Pacific Islands – key issues

Dr Angela Clare, Foreign Affairs, Defence and Security

Key issue

Pacific Island countries face formidable development challenges, including providing employment, infrastructure and services to their young populations, addressing the disruptive effects of climate change, and managing increasing geostrategic competition.

The recent China- Solomon Islands security agreement raised alarm in Australia and the US, but it also highlighted the governance and security challenges faced by Pacific Island countries.

Foreign policy experts argue that a ‘business as usual’ approach is no longer enough if Australia wishes to forestall future security agreements between China and Pacific Island countries. Australia needs to build trust and offer meaningful solutions to the region’s development priorities if it is to achieve greater convergence around the security threats facing the region.

Key challenges for Pacific Island countries

The Pacific is a geographically and culturally diverse region with immense natural resources. But its small and dispersed populations, narrow-based economies and vulnerability to natural disasters present formidable constraints to development. Economic growth to provide social services, infrastructure and employment to young populations, addressing the threat of climate change and building human resource capacity are among the most pressing priorities for Pacific Island countries. At the same time, increasing geopolitical competition is presenting new security risks and adding to the region’s governance challenges.

With at least half the population aged under 23, the region’s ‘youth bulge’ is expected to have a major impact on the region’s development in the coming decades. The main challenges associated with this trend – strongest in the Melanesian states of Papua New Guinea (PNG), Solomon Islands and Vanuatu – include increased unemployment and poverty, poorer education outcomes, rising pressure on already fragile social services, increased chronic health problems and higher risk of social unrest.

Tensions over land in urban areas is becoming more common as people move from rural to urban areas, while in PNG, the loss of customary land is seen as the most likely issue to provoke disputes.

The Pacific region also has some of the world’s highest rates of violence against women and girls – about twice the global average. The region has some of the lowest rates of women in parliament and economic opportunities for women remain limited.

Increasing geostrategic rivalry has been a destabilising force over the last decade. China’s growing engagement in the Pacific has seen an influx of new international partners and increased access to much-needed finance for Pacific Island countries. It has also coincided with the rise of a more assertive ‘Blue Pacific’ diplomacy by Pacific Island states. But Pacific leaders acknowledge that geostrategic competition is exacerbating the region’s vulnerabilities: growing transnational crime, including illegal fishing, is increasing competition for resources, corruption has increased the complexity of security challenges facing the region, and urgent development needs increase opportunities for foreign influence.

Most Pacific Island countries were successful in preventing the entry of COVID-19 over the first year of the pandemic, but outbreaks occurred across the region in 2021, the largest in French Polynesia, Fiji, New Caledonia and PNG. Several countries have suffered marked slowdowns in economic activity as a result of COVID-19 related restrictions, particularly those that are heavily dependent on tourism, such as Fiji, Vanuatu and Samoa. The pandemic brought labour mobility to a halt, shrank economic activity, cut jobs and reduced working hours for overseas migrant workers. COVID-19 is likely to leave the Pacific on a development path some 9% lower than pre-pandemic levels, the Lowy Institute estimates.

Climate change compounds these challenges. The International Monetary Fund has estimated that Pacific Island countries need 6–9% of GDP each year for 10 years to climate-proof their infrastructure and increase coastal protection. Their access to international climate finance has fallen well short of this level, however. In 2017 the Asian Development Bank estimated that Pacific countries required infrastructure investments of US$3.1 billion per year to 2030 to meet their needs. With a growing gap in their capacity to address these issues, the Pacific is expected to remain one of the world’s most aid-dependent regions.

Australia-Pacific relations

As the largest regional power, Australia has long considered itself to have a leadership role in advancing the prospects of its Pacific Island neighbours. Australia is the region’s biggest development partner by a large margin, providing an estimated $5.37 billion in aid to Pacific Island countries over the last 3 financial years. With New Zealand and the US, Australia is also one of the region’s primary security partners. It has been the major donor for the region’s COVID-19 response, providing $804 million in additional aid and over 2.5 million vaccine doses to 8 countries since the start of the pandemic. Australia has also been at the fore of natural disaster relief efforts, most recently in response to Tonga’s devastating January 2022 volcanic eruption.

Maintaining – and where necessary, restoring – its position as the region’s ‘partner of choice’ and preventing an external power from gaining a strategic foothold in the region has been critical to Australia’s interests in the Pacific since the Second World War.

