Development aid - help or hindrance to Pacific countries?

Analysis - There are suggestions that Chinese aid to some Pacific nations is making their debt situation worse.

Over the past two decades China has poured billions of dollars of aid in the form of grants and soft-term loans to nations such as Tonga, Samoa, Fiji, Vanuatu, Kiribati and Solomon Islands.

According to the Lowy Institute the total aid provided to Pacific nations in 2019 was $US2.44 billion.

In 2022, Tonga's budget national statement recorded an external debt of $US195m or 36 percent of its gross domestic product, of which two-thirds is owed to China's Export-Import Bank.

Carol Li, a fellow at Hawaii's Pacific Forum - a Honolulu-based foreign policy research institute - told RNZ Pacific that countries had accrued debt after taking on Chinese development projects that did not produce returns on investments.

"Countries like Tonga have a lot of debt that they might never be able to repay," Li said.

"China provides development aid at a very low cost, but at the same time I think that many of these projects are short-term solutions that don't speak to what the local population wants.

"It affects their economy such as their ability to pay for services that they might need because they signed on to these types of projects that are not returning on investments like they're supposed to.

"It is a huge concern. I think when countries provide aid to the Pacific countries, they should focus on how to build resilient systems for them to be secure so eventually one day they won't need aid."

Pacific Island nations have largely welcomed Chinese assistance projects, and some have been beneficial.

Examples include a scholarship programme that has provided hundreds of young Pacific Islanders with tuition-free studies at universities throughout China, and the renovations of critical infrastructure such as roads and schools.

This month, a People's Liberation Army hospital vessel The Peace Ark concluded a tour of Kiribati, Fiji and Tonga where it provided free medical treatment. The ship has treated thousands of Tongans since 2014.

Last month, Solomon Islands Prime Minister Manasseh Sogavare visited Beijing where he met with Chinese Premier Li Qiang and signed a number of trade and cooperation agreements including training support to the Solomon Islands' police.

"When we won the bid [for the Pacific Games], no other nations believed in us. We were struggling, and China stood by our side and assisted us," Sogavare told China's state-owned news agency Xinhua.

Loans as leverage

However, China is being accused of using its wealth to exploit Pacific islands by using development aid as currency to win votes in the United Nations.

"China has been very effective in small states that each have a UN vote and with some incentives," Anja Manuel, a former US Diplomat told RNZ Pacific.

"Some would call them bribes while others are totally legitimate - but using those to bring small states over to their side."

The generous loans are seen by some as a way of throwing developing nations into insurmountable debt and using the liability as leverage to get economic and political influence.

"China uses so-called 'debt diplomacy' to expand its influence," said former US Vice President Mike Pence in 2018.

In March, US Treasury Secretary Janet Yellen reiterated such concerns.

"I am very very concerned about some of the activities that China engages in, globally, engaging in countries in ways that leave them trapped in debt and don't promote economic development," she was quoted as saying by Reuters.

How China sees its role

Rob York, programme director for regional affairs at the Pacific Forum, said the United States has had to reconsider its influence in areas that were heavily influenced by China.

China viewed itself as the natural leader in the Asia-Pacific region, he said.

"From a very long time the philosophy of the PRC [People's Republic of China] is hide your strength and bide your time," York said.

"These developments here (Pacific) and in southern Africa, show that philosophy is coming to an end, and the United States is learning to compete in areas that it has not being paying attention to," he said.

"That means re-learning what the priorities are in the Pacific, which means to say that you need to help us not because of who we are but because of what you are dealing with… climate change for instance.

"In a vacuum, China pursuing relations with Pacific island states is acceptable but we don't live in a vacuum, we live in an international political climate where China has caused other countries to go into debt with it."

In recent years, tensions have ramped up in eastern Asia and the Pacific - over Taiwan, maritime disputes in the South China Sea, and trade wars.

"The US has outlined its own strategy towards China in sort of a three part saying, which is invest, align and compete," Camille Dawson, a US Department of State Diplomat recently told RNZ Pacific.

Over the last year, there's been heavy media speculation that recent moves by the Biden Administration, such as the $US810m pledge towards developing Pacific Island nations, the establishment of new embassies in the Pacific, and the signing of a defence agreement with Papua New Guinea, are strategic to countering China's influence.

"Its location and its need for assistance, particularly to help it deal with the impact of climate change, has triggered a battle for influence - with China keen on playing a prominent role," a BBC article stated.