Introduction
3.1
Representations on how Australia can strengthen trade and investment with Pacific island countries were made to the Sub-Committee at public hearings and in submissions. Greater regional economic integration between Australia and Pacific island countries is seen as important to helping grow trade and drive development in largely rural agricultural-based economies.
3.2
While opinions on the projected benefits of the Pacific Agreement on Closer Economic Relations (PACER Plus) differed, its implementation will be seen as a driver of closer economic integration despite two of the Pacific’s largest economies in Papua New Guinea and Fiji remaining outside of PACER Plus. The Sub-Committee would welcome Australia developing a safe effective travel bubble with the Pacific and New Zealand to help reboot tourism in Pacific island countries hit hard by the COVID-19 pandemic-related travel restrictions. The Pacific bubble would also open up Australia, especially its agricultural sector, to accessing much needed seasonal workers from the Pacific region. Other areas to help strengthen trade with the Pacific are improving biosecurity for Pacific food and timber exports, aid for trade programs, bolstering private sector development and Queensland as a Pacific hub. Australia can take a role in delivering infrastructure projects that provide more reliable and sustainable water and electricity, better transport links, improved health services and affordable internet.
Promoting greater regional economic integration
3.3
The World Bank Group submitted the decline in the share of trade in goods and services between Australia and Pacific island countries between 2008 and 2018, as shown by Figure 3.1, except for the Cook Islands, also highlighted the potential benefits of regional economic integration from the Pacific Agreement on Closer Economic Relations (PACER Plus) trade agreement.
While trade in goods and services as a share of GDP for the Pacific countries has grown overall, the share going to Australia has largely declined. This is partly due to increased trade between the Pacific and other trade partners, particularly China, but it points toward the opportunities that PACER Plus can provide to Australia with reduced barriers to trade, investment, and greater avenues for labour mobility.
3.4
DFAT described PACER Plus as a comprehensive regional development-centred free trade agreement between Australia, New Zealand and nine Pacific island countries (Cook Islands, Nauru, Niue, Kiribati, Tuvalu, Samoa, Solomon Islands, Tonga and Vanuatu). PACER Plus was agreed in 2017. When PACER Plus enters into force after expected ratification in late 2020, it will be the first trade agreement facilitating regional economic integration open to all Pacific island countries that is comprehensive—covering goods, services and investment. It also has a strong development focus with Australia and New Zealand committing A$25 million in development assistance to help Pacific island countries realise the opportunities of the agreement.
3.5
The Vice President of the Australia Pacific Islands Business Council, Mr Denis Etournard, as a businessman in New Caledonia highlighted the importance of an Indo-Pacific agreement between Australia, New Zealand and France to help Pacific island countries protect their environment and economies.
It’s very important that we reinforce that agreement. If you look at the green economy and the blue economy, the blue economy is devastated in the Pacific by countries that can’t control their oceans, and it’s creating devastating results on tuna. On the green economy, countries have lost their forests and they’ve damaged forests in the Solomon Islands, in PNG and everything. We have a responsibility to ensure that the future green and blue economy is done well for the populations of the countries. Those are general points: education standards, infrastructure, logistics and green and blue economies.
…we have regions of those European countries that are specialised in green and blue economies for the tropical regions. That’s why we have scientists, research centres and high-development technology businesses being developed, because of the quality of the green and blue economies of the Pacific.
3.6
Dr Wesley Morgan, Adjunct Research Fellow at the Griffith Asia Institute highlighted that while broadly speaking Pacific island countries are really uniquely rural, many islanders want to trade globally.
They have very large numbers of people who are not employed in the formal economy—they’re often working their own land. But that doesn’t mean that these people are not entrepreneurial, innovative and participating in international trade; often they are. In very remote parts of the Pacific, people will still be producing coffee that ends up in cafes in Amsterdam. They’ll be producing high-value, niche chocolates that will be sold into markets around the world. Here there is a link between agriculture and ICT.
3.7
Dr Morgan believed the Australian Government ‘…really needs to be thinking about how Australia can promote Pacific products into the Australian market as high-value, niche products’.
Here I’m thinking single-source chocolate and single-source coffee. These things are happening already. To be sure, they’re not likely to be a mass industry in the way that commodity trades of the past have been—things like sugar and copra—but there is a lot of potential when you marry those two things, both agriculture and ICT. The importance of the ICT there is in the marketing and in the helping to ensure that producers themselves understand what the consumers at the Australian end are wanting.
3.8
Austrade’s Acting General Manager of Government and Partnerships, Ms Margaret Bowen declared prior to COVID-19 pandemic the Pacific was certainly attracting increased attention from the Australian business community and the global business community.
There is growing investment in the Pacific and increased commercial activity, and emerging technologies are helping to drive business opportunities in the Pacific in a way that previously we couldn’t do.
3.9
The Department of Industry, Science, Energy and Resources (DISER) submitted its relationship with the Pacific region was relatively small and dominated by the resources sector in PNG.
To achieve growth in trade more broadly, Australia will need to rely on an array of technical and scientific connections to build opportunities for technology adoption and services trade, increase efforts to reduce technical barriers, and influence good regulatory practices that facilitate trade.
3.10
DISER declared that its broad portfolio was well placed though to contribute to Australia ‘…activating greater trade and promoting sound investment between Australia and the Pacific islands’.
It has well-established relationships across a range of sectors, including in natural resource management, quality infrastructure, biosecurity risk management and other technical fields. These relationships have the potential to be scaled up, with better linkages to opening up trade and investment flows where possible. The opportunities will be diverse, with digital transformation and the adoption of technology a useful priority that can be leveraged to assist a broad range of sectors and smaller business in accessing global value chains.
3.11
DISER outlined there were significant opportunities growing trade with Australia’s largest trading partner in the Pacific and for the continued development in the PNG resources sector.
It is believed that there is a vast wealth of resources in PNG left undiscovered as rough terrain and harsh climate makes exploration difficult. Australian companies are well placed to support the development of the PNG resources sector, given their experience operating in rough terrain and in remote and harsh conditions. Major project proposals that are being developed by Australian firms in PNG include the Wafi Golpu copper-gold mine and the Freida-River copper-gold mine.
3.12
A key insight on the development impact of trade and investment by the World Bank Group was the importance of people to people contact in the Pacific. It builds broad-based connectivity through multiple channels such as in trade, foreign direct investment, labour mobility, telecommunications, the internet, and transportation, and it ‘…facilitates the transfers of knowledge and technology that are critical to long-term growth and development’.
While all these forms of connectivity can enhance knowledge and technology transfers, it should be highlighted that person-to-person contact remains an essential part of facilitating business. Managers need to travel for their businesses and trade and investment is facilitated through personal relationships and local market knowledge. Multiple channels of connectivity complement one another because of the tacit (learning by doing), rather than explicit (contained in books or blueprints) nature of knowledge transfers. People-to-people contact through labour mobility including work programs, overseas studies, and tourism, enhances the knowledge spill-overs by people transferring information between markets and supporting connections to them.
3.13
The World Bank Group believed linkages between firms in global value chains as well as foreign ownership and management practices can generate local knowledge spill-overs in the Pacific.
In the Pacific, despite progress made on enhancing connectivity, the region remains among the least connected globally, even when accounting for the physical distance to large markets and other development challenges such as market size and exposure to natural disasters.
3.14
Australia is also increasing its engagement with other donors and trading partners with interests in the Pacific, according to DFAT, including Japan, Korea, China, the US, the EU, New Zealand and the UK.
We welcome all investment that supports sustainable development in line with the priorities and ambitions of Pacific island countries, is delivered transparently and aligns with the principles of debt sustainability. As the region’s major bilateral grant development partner, Australia is committed to greater cooperation and coordination with other development partners to maximise opportunities for the Pacific.
PNG seeks assistance with downstream processing of products
3.15
Deputy High Commissioner of Papua New Guinea in Australia, Mr Sakias Tameo, highlighted trade was an important pillar of the Comprehensive Strategic and Economic Partnership (CSEP) with Australia, and the need for more Pacific products to get to market in Australia.
In PNG, trade is very important. I go to a whole lot of Woolworths and other shopping places here. As I go through the aisles I see so many products made out of coconut. There are drinks and all these other products. Have they come from the Solomon Islands, Vanuatu, Papua New Guinea, Tonga or Samoa? We have so much coconut, yet so many products on the shelves are made somewhere else. These things we have it in our own communities in our own countries.
3.16
Mr Tameo outlined the big challenge for PNG as a resource rich country was getting help from partners like Australia to develop its downstream processing industries.
That’s why our government is talking about downstream processing. That’s very important. I think that’s more important than development cooperation. Investment in those industries can help in terms of economic stability and performance, improve living standards and so on. I think Pacific island countries could be helped in terms of downstream processing of things like coconuts.
3.17
Mr Tameo conceded that PNG and other Pacific countries lack the efficiencies of many South-East Asian countries but they do have the raw materials and manpower to add value to these sought after resources.
We definitely can’t compete with Vietnam and all Asian countries. They’re very efficient. We can’t compete with them, but we’ve got the raw materials. If Australia can focus in terms of helping us with our downstream processing, that would help us a lot. As people say, if you teach a man how to fish they will fish for life.
At the moment the Australian investors are so focused on the mining industry, banking and service. They get the money from PNG and come to Australia. We want some diversification to take place. That’s why all the Chinese and everybody else are going in and cutting down the trees and taking them off to Asian countries. All that is happening. If we can have some downstream processing, it can help the communities to maximize gains from their own resources. I think that’s where Australia can really help us. We can look at downstream processing, create employment and so on.
Importance of labour mobility to the Pacific
3.18
Temporary migration programs provide overseas employment opportunities to low- and semi-skilled workers who according to the World Bank Group would be unable to migrate through skilled migration channels. The World Bank Group stressed these schemes are especially important in countries where other types of migration are limited, such as in Vanuatu and Kiribati.
3.19
At the personal level, income gains for Pacific islanders from such programs were found by the World Bank Group in 2018 to be ‘…several orders of magnitude larger than those generated from domestic employment’.
The average Pacific island worker participating in the Seasonal Worker Programme (SWP) remits approximately $A2,200 and transfers $A6,650 in savings home over a 6-month period. These income gains per worker are significantly larger than those of other employment focused interventions (public works programs, entrepreneurship programs etc.).
3.20
The World Bank Group believed that schemes like the Seasonal Worker Programme, Pacific Labour Scheme, and New Zealand’s Recognised Seasonal Employer scheme thereby deliver a true ‘triple win’, benefiting both the receiving and sending country, as well as the migrant worker.
3.21
The High Commissioner for New Zealand in Australia, Her Excellency Hon. Dame Annette Faye King told a parliamentary hearing that labour mobility was ‘…absolutely crucial for the Pacific but also for Australia and New Zealand employers’.
We’ve been pleased to be able to work alongside Australia and Pacific partners to build the architecture for labour mobility cooperation. This will be supported by the implementation of the arrangement on labour mobility, which is a unique aspect of the PACER Plus agreement…We see that as a very important part of regional economic integration and development.
3.22
The World Bank Group also highlighted Tonga as an example of the national importance of remittances to some Pacific island countries. In 2018 remittances back to Tonga from Tongans working overseas in Australia and New Zealand were ‘equivalent in value to 35.2 percent of GDP—more significant than in any other country’.
Studies have shown that remittances in the Pacific alleviate poverty and raise living standards. While temporary migration is not the solution to domestic development challenges, it can be a safety-value for low or under-employment and provide an avenue for skills and future business development.
3.23
With support from DFAT, the World Bank has conducted analytical studies and technical assistance for the expansion of labour mobility opportunities for the Pacific for over the last decade. This work included World Bank support for a pilot for ni-Vanuatu people to work on New Zealand farms in 2006 forming the precursor to the establishment of New Zealand’s Recognized Seasonal Employer (RSE) scheme and Australia’s more recent Pacific Labour Scheme (PLS), which is managed by DFAT.
The World Bank’s analytical work has included evaluations assessing the development impacts of Pacific migration; sectoral labour market assessments (aged care, for example); and long-term modelling examining the economic and labour market impacts of migration from the region.
3.24
The ANU Development Policy Centre submitted the expansion of labour mobility has been the most positive development in the Pacific over the last decade.
…the Pacific is not a traditional trading region. But decades of experience show that aid is not the solution either. Labour mobility is a private sector activity, appropriate to Pacific characteristics. While we have made a start there is much that can be done to boost Australia-Pacific labour mobility pathways.