Australia has responded to China’s growing influence in the region through its Pacific Step-up, which has sought to better support the region’s priorities through a number of new security and development initiatives. Australia’s major investments since 2018 include the $3 billion Australian infrastructure financing facility for the Pacific, the labour mobility scheme, the Pacific Security College, new people-to people initiatives and increased diplomatic posts in the region. Australia is promoting trade links with Pacific Island countries through the Pacific Agreement on Closer Economic Relations Plus (PACER Plus).

Australia’s defence ties, including its long-standing programs between the Australian Defence Force (ADF) and Pacific militaries, are regarded as its strongest institutional ties in the region. The Pacific Maritime Security program – a key element of this cooperation – helps Pacific countries protect their maritime resources and gives Australia a valuable strategic presence in the region.

Some of Australia’s other key strategic initiatives in the region include its commitments to redevelop the PNG- Australia- US Lombrum naval base on PNG’s Manus Island; fund an undersea internet cable linking PNG, Solomon Islands and Australia; and co-fund Telstra’s purchase of regional telecom company Digicel, whose headquarters are in PNG.

The announcement of a new security agreement between China and Solomon Islands, signed in March 2022, raised alarm in Australian and US security circles, who fear that it may lead to a Chinese military base in the Pacific and ‘substantially alter the balance of power in the Indo-Pacific’.

Incoming Foreign Minister Penny Wong visited the Pacific shortly after the new Albanese Labor Government was sworn in, committing to deepen Australia’s engagement in areas such as climate change, defence, maritime cooperation and labour mobility.

For many foreign policy experts, the new China-Solomons security pact shows that a rethink of Australia’s policy settings in the region is needed. While the Pacific step-up sought to advance the integration of Pacific countries into the Australian and New Zealand economies and security institutions – 'essential to the long-term stability and economic prospects of the Pacific’, according to the 2017 Foreign policy white paper – it has not gone far enough.

Some have argued that Australia will need to go beyond a ‘business-as-usual’ approach if it is to forestall further security agreements between China and the Pacific Island countries. Given the ‘sheer scale’ of China’s economy and the opportunities it offers to Pacific Island countries, Australia should not try to outspend China but offer ‘genuine partnerships’ that address the needs and aspirations of Pacific Island countries.

Among the proposals advanced are increased investments in defence and development assistance, meaningful action on climate change and deeper regional economic integration, including increased opportunities for Pacific Islanders to gain employment and permanent residency in Australia.

The need to build greater trust, mutual understanding and respect in Australia’s Pacific relationships is a widely shared view. Australia has often been criticised for its tendency to take an overly ‘securitised’ and at times heavy-handed approach in the region, and Pacific experts have long warned against the corrosive effect of failing to engage with the region’s own security priorities. Australia’s refusal to endorse stronger action on climate change is seen to have been particularly damaging to its relations in the region, fuelling the perception that its primary interest was competing with China, rather than in promoting the interests of Pacific states themselves.

The region’s international partners need to treat Pacific nations as equals in their conversations about security and China’s role in the region, according to New Zealand analyst Anne-Marie Brady. Few Pacific Island countries ‘would welcome dependency on China, or the Pacific turning into a Sinocentric order’, she argues, but if partners fail to treat the region’s leaders as equals, they add to the risk that some in the region ‘conflate concern about the real dangers of [China’s] political interference and grey-zone activities – when expressed by “Western” actors – with neo-colonialism’.

Others have argued that the China- Solomon Islands security deal underlines the need for Australia to develop a more nuanced understanding of the security risks facing the region. Interpreting the security agreement as Australia’s failure to maintain primacy in the Pacific ‘overlooks the complex ways in which power is exercised in the region’. Providing aid, infrastructure and finance does not necessarily translate into diplomatic influence, and Australia needs to recognise the ‘complex webs of authority and influence’ that operate at the sub-national and national levels.

A number of commentators have made the point that Australia cannot achieve its security goals alone. Australia needs to develop a shared view of the risks China presents to the region and engage Pacific Island countries more strongly with that threat. It could do this by working with other partners and Pacific Island countries to institutionalise security dialogues and build the understanding and trust needed to address ‘potentially sensitive issues’ and ‘provide a platform for Pacific voices and perspectives’. It could also build partnerships with countries outside its traditional security partners, such as South Korea, to pursue ‘a less securitised form of diplomacy’ and ‘grow the ecosystem of aid, investment, and trade in the region’.

