IDYP: Battle for the Pacific
By David Chaur, IDYP Business Engagement Co-Chair
There’s a storm brewing in the Pacific. After years of being on the backburner, the Pacific is now getting a lot of love and attention from its neighbours, New Zealand and Australia, a familiar donor in Taiwan, but more recently, from China.
New Zealand led the charge with the Pacific Strategy and Reset in 2018, committing $714.2m. In the announcement, the Foreign Minister asked for Australia’s support, and Australia duly responded, committing to an increase in funding to A$3b. The importance of the Pacific to Australia was reflected in the recently elected Prime Minister making the Solomon Islands the first official visit.
The introduction of China’s interest in the Pacific may have triggered the newfound activity. China is expressing it’s interest in the Pacific through its One Belt, One Road initiative, funding the development of infrastructure. The initiative has seen mixed results, with controversy surrounding the ability for recipient nations to repay loans provided for construction projects. The most extreme example is Hambantota Port in Sri Lanka. In this example, the forecasted revenue and justification of investing in the project wasn’t realised, leaving the government unable to repay the loan. In response the Chinese took a commanding share of the port’s ownership together with 15,000 acres of surrounding land for 99 years.
China is also causing a divide amongst the Pacific nations. In the Solomon Islands the recently elected Prime Minister is under pressure from his MPs to change from supporting Taiwan to favouring China with the threat of facing a motion of no confidence. The Solomon Islands have historically been close allies with Taiwan, who provide aid in the form of cash with little supervision of its spend. Both Australia and New Zealand have stated they are placing no pressure on the decision but have contributed their thoughts on the issue. In particular, New Zealand highlighted China’s humanitarian track record, calling out the events of Tiananmen Square on its 30 year anniversary. Between Pacific nations, the China versus Taiwan divide is best reflected in 7 recognising China, while 6 recognise Taiwan.
In general, the increase in focus and effort towards the Pacific is a positive change. Each donor country is increasing the amount of funding committed and this will lead to development in the region. Pacific nations are in a challenging position of having to manage the agendas of multiple donors. Each source of foreign aid comes with a different approach to its governance and administration. Some is given with a high level of freedom to spend as desired, some are tightly governed, and others are unknown quantities. As the saying goes, there’s no such a thing as a free lunch. So what is best for the Pacific?