By Lowy Pacific Aid Map shows Australia now dominant lender and infrastructure investor
The Australian government provides about 37 per cent of development spending to the Pacific. (Supplied: Department of Defence)
In short:
The latest Lowy Institute Pacific Aid Map has found that Australia has supplanted China as the dominant lender and infrastructure investor across the Pacific.
The federal government provided around 37 per cent of all development spending in the Pacific in 2024.
The Asian Development Bank and the World Bank are still major lenders in the region, contributing 11 per cent and 10 per cent of total overall development spending respectively.
Australia has supplanted China as the dominant lender and infrastructure investor across the Pacific as the government ploughs billions of dollars into the region through both foreign aid and loans.
The latest version of the Lowy Institute’s Pacific Aid Map also shows that Australia has also maintained its position as by far the largest aid donor in the region, with the federal government providing around 37 per cent of all development spending across the Pacific in 2024.
That puts Australia well ahead of the other countries, with New Zealand sitting at 11 per cent, the US at 8 per cent, China at 6 per cent and Japan at 3 per cent.
The map’s lead author, Riley Duke, said the latest data showed a “striking” shift, with China’s lending to the region continuing to fall away.
“Historically this has been an area very much dominated by China. Beijing has built a lot of relationships and influence through these big loan finance infrastructure deals,” he said.
“So, it’s significant that Australia seems to have crowded out China in this space.”
China’s lending to the Pacific has continued to decline. (Supplied: SPTO)
The shift means that Australia will face growing pressure to show it can deliver major infrastructure effectively without saddling Pacific nations with unsustainable debt.
A small number of Pacific countries, particularly Tonga, have struggled with the financial implications of Chinese loans, and the issue has generated political controversy over several years.
Mr Duke said it was far too early to judge the success of Australia’s push into the infrastructure space, because it was still a newcomer.
“Australia has inked a lot of these deals but there’s still a lot in the pipeline that hasn’t yet been delivered,”
he said.
“How successfully Australia is able to deliver these projects will determine the legacy of this push into the infrastructure and lending space.”
Much of Australia’s new infrastructure funding has been funnelled through the Australian Infrastructure Financing Facility for the Pacific (AIFFP), which has already committed more than a billion dollars in loans as well as more than $850 million in grants since being established in 2019.
The Lowy Institute estimates the government has signed new loan agreements worth $US2.4 billion ($3.44 billion) since 2021.
Mr Duke said the key would be delivering projects on time and on budget, and ensuring they funded projects which boosted economic activity in Pacific nations.
“Everything hinges on the quality,” he told the ABC.
“If a project is well-built and it contributes to economic growth, then it pays itself off.”
Sources of debt financing in the Pacific, disbursed loans in constant 2024 US dollars. (Source: Lowy Institute Aid Map)
Australia’s emergence as the key lender in the region has not completely sidelined Beijing across the Pacific.
The Asian Development Bank and the World Bank are still major lenders in the region, contributing 11 per cent and 10 per cent of total overall development spending respectively: ahead of all countries other than Australia and New Zealand.
And the Lowy Institute’s Riley Duke said Chinese construction firms still “dominated” many contests for major World Bank and ADB projects, despite Australian government attempts to shift their operating model.
“This year we have data showing over the last decade over half the infrastructure contracts awarded by volume [by the ABD and World Bank] have been won by Chinese state-owned firms,” he said.
“So this means that China, while its infrastructure lending has gone down, is still playing a major role in the infrastructure space, and a very visible one, on the ground.“
He said China was also increasing the amount of money it was handing to the Pacific through grants, with the money often being poured into smaller but equally visible projects like health clinics, roads and schools.
The Aid Map also found that while Donald Trump’s aid cuts had fuelled uncertainty in the Pacific, the US administration’s move to renew the US Compacts of Free Association with the Federated States of Micronesia, the Marshall Islands and Palau — worth more than $7 billion over two decades from 2024 — meant that its overall commitment to the region remained relatively steady.
Originally published on www.abc.net.au — View original