We [Australia] have a robust policy framework governing our approaches to China … It is partly defensive, yes, because China’s action requires it. But it is also proactive and open to a possible model of beneficial co-existence.
— Frances Adamson, Secretary of the Australian Department of Foreign Affairs and Trade, 2021
The United States, by its own admission, has paid insufficient attention to the Pacific Islands region in the last few decades. The Obama administration’s pivot to the Asia-Pacific, announced in November 2011 and presented to Pacific Islands leaders in 2012 by then US Secretary of State Hillary Clinton, had little impact. The United States appeared on track to reduce its financial commitments to Compact of Free Association (COFA) states — the Federated States of Micronesia, the Republic of Palau, and the Republic of the Marshall Islands — until China’s rising influence in the region triggered a 2023 promise of US$7.1 billion over 20 years, trebling COFA offerings.
Development funding and promises by traditional partners have increased, but coordinated engagement has fallen short. At the 2018 APEC leaders’ meeting in Port Moresby, the United States, with Australia, Japan, and New Zealand, committed to assist with supplying electricity to 70 per cent of PNG’s population by 2030, aiming to show Western resolve in delivering results together, and countering China. At the time, it was a rare display of multi-donor cooperation, but the rushed announcement led to project design and coordination flaws, leaving the institutionally weak PNG Power to facilitate the complex project and Australia to do the heavy lifting.
As Chinese influence grew, the United States pursued more collaboration with PICs and with likeminded partners, but delivering has been difficult. The 2020 Pacific Pledge committed the United States to increase its development partnerships in the region. Early in the Trump administration, the National Security Council created a position focused on Australia, New Zealand, and the Pacific (a role formerly folded into East Asia) to boost performance. The Biden administration penned the first-ever Pacific Partnership Strategy to guide engagement and “coordinate with allies and partners — as well as with the Pacific Islands — to avoid redundancy and best meet the needs of the Pacific Islands”.
Development funding and promises by traditional partners have increased, but coordinated engagement has fallen short.
A US–PIC summit convened by Washington in 2022 was backed by US$810 million in new funding over ten years, mostly targeting regional initiatives such as maritime security and climate resilience. A further commitment of US$200 million was made at a 2023 summit, also focusing on regional engagement and strengthening regional institutions dealing with Pacific priority areas of resilience, disaster response, maritime security, and human development. All were positive initiatives but securing resources and supportive institutional arrangements has been slow. Congressional authorisations and appropriations are still awaiting action.
Delivering on financial commitments is critical, but there are other untapped opportunities. For example, the technical expertise of the United States in artificial intelligence and digital technology opens possibilities in maritime security to improve surveillance of valuable and vast ocean spaces. Western markets and education sectors are also attractive to PICs but remain hard to access. And the Partners in the Blue Pacific initiative has more untapped potential, as discussed later.
Australia has faced accusations of regional neglect, but it invests more than any other donor to the Pacific Islands, including in regional institutions. In 2016, largely in response to record high levels of Chinese aid and growing influence, then Australian Prime Minister Malcolm Turnbull announced a “step change” in regional engagement to show long-term and enduring commitment and to “sharpen regional approaches”. In 2018, then Prime Minister Scott Morrison unveiled the Pacific Step-up initiative, which spanned security and development, including regional investments in security via the new Australia Pacific Security College and the Pacific Fusion Centre, and new funding for disaster resilience and digital connectivity.
In a further move to address the huge infrastructure deficit in the region and offer an alternative to Chinese infrastructure loans, Australia established the Australian Infrastructure Financing Facility for the Pacific (AIFFP) in 2019. This regional fund has AU$3 billion for infrastructure lending and another AU$1 billion for grants, and supports airports, sea cables, roads, ports, and renewable energy projects — about AU$1.2 billion has been committed across the Pacific. Australia is now the leading bilateral development partner for infrastructure investments in the region. The AIFFP provides an alternative to Chinese lending and sets regional standards for local procurement and accountability, but adds another financial mechanism to an already complex, crowded, and bureaucratic system.
The recently announced Australia–Tuvalu Falepili Union treaty signalled a shift in Australian regional engagement.
