The rise of Asia has attracted attention from Asia-Pacific major powers, including the United States, China and Japan. This article looks at the politics of foreign aid by analyzing its development, dynamics and local responses with a specific focus on Southeast Asia. The first section of this article highlights the importance and definition of the politics of foreign aid whereas the second section delineates the problematique of contemporary discussion. The current development and changing faces of foreign aid practice and economic engagement in Southeast Asia as a case study is provided in the third section. This article, then, examines competing IR theoretical frameworks for the purpose of re-orientating the configuration of level-of-analysis and network of stakeholders. It will particularly pinpoint the responses towards/against the external economic involvement in infrastructure issues at Southeast Asian localities. Finally, it concludes by recommending changing ideas and practices from "legitimate engagement" to "fair engagement" for the purpose of bridging the external economic resources with local social development.