CHINA BRINGS AUSTERITY TO LAID-BACK RAROTONGA

PACIFIC ISLANDS REPORT

Pacific Islands Development Program/East-West CenterWith Support From Center for Pacific Islands Studies/University of Hawai‘i

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Feature

CHINA BRINGS AUSTERITY TO LAID-BACK RAROTONGA

Islanders, academics question Chinese motives in Pacific

By Rachel Reeves

SANTA BARBARA, California – (June 9, 2008) At seventy-three years old, Lorna lives in the middle of the busiest town on the island of Rarotonga—but busy is a relative term. She leads a simple life; her modest home, flanked by mango trees and coconut palms, sits amongst a cluster of small cafes and pearl boutiques that is Avarua, capital of the Cook Islands. Here, in downtown Rarotonga, Lorna’s home blends into its background. But the austere gray police station next door seems too modern, too impersonal for this place. The big brick courthouse down the road doesn’t suit a little town that straddles fertile green hills and a palm-fringed lagoon. For many locals, these structures feel disproportionately huge, plunked in the middle of a small island with no traffic lights.

Both buildings were designed by Chinese architects, constructed by Chinese laborers, made of imported Chinese materials and funded by Chinese dollars. They reflect the recent increase in China’s extension of financial aid to Pacific island nations.

The level of Chinese attention to the Cook Islands has piqued the interest of locals and scholars alike. Some feel gratitude toward China for filling shrinking government coffers, others resent the alleged lack of transparency in the government’s negotiations with China and still others are concerned that China’s interests lie with the Cooks’ vast expanse of mineral-rich seafloor and fishing territory.

China’s involvement with Oceanic nations is reflective of its recent efforts to establish relationships through monetary means with other developing countries in Africa, the Middle East and Latin America. Professor Terrence Wesley-Smith of the Center for Pacific Islands Studies at University of Hawai’i at Manoa noted that for China, the Pacific is just one piece of the puzzle.

"China is active everywhere on the globe and it’s active everywhere in pursuit of its own interests—for the most part those interests are economic," he said. "It’s in Africa because there are resources; it’s in the Middle East because it needs oil and so on and so forth. There are practical reasons for China to be active all over the world and the Pacific is just the latest chapter in that global expansion."

In 2006, China sent 40 workers to Rarotonga to erect the NZ$4.8 million courthouse in Avarua. The courthouse was the first visible manifestation of a burgeoning friendship between China and the Cook Islands government. The NZ$4 million police station that was built in 2007 was another gift from the Chinese government to Rarotonga, followed by a NZ$12.2 million grant later that year. Officials are currently negotiating plans with the Chinese for a NZ$13 million sports stadium, which will house the 2009 World Youth Netball Championships and the 2009 South Pacific Mini-Games. China has also offered full educational scholarships to Cook Islands youth and expressed a willingness to aid the Cook Islands in developing telecommunications infrastructure and an inter-island shipping industry.

To date, the Cook Islands government has received from the Asian Development Bank (ADB) a total of NZ$52 million in soft loans with 2.5 percent interest, to be paid over twenty years with an additional five-year grace period. For purposes of comparison, interest on soft loans to international borrowers from the China Import Export Bank is set at 8 percent, according to a media release from the office of the Financial Secretary. China also expressed a "willingness to ‘write off’ or change to a grant if we are experiencing repayment difficulties," a Cook Islands government spokesperson said.

A Cook Islands government official, speaking on condition of anonymity, explained that ADB loans are far more complex than the numbers indicate. He added that his government has recently exhausted its final concessionary loan and will begin paying the standard rate on commercial loans shortly. He confirmed that interest on Chinese loans to the Cook Islands has been low in the recent past and suggested that this was a means for China to secure support from island leaders early in the game.

"China is a new player in the market place [of the Pacific Islands region]," he said. "It has looked around at what the competition is offering and has undercut them all. China needs friends and it’s buying them—helping them to meet their needs."

