Wednesday 21 Aug 2019 | 19:20 | SYDNEY
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About the project

A focus on Pacific Islands has been a central component of the Lowy Institute’s work for more than a decade. We research contemporary challenges facing the Pacific islands region in areas including geostrategic competition, sustainable economic development, governance and leadership challenges, poverty alleviation, and Australia’s relationship with Pacific countries and organisations. We also hold major conferences, workshops, dialogues and exchanges. We have produced influential work on Australia’s Regional Assistance Mission to the Solomon Islands, the 2006 Fiji Coup, normalising Australia’s bilateral relationship with Fiji, Australia’s bilateral relationship with Papua New Guinea, the future development challenges of Papua New Guinea, the economic benefits of greater labour mobility between Australia and the South Pacific, security and resilience dynamics in the Pacific, and foreign aid flows in the Pacific.

The Institute manages four major projects focusing on the Pacific:

The Pacific Research Program (PRP) is a consortium partnership between the Lowy Institute and the Australian National University’s Department of Pacific Affairs and Development Policy Centre, with the support of the Department of Foreign Affairs and Trade. The PRP is designed to be a globally pre-eminent centre of excellence for research on the Pacific. More details are available here.

The Lowy Institute Pacific Aid Map is supported by the Department of Foreign Affairs and Trade and is designed to enhance aid effectiveness in the Pacific.

The Australia-PNG Network is a project supported by the Department of Foreign Affairs and Trade, designed to foster people-to-people links between Australia and Papua New Guinea. More details are available here.

The South Pacific Fragile States Project was a project supported by the Department of Defence to produce independent research and forward looking analysis on the key drivers of instability in the South Pacific and the associated security challenges for Australia and the wider region. More details are available here.

THE MAPPING FOREIGN ASSISTANCE IN THE PACIFIC PROJECT

The Lowy Institute Pacific Aid Map is an analytical tool designed to enhance aid effectiveness in the Pacific by improving coordination, alignment, and accountability of foreign aid through enhanced transparency of aid flows. The Pacific Aid Map has collected data on close to 13,000 projects in 14 countries supplied by 62 donors from 2011 onwards. All data has been made freely available on this interactive platform, allowing users to investigate and manipulate the information in a variety of ways. The Pacific Aid Map is supported by the Department of Foreign Affairs and Trade.

The Lowy Institute Pacific Aid map is available here.

Country profiles from Pacific Islands countries can be found here.

See the Chinese Aid in the Pacific map here.

 

 

Experts

Shane McLeod
Research Fellow, Aus-PNG Network
Alexandre Dayant
Research Fellow, Pacific Islands Program
Jonathan Pryke
Director, Pacific Islands Program
Sean Dorney
Nonresident Fellow, Pacific Islands Program
Ian Kemish
Nonresident Fellow, Pacific Islands Program
Jenny Hayward-Jones
Nonresident Fellow, Pacific Islands Program
Annmaree O’Keeffe
Nonresident Fellow

Latest publications

Lowy Institute Pacific Aid Map - Country Profiles

These summary profiles of the 14 Pacific Islands countries analysed in the Lowy Institute Pacific Aid Map pull together the key findings for each country. They include the total aid spent and committed, the top donors and the total number of projects. Each profile highlights the key projects in each nation and the sectors where aid is being delivered.

Lowy Institute Pacific Aid Map

The Lowy Institute Pacific Aid Map is an analytical tool designed to enhance aid effectiveness in the Pacific by improving coordination, alignment, and accountability of foreign aid. The interactive collects data on almost 13,000 projects in 14 countries from 62 donors from 2011 onwards. This data has been made freely available on an interactive multifaceted platform, allowing users to examine and manipulate the information in a variety of ways.

Worry ahead of New Caledonia’s independence vote

Last month, a year before the deadline for the referendum on independence from France, French Prime Minister Édouard Philippe visited the semi-autonomous territory of New Caledonia.

Philippe is anxious about potential unrest. In October, a special delegation of New Caledonians expressed their concerns to the UN decolonisation committee in New York. According to them, the Noumea Accord (the territory's roadmap leading to the 2018 referendum) is not being applied correctly.

