Waylaid Dialectic

July 4, 2019

Will Australian aid’s increased focus on infrastructure be good for the Pacific

Filed under: Random Musings — terence @ 4:23 pm

A revised version of this blog post is now published on East Asia Forum. You can read it here.

The need for infrastructure in the poorer parts of the Pacific is obvious. Outside of urban areas, once-paved roads are now muddy tracks. On some islands, planes land on grass runways that are frequently closed by rain. In places, small boats take hours to convey cargo from ships moored off coasts deprived of wharves.

Australia’s never completely forgotten the infrastructure needs of the Pacific. The chart below shows aid for infrastructure work as a share of total Australian foreign aid to the Pacific over the last 15 years. In 2013, a recent low point, Australia still spent $70 Million (USD) on infrastructure in the region.

Infrastructure spending as a share of total Australian government aid to the Pacific

chart

Data source: OECD Creditor Reporting System data. 2017 is the most recently available year.

Yet, Australian aid’s focus on infrastructure in the Pacific is set to substantially increase. This will come through aid grants (grants have been how Australia has typically aided the Pacific) and to an increasing extent through the provision of loans.

Infrastructure is needed in less affluent Pacific countries. But Australia’s newfound fixation on infrastructure spending is not guaranteed to be beneficial. There are two reasons why it isn’t: recipient context and donor motivations.

Aid is never guaranteed to succeed – tailoring aid to recipient context is crucial if it is to work. It is very hard to spend aid successfully on infrastructure in poorly governed countries such as Papua New Guinea and Solomon Islands, the two largest Pacific recipients of Australian aid. Unclear property rights and governments too weak to exercise eminent domain make new infrastructure projects difficult. (Such challenges that have hampered the development of the Tina River Hydro-electricity project in Solomon Islands, to give one example.) It is also hard to get governments in poorly governed states to play the crucial role of maintaining infrastructure. Part of the reason why roads are in such a bad state in countries like Papua New Guinea is that governments have neglected the task of maintenance for decades. These challenges don’t mean all infrastructure work is destined to fail. But they do mean it needs to be very carefully planned, and only undertaken if challenges do not appear too great.

Which brings me to donor motivations. Aid donors that are truly concerned with helping developing countries will be more likely to carefully scope and plan projects to ensure they are appropriate for context. Unfortunately, not all of Australia’s new found interest in infrastructure in the Pacific can be attributed to a genuine desire to help. Much of it seems to stem from a desire to stave off China’s rising influence. Possibly that reflects a reasonable strategic concern on Australia’s behalf, but a preoccupation with China is unlikely to be a useful guide to good decision making when it comes to aiding the Pacific.

Take, for example, Australia’s promise, made along with other aid donors, to bring electricity to 70 per cent of the population of Papua New Guinea within 11 years. The promise will never be met. Current electrification rates are 23 per cent and not increasing rapidly. Much of Papua New Guinea is very remote, and the country is, as I’ve already mentioned, poorly governed. So why was the promise made? Reporting in U.S. media has stated the electricity work is, “a response to growing Chinese influence in the Pacific.” Australia and its allies are making unmeetable promises in response to the rise of China. This is exactly the type of decision making that undermines the chances of aid succeeding.

Australia’s apparent eagerness to use loans as well as grants to fund infrastructure in the Pacific further complicates matters. Loans have a role in aid work, but it’s also crucial they succeed. If an aid grant fails, the money is wasted. If an aid project funded with a loan fails, the money is worse than wasted – the recipient is indebted and has nothing to show for it.

Some people are instinctively hostile to aid being spent on infrastructure projects. I’m not one of these people – infrastructure is a key part of development. I am, however, instinctively hostile to aid being misspent. Australia, like most other OECD countries spends very little on foreign aid. The least it could do is maximise the chances the money it does give helps people in need. Unfortunately, Australia’s current lurch towards infrastructure spending is likely to make its aid less effective, not more.

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