Though many scholars speculate that China’s motives are primarily economic, Chinese government officials allege that they are simply seeking political support. In talks with Cook Islands officials, Chinese premier Wen Jiabao has repeatedly requested one favor in return for his aid packages: that the Cook Islands government officially recognize the One-China policy, which stipulates that Taiwan, Hong Kong and Macau are not independent entities but constituents of mainland China. The ideological conflict between China and especially Taiwan seems to have triggered a race to claim the support of Pacific island nations through any means possible.

Wesley-Smith demarcated the political nature of China’s interest in Oceania and suggested that China’s efforts are currently focused on isolating the Taiwanese government from the international playing field.

"The Chinese think (Taiwan is) a renegade province that’s a legitimate part of their country," he said. "They want to go places that recognize Taiwan and counter that—they’ve been very successful, in fact. Whatever they can do to win countries, they’ll do."

At present, the governments of the Cook Islands, Federated States of Micronesia, Fiji, Kingdom of Tonga, Niue, Papua New Guinea, Samoa, Kingdom of Tonga and Vanuatu side with China while those of Kiribati, Marshall Islands, Nauru, Solomon Islands, Palau and Tuvalu recognize Taiwan as regionally and politically autonomous. It is not uncommon for an island government, such as that of the Marshall Islands, to switch its allegiance from Taiwan to China in response to financial inducement.

Wesley-Smith pointed to the possibility that Chinese political motives run deeper than a desire to garner support for the One-China policy. "I think this is a little bit wider than just Taiwan," he said. "Having allies in the UN and other international organizations can also work to China’s advantage when people criticize China for its human rights violations."

Whatever the motive, China’s strategy of offering aid in exchange for diplomatic recognition is becoming more noticeable throughout the Pacific. Scholars have termed this tactic "checkbook diplomacy," which implies the physical purchase of political support.

The consensus among a number of academics is that this approach to ally building has a negative impact on the less powerful party. Some doubt that a relatively weak island nation will be able to resist becoming dependent on a powerful benefactor like China. Wesley-Smith, however, noted that this aid dependency is not a new phenomenon in the Pacific region nor is it specific to the Chinese situation.

"There are always some big problems with small economies and the issue of aid dependency. If you look at these economies you see that aid flows are among the highest in the world per capita, actually. But I think you’ve got to look at the history of that and how that happened—it didn’t just happen by accident," he said. He suggested that by positing the issue in a wider context, it becomes possible to dispel some of the anxiety surrounding the problem of dependence on Chinese aid.

"If you think back to the time of independence—we’re talking about the Cold War, a global competition between the West and the Soviet Union. For the decision makers in Canberra and Wellington and Washington, the bottom line when it came to the Pacific was to ‘keep those countries on our side.’ It was a determination to keep the Soviets out of the region by influencing the leaders, establishing or cultivating relationships with Pacific countries. And one mechanism for doing that was providing aid," he said.

For Wesley-Smith, Pacific island history is rooted in a colonial tradition of aid dependency. Chinese aid does not differ from that offered by Australia, New Zealand or the United States in terms of its purpose or its scope. Checkbook diplomacy, he said, is not specific to Chinese strategy. Rather, it is a tactic employed by governments all over the world and plays a significant role in contemporary Oceanic history. "All countries who are involved in the region are doing what they’re doing because they’re trying to achieve certain objectives," he said.

Most scholars maintain that this long history of aid dependence throughout the Pacific has created issues for a number of island governments. Academics generally object to any decision or business negotiation that could potentially exacerbate the problem.

In an interview with Japan Focus, Professor Stuart Harris of Australian National University delineated the dangers of checkbook diplomacy for small, vulnerable Oceanic nations. "The context in which this competition [between Taiwan and China] plays out is a region largely of states that are weak in economic and governance terms, with governments that are often basically unstable," he said. "Aid dependency is widespread and so is corruption. The impact of the competition between Taiwan and China, usually in the form of financial aid, undermines the considerable efforts made in a number of these states."

In a recent e-mail, a representative of the Cook Islands government who requested anonymity defended the stability of the Islands’ political institutions. "You might recall the Italian loan for the Sheraton Hotel signed off in the 1980s—turned out to be a scam by an Italian bank that had been infiltrated by the Mafia. The fact that Cook Islands signed off on that document was due to ‘weak governance’ issues," he said. "The ‘checks and balances’ now in place within government are much more stringent and the likelihood of that happening now is a lot less."

