Jason Young, Victoria University ofWellington, New Zealand

Paper prepared for The Pacific Islandsin Transition: Opportunities and Challenges Seminar, hosted by theCenter for Pacific Island Countries Studies of Guangdong University of ForeignStudies, co-sponsored by the Center for Oceania Studies of Sun Yat-senUniversity, Guangzhou, China, 17 June 2016.

Abstract

The Southern Leg of the 21^stCentury Maritime Silk Road was added to the One Belt One Road initiative in2015. This presents an exciting opportunity for sustainable local developmentand long-term economic connectivity between China and the South Pacific. Inorder to achieve this, however, local development conditions and existingprograms and relationships will need to be considered carefully. This paperintroduces the Southern Leg of the Silk Road initiative to developinfrastructure and increase economic connectivity in the South Pacific andidentifies five challenges for that initiative. Based on these challenges andthe considerable development opportunities, the paper recommends six areas ofjoint research between Chinese, Pacific and Australasian institutions in orderto identify potential Silk Road projects and proactively shape Silk Roadactivities and governance to sustainable win-win outcomes for the region.

Introduction

The ‘21^st Century Maritime SilkRoad is an aspirational strategy to increase economic connectivitybetween China’s East Coast ports, Southeast Asia and the South Pacific, SouthAsia, Africa and Europe through infrastructure and development projects, tradeagreements and a wide range of cooperative projects. It is the maritime partnerof the more familiar ‘Silk Road Economic Belt’ initiative that seeksimproved economic links between China and the Eurasian mainland through WesternChina, Central Asia, Russia, Europe and South Asia. The land-based and maritime-based strategiescollectively form a highly ambitious strategy known as ‘One Belt One Road.

Figure 1: Geographical Scope of One Belt One Road

Source: CNKI Journal Translation Project Website (2016)[1]

The ‘21^st Century Maritime SilkRoad’ runs from Venice to Athens and down through the Mediterranean Sea andSuez Canal, to port in Nairobi (Kenya), before heading east to stop in Kolkata(India) and Colombo (Sri Lanka), through the Malacca Strait and via ports in KualaLumpur (Malaysia) and Jakarta (Indonesia) and on to a series of ports on theChinese east coast. A ‘Southern Leg of the 21^stCentury Maritime Silk Road was added in 2015 bringing the South Pacific into the initiative. Thegeographical scope of the Maritime Silk Road initiative is highly ambitious,covering South Asia, Southeast Asia, Europe, North Africa and the SouthPacific. These regions have a high degree of economic, political and culturaldiversity and represent a major portion of the world’s gross domestic product.^[2]

Concrete projects and activities that willdefine the OBOR initiative are slowly emerging and include projects to buildinfrastructure and economic connectivity through loans and contracts to anumber of countries and for joint development projects in areas such as energyand roads and rail. The National Development and Reform Commission, Ministry ofForeign Affairs and Ministry of Commerce released the most detailed document onthe initiative on the 28^th of March 2015.^[3] Thisset out the rationale for the initiative as promoting development, trade,investment and people and cultural flows in China’s surrounding regions throughinfrastructure development to improve connectivity and capacity as well asthrough economic cooperation projects, tourism and cultural exchanges.

The roughly 23 initiatives listed under‘key areas of cooperation cover: political communication;infrastructure connectivity; key transport routes; resource cooperation;telecommunications; facilitating unimpeded trade; information exchanges andsupervision cooperation; facilitating trade and investment; new industrycooperation; monetary circulation; financial supervision and cooperation;people, government/party and non-government organisation exchanges andcooperation; and, technology cooperation. Financing for the projects will comethrough the Asian Infrastructure Investment Bank (AIIB), which is authorized tolend $100 billion in capital, as well as a government-backed Silk Road Fund of$40 billion and the New Development Bank established by Brazil, Russia, India,China and South Africa.

Mechanisms for introducing the OBORinitiative include using existing bilateral, regional and multilateralorganizations as well as the establishment of new initiatives and frameworksfor cooperation such as the AIIB. A number of memorandums and agreements havebeen negotiated and signed with countries and organisations in the region andfurther agreements will be a necessary part of the ongoing initiative. As theplans take concrete form we are likely to see a flurry of infrastructuredevelopment in China’s western region and a number of concrete projects inChina’s surrounding regions dealing with infrastructure development, industryinvestment, resource development, economic and trade cooperation, financialcooperation and people exchanges. Bilateral diplomacyis likely to increasingly be defined within the Silk Road discourse.

The March 2015 document introduced thefirst policy reference to the South Pacific in the Silk Road initiative: ‘Thekey directions for the 21^st Century Maritime Silk Road are fromChina’s coastal ports through the South China Sea to the Indian Ocean,extending to Europe; [and] from China’s coastal ports through the South ChinaSea to the South Pacific.”[4] Thishad been signaled earlier when President Xi Jinping made his state visit to NewZealand in 2014 and noted ‘the South Pacific is a natural extension of the 21^stCentury Maritime Silk Road proposed by China, we welcome New Zealand participationas a means of enabling even greater trade and economic cooperation betweenChina and New Zealand’.[5] Similarstatements were made in Australia and Fiji during state visits to thesecountries.

Moreover, former Chinese Ambassador to theUnited Nations, Wu Jianmin, stated in a talk at Victoria University ofWellington in 2015 that OBOR is ‘the most significant and far reachinginitiative that China has ever put forward’. That same year, Madame Fu Ying,Chairperson of the Foreign Affairs Committee of the National People’s Congress,gave a public lecture in New Zealand where in response to the question ‘what isthe 21^st Century Maritime Silk Road and what could it mean for NewZealand?’ she responded New Zealand was welcome to join the initiative which isa ‘blank page’ for countries in the region to work together with China topromote development and connectivity. Chinese officials have therefore clearlysignaled their intention to develop the Southern Leg of the Maritime Silk Roadin partnership with South Pacific states.

This paper focuses on the Southern Leg ofthe 21^st Century Maritime Silk Road in the South Pacific. The firstsection reviews China’s engagement in the South Pacific. This is followed by asection that identifies the opportunities and challenges of this type ofinitiative. The final section puts forth a series of policy recommendