2023 Pacific Aid Map Reveals Chinese Aid in Retreat
The Lowy Institute's updated 2023 Pacific Aid Map has revealed a shift in the landscape of foreign aid in the Pacific region, with China reducing overall support to the region whilst increasing the politically targeted nature of its Aid.
"Since the onset of the pandemic, there has been surprisingly little new Chinese financing in the region. China's total development finance disbursements fell to just $241 million in 2021, below its pre-pandemic historical average of $285 million per year. This year, Beijing’s Official Development Finance (ODF) commitments were a quarter that of its historical average," said Mr. Alexandre Dayant, Deputy Director of the Lowy Institute’s Indo Pacific Development Centre.
This year's Pacific Aid Map covers 82 donors, tens of thousands of projects and activities, 70 million datapoints and more than US$44 billion in spending.
“It is the largest and most comprehensive database of Official Development Finance – grants, loans, and other forms of assistance – ever assembled for the Pacific,” said Dayant.
The map includes data on every aid project in the Pacific Islands from 2008 to 2021 and unveils a distinct change in Chinese foreign aid strategy in the Pacific. Despite its growing geopolitical influence in the Pacific Islands region, China's share of total Official Development Finance (ODF) in the Pacific has been declining since 2016. However, Mr Dayant says there is nuance to the China picture.
"China's decreasing ODF engagement should not be seen as a wholesale departure from the region. Instead, it reflects a strategic shift to reduce risk, cement political ties, and enhance capital returns. For instance, China increased aid to Solomon Islands and Kiribati after their diplomatic switch from Taiwan in 2019."
Australia, by contrast, has taken a prominent position across the Pacific aid landscape. In 2021, Australia dramatically increased its support, partly reflected by a $466 million loan to Papua New Guinea, marking the largest transaction ever recorded in the Pacific Aid Map.
"The Pacific Step-Up policy announced in 2018 aimed to bolster Canberra's standing in the region through higher development aid, infrastructure investments, and security collaboration and we are now seeing this in the numbers. Australia is the largest donor in the Pacific, accounting for about 40% of total ODF,” said Dayant.
The 2023 Pacific Aid Map reveals a record-breaking year in terms of project commitments, with over 51 donors pledging around $5.5 billion to the region. This financing includes significant allocations for Covid-related initiatives, infrastructure projects, and direct budget support. Geopolitical dynamics and competition for influence have also contributed to this surge in development financing in the Pacific.
"The Pacific Aid Map's latest data showcases an evolving landscape of aid in the Pacific, with a shift towards loans as opposed to grants, which are stagnating. This should be watched carefully, as we need to avoid compounding debt sustainability risk in what is already a highly vulnerable region and thanks to climate change, only more so going forward," said Dayant.
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