He explained that dependency syndrome is a non-issue within the Cook Islands government and defended the Cooks-China relationship as a mutually advantageous arrangement. He added that the decision to accept Chinese loans was a sensible one, as China has proven to be a more flexible business partner than any other foreign power to date.

"Western institutions have failed to meet our development needs through an insistence [that we adhere] to a policy on loans and aid based on regional approaches that don’t meet the needs of microstates," he said. "[Their offers] are more insidious than the Chinese."

Many islanders feel that China does have sinister ulterior motives and suspect that local officials are interested in their personal economic security before that of their people. That government officials across the Pacific receive prepaid trips to Beijing and contractual perks worsens such suspicions.

UCSB Professor of Anthropology Shankar Aswani specializes in Oceanic studies and works closely with the Solomon Islands government. He, too, doubts the purity of business friendships between Chinese officials and high-ranking local officials. "The Chinese are ruthless. They’re smart. They’re businessmen. They’re going to steamroll these countries, and the country leaders are going to help them. A lot of this business is dark, secret, under the table," he said.

Where land mass is limited and leaders exert a disproportionate influence, countries become vulnerable to the whims of external forces, he said. Internal corruption, endemic to a large number of island nations, deeply exacerbates this weakness. Aswani offered the example of the Solomon Islands, where local officials have recently engaged in questionable business transactions. "These ministers and government officials are selling out their countries," he said. "They’re making deals to the detriment of the environment and to the detriment of their people."

Wesley-Smith feels that to assume all island governments are internally corrupt and mismanaged is to commit a gross over-generalization. "It’s a long tradition of outsiders making very derogatory statements about Pacific islanders," he said. "It’s dressed up in the guise of academics but it’s basically a colonial attitude toward the region, stemming from a sense that these countries are just not capable of really looking after themselves, not up to the task of running independent countries."

Still, some locals and scholars worry about the Chinese intentions in the Cook Islands. A lack of transparency in negotiations between the two powers feeds this reaction to Chinese infiltration. In a March interview with the Cook Islands Herald, South Pacific Mini-Games CEO David Lobb took issue with "the one-sided consultative process, the lack of communication and lack of independent advice with respect to costings." Lobb’s concerns reflect those of other locals, who feel that top government officials have failed to inform the public about their business with China.

A government official, speaking on condition of anonymity, admitted that a lack of transparency in government affairs is endemic to Cook Islands political history. "One of the biggest problems we have here with the ‘China issue’ is the failure of government to keep the public informed through a process of information flow and feedback," he said.

He alleged that a lack of transparency does not indicate internal corruption nor does it imply that political elites are making secret, self-enriching financial agreements with the Chinese. "All the transactions to date have been made in accordance with international law and aid and loan agreements," he said. "Rest assured that adequate risk assessment is done before any loan documents are signed off."

Government statements such as this one have not, however, successfully dispelled local concerns pertaining to the Chinese situation.

In a farewell speech to the public, former New Zealand high commissioner John Bryan addressed local concerns regarding Chinese influence in the Cook Islands. "There are lots of ideas floating around, including [the Chinese] wanting access to Cook Islands fishing grounds, the establishment of a fishing fleet in the northern group and the facilitation of migrants. Maybe there is an ounce of truth in that," he said.

Bryan’s allegations reflect a widespread fear among locals that their government will to some extent surrender its political autonomy or concede its marine resources. Many consider situations in which other Pacific islands have sold fishing rights to Asian nations and worry that the Cook Islands will follow suit.

This is a particularly sensitive issue, as years ago dense concentrations of manganese were discovered in the Cook Islands Exclusive Economic Zone (EEZ). Recently, groups from Canada and Norway have expressed interest in developing infrastructure to harvest the mineral resource.

University of Texas graduate Rena Buchanan, who has a degree in chemical engineering, suggested that China would have good reason to target the Cook Islands’ manganese deposits. "The most common end-products built with manganese are used in construction and transportation industries, both of which are experiencing unprecedented growth in China," she said. "Steel and aluminum alloys would be in great demand to support the growth of China’s infrastructure as well as to support the building of more industrial plants."