How this situation unfolds will be of significant interest to the region.

Memories of painful 'events'

New Calendonia has struggled with instability in the past, with the most notable example being the évènement, as the locals call it, in the 1980s. Despite decolonisation processes in territories around the globe, French governments succeeded in curtailing self-determination among the Kanak population for three decades until the territorial elections of 1984. That year, the influential indépendandtiste Jean-Marie Tjibaou proclaimed the creation of the sovereign state. The Kanak and Socialist National Liberation Front (FLNKS) rose up against  loyalists of the territory, leading to conflict along a distinct ethnic divide. In 1988 violence reached its peak with the deaths of 21 people in a hostage crisis in Ouéva.

This violence pushed both sides to open dialogue, which led to the signing of the Matignon-Oudinot Accords that same year. These agreements offered institutional and economic guarantees to the Kanaks and planned a ten-year development program that led to the negotiation and ratification of the Noumea Accords on 5 May 1998. The Noumea Accords, in turn, prepared for the progressive transfer of certain powers of self-determination to the locally elected government of New Caledonia. France kept the five sovereign powers (defence, foreign affairs, currency, justice, and public order) until 2018, and the organisation of a referendum for independence. The goal of this referendum (the first of a possible three from 2018 to 2022) is to vote on three topics: the transfer of all sovereign powers to New Caledonia, the admittance of 'full responsibility' international status, and incorporating nationality into citizenship.

Sources of instability

The potential for instability of a sovereign New Caledonia has three dimensions: social, political, and economic.

First, there is a social issue. At the time of the last census, New Caledonia had around 268,000 inhabitants. Kanaks made up 39%, while Europeans made up 27%. The others (populations feeling Caledonian and not affiliated with any other ethnic group proposed) represent 20% of the population, followed by smaller ethnic groupings. As a proportion of the population, the Kanaks represent the largest single ethnic group on the territory. However, when comparing the Kanaks' numbers against the total non-Kanaks, the native population is a minority. This dynamic can lead to tension.

Second, the political and legal situation of the territory is complex. The Noumea Accords generated a particular institutional landscape in New Caledonia. The French Constitution had to be modified to create the 'Transitional provisions relating to New Caledonia', resulting in the creation of a special and unique 'New Caledonian' citizenship.

This special status preserves voting rights in the referendum for long-term residents of New Caledonia. Only people with ten years' residency to 1998 and their descendants are able to participate in the referendum. This also creates a tension among the population living on the island, many of whom have arrived in the years since 1998 and expect to have a say on the territory's future sovereignty.

Finally, the fragile economy is an important source of instability in New Caledonia, a resource-rich territory with ample hydrocarbons, fish stocks and about a quarter of the world's nickel reserves. The nickel industry has always been important for the development of the territory's economy. Between 2004 and 2014, the metal's relatively high price accrued important economic benefits for New Caledonia; however, the past three years have seen prices collapse, and the industry has suffered as a consequence.

New Caledonia's economy is now in bad shape, making the territory's financial dependence on France more pronounced. The cost of public services in New Caledonia averages 350 billion CFP francs per year (AU$1.92 billion), half of which is paid for by the French central government. Various infrastructure projects have been financed by France and/or the EU to sustain New Caledonia's economy. Today, France's financial support makes up more than 15% of the territory's GDP. Without this support, it would be difficult for New Caledonia to finance its own public service and to sustain its economy. This, by itself, could contribute to anxiety on the island.

This instability is not only a worry for France, but also for the regional community.

For Australia and New Zealand, the French territory is of strategic importance. Over the past few years, China has been increasing its engagement with the region. As Australian former diplomat Denise Fisher wrote about New Caledonia, 'at a time when Chinese engagement … can potentially alter our seaways and immediate neighbourhood, a stable ally at the western end of the South Pacific is an asset'.

What can be done

It is in the region's best interest to keep New Caledonia stable. But what can be done?

On a societal level, both Kanaks and non-Kanaks need to find common ground moving forward. Although the yes or no nature of the referendum does not leave much space for consensus, both camps need to form a shared vision of how the territory can unify post-referendum.

