Either way, the Chinese are coming
By ROWAN CALLICK in Islands Business
They are eagerly awaited for the fortunes they are said to bring islanders. And they are equally feared for the destruction they are alleged to have on traditional Pacific ways.
Either way, the Chinese are coming. Many are already here in the islands, but the expectation of a far bigger Chinese presence is overwhelming.
And the preparation is almost non-existent, in terms of Pacific understanding of the culture, politics, economy or language of China. Many visits are made there—but usually paid for by the hosts, and with an overwhelming focus on seeking financial and material benefits from a China perceived wrongly as wealthy.
In fact, China's average wealth is lower than that of many islands countries. But its living standards have been growing very rapidly—for reasons which, for the most part, remain mysterious in the Pacific, because of its inadequate understanding of China: hard work, savings, a family focus on education, a government focus on building—and maintaining high quality infrastructure, and a priority on creating the settings needed for business success and thus for jobs, the core factor in development.
In Papua New Guinea, Planning Minister Paul Tiensten has boasted that the country "can become the China of the Pacific." But, while he referred in general terms to "aligning itself with short and long-term government strategies," it is unclear which qualities of China he had in mind.
As Australia and New Zealand review and prepare to restructure their aid programmes in the region, China's Vice Foreign Minister Cui Tiankai stated clearly at the Pacific Islands Forum meeting in Port Vila last August: "China will push forward its relations with the islands countries to a higher level."
But the gap between islander expectations and China's capacity and desire to deliver is growing steadily wider as the performance of Pacific societies continues to trail their citizens' hopes.
No Pacific country is in the top half of the 2010 UN Human Development Index. Many are turning to China, as the great success story of development in this new millennium, to lead the way.
At the same time, in some areas, the Chinese are being demonised as the new exploiters. The truth, as ever, is somewhere in between. And it is all the harder to discover and disseminate, since so few Pacific islanders have the experience and skills to understand and explain what drives China and Chinese business.
Most Pacific leaders visit China with their hands out for personal or national favours, not with their notebooks open ready to observe and note how China has achieved its remarkable development successes.
There is a wide expectation that the best way to achieve maximum material benefits is to set China up to out-perform its apparent Western "rivals" such as Australia, New Zealand and the USA.
This assumes that diplomatic relations and aid are part of a big strategic game in which the winner takes all.
This was indeed the situation when China and Taiwan vied for diplomatic partners in the region. But since the smart and very internationally minded lawyer Ma Ying-jeou won the presidency in 2008, that rivalry has largely been placed in abeyance.
China has eight diplomatic partners among the islands states, Taiwan has six, and the two sides have tacitly agreed to leave the great game at that score for at least a few years to come.
That gives the countries scope to focus not so much on "greasing" the politicians in power as on consolidating their relationships and their support for the countries that recognise them.
China and Taiwan are also now especially keen to participate in regional programmes as "responsible stakeholders" in the international system.
As he proved so often in his long career as an expert island-watcher, the late Professor Ron Crocombe was prescient in his final book, choosing as the topic "Asia in the Pacific Islands: Replacing the West."
Compete for influence
He said in terms of external military influence, the Pacific was known from the 1500s as "a Spanish lake", from the late 1700s as "a British lake", and from World War II "an American lake".
Today, he said, the Asian powers are vying for that title, as China and Taiwan, Japan and India compete for influence.
A century ago, Crocombe said, "Asians were among the least educated, poorest and lowest-status people in the region".
Today, that has all changed. Asia is the main market for the commodities—minerals, oil and gas, timber, fish, tree crops—that the Pacific sells, and increasingly for tourism too.
And as Crocombe wrote, "Islanders do not feature in business or politics in Asia—whereas Asians are prominent in business and influential in politics in the islands".
Islands governments, he said, which after independence sought self-reliance, "now seek foreign investment—in fact, they plead for it".
And as Japan, then Taiwan, Korea and Singapore, and now China, have enjoyed a surge of growth and surplus capital, they have risked some of it in the Pacific, focusing on extraction or speculation more than production, with fishing, logging, land and hotels common targets.
Since the 1990s, Crocombe said, "conditions in the islands have attracted speculative 'frontier' enterprises from Asia seeking short-term gains using opportunistic techniques"—a polite term for corruption.
The key goals of the aid policies of the larger Asian nations, he said, include islands' votes at the United Nations and at other international forums, and resources.
"They try to influence the political and strategic positions of islands governments, as do Western donors, despite denials from all of them."
New Asian paradigm
But Crocombe believed that long after the tides of population, trade and investment have turned in favour of Asia, Western influences were likely to remain strong because of the English language, Western patterns of education, entertainment and organisation—and Christianity.
He lamented that little was being done in the islands to prepare people to gain optimum benefit from the new Asian paradigm.
"Responses are needed across the board—not just in foreign policy and practice, but in the preparation of teachers, curricula, media personnel, politicians, civil servants and the public, as well as adaptation of the economy to benefit from the new potentials."
The biggest island nation, Papua New Guinea, is at the frontier of these new challenges, as so often happens.
It is the first recipient of a major Chinese investment—the $US1.5 billion Ramu nickel mine being developed by one of the country's biggest state-owned businesses, Metallurgical Construction Corporation (MCC).
The succession of problems encountered so far during the project's development—labour issues, landowner disagreements, environmental battles—have placed MCC on a fast learning curve.
The company appeared to have expected that its strong relationship with Prime Minister Michael Somare and elements of the central government should be sufficient to ward off any challenges. But it has since learned the need to address all the stakeholders more directly, and has discovered the fiercely independent nature of the legal system in PNG.
