14.05.2020 Author: Sofia Pale

Fiji to become the West’s Foothold in Oceania?


The fact that economies of most of the small island nations in Oceania are not well-developed means that the financial system in the region is not particularly advanced. Some of the countries do not even have their own currency and use that of their more developed neighbors, i.e. Australia, New Zealand and the USA. There are regions with a relatively high standard of living, such as Guam and Tahiti. However, their prosperity depends on regular financial investments made by countries they are a part of, i.e. the United States and France, respectively. Hence, it is difficult to attribute their economic success to their own policies. One of the few nations of Oceania that has achieved economic prosperity is the Republic of Fiji.

It is the third most populous country in Oceania (after Papua New Guinea and New Zealand), with a population of approximately 900,000 people. Fifty % of them are of working age. During the last decade, Fiji’s economy has grown substantially. In addition, the country has been cooperating with large financial institutions, such as the Asian Development Bank (ADB), for quite some time. In the past 50 years, the ADB has invested more than $590 million into Fiji’s economy in the form of various loans, grants, economic aid, etc. In fact, the regional headquarters of ADB is located in Suva, the capital of this country.

The government of Fiji aims to fully realize the island’s potential as a country and transform it into an economic and transportation hub of Oceania.

In 2017, the 20-year National Development Plan (NDP), prepared with the assistance from the ADB and New Zealand’s leadership, was approved by the government of Fiji. According to the plan, conditions for doing business and financial stability in Fiji need to be improved; it is also important to attract investment into the nation’s economy, and other measures that encourage economic growth have to be taken. In order to help Fiji attain these goals, in 2019, the World Bank Group decided to provide the island nation with financial aid amounting to $64 million. The ADB, and the leadership of Australia, New Zealand and the EU, as well as the IMF (the International Monetary Fund) are all part of the funding initiative.

The South Pacific Stock Exchange (SPSE) is based in Fiji. From 2018 to 2019, it signed a number of Memorandums of Understanding with stock exchanges of the most prosperous nations in Oceania – New Zealand and Papua New Guinea. The financial institutions will collaborate on issues to do with securities, international trade agreements, transport, investments, etc.

In May 2019, Fiji became the first country in Oceania to host the 52nd Annual Meeting of the Board of Governors of ADB. In his opening address, Prime Minister of Fiji Frank Bainimarama stated that his nation was “laying the groundwork to host even bigger gatherings”, such as the IMF and World Bank Group Annual Meetings in the years ahead by building a new convention center, among other facilities, which would have the capacity to seat at least 4,500 people. The Fijian leader also gave a vivid description of the country’s economic achievements in the recent decade. He pointed out that Fiji had “established direct air connections to San Francisco, Los Angeles, Hong Kong, Singapore and Tokyo”, which could help transform the island nation from the “hub of the South Pacific” to “the hub of the entire Pacific Rim”. In addition, the Prime Minister talked about Fiji’s improved telecommunication and transport infrastructure, including the re-development of the Nadi International Airport, which had been since “recognized as a leading green airport in the Asia-Pacific region”. “Fiji has emerged as a case study in harnessing the power of unity to create inclusive and wide-reaching prosperity,” concluded Frank Bainimarama.

In 2019, the World Bank Group opened its new South Pacific hub in the Fijian capital, Suva. In addition, it granted Fiji access to concessional finance, or IDA (the International Development Association) funds.

Australia, New Zealand and the European Union member-states are nations of the West, headed by the USA, and they are the ones providing assistance to Fiji with its economic initiatives. The World Bank Group and the IMF are financial institutions that the United States also plays a leading role in. And Japan, whose main ally is once again Washington, is a key player in the ADB.

All of these developments are especially interesting considering the fact that, at present, Oceania and the entire Asia Pacific region are part of the battleground where the West, led by the United States, and China are fighting for world dominance.

The PRC has grown so prosperous and powerful in recent decades that it has become the USA’s main rival. Currently, it has been increasing its influence in the Asia-Pacific region and trying to edge out Washington from its leading position. China’s naval forces are powerful and well-equipped but the main tool the PRC uses to gain a foothold in various regions is loans and investments, which it offers to nations with poorly developed economies, thus making them its partners and debtors. China has been pursuing a similar policy in Oceania. Negotiations between the PRC and Vanuatu showed what Beijing’s ultimate goals in the region were.

Vanuatu is an island nation in the South Pacific Ocean. Just as the rest of the region, the country was in the West’s sphere of influence for quite some time, and it received economic aid from the United States and New Zealand. However, in the past decade, the funding provided by the West has decreased while that from China has grown, and at some point in time, the PRC became a closer partner to Vanuatu than its previous allies. In spring 2018, Australian media outlets reported that the government of Vanuatu was engaged in negotiations with the PRC on establishing a Chinese military base in the island nation. Oceania is part of a strategic security zone for Australia and New Zealand as well as the United States. China and Vanuatu were quick to refute the rumors about the negotiations, but the governments of Australia and the USA expressed serious concerns about the report. It is worth pointing out that despite PRC’s assertions that Beijing did not conduct negotiations with Vanuatu about the military base construction, its establishment would be in line with China’s current foreign policy goals and would substantially strengthen PRC’s position in the Asia-Pacific region. After such developments, naturally, the USA, Australia and New Zealand began to increasingly focus on Oceania. It is plausible that the initiative to invest in Fiji’s financial sector is part of the West’s strategy aimed at containing China.

Currently, the World Bank Group is working on various projects, worth $120 million, in Fiji, including those tied to transportation and telecommunication spheres. The initiatives in telecommunications are of particular interest to the West because a key stage in the “trade war” between the PRC and the United States involved attempts by the US to drive out Chinese companies (Huawei and ZTE) from Western markets. The two firms are leaders in the PRC’s telecommunications sector and sell reasonably priced computers and smartphones worldwide. Huawei was also planning on installing its 5G wireless networks, which were meant to take internet and mobile connectivity to another level, in any countries interested in the new technology. The United States claimed that authorities in the PRC would be able to access information transmitted via such networks. And in response, Washington has been trying to drive out Chinese telecommunication companies and promote its own instead. It is possible that a similar situation is unfolding in Fiji.

It appears that the Republic of Fiji has become the West’s new ray of hope in Oceania. The World Bank Group, IMF, ADB as well as the USA, Australia and New Zealand are planning on investing money in Fiji and connecting it to the rest of the nations in Oceania. Perhaps, these efforts are meant to prevent Fiji from establishing closer ties with Beijing. And only time will tell whether such policies will bear fruit or not.

Sofia Pale, PhD in History, Researcher at the Center for Southeast Asia, Australia and Oceania at the Institute of Oriental Studies, Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.

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