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Beijing exploits South Pacific islands neglect

By Judith Sloan

Canberra has been complaining about Beijing’s aid practices in the South Pacific for decades. There is one overwhelming reason Beijing’s aid in the South Pacific is so problematic. It is, and has always been, designed not primarily to foster development but to foster Chinese economic influence. On that score, it has been overwhelmingly successful, though not without its problems even for Beijing itself. However, as The Australian reports today, our own aid has also been highly problematic at times. The truth is the South Pacific presents formidable challenges to outside governments trying to do good.

Among these are widespread corruption, which makes turning aid dollars into outcomes very difficult. Another is that infrastructure must not only be delivered in a good state but locals must be fully trained and motivated, and sometimes funded, to provide long-running upkeep and maintenance. Otherwise even something that starts out life shiny and new and working can quickly turn into a white elephant. Thirdly — and sadly — without exception the South Pacific states have had very poor development records. That means it is extremely difficult to maintain First World standards of probity and delivery, but it is also extremely difficult to deliver aid in a way that blends into the local economy manageably.

Added to this is the challenge of logistics in isolated nations. One of the most effective avenues of aid is through education and training. But here is another paradox. The best-educated people in the South Pacific are naturally inclined to move to Australia or New Zealand, or further afield, in search not only of better opportunities but also of a context where they can give full expression to the training and education they have received.

On the reverse side, South Pacific societies are not refreshed or stimulated by the new ideas and energy of a stream of immigrants. Where productive immigrant communities have established a beach head, such as Chinese small traders and shopkeepers in Solomon Islands and a few other nations, they have typically become a source of resentment.

Australia has had its own problems delivering aid well. The South Pacific has gone out of fashion in Australia. The cadre of Australian policy practitioners, and commercial operators, with deep knowledge of the South Pacific, is painfully thin. And then every so often Australian policy reverses itself, sometimes going through periods of nutty political correctness in which it does not want to use Australian companies and label the aid as Australian.

There can also be political difficulties. The long years in which Canberra’s official policy was to isolate the Fijian government was almost clinically insane on Canberra’s part. This isolation served no moral purpose, harmed Fijian society, shattered Australian influence and forced the Fijians into the arms of China — as comprehensive a set of bad policy outcomes as any textbook on how not to do foreign policy could ever come up with.

The Chinese face all the same problems in the South Pacific as we do, but that doesn’t matter much to them because their interests are not remotely the same as Australia’s. For a long time Canberra complained that Beijing and Taipei engaged in an extremely unsavoury financial contest for influence in the South Pacific via their respective aid programs. The object of each was to get one or other of the South Pacific nations to switch their diplomatic recognition from one to the other. Huge amounts of aid sloshed around the Pacific. Beijing was utterly unreceptive to Canberra’s countless entreaties to reform its aid practices.

More recently we have seen an almost global effort by Beijing to transform its aid directly into financial and political influence.

The Chinese pattern is clear. There is undoubtedly some real aid and this is good for the South Pacific. However, as International Development Minister Concetta Fierravanti-Wells pointed out, much Chinese aid is in vanity projects that appeal to politicians’ egos but deliver nothing useful in terms of development. The Port Vila conference centre is an example.

The initially concessional loans that the Chinese offer to these vulnerable states with their fragile economies and minuscule revenue bases are an example of predatory subprime lending. The states cannot afford the interest. This leaves them in a poker game in which the bigger partner holds all the aces and is the house banker. Beijing can decide to take equity in the asset, it can roll over the loan, thereby continuing the state of dependency, or it can enforce the loan. Or it might seek other considerations in order to continue the loan on concessional terms. These might involve votes at the UN, or perhaps even some version of military relationships.

That Australia has allowed this situation to develop is a sign of the feebleness and incompetence of our presence in the South Pacific over the past 1½ decades. We may like to strut the global stage at forums such as Davos, but the area for which we have most responsibility, beyond our own national territory, is the South Pacific. The development challenges in the South Pacific are enormous. In many of them the state has not mastered the society, in some it has hardly influenced the society.

These states have notionally been under close Australian tutelage for decades. Their failure is also our failure.

And it is this joint failure that Beijing is exploiting so effectively.

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