On the political front, the French Prime Minister mentioned this month that 'everything possible will be done to identify everyone who is not yet registered on the electoral lists but who is qualified to be'. Having a clear electoral roll would simplify the election process.

On the economy, few solutions have been offered over the past few years. Philippe Gomès, leader of the pro-France group, suggests the creation of a 'fund for the future generations' that would be fed by revenues from the nickel industry. This would allow the country to create sufficient savings for the generations to come, and is a model used in other Pacific island countries, such as Tuvalu and Timor-Leste. But this would not help immediately, and would be challenging because the nickel industry is suffering currently. The economy also needs to diversify, with the government investing more in other economic activity, such as tourism, agriculture and fisheries. It could also look to explore opportunities in its immediate waters, rich in cobalt, phosphate and other hydrocarbons.

At the moment, the situation in New Caledonia should be watched closely by its neighbours. According to a recent poll, New Caledonians are likely to vote to remain a part of France. However, there is still one year to go before the referendum. No doubt Canberra, Paris and the region in general will be paying close attention.

The bad – and good – of China’s aid in the Pacific

The Pacific region is making headlines across Australia after Pacific and International Development Minister Concetta Fierravanti-Wells harshly criticised Chinese aid in the region. 'Useless' is how Fierravanti-Wells has described Chinese aid projects, leading countries to take on debt they can't afford. While her concerns are legitimate, her blunt delivery hasn't been constructive and has led to some considerable political and diplomatic fallout.

So what's the real story? Is Chinese aid in the Pacific useless?

The answer is not so simple. China's aid program is so opaque it is very difficult to understand exactly what it is doing. China does not conform to the sophisticated reporting and accountability mechanisms that traditional Western donors have developed over decades of aid delivery. According to some estimates, China announced more than US$350 billion in aid between 2000 and 2014 under a shroud of secrecy, leading to considerable anxiety about where, why and how Chinese aid is given.

This anxiety extends to the Pacific, where since 2006 China has rapidly expanded both its commercial ties and aid program. The Lowy Institute has invested considerable time to better understand China's engagement. Our map of Chinese aid in the Pacific shows projects committed from 2006 to the middle of 2016. By scouring budget documents from countries across the Pacific, Chinese government websites, secondary sources such as conventional and social media, and conducting numerous interviews, we have compiled the most comprehensive picture of China's involvement in the region. It is not perfect, but it identifies and quantifies Chinese aid better than any other source.

Our research shows Chinese aid in the Pacific has grown substantially, with China committing more than US$1.7 billion in aid to eight Pacific Island countries (including Timor-Leste). To put this into context, total traditional aid to these countries over the same period was over US$9 billion, with aid from Australia making up almost two-thirds this amount.

An important distinction must be drawn between Chinese projects and traditional ones. China typically engages in large infrastructure projects by providing low interest, or 'concessional', loans that eventually have to be repaid. There is often scant information beyond an announcement, with no detail on the terms of these loans or repayment schedule. Australia and other traditional donors typically provide one-way grants that do not need to be paid back and engage in more complex (albeit far from perfect) forms of assistance across multiple sectors, from humanitarian assistance to governance support.

To illustrate this point, while we have identified 216 Chinese aid projects in the Pacific from 2006, there have been more than 5000 projects carried out by traditional donors since only 2011. While Chinese numbers may appear large, it involves a concentration into select large projects. Because of this distinction, comparing Chinese aid to Australia's is like comparing apples and oranges. China has emerged as a significant donor, yet is it clearly still not the biggest player in the Pacific.

Understanding the quantum of Chinese aid is only the starting point. The greater challenge is understanding quality, the point that has landed Fierravanti-Wells in strife. Such judgments are not black and white, and ultimately projects have to be assessed on a case-by-case basis. The best research on this, looking at the experience of four countries in the region, has found that effectiveness of China's aid to be mixed; projects in Samoa have largely led to positive outcomes, while the experience in Tonga and Vanuatu has been less positive.

