Aid Policy and the Politics of Aid. Opportunities and Challenges of the Rise of Chinese Foreign Aid in the Pacific Island Countries

Table of Contents

Introduction

China International Aid Programme

Chinese development aid in the South Pacific

China in the Pacific Islands and the politics of aid

Chinese aid and its stakeholders

Chinese aid in the Pacific Islands: opportunities and challenges

Conclusion

Reference list

Introduction

In the last two decades, China has emerged as a leading provider of development aid assistance in developing countries in Africa, Latin America and in recent times, in the Pacific Islands. China’s quest to maintain its increasing population and continue to expand its economic growth at world stage level has exacerbated China’s engagement with resource developing countries. This increasing intensification of Chinese’s development aid programme in developing countries has been prominent towards the late 1990s, mostly driven by the China ‘go out’ strategy (Brant 2013). The ‘go out’ strategy is China’s aid model that combines both private and State-Owned Enterprises (SEOs) to venture into resource-based countries to create market-led investment through supports from the Chinese government. The overarching focus of China’s development aid is to assist other developing countries achieve their self-development objectives. The Chinese policy is framed within the context of accessibility to natural resources, such as oil, mining and gas in exchange for promoting growth in developing countries. This approach to aid seems to be changing the way development aid had been delivered. But critics of rising Chinese aid and diplomacy particularly in the Pacific Island countries are suspicious and doubtful of what Chinese motive in Oceania could be. Some scholars for instance, Henderson and Reilly (2003) unequivocally claim that Chinese intensification in Pacific countries will destabilise relationship between the United States and the Island countries, alluding to the Cold War between China and the US. Similarly, Windybank (2005) asserts that Chinese aid is given as a recipe to undermine Taiwan’s interest. However, others have argued that Chinese aid in the Pacific is commercially led and geared towards increasing aid visibility and providing alternatives for the Islanders, and not geopolitical (Wesley -Smith 2007).

This essay first examines Chinese rise and the characteristics of its international aid programmes. Next it focused on the role of development aid in the Pacific and determined whether aid has been utilised for political gains. Particularly, this essay analyses the key stakeholders representing Chinese aid and subsequently discusses the opportunities and challenges of Chinese aid to the Islanders. This essay argues that Chinese aid is commercially driven. Although it has been provided for strategic interests, it has further offered new opportunities and challenges for the Pacific countries.

China International Aid Programme

The emergence of China as a key driver of development aid in developing countries has received wider appreciation and supports amongst recipient countries’ particularly in the Pacific Islands. In part, the acknowledgements of Chinese aid in developing countries hinge on what Brant (2013, 160) highlights as Chinese ‘going out’ strategy which reflects explicitly on Chinese local development policy of helping other developing countries achieve growth through no conditional aid programmes. The Chinese ‘go out’ economic strategy integrates and encourages both the private sector and State-Owned Enterprises (SEOs) to engage in a market led development activities with developing countries (People’s Republic of China). The combination of private sector and SEO’s in the engagement and delivery of development aid in developing countries makes Chinese aid problematic to comprehend (Hameiri 2015). However, much of the problems attributed to Chinese aid is the lack of clarity in what mainly constitutes development aid, investment and trade (Breslin 2013). Significantly, Chinese international aid is said to be provided in three different forms: grants, interest-free loans and concessional loans which are tied to different development activities (People’s Republic of China 2011). For instance, Breslin (2013) documents that the grants components of the Chinese aid programme are directed towards providing social services, such as the construction of education facilities, hospitals, and technical assistance programmes; while interest-free loans further support the creation of public services in recipient’s countries.

Moreover, Chinese development aid assistance in developing countries contrary to the Organisation of Economic Coordination Development (OECD) has several layers of stakeholders that represent China’s interest overseas; from small and big enterprises to government officials (Brant 2013). Though much of this strategy is explained through the Chinese principle of a win-win relationship, it demonstrates the objectives of no interference (Economist, 2015), and further adds to the complexity of understanding who represents Chinese aid interest. However, Hayward-Jones (2013, 9) writes that while Chinese government articulates its development aid policy in terms of ‘South-South’ cooperation to promote socio, economic, political and environment interaction amongst developing countries for attaining sustainable development, the results of Chinese aid intervention are often problematic and often benefits China. Given that Chinese benefits from its aid programme this could be understood through the win-win model which has shown increasing benefits for recipient countries.

Chinese development aid in the South Pacific

Studies have shown that the Pacific Island countries excepting Australia and New Zealand are thinly populated, developmentally backward and economically fall behind. Apart from their demographic and economic characteristics, the Pacific regions constitute significant geographical sphere, endowed with natural resources and are key decision makers in international organisations, such as the United Nations (Hannesson 2008; Stringer 2006). Therefore, it is worth noting that countries in the Pacific Islands due to their poor economic conditions dependent on development aids. Although development aid programme is not new to the Pacific countries, it suffices to say that much of the aid programmes undertaken by traditional donor countries of the Organisation for Economic Corporation and Development (OECD) hitherto have not addressed the development needs of the Islanders. With the rise of China as a key player in the development aid industry in recent times, much is said to be changing within the aid sector.

Increasingly, Chinese development intervention in developing countries in Africa, Latin America and the Pacific Islands has been embraced my many developing countries governments. The rapid increase in Chinese diplomacy and development aid has been widely welcomed among emerging countries. Nevertheless, it has been met with intense resentment and suspicion among scholars, policy makers, politicians and media observers. Several scholars have argued that much of the narratives pervading Chinese development programmes in the underdeveloped countries have been depicted particularly by western politicians and media commentators alike. For instance, increasing Chinese aid in the Pacific Regions has been characterised as a strategic intervention to limit United States relations with the Pacific, Henderson and Reilly (2003); a deliberate attempt to destabilize efforts by Australia and New Zealand to restore democratic governance in Fiji, Brady (2012); emergence of ‘neo-colonial slavery’ in Papua New Guinea (Callick 2007, 1); and a strategic move to isolate Taiwan’s interest in the Pacific Islands, Windybank (2005). However, most of the western rhetoric on Chinese intervention in Oceania do not fit appropriately with Chinese foreign aid policy which is articulated through the following principles:

Unremittingly helping recipient countries build up their self-development capacity; imposing no political conditions; Adhering to equality, mutual benefit and common development and Keeping pace with the times and paying attention to reform and innovation… (People’s Republic of China 2011; http://english.gov.cn/archive/white_paper/2014/09/09/content_281474986284620.htm).

Being that China is not a member of the Organisation of Economic Corporation and Development (OECD), its approach to development aid assistance in developing countries and specifically in the Pacific Islands seems to embrace some core values of ‘the Paris Declaration’ which emphasizes recipient countries’ ‘ownership’ and ‘harmonisation’ of development aid programmes(Paris Declaration 2005). In fact, responding to Chinese increasing aid in the Pacific regions, Saunders (2006) and Wesley -Smith (2007) assert that Chinese development aid on the Island countries focuses on creating the enabling environment and new opportunities for the Islanders to make decisions on achieving their development objectives; and not to involve in geopolitical fights with traditional donors of Australia and New Zealand.

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