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Witnessing an opaque Pacific power shift

Witnessing an opaque Pacific power shift

Today the Lowy Institute’s Melanesia program launches a major update to the Institute’s flagship research mapping project on Chinese Aid in the Pacific.*  The map now contains a decade of Chinese government aid activities in the Pacific Islands region, making it a valuable resource for anyone working on and interested in the region's shifting geopolitical landscape.

This latest update includes 48 new projects that commenced over the last 18 months. It also includes updates to 18 previously mapped projects. These new projects amount to $US297 million (or $A392.7 million) to eight countries in the South Pacific plus Timor-Leste (it does not include six countries that recognise Taiwan). This bring China's total aid spend in the region to $US1.78 billion, spread across 218 projects, since 2006.

The origins of this project go back to Fergus Hanson’s 2005-09 series of papers on China in the Pacific: New Banker in Town and Jenny Hayward-Jones’s work on Pacific geo-strategic competition. In 2015 former Lowy researcher Dr Philippa Brant, with a strengthened data collection process, a rigorous methodology, and research funding from the Australian government, built an online map to visualise 2006-14 Chinese aid activities (in US dollars) on this interactive map.

There has been substantial movement across this now-updated map, and the data, painstakingly collected and debated, speaks for itself. The Chinese government has overtaken New Zealand and Japan (foreshadowed here) and is also on the verge of overtaking the United States in terms of total aid delivered to the region since 2006. This means China will soon be the second largest aid donor, behind Australia, to the Pacific Islands. This isn’t a surprising finding. In fact, if you take out Micronesia where the bulk of US development funds flow, the US aid footprint across Melanesia and Polynesia – where most of the region’s population live – is surprisingly small. [fold]

The updated map draws on over 660 multi-language sources including public budget documents, media articles, tender contracts, community newsletters, Facebook posts, YouTube videos and tweets. The 48 new projects range dramatically in size and scope. They include small grants of goods and services such as new indoor rowing machines gifted to Samoa, a red electric guitar to Fiji and a collection of water supply systems built for small towns in Tonga. 

Medium sized projects include the redesign and construction of Vanuatu’s Prime Minister’s Office and a large fleet of flashy quad bikes for Cook Islands MPs. Finally there are the large multi-year infrastructure projects, including the Prime Minister O’Neill-driven Western Pacific University in the Southern Highlands of PNG which has just started construction.



While the data speaks for itself, it doesn’t speak to the western constructed system  of international development assistance, which has long dictated how countries have traditionally delivered and reported their foreign aid.  This is why comparisons with other donors, including OECD DAC donors Australia, the US, Japan, NZ and the EU, are tricky. Non DAC donors present in the region including China, Taiwan and India don’t report regional aid data in a systematic way that is available to the public. Importantly, many of China's large development projects in the region are actually loans with terms that are not made publicly available. So while China's aid program continues to rapidly expand in the Pacific Islands, users of the map should keep in mind that China provides aid in three main forms (i) grants; (ii) interest-free loans administered through state finances (i.e. Ministry of Commerce) and (iii) concessional loans administered through China EximBank (usually 2-3% interest rates). And it's these concessional loans, that must be paid back by recipient governments, that are boosting the size of China's aid program.

While comparisons may be difficult, the Lowy Institute’s Chinese aid map displays a decade of cumulative development flows so we can track clear and emerging trends. For example, China remains the largest donor in Fiji and is on track to overtake Australia and become the largest donor to both Samoa and Tonga. China is also the second largest donor to the Cook Islands (behind NZ) and the third largest donor to the Federated States of Micronesia (behind the US and Japan).

China may be elbowing DAC donors out of the way across the region, but the Australia Government remains - by far - the dominant donor in PNG. Unless there are further cuts to the Australian aid program, it’s hard to see that changing any time soon. However, this updated map also shows that the overwhelming majority of new Chinese development funds coming online are in fact flowing to Papua New Guinea. PNG’s absorption of such a dominant share of China’s regional aid distribution was among the more surprising findings. The bulk of Chinese aid funds to PNG take the form of concessional loans to build large infrastructure projects, many of which have been mooted for years but often delayed.

Overshadowing the rest of the map is the new $US162 million New Enga provincial hospital project that appears to be the most expensive development project ever undertaken by China in the Pacific Islands region. A China EximBank concessional loan, the project is in the advanced stages of pre-construction.

Traditional partners, including Japan and the US, have been losing ground to China in the Pacific Islands for a decade. Foreign aid is, of course, only one measure of global engagement and influence. But in the Pacific Islands region, where most countries don’t have a strong and sustainable economic base, and not all public funds eventuate or are spent in line with public expectations, aid engagement plays an outsized role in bilateral relationships.

Beyond the obvious intended (and much debated) benefits of development assistance, a diverse and flexible aid program like China’s gives politicians and Chinese contractors a ‘go-to-place’ to voice, successfully and unsuccessfully, their latest aid wishes. Providing this platform and playing this role in the region has worked out well for the Chinese government, which is just doing what all governments do – engaging internationally to promote its own interests.  But those interests don't always benefit Pacific partners - debt distress, local business frustration, poor aid management, aid quality complaints and high-level corruption are some of the issues that have arisen from China's style of foreign aid delivery in the Pacific.

Much like Australia, China brings so much more to the table than aid. It offers up a bundle of tangible benefits to Pacific partners: a booming trade relationship; a web of direct investment flows; an abundance of visits; training and scholarships; new provincial linkages; growing police and military cooperation; training and engagement; as well as increasingly well-publicised civil society support, including an expanding regional Confucius Institute presence.

As China’s aid program increasingly rivals Australia’s in size and scope, a key issue for the government will be gaining a better understanding of the totality of China’s engagement with the region; much of the dynamic and ever-expanding China-Pacific relationship remains incredibly opaque, and hence, poorly understood. Prime Minister Turnbull's attendance at this week's China-funded Pacific Islands Forum Leaders meeting in Micronesia provides the perfect opportunity to articulate and reinforce Australia's longstanding and deep commitment to our nearest neighbours. It should also give pause to think more about the future of Australia's role in the region. 

* Danielle Cave is a contractor for the Lowy Institute on this project. Please contact if you have feedback or data to share on Chinese aid activities in the Pacific Islands.

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