Only 5 projects in Australia's Pacific infrastructure fund since 2018

Since the 2018 announcement of the Australian Infrastructure Financing Facility for the Pacific — worth 2 billion Australian dollars — just five projects have been approved for funding: a telecommunications cable project in Timor Leste; a solar plant in Papua New Guinea; a flood alleviation program in Fiji; a submarine cable project in Palau; and a hydropower transmission system in the Solomon Islands. Despite these approvals, AIFFP contributions and the details of two of these projects are still in negotiations, and just AU$5.3 million ($4.09 million) has been disbursed to date supporting the scoping or the design phase of projects. “That has gone to the Timor-Leste cable design, approximately AU$870,000; Fiji, Nadi flood alleviation project scoping study, AU$506,300; project preparation for potential PNG electrification investments, AU$726,000; project preparation for potential PNG transport investments, AU$1.6 million; a branching unit for the Palau cable, AU$1.2 million; and the remainder is program implementation support of around AU$400,000,” Elizabeth Peake, first assistant secretary at the Office of the Pacific explained at Senate estimates on June 4. The AIFFP consists of an AU$500 million grant component and AU$1.5 billion in loans. To date, disbursements have been from grants only with money yet to be drawn from the loan component. “A quarter of 1% out the door since 2018 doesn't seem to match the ambition of the announcement.” --— Australian Sen. Tim Ayres What is the AIFFP process? Peake explained that there are a number of phases projects need to go through before they are finalized and funding is released. “The first phase is one of identification to concept, and both governments — the Australian government and our partner-country government — have typically, or routinely, announced the projects when they're between concept and design phases but before the finalization of the full financing packages and all the financing documentation,” she said. On completion of the financing documentation, the project then moves into its procurement stage before being implemented. The board of the AIFFP, consisting of government and non-government representatives, advises the government on projects suitable for funding and has so far met 15 times. An additional nine approved projects are yet to be made public, according to Peake. Despite government approvals, the AIFFP is yet to finalize the details of all projects. In PNG, final negotiations for the solar power project are continuing, held up by negotiations for access to land from Oil Search. An alternative energy project is also causing delays. “There is one element of delay to the project, which is that the Markham Valley solar project is co-located on a piece of land with a biomass project that is also being pursued by [PNG Power Limited],” Peake said. And in the Solomon Islands, the hydropower project continues to be in “very late stage” negotiations, a status it has been assigned since March. What explains the slow action? Despite zero loans being drawn on to date, Foreign Minister Marise Payne does not believe progress is moving slowly. “The AIFFP, which commenced from a clean slate ... on 1 July 2019, across multiple countries across the Pacific, in multiple jurisdictions, with multiple partners, has in fact, I think, made significant and very positive progress in terms of Australia's support for infrastructure development in the region,” she explained at estimates. “We work closely with our partners on what their priorities, their processes, their governance and their systems are, and we're very respectful of that as well.” For Frances Adamson, secretary of the Department of Foreign Affairs and Trade, getting the projects right was the priority to ensure they were linked to policy needs. “From the point of view of broader strategic interest, the AIFFP is a really important capability that we've been building,” she said. “Yes, when you talk about the proportions and all the rest of it, they are low, but it's taken a while for the team to build that capability to find suitable projects ... From my perspective as secretary, it's a really important capability, and I think it's got national significance.” Compared with the Asian Infrastructure Investment Bank, Peake said they are progressing as expected and comparatively well against other new finance facilities. “From the time that AIIB was announced to its first loan was two years and eight months,” she said. “In comparison, from the time the Prime Minister [Scott Morrison] announced the AIFFP to the completion of its first loan was two years and two months. So I think, by international comparison, the AIFFP is making solid progress.” And she said a “substantial pipeline” was in play. But for the opposition parties, it appears to be a failed promise. “I’m not persuaded,” Labor Sen. Tim Ayres said. “A quarter of 1% out the door since 2018 doesn't seem to match the ambition of the announcement.”