00:00 The main finding is that Australia is still by far the largest donor of foreign aid throughout
00:06 the whole Pacific. So one of the things that the Lowy Institute has done this time around
00:10 is crunch all of the data from 2008 up until 2021. And over that period, Australia's provided
00:17 around 40% of all of the total foreign aid supplied. So when it comes to the largest
00:24 providers, particularly if you exclude some of the multilateral institutions like the
00:28 Asian Development Bank, it really is Australia first, Daylight second, and then a host of
00:33 other players such as New Zealand, China, Japan and the United States. But one of the
00:39 interesting things in this year's map is that the researchers at Lowy Institute have tracked
00:44 a change in the way Australia distributes aid. Now traditionally, almost all of Australia's
00:50 aid has been in the form of grants that's handed over, particularly to support things
00:54 like governance, health and education in these countries. Around the time of 2019, though,
01:01 around the time of COVID, that started to shift perhaps a little bit earlier as Australia
01:05 increasingly started to get into the infrastructure game. And what we've seen in the most recent
01:09 iteration is Australia has now emerged as the major lender in the region. Now most of
01:15 its money is still in the form of grants, but it's now the leading lender as well as
01:19 the leading donor. And that creates risks as well as opportunities. On the one hand,
01:25 Pacific nations are asking for these loans to help them balance their budgets, to build
01:29 infrastructure, all of that sort of thing. But there are risks because a number of Pacific
01:34 countries, particularly in the wake of COVID and travel bans, are struggling with bad balance
01:40 sheets, they're struggling with high levels of debt. And Alexander Dayant from the Lowy
01:44 Institute, one of the main authors of this map, says Australia has to be careful that
01:48 when it goes into the lending game, that it treads carefully, that it doesn't overload
01:53 countries already struggling with debt. Let's take a listen to what he had to say.
01:58 And what's interesting to see that a lot of this financing is coming under the form of
02:04 what you call concessional loans. So loans that are very cheap, below market rate in
02:08 nature, but that are still loans. And this comes at a time where the overall debt in
02:16 the Pacific is actually increasing. So one of the points that we mentioned in our report
02:22 is to say that, you know, despite the fact that the Pacific needs financing, Australia
02:28 will need to trade very carefully when providing those development loans to the Pacific. Because
02:32 yes, most countries in the Pacific now face a high risk of debt distress, according to
02:37 the International Monetary Fund. And so it is very important for Australia, as for any
02:42 other development partners that provide loans to the region to trade very carefully.
02:46 Stephen, what's the Lowy Institute said about the way China's approach has changed?
02:52 Well, China's approach has also shifted. There has been, of course, a mark shift since about
02:57 2016 in the sheer amount of Chinese aid coming into the Pacific. Since 2016, the amount of
03:03 direct traditional foreign assistance from China has actually fallen. And it's fallen
03:08 again in the most recent year, 2021, down to around $241 million. And the Lowy Institute
03:14 says the way China's doing this has changed. It stopped its so-called brash approach, where
03:19 it would fund big and often flashy projects in a number of Pacific Island countries. And
03:24 it's now moving to what it's called in a broader bit of terminology, small and beautiful
03:29 projects, which the Lowy Institute says are actually more tightly targeted. They're smaller
03:33 projects, but they're aimed very firmly at political elites, particularly in countries
03:37 where China's making headway like Kiribati and Solomon Islands. And they're designed
03:42 to win as much political favour as possible for Beijing. Now, it's also worth noting,
03:46 Ros, that even though China has stepped back as a direct aid donor, it still does play
03:50 a big role in other ways. And particularly at the moment, a lot of the funds that are
03:55 coming through the ADB and other multilateral institutions are then actually being handed
04:00 to Chinese state-owned companies who take responsibility for those major projects. And
04:04 China's of course also intent on ratcheting up its strategic presence in the region. So
04:09 the Lowy Institute's map here doesn't say China is not a factor in the Pacific, far
04:13 from it. But the way China is operating has changed in some ways quite dramatically.
04:18 [BLANK_AUDIO]
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