3.25
The First Assistant Secretary, Delivery and Employer Engagement Division, at the Department of Education, Skills and Employment, Ms Margaret Kidd, highlighted that more than 95 per cent of workers in Australia on the Seasonal Worker Programme came from PACER-Plus countries with only a few from Fiji and PNG.
If I look at our figures for 2019-20, we had 9,800 workers and only three per cent were from non-PACER Plus countries, so from Fiji and Papua New Guinea. That’s a very small proportion.
3.26
The World Bank’s advisory work has centred on knowledge sharing and regional cooperation; supporting labour migration policy frameworks; female participation; and strengthening institutional capacity through direct hands-on support to labour sending units. More recently, the World Bank submitted it has also moved to support labour mobility in its lending and operations.
The Skills and Employment for Tongans project supports recruitment efforts with a focus on disadvantaged households, while also funding skills development and training that is relevant (and importantly, recognized) for temporary migration opportunities overseas. There is potential to extend such support to new areas and to other countries.
3.27
The World Bank believed more can be done to increase female participation in labour mobility schemes and to ensure that sending households receive appropriate support.
3.28
The World Bank welcomed the inclusion of more of those islanders living in remote and rural areas of the Pacific to help increase the poverty alleviation impact of temporary migration schemes, with ‘development partners potentially assisting through financing of pre-departure costs using revolving funds or micro-finance programs’.
Nonetheless, 39 percent of PLS workers are female, a big improvement on the established and the larger Seasonal Worker Programme, where the ratio is 18 percent. Through these labour mobility schemes, in addition to improving domestic investment climate, the hope is that investment and trade opportunities will expand in the PICs.
Making remittances to the Pacific more affordable
3.29
DFAT outlined its commitment to supporting accessible and affordable remittance flows from Australia to the Pacific. The Pacific Financial Inclusion Program, to which Australia contributes funding, works with industry and Pacific banks to link international remittance platforms to bank accounts and integrate mobile money platforms to Vodafone’s international money transfer hub. Australia’s GfG Program in Vanuatu supports e-Wallet fintech applications for electronic money transfers between phones, including from international locations.
Pursuing a Pacific travel bubble with interested countries
3.30
While travel restrictions remain in place beyond the Australia and New Zealand travel bubble as of early June 2021 due to the much greater impact of the COVID-19 pandemic upon public health internationally, the ANU Development Policy Centre supported the expansion of a Pacific travel bubble outside of Australian and New Zealand’s borders to include willing Pacific island countries. Possible ‘Pacific bubble’ countries include the likes of Fiji, Vanuatu, Tonga, Samoa and the Solomon Islands.
The Pacific bubble should be pursued with interested Pacific countries to support tourism and labour mobility. In the current environment, the immediate need is to help the Pacific re-open its international borders. Australia can do this by proactively working towards a Pacific bubble, supporting Australian tourists to visit the Pacific and Pacific workers to work on Australian farms. With evidence of a looming harvest shortage over summer, supporting a pathway, with appropriate safeguards, for Pacific Islanders to work in Australia is particularly important.
3.31
Executive Committee member of the Australia Pacific Islands Business Council, Ms Tessa Price, knew firsthand that many Pacific island countries have been hit hard by COVID-19 travel restrictions decimating their tourism, the ability of their seasonal workers to work in Australia and New Zealand and also with attracting new business ventures.
Really the opportunity is…to open up safe air bridges or quarantined free-travel areas between New Zealand, Australia and some Pacific island countries. I think you can do that from a business perspective and from a tourism perspective as well.
Whilst tourism is not almost everything, it would actually help, and we do need to get tourists back in country and airlines back in the air. That will certainly help the Australian airlines as well and will stimulate the economies. I know you’re aware that the Pacific countries don’t have the same stimulus packages…it is a tough time in the Pacific, with a large chunk of the workforce out of work. We think that sharp economic contractions are due this year in the Pacific as a result.
We know that remittances, which is money that family and friends send back home, are holding up at this stage. Really, the long-term solution to the current crisis is recovering international tourism.
3.32
The Development Policy Centre believed Australia will need to work with Pacific island countries that will want to open their borders at different times due to legitimate public health concerns and their ability to contain any COVID-19 outbreaks.
Australia should work with those Pacific island countries who are willing to reactivate their economies, and thereby ease their suffering.
3.33
Save the Children Australia agreed with any establishment of a ‘Pacific Bubble’ to support Pacific labour mobility, and the flows of remittances and trade into Pacific communities during ongoing COVID-19 restrictions. Save the Children Australia welcomed discussions between Australia, New Zealand and some interested PICs, aimed at creating a ‘Pacific bubble’ to protect both Pacific tourism jobs and Pacific labour mobility into Australia.
Of course, we expect that such discussions will cover the appropriate quarantine and isolation safeguards, as well as labour protections so that the wages and conditions of Pacific workers in Australia align with Australian community expectations.
3.34
Noting the value of tourism too, Save the Children Australia highlighted in 2020 the lack of COVID-19 infections on some Pacific islands and stressed the importance of remittances as a ‘critical source of financial flows into the Pacific, improving the prosperity of the communities they support’.
Further, to date [May 2020], Vanuatu and Solomon Islands have suffered no COVID-19 infections, while Fiji has reported only a small number of cases. Assuming the PICs (and Australia) continue to contain the virus, implementing a Pacific bubble could permit labour migration between the two locations to continue, helping to ease the burden created by disruptions across other sectors.
Remittances are already a greater share of Pacific economies than aid and represent 5-40 per cent of PICs’ GDP. The World Bank estimates that due to COVID-19, global remittances are projected to decline by approximately 20 per cent, making this economic shock the largest decline in remittances in recorded history.
3.35
The Counsellor and Official Representative of New Caledonia to Australia, Dr Yves Lafoy, told the Sub-Committee that New Caledonia would welcome a Pacific travel bubble because on health security grounds, the Pacific has been acknowledged on the international stage for its ‘successful management of the health impact of the COVID-19 pandemic’.
New Caledonia is currently COVID-free, with no deaths and only 23 cases registered previously. Cooperation with Australia to repatriate New Caledonian citizens during this challenging time is a clear reflection of our close relationship…In June 2020 the president of New Caledonia acknowledged Australia’s commitment to regional economic recovery, expressing New Caledonia’s interest in being a part of a safe travel zone between Australia, New Zealand and the other Pacific countries.
The prospect of a resumption of flights with the Australian neighbour (by early 2021) is likely to encourage the restart of economic and tourist activities between the two countries.
3.36
In late 2020 in New Caledonia, the quarantine in a hotel requisitioned by the Government of New Caledonia was ‘compulsory for passengers arriving in New Caledonia by plane or pleasure boat, except for passengers coming from Wallis and Futuna. A screening test (PCR) is compulsory at the end of the quarantine’.
3.37
President of the Australia Fiji Business Council, Ms Allison Haworth West, called for the first phase that would ‘urgently be a business bubble to try to allow easier flow of businesspeople to establish businesses of their own or other businesses that are trying to function’.
We’re proposing a process with an organised structure with less onerous conditions for travel, reduced isolation requirements, stay within a COVID hotel, have social-distanced and pre-organised meetings and then leave the country, possibly having never left that hotel.
3.38
The Vice President of the Australia Pacific Islands Business Council, Mr Denis Etournard, as a businessman echoed frustration with the closed international borders during 2020 despite minimal COVID-19 cases.
On the COVID-19 bubble, I’ve done three quarantines in hotels going from Australia to New Caledonia, and I’ll be doing my fourth. I can’t understand that, because there are tests now and we’re coming from COVID-free areas. At the same time we’re having seasonal workers coming into the Northern Territory and other places, yet we can’t have business people travelling. That’s something I have difficulties with.
3.39
Ms Allison Haworth West accepted it will be difficult, but she believed most Fijians want Australia and New Zealand to move forward with the proposed Pacific travel bubble to kick-start the economy.
The context of this is we know there are discussions going on with America for opening up in some limited capacity; however, 65 percent of Fiji’s arrivals traditionally are from Australia and New Zealand. So it is very important for Fiji. In addition to our trade links, the Fiji economy relies on Australia for economic strength. So we implore the Australian government to get on the front foot and make this happen.
3.40
The High Commissioner for New Zealand in Australia, Her Excellency Hon. Dame Annette Faye King outlined on September 2020 that New Zealand was ‘…very committed to a Trans-Tasman safe travel zone’ with Australia first before expanding into the Pacific.
A lot of work has been done by officials—putting in place the building blocks for a Trans-Tasman travel zone. But, of course, the public health considerations do remain paramount for both our countries. When it is safe and the opportunities are there we will pursue them. Our Prime Minister hasn’t put a time frame on it yet, but she’s made it clear that we’re not ready yet, as we both our countries are currently focused on an outbreak at home. But we do know that the benefits of a safe travel zone will be real and significant, and we will look for a Pacific expansion once we do have an effective travel zone in place across the Tasman. We will explore those opportunities, but at the forefront will have to be the safeness of travel, because we do not want to see the pandemic spread to the Pacific islands and some who do not have it at all at present.
3.41
A safe travel zone was important because Australia is the important source of 26 per cent of remittances into Pacific island countries (PICs), according to Save the Children with Pacific, with seasonal workers sending home approximately $2,200 each over a six-month period in Australia, and bringing an average of $6,650 in savings back at the end of their period of work in Australia.
The Australian government has allowed Pacific Islanders on labour mobility schemes to stay in Australia during the pandemic and to keep working, allowing this form of trade to continue, and we argue that it should further extend this capacity during the crisis.
3.42
Save the Children supported the creation of a regional bubble that includes the Pacific islands because it would allow Australia’s temporary labour programs to continue as much needed agricultural and seasonal labour from other countries, such as backpackers, dries up.
As a result, Australia can ensure a well-regulated labour supply for key industries such as horticulture, marking a departure from the poorly regulated use of backpacker and other migrant labour in these sectors to date. It could also give Pacific Islanders a chance to send money back to their families, supporting children to stay in school and continuing their access to healthcare.
3.43
In November 2020, the Griffith Asia Institute found it disappointing that conversations about a ‘Pacific bubble’ had not progressed at the regional level much earlier in response the impact of COVID-19 travel restrictions as advocated by Dame Meg Taylor, Secretary-General of the Pacific Islands Forum Secretariat.
Initial conversations were very much focused around tourism and, in relation to some countries such as Fiji and Cook Islands, this remains the case. However, in many other places (Vanuatu, Tonga, Samoa, Solomon Islands) the main focus is around re-opening of labour mobility options via the Seasonal Worker Program and the Pacific Labour Scheme. This is not surprising and more needs to be done to ensure that all stakeholder needs and concerns are heard and addressed. Again, it has become evident that for many employers, these options have had low visibility thus far.
3.44
The Griffith Asia Institute highlighted labour shortages in Australia, it estimated at over 20,000 plus seasonal workers in agricultural sector, and believed it point to an opportunity to develop a greater regional commitment.
…to maximising the benefits that are to be gained from using labour mobility as a pathway to greater economic integration as between Australia and the Pacific islands region. However, in order for this to be a long-term success and to minimise reputational and diplomatic risk, more care and attention will be required to address community concerns (here in Australia and in sending countries) around protection of workers’ rights and safeguarding their wellbeing. This is even more the case in the Covid era.
3.45
The project lead of the Pacific Hub at the Griffith Asia Institute Dr Tess Newton Cain warned the economies of Pacific island countries and their communities would struggle if remittances diminish due to COVID-19.
…we also feel that a labour bubble is required between Australia and established labour sending countries such as Vanuatu, Tonga and Samoa, and then increasingly with countries that are newer to the labour sending space. This will allow for much needed injections of cash into Pacific island countries by way of remittances and for Australian businesses, especially those in agriculture, to fill critical labour shortages.
3.46
Even though its status as a French Overseas Territory means New Caledonia is not eligible for the Australian labour mobility programmes, New Caledonian residents under the age of 35 can still participate in the Working Holiday Maker programme once international travel resumes.
This programme allows people to work up to three times a year in Australia, subject to meeting strict conditions for an extension of the initial visa. If the Trans-Pacific Bubble project comes to fruition, it is expected that more New Caledonians will travel to Australia, pending the resumption of international flights.
Agricultural aid and trade development
3.47
The Australian Centre for International Agricultural Research (ACIAR) declared it is in ‘Australia’s national interest to ensure a stable and prosperous Pacific through developing trade opportunities that deliver food security benefits and more-stable economies’.
