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
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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