The Cook Islands, a tiny Pacific nation of 10,000 and recipient of significant Chinese aid, is the host of this year's annual Pacific Islands Forum, which starts on Monday 27 August.
The meeting's official theme is Large Ocean Island States – the Pacific Challenge. But the real challenge for the meeting will be staying focused on the theme and not on what is expected to be an opportunity for another geo-strategic play-off between China and the US. The irony is that neither country is a member of the Pacific Islands Forum. Instead, they will be talking to Pacific representatives during the post-forum dialogue.
For the first time ever, the US Secretary of State is expected to attend this dialogue. Although Hillary Clinton's attendance still hasn't been confirmed by the State Department, the visit by a US advance planning team is being seen as a sure sign. If she does participate, it will represent yet another scaling up of US engagement with Pacific island countries.
While South Pacific engagement may be a sideshow to the bigger diplomatic, economic and geo-strategic interactions being played out between China and the US in Asia and the northern Pacific, the US has recognised that south of the equator should not be overlooked.
In line with Washington's re-balancing towards Asia and the Pacific, Hillary Clinton told South Pacific leaders at the 2009 UN General Assembly that USAID would renew its commitment to the Pacific. A year later, Clinton announced during a keynote address at the East-West Center in Hawaii that USAID would open an office in Fiji, with a US$21 million budget for climate change activities. This would mark the return of USAID to the region after a 16-year absence. However, just one month later, during Clinton's visit to PNG, a change in location of the office from Fiji to PNG was announced. The office was opened in Port Moresby in October 2011. [fold]
While there was media speculation about the reasons for the change, including presumed pressure by Australia to further isolate Fiji, the US maintained that PNG was chosen because it was the growing economic power in the Pacific. Comments by Clinton earlier this year provided more context. She made it clear in her testimony to the Senate Foreign Relations Committee that cuts to the foreign affairs budget, which includes aid, would hit US efforts to compete with China's rising power. She cited both PNG and Fiji as countries in the Pacific where China had increased its influence.
Pacific island countries, once distant from the centres of economic power, now find themselves in the backyard of the world's ascendant economic power, China. On economic grounds alone, these new circumstances provide evolving and growing opportunities for Pacific island countries to increase engagement with China.
The rise in China's influence across the region is evident on a number of fronts, notably its donor activities.
While it is difficult to ascertain with any certainty the size of China's aid program because of a lack of comprehensive public information, a report released in 2011 by the Lowy Institute estimated that China's soft loans to the region had increased from US$23 million in 2005 to over US$183 million in 2009. Based on the Lowy Institute's findings, China appeared to be the third-largest donor to the region in 2009 after Australia and the US. Aside from the aid relationship, the region's trade with China has also grown steadily over the past 10 years, increasing by seven times on average for Pacific island countries in that time.
On the other hand, America's latest aid initiative in the Pacific is financially modest, although its longstanding annual payments to the three Micronesian Compact States (Palau, Marshall Islands and Federated States of Micronesia) maintain its position as the second-highest OECD donor to the region. But Washington is supplementing its aid investment with an increased physical presence through the opening of the Port Moresby office as well as more regular and significantly higher profile visits.
For the Pacific's developing countries, increasing Chinese and American interest provides opportunities to consider alternatives to Australia. Economically, Australia dominates in this region. Of the 16 members of the Pacific Island Forum, 14 are developing countries with a significant proportion of their development aid coming from the other two members, Australia and New Zealand. More than 50% of all donor funding to the region comes from Australia.
While Australia's generous aid program reflects in part Canberra's recognition of the region's core geo-strategic relevance, the role of chief banker has tended to dominate bilateral relationships. It's time to look again at the state of those relationships and, like the US, put less emphasis on scaling up the aid and more on the substance and profile of the engagement.
As Australia goes to the Pacific Islands Forum, pockets no doubt brimming with new aid initiatives, it should look for other ways to engage and be seen to be engaging with Pacific island states on the broader menu of shared issues. As the US-China Pacific play-off shows, there's more to the Pacific than aid projects.