3.48
ACIAR has been supporting collaborative research and capacity building with the Pacific since 1982, focusing on Papua New Guinea, Fiji, Vanuatu, Solomon Islands, Tonga, Samoa, Tuvalu and Kiribati.
In 2019/20 ACIAR has 69 active research projects in this region valued at $20.3m and formal capacity building valued at $2.2m.
3.49
ACIAR submitted that facilitating the development of agricultural commodity trade and related enterprise development has been a major part of Australian development assistance to the Pacific countries. It outlined DFAT has been supporting the Pacific Horticulture and Agriculture Market Access program (PHAMA) and the Market Development Facility (MDF), and ACIAR supporting the Pacific Agribusiness Research-for-Development Initiative (PARDI) and Transformational Agricultural Development Program (TADEP) in PNG.
ACIAR now has a range of well advanced ‘commodity’ and ‘product development’ projects including on pearls and pearl handicrafts, algae, cocoa, breadfruit, local tree nuts, timber products and protected cropping of vegetables. From these experiences, each starting with value chain research to understand the constraints to industry development, ACIAR and its partners have learned how relatively modest injections of public funds can help to facilitate enterprise development and trade in agrifoods and byproducts.
Fostering the development of agrifood, marine products and forestry value chains will continue to be important within the Pacific region, with increasing emphasis needed on inclusion and equity in the functioning of such chains.
3.50
The Griffith Asia Institute’s Dr Tess Newton Cain outlined concerns about food security due to COVID-19 pandemic was driving a renewed emphasis on agriculture in the Pacific island countries.
…in the face of COVID-induced economic downturn, and we have heard quite a bit of that already, many Pacific island communities and their governments are re-engaging with agriculture to provide for food security, to facilitate import substitution and also to generate a surplus for export. Australia can and should play an important role in this by supporting agricultural value chains at all of their stages.
We are particularly keen to see more work done in the parts of the value chain that operate in this country at the retailer and consumer end. We see this as part of how Australia can support Pacific island countries in their quest for economic survival.
3.51
According to DFAT many ACIAR projects – notably in biosecurity but also in crops, livestock, horticulture, fisheries, water and forestry – have delivered significant benefits back to Australian industries through early detection and better management of pests and diseases, access to better varieties, or improved productivity or resilience.
As part of combatting the damage caused by the Coconut Rhinoceros Beetle, ACIAR has provided surveillance, clean-up, disease studies and awareness.
3.52
President of the Australia Fiji Business Council, Ms Allison Haworth West, saw a great potential for Australia to take a mentoring role in some capacity with Fijian agriculture to share ideas and assistance.
Fiji has a huge opportunity, sharing climate commonalities with Queensland. If you look at the successful crops in Queensland, many of them could be grown in Fiji, where there is a very low labour cost. The challenges that they have are skills and infrastructure. Obviously investment is needed to bring mechanisation to that agribusiness. But, in addition to that, even the more labour-intensive crops, the more niche, high-yielding crops, are a real opportunity for a country like Fiji. Australia is uniquely placed to be able to support that, but it takes a proactive approach to reach out and provide that assistance.
3.53
The Department of Agriculture, Water and the Environment outlined it leads the Australian Government’s engagement with the United Nations Food and Agriculture Organization (FAO) with a core annual membership contribution of approximately $15.9 million in 2018-19.
Australia is an active member of the FAO South West Pacific region and ensures the FAO’s assistance is well targeted and adequately resourced to meet the needs and priorities of Pacific island countries.
Improving the biosecurity of Pacific exports into Australia
3.54
The Department of Agriculture, Water and the Environment submitted it has a number of capacity building programs in place with Pacific island countries which provide the opportunity to strengthen trade through an increased ability to meet international biosecurity and technical standards.
The department’s strong technical support is well regarded and valued across the Pacific. This ongoing engagement has nurtured strong and productive relationships between institutions and officials and is a critical element to promoting trade and unlocking opportunities.
3.55
The United Nations Conference on Trade and Development called for Australia to ‘simplify trade/imports for products that are specific to Pacific Islands (taro, kava, red toddy syrup, copra, coconut products) for instance in reducing the processing quarantine processing time for the registration of new crops/agricultural products’.
Sea Container Hygiene System
3.56
The Sea Container Hygiene System (SCHS) is a long-term strategy developed by industry in collaboration with the Agriculture Department and the New Zealand Ministry for Primary Industries (NZMPI) to manage biosecurity risks associated with sea containers at the port of loading.
This system rewards compliant parties with reduced intervention and delay on arrival, and effectively screens for approaching risks. Losing time on arrival in Australia is a major irritant for Pacific exporters. The offshore management of biosecurity risks under the SCHS offers both economic and biosecurity benefits to Australia, New Zealand and participating Pacific island countries.
3.57
The SCHS is operational in Fiji, Papua New Guinea, the Solomon Islands, Tonga and Samoa with future expansion plans to include the recognition of additional facilities in Papua New Guinea, Vanuatu, and Samoa.
Australian Fumigation Accreditation Scheme
3.58
The Australian Fumigation Accreditation Scheme (AFAS) improves offshore biosecurity treatments, according to the Agriculture Department, by working directly with ‘…overseas governments and methyl bromide fumigators to improve technical skills, and biosecurity treatment regulatory systems’.
3.59
AFAS is voluntary, with interested National Plant Protection Organisations (NPPOs) participating through bilateral agreements with the Agriculture Department.
AFAS is established in Fiji as a regional centre for providing ongoing training to Pacific island countries on biosecurity treatment measures. However, other Pacific island countries lack national funding and human resources limiting its delivery across the region.
Animal disease investigation and veterinary epidemiology training
3.60
The Agriculture Department outlined its role in coordinating the delivery of animal health surveys and capacity building activities with its biosecurity counterparts in Pacific island countries.
The department provides training and mentoring to Pacific island animal health officials in a number of areas such as data collection and analysis, veterinary epidemiology, animal disease investigation, public awareness and survey design.
3.61
The Agriculture Department’s more recent attention has been focused on containing the threat of African Swine Fever (ASF) in the Pacific, but especially to rural communities in PNG.
In Papua New Guinea alone, the National Agriculture and Quarantine Inspection Authority (NAQIA) estimates that there are 360,000 village pig farmers, 2.4 million pigs, and hundreds of thousands of families depending on their pigs for economic and cultural wellbeing. Controlling ASF in the Pacific is critical in managing Australia’s capacity to prevent ASF from reaching Australia.
Supporting the trade in legal timber products
3.62
The Agriculture Department submitted its forestry engagement in the Pacific focuses on addressing illegal logging and associated trade in the Pacific while complimenting the work of the Australian Centre for International Agricultural Research on value chains for legal timber product.
Some larger forestry players in the Pacific are facing emerging risks related to forest management, timber supply and processing, and legality.
3.63
The department has been negotiating Country Specific Guidelines (CSG) with several Pacific island countries for several years to provide a forestry management framework to mitigate these emerging risks.
These are recognised under Australia’s logging laws, and will facilitate the trade of legal timber products from Pacific Island countries to Australia.
…opportunities exist for the department to support the mutual interests of Australia and the Pacific through developing and maintaining legal and sustainable forestry systems. This work is complementary to ACIAR’s work on value chains focussed on legal forestry markets, which includes engagement with the private sector where possible.
Australian aid in the Pacific
3.64
Australia remains the most important donor of aid to the Pacific region, according to the ANU Development Policy Centre and Figure 3.2. Based on data from the Lowy Pacific Aid Map, in 2017 Australia’s aid program to the Pacific was US$750 million, well ahead of New Zealand (US$221 million) and China (US$199 million).
This leading position does not always apply when it comes to individual countries. The largest proportion of Australia’s aid spend in 2017 was directed to PNG (US$415 million). In Samoa, however, China was the largest donor of aid – US$30 million, with Australia’s aid program to Samoa reported as US$26 million.
International trade and aid partners in the Pacific
3.65
The World Bank and the Asian Development Bank (ADB) make significant contributions to Pacific island countries, according to DFAT. Australia has partnerships with the ADB and International Finance Corporation (IFC), together with New Zealand, aimed at addressing broader business enabling issues, including investment, and promoting small enterprise and broader private sector development. Both the World Bank and ADB have a ‘strong focus on women’s economic empowerment’.
3.66
According to the ANU Development Policy Centre the Pacific remains ‘highly dependent on aid’ as shown by Figure 3.3, with the Marshall Islands, Federated States of Micronesia and Tuvalu the three most aid dependent nations in the world on 2017 OECD data.
With the exception of PNG and Fiji, PICs all fall within the top 20 most aid dependent countries in the world, measuring aid as a proportion of Gross National Income. Six are in the top ten – Marshall Islands, FSM, Tuvalu, Nauru, Tonga, and Solomon Islands.
3.67
Professor Stephen Howes, the Director of the ANU’s Development Policy Centre highlighted that Australia is by far the most important Pacific donor of foreign aid, even when China is into account.
China has become more important, but we’re still a long way in front—but not in every country. We have a particular focus on Melanesia. In PNG we dominate the aid front, but in Samoa we’re one of a number of important donors rather than the dominant donor.
Major Aid for Trade donors in the Pacific
3.68
The Institute for International Trade outlined that in Aid for Trade (AfT) the ‘…focus of some of the largest donors to the Pacific region, some with far deeper budget capacity than Australia, is on economic and trade infrastructure’.
Japan, the Asia Development Bank, World Bank and China put most of their AfT disbursements into [trade-related and] economic infrastructure, and Germany has a particular focus on quality infrastructure in support of laboratories and export/import facilities that improve trade facilitation.
3.69
Since China does not conform to OECD DAC reporting standards, according to Institute for International Trade, it was difficult to estimate China’s spend on AfT.
However, given the total 2017 aid spend from China was about US$165 million, as estimated by the Lowy Institute, and with ongoing commitments mainly to infrastructure and roads construction in PNG, the multi-year nature of Chinese aid commitment and the fact that China, like other donors, does not always meet the announced commitments, one could reasonably estimate that China disbursed around US$100 million on AfT in 2017, making it the sixth largest AfT donor in the region.
Table 3.1: Major Aid for Trade donors to the Oceania region: 2017
|
|
|
|
Japan
|
$213.6 M
|
|
Australia
|
$157.6 M
|
|
World Bank Group
|
$148.3 M
|
|
New Zealand
|
$134.1 M
|
|
Asian Development Bank
|
$104.4 M
|
|
China
|
$100.0 M (estimate only)
|
|
European Union
|
$62.0 M
|
|
Green Climate Fund
|
$42.9 M
|
|
South Korea
|
$33.4 M
|
|
Germany
|
$11.3 M
|
Source: Institute for International Trade, Submission 37, p. 9 & OECD-DAC CRS: aid activity database (2019)
New Zealand
3.70
DFAT outlined that New Zealand, like Australia, has close economic ties to the Pacific island countries, driven by its geographic proximity and historical and cultural linkages with them.
It is currently the sixth-largest trading partner for Pacific island countries, accounting for 4 per cent of total two-way trade. This share has declined slightly over the past decade from 5 per cent in 2008.
3.71
High Commissioner for New Zealand in Australia, Her Excellency Hon. Dame Annette Faye King told a parliamentary hearing about its Pacific Reset that compliments Australia’s Pacific Step-up.
We’ve now got 30 of our government agencies responsible for New Zealand’s interaction with Pacific peoples in the region … the Reset seeks to anchor New Zealand’s relationship in the Pacific on a genuine, mature political relationship and partnership. It’s a conscious reframing and deliberate move away from the donor-recipient dynamic. To reinforce this, the Reset is underpinned by some key principles of engagement in the Pacific—understanding, friendship, mutual benefit, collective ambition and sustainability ... We prioritise our close cooperation with Australia, in particular, as well as others in this respect.
3.72
High Commissioner King said New Zealand’s immediate priority for its development work was ‘supporting Pacific countries respond to the impact of COVID-19’.
Australia and New Zealand have a history of effective coordination in responding to humanitarian challenges and natural disasters, including the recent Samoa measles outbreak.
Japan
3.73
Japan is another significant trading partner for Pacific island countries, enhanced significantly by the introduction of Liquefied Natural Gas exports from PNG in 2014. Japan remains the world’s third-largest economy and is deepening its engagement and investment links with Pacific island countries under former Prime Minister Abe. It maintains eight embassies in the region, with another scheduled to open in Vanuatu this year.
Japan has also made efforts to boost Japanese tourism in Pacific island countries, relaxing some visa requirements to encourage two-way people-to-people flows, including some seasonal labour to Japan.
