Belt and Road Initiative in Fiji and the Pacific
The BRI (Belt and Road Initiative) is a global proactive network
The Pacific Islands comprise of 10 million people and a combined GDP of about US$33.77 billion (FJ$69.79bn). Pacific Island nations have embraced the Belt and Road Initiative (BRI) as an empowering avenue through which they can be sustainably integrated into global trade and investment strategies to lift them out of their isolation and socio-economic situations.
The BRI is a world-wide sustainable development strategy adopted by the Chinese Government in 2013 to support social and economic growth through infrastructure development and investments.
The BRI works to overcome an ‘infrastructure gap’ so as to facilitate sustainable development globally, including the Asia and Pacific Islands region.
The BRI involves “creating a vast network of railways, energy pipelines, highways, and streamlined border crossings, both westward— through the mountainous former Soviet republics—and southward, to Pakistan, India, and the rest of Southeast Asia. About 4.4 billion people live in nations that have signed up for the BRI. They make up 62 per cent of the world population with a combined GDP of US$23 trillion (FJ$47.53tr)”. (Singh, 2019). There are two aspects to the BRI. One is based on China’s outreach to Central Asia and the other aims to build upon the maritime ‘road’ linking China to the rest of the world, including the Pacific Islands.
Wang Yiwei of Renmin University notes that the BRI aims to “promote lasting peace, common security, common prosperity, openness and inclusiveness, and sustainable development.”
China will share “its development experience, but it will not interfere in the internal affairs of other countries” (Wang Yiwei is quoted in Singh, 2019).
By July 2019, the Chinese Government had concluded inter-government co-operation agreements with 136 countries and 30 international organisations in Eurasia, Africa, Latin America, the Pacific Islands and Western Europe.
In terms of trade and investment within the period of 2013 – 2018, the value of China’s trade with BRI partner states reached US$6 trillion (FJ$12.40tr). Within the same period, China’ direct investment in BRI partner states reached US$90 billion (FJ$185.99bn). The proportion of China’s trade value with BRI partners (in China‘s total foreign trade value) grew by 25 per cent in 2013 to 27.4 per cent in 2018 (yidaiyilu, 2019).
BRI support nations
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From 2011 to 2019, China provided $1.47 billion in aid and concessional loans to Pacific island nations. China looks set to overtake Australia to become the region’s top donor within the next three years. In October 2019, the Third ChinaPacific Island Countries Economic Development and Co-operation Forum was held in Apia, Samoa.
This was attended by Vice Premier Hu Chunhua. The Solomon Islands and Kiribati recognised China in September, 2019.
Fiji’s Prime Minister Voreqe Bainimarama attended the first Belt and Road Forum in 2017 and Papua New Guinea’s former Prime Minister attended the second Belt and Road Initiative (BRI) in April 2019.
The Communique of the second Belt and Road Forum noted an interest to work with the Pacific Islands Forum. (Pitlo, 2019)
The History of BRI in the Context of the Pacific
In 2013, while in Kazakhstan and Indonesia, President Xi Jinping proposed the building of the Silk Road Economic Belt and the 21st Century Maritime Silk Road, which is now called the Belt and Road Initiative.
President Xi noted the Chinese saying, “Peaches and plums do not speak, but they are so attractive that a path is formed below the trees.” Over 135 countries and international organisations have supported and got involved in this initiative. (Xinhuanet, 2017)
President Xi Jinping in his meeting with Pacific islands leaders in Port Moresby in 2018 noted that China will encourage the active participation of Pacific island countries in the Belt and Road initiative (BRI) in line with their own national conditions, strengths and development strategies.
President Xi noted: “I am convinced that the BRI will open up new pathways for Pacific island countries to enhance business ties and connectivity with China, among themselves and with the rest of the world, and for the island countries to take a greater part in economic globalisation.” (DPT, 2018)
The Belt and Road Initiative (BRI) is intended to enhance connectivity and practical co-operation. There is now a general connectivity framework which has six corridors, six connectivity routes and many states and ports have been successfully integrated into it.
In all regions of the world including the Pacific Islands, the Belt and Road Initiative has opened up dynamic spaces for global economic growth. The BRI has aided in improving people’s lives in the nations that have signed on to it (Xinhuanet, 2019).