Australia’s relations with the Pacific have strong foundations, and Australia may yet be able to work with Solomon Islands to prevent the security pact from destabilising the region, according to former head of the Regional Assistance Mission to Solomon Islands (RAMSI), Nick Warner. This will require ‘skilful diplomacy’, he argues: more aid, seasonal workers or defence force training in Australia is the ‘easy part’; what is needed instead is ‘patience, trust, quiet communication and building relationships’.

China in the Pacific

While China has had commercial interests in the Pacific for hundreds of years, its engagement in the region has increased significantly since 2006. China now has considerable economic and business interests in the Pacific, including fisheries, timber, mining, energy and port access. By 2021, China had signed Belt and Road Initiative (BRI) cooperation agreements with all 10 Pacific Island countries with which it has established diplomatic relations.

For Pacific Island countries, access to finance, infrastructure spending and trade have been among the main benefits of China’s engagement. While Australia remains the largest trading partner with the Pacific at 18% of total merchandise trade (p. 15), the value of China’s 2-way trade with Pacific Island countries increased 3-fold between 2008 and 2018 (p. 103), with its share of total Pacific Island country exports rising from 6% to 20% over this period. China is the largest importer of the region’s natural resources, importing resources worth US$3.3 billion in 2019. In 2019, PNG alone exported US$2.3 billion worth of oil, metals and minerals to China.

China’s direct investment in Pacific Island countries rose by 400% between 2013 and 2018, from US$900 million to US$4.5 billion. This compares to Australia’s total investments in the Pacific of A$18.5 billion in 2018, according to Department of Foreign Affairs and Trade estimates (p.10). Vanuatu, Samoa and Tonga are among China’s most significant debtors, while PNG has high levels of ‘hidden’ Chinese debt, according to the US-based AidData.

China’s aid and lending to the Pacific has declined since 2018, however, falling by 31% from US$246 million in 2018 to US$169 million in 2019 – its lowest levels since 2012, according to Lowy Institute analysis. This decline suggests that Pacific countries may have less capacity to take on new loans or are more wary of the ‘mixed track record’ of Chinese loans, the authors suggest. It may also be that ‘Chinese aid has served its purpose’:

Chinese loans have been used as a vehicle to get State-Owned Enterprises into the region. These SOEs have now put down deep roots and are competing in commercial activity across the board. According to China’s investment statistics, Chinese construction activity in the region was US$958 million in 2017, almost six times greater than its foreign aid activities. These companies are still building China’s presence and influence in the region without needing direct government support in the form of loans.

China’s strategic interests in the region include garnering diplomatic support for its foreign policies, particularly its ‘One China’ policy. Four Pacific Island countries – the Marshall Islands, Nauru, Palau and Tuvalu – continue to maintain diplomatic relations with Taiwan, while Solomon Islands and Kiribati switched their recognition from Taipei to Beijing in 2019. In 2021, when the human rights situation in Xinjiang was raised at the 47th UNHRC session by Canada, Kiribati, PNG, Solomon Islands and Tonga were part of a coalition of 69 countries that supported China’s position. Both PNG and Vanuatu have expressed positions on the South China Sea disputes that closely align with those of China, and have moved against journalists critical of the Chinese Government.

At the same time, China has met with some pushback from Pacific Island countries, and the country has particularly struggled to build influence in PNG, the largest country in the region. China’s engagement in the region has been criticised for its potential debt entrapment, the quality of the projects it is financing, and for exerting pressure on local media and compromising political processes, including elite capture. China’s involvement with illegal fishing has been seen as a threat to the region’s revenue sources and food security.

The prospect of China gaining sufficient economic leverage over Pacific nations to allow China’s military access to strategic defence infrastructure such as ports and airstrips is a major concern to both the Australian and US governments. China is reported to have tried to gain access to militarily significant airfields and ports in Kiribati, Vanuatu and French Polynesia, and has established military cooperation with Fiji, PNG and Tonga.

Analysts suggest that the recent China-Solomon Islands security pact was likely driven by the Chinese Government’s aim to deepen security cooperation with Pacific Island countries and protect its overseas interests, as well as the growing rivalry with the US and its allies in the region. For its part, China has strongly denied it has any intention of building a military base in Solomon Islands, and argues that the agreement ‘is based on Solomon Islands’ needs and requirements’.

