Distract and divert: the cost of Australia’s ‘Step Up’ in the Pacific

Alex Chudleigh

It’s now the norm that whenever a federal budget is released, foreign aid is put to the sword. Decreases in aid have accelerated since the Coalition formed government in 2013 and once a point of national pride, making up 0.45 per cent of Gross National Income (GNI) in the mid-80s, aid now hovers around 0.2 per cent. These cuts are not only disconcerting but disproportionate—aid expenditure makes up a meagre one per cent of the overall budget. For many, this trend is alarming not only in moral terms, but also because aid is an important way for Australia to achieve its foreign policy goals and enhance its international reputation.


Canberra's renewed commitment to the Pacific, through its 'Step Up' initiative, promises $1.4 billion from 2019-2020–a huge chunk of the overall budget at 35 per cent–and demonstrates the government's continued belief in aid as a tool to advance foreign policy objective. The ‘Step Up’ is commendable as it addresses concerning regional infrastructure and development gaps, but the overall decline in aid presents a more serious threat to Australian interests than the benefits of focusing solely on the Pacific.


While the ‘Step Up’ reflects Australia’s strategy of utilising aid as a diplomatic tool, allowing it to garner influence and promote regional stability through infrastructure and development projects, the refocus on the Pacific has largely been driven by geopolitical factors. Australia’s stubborn inaction on climate change has long been met with anger in the Pacific, and simmering discontent boiled over at the 2019 Pacific Islands Forum, where Australia ensured that the official communiqué made no firm commitments towards confronting climate change, an issue critical to Pacific island nations.


Australia remains the dominant source of aid in the Pacific, but increasing Chinese investment in the region through the Belt and Road Initiative (BRI) provides a luring alternative for countries dissatisfied with Australia’s climate policies. China’s investments in infrastructure and development projects are ostensibly aimed at providing capital to developing countries, but fit within a broader picture of courting favour. It is this, coupled with the need to heal its Pacific relationships that has caused Australia to so drastically increase its aid to the region – doing so allows it to bolster its regional authority while curbing Chinese encroachment into its sphere of influence.


Ironically, the increase in aid to the Pacific has come at the cost of aid reduction to recipients being courted by China in its own sphere of influence. Namely, DFAT’s Aid Program Performance Report reveals that all bilateral development aid to Pakistan will be phased out. While this is the result of a diminishing overall aid budget, prioritising the Pacific will have negative consequences for Australia’s influence in other regions.


From 2012, Australian aid in South and West Asia has reduced by about half, with Pakistan being directly affected. Pakistan’s high rates of poverty and gender inequality demonstrate Pakistan’s problems in providing economic and social services to its people. Australian aid was successful in supporting Pakistan’s vulnerable population: it ensured 1.7 million people received conditional cash and food assistance; helped tackle gender violence—with roughly 70 per cent of men and women in targeted communities playing an active role in local initiatives - and helped send two million Pakistani girls to school.


These successes are noble for their own sake, but they also allow Australia to project power beyond its immediate region, strengthening ties and building relationships useful in international forums – platforms essential for middle powers like Australia to leverage their influence and pursue their interests.


If Australia’s goal is to utilise its aid to increase its influence while curbing China’s, the decision to cease aid to Pakistan is poorly timed. While it’s true that Pakistan and China share a special relationship, with the latter investing significant amounts of capital in the former, China’s increased presence in Pakistan has resulted in diplomatic strain. The China-Pakistan Economic Corridor, seen as a flagship project of BRI promised to increase Pakistan’s GDP by almost 10 per cent by 2030, has led to fears of debt trap.


The cost of the project has increased, and while it has developed critical infrastructure, the most well-paid jobs have gone to Chinese workers, a feature replicated in other BRI projects. This, coupled with the treatment of Uighur Muslims in Xinjiang, has amplified anxiety amongst Pakistanis and negatively impacted the Chinese relationship. The lost opportunity here for Australia is apparent: by retreating from Pakistan, it is arguably relinquishing a relationship it has developed over time and with it, the prospect of exerting influence at a time when China is politically vulnerable.


The ‘Step Up’ in the Pacific is welcome, but it distracts from the concern that if Australia wishes to utilise its resources for foreign policy objectives, it cannot continue to cut its foreign aid budget. By following countries like Britain and increasing overall aid expenditure to 0.7 per cent of GNI, the UN target, Australia could simultaneously pursue its interests in the Pacific while dedicating development assistance to other regions of strategic importance. Doing so would allow Australia to build relationships, solidify its influence and leverage its power more effectively.


Alex Chudleigh recently graduated with Master of International Relations degree at the University of Melbourne, specialising in Southeast Asian regionalism and Australian foreign policy in the Indo-Pacific. He also recently completed an internship with the Australian Institute of International Affairs.

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