Huawei is assisting the Pacific region to utilise the digital economy by working with local telecommunications providers, governments, and businesses to enable connectivity through subsea cables, 4G & 5G networks, datacentres, and the deployment of smart devices.
Huawei’s strategy is to connect the Pacific region, with more reliable and higher-speed internet connectivity. With this connectivity, islands in the remote Pacific will efficiently participate in the digital economy, improve their socio-economic status, help mitigate natural disasters and climate change responses, develop digitalised health and education services, introduce ecommerce, and boost tourism (Reichert, 2016.)
The CIO of Huawei Technologies South Pacific ICT Solutions Marketing highlighted the following salient points: “Firstly, we need to put smart devices in the hands of all island nation citizens. These devices are the window to the rest of the world, and will bridge the digital divide, enabling access to information as well as supporting business ecommerce type transactions. Secondly, networks enable islands to connect and communicate to the global digital economy. Huawei believes the two main technologies are LTE, to provide on-islands connectivity, and submarine cable, to support global connectivity.” (Reichert, 2016)
Under the BRI, China will undertake reforms to open up its markets. For Pacific Islands states that are linked to the BRI, it provides an opportunity to develop two-way trade with China.
Pacific Islands states will have greater market integration with nations in Asia and the global regions. This implies expanding market access for foreign investment in
more areas.
Second, China will intensify efforts to enhance international cooperation in intellectual property protection. Third, China will increase the import of goods and services on an even larger scale.
Fourth, China will more effectively engage in international macroeconomic policy co-ordination.
Fifth, China will work harder to ensure the implementation of opening-up related policies.
These proactive measures to open up the market will promote highquality economic development, meet the people’s desire for a better life, and contribute to world peace, stability and development. It is expected that other nations will also create enabling environments of investment.
Through BRI, a more open China will further integrate itself into the world and deliver greater progress and prosperity for both China and the world at large. (Xinhuanet, 2019)
Trade has increased between China and the eight Pacific nations rising to a combined US$4.32 billion (FJ$8.93bn) in 2018 an increase of 25 per cent from 2017. China is the largest trading partner of the Solomons Islands, the second-largest to Papua New Guinea and Fiji, and the third-largest to Samoa.
China’s direct investment in the Pacific region has increased to US$4.53 billion (FJ$9.36bn) in 2018, a more than fourfold increase from the US$900 million (FJ$1859.94m) that China invested in 2013. (Zhou, L. 2019)
Trade through BRI
China’s massive market requirements promotes the trade growth of countries like Fiji which benefit from Chinese investment under BRI. For example, between 2015 and 2019, a total of 277 Chinese investment projects, worth about FJ$2.36 billion (approx US$1.08 billion) were expedited in Fiji. (Xinhuanet, 2019).
The growth of cross-border capital flows to BRI partner states and regions like the Pacific was higher than the flows to other non BRI regions. China’s foreign direct investment and overseas direct investment in the Pacific will be the new engine to drive sustainable development growth.
Many Pacific island governments want to diversify their economic and diplomatic ties beyond traditional partners and have cultivated South–South ties with China and other nations.
Over the last 10 years, the Pacific nations have promoted the New Pacific Diplomacy through the Pacific Small Island Developing States group at the United Nations, emphasising that they don’t see the need to choose between old allies (US, Australia and New Zealand) and new partners. Many Pacific nations have been extending their trade and aid links with India, Indonesia, Korea, Cuba and Middle East states, even as they maintain ties with the US, Japan, France and the ANZUS allies. (Maclellan, 2020) CCECC South Pacific Ltd, the Oceania subsidiary of the China Civil Engineering Construction Corporation, or CCECC now operates in Tonga, Solomon Islands, Tuvalu, Fiji, Vanuatu, Papua New Guinea, Cook Islands and Australia. They have built infrastructure projects in Vanuatu that include a new parliament building, a national convention centre, a national sports complex, an office complex for the Prime Minister and a new building for the Melanesian Spearhead Group. CCECC is also building roads and high schools on the islands of Tanna and Malekula. (Maclellan, 2020)
In the case of the Solomon Islands (pop: 627,000) which formally established diplomatic relations with China in 2019, their incentive was the opportunity for increased trade with China, the Pacific and the world.
