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

Hien Phuc Nguyen1, Anh Ngoc Quang Huynh2, Ulrike Reisach3, Xuyen Thi Kim Le 1
1 Foreign Trade University, Hanoi, Vietnam
2 University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam
3 Neu-Ulm University of Applied Sciences, Germany

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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.

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