The Chinese Foreign Minister visited 8 Pacific Island countries in May 2022 and held online meetings with several more to seek support for 2 new economic and security deals incorporating trade and investment, public health, policing, cybersecurity, maritime surveillance and disaster response. The proposals – which analysts claim would dramatically increase China’s integration with the region – have so far failed to gain agreement.

China-Solomon Islands security agreement – background

The new security agreement came as no surprise to Pacific observers, who note that it reflects China’s growing diplomatic and economic ties with Solomon Islands and its strategic ambitions in the region. Two-way trade with China makes up around 46% of Solomon Islands’ total trade. China’s recent engagement includes a number of high-profile investments, including the construction of 7 stadiums for the South Pacific Games to be held in Honiara in 2023.

Solomon Islands’ Prime Minister Manasseh Sogavare has strongly denied that the agreement will lead to a military base, confirming that ‘Australia remains our partner of choice, and we will not do anything to undermine Australia’s national security’. He described the security agreement as ‘necessary for countering the “hard internal threats” facing his country’, arguing that his country’s existing security agreement with Australia has proven ‘inadequate’ following last November’s anti-government protests in the capital, which targeted Chinese businesses.

The November 2021 unrest in Honiara was triggered when protesters – largely from Malaita province – marched on parliament and demanded Prime Minister Sogavare step down. Malaita’s grievances have been linked to the national government’s 2019 decision to switch diplomatic allegiance from Taiwan to China, and to long-standing tensions between national and local government. China and Taiwan had waged a contest over diplomatic recognition in Solomon Islands for a number of decades, with both countries accused of engaging in ‘chequebook diplomacy’.

Following the outbreak of violence in November 2021, Australia sent Australian Federal Police and ADF personnel to Honiara in response to a request from the Solomon Islands Government, the first time it had sent personnel to the country under the 2017 security agreement between the 2 countries.

But the unrest goes well beyond ‘a pro- versus anti-China issue’, analysts argue, and highlights the economic divide between regions and allegations of corruption in the central government’s dealings with China. Malaita is the most heavily-populated island in Solomon Islands, but its development has lagged behind that of Guadalcanal, where the capital Honiara is located. Economic issues are believed to have driven the internal conflict in Solomon Islands from 1998 to 2003, known as ‘The Tensions’.

Malaitan Premier Suidani’s decision to maintain ties with Taiwan despite the central government’s switch to China in 2019 was ‘readily embraced’ by Malaita’s decades-old secessionist movement, according to Pacific analyst, Mihai Sora. China promised $730 million in financial aid to the Solomon Islands Government following the switch, while Malaita province continued to receive support from Taiwan. In October 2020 the US allocated US$25 million in aid directly to the Malaitan provincial government – 50 times what the province received in the preceding year from donors – in what has been seen as part of US-China strategic competition in the region.

The solutions are complex and long-term. Solomon Islands needs economic development to provide employment, infrastructure and services to its young population and a stronger sense of national identity to foster social cohesion, Pacific observers argue. But in a country characterised by high levels of corruption and a clientelist system of politics, these reforms will not be easy to achieve.

Regional integration

Some of the more ambitious ideas for resetting Australia’s relations with the region involve deeper economic regional integration, including through increased labour mobility and migration opportunities, which proponents argue have the potential to provide long-term solutions to the Pacific’s development challenges.

Labour mobility programs have long been identified as areas of particular benefit to the region. While concerns have been raised about the exploitation of workers under Australia’s labour mobility schemes, they have offered Pacific workers opportunities to gain skills, earn income and support their communities at home through remittances.

The incoming Labor Government has pledged to strengthen cooperation across all areas of Australia’s engagement in the Pacific, promising a $525 million increase in development assistance over 4 years and new initiatives in defence and maritime security, media and climate change. Labor also flagged several reforms to the Pacific Australia Labour Mobility (PALM) scheme, including helping to meet upfront travel costs for Pacific workers, allowing participants to bring family members to live and work in Australia, and establishing a 4-year Agriculture Visa.

