Camille Luchs | Indo-Pacific Fellow
Geopolitical competition is stirring the waters of the South Pacific. As China withdraws loan financing from the region, shared infrastructure investment may be key for other Indo-Pacific players looking to strengthen relationships with Pacific Island Countries (PICs).
China has sought engagement in the South Pacific through aid and development finance, in addition to security and diplomatic relations. This economic engagement has a far-reaching legacy within PICs. In Fiji, Beijing’s presence can be felt both in the funding and construction of infrastructure projects.
Queen Elizabeth Drive follows the sea wall around Fiji’s capital city, Suva. Since 2021, the road corridor has been under construction and is one of many major road upgrades currently underway in the island nation. The project is contracted to China Railway 5th Engineering Group, one of many Fijian government infrastructure contracts awarded to China Railway Group.
In its Corporate Plan for 2022/2023, the Fiji Roads Authority (FRA) nominated six foreign contractors in its list of key contractors: three Chinese contractors and three from New Zealand. The Chinese contractors share the state-owned parent organisation China Railway Construction Corporation Group, highlighting Beijing’s substantial role in the construction of Fiji’s roads.
On the other end of the development pipeline, the FRA utilised FJ$5 million from EXIM China in 2016 compared to approximately FJ$300,000 from the Asian Development Bank. Moreover, informal statistics suggest Chinese enterprises employed over ten thousand locals in Fiji’s infrastructure constructions. China continues to act as a major partner for the funding and construction of Fiji’s roads, as well as a major local employer. However, over recent years Chinese investment has declined, and aid has fluctuated in the region.
In 2021, according to CEIC Data, Chinese outward investment in Oceania totalled at US$2116.42 billion, falling from a peak of US$5211.77 billion in 2016:
Similarly, Chinese outward investment in Fiji totalled at $US37.16 million in 2021, falling from US$44.61 million in 2016:
Additionally, The Lowy Institute reports that Chinese development finance to South Pacific partners has fluctuated, peaking at US$334 million in 2016 and falling to US$188 million in 2020. The fall in Chinese development finance is likely due to limited absorption capacity and lower cost options from other development partners in the region.
PICs, under a vision of a Blue Pacific, are seeking greater recognition and agency in global affairs. Regional cooperation throughout the Indo-Pacific will be welcomed in addressing the region’s shared security and challenges. Moreover, PICs struggling with Chinese loan repayments and failed Chinese infrastructure projects are looking beyond Chinese development assistance.
In Fiji, falling development finance may be a welcome change. Denghua Zhang from Australian National University has identified growing concerns from scholars and students in Fiji about a Chinese economic monopoly, lack of job opportunities for locals, and the erosion of Pacific Islands’ sovereignty. This is despite claims from Beijing that the Chinese government does not attach ‘political strings’ to its cooperation with the country. China’s withdrawal of loan funding and lower outward investment to Fiji creates opportunity for shared sustainable infrastructure investment from other Indo-Pacific partners.
Shared infrastructure investment will be one of the paths forward for engagement with the South Pacific. In 2022, Fiji joined as a founding member, and first PIC, of the Indo-Pacific Economic Framework for Prosperity. The dynamics of loan financing to the region have also changed as regional partners move to fill the finance gap, with Australia issuing their first sovereign loan to Fiji to assist with road and bridge upgrades.
While it appears that Fiji will not entirely resist Chinese aid and investment, having signed up to the Belt and Road Initiative in 2018, the country is seeking opportunities to engage with a broader range of investment partners and address issues of debt sustainability impacting the South Pacific. Indo-Pacific countries seeking stronger ties in the Pacific amid China’s loan withdrawal must target infrastructure development. The first place to start could be Fiji’s roads.
Camille Luchs is the Indo-Pacific Fellow for Young Australians in International Affairs. She is currently completing a double degree in Justice and Business at Queensland University of Technology.
As a 2022 Westpac Asian Exchange Scholar and New Colombo Plan Scholar, Camille has completed studies in Japan and Singapore. Camille is passionate about exploring the region’s security challenges, with a specific focus on women’s leadership. She is currently completing an internship in leadership development in Fiji, before travelling to Taiwan to complete another internship in security policy.