3.74
DFAT detailed Australia and Japan are deepening their cooperation in the Pacific on development assistance and financing, and also in trilateral; projects with both Australia and the United States.
Japan emphasises the need for quality regional infrastructure investment. It advocates strongly for investment principles which consider environmental and social impact, debt sustainability, safety and reliability, and the use of local employment and technical expertise. Through AIFFP, we are examining projects where we can partner with Japan in third countries in the Pacific. Trilateral cooperation with the United States is also growing, including through the Trilateral Infrastructure Partnership (TIP) with Japan, United States and Australia.
3.75
DFAT highlighted that Japanese infrastructure development and financing in the region was a major pillar of former Prime Minister Abe’s foreign and trade policy.
Japanese projects include the redevelopment of Nadzab Airport in Papua New Guinea, the upgrade of Honiara airport in Solomon Islands and the redevelopment of Lapetasi Wharf in Port Vila, Vanuatu.
United States of America
3.76
The United States is another significant partner in the region, DFAT submitted.
The Federated States of Micronesia, the Marshall Islands and Palau are in Compacts of Free Association with the United States, whereby the United States has authority for the defence and security of these nations, which in exchange receive economic assistance, the right to serve in the US armed forces and citizens admitted to the United States under the Compacts may reside, work and study in the United States.
3.77
According to DFAT the US state of Hawaii is an important transport hub for trade in the Pacific and US military bases also have a positive impact on trade, investment and economic growth in the region.
3.78
Australia and the US have, according to DFAT, been deepening their cooperation in the Pacific on economic infrastructure, macro-fiscal management and financing.
We are also working together in concert with Japan on initiatives like the Trilateral Infrastructure Partnership (TIP) and the Blue Dot Network on infrastructure standards. Some new good practice is emerging and there are opportunities in both systems to improve coordination and overcome barriers to cooperation.
China
3.79
DFAT outlined how over the past decade, China has emerged as a significant trade and investment partner for many countries, including Pacific island countries.
A China-Pacific Island Countries Program of Action on Economic Development and Cooperation was signed in 2019, which includes developing economic relationships with Pacific island countries in agriculture, forestry and fisheries, energy and resources and tourism.
3.80
The value of China’s total two-way trade with Pacific island countries increased almost threefold between 2008 and 2018, according to the International Monetary Fund’s Direction of Trade Statistics. Over the same period, China’s share of total Pacific island country exports to the world increased from 6 per cent to 20 per cent, while China’s share of Pacific island country imports increased from 7 per cent to 13 per cent.
This growth in trade is largely attributed to LNG and nickel exports from PNG, with an additional purchase agreement signed in 2019. China is now the largest destination for Pacific island country exports and the third largest source of imports (after Australia and the EU).
3.81
DFAT submitted that Australia and China were also exploring options for further development cooperation in the Pacific, both through the bilateral Memorandum of Understanding on Development Cooperation with the Ministry of Commerce renewed in 2017, and China’s International Development Cooperation Agency created in 2018.
3.82
The Institute for International Trade highlighted Australia’s examples of close cooperation with major infrastructure donors, including China.
Chinese aid in the provision of anti-malarial programs to PNG for example, was a joint venture where Australia provided knowledge of local expertise and capacity, as well as information on institutional and cultural processes required in order for the program to be successful, while China provided the materials (e.g. mosquito nets and other medical infrastructure).
3.83
DFAT claimed Australia is one of the few countries to have existing trilateral cooperation with China in the Pacific, through the Australia-China-Papua New Guinea trilateral malaria project.
The first phase of the project was seen by all three partners as a success, with the second phase commencing in January 2020. Shared Australia-China development priorities in the region offer potential to unlock new trade and investment opportunities in priority areas identified by our Pacific partners.
Improving higher education outcomes in the Pacific
3.84
His Excellency Mr John Ma’o Kali, High Commissioner in Australia for Papua New Guinea declared that any arrangement between Australia and PNG has to be a ‘two-way thing’.
Absolutely. At the moment, Pacific labour mobility, which is under two schemes—the Seasonal Worker Program and the Pacific Labour Scheme—seems to be in one direction, where we are supplying to the Australian labour market. But the reverse should also happen, where Australia should supply some expertise into our country to develop the capacity in our countries in order to generate the skills that are needed. We have some options with the current statement of intent to develop TVET, technical and vocational education and training, and potential institutional partnerships in primary schools, secondary schools and tertiary institutions to address this, but I think it is going to be a challenge with COVID now.
3.85
Her Excellency Ms Hinauri Petana, High Commissioner in Australia for the Independent State of Samoa highlighted the exciting potential for improved education outcomes in Samoa due to advancing technology.
We have to take into consideration the different levels of advancement of technology and its use in our respective countries. Some have made great strides using that as a medium for sharing of experiences, especially education…We have our own respective institutions who safeguard the qualifications and the standards of qualifications. It’s a very worthwhile pathway to consider, but a lot of preparation internally is needed in our respective countries to be able to engage.
3.86
High Commissioner Petana noted Samoa had been approached individually by Australian tertiary institutions, such as Monash University and University of Melbourne about the delivery of courses.
Some of them have got relationships going with our respective institutions at home. Maybe this is really the new mode we’re heading into. We don’t know how long it’s going to take to develop to where we have uniformity in acceptable standards in the type of education or whatever sector that will be brought into this.
3.87
High Commissioner of Vanuatu His Excellency Mr Samson Vilvil Fare claimed Vanuatu was one of the beneficiaries of technology in education, because they use a lot of distance education, especially with France, because they speak both French and English.
Last year, we launched the bachelor of tourism degree. That’s a bilingual bachelor degree with La Trobe University, the University of Malaya and three universities in France. Teachers also come to teach this bilingual bachelor degree. It’s definitely a great advantage to us because we’re a small country and we’re trying to get benefits from the technologies that are there.
3.88
High Commissioner Vilvil Fare requested Australia look at providing different opportunities for a quota of Pacific islanders to study in Australia, in the higher education system but only pay local fees or be able to access the student loan scheme.
…open that up to the Pacific countries in terms of setting a quota, where Pacific islanders can come to Australia and study in universities and pay the local fees. Some countries—for example, Canada and France—put in quotas like that and would accept a number of francophone students to come and study, but they pay the local fee rather than the international fee. This would be a great support to our Pacific intellect, when you open up those studies. In Australia, especially higher education is quite expensive for our Pacific island countries to afford, when you pay $30,000 a year for tuition fees.
I’m a great believer in countries with a very good higher education system opening the market to Pacific island countries so they can come and study, and pay the local fees.
If we come here, maybe we could have some incentives to help us in accessing higher education here, especially in very specific areas. I’m talking about health or engineering or other areas that would be of importance to our countries in the region.
3.89
High Commissioner Kali asked why Papua New Guinea has the lowest number of seasonal workers in Australia; when it was the biggest country in the Pacific. He would also welcome more Australians under the New Colombo Plan studying on exchange in PNG.
So we ask ourselves why it is that we have not been able to break through. We are trying to address all these issues, but there is a lot of political will to try to increase the number of our people coming into the workforce in Australia and to work with the Australian people to address our supply side as well as understand the demand side. At the same time, we also ask if there could be Australians coming into Papua New Guinea to, for example, teach English, maths and science—core subjects—and students, under the New Colombo Plan, to come and study in our institutions—to share and study our cultures—not necessarily only in Port Moresby, but also have the same number in the districts, where they can work and live with the people and be part of the community. Those types of exchanges into the future will be good...
3.90
Mr Sakias Tameo, the Deputy High Commissioner of PNG, outlined that PNG has its own universities and colleges but he believed it would be of greater value to PNG if these graduates gained work experience in Australian government departments before returning home.
Definitely Australia’s are top class, but in terms of making my point let’s look at Divine Word University and UPNG. There’s not really much of a difference between the degrees that are offered in PNG and Australia…We have people coming here to do a PhD and all that. They are focused on getting their degrees. That would be the same degree that UPNG or Divine Word would offer. The difference is that they are learning in this great country. But they’re not actually going out working with the departments in the various environments. They can really add a lot of value in going back to PNG. They achieve a good qualification in Australia at the ANU, but they don’t know how the Australian system works. That really puts us in a disadvantaged position.
3.91
Mr Tameo claimed in the PNG’s education department, there were a lot of highly-educated PhD people, but problems still exist with the education department.
Why is that? It’s not a degree or qualification. They have done their studies in Australia, but they have not understood how the best country functions in terms of the education department and in terms of health. If our students could be given the opportunity to work alongside Australians so they can see how the Australian system functions then they could effectively go back to PNG and the Pacific island countries and contribute in a much more meaningful way.
Of course some of them are coming from education and other [PNG] departments to further their education in their respective fields. Then they come to the ANU and other universities to do their academic studies, but they haven’t actually learnt. If they can be given opportunities to get some work placements, some experience for a couple of years with the Australians, then they’ll definitely know that they’ve got a qualification. They can acquire the necessary skills and learn how Australians do their business, so when they go back [to PNG] they can effectively work. With only qualifications, it’s not helping us.
Aid for Trade programs
3.92
According to DFAT, Australia is providing considerable aid for trade to the region, recognising the considerable potential of trade to drive development, but also the specific barriers facing Pacific island countries.
Alongside support for PACER Plus implementation, Australia has contributed more than its aid for trade funding target of 20 per cent of its ODA budget for the Pacific.
3.93
DFAT claimed Australia’s other regional, bilateral and multilateral aid for trade initiatives are also supporting Pacific island countries to access and benefit from the global trading system.
For example, we fund Pacific Trade and Invest (PTI) Australia to introduce Pacific exporters to Australian buyers, Pacific enterprises to Australian investors and connect Pacific tourism operators with Australian tourists and service providers to improve business outcomes for Pacific Island businesses. In 2018, PTI Australia facilitated A$23.5million in exports and A$2.29million in investment working with 981 businesses across the Pacific Island Forum nations. PTI Australia is also empowering women in trade, working with 278 women-led enterprises across the Pacific to facilitate 218 deals worth A$6 million in 2018.
3.94
Aid for Trade (AfT) continues to play a vital role in supporting trade and economic development in the Pacific Islands.
3.95
According to the Institute for International Trade (IIT) the Pacific Islands Forum Secretariat’s (PIFS) Aid for Trade Strategy 2020-2025 is about helping developing countries, in particular the least developed, to build the trade capacity and infrastructure needed to benefit from trade opening.
It has a critical role to play in helping Pacific Island countries turn trade policies and strategies into real world trade development.
3.96
The IIT outlined the stated objective of the AfT Initiative, launched at the 2005 Hong Kong WTO Ministerial Conference, was helping ‘…developing countries to build the supply-side capacity and trade-related infrastructure that they need to implement and benefit from WTO Agreements and more broadly to expand their trade’.
AfT seeks to provide particular support to the private sector to build their capacity to trade, through technical assistance, provision of appropriate economic infrastructure, and by supporting the capacity of governments and institutions to implement trade and regulatory reform in favour of more efficient and cost-effective private sector participation in trade.
Categories of Aid for Trade
1
Technical assistance for trade policy and regulations: comprising the following sub-categories: trade policy and administrative management; trade facilitation; regional trade agreements; multilateral trade negotiations; and trade education/training.
2
Trade-related and economic infrastructure: for example, building roads, ports and telecommunications networks to connect domestic markets to the global economy.
3
Productive capacity building: (including trade development), for example focuses on support for the private sector to exploit its comparative advantages and diversify its exports.
4
Trade-related adjustment: helping countries with the adjustment costs associated with trade liberalisation, such as tariff reductions or identifying contributions to developing country budgets to assist in the implementation of trade reforms.
3.97
In the Pacific, the IIT detailed that most AfT funds are distributed for trade-related and economic infrastructure with funding to this category increasing substantially over the last decade. IIT noted there has also been a gradual increase in support of the productive capacity building category.
In 2017 for example, almost 45 per cent of AfT currently spent on productive capacity building targets the private sector.
Table 3.2: Pacific Aid for Trade Disbursements by Category 2006 - 2017
|
|
|
|
|
|
|
|
|
|
2006-08
avg.
|
2009-11 avg.
|
2012-14 avg.
|
2015
|
2016
|
2017
|
|
Trade Policy & Regulations
|
2.4
|
10.0
|
19.3
|
21.0
|
10.4
|
13.2
|
|
Economic Infrastructure
|
137.7
|
200.7
|
281.8
|
359.1
|
345.1
|
381.8
|
|
Building Productive Capacity
|
116.4
|
112.5
|
126.5
|
180.2
|
134.6
|
298.3
|
|
Trade-related Adjustment
|
0.0
|
0.3
|
0.0
|
..
|
0.0
|
..
|
|
Sub-total
|
256.1
|
323.4
|
427.5
|
560.3
|
490.1
|
693.3
|
Source: Institute for International Trade, Submission 37, p. 8 & OECD-DAC CRS: aid activity database (2019)
3.98
Ms Mele Amanaki, the Tonga-based Chair of Public Services International Oceania cautioned against Australia’s use of Aid for Trade during the COVID-19 pandemic and an increasing reliance in the Pacific on remittances.
