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Chinese aid in Fiji coming under new pressures

Chinese aid in Fiji coming under new pressures

I was in Fiji last week to get an update on Chinese assistance to the country, as part of a larger project I'm doing mapping Chinese aid activities in the Pacific islands, to be launched in early 2015.

Navua Hospital, built with Chinese aid assistance, Fiji. (Author photo)

Fiji is becoming popular again in the post-election environment.

Chinese President Xi Jinping is scheduled to visit Fiji after his trip to Australia for the G20 next month (we should expect some announcements, as is common in Chinese high-level visits, though apparently nothing too big in terms of aid is on the cards). Australian Foreign Minister Julie Bishop is dropping by this week, and the Asian Development Bank, World Bank and Japanese are all developing new programs (with new loan financing) for Fiji. Prime Minister Bainimarama will attend the Seventh Pacific Islands Leaders Meeting in Japan next year,  his first time in eight years.

With all that international attention, suddenly Chinese assistance might not look so appealing. My trip revealed two main insights about the challenges confronting Chinese aid in Fiji.

1. Chinese aid is not as quick or efficient as assumed

It is frequently said that developing-country leaders like Chinese aid because it is quick and efficient. I've said this myself too. While this is sometimes the case, it is actually far from a universal truth.

I was surprised to see a number of projects that had been agreed to when I was last in Fiji, five years ago, still underway or only recently completed. [fold]

Two low-cost housing projects in Suva are funded through China Eximbank loans that were signed in 2010. But these loans came from the regional concessional loan package announced back in April 2006 at the 1st China-Pacific Island Countries Economic Development and Cooperation Forum in Nadi. Construction started in early 2011 and the projects have only just been completed. In fact the project was halted due to a dispute over building standards and subsequent cost blowout. It took a plea by Prime Minister Bainimarama during a visit to Beijing, and the Chinese Embassy stepping in with some grant funding, to resolve the dispute and get the project completed.

Similarly, the Somosomo mini-hydro project on the island of Taveuni was originally discussed with China in 2005. A Chinese team did a survey in 2010. The Chinese contractor, Hunan Engineering Construction Group, signed the contract in September 2013 and started work in July this year. The grant-funded dam is scheduled for completion in September 2015. This is some ten years after the project was first proposed and five years after the first Chinese site survey.

The efficiency of Chinese assistance is usually used as an explanatory factor by developing countries as to why they sometimes take on Chinese aid over 'traditional donor' support, which can be encumbered with complicated processes. But clearly it isn't just a matter of China pledging a loan and a project being built a couple of years later.

2. It all comes down to design

We've heard numerous stories of inappropriate or unsustainable Chinese aid projects. Time and again it seems problems stem from issues around design. A Chinese company will implement a project according to a design usually done by a separate Chinese company. As the Chinese aid system currently stands, it is difficult to negotiate changes to the design down the track.

The new Navua hospital (pictured above) is a case in point. According to the Chinese, the design for the hospital was approved by the Fijian Government. Chinese aid is managed through the Prime Minister's Office (PMO) in Fiji and it appears the Ministry of Health had no involvement at the design stage.

As a result, when the hospital was handed over to Fiji in July, health officials discovered a number of design features that weren't ideal. Toilets are too small and frequently get blocked, tiles on the kitchen floor are too slippery, basins are too shallow to clean medical instruments, and telephone connections are in strange places. The ramps connecting the two wards are steeper than the usual standard. This has led to the hospital manager instructing staff not to transfer patients on trolleys. Instead they must use an ambulance to move people between wards less than 20m apart.

The Health Ministry is happy with the workmanship and professionalism of the Chinese contractor, Yanjian Group. But it will now have to resolve some of these design issues at its own cost. This might have been avoided had the PMO involved them.

It can be a challenge working within the Chinese aid system. As I've outlined previously, much depends on strong government processes around project negotiation and implementation. In Fiji's case, it seems there could be better involvement of line ministries, particularly at the design stage.

But it is important to note that despite these challenges, Chinese assistance in Fiji is supporting some priority areas such as health care, rural infrastructure and housing. And I drove along some very smooth Chinese-built roads. Going forward, the Chinese embassy is keen to use its grant aid to support projects that have a positive impact on the people of Fiji, including in climate change and renewable energy. 

The Fiji Government hasn't yet put in its wish list for projects to be funded through the new US$1 billion regional concessional loan facility announced at last year's 2nd China-Pacific Island Countries Economic Development and Cooperation Forum in Guangzhou. It is smartly waiting to see what's on offer from the other agencies that are now re-engaging. The Asian Development Bank and World Bank loans have lower interest rates than China, and allow for local contractors and consultants.

The PMO needs to be more proactive with project design, insist documents are provided in English and consult with its own experts before signing contracts. This will help ensure projects built with Chinese aid are appropriate and therefore well received. It is a good sign that the Chinese embassy has recognised the problems with its project design processes.

Given some of the challenges with Chinese projects and the very tied nature of its aid program, coupled with the fact that more options are now available, we may see the newly-elected Fijian Government prioritise loan assistance from other partners ahead of China in the next year.

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