HomeNewsAustralian aid policy to focus on climate — and countering China

Australian aid policy to focus on climate — and countering China

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Australia has put the climate and job creation in the Pacific at the center of its new foreign aid policy, part of an effort to woo back island nations that have fallen under China’s deep-pocketed influence.

The policy, unveiled by the center-left administration of Prime Minister Anthony Albanese on Tuesday, will direct at least half of all investments valued over $2 million toward climate-focused projects by June 2025, rising to 80 percent of investments by 2029.

It comes amid calls from Pacific nations for world leaders to address a climate crisis that threatens their existence, with rising sea levels and increased natural disasters linked to warming temperatures.

“Australia is using all elements of our national power to advance our interests and shape the world for the better,” Foreign Minister Penny Wong said in a statement as the policy was unveiled Tuesday. “Development and prosperity underpin peace and stability.”

The new international development policy also takes aim at China’s “debt-trap” diplomacy — although the document doesn’t mention China by name. It ranks “looming debt” alongside climate change and escalating disasters among the major challenges facing the region.

Australian officials predict public debt in the Pacific will almost double from 2019 levels by 2025, making it hard for countries to deliver vital services like health care and education.

Wong said Canberra’s goal is to “advance Australia’s interests in a peaceful, stable and prosperous Indo-Pacific and ensure we are a partner of choice for our region.”

U.S. and China battle for influence in Pacific island nations

Instead of mentioning China, the policy refers to the “vexing strategic circumstances” facing the region and says the “security and economic dynamics that have held for decades are shifting” — which analysts say is code for concerns about an emerging great-power competition between Washington and Beijing.

Top U.S. officials including Secretary of State Antony Blinken and Defense Secretary Lloyd Austin have fanned out across the region in recent weeks in a more assertive stance against China. Washington is also stepping up its regional presence with new embassies in the Solomon Islands and Tonga and plans for two more in Vanuatu and Kiribati.

China has been building up its presence in the strategically important region in recent years, taking advantage of a power vacuum as the United States struggled to disentangle itself from more pressing foreign policy priorities elsewhere.

Australia, which shares many of the U.S. concerns about China’s activities in the Pacific, has struggled to compete with Beijing’s Belt and Road infrastructure initiative.

The changes will apply to all of Australia’s $3.1 billion in foreign aid programs, but the policy does not allocate more money to aid.

Canberra’s foreign aid budget, around 0.2% of gross national income, is among the lowest of any developed nation, although Albanese’s government has been promising to increase it.

The investments unveiled Tuesday are, on their own, “not sufficient to wind back China’s influence in the region,” said Benjamin Herscovitch, a China-focused research fellow at the Australian National University.

But they do “provide countries in the region with alternatives to Chinese aid and infrastructure,” he said, alongside “harder-edged ways of counteracting and deterring China’s power” such as the AUKUS nuclear submarine partnership with the United States and Britain.

Beijing’s economic inroads have led to deepening security ties — the Solomon Islands has signed defense and policing pacts, while Fiji agreed to law enforcement cooperation, although the new government has promised to rip it up — and to growing debt burdens. Tonga owes two-thirds of its $430 million external debt to China, a sizable portion of which comes due next year.

Many countries have complained that Chinese construction companies bring their own workers rather than employing locals. The Australian policy appears to respond to that by setting targets for hiring local contractors to increase the direct benefits to the Pacific countries.

Pacific experts say Canberra’s new focus on infrastructure projects designed to create local jobs shows officials have been listening to the requests of Pacific leaders.

The pledge to direct a large share of its investments toward projects with a climate change focus will probably also find a receptive audience — particularly in low-lying atolls like Tuvalu and Kiribati, said Maho Laveil, a researcher from the University of Papua New Guinea currently at Sydney’s Lowy Institute think tank.

Already, some 6,000 residents of Kiribati, which will be among the first countries rendered uninhabitable by rising sea levels, have sought refuge from rising seas in Fiji, Laveil said. “It’s consistent with what a lot of Pacific Island nation leaders have been asking in the past. Obviously, climate change is top of the agenda.”

China’s growing reach is transforming a Pacific island chain

Climate change has long been a sore point in relations with Pacific nations because Australia is among the world’s highest per capita emitters.

Beijing’s approach of using Chinese workers to build roads, stadiums and administrative buildings in island nations has also been a source of local tension. As has Canberra’s reliance on Pacific migrant laborers to take up low-paid jobs in Australia that its own citizens avoid.

“What Pacific countries want is economic development and particularly employment in their country,” said Cleo Paskal, a Pacific expert and senior fellow at the Foundation for Defense of Democracies. “They don’t want to have to go to Australia to pick fruit. They want to grow their own fruit and export it to Australia.”

Canberra is walking a diplomatic tightrope in that its new aid policy comes amid a period of economic rapprochement with Beijing, its biggest trade partner. Only last week, China removed tariffs on Australian barley — a legacy of years of crippling trade restrictions imposed after Australia’s then-conservative prime minister called for an inquiry into the origins of the coronavirus pandemic.

China and Australia are starting to get along. Will AUKUS torpedo it?

“The Pacific islands for China is not a luxury. It’s a strategic imperative,” Paskal said. “If China thinks that debt traps are helpful and you’re trying to give a country an alternative to debt traps, China will try to block you. And they might do it on the ground in that country, or they might do it in your own country.”

The new policy document also includes a broad pledge to work closely with Southeast Asian countries where China’s loans loom large. In Sri Lanka, for example, China assumed control of a port facility it financed and built in 2017 after the country struggled to repay its debts — a pattern policymakers and analysts here worry could play out across the Pacific.

There is little expectation, though, that Canberra can outcompete Beijing in terms of infrastructure investments. “You don’t have Australian firms that can roll out railway networks in the island of Java in Indonesia, for example. Or build large rail networks elsewhere in mainland Southeast Asia,” said Herscovitch.

Pannett reported from Wellington, New Zealand, and Vinall from Melbourne, Australia.

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