Source: Islands Business
If you have a project in mind, just ask Beijing for yuan. You stand a better chance of a generous handout or soft loan from China than any other donor.
As government leaders begin preparing for the August meeting of the Pacific Islands Forum in the Cook Islands, China is certain to take a higher platform than any other issue.
China—which has been the envy of the western world in recent years with a powerhouse economy and unprecedented growth surpassing even Europe and the United States—has carved a reputation in the islands region with multi-million dollar development aid to needy economies.
Traditional donors like Australia and New Zealand could soon be overtaken by China as the leading contributor of aid to the islands economies.
Last month, China became a focal discussion point in Sydney as investor concerns were aired at how swiftly the Asian giant was making inroads into the Pacific Islands Forum region.
China in PNG
“We’re really just at the beginning of the game in terms of investment†by China in PNG,†a China specialist at the University of Sydney, Graeme Smith told investors last month.
He noted that in the past five years to the end of 2010, Chinese direct foreign investment in PNG had quadrupled to US$323.3 million.
Smith was speaking on the sidelines of a seminar on the future of PNG organized by the conservative think-tank, the Menzies Research Centre in Sydney.
He said that while that amount was higher than Chinese capital investment in either New Zealand or Fiji that year, it was still only a fraction of the US$9.87 billion invested in Australia in 2010.
In PNG, China’s largest project thus far is the 85 percent-owned US$1.5 billion Ramu nickel and cobalt mine and treatment plant that is now raising concerns in the Madang province, PNG’s northern region.
Although Smith seems to have down played fears that growing Chinese investment in PNG was part of a broader strategy by the world’s second-largest economy to extend its political and economic influence in the Pacific, it was clear the essence of the seminar was exactly that.
“This idea that somehow the Chinese state is supporting all forms of Chinese investment is very much not the case,†Smith said.
China poured nearly $150 million for the construction of 10 tuna canneries in PNG over the last couple of years as part of its broader plan to assist the Pacific islands’ primary industries.
China in Samoa
The region’s oldest independent nation, Samoa has also identified China as a close friend than any other in recent times.
Prime Minister Tuilaepa Sailele Malielegaoi took a swipe at Washington, which administers the neighboring American Samoa, at Samoa’s 50th anniversary celebrations in Auckland last month.
He said many of the largest buildings in Apia were built by Chinese corporations and funded with soft loans from China. “We brought the Chinese in. We asked them to come and fill in the gap that New Zealand and Australia cannot do for us,†said Tuilaepa.
He said unlike the US, Australia and New Zealand, China was more lenient with loans and development aids.
Tuilaepa argued that Washington was least interested in the independent nations of the Pacific primarily because it was too preoccupied with its own territories in the region.
“You [the US] are only interested in areas where fighting, wars are fought. And I know why. So it will help your industries, your war machines. But you’re not interested in the Pacific because it is peaceful,†said Tuilaepa, leader for 14 years of the influential Human Rights Protection Party—which has dominated politics in Samoa for nearly 30 years.
China in Tonga
Tonga was also singing China praise in June as a new Memorandum of Understanding was being formalized for the purchase of two new planes from Beijing.
The Chinese government deal worth TOP$25 million (US$9 million) will pave the way for Nuku’alofa to receive further aid for a new company to operate the planes, maintain the aircraft and provide training courses for Tongan crew members and pilots.
Signed between Tongan Prime Minister, Lord Tu’ivakano and a delegate from the Chinese civil aviation, the agreement binds the two countries for three years. Tongan deputy Prime Minister, Samiu Vaipulu, also a signatory to the deal has pointed out that China would pay one third of the total cost of the plane for the national carrier. China has already provided nearly $50 million for the construction of major roads in Tonga.
China in Fiji
Being the first country amongst the Pacific islands to formalize diplomatic ties with China in 1975, Fiji is a prime destination for Chinese aid.
From language schools to military, from hospitals and doctors to village projects, China has been a regular source for development assistance in Fiji.
Even when the rest of the donor countries and agencies were deserting Fiji under Prime Minister Frank Bainimarama’s military government, China stood by Suva.
Last month, a close ally of China and a country which is seeking diplomatic ties with the Pacific islands, North Korea sent a delegation to Suva. It would be North Korea’s first step towards gaining recognition in the Pacific Islands Forum region’s most influential member, Fiji—also home to the island region’s second largest economy—behind PNG.
The visit comes after Fiji was turned away from the Japan-Pacific Islands leaders’ summit in June by Japan, which ruled North Korea for years. North Korea is a member of the Non Aligned Movement, a global bloc of 120 nations of which China and Fiji are members.
China in Kiribati
In recent years, Tarawa has also benefitted from China’s huge assistance. Chinese aid has paid for the building of the main infrastructure in Kiribati, although the $8 million stadium was built by Taiwan.
Kiribati is also home to doctors and specialist workers from China, paid entirely by Beijing. The Cook Islands, Solomons and Vanuatu—which has its own diplomatic war brewing with Australia over the expulsion of its defense personnel from Port Vila—have also been large recipients of Chinese aid.
Aid tops $700 million
A report by the Sydney-based Lowy Institute estimates that China has poured over $A700 million into the Pacific islands with PNG claiming more than half of it.
“It is still too early to tell whether this jump in aid to PNG represents a shift in Chinese policy towards a more interest-based approach or is it just an anomaly?†the report said.
It is said that China has tended over the previous five years to select one or two countries each year to give the bulk of its aid to or soft loans to the region for long-term infrastructure projects. Its $156 million pledge to PNG in 2009 compared with $13 million in 2008, $13.7 million in 2007, $18 million in 2006 and $4 million in 2005.
In the Cook Islands, China is investing around $27 million to upgrade its water supplies and road.
Debt write-off
As Tuilaepa pointed out that while there is an obligation for the debt-ridden islands governments to repay some of the Chinese soft loans, Beijing has been considerate in writing off some loans.
“There is anecdotal evidence that some islands countries are taking on Chinese loans with the expectation that China will forgive the debts after an appropriate time has lapsed and if requested,†said the Lowy report.
“While there is evidence of China’s forgiving some loans (in 2006, for example, China extinguished US$11.5 million in debt owed by Samoa), one multi-national donor knew of two cases where governments had asked for a loan to be forgiven and this request was turned down by China, with the explanation that the time was not appropriate (leaving open the prospect of future forgiveness).â€
China now has formal and full-fledged diplomatic relations with eight islands countries but it seems clear that Beijing will not stop there. Behind Australia and the United States, Beijing is clearly the next biggest donor.