Australia’s former minister for the Pacific region, Senator Concetta Fierravanti-Wells, has questioned the centre-right Coalition government’s plans to increase investments in infrastructure in the South Pacific.
The A$2 billion ($1.4 billion) Australian Infrastructure Financing Facility for the Pacific aims to provide grants and long-term loans for investments in telecommunications, energy, transport, and water infrastructure, Australia’s Prime Minister Scott Morrison announced in November. The plan was first floated by former Prime Minister Malcolm Turnbull in the last months of his leadership when Fierravanti-Wells was his minister.
The financing facility would be run out of Australia’s Department of Foreign Affairs and Trade and be responsible for making up to A$1.5 billion($1.05 billion) in low-interest loans and A$500 million ($352 million) in grants.
The move had come in response to concerns that Communist China’s influence was growing in the region through China’s controversial “One Belt, One Road” or Belt and Road Initiative that was offered aid to Australia’s island neighbors.
Fierravanti-Wells told an Australian newspaper that the Morrison government’s move will only add more debt to already struggling Pacific countries, and lessen the countries’ ability to spend money on pertinent local issues.
“Let’s be clear. A loan is a loan. It needs to be repaid, usually with interest,” Fierravanti-Wells told The Australian newspaper.
“Given that the debt in the Pacific is already about A$5.5 billion ($3.87 billion), including about A$2 billion ($1.4 billion) to the Asian Development Bank and World Bank, and A$1.5 billion ($1.06 billion) to Beijing, why are we even contemplating saddling our neighbours with even more debt?”
According to The Australian, Fierravanti-Wells said that lending more to these countries, which have external debt-to-GDP ratios ranging from 25 percent to 90 percent, could threaten the stability of their economies.
“This means scarce government resources must be deviated into debt repayment and away from critical spending such as health and education,” she said.
Complaint from Beijing
In January, when Fierravanti-Wells was still minister for international development and the Pacific, she told The Australian newspaper that China was lending to Pacific nations on unfavorable terms to construct “useless buildings” and “roads to nowhere.”
“You’ve got the Pacific full of these useless buildings which nobody maintains, which are basically white elephants,” she said at the time.
Beijing in January lodged a diplomatic complaint against Fierravanti-Wells complaining that the remarks were “full of ignorance and prejudice,” according to The Sydney Morning Herald.
At the time, then-Foreign Minister Julie Bishop told The Australian that she would not support projects that placed “onerous debt burdens” on developing countries.
In August, Fierravanti-Wells told the Australian Broadcasting Corporation (ABC) that other Pacific leaders had contacted her with messages of support.
“The reality is that subsequent events have vindicated my position and the concerns I raised,” she told the ABC in August.
“My comments stimulated an international debate, it stimulated a debate in the Pacific … and a growing awareness of the impact of debt.”
Debt Distress in the Pacific
China has transferred at least A$1.8 billion (1.26 billion) in aid and loans to South Pacific countries in the decade through to 2016, the Sydney-based Lowy Institute international policy think tank found.
Its Pacific program director Jonathan Pryke told The Australian that Fierravanti-Wells’ concerns are valid.
“It’s a really valid concern and one I know the bureaucracy is concerned about,” Pryke said.
“We will need to be creative in how we structure these loans to ensure we do not contribute further to the debt burdens for these countries.”
With the exception of Papua New Guinea and Fiji, Pryke said other Pacific countries are approaching debt distress.
“A lot of these economies are so small, one loan can take them right up to their debt threshold,” Pryke told The Australian.
The Associated Press contributed to this report.
