Aid ‘over-reliance’ unhealthy, says Beer

Monday May 21, 2018 Written by Published in Politics
Prime minister Henry Puna pictured at the offi cial opening of Apii Nikao earlier this month. The school was built with Chinese funding and involved Chinese labour. Prime minister Henry Puna pictured at the offi cial opening of Apii Nikao earlier this month. The school was built with Chinese funding and involved Chinese labour.

The Cook Islands government’s “chronic over-reliance” on aid from foreign agencies including China is unhealthy, says Opposition deputy leader James Beer.


His comments follow a new report presented to the US State Department, which claims the Chinese government is leveraging billions of dollars in debts to gain political leverage with developing countries across Asia and the Pacific.

Beer says governments that get overly-desperate for continuous support from foreign countries could lead their nation into massive economic and sovereignty issues in future.

An independent report, written by a pair of Harvard University scholars, identified 16 countries, including three from the Pacific, targeted by the Chinese government for “debtbook diplomacy”.

The Cook Islands was not part of the study, however, the country has received millions of dollars in aid and loan from the Chinese government since the early 2000s.

The report said in some cases, the debts grow too large to pay back, allowing China to leverage the loans to “acquire strategic assets or political influence over debtor nations”.

Beer said Cook Islands’ growing dependence on aid and soft loans was a worrying sign.

Of particular concern, he said, were the loan arrangements with China, which he claimed often contained embedded conditions that require the host country to rely on them for a large portion of the labour and materials.

“This creates taxpayer debt but migrates the revenue, which normally a country would use to repay the debt, back offshore. The cash visits us temporarily, hands us debt, and then goes back to where it came from,” Beer said.

“These turnkey infrastructure loans subtly migrate our diplomatic and international tone towards that of an over-obliging host country, where we bend over backwards to meet requests and forgo conditions.

“In other words, these arrangements train us to ignore diligence and to accept highly unfavourable conditions.

“By way of example, the Chinese workers involved in the Te Mato Vai project were not required to go through the painful but important work-permit process, which is a requirement for all other businesses. It causes us to surrender a small but important part of our sovereignty.”

Beer claimed the Crown was indebted to the Chinese government’s EXIM Bank to almost 50 per cent of the nation’s entire gross debt.

The total gross debt owed by the Crown as at June 30, 2018 is estimated to be $122.6 million.

“We must carefully observe the predicaments other countries have fallen into because they weren’t able to manage their loan repayments, more than one nation has had to swap key national assets to erase crushing debt,” Beer said.

“It's a simple, unsophisticated squeeze; the debt is designed to be easy to get … but national autonomy is nearly impossible to regain once surrendered.”

Beer said this was not entirely an issue that arose in the Cook Islands relationship with China. He added it was a global phenomenon that had existed for many decades, with many governments acting as both predator and prey.

In the Pacific, the report show nations such as Vanuatu, Papua New Guinea and Tonga all owe the Chinese government billions of dollars in loans.

It also stated there were a number of ways in which Beijing and state-owned enterprises leverage debt to help China's strategic aims.

In one case identified in the report was infrastructure built with Chinese loans, which was then leased back to Chinese interests to pay off the original debt.

“Real progress, economic diversity, and financial autonomy are difficult. Loans that erode our sovereignty are easy … and foolish,” Beer said.

On Friday of last week CINews asked government for comment on the report, but had not received a response when this edition of the newspaper went to print last night.

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