China has not laid a public claim to Cook Islands’ mineral or marine resources. Still, locals expect that if and when scientists perfect manganese harvesting technology, the Chinese will expect to make a profit on the Islands’ nodules as compensation for their generosity toward the government. "For China this is a geopolitical investment for long-term influence," Aswani said. "That’s their mentality. They’re thinking, ‘I give you money, I give you labor, I give you buildings. You owe me.’"

A Cook Islands official, speaking on condition of anonymity, admitted in a recent e-mail that he expects China to request rights to oceanic resources in return for its monetary contributions. "Undoubtedly the growth of [China] will be a major factor in the economic feasibility of nodules exploitation in the Cook Islands," he wrote. "I am just waiting to be seduced by a Chinese agent [to] make sure they get first ‘dibs.’"

At the 2006 First Ministerial Conference of the China-Pacific Island Countries Economic Development and Cooperation Forum in Nadi, Fiji, Chinese Premier Wen Jiabao alluded to the economic nature of China’s interest in Oceania. He noted that China’s involvement is "not diplomatic expediency; rather it is a strategic decision," he said. "Our economies are complementary. China has funding and expertise. The island countries are rich in natural resources. Herein lies huge potential for bilateral co-operation."Many Cook Islanders doubt that this cooperation will prove to be mutually advantageous. In a May 16 issue of the Cook Islands news, residents voiced their concerns in a number of letters to the editor.

One local under the alias of "Blind Man" wrote the following: "Has there ever been a deal with any Chinese in history, either commercial or political, that did not have a string attached? To think otherwise is naïve and foolish. You may just not see the results for a decade or two, and by then this government’s responsibility will have been happily passed on to someone else…but the cost will still have to be counted sometime in the future."

Another concerned local expressed a similar feeling toward the current state of affairs. "You say we aren’t promising [the Chinese] anything. That is true right now but very soon it may not be: If we enter into this loan then we are promising to pay it back with interest. For a small country like ours that is a very big promise," the resident wrote. "The more loans we end up taking from them the harder it will be to extract ourselves if things suddenly turn out not to be to our liking. The time to stop the sliding scale is right now, while we still can."

Rarotonga local Marjorie Crocombe, who has authored and co-authored a number of books on Pacific history, pointed to other negative implications of Chinese aid for the island. According to Crocombe, the courthouse and the police station "could have been built in time by competent local builders and the government could even pay for it instead of rushing off to patipati—i.e. ask the Chinese to pay for it and to bring their men here to build it. [Meanwhile] our own people have to [lay] off workers, who then migrate," she wrote in a recent e-mail.

She referred to the newly erected police station and the courthouse as "plain disasters." Many locals agree that these structures are ostentatious and futile and that financial aid would be better spent on sustainable development projects. It is likely that some of these issues are the basis for local suspicion of Chinese motives and subsequent discrimination toward Chinese visitors. In Tonga and in the Solomon Islands, for example, locals have responded to Chinese infiltration and development aid with rioting and arson attacks.

Wesley-Smith suggested that the real issue does not center on Chinese aid in particular but on the Cook Islands’ capacity to retain control over its assets. "I think the focus shouldn’t necessarily be on the Chinese—that’s in a sense too easy," he said. "The questions are much bigger than that—it’s about globalization, it’s about development and Pacific cultures and economics and how they can survive and flourish in this thing we call globalization. There are some very worrying questions—it’s more about the process itself rather than who’s propagating it," he said.

He noted that in this new global era, it is imperative that an island nation maintain a certain level of autonomy over its resources. "Pacific island leaders, governments and people taking charge of the agenda and being in control of their own futures—for me, that’s the key element," he said. "Being able to determine clearly their interests and being able to resist activities and advances and ideas that are not going to further their interests—that’s the key issue for the future of many Pacific societies."

China’s recent involvement with Oceanic nations has evoked a number of responses, both positive and negative, that point to an increasing awareness of the acceleration of global change. Though the futures of Pacific societies are unforeseeable, they will undoubtedly depend on local and international attention to political and socio-economic issues. The pressure that island communities can and must direct toward their governments will ensure the survival of these microstates in the era of global capitalism.