Importantly, the authors find that the quality of Chinese aid projects are 'dependent in large part on the actions of Pacific Island governments'. This shouldn't come as a surprise. China is not forcing aid on these countries; the Pacific governments have to tell China what they want and manage the projects to a standard that ensures China delivers. With these findings in mind, a criticism of Chinese aid is also an implicit criticism of the governments in the region that agreed to the projects in the first place.

The point Fierravanti-Wells makes about debt distress is a fair one. The International Monetary Fund has noted that Tonga, Samoa and Vanuatu all face considerable debt repayment pressures, and all have significant debt to China. Xi Jinping has even acknowledged the debt burden in the past, promising forgiveness that has yet to eventuate. There are also cautionary tales elsewhere in the world of China taking advantage of debt-distressed nations. Considering the portfolio of loans in Pacific countries (think government buildings and conference facilities, rather than critical infrastructure projects such as deep-sea ports or airports), this seems less of a problem, though certainly worth keeping a close eye on. But again, much of this responsibility must rest with Pacific governments. Australia can't criticise China without criticising decision-makers in the Pacific as well.

Given this messy context, the statements by Fierravanti-Wells, while not without basis, have not been constructive. Attacking the new kid on the block is the easy way out, and Australia is a far from perfect player in the region. The government should instead be working harder to encourage the role of Chinese aid in the Pacific, acknowledging it as an important complement to Australia's aid. China's continuing attention on the region should also be a catalyst for Australians to take a hard look at themselves and ask how they can do more in the immediate region and work with all actors towards a more prosperous Pacific.

Pacific island links: Chinese aid, the Panguna mine, Kato Ottio and more

By Euan Moyle, an intern with the Lowy Institute's Pacific Islands Program.

  • The Minister for International Development Concetta Fierravanti-Wells has accused China of providing unfair loans to Pacific nations and building 'white elephants' to grow influence in the region.
     
  • A volcano on Papua New Guniea's Kadovar Island has erupted after lying dormant for at least 300 years, forcing 700 people to evacuate and raising concerns of a possible tsunami if the eruption escalates. 
     
  • Still in PNG, Chief Justice Sir Salamo Injia was attacked and injured in Enga Province in what is believed to be violence related to sorcery.
     
  • Tongan King Tupou VI has officially reappointed 'Akilisi Pohiva as Prime Minister, after the King unexpectedly dissolved Parliament and called a snap election in late 2017, which Pohiva's Democratic Party went on to win.
     
  • Attempts by Bougainville Copper Limited to reopen the Panguna copper mine in Bougainville, the source of the decade-long conflict on the island in the 1990s, have been shelved indefinitely after a vote by landowners.
     
  • ABC's Pacific Beat reflected on some of the successes, comebacks and controversies that shaped the emerging music scene in the Pacific in 2017.
     
  • Stephen Howes and Sachini Muller look at the rapid growth of Australia's Seasonal Worker Program, which is attracting increased interest from Pacific Islanders.
     
  • PNG Kumuls rugby league player Kato Ottio collapsed and died at training in Port Moresby earlier this week at the age of 23, sending the rugby league community into mourning:


What next for Papua New Guinea?

It has been a tumultuous year for Australia's nearest neighbour.

The protracted and controversial elections in Papua New Guinea took up most of 2017, with Peter O'Neill winning a second term and cementing his position as the most formidable politician of his generation. The government announced an ambitious 100-day plan of reform to move the country in a more positive direction. The plan came to an end at the weekend, and while progress has been made, reform looks to have stalled. Last week's budget brought more bad news, showing the challenges of attempting a course correction given the government's stark fiscal position. With the cost of hosting the APEC leaders' summit next year only adding to tightening fiscal pressures, the scope for much-needed reform looks limited.

Compounding the pressure is the difficulty of making an objective assessment of where PNG stands and identifying the most pressing priorities. Quality data is scarce and incomplete, trends are difficult to establish and validate, and prognostications about PNG's future tend to be dogmatic and politicised. The Lowy Institute, through a new series of papers, aims to help fill in some of these gaps by assessing the contemporary state of PNG, and where it might go in the future. We have brought together experts from across their respected fields, drawing on the best available evidence, to assess the state of various parts of PNG.

