What are the aids for?

Australia’s Minister of International Development, Concetta Fierravanti-Wells recently made a serious accusation on the rising investments of the Chinese in the Pacific region. She criticised their aids expenditure as ‘roads to nowhere’ and ‘useless buildings.’ These comments have resulted in further dampening of the present relationship between the two countries.

Background

The Chinese aids program in the Pacific Island is considered to be ‘opaque’ as described by Jonathan Pryke, Director of the Lowy Institute for International Policy. The institute has invested considerable time and effort in understanding the patterns and characteristics of the range of investments in that region.

China currently has diplomatic relations with 8 Pacific island countries namely, the Cook Islands, Federated States of Micronesia (FSM), Fiji, Niue, Papua New Guinea (PNG), Samoa, Tonga, and Vanuatu. On the other hand, Taiwan maintains diplomatic relations with 6 other countries.

Sino-Pacific relations is highly influenced by the competitive atmosphere between the People’s Republic of China (PRC) and Republic of China (ROC), also known as Taiwan. The state of diplomatic rivalry between the countries gave rise to the use ‘chequebook diplomacy’ in order to gain diplomatic favour through economic aid and investments in the Pacific island region. As a result, this brought a revelation to the Chinese foreign policy as it took an aggressive standpoint. However, after the elections in Taiwan in 1999, a tacit agreement between the countries was signed in order to no longer engage in methods and approaches to persuade any more allies in the region.

Though China engages mainly in bilateral relations it has held two regional meetings among the Pacific island countries. Specifically, to maintain and strengthen its economic relationship with effectively engaging in aid expenditures throughout these regions. These bilateral meetings were, “China-Pacific Islands Countries Economic Development and Cooperation Forum,” which was first held in April 2006 in Fiji. The second was held in November 2013 in Guangzhou.

Since 2006 there has been a substantial growth in investments from China. According to the Lowy Institute, there are more than 210 projects worth US$1781 million from China alone. The main characteristic of China’s aid is in large infrastructure projects provided at low-interest rates, on loans which eventually has to be repaid.

China is a major contributor to the region but it is not the largest. Australia, on the other hand, plays the dominant role; its contribution is US$7703 million towards this region. Since 1999 there are more than 3000 Chinese companies operating in these regions which have ventures ranging from mining companies to restaurants and grocery stores. The Chinese State-owned Enterprises (SOEs) have also invested in Pacific fishing, nickel, timber, seabed mining, petroleum, tourism etc. Apart from the existing aid program, China also provides support for the regional corporation through scholarships for students and humanitarian training to government officials.

Analysis

These accusations by minister Fierravanti-Wells signals the prime motive behind the Chinese aids expenditure. Their impression in these areas has significantly deepened over the years. Consequently, it poses a threat to the ‘big brother’ Australia in the Pacific. This level of importance shown by China towards the Pacific islands has placed Australia in a tight spot.

China engages mainly in providing infrastructure aids at low-interest rates but Australia provides one-way grants that need to be paid back. They also engage in humanitarian assistance to the governments.

The competition between the countries is not territorial alone. Considering the aggressive foreign policy objectives of the Chinese, the motive could be to discard any presumptions of Anti-China elements. The country has thus engaged in providing soft loans and preferential trade to all its diplomatic partners. However, these loans have only increased the debt burden of the economically small countries in the Pacific.  Tonga, Samoa and Vanuatu are some of the countries that have already fallen into the debt trap. 

Lowy's Danielle Cave on her analysis of the Chinese aids expenditure wrote that “The Chinese Government ... is just doing what all governments do — engaging internationally to promote its own interest.” She also added saying China's style of foreign aid delivery does not always benefit the Pacific island nations as some of the issues they face are, “debt distress, local business frustration, poor aid management, aid quality complaints and high-level corruption.”

The Australian National University Professor Hugh White said that while “Beijing is clearly driven by its economic interests — the larger strategic threat cannot be ruled out. China clearly does seek to become at least a leading power in the Western Pacific and perhaps the leading power in the Western Pacific."

Australian Defence Force Academy (ADFA) analyst Cameron Hawker said: “But we tend to take it for granted that no hostile power will act in the space and if a hostile power were to act in that space it would definitely be a threat to Australia." He also said that "Australia offers a much broader range of engagement than China possibly can.”  As it is not alone, New Zealand and other similar countries with the same interest can also provide soft power options.

Counterpoint

Not everyone is against these investments however. Australian Prime Minister Malcolm Turnbull on March 2018 revealed that he supports Chinese foreign investment in impoverished Pacific Island nations so long as it is productive, amid concerns Beijing is buying increased influence in the region. He said, “We welcome this investment from any source, any nation, any development bank, on the basis that it is going to provide real value, supports good governance, has got a robust business plan and so forth.”

Assessment

Our assessment is that the growing Chinese footprint is definitely a concern for Australia and other large economies in the Pacific region. Increased competition spurred by China only poses a threat to the effective and beneficial role a neighbour plays to the island nations.

Though diplomatically China has been successful in gradually gaining the interest of many countries-its strategic aspects are still unclear. Are they waiting for the right moment to seize the opportunity, similar to the 2006 Military Coup in Fiji or is this developing into territorial politics?

Perhaps Australia can turn this competition into an opportunity and play the role of an effective big brother in the Pacific region to suppress the uncertainty of China’s strategic desires.