Pacific infrastructure development: stepping up without stamping out
14 Jun 2019|

Last week I spoke at a workshop sponsored by the Strategic and Defence Studies Centre and the National Security College at the ANU on the topic ‘How does the “Pacific” fit into the “Indo-Pacific”? The changing geopolitics of the Pacific islands.

I was asked to address the question of how Australia can ensure that its ‘Pacific step-up’ advances our strategic interests in the region. I argued that the step-up needs to improve collaboration between government and the Australian business sector, drawing on the vast experience with and expertise on the region which resides in our membership in the Australia–Pacific Islands Business Council.

I co-authored an ASPI report on this theme last year. In January 2019, not long after the report was published, Prime Minister Scott Morrison visited Vanuatu and Fiji. Earlier this month, the prime minister went to Solomon Islands on his first overseas visit since being elected in May. These visits were in many ways historic: it’s rare for Australian prime ministers to make bilateral visits to the Pacific, as opposed to attending multilateral gatherings like the Pacific Islands Forum leaders’ meetings.

But in my view the prime minister missed the opportunity to invite Australian business participation in the visits. He was accompanied by all the heavyweights of the Pacific security and policy apparatus in Canberra. But no business representatives were included: no one with interests outside the infamous ‘Canberra bubble’.

It’s useful that the government is setting up the Australian Infrastructure Financing Facility for the Pacific and providing an extra $1 billion for the Export Finance Insurance Corporation to help support Australian involvement in the region.

These initiatives are designed to seek out new opportunities and avenues for commercial cooperation, as well as improve leveraging of commercial funds. But it’s going to require working with the Australia–Pacific Islands Business Council based in Brisbane and the Australia–Fiji and Australia–Papua New Guinea Business Councils.

Our three Pacific business councils are also working with the Pacific Islands Forum to foster a regional financing facility, which aims to create more commercial partnerships and assets, not debt. The facility is designed leverage contributions from the steadily growing funds in the island countries and Australia.

When it comes to strengthening our commercial ties with the Pacific, it’s not as though we’ve got out of the game. We remain the top source of imports to PNG, well ahead of China, and to Fiji we are just behind Singapore and New Zealand, again in front of China. We’re number one in imports to Kiribati, and second in Vanuatu.

Some of Australia’s larger law firms, accountants and advisories are running profitable regional operations. There remain many Australians operating in the construction industry in the Pacific. We should be enlisting those in Australian business who understand the islands region.

The Australian’s long-time Pacific observer Rowan Callick has rightly argued that the areas that require engagement with island communities should be among those in which Australian firms can lead the way, such as the huge gas production industry in PNG, which requires large-scale, patient negotiations with landowners. This has been driven by Australians—with the ASX-listed Oil Search Foundation playing a prominent role.

The most eye-catching of the proposals is the PNG electrification project, which aims to provide power for 70% of the country by 2030. To get more Australian involvement in such ambitious projects, the Australian government can most usefully play a role by providing a flow of information about commercial opportunities in the Pacific to the private sector.

The new $2 billion infrastructure fund is a positive step (although not all agree), but, as usual, the devil is in the detail. We should welcome increased Australian business activity, but this may have downsides for some island states that have successfully fostered local small and medium-sized enterprises (SMEs), particularly in the area of renewable energy.

Having more Australian businesses with financial assistance from the Australian government won’t make the lives of those local businesses any easier. While the end result might be better infrastructure built more quickly, the crowding out of local businesses might take some of the shine off this initiative.

The successful growth of SMEs in the Pacific has long been an aspiration for the island countries and donors alike. Crowding the existing SME market might not be the best outcome. Perhaps we should be concentrating on infrastructure in places where there’s limited local capability.

The administration of the fund should ensure that project contractors are required to engage effectively with local contracting and subcontracting entities to build capacity and grow the SME sectors in the Pacific islands economies. As Richard Herr recently argued in his ASPI study of China’s soft power in the region, we should include significant skills-training and administrative-mentoring components into projects. The funding for those components should be made available to Australian firms competing privately for infrastructure projects in the region, ‘so that they don’t lose any competitive advantage when tendering by including such skills-transfer elements’.

At last week’s ANU workshop, I also offered three thoughts on strengthening the people-to-people side of our Pacific step-up. First, I suggested that the Pacific Labour Scheme visa class be extended to skilled positions: Pacific island apprentices and tradespeople working in Australian jobs would take home knowledge of quality systems, supervision, safe work practices and maintenance philosophies.

Second, I raised the idea that Pacific island placements in Australian agencies would provide junior bureaucrats and administrators with skills in recordkeeping, planning and management that could lead to improved prospects for future business linkages.

Finally, I argued that Australia’s standing in the Pacific would benefit from a bulked-up version of some of our existing volunteer schemes—a program where young Australians get Pacific island experience through placements in Pacific island government agencies.

This could become a professional career development component within certain streams of the Australian public service. We seem to be able to convince teachers and doctors to work in rural communities, so why not broaden the concept?

The real dividend here would be greater respect and empathy for Pacific islanders that young Australian professionals would potentially bring to future roles in our aid, commercial and security relationships.