The series begins with Bal Kama assessing local politics, a hard task in a year of such profound political upheaval. Kama argues that the country's recent political stability has come at the cost of weakening the legislative authority of the parliament. This has been exacerbated by the government's moves to control critical electoral funding through the District Service Improvement Program and Provincial Service Improvement Program, thereby controlling MPs' behaviour. While the legal system remains robust, cracks are appearing as it suffers under the strain of one of the most litigious societies in the world. Kama foresees growing political dysfunction, exacerbated by a marginalisation of the traditional bureaucracy. The results of the 2017 election illustrate an increasing risk of regional factionalisation among the political elite that could further complicate a messy process of decentralisation.

Paul Barker and I discuss the bumpy road of progress in PNG society. We show that on many indicators the country's rapid population growth is outpacing development progress, and service delivery is struggling to keep up. Growing urbanisation is increasing the burden on service providers. More than 40% of the population is under the age of 14 and soon to enter an already underemployed workforce. Women are severely marginalised. The small formal sector is growing, but employment needs are not being met by an underskilled domestic workforce. Without significant investment and smart policy implementation focused on developing the human capital of PNG, future generations will lack opportunity and be further marginalised. The country has some policies and legislation in place to turn things around, but resources and implementation have been lacking.

Sinclair Dinnen discusses internal security trends and prospects, outlining the prevalence of crime and interpersonal violence, corruption, illegal firearms, resource-poaching and transnational crime. While the drivers of these issues are complex and multidimensional, they are exacerbated by the neglect and politicisation of the PNG police force. Ineffective public policing and widespread insecurity provide the context for the rapid growth of the private security sector, which now outnumbers police three to one. The expansion of private security forces threatens to further undermine investment in public security, but may prompt the government to engage in security governance in a more holistic way.

A collection of experts, led by David Osborne, examine the current state of PNG's economy. Their paper provides an assessment of macroeconomic stability and of fiscal policy and debt. On the former, the authors chart the deterioration of PNG's monetary situation and argue for greater exchange rate flexibility to restore equilibrium and investor confidence. On fiscal policy and debt, the authors argue that revenue and expenditure volatility combined with revenue leakage has been a critical destabiliser for effective planning and expenditure. The chances of debt distress are currently low, but of growing concern.

Craig Lawrence provides an overview of the state of infrastructure, focusing on telecommunications, transport, energy, and urban water. He argues that the physical stock of infrastructure assets in PNG is insufficient to deliver the economic and social services needed to drive faster economic growth and improve human development. Effective national infrastructure planning and funding and the role of the Independent Consumer and Competition Commission will be critical for infrastructure improvement in the years ahead.

Finally, Jenny Hayward-Jones discusses the changing nature of geopolitics in PNG. She argues that geopolitics in the Pacific are typically benign, but this is beginning to change with the emergence of China as a growing power in the region. Meanwhile, the government in Port Moresby is financially constrained and focused on domestic challenges, and its ability to manage a range of existing and foreign interests is very limited. The APEC leaders' summit in 2018 provides an opportunity to market PNG's economic potential, but could damage its international reputation if not managed effectively. Australia will assist with this, but will need to work harder to restore and maintain its legitimacy as PNG's closest partner.

I round out the series attempting to interpret what this all means for PNG's future, and what some future scenarios might look like. Accepting that this process is about as reliable as staring into a crystal ball, I outline three potential scenarios for the country: 'gradual improvement', 'muddling through', and 'accelerated decline'. Given current trends along with growing societal and economic pressures, the most likely scenario for PNG is a continued muddling through, or slow muddling down, in the immediate to medium term. Should demographic change and resource sector revenue volatility stabilise, together with a refocusing of investment on the development of domestic human capital, the long-term prospects for the country look more promising.

The Lowy Institute has a deep and long-standing commitment to our nearest neighbour, and we hope that this body of work will add to the discussion among PNG experts and policymakers, and contribute to the foundation of objective assessment from which progressive reforms can be drawn.

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