Foreign Minister Wang Yi noted that: “The Solomon Islands acknowledges the one-China principle and the island of Taiwan is an inseparable part of China. China highly praises the stance of the Solomon Islands. China won’t seek unilateral interest, and our co-operation with the Solomon Islands will be equal, open and reciprocal.” (Reported in CAC 2019)
Solomon Islands integration into the BRI will mean closer political and economic co-operation with China that will also benefit the regional development of the entire Pacific islands. In 2017, Solomon Islands exports to China accounted for 65.2 per cent of its total exports. In 2018, China-Solomon Islands trade reached 2 billion Solomon Islands dollars, with China the largest single trading partner of the country in total trade volume. Trade and investment are key incentives for Pacific Island nations under the BRI framework. The meteoric rising number of Chinese tourists expecially in Vanuatu, Fiji and Samoa is very much welcomed not only as a source of foreign exchange earnings but as a means of promoting the Chinese language, culture and expressive arts in the Pacific.
President Xi Jinping Island Leaders
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Pacific
China has already increased cooperation with Pacific nations under the BRI framework. President Xi Jinping met Pacific island leaders in Port Moresby on November 2018, to strengthen bilateral ties and cooperation. (Xinhuanet, 2018) During the meeting with the President of the Federated States of Micronesia Peter Christian, President Xi said China appreciated the Pacific island nation’s adherence to the one-China policy. Xi said that China was ready to support and help the Federated States of Micronesia in tackling climate change within the framework of South-South co-operation. (Pacnews, 2018)
During the meeting with the Prime Minister of Samoa, Tuilaepa Malielegaoi, President Xi noted that the bilateral relations faced new opportunities for development. He said that China supported Samoa in hosting the 2019 Pacific Games and will continue supporting the country to improve its capability to tackle climate change. (Pacnews, 2018)
When meeting with the Vanuatu Prime Minister, Xi said ChinaVanuatu relations are at the best period of development in history. China will support as always Vanuatu’s national construction and sustainable development, encourage more capable enterprises to invest in Vanuatu, as well as promote cooperation in such fields as trade, infrastructure construction, transportation, communication, culture, education and healthcare within the BRI framework. (Pacnews, 2018) In his meeting with Prime Minister Henry Puna of the Cook Islands, Mr Xi said China and the Cook Islands have upheld sincere friendship, mutual respect and equal treatment since they established diplomatic relations 21 years ago, and have achieved mutually beneficial and win-win results. Taking the signing of bilateral cooperation agreements on jointly building the Belt and Road as an opportunity, China is willing to consolidate friendship between the two peoples, and enhance communication and cooperation with the Cook Islands in such fields as economy and trade, tourism, culture and at local levels with the principle of achieving shared growth through discussion and collaboration. (Pacnews, 2018)
In his meeting with the Prime Minister of Tonga, Mr Xi said China and Tonga have produced fruitful results in mutually beneficial cooperation in the past 20 years. Mr Xi said he hoped that the two sides tap into their potential, boost co-operation in such fields as trade, investment and infrastructure construction, and expand people-topeople, culture and local-level communication. (Pacnews, 2018)
When meeting with Niue Premier, Mr Xi stressed that China would continue to follow a policy of pursuing the greater good and shared interests and uphold the principle of sincerity, real results, amity and good faith in developing its relations with Niue. China, Mr Xi said, is ready to strengthen co-operation with Niue in the fields of climate change, South-South co-operation, maritime affairs, environmental protection, and promote green, lowcarbon and sustainable development. (Pacnews, 2018)
Mr Xi also met with Fiji’s Defence Minister who also served as the representative of the Fijian Government. China is willing to work with Fiji to further promote political mutual trust, deepen pragmatic co-operation, strengthen the friendship between the two peoples and push forward their bilateral ties. (Pacnews, 2018)
Song Wei a Research fellow at the Chinese Academy of International Trade and Economic Cooperation noted that the BRI can promote connectivity in the South Pacific region. Mr Song said that China had assisted Tonga and Samoa with Modern Ark 60 airliners and Y12 aircraft, giving South Pacific island countries a boost of regional connectivity.
“Without investment and trade, no commercial capitals can be brought in to form a whole industrial chain. When the role of aid cannot be brought into full play and no commercial capitals are mobilised, aid programmes can hardly sustain (the economy).” (Song is quoted in CAC 2019).