Australia has continued to increase funding and engagement in the region. Canberra announced an additional AU$900 million over four years (2022–26) in October 2022, and the 2023 May budget committed AU$1.9 billion to boost Pacific engagement, with AU$1.4 billion of that to enhance Pacific security. Initiatives remain largely bilateral, but there are increasing commitments to multilateral action and regional institution reform to secure efficiencies and shape donor engagement. For example, recognising the value of regional cohesion and shared norms, Australia introduced the Pacific Quality Infrastructure Principles at the 2023 Pacific Islands Forum Economic Ministers’ Meeting. The aim is to raise the quality and sustainability of regional investment, including by China and other donors.
The recently announced Australia–Tuvalu Falepili Union treaty signalled a shift in Australian regional engagement. The treaty creates a “special human mobility pathway” for up to 280 citizens annually from Tuvalu to live, work, and study in Australia. It also provides security assistance to Tuvalu in response to natural disasters, public health emergencies, and military aggression. The catch is that Tuvalu must consult Australia on any security or defence-related engagement with other states, potentially creating a hurdle for future Chinese engagement. With an election due in early 2024, the Union and its implications for sovereignty will be publicly debated.
Similarly, the 2023 Australia–Papua New Guinea Bilateral Security Agreement and the Papua New Guinea–United States Defence Cooperation Agreement also create stronger security bonds. PNG Prime Minister James Marape has declared a clear preference for traditional partners to help provide security, but is keeping the trade and investment welcome mat out for China. Geopolitical contestation will persist and need management to safeguard governance, sovereignty, and development prospects.
THE COSTS OF GEOPOLITICAL COMPETITION
Despite some of the highest levels of per capita aid globally, PICs are off track to achieve most Sustainable Development Goals, with a recent report noting “increasing vulnerabilities, deepening inequalities, and limited access to infrastructure and basic services”. The ADB estimates the region has US$2.8 billion a year in unmet investment needs out to 2030, and at least an additional US$300 million per year is required for climate mitigation and adaptation. Development partners are needed to help lift performance.
Geopolitical competition has led to record high development aid and loans to PICs (Figure 5). In some cases, this aid boosts critical infrastructure and services, but where accountability and transparency are weak, it can serve narrow political interests above development goals. Increasingly, PICs are under debt distress and need more access to grants and highly concessional loans that address their vulnerabilities. Yet grants to the Pacific Islands are declining on a per capita basis.
While there are many donors, some play outsized roles and shape development engagement. Australia leads development assistance in the region, while Japan, the United States, China, and New Zealand are among the top bilateral donors. Most aid is given bilaterally and not well coordinated regionally, though among likeminded partners there is more cooperation in areas such as infrastructure and telecommunications, where reaching scale and meeting high costs necessitates collaboration. Regionwide, MDBs are some of the few entities that attract participation from all key donor countries and streamline aid processes.
Managed well, multilateral platforms provide an opportunity for strategic dialogues among financers and recipients, and a means to raise standards of sustainability and accountability, but quality outcomes require robust systems to address concerns about value-for-money, recognition of contributions, and control over processes and outcomes. Some multilateral contracts have failed to deliver quality projects, or failed to advance local development and good governance.
Regardless of bilateral and regional capacity-building and support, security and development gaps will occur, creating opportunities for others.
Pacific regional entities such as the Pacific Islands Forum (PIF) and its associated agencies also play an important role as centres for coordination, information sharing, and norm setting. They benefit from traditional partner support to strengthen capacity, governance frameworks, and engagement approaches. The increased backing of the Pacific Regional Infrastructure Facility (PRIF) is an example of leveraging a regional agency to better align with Pacific priorities, as well as boost the capacity of PICs to strengthen their building codes, better manage projects, and implement National Infrastructure Investment Plans.
The downside of regional institutional arrangements is that they are rarely binding. In addition, regional agencies often lack resourcing even though they are uniquely placed to improve professional capacity and networks across the region, particularly for transnational issues. While engagement is time intensive and involves compromise, there are few other ways to align regional actions with regional policy, and build broad-based Pacific-wide values. For example, the Biketawa Declaration strengthens regional security cooperation and framing, and promotes norms such as the “Pacific family first”, which underpins traditional partners as the “security partner[s] of choice” for reasons of familiarity, interoperability, and continuity.
Yet, regardless of bilateral and regional capacity-building and support, security and development gaps will occur, creating opportunities for others. More partner funding alone will not solve the problem. What is needed is innovative engagement and partnerships that provide resources as well as strengthen regional and national institutions to deliver services and accountable governance, and sustain them over time.