Australia’s promotion of PACER Plus and its ‘aid for trade’ strategy looks to advance this problematic approach across the Pacific. This moment of crisis is an opportunity to review and recalibrate Australia’s approach across the Pacific using a public goods model. The pandemic has laid bare that unique position of our small island countries and the fragility of our economies. While swift border closures have thankfully spared most of us from COVID-19 outbreaks, this has worsened economic, social and political crises in our countries. This includes an unsustainable reliance on remittances from migrant workers, international tourism and a lack of domestic production capacity.
3.99
The Institute for International Trade (IIT) believed there was a serious gap in the provision of technical assistance for trade policy and regulations category of AfT to the Pacific, but it was a strength of Australia’s aid programs, which it had experience in delivering.
…an area where Australia has a particular comparative advantage given its history of ODA support for good governance, economic reform, health reforms, education and scholarships, and building business and trade relationships, together with socially inclusive development. Australia’s standing as a donor more focussed on people to people and human development programs is an important reputation to preserve, and it is strongly recommended that the focus of our AfT programs should be strengthened to increase our attention to institutional capacity building, as well as capacity building of the private sector.
3.100
The IIT claimed this focus would be ‘…consistent with stated demand driven needs of a number of PICs’.
As part of a more comprehensive review of AfT for DFAT, a short AfT survey of Developing Countries (DCs) was undertaken including Samoa, Kiribati, Vanuatu, and the Pacific Islands Forum Secretariat. Each government or organisational representative was asked to share their three principal AfT priorities. Kiribati, Vanuatu and Samoa all ranked ‘institutional capacity building and trade policy support’ as their number one priority. The Pacific Island Forum Secretariat prioritised regional connectivity and digital technology.
3.101
The IIT outlined the priority areas of the Pacific Island Forum Secretariat 2020-25 Aid for Trade strategy as:
Support for the expansion of services trade especially tourism, telecommunications, transport, energy and finance.
Regional connectivity in particular digital connectivity through ICT infrastructure and services, and including the need for institutional capacity building in support of strengthening inter-agency cooperation.
E-Commerce targeting the private sector as supported by regulatory reform.
Deepening Pacific Forum Markets, meaning closer integration of the region and the freer movement of goods, services, capital and labour, and including trade facilitation reforms and capacity building in the public sector…as well as the strengthening of Pacific quality systems to allow Pacific goods to meet quality and sustainability product standards.
3.102
Following its own review of Australia’s AfT programs, and of the priorities as determined by Pacific island countries, the Institute for International Trade (IIT) declared Australia should ‘…focus its AfT program in the Pacific on building human resource, educational and institutional capacity in the region’.
This includes a strong focus on trade related capacity building and technical assistance, as this form of AfT assists PICs to build their capacity to negotiate favourable trade terms, implement multilateral, regional and bilateral trade commitments, reform national economic and trade policies, improve trade facilitation processes and procedures, and build trade-enhancing institutions that understand the importance of prudential regulation and social inclusion objectives.
3.103
IIT also called for AfT investments delivered by DFAT to focus on the following thematic priorities, consistent with Australia’s 2015 Aid for Trade Strategy and the PIFS AfT Strategy:
Digital Technology and E-Commerce - Capacity building and technology transfer with a focus on capacity building for private sector partners including SMEs and MSMEs.
Trade in Services - Utilising Australian private and public sector expertise across a range of services, including services in support of facilitating tourist services in the Pacific, ICT and business services, health services and agricultural related trade services.
Women-Centred Capacity Building - A particular niche for Australia is the utilisation of its expertise in focusing on the capacity building of women-managed SMEs and trading enterprises in the Pacific region, given the growing number of small-scale business.
3.104
Senior Research Fellow from Deakin University, Dr Victoria Stead also recommended the importance of Australia prioritising ‘…forms of training, seed funding, and targeted support to allow Pacific Islanders, including Pacific Islander small business owners, to operate on equal footing with Australian corporate operators’.
Case study of Pacific Trade and Invest Australia’s digital programs
3.105
DFAT submitted its support of PTI Australia to deliver innovative programs across the Pacific, including their digital tourism and ecommerce trade programs.
Digital tourism: The World Bank’s Pacific Possible report forecasts that tourism could generate over US$1.6 billion in spending and over 110,000 additional jobs in the Pacific by 2040. PTI Australia developed the Digital Tourism Program in 2012 to upskill local tourism operators in digital marketing and provide practical steps to increase sales by enhancing their digital presence. PTI Australia travels to Pacific island countries to deliver digital tourism workshops.
PTI Australia also supports the development of websites with booking and payment functions for local tourism operators. For tourism operators with an existing strong online presence, seed funding is available for the development and implementation of a digital marketing strategy to further drive sales. Since the beginning of the program, PTI Australia has funded over 300 websites and trained over 1000 enterprises to build their online capability, generating tourism sales in the region worth $10.3 million in 2018 alone.
Digital trade: According to PTI Australia research, only 36 per cent of companies in the Pacific have their own website. Platforms like Amazon provide an entry point for Pacific Islanders keen to reach international markets, overcoming traditional barriers to cross-border trading and accessing the $4 trillion global ecommerce industry. PTI Australia’s Digital Trade Program teaches Pacific island businesses about the digital e-conomy and how to sell products on platforms such as Amazon. The program aims to increase exports, diversify income and reach new foreign buyers, in turn increasing local employment. Export-ready Pacific enterprises can apply for one of 15 places in an e-commerce accelerator to receive one-on-one training with an Amazon coach, learning about selling strategies, warehousing, supply chains and payment logistics. In addition, PTI Australia have delivered a series of workshops in Samoa, Fiji, Vanuatu, covering digital sales strategies, becoming a seller on Amazon and ensuring Pacific products meet international standards. Over 100 enterprises have participated.
Pacific Horticulture and Agriculture Market Access program
3.106
DFAT has been targeting growth in the agriculture sector since it has been found by the World Bank report Ending Poverty and Hunger by 2030 to be ‘two to four times more effective in raising incomes among the poorest compared to other sectors and is therefore crucial to economic growth in many Pacific island countries’. DFAT claims Australia, through its aid investments in the Pacific, is focused on increasing small-scale farmers and fishers’ participation in markets.
3.107
The Pacific Horticulture and Agriculture Market Access program (PHAMA Plus) as a part of agricultural export development and private sector engagement is helping Pacific Island countries maintain and develop their agricultural export markets.
…by assisting them to meet export market biosecurity and quality requirements. The program has been instrumental both in opening new markets for Pacific Island countries and ensuring that existing markets remain open.
3.108
DFAT submitted that PHAMA Plus has helped open, maintain or improve Australian and New Zealand market access for beef, taro, watermelon, cooked breadfruit, ginger, copra, fresh Tahitian limes, vanilla and cinnamon pastes, and sawn timber. PHAMA Plus has also facilitated access to other markets for cocoa, coffee, squash, kava and fish. PHAMA Plus has supported Solomon Islands market access for tuna to the EU, directly improving the livelihoods of 2,300 workers.
3.109
DFAT’s Aid for Trade Adviser Mrs Sabrina Varma praised PHAMA as a really good example of a regional aid for trade program in the Pacific which is ‘…helping a number of developing countries, as well as least developed countries, to be able to access markets by meeting sanitary and phytosanitary related standards’.
Obviously, agriculture is a really important sector, as well as exports for the Pacific, so being able to meet those standards is really important, and they need technical assistance to be able to do that. Our funding and working with partners in the region who have the expertise to help these countries meet those standards goes a long way.
3.110
The Department of Agriculture, Water and the Environment outlined its key role with DFAT on programs such as PHAMA that improve market access for Pacific agricultural and horticultural exports to Australia.
PHAMA has been a practical collaborative tool which helps establish new markets for agricultural commodities and assist in regional harmonisation of trade across Pacific island countries. PHAMA has supported a dedicated officer in the department who facilitates access to Australia from Pacific island countries such as ginger, taro, Tahitian limes, leafy vegetables, baked breadfruit, dried spices and handicrafts.
3.111
DFAT provided an example of the benefits of PHAMA Plus in Papua New Guinea to educate tourists how to safely buy handicrafts that meet biosecurity concerns.
PNG produces a diverse range of quality handicrafts that are sold primarily to tourists from cruise ships and at duty-free shops and handicraft shops in major centres. Surveys of cruise ship passengers have revealed that tourists are reluctant to buy handicrafts for fear of confiscation by biosecurity authorities back home.
3.112
PHAMA Plus produced guides to inform sellers and tourists of relevant standards, backed by training and videos for screening on cruise ships and aeroplanes.
Case study of PHAMA Plus in PNG – Grace Klembasa’s cocoa
For more than 10 years, Grace Klembasa worked on cocoa farms in Aitape, West Sepik. She entered a sample of dried cocoa beans in Papua New Guinea’s first Cocoa of Excellence Show, held in Kokopo in May 2017. Hosted by the PNG Cocoa Board and PHAMA Plus, the show helps link PNG cocoa producers to buyers of premium cocoa and craft chocolate makers. International judges ruled her sample the best among 18 finalists and almost 100 cocoa samples. A year later, bars of single origin 70 per cent dark chocolate made from cocoa beans supplied by Grace were among a display of chocolates by the renowned Madre Chocolate in Hawaii. Cocoa is a K300 million industry in PNG, supporting over 150,000 households and providing income for at least 20 per cent of the population who are smallholder farmers.
Supporting private sector development in the Pacific
3.113
To promote private sector development in the Pacific, DFAT submitted Australia is also collaborating with business through a partnership approach to initiatives that deliver both commercial and development outcomes. DFAT claims this approach provides mutual benefits, leveraging the innovation, expertise, networks and resources of the private sector and the convening power, deep country knowledge and technical expertise of the Australian Government.
Established in 2015, the $20 million Business Partnerships Platform (BPP) enables businesses and their partners to apply for matched co-funding for investments that deliver sustainable economic growth and improved livelihoods. In the Pacific, Australia has supported BPP partnerships in PNG, Samoa, Solomon Islands, Tonga and Vanuatu in clean energy and agribusiness. The BPP will expand to Fiji in 2020.
3.114
The Vice President of the Australia Pacific Islands Business Council, Mr Denis Etournard, highlighted the potential opportunities possibly from PACER Plus for joint ventures with businesses in Pacific island countries.
Coming to PACER Plus, I think there’s a great opportunity for Australian businesses to do joint ventures with businesses in the Pacific, in subcontracting manufacturing and the transformation of agricultural products to create added value at a cheaper cost with the expertise of the Australian businesses. I can give you a few examples that we’re working on with certain businesses where we’re manufacturing, with traceability, high-quality products for Europe, Japan and other places. We do it in the Pacific, in New Caledonia and in Tahiti. I think that’s an opportunity for Australian businesses to see precisely, through our councils, what businesses could subcontract part of the manufacturing, or the processing, that might be done in Australia or other places, and subcontract it in a joint venture to businesses in the Pacific with Australian shareholding.
3.115
Managing Director of Indra Australia Pty Ltd, Mr Tehmur Khan Galindo, outlined the need for the Australian Government support smaller enterprises seeking new opportunities in the Pacific. From a funding perspective, it would be much easier for the private sector from Indra’s experience to plan out its projects and its resources in advance if it had a clearer path as to ‘…where the money would be allocated and to what extent’.
Then it’s also very important, especially for the companies that don’t have as much experience in the Pacific, that the government facilitates working groups or workshops between industry with experience in the region and the government. For those new companies that would like to go to these countries and do business I think it’s very important, in order to attract reliable and good companies in Australia, that they understand the business environment and that they understand that they will be supported if they face challenges, because I think that’s one of the biggest challenges for smaller companies.
If I go to Vanuatu and I try and execute a project there and I start to face problems, who will I be able to go to and ask for help? I understand that there are contractual obligations and those must be met. I’m not saying in any way that the government should intervene there. That’s why we signed contracts. But there are nuances from a way of doing business. It is sometimes important that the government supports the smaller enterprise.