The BRI also promotes affirming relations between Pacific island states with Australia and New Zealand. New Zealand, for example, has a Double Tax Treaty with China. Even citizens of self-governing nations such as the Cook Islands and Niue carry passports issued by New Zealand and are de facto New Zealand citizens.
China is expected to build a port on Penrhyn Island in the Cook Islands, and an expressway around Niue. China has also provided funds to the Cook Islands for fishing licence fees for blue and yellow fin tuna. (Devonshire-Ellis, 2019) The Cook Islands comprise of 15
inhabited islands and a population of 17,500. China has provided $66.3 million in aid between 2006 and 2016, compared to $39.3 million by New Zealand during the same period.
The Chinese assistance has been distributed across 13 projects in the public services, education and the fishing industry. The Cook Islands was the first country where China partnered with New Zealand in 2013 on a 3- year foreign aid project plan. (Hill, 2018)
In Fiji, Li Haolin, of the Guangdong Silkroad Ark Investment Company told CGTN that they are proposing to build a beachside hotel with the architectural design featuring the merging of cultures. The design will integrate Fiji’s customs and the culture of the ancient Silk Road. The investment will also provide employment to many local people. (Li Haolin is quoted in Devonshire-Ellis, 2019) Fiji cosmetics is now selling in the Chinese market. Businessman Shan Yuqiang, general manager of Fiji International Trade Company said, “Fiji’s natural skin care products are very famous. Many Hollywood stars like it. So after negotiations with the producer, I got the dealership for their products in China. After President Xi’s visit to Fiji in 2014, Chinese people got to know Fiji a lot better. And our business is good.” (Shan Yuqiang is quoted in Devonshire-Ellis, 2019) Under BRI, China has signed fishing licences that will see Micronesian tuna exported to China. Samoa’s Prime Minister Tuilaepa Sailele Malielegaoi noted that, “The Belt and Road Initiative is opening a vast market and bringing lots of opportunities for the world, in particular for the small countries like Samoa in the South Pacific region in these difficult times and challenges posed by climate change.”
Sustainable financing
Prime Minister Tuilaepa had stern words for those nations that are criticising the BRI Framework as a “debt trap.” He said, “We are fortunate to have grants from China. I think all the allegation (of the China debt trap) is based completely on misunderstanding of the issues involved.” (Devonshire-Ellis, 2019)
Lowy Institute notes that, “our analysis suggests that China’s lending practices in the Pacific have not been so problematic as to justify accusations of debt trap diplomacy.”
According to the regular assessments by the International Monetary
Fund, debt sustainability risks are indeed rising in the Pacific, but this is more closely linked to the region’s high exposure to disasters, rather than excessive Chinese lending.
China’s lending terms are also hardly predatory. China appears to have been much more careful in the Pacific, with the vast majority of its loans having been concessional enough to qualify as aid, according to the standard of the Organisation for Economic Co-operation and Development (OECD).
Our research found that in 90 per cent of cases, Chinese loans were made in situations where there appeared at the time to be scope to absorb such debt sustainably.
That leaves 10 per cent of cases where Chinese loans looked problematic, but in comparison to other official lenders in the region, this figure would not make China a huge outlier.
Positively, China has begun taking debt sustainability more seriously, in particular by signing up to G20 principles and guidelines, which include commitments to key global standards for sustainable lending (Pacnews, 2019)
China has not been the main factor behind rising debt risks in the Pacific. The bulk (97 per cent) of China’s official loans has been through the EXIM Bank with an interest rate of 2 per cent, a 5 to 7 year grace period, and a 15–20-year maturity.
All of the largest loans to Samoa, Tonga, and Vanuatu have carried these standard terms, including a 20-year maturity. The macro-debt dynamics implied by China’s lending terms are favourable for the Pacific. With nominal GDP growth across the region generally well above the 2 per cent interest being charged, even slow-growing Pacific economies can potentially grow their way out of Chinese debt. China’s bilateral lending terms are also vastly more favourable than those available from the market. Among Pacific countries, only Fiji and Papua New Guinea have meaningful access to market-based financing.
Long-term government domestic borrowing costs are currently around 6 per cent in Fiji and 11 per cent in Papua New Guinea. (Rajah, Dayant and Pryke, 2019)
TOMORROW:
BRI and COVID-19 Eradication and Climate Change Issues