Notably, Labor has proposed establishing a Pacific window in Australia’s permanent migration program, the new Pacific Engagement Visa. Modelled on New Zealand’s Pacific Access Resident visa, the scheme will provide an initial 3,000 visas for those able to find employment in Australia, opening opportunities for permanent residency denied under temporary labour programs. In all, the proposals represent a significant step-up in Australia’s approach to Pacific labour mobility, according to the ANU’s Stephen Howes.

One group of researchers has put the case for an incoming Australian Government to go further in this area, proposing a ‘New Regional Compact’ that shifts the focus from temporary and short-term labour mobility programs to long-term policies that emphasise skills development. The compact would be designed to increase access for those Pacific countries with lower levels of labour mobility – including PNG, Solomon Islands and Vanuatu – and include pathways to permanent residency and assistance to ‘support Pacific human capital development’.

Michael Shoebridge from the Australian Strategic Policy Institute argues that Australia should open its economy and labour market to South Pacific people, along the lines of Australia and New Zealand’s Closer Economic Relations Trade Agreement and visa-free work and travel framework. Such a deal ‘will matter much more than any amount of aid money and any amount of rapidly built large infrastructure and debt from our friends in Beijing’, he suggests.

Academic John Blaxland has argued that Australia should offer a compact of association with the smaller South Pacific countries, akin to the treaty arrangements the US maintains with Palau, the Marshall Islands and the Federated States of Micronesia, and the associated status which Niue and the Cook Islands have with New Zealand. The compact would allow for shared governance of administrative territories, including policing and defence, and provide opportunities for permanent residency in Australia.

Blaxland’s was one of a number of proposals for greater economic integration considered by the Joint Standing Committee on Foreign Affairs, Defence and Trade in its inquiry into Strengthening Australia’s relationships in the Pacific (March 2022). The committee acknowledged ‘the sensitivities’ around proposals for a compact of association – specifically in regard to the issue of Pacific sovereignty – but noted that such an approach could offer significant benefits to both Australia and Pacific Island countries, particularly those most vulnerable to population displacement risks due to climate change (p. 80). The committee recommended Australia ‘start dialogue’ with Pacific Island countries and ‘evaluate bold ideas for longer term Pacific region “deep integration”’ (pp. 100–101).

The inquiry was one of 4 the committee conducted into Australia’s relations with the Pacific in 2021–22, which also included the Inquiry into Australia’s Defence relationships in the Pacific (April 2021), Deepening relations with the Pacific nations through trade (September 2021) and the Inquiry into the human rights of women and girls in the Pacific (November 2021).

The reports’ recommendations were wide ranging and included calls for Australia to deepen defence and security relations with Pacific Island countries; increase support for COVID-19 recovery; boost trade, economic support and investment in infrastructure; strengthen people-to-people links, including through sport, churches, media and education; establish greater Australian media presence in the region; and advance the status of women and girls across Australia’s engagement.

They also recommended building on existing labour mobility schemes to improve Pacific workers’ welfare and promote skills transfer, remittance income, and creating pathways to permanent residency and migration intake.

The Australian Parliament plays an important role in supporting parliaments in the Pacific through forums such as the Inter-Parliamentary Union (IPU) and the Asia Pacific Parliamentary Forum (APPF), and through parliamentary capacity-building programs, twinning arrangements and delegation visits. The IPU and the APPF hold regular conferences to bring together parliamentarians from across the region to discuss key issues facing democracies and promote integrity in government and parliaments.

Labor has pledged to reinstate bipartisan Parliamentary Pacific visits as part of its commitment to strengthening Australia’s relations with the region, noting that ‘Bipartisan visits were undertaken by the Turnbull Government and former Foreign Minister Bishop, but have not been continued by the Morrison Government’.

Further reading

Pacific Islands Forum (PIF) Secretariat, Action Plan to Implement the Boe Declaration on Regional Security, (Suva: PIF Secretariat, 2019).

Pamela Thomas and Meg Keen (eds), ‘Perspectives on Pacific Security: Future Currents’, Development Bulletin 82, (February 2021).

Geoffrey Wade, Solomon Islands and China, FlagPost (blog), Parliamentary Library, 16 December 2021.

Romeo Arahan et al., Pacific Island Countries in the Era of COVID-19: Macroeconomic Impacts and Job Prospects, (World Bank Group, December 2020).

Stewart Firth, Instability in the Pacific Islands: a Status Report, (Sydney: Lowy Institute, 4 June 2018).


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