Geopolitical competition in the Pacific is intensifying, and left unmanaged it can compromise development and governance. Development partners could do much more to align with Pacific priorities, pool resources, and dial-up impact in a “race to the top.”  

Pacific Island countries find themselves caught in the cross-currents of great power rivalry. Growing strategic jostling between China and traditional partners — Australia, New Zealand, United States, and France — in the Pacific has transformed development assistance into a proxy for great power competition.

Some observers might see this in two-dimensions, with traditional Western donors and China vying for influence. But what is at play is better seen as multidimensional, with Pacific island countries’ agency, and greater donor cooperation and accountability also in the mix. It is a dynamic situation, with Pacific countries navigating the tides of power to carve out their own development paths. Western powers could do more to work together and help lift engagement standards to achieve development goals.

Geopolitical rivalries

For decades, countries like Australia and the United States have been key players in different parts of the Pacific. Australia’s focus has been in the South Pacific and the US in the North Pacific. More recently those geographic divisions have given way to a pan-Pacific focus. Previously, Western engagements, rooted in historical ties and a liberal internationalist perspective, have shaped the region’s development landscape. But new players with different agendas and approaches are changing the game.

Chinese investment in the region hit record highs in 2016. In 2021, China was the fifth-largest bilateral donor, however it has shifted from large, showy investments to more targeted and smaller projects, mostly for infrastructure (Figure 1) and resources development. Some priority areas, such as climate resilience, are largely neglected (Figure 2). With its touted no-strings-attached aid and politically prized development projects, China offers an alternative to the traditional aid models of the West.

The additional aid and interest from China are welcome. But geopolitical leveraging, not managed well, can erode governance, accountability, and regional stability. Chinese deals curry elite political favour, and the rushed Partners in the Blue Pacific mechanism has been criticised for undermining existing regional institutions.

PICs navigating choppy geopolitical waters

Amid these power plays, the PICs are not mere bystanders. They demonstrate agency and strategic thinking, leveraging their position to extract maximum benefits from both sides. By engaging with multiple donors, these countries aim to balance the scales, ensuring their development agendas are not overshadowed by the interests of the more powerful nations and, on occasions, harnessing financial flows in favour of ruling elites. This balancing act – reflected by Pacific leaders’ repeated insistence of being “friend to all, enemy to none” – is fraught. It requires careful navigation to maintain sovereignty and avoid falling into a dependency trap or becoming pawns in a larger geopolitical game.

Greater cooperation and coordination among donors will prove pivotal in improving Pacific development outcomes. Essential to this is finding common ground by focusing on the needs and aspirations of the PICs, for example embodied in the 2050 Strategy for the Blue Pacific Continent or National Security Strategies.

With PIC needs and aspirations in mind, traditional donors can improve the scale and reach of aid through multilateral and regional partnerships, as noted in a recent Lowy Institute report. Positive examples of the power of cooperation are seen in the multilateral bank reforms aimed at boosting local procurement and employment, raising the standards of project delivery, and investing more in local technical expertise. This needs to be done without excluding the quality engagement of any player, adding to costs of development, and neglecting recipient consultation. It’s still a work in progress.

Sustainable Development: More than just aid

Sustainable development assistance has multiple facets, including building resilient economies, fostering good governance, and ensuring development projects align with the long-term interests of the PICs. Success calls for a nuanced understanding of the region’s unique cultural, social, and environmental landscape — best achieved through genuine, inclusive development partnerships.

Too often donor agendas set aid priorities, missing the opportunity to benefit from local strengths and networks. Professional networks that combine strengths of traditional partners and PICs include the regional chiefs of police and customs agencies that combat transnational crime, and the re-invigorated Pacific Islands News Agency that is building Pacific journalist capability to analyse and tell their own stories. Chambers of commerce also have an important role to play in sustaining economic development.

The most important security issue for the Pacific, climate change, exposes countries to storm surges, unprecedented cyclones, droughts, and sea-level rise. The ADB estimates the region has US$2.8 billion a year in unmet investment needs out to 2030, and at least an additional US$300 million per year for climate mitigation and adaptation. With these huge needs — most unmet — donors need to pool resources, and simplify and localise finance mechanisms to build resilience. That means more commitment to regional funds like the Green Climate Fund and to Pacific-based initiatives such as the Pacific Resilience Facility.

Of course, more than dollars are needed. One of the critical issues in Pacific development is the question of accountability and governance standards. As China increases its regional footprint, concerns arise about project transparency, sustainability, and rival development norms imbedded in Chinese “global initiatives.” The Western donors, with their emphases on democratic values and human rights, offer a contrasting approach. For the PICs, navigating these differing standards is a delicate task, one that requires a careful balancing of values, interests, and politics. But if the goal is to stimulate a “race to the top,” then a better aligned approach to the Pacific context and stronger quality controls are needed by donors and regional institutions.

A Region at a Crossroads

The Pacific region stands at a crossroads, with its future development trajectory influenced by the actions of both regional and global powers. Pacific countries, while small, have a significant role to play in this unfolding narrative. By strategically leveraging their relationships with both traditional Western donors and China, they can steer their development journey towards a more sustainable and prosperous future.

The challenge lies in ensuring that this development is sustainable and inclusive, respecting the unique cultures and aspirations of the Pacific peoples, while not falling foul of elite political power plays. As the great-power rivalry continues, the world watches with keen interest, hoping that the winds of change will bring progress and stability to this unique, and strategically important, region.

The full report on which this paper is based is available at: Geopolitics in the Pacific: Playing for advantage.

Professor Meg Keen FAIIA is the Director of the Pacific Islands Program at The Lowy Institute. She was also the inaugural director of the Australia Pacific Security College, senior analyst with the Office of National Intelligence and ANU senior fellow conducting research on pacific politics and security.

Professor Alan Tidwell is the Director of the Center for Australian, New Zealand, and Pacific Studies at Georgetown University’s Walsh School of Foreign Service. His research focuses on Australian–American relations, the geopolitics of Oceania’s smaller states, and conflict resolution.

This article is published under a Creative Commons License and may be republished with attribution.