Australian aid's new focus: Infrastructure finance, security, sports

CANBERRA — Australian Prime Minister Scott Morrison this month announced his plans to strengthen Australia’s engagement in the Pacific — including a 2 billion Australian dollar ($1.46 billion) Australian Infrastructure Financing Facility for the Pacific, stronger military and policing engagement, a focus on sports for development, and expanded Australian broadcasting in Pacific nations. Internationally, the move was seen as a play to take on Chinese financing within the region.

In a speech addressing the Pacific engagement plans, Morrison said funding would come from within the existing budget: “We have undertaken a rigorous prioritization of our foreign policy and aid and defense and police strategies and plans to make the Pacific a priority.”

The announcement coincided with an interview by the prime minister in Australian newspaper the Daily Telegraph, with a statement that the aid budget would not increase under his government. This led to questions on whether there would be cuts to other areas of the Australian aid program.

Expanding on the announcement

According to assistant minister for international development and the Pacific, Anne Ruston: “The Pacific is where Australia can make the biggest difference in world affairs. The announcements are the result of ongoing dialogue with regional leaders.”

On financing the Australian Infrastructure Financing Facility, Ruston said it will be grant funding combined with loans to support the development of high-priority infrastructures, such as telecommunications, energy, transport, water, and other priority sectors.

“The Australian Infrastructure Financing Facility for the Pacific will consist of a AU$1.5 billion loans facility, funded through a new capital injection from government, and a AU$500 million grants component, from within the aid budget,” Ruston said. “No one is cutting the aid budget.”

The new security initiatives aim to “build on long-standing and enduring partnerships between Australia and Pacific states,” Ruston said. Those will be funded from existing defense budget allocations, separate from official development assistance.

Implementing the changes

Though Ruston insisted the aid budget would not be cut, it was not confirmed in the infrastructure funding — particularly the AU$500 million in grants to come from within the aid program — was an annual figure or to be spread across multiple years. In the Pacific, infrastructure and trade combined is expected to account for 21.7 percent of the AU$1.3 billion to be directed to the Pacific for financial year 2018-19. That equals AU$282.1 million, and would mean that if AU$500 million is an annual grant sum, there may need to be expenditure shifts from other focus sectors or regions.

Clarification may come in the midyear economic and fiscal outlook budget, to be released later this year, with detailed decisions on the profile and composition of reprioritization.

What is the view of development banks?

For some, there is concern that the new announcement will focus too much on infrastructure and loans in a region that currently has a number of choices for infrastructure financing. But those development banks that may be considered competition are supportive of the announcement.

Laurel Ostfield, spokesperson for the Asian Infrastructure Investment Bank, said additional funding to support the $26 trillion funding needs for infrastructure in Asia by 2030 was appreciated: “The infrastructure needs throughout Asia are large, and this is additionally critical for the Pacific Islands, which are particularly susceptible to the risks of climate change.”

Carmela Locsin, director general of the Pacific department at the Asian Development Bank, echoed these statements: “ADB welcomes Australia’s announcement to increase financing for Pacific countries’ infrastructure needs, and looks forward to cooperating with Australia.”

Tom Perry, team leader for Pacific communications at the World Bank, said: “Additional support and investment in critical infrastructure will benefit the Pacific, particularly given the scale of need for infrastructure.”

And all said they were keen to work with Australia in expanding existing partnerships to deliver better development outcomes to the Pacific.

“We look forward to discussions with the Australian government on how best we can work together to share knowledge and resources that deliver the most effective outcomes for the Pacific,” Perry said.

A spokesperson for New Zealand’s Ministry of Foreign Affairs and Trade said the neighboring country welcomed the announcement too: “Supporting Pacific countries in meeting their significant infrastructure needs is a shared priority … We will be engaging closely with Australia on their plans.”

Does the announcement support Pacific needs?

The focus on infrastructure, however, has some in the development sector concerned that funding for humanitarian crises and disaster resilience could be reduced.

Oxfam Australia CEO Helen Szoke, in a response on the Oxfam website, warned that the efforts “shouldn’t come at a cost to other vulnerable communities around the world who rely on humanitarian assistance in the form of life-saving Australian aid.”

“While infrastructure is important, we must focus in particular on the number one threat to the livelihoods, wellbeing and security of people in the Pacific — climate change.”

For AIIB, however, infrastructure projects are seen as inherently linked to economic and social development in Asia: “We see infrastructure as an enabler to unlock Asia’s potential by better connecting people, goods, and services to safe electricity, clean water, and thriving urban centers,” Ostfield said.

This idea is supported by some members of the Australian research sector. Professor Matthew Clarke from Deakin University said shipping infrastructure and internal roads are lacking as a Pacific priority: “Such infrastructure enhances not only economic opportunities but new and improved access to health, education, and other social services to populations that have difficulty in accessing such services.”

Chengxin Pan, associate professor of international relations at Deakin University, agreed and said the new announcement is hitting the mark — as long as the motives are genuine.

“The new infrastructure financing initiative shows that Australia now realizes the infrastructure need of the Pacific and has begun to commit fund to it,” he said. “China alone certainly couldn’t and shouldn’t provide all the financing needs for Pacific infrastructure development and there is room for more players.”

“Both Australia and China provide aid — in part — to serve their national interest,” he said. “Part of increasing Australia’s national interest in this region is stability and influence. With donors competing for influence, new opportunities exist for recipient nations to seek to leverage [during] this competition between donors. We would expect recipient nations to seek to take advantage of this situation.”

For Pan, the main priority is ensuring that decisions are made in close consultations with Pacific island leaders and communities.

“It is curious that throughout Morrison’s speech, there was no mention of ‘climate change’ at all, whereas climate change is arguably one of the biggest concerns of Pacific island countries,” he said.