Solomon Islands sees private sector as engine for growth
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Solomon Islands Government submitted it was encouraging foreign direct investments (FDI) into the country through its policies and regulations, which ‘…help to offer incentives for interested investors’ but also to protect some sectors too.
At the same time, in a bid to grow its small indigenous and local business interests, certain specific areas of business activities are targetedly protected and restricted by policy statute.
The Solomon Islands recognizes the private sector as the engine for economic growth and development of the economy.
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The following sectors were identified by the Solomon Islands Government as key areas for investment through foreign direct investments:
Tourism Development – accommodation/ resorts, adventure services.
Fishing & Fish Processing.
Commercial Livestock Farming.
Timber Processing & Manufacturing.
Mineral Prospecting and extraction
Transport & Telecommunication Services.
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Foreign investments being targeted by the Solomon Islands Government with the following features, including having a vision for a long term investment in the country, were being encouraged by tax incentives:
strengthen the technical and marketing expertise of the private sector
maximise the use of local raw materials through different stages of production
promoting export and import substitutes
creating employment for and training of Solomon Islanders
transfer and integrate knowledge and technology into the economy
have a vision for a long term investment in the country.
Case study of private sector development initiatives in the Pacific
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DFAT submitted Australia provided funding to the Asian Development Bank to implement the Pacific Private Sector Development Initiative (Pacific PSDI Phase 3: Australia A$32.14 million, 2013-19) which improves the enabling environment for business, trade and investment.
In Samoa and Solomon Islands, PSDI supported business law and registry reforms increasing the annual rate of company formation by 114 per cent and reduced the time required to start a business from 24 days to just over one. The new companies have generated an estimated 2,000 new jobs and over US$100 million in new investment. In Solomon Islands, PSDI assistance helped SOEs operate commercially and transparently, leading to an impressive turnaround of returns on equity and assets from 4.3 per cent from 2002-09 to 10 per cent in 2010-14.
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Australia’s aid program, according to DFAT, supports direct trade, private sector development and broader economic growth outcomes through utility and regulatory reform, trade policy and productive capacity building, improved service delivery and public expenditure reform.
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In Solomon Islands, DFAT submitted $14 million is being invested in a new Strongim Bisnis facility from 2017-2020 under the Solomon Islands Growth Program.
Strongim Bisnis works primarily with the private sector on business practice, market development, risks and resilience, and women’s participation in the economy. It is focusing initially on the cocoa, coconut and tourism markets.
Case study of Governance for Growth (GfG) program in Vanuatu
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The Vanuatu Governance for Growth (GfG) program was established in 2007, according to DFAT, to improve Vanuatu’s growth and service delivery through regulatory reform and improved public expenditure management. GfG is now in its third phase (2017-2021), investing up to $20 million to support the Vanuatu Government’s ‘…reform agenda and economic management in order to provide the right conditions for business and investment’.
GfG works through a range of partnerships, including with the Vanuatu Prime Minister’s Office, the Ministry of Finance and Economic Management and the Ministry of Tourism, Trade and Industry. These partnerships also provide a platform for dialogue between the Australian and Vanuatu governments on economic policy and for working on issues of mutual interest. GfG’s work is predicated on the view that regulatory reform, better sectoral policies and improved governance are pre-requisites for growth.
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A key objective of GfG is to contribute to building a better business environment for trade and economic opportunity in Vanuatu by ‘modernising trade policy and performance; improving transparency and efficiency; strengthening freight systems; and aligning with international financial rules’.
GfG supports Vanuatu to engage in an open economy based on transparent rules; fair and open competition; and transparent, non-discriminatory, and predictable regulatory systems. These measures promote prosperity and stability. They also protect Vanuatu from criminal or foreign interests that run counter to the interest of the Vanuatu people and the institutions that serve them.
Improving infrastructure to grow business and trade
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For bilateral trade and investment to flourish, according to the World Bank Group, Pacific island countries (PICs) will need to establish a solid enabling business environment that includes, among other factors, the ‘…provision of reliable infrastructure services such as electricity, transport, as well as information and communication technology (ICT)’.
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Accordingly, the Save the Children Australia recommended that the Australian Government adopt a suite of measures for ‘…shoring up the economic wellbeing of Pacific communities, without which the idea of enhancing trade relations with the PICs lacks foundation, given present conditions [under COVID-19 travel restrictions]’.
The first of these measures is adopting a more holistic view of infrastructure so that it encompasses the human and social systems that protect the resilience of Pacific communities.
Development of water infrastructure in the Pacific
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In 2017, the Asian Development Bank (ADB) according to Australian company eWater Ltd, assessed that Pacific countries require infrastructure investments of USD3.1 billion per year to 2030 to meet their needs.
The World Bank has estimated USD130 million is needed every year to 2030 for PNG’s water and sanitation infrastructure alone.
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eWater submitted that expanding access to clean water and basic sanitation services is fundamental to reducing poverty.
Under-investment in water infrastructure can have very serious health and social implications and impede economic development. The impact of poor water and sanitation services falls disproportionately on women who bear responsibility for all household water and sanitation related tasks such as cleaning, cooking, washing, caring for children and the sick. As a result, women are also commonly locked out of contributing to economic development in the village and in the broader society.
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eWater noted the 2017 Joint Monitoring Program data indicates that only half of the population (52 per cent in 2017) in the Pacific used improved drinking water sources, whereas one third (31 per cent) used improved sanitation, with very little progress over the past 25 years.
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eWater believed Australia is well placed to assist improved water management in the region and could significantly diversify its trading relationships through a focus on water related goods and services.
eWater can assist with higher level water assessments, determining water supply and demand in rivers and regions that can enable national water planning and management of the available resources. Such assessments are critical to ensure supply for agriculture, industry, communities and for sanitation. The Pacific is keen to learn from Australia’s water management skills and experience…
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eWater agreed with the ambition of the UN World Water Development Report 2020 that climate finance for water resource management and sanitation supports community climate resilience, job creation at the local level and helps to improve sustainable development outcomes.
Barriers to increased access to climate finance, such as lack of capacity and lack of institutional coordination, must be urgently addressed.
Provision of more affordable and reliable energy
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The World Bank Group (WBG) submitted that the cost of energy services in the PICs is among the ‘highest in the world, energy access rates are among the lowest, as well as being vulnerable to imported fossil fuel products and price volatility’.
The quality of services is generally poor. Private sector participation in the energy sector is challenged not only by the inadequate policy, legal, and regulatory environment but also by underdeveloped supply chains, and shallow financial markets.
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However the World Bank Group believed some of these underlying challenges also presented opportunities for ‘…leapfrogging conventional technology options and delivering affordable, reliable, and sustainable energy services to the people and businesses in the region’.
The high cost of energy services makes new and innovative technologies to become cost competitive relatively early compared to other countries.
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The Managing Director of energy and water consulting firm Entura, Ms Tammy Chu, saw opportunities for developing hydropower schemes in the Pacific that also improves water supply.
…if there is potential for small to medium hydropower, that can provide secondary requirements, particularly from a dam perspective, or water that could be used for potable water requirements, flood mitigation and also recreational activities on the reservoir itself. So there is that additional benefit, depending on the size of the scheme and potentially the size of the dam and the reservoir.
Pacific’s need for long-term planning and improved maintenance
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Entura’s Ms Tammy Chu, identified the challenges with delivering renewable energy, water management and climate-resilient infrastructure projects. Ms Chu declared the Pacific requires sustainable, affordable and reliable energy, that requires a ‘…long-term energy vision and planning, an ongoing funding model and the expansion of local skills and expertise’.
We believe the most efficient use of funding needs to start with planning. This is not uncommon, due to the size of the utilities and often the subsistence nature of some cultures. As a result we see money spent in an ad hoc fashion to address immediate issues. Seldom is there an opportunity to plan for the next stage. As a result the outcomes are often less tangible, benefits cannot be demonstrated and funding can dry up. Where we have been involved in providing planning services and road maps we’ve seen the benefits of staged funding aligned to a common goal. That enables shovel-ready projects that are economically feasible to be prepared, programmed and implemented in achieving strategic objectives.
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Once an energy infrastructure project is built and operational, Ms Chu highlighted the importance of keeping the power source reliable and running often in harsh environments requiring the training of local maintenance crews to develop their skills and expand their expertise.
The next challenge is to prevent the build-neglect-rebuild paradigm that we so often see in developing countries. This requires a program of training and upskilling of locals as part of a development program to ensure that there is sufficient expertise to operate and maintain the facility throughout its life cycle. Due to the limited resources available, together with high mobility, training and upskilling requirements, a continuous program needs to be effective.
We believe that the whole region could, for example, be a regional trading hub or training centre of excellence that would enable local skills development in areas of renewable energy and trade skills to be developed. We see that there is an opportunity to provide a regional major projects office for the coordination and project execution of infrastructure. As a whole region, this could be helpful in applying consistent standards and guidelines across the region.
Solomon Islands’ Tina River Hydropower Development Project
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The World Bank Group expected established regional institutions that represent a collective vision for the future of the PICs and partners can coordinate their aid and economic activities around a shared future in improving access to energy.
For example, in Solomon Islands, WBG has been supporting Tina River hydropower development, which would transform the country’s energy supply and cost of doing business. Similarly, in PNG, the WBG, along with Australia and other development partners, are jointly supporting major electrification initiatives.
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High Commissioner of Solomon Islands, His Excellency Mr Robert Sisilo, welcomed Australia’s offer to provide the requested further support for the development of the Tina River hydro-electric project, through the Australian Infrastructure Financing Facility for the Pacific.
Over the past 10 years Australia has supported the Tina River Hydropower Development Project, which will provide cheaper electricity to the country’s capital, Honiara. This certainly will boost household incomes, reduce business costs, provide opportunities for better services and support Solomon Islands post-COVID-19 economic recovery.
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High Commissioner Sisilo believed as a renewable energy source, the Tina hydro will also enable Solomon Islands to meet its commitment for emissions reduction under the Paris Agreement.
Lest we forget, climate change, not COVID-19, not even China, is the biggest threat to our security.
Role for smart energy systems
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Indra Australia submitted despite the growing penetration of photovoltaic (PV) solutions, small Pacific island countries still ‘…rely on thermal, mainly diesel, baseload power generation’.
Beyond the sensitivities surrounding fossil fuel use in a region at the forefront of climate change and rising sea levels, there are well-documented risks arising from price volatility and a fragile supply chain.
On the other hand, PV and wind generation can be fickle and their ‘firming-up’ requires investments in energy storage technologies such as batteries. This new mix of energy sources creates its own challenges in matching supply with demand and maintaining frequency and voltage to protect the grid and provide an adequate quality of service.
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Indra detailed it has developed a solution to these challenges, a smart energy micro-grid currently being deployed at Monash University’s Clayton Campus in Melbourne. Its micro-grid provides a ‘…cost-effective approach to real-time coordination, that optimises the use of renewable sources and minimises the need for thermal generation baseload or expensive storage’.
One of the key enablers of this solution is smart metering systems, which are being adopted extensively throughout Asia, where mini- or micro-grids are also becoming the preferred alternative to transmission and distribution grids for isolated townships and rural areas.
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Indra’s claimed its metering data management suite is manufacturer-agnostic and interoperable, meaning customers avoid vendor lock-in, allowing them to take advantage of the best metering hardware and communications infrastructure on offer.
This solution would be particularly well-suited to the needs and environment of dispersed and isolated Pacific island communities.
Improving transport connectivity across the Pacific
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The World Bank Group highlighted the importance of land, aviation and maritime transport infrastructure for tourism, logistics and trade, local economic development, and in providing access to other economic and social activities.
As the economies of many PICs are highly dependent on revenue from fisheries, maritime infrastructure is critical for international, inter-state and inter-island trade, and for access to education and health services to and from the main and outer islands.
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Although connectivity capabilities among the Pacific island countries vary significantly according to the World Bank Group, these countries often face similar challenges:
i.
the remoteness and resource constraints that result in high logistic costs and impediment to trade;
ii.
insufficient maintenance and lack of construction skills that lead to poor condition of roads, jetties and wharves;
iii.
rural and outer island populations lack access to reliable roads and must contend with unsafe jetties and wharves, which results in safety issues and high transportation costs for many farmers selling goods in markets; and
iv.
transport sector that is critically exposed to the effects of climate change, including higher extreme and average temperatures, sea-level rise, increased rainfall intensity and an increased intensity of wind from tropical cyclones.
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The focus of the World Bank Group’s transport sector engagement has been in the areas of ‘…connectivity, safety, security and enhancing infrastructure resiliency to climate change’.
