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December, 201811:59 AM



Australian government clarifies Pacific fund

Australian government clarifies Pacific fund

As another Asia-Pacific Economic Cooperation (APEC) forum concluded, representatives from different nations posed many more questions than they received answers to.

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By Thomas Hudson 20.11.2018

As another Asia-Pacific Economic Cooperation (APEC) forum concluded, representatives from different nations posed many more questions than they received answers to.

Two of the main lines of talks centered around China and how its relationships with both the US and Australia will affect the future of the Pacific.

The trade war between the US and China shows no signs of slowing down, although news and rhetoric on this issue seems to be somewhat calmer over the last few weeks. That said, there is no clear intent on either side to allow the trade dispute to abate, so it remains a case of waiting for the next tranche of tariffs to kick in before many countries learn of their effects over the longer term.

At the same time, a growing conflict between Australia and China is taking place as both countries try to maintain a strong level of influence in the Pacific.

With China rapidly expanding its Belt and Road initiative (BRI) around the world, there are concerns in the West that this will allow it to command too much control over smaller islands when it hands out investments for building infrastructure and expects some sort of return.

In response, Australia announced an AU$2bn investment plan for the Pacific, and the country has now revealed the plan's details more specifically. Assistant Minister for International Development and the Pacific Anne Ruston spoke of how the investment would benefit the region.

Noting the need for clear investment in certain areas, particularly in telecoms, transport, energy, fuel and water, Ruston said: "The Pacific is where Australia can make the biggest difference in world affairs." She added: "No one is cutting the aid budget."

This budget has brought about concerns that it would have to receive funding by making cuts elsewhere. Ruston clarified that it will "consist of an AU$1.5bn loans facility funded through a new capital injection from the government and an AU$500m grants component from within the aid budget."

The relationships that Australia aims to develop further with Pacific countries will also involve working on strengthening military ties, which will "build on long-standing and enduring partnerships", according to Ruston. She added that financing will not need to come from the aid budget and will instead generate from defense funds.

At present, some issues have still not been resolved, including whether the funding for this initiative will be annual or just a one-off boost from current funding pots. With budgets yet to arrive for the middle of the financial year, this may become clearer further down the line.

Some analysts worry that by only offering some grants and loans with little boost to any area apart from infrastructure, Australia may not be competitive enough to hold off the large sway of China. However, the development banks that serve as competitors to Australian banks seem confident that this is a viable plan.

The Asian Infrastructure Investment Bank’s spokesperson, Laurel Ostfield, said that funding such as this is "additionally critical for the Pacific Islands, which are particularly susceptible to the risks of climate change." Meanwhile, the World Bank's Team Leader for Pacific Communications, Tom Perry, said that given the huge scale of investment needed in infrastructure in the region, it is unlikely to go to waste and will make a positive difference. How this funding will change the geopolitical landscape is not yet known.

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