian CSOs are resilient, and they will find ways to adapt. The bigger question is what happens to the marginalised and vulnerable communities that rely on these programs.

Trump’s “America First” outlook presents a highly transactional approach to foreign policy and international relationships. Given this, it is unsurprising that the Trump administration sought to better align US international development assistance with national security objectives.  

However, the rapid dismantling of USAID and the halting of all its projects went much further than expected. The suddenness of these actions and the severity of their impact in the Indo-Pacific region have arguably run counter to US interests. The “soft power” component of development assistance has long been appreciated across the US political spectrum, with conservatives such as Secretary of State Marco Rubio voicing strong support in the past for USAID and its critical role supporting US national security.  

In Southeast Asia, USAID has been one of the primary vectors for US engagement, even in countries with minimal economic or defence ties with the US. And in the vast Pacific Islands region, USAID has played a critical role in providing development assistance and bolstering US presence and influence amid growing Chinese attention. The opening of the Pacific USAID mission in Fiji in 2023 was hailed as a huge win both for the region and for US-Pacific relations – part of US re-engagement after decades of relative neglect.

Beyond recipients of US assistance, US allies such as Australia and Japan are also left in the lurch – sometimes literally, as joint development projects are put on hold. For countries that have grown more strategically aligned with the US over the last several years, reduced US influence affects their own national security interests. While the long-term consequences remain uncertain, the negative effects are already being felt across the region.

The Pacific and Southeast Asia will be less affected than other regions. Conflict-affected, aid-dependent countries for whom the US is a leading donor are most exposed: South Sudan, Somalia, Yemen, Afghanistan, etc. Australia can’t ignore these effects just because they are far away; conflicts and health system failures in these countries can have big impacts on our prosperity and security and that of our neighbours.

In the Pacific, the direct effects of a permanent US aid retrenchment would be hardest felt in the three ‘compact states’ – Palau, the Federated States of Micronesia, and the Marshall Islands. Aid comprises around a quarter of FSM’s national income and the US provides almost 80% of this finance. Countries in Melanesia and Polynesia will be less affected, but projects could still close. In Southeast Asia, poorer and conflict-affected communities in Cambodia and Myanmar are bearing the brunt and have the most to lose.

Trump’s decision will also have a major impact on the global development, climate and humanitarian architecture.  Beyond the compact states, large-scale US cuts to multilateral aid could be the biggest source of disruption for the Pacific. It will become increasingly untenable for Australia to press these institutions to prioritise the Pacific as they face a potentially existential funding crisis without substantially increasing our own multilateral contributions.    

But the most enduring impact will be the erosion of trust in the US in a more competitive aid environment. The freeze is capricious, and while the courts have recently ordered that it be lifted, there is no guarantee that the Trump administration will comply. Many organisations that rely on US funding could still collapse. And, as predicted, people are now dying.