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China's Pacific aid secretive and erratic -

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China's Pacific aid secretive and erratic

Meredith Griffiths reported this story on Wednesday, July 22, 2009 12:38:00

PETER CAVE: For the past few years China has been rapidly increasing the amount of aid that it
gives to Pacific Island nations. Last year it was $253 million across the top of the table, making
it the second largest donor in the region after Australia.

But a new report from the foreign policy think tank, the Lowy Institute, says that China's aid
program is secretive and so erratic that it makes long-term planning for the region difficult. And
the report's author, Fergus Hansen, says China may have miscalculated by helping to prop up the
military regime in Fiji.

He told Meredith Griffiths that China treats the details of its aid program as a state secret.

FERGUS HANSEN: The problem with the secrecy is that it inhibits donor coordination so that other
donors don't know what China's doing, which has the potential to lead to duplication for example,
and from recipients it has also, there's evidence it leads to a suspicion among them that China
might be over-quoting the cost of the project it's building, forcing them to take out larger loans
than is in fact necessary.

MEREDITH GRIFFITHS: So what it China's aid strategy in the Pacific?

FERGUS HANSEN: For several decades China has been trying to win back the countries that recognise
Taiwan, and that's led it into an approach to aid giving its focus to very much on the short-term.

MEREDITH GRIFFITHS: You described China's aid pledges in this region as erratic; how is that
different from the aid programs from Australia or from the USA?

FERGUS HANSEN: We tend to take on long-term programs such as trying to improve health care delivery
or improve education services over a long period of time, and those sort of commitments mean that
we're in there giving comparable amounts of aid each year.

If you look at China's aid by contrast, it's very sporadic and it tends to focus on one-off
projects. For example if you look at aid to Micronesia, in 2008 its pledge (inaudible) was worth
just 28 per cent of the amount it had promised the previous years, and it really means that for
these governments it's very hard to rely on Chinese aid or to look at long-term development

MEREDITH GRIFFITHS: Isn't Australia, isn't the US, aren't those countries also motivated by their
domestic agendas when they're deciding some of their aid priorities?

FERGUS HANSEN: Definitely, every country has national interests that are at least to some extent
underlying their aid programs, but I just think, even if you look at China's long term interest in
the Pacific, it's not really using its aid program to address them.

MEREDITH GRIFFITHS: Can we talk a bit about the relationship between China and Fiji; what's going
on there?

FERGUS HANSEN: China and Fiji were in discussions over a large soft loan worth $US150 million, but
it was only after the coupe that China concluded the deal. It then followed with another large soft
loan that was worth about $US83 million. I think it's really gone beyond what normal relationship
management would require and has really, sort of, quite unusually over engaged Fiji.

MEREDITH GRIFFITHS: You've referred to that as a miscalculation by China, where do you think it has
gone wrong?

FERGUS HANSEN: Well I think if you look at Bainimarama's support in Fiji, it's quite small, his
credibility has really been undermined by the fact he hasn't shown any attempts to try and
implement his reform agenda, and on top of that if we look at past coupe leaders in Fiji, his
ongoing leadership is not by any means a guaranteed proposition.

MEREDITH GRIFFITHS: How is China's aid program changing the way international relations work in the
Pacific region?

FERGUS HANSEN: China's aid is really quite commercially minded. The OECD (Organisation for Economic
Cooperation and Development) has set up guidelines for aid giving. China has decided to give aid
outside of that framework, sensibly because it sees them as Western standards.

The problem with that of course is that there's a reason why those standards have been developed in
the first place. We saw for example, aid givers loading up many very poor countries with enormous
loans to the point at which they finally broke under the rate of the repayments of those loans.

China is still continuing as we see in the Pacific to give very large loans to countries, some
cases up to 22 per cent of their entire GDP in one loan. It's in a sense jeopardising some of the
development benefits we've seen in recent years.

PETER CAVE: Fergus Hansen from the Lowy Institute speaking to Meredith Griffiths.