For example, the maritime transport projects in the Northern Pacific provide improvements to maritime infrastructure, security and safety equipment, as well as emergency response ability. The regional aviation program contributes to strengthening air transport safety and oversight through upgrading and rehabilitation of runway as well as building capacity in aviation operations.
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Indra Australia submitted its involvement in the World Bank Pacific Aviation Investment Program has supported ‘safer and more efficient air travel to and from Pacific nations – including Kiribati, Samoa, Tonga, Tuvalu and Vanuatu – through improvements to aviation infrastructure, management and operations’.
This program is supported by the Australian government and acknowledges that greater flight access and improved travel conditions are critical to promoting tourism and trade and also allow Pacific islanders to access jobs, markets and services overseas. It will boost regional integration through shared technology, systems and an effective air transport network, especially through connectivity with Australia and New Zealand.
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The Managing Director of Indra Australia Pty Ltd, Mr Tehmur Khan Galindo stressed the efficient operation of transport networks, ‘underpinned by safe and effective navigation and air traffic control, are the lifeblood of trade and investment’.
Indra’s air traffic management, communication, surveillance and navigation systems are helping to overcome the Pacific’s tyranny of vastness. While COVID-19 has restricted the Pacific’s connectivity with Australia and other international markets, regular and trusted air connections actions will remain vital to the region’s prosperity. However, the long-term viability of these essential systems is dependent upon successful maintenance programs and contracts.
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Indra Australia has also outlined its significant contribution to improving air traffic management and communications capabilities in Papua New Guinea, working in partnership with the Australian Government and the Asian Development Bank.
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Indra, which has installed air traffic management, communication, surveillance and navigational systems in nations such as Fiji, Samoa, Tonga, Cook Islands and Papua New Guinea, warned that all these systems require regular maintenance and support to function effectively.
By establishing maintenance and support contracts for these systems, Australia would help create a more resilient air traffic network for PICs that will underpin greater connectivity and facilitate greater trade and investment between Australia and its Pacific neighbours.
These contracts must include appropriate provisions on scheduled maintenance, non-scheduled maintenance, repairs and replacement of safety-critical spare parts to keep these systems available to airlines and other operators in the area. The programs will also need to include continued upgrades to keep the systems compatible with systems in the rest of the world. A typical price per year for full maintenance and support is US$1 million per nation.
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Indra noted that without such maintenance and support agreements, ‘supplied systems will fail to operate, or operate with a downgraded performance, as nations typically lack the skillset to adequately maintain them themselves’.
Not only does this undermine the significant investment in these systems, it causes safety concerns for airlines and operators.
Developing Cairns and Queensland as a Pacific hub
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The Cairns Regional Council declared that Cairns is strategically positioned to support initiatives relating to engagement with neighbouring Pacific island countries, for the benefit of both Australia and its Pacific neighbours, both in relation to PACER Plus and Australia’s Pacific Step-up program.
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The Regional Council highlighted that Cairns is the ‘closest Australian city to the PNG capital Port Moresby, less than a 90 minute flight away, with a large expat community of PNG and Pacific island nationals calling Cairns and the region home’.
Cairns has a strong economic, cultural, and social connection with PNG and the Pacific, including a long established sister-city relationship with Lae, PNG’s second largest city.
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The Regional Council believed many factors aligned with the Australian Government’s Pacific Step Up agenda supported establishment of Cairns as the Pacific hub for Australia. According to the 2016 Census Cairns has a multicultural population, 2.7 per cent of which claim Pacific island ancestry, compared to 1.5 per cent and 0.9 per cent for Queensland and Australia respectively.
Cairns is already a base for Australia’s participation in the development of cultural and education research and teaching, health care, marine training, logistical support including maintenance, and security for South Pacific nations. Cairns also has strong established networks and links with nations of the Pacific, together with expertise in working with dispersed populations and tropical climates. A direct example is that an estimated 470 Fly In Fly Out (FIFO) workers are based in Cairns who work in PNG.
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With major forthcoming projects such as the Wafi-Golpu gold and copper mine due to open near Lae in PNG, the Regional Council sees potential for increased levels of international FIFO activity from Cairns, providing an ‘increase in expertise to PNG with potential for knowledge sharing and upskilling of the local workforce’.
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Due to its strategic location, according to the Council, Cairns plays a pivotal role in supporting the ongoing deployment of the Pacific Patrol Boat Program. Under this program, 22 Pacific Class patrol boats were donated by the Australian Government to 12 South Pacific countries where they are operated by militaries, coast guards and/or police forces.
Cairns’ marine businesses, located in the Cairns Marine Precinct, have supported the program through the provision of refit and maintenance services. Additionally, the recently announced $162 million HMAS Cairns expansion (part of the Department of Defence’s broader Navy Capability Infrastructure Sub-program) will set the foundation for Cairns to play a greater role in the security of the region, complementing the joint capabilities of the Australia-US redevelopment of Lombrum naval base on Manus Island.
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The Cairns Regional Council believed Cairns’ ‘…well-established and connected airport and seaport provide an opportunity to further strengthen Australia’s relationships in the Pacific’.
Improving air connectivity between Australia and PNG
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PNG carrier Air Niugini was the first airline to operate international flights into Cairns, according to the Regional Council, and before the COVID-19 restrictions on travel in March 2020, it was operating a 90 minute service between Port Moresby and Cairns 10 times per week using a Fokker aircraft.
Over 60,000 people travel this route each year. With support from the Queensland Government, Cairns Airport, and Cairns Regional Council, Air Niugini has recently enhanced this service by operating a larger Boeing 767-300ER wide-body aircraft on the route twice per week. This new wide-body aircraft has a freight capacity of 18 tonnes per flight. The increase in capacity will provide a valuable airfreight link between Cairns, Port Moresby, and Hong Kong, as well as a number of other destinations in Asia and the Pacific (notably Solomon Islands and Vanuatu…) through Air Niugini’s international network … It presents a significant trading opportunity for the Cairns region.
Establishing an airlink between Cairns and Lae in PNG
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With support from Cairns Regional Council, Tradelinked Cairns-PNG-Pacific had investigated, pre-COVID-19 restrictions on air travel, the potential opportunities that direct air links between Cairns and the PNG port city of Lae, with a population over 100,000, may deliver when the Nadzab Airport is upgraded to international status. The Regional Council believed the study highlighted the opportunity of 1.8 to 2.4 services per week using a 70-seater aircraft going to PNG’s second largest city Lae based on current conditions, and potentially an additional 2.7-3.6 services per week to meet associated demand for the Wafi Golpu mine near Lae when it is operational.
It should also be noted that Lae is home to PNG’s largest trade shipping port. Accordingly, a direct flight link between Cairns and Lae would further strengthen trade routes into the Pacific.
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The Regional Council submitted a business case for a Lae service using Tradelinked Cairns/Cummings Economics research that for those passengers leaving Lae, who are transiting to and from other Australian centres, there is a saving of one transit via Brisbane or Sydney (1 flight per week).
There will be flight time savings and airfare savings especially to Darwin, Perth and Adelaide. Current passenger numbers over the next 12 months, to/from PNG (Port Moresby) Cairns, are estimated at 65,000 – 70,000.
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Based on City-Pair Sabre data supplied by Cairns airport pre-COVID-19 restrictions, estimated passenger numbers between Lae and Cairns to be a minimum of 120 per week. The business case for an air service between Cairns and Lae also included potential for carrying a range of freight.
Survey of businesses in Cairns and Lae indicated freight opportunities ex Cairns mainly in machinery and parts, possible workwear and dairy products marine, hospital and education material, tourism gear, bicycles and fresh fruit and vegetables, and ex Lae agricultural products (including coffee, cocoa and vanilla), PNG artisan products and machinery and equipment sent down for repair, reconditioning.
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The Regional Council submitted that additional airfreight export capacity, specifically in regard to perishable agricultural goods, will also be supported by a proposed $10 million Regional Export Distribution Centre to be built at Cairns International Airport.
Agricultural trade has traditionally been limited due to legislative barriers however PACER Plus represents an additional opportunity to develop trade in this sector.
More demand for airlinks between New Caledonia and Australia
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The New Caledonia Government submitted there was a ‘strong demand from New Caledonians to travel to Australia’ by air.
New Caledonia wishes to work from the Sydney Hub in particular and has been in discussions since mid-2019 with Australian airlines.
Regional Office of the Pacific based in Cairns
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The Cairns Regional Council suggested DFAT’s Office of the Pacific that is supporting Australia’s engagement with the Pacific consider the benefits of establishing a regional office in North Queensland as a link with Canberra and Brisbane offices and to help ‘…enhance whole-of-government coordination consistent with the priorities of Pacific countries’.
The presence of senior departmental personnel and the creation of a Cairns-based trade officer role with a specialism relating to regional Pacific trade programs, would be an asset in educating the market on accessing opportunities linked to PACER Plus and existing Free Trade Agreements. There is also an opportunity to further leverage local industry sectors, particularly tourism and agriculture, to support the Pacific Labour Scheme (PLS) and Seasonal Worker Schemes.
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As of January 2020, the Cairns region had 65 employees participating in the PLS, mostly from Vanuatu and Solomon Islands, with PNG, Tonga and Tuvalu also represented.
Upgrading internet communications technology in the Pacific
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The World Bank Group (WBG) anticipated digital transformation can accelerate economic growth, facilitate trade, increase social inclusion and provide access to better services in Pacific island countries. The World Bank Group believed access to basic telecommunications and internet services has ‘improved dramatically in recent years in most Pacific countries, despite the remote and dispersed environment of the Pacific’.
However, overall adoption of digital technologies in the Pacific is relatively low, compared to East Asia or the Caribbean. The low rate of adoption is a symptom of the high costs of reaching small dispersed populations and the relatively delayed rollout of the core backbone submarine cable infrastructure.
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The World Bank Group outlined during the last decade there has seen sizable financing invested in improving the digital technology infrastructure in the Pacific. The WBG submitted alone has provided more than US$200M in financing for the sector.
When coupled with the adoption of an enabling legal and regulatory environment and strong and effective regulatory institutions, this connectivity layer will encourage the private sector to expand its investments in digital technologies, generate an increase in e-commerce, financial services and help launch a new wave of digital content for Pacific countries.
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Overall the World Bank Group expected the development of the digital economy will lead to ‘…improved service delivery, reduced business transaction costs, new business opportunities, new job opportunities, greater and more inclusive economic growth, and stronger national and regional integration in the Pacific’.
In the next phase of investment, the WBG, together with the other development partners, will focus on digital transformation programs that support the client countries in building the foundations for government digital platforms as a basis for enhanced service delivery.
Australian Infrastructure Financing Facility for the Pacific
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The $2 billion Australian Infrastructure Financing Facility for the Pacific (AIFFP) will, according to DFAT, deliver three high level outcomes, including being able withstand the impacts of climate change:
supporting Pacific countries and Timor-Leste to have greater access to capital to support quality, inclusive and resilient economic infrastructure;
delivering infrastructure financing that meets the development needs of the partner countries; and
making Australia a partner of choice for infrastructure in the Pacific and Timor-Leste.
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DFAT submitted that the AIFFP is currently ‘assessing a range of potential infrastructure investments in the region focused on energy, transport and telecommunications, water and other priority sectors for Pacific partners which will contribute to enhanced connectivity, trade and investment and broader economic development’.
All infrastructure supported through the AIFFP will be built to withstand the impacts of climate change and natural disasters. In addition, we have established a Climate Infrastructure Window in the AIFFP, which will help to advance the region’s energy ambitions. The aim of this window will be to fund projects which specifically support renewable and lower emission energy generation and transmission.
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Australia Pacific Islands Business Council member Ms Tessa Price really welcomed the AIFFP and Australian-funded construction work to help bolster struggling Pacific island economies.
…what we’ve seen successfully work in the past from a GDP-growth perspective is construction. When cyclones go through the region and ports, roads, seawalls, schools et cetera have to be rebuilt, that is when you can actually help stimulate economies and drive economic growth as well.
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eWater welcomed the focus of AIFFP in support of capacity building and whole of life maintenance for water related investments but questions whether resources are being made available to ensure their implementation.
As manager of the Australian Water Partnership on behalf of DFAT, eWater is aware of the efforts of the Pacific Water and Wastewater Association (PWWA) to prepare their 30 member utilities from 21 Pacific countries for increased investment in water and sanitation in the region and to build the planning and management capacity of staff in their member utilities.
