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14 February 2014 14 February 2014

14 February 2014 - PowerPoint Presentation

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14 February 2014 - PPT Presentation

Australasian Aid and International Development Policy Workshop Chinese Assistance in the Pacific Are Pacific Island Countries Passive Recipients or Active Agents Matthew Dornan and Philippa Brant ID: 244885

chinese aid concessional loans aid chinese loans concessional china eximbank assistance loan pacific year rmb government policy period construction

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Slide1

14 February 2014 Australasian Aid and International Development Policy Workshop

Chinese Assistance in the

Pacific:

Are Pacific Island Countries Passive Recipients or Active Agents?

Matthew Dornan and Philippa BrantSlide2

US$850 million disbursed between 2006-2011

Australian aid over same period totalled US$4.8 billion

2006 concessional loan package RMB 3 billionNew US$1 billion concessional loan pledge in November 2013

Size of Chinese aid in the PacificSlide3

What is Chinese aid?

Total foreign aid budget now approx. US$6.4 billion. Larger than Australia

Bilateral aid provided in three main forms:

Grants

Interest-free loans

Concessional loansSlide4

What is Chinese aid?

Interest-free loans

Provided for 20 years

5 years of use

5 year grace period

10 years of repayment

Used for public facilities and projects that ‘improve people’s livelihood’

Can be renegotiated and outstanding debts can be cancelledSlide5

What is Chinese aid?

Grants

Provided ‘in-kind’ (rather than cash)

Used for small/medium projects

Commonly given in amounts of RMB 10m or RMB 20mSlide6

What is Chinese aid?

Concessional loans

Minimum loan of RMB 20m

Current annual interest rate between 2-3%

15-20 year repayment

5-7 year grace period

Provided by China Eximbank

Not easily rescheduled or cancelledSlide7

What is Chinese aid?

Conditions

‘One China’ – must recognise PRC not ROC

Tied to Chinese companies and contractors

Concessional loans must (in principle) procure 50% of materials from China

Reflects links between aid, investment and developmentSlide8

Key Actors

State Council – sets policy direction

Department of Foreign Aid

(within Ministry of Commerce) – manages program

Ministry of Finance – approves budget

Other ministries & bodies involved in sectoral

-

specific aid

China Eximbank

– provides concessional loans

Chinese state owned enterprises – implement projects

Chinese Embassies – responsibility/oversight in countrySlide9

Cook Islands

Total aid US$34m over past decade

New 3-year strategy for utilisation of grant money developed by Cook Islands

government

‘World first’ trilateral project funded

through existing concessional loan from China + NZ

grantSlide10

Tonga

Since 2008,

assistance

to Tonga has been dominated by two large China

Eximbank

concessional

loans, worth

US$120 million

(28

% of

GDP)

Repayment has been deferred, although not the maturity of the loan

The loans were negotiated and

decided on at the political level, with limited input from the civil serviceSlide11

Samoa

China

Eximbank

loans

are

valued

at

16

% of

GDP, and have funded construction of key government buildings

C

lear

and transparent

decision-making processes

have

helped to safeguard

the role of the civil service

Oversight of construction is

generally robust, with the government outsourcing supervision to engineering/construction firms. Slide12

Vanuatu

The way in which China

Eximbank

loans are agreed is contentious

‘Big man’ politics appears to play a prominent role

Contracting companies approach ministers with proposals and offers of

Eximbank

financing

The Vanuatu Government has lobbied for grants and loans to cover project management costs, without successSlide13

Findings

Political dynamics

and the capacity of the civil service play an important role in determining the effectiveness of Chinese assistance

Case studies highlight the importance of due process

Transparency is vital, although often lacking

Central agencies should be involved in negotiating assistance,

given

superior analytical capacity

Pacific islands countries can learn from one another; evidence suggests that this is already occurring

Impact and effectiveness of Chinese assistance depends in large part on actions of Pacific Island governments Slide14

Thank you

Dr Matthew Dornan

Development Policy CentreAustralian National UniversityE: matthew.dornan@anu.edu.auDr Philippa BrantLowy Institute

for International Policy

E:pbrant@lowyinstitite.org