As Bougainville seeks under its new president, the veteran politician and former Catholic priest John Momis, to regain some of its once envied living standards, it is looking to reopen the copper mine closed 21 years ago at the start of the civil war and to attract investment from China—to which Momis was formerly the PNG ambassador.
Momis has joined others in urging that China—to which he recently led a large delegation—be adopted as a model for PNG, stressing the country's success through opening its economy to foreign capital, technology and management skills.
But at the same time as Sinophilia—a love of China—is growing in PNG and elsewhere in the Pacific, so is Sinophobia—a fear or hatred of China.
Bernard Yegoria, a Papua New Guinean studying for a master's degree in international relations at Jilin University in China's north-east, said: "We witnessed the ransacking of Asian businesses in 2009, mostly targeting people of ethnic Chinese origin in major towns because of the disparity of wealth.
"This Sinophobia is growing and could lead to a major social uprising. Chinese entrepreneurs were in PNG a long time before independence and contributed immensely to PNG's development as a sovereign nation.
"But in more recent years, a new wave of Chinese immigrants and business activities has moved in a different pattern.
"The Chinese have adapted to the changes in PNG society, backed by their guanxi (network) system that is similar to our wantok (relative) system.
"We, on the other hand, have failed to evolve the way we do business. As a result, the lack of opportunity experienced by middle and low class citizens has led them to take out their frustrations on foreign-owned businesses"—with the new Chinese migrants, some of whose legality has come under question, in the front line.
So at one level, politicians seek support from China, importers depend on Chinese goods, exporters look to Chinese markets, with businesspeople and officials constantly visiting China, as they have done last year for the Shanghai expo.
At another very different level, there is a disconnect and intense mistrust between grassroots islanders and the new class of Chinese migrants, workers and businesses.
The declaration of peace in the diplomatic war between China and Taiwan, which was especially hot in the Pacific, is a key factor that will permit both countries to start to address such poor perceptions, rather than focusing on consolidating their own supporters and seeking through chequebook diplomacy to entice more countries to join their banners.
Kiribati, Marshall Islands, Nauru, Palau, Solomon Islands and Tuvalu recognise Taiwan, the other eight islands countries recognise China.
Taiwan's President Ma has admitted publicly that corruption was a side-effect of this diplomatic war, which involves a quarter of Taiwan's total diplomatic partners around the world.
He told ISLANDS BUSINESS during a visit to Solomon Islands in 2010: "We wanted a framework that puts cross-strait relations and our foreign relations on the same plane.
"As we have improved relations with China, countries which are China's allies have done the same with us.'' And Taiwan is now, he said, relaxed about its partners building links with China outside diplomacy.
That regional visit helped him flesh out how Taiwan's new aid programme will function, with different countries hosting technical assistance programmes that can be tailored for most of the six countries—encouraging a return to healthier diets, operating on cataracts, advising on land reform, for instance.
When Ma arrived in the Solomons, he was told bluntly what had to change. The Solomon Star editorialised to him on "the abuse of your taxpayers' money by MPs using Taiwanese aid money as a slush fund. We are begging you to put a stop to this".
Ma said President Frank Kabui twice raised such concerns during a state banquet. "Ever since I got here," he said, he had been confronted about the corrupt use of Taiwanese aid.
He said: "That is exactly our instruction to our ambassador here. We have a watchdog agency in our government structure, the Control Yuan. It is in charge of investigating bureaucratic activities, and our ambassador here knows that very well.
"I sometimes joke to our ambassadors that they have to let their friends know I used to be the justice minister."
For a rare moment, though, he wasn't smiling. "We've been accused before of doing things not quite acceptable by international standards," he said candidly.
China and Taiwan are both offering scholarships to islanders, through the Pacific Islands Forum.
As China's vice-minister, Cui said at the last Forum summit in Port Vila: "China is ready to maintain the high-level exchanges, deepen economic and trade cooperation, and further strengthen cooperation with Pacific islands' regional organisations."
This is a side of China's Pacific strategy that appears to be rarely noticed—but is becoming increasingly important.
China has been prepared, for instance, to provide Fiji with more material support as Western powers hold back until the country's military rulers hold elections, but this has been more modest than many—including the government—had hoped.
Tai chi instruction on the Sukuna Park oval for public servants, while clearly beneficial, does not compensate for the country's economic downturn.
Essentially, China wants to work cooperatively within the islands region—including with Australia and New Zealand, to which it has become as close as to any Western countries.
It looks to Australia for crucial supplies of minerals and has a free trade agreement with New Zealand.
The words of Vice Minister Cui need to be taken as they were intended. China will refuse to be played off as "siding" with any one country or group within the region, where its aid increased by six times from 2005-2008, filling—as Danielle Cave of Lowy Institute in Sydney puts it—"the gap left by US neglect," although Washington, waking up, did send its largest delegation ever to the Forum summit in Port Vila.
Beijing lifting its game
The Lowy Institute presented a report in 2009 that claimed "China lacks a coherent strategy for its aid programme in the Pacific—beyond checking and reversing diplomatic recognition of Taiwan [a goal now made largely redundant]—and tends to pursue short-term objectives.
"China pledges aid in an erratic manner, funds projects without regard to recurring cost, and the secrecy surrounding its programme obstructs development outcomes and breeds suspicion."
Beijing has worked since then to lift its game, in part by getting closer to other major aid donors in the region.
Foreign Minister Yang Jiechi stressed on December 2: "It's important to note that China-US relations in Asia and the Pacific region should be cooperative and win-win—not a zero-sum game."
To turn win-win into an even better win-win-win, requires the Pacific to lift its game too, and to work to understand China and how it works in order to benefit more fully from its extraordinary rise without letting negative elements of that rise overflow into the islands