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DFAT detailed the Australian Government had funded the connection of the undersea telecommunications cables to Papua New Guinea and Solomon Islands in 2019. This includes funding for a domestic network in Solomon Islands linking Honiara with Auki in Malaita Province, Noro in Western Province and Taro in Choiseul Province.
This will contribute to ongoing efforts to support development of e-commerce and digital trade capabilities, an emerging area of potential for Pacific trade and investment.
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The Australia-PNG, Australia-Fiji and Australia-Pacific business councils jointly submitted their support for the establishment of the AIFFP.
The establishment of the AIFFP is seen as an opportunity to reinvigorate Australian business engagement in the Pacific as well as improve the economic capabilities in the region and assist develop business capability in the region.
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The business councils proposed a number of measures as characteristics of the AIFFP including that the Governing Board of the Facility should include ‘…at least two Australian business representatives with extensive experience in the region selected in consultation with the [three] Business Councils’.
The representatives so selected should be one with extensive regional legal experience in major commercial and financial transactions and one with extensive financial services experience in the region. This will help ensure the Fund is able to draw on the knowledge, understanding and expertise of people who have decades of experience working in various Pacific jurisdictions.
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The business councils also urged the AIFFP must mandate in its contracts an ‘…enforceable requirement for contractors to ensure they engage effectively with local contracting and sub-contracting entities to build capacity and grow the MSME sectors in the Pacific islands economies’.
…contracts allow for an appropriate margin of preference for Australian contractor bidders to be awarded work to assist attract more Australian companies into the region. Determining what that margin might be will require some study. This is not put forward as a means of feather bedding for Australian companies, but rather as a means of redressing what is currently an uneven playing field under which some contracting parties from third countries are not required to comply with local labour requirements.
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The Save the Children Australia submitted that since Australia announced its major Pacific infrastructure financing initiative, the AIFFP, in 2017 will focus on telecommunications, energy, transport, water, and ‘…other priority infrastructure,’ the AIFFP was yet to announce an ‘approved infrastructure project financed under its auspices’.
Yet the Facility is holding $500 million in ODA funds over four years, with an additional $1.5 billion in the form of a line of credit from the Australian federal budget. In addition, its administering agency, Export Finance Australia, has access to an additional $1 billion in callable capital, should it be required in an emergency.
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The Save the Children warned the COVID-19 pandemic and its resulting economic devastation in the Pacific, should be enough of an emergency to prompt Australia to now expand the scope of the AIFFP so that it can ‘…finance the creation of social and economic protection schemes that complement the PICs’ national stimulus packages’.
The AIFFP could be used to finance a set of packages consisting of cash transfer funds for immediate relief for households, such as those devastated by Tropical Cyclone Harold in Vanuatu, in addition to finance for job and income protection schemes across the region, to support their resilience in this COVID-19-induced recession. These packages can be designed at national and regional scales, to assist micro-states like Kiribati, for example, who argue they are at a disadvantage due to their small size, causing them to be overlooked by large infrastructure initiatives like the AIFFP.
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Even most of the larger PIC economies, whether they depend on tourism, resources, infrastructure construction, or combinations of these activities, cannot finance their economic recoveries single-handedly, according to Save the Children Australia.
For example, PNG and the Solomon Islands are experiencing either resource gluts or weakening demand respectively, resulting in reduced revenues from LNG and timber. The PNG government has limited fiscal resources and cannot implement an expansionary, stimulus-based budget alone, so is urgently seeking loans from development partners like Australia.
The PNG state is in significant debt, and in addition, the prevalence of extreme poverty is high in PNG – around 38 per cent of the population lived beneath the poverty line in 2010 (the last time data was collected). According to the World Bank, PNG is headed for zero to negative growth in the short term, while travel bans present the risk that food and healthcare supplies to PNG’s poor, who are largely concentrated in rural areas, will be disrupted.
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Likewise the Save the Children highlighted concerns about low government cash reserves in the Solomon Islands exacerbating ‘..vulnerability, especially in rural areas, which have experienced substantial reductions in development expenditures, resulting in less effective service delivery and little development expenditure’.
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Save the Children Australia outlined that like PNG, the Solomon Islands, was also looking for more donor-funded infrastructure spending and loans to stimulate the economy and offer tax relief measures and concessional loans aimed at ‘…shoring up smallholder agriculture, for example’.
Even Fiji, with its relative lack of poverty, cannot afford measures such as wage subsidies and wage transfers to households. This situation affords the Australian Government an opportunity to assist the PICs by funding measures that complement their own.
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Save the Children urged the Australian Government to address the PICs’ social protection needs by ‘expanding the focus of its Pacific Step-Up from hard infrastructure to the various forms of soft and human infrastructure that can protect communities facing simultaneous, interlocking, and potentially devastating social security challenges’.
Case study helping Samoans access better more affordable internet
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DFAT declared that Australia’s support for the construction of the Tui-Samoa submarine cable, and the associated legislative reform processes, has ‘…significantly improved Samoa’s digital connectivity, contributing to economic growth’.
The wholesale price of internet bandwidth [in Samoa] is 90 per cent lower than in 2015, significant increases in the volume of data usage occurred in 2018 -19, and mobile operators are aiming to reach universal 3G coverage by the end of 2019.
Australia had worked with the World Bank and Asian Development Bank to provide Samoa with a new submarine internet cable. Australia has invested in the new cable as a way to support the creation of new jobs and ways of doing business, better access to information and markets and opportunities for revolutionising basic services including health and education.
Providing improved health services to the Pacific
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Solomon Islands High Commissioner His Excellency Robert Sisilo believed provision of a multi-role health vessel similar to the YWAM training and medical ship, YWAM PNG, a small cruise liner refitted to provide dental services, day procedures, a laboratory, four patrol tenders and accommodation for more than 100 volunteers on board, would make a huge difference to the lives of those Solomon Islanders in remote villages isolated from medical services.
I mean coming from a country made up of about 800 islands, it certainly would be a very useful thing if we have a medical ship or health vessel with a multipurpose role going around the islands, especially for the rural areas where health facilities are very much wanting.
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High Commissioner Sisilo recalled his own experiences coming from a Polynesian atoll on the outskirts of the Solomon Islands.
The only way to get there is by boat, and the boat goes there once every three months—if you are lucky. Most of the time the clinic at home is without medication or medicines, and even without a registered nurse, so it’s really a challenge for some of our outlying islands. If we had this kind of vessel working in Solomon Islands, visiting the islands every now and then, that would certainly be a game changer. It would also prevent people from coming every now and then to the main town. It can be very expensive coming over to Honiara, and then you have to spend another two or three months before the next boat goes back.
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Mr Sakias Tameo, the Deputy High Commissioner of Papua New Guinea, acknowledged the YWAM medical ship does a good job in servicing remote coastal parts of PNG.
It goes to the western and gulf provinces. They really provide a lot of valuable services, because obviously our people need help out there in terms of health.
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Health services provider Aspen Medical submitted with respect to health services and given the context of the COVID-19 pandemic, there is significant opportunity to assist Pacific island countries improve ‘the standard and quality of local healthcare services, including the enhancement of disaster planning and preparation activities’.
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Acknowledging that two major trading partners in PNG and Fiji are not members of the PACER Plus group of Pacific nations, Aspen Medical does see opportunities to work within PACER Plus to enhance their health capabilities of the member nations.
The needs of our respective regional neighbours are changing and evolving. We should not assume to understand what each country needs now and/or into the future.
Accordingly, we support the current DFAT Policy initiative and supporting actions being undertaken and led by DFAT relating to the ‘Partnerships For Recovery’ policy document. Specifically, we welcome ‘Health Security’ being identified and included as a key pillar within current Australian Federal Government policies and planning.
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Aspen Medical was also example of an Australian company that Austrade have assisted in the Pacific since the company first started delivering services in the Solomon Islands in the early 2000s, according to Austrade’s Acting General Manager of Government and Partnerships, Ms Margaret Bowen.
In 2018, the government of Fiji announced that Aspen Medical would be its key partner in delivering health care in reforming Fiji’s healthcare system. Austrade has stood side by side with Aspen Medical throughout its two decades in the Pacific, in a number of Pacific countries now. Importantly, Aspen Medical has helped to accredit hospitals in the Pacific and to bring them up to international standards. The work is commercial but the effect is kind of universal.
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In light of the global pandemic Aspen Medical also welcomed the country-by-country analysis that will help determine relevant needs, areas of improvement and health priorities at an individual country level.
Once the analysis is completed, and as a high-level approach, the Government could consider utilising some of the funding allocated to the Australian Infrastructure Financing Facility for the Pacific (AIFFP) which could potentially be directed toward boosting Regional Health Security initiatives which will ensure that all Pacific nations are better equipped and trained to respond more effectively to manage future major health challenges, such as the COVID-19 pandemic.
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Australia should use the AIFFP, according to Save the Children, to help finance some of the health capacity expansion that many of the Pacific island countries require, in collaboration with multilateral funds.
While the medical supplies and personal protective equipment that Australia is delivering are a good start, longer-term support needs to be considered, including via new initiatives and social enterprises being developed in Australia.
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Save the Children submitted that Australia could finance an important Australian initiative aimed at ‘…protecting Pacific children (and adults) from acute respiratory infections and pneumonia by providing oxygen in conditions where a constant electricity supply cannot be guaranteed’.
Save the Children is calling for support for the FREO2 Foundation, based at the University of Melbourne, which has developed a range of new technologies to ensure 100 per cent availability of oxygen even in low electricity environments, and which, in partnership with Save the Children, plans to establish a pilot of this technology in the Solomon Islands – a country which has some of the highest incidence of pneumonia in the Pacific, even before COVID-19.
Case study of a public private partnership in Fiji healthcare
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DFAT submitted a respected Australian healthcare business entered into a public private partnership (PPP) with the Government of Fiji in early 2019 to ‘…substantially upgrade, maintain and operate two public hospitals in Fiji, providing free health services for Fijian citizens’.
The PPP is a first for Fiji and the Pacific. It will provide access to a wider range of higher-quality health services for the first time. Heart surgery and radiotherapy for cancer will be available for Fijians for the first time.
The project has great potential to strengthen Fiji’s credentials as a medical services hub for the region. The hospitals will be built to international standard, promoting confidence in the level of care available. With one of the hospitals located in close proximity to Nadi International Airport, which enjoys good connectivity with Australia, there is potential for Fiji to become a premier retirement and aged care destination.
The International Finance Corporation (IFC) provided technical support to the Fijian Government to structure and tender the PPP. Australia’s aid program part-funded IFC’s feasibility work on this project. The PPP was awarded following a competitive tender.
Upon being awarded the contract, the business…under-estimated the likely costs of construction. This demonstrates the need to build in flexibility within PPPs to address perceived financing shortfalls, while avoiding over-investment of partner government resources.
Supporting sustainable growth in the Pacific
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DFAT submitted sustainable economic growth requires ‘societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment’.
Importantly for Pacific Island countries, this includes planning for and adapting to climate change.
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According to DFAT, Pacific island countries are some of the most vulnerable in the world to the effects of climate change. The World Risk Index 2019 ranks five Pacific island countries among the top 20 most at-risk countries, including Vanuatu and Tonga, which are ranked first and third respectively.
Pacific island countries’ key economic sectors, including agriculture, fisheries and tourism, are among the most vulnerable to the impacts of climate change. Rises in sea levels, temperature and cyclones can impact infrastructure, which supports connectivity, such as transport (including ports and roads), which directly supports trade. Post-disaster assessments of recent extreme events, including Tropical Cyclone Pam (Vanuatu and Tuvalu) and Tropical Cyclone Winston (Fiji), cite sustained impacts on productivity, supply chains and access to markets in all economic sectors.
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DFAT believed disruptions to trade associated with climate change are already occurring, and required resilient infrastructure planning, design and maintenance that enables countries to maintain linkages to regional and global markets.
Incorporating environmental resilience can help obtain efficiencies towards the already high costs of linking Pacific markets and support improved trade competitiveness.
Resilient infrastructure projects in the Pacific
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DFAT highlighted a resilient infrastructure project in Vanuatu. Australia funded a project to assist Vanuatu’s recovery from Tropical Cyclone Pam, delivered through the Enhanced Integrated Framework (EIF) - a multilateral partnership dedicated to assisting Least Developed Countries (LDCs) to use ‘…trade as an engine for growth, sustainable development and poverty reduction’.
This project rebuilt and redeveloped the Port Vila commercial cruise ship port, aiding in Vanuatu’s economic recovery while also delivering an upgrade to Port facilities building in disaster-resilience.