Does Japanese ODA really contribute to economic growth for ASEAN countries?

Abstract

Japan has provided ODA funding for promoting economic development in ASEAN countries for long time. However the percentage of the fund has been descending for over a decade. This paper therefore aims to verify how Japan's ODA contributes to economic growth, proxy by GDP, for the ASEAN region in the period 2008-2020. Based on the Cobb-Douglas production function, we build our model to estimate the effects of the ODA factor. We employed a wide range of quantitative econometrics models to properly determine the link between financing assistance and the economic expansion of those Southeast Asian nations. The results suggest that ODA exhibits a significantly positive relationship with economic growth for this region over 13 years. A 1% increase in the ODA inflow contributes to the economic growth of 0.226%. In addition, both determinants, such as capital and labor, become important factors driving the growth in GDP while the FDI has a negligible impact. Finally, ODA is seen as a complement to the recipient's efforts as well as a driving force for the giver. From this point, some policies are drawn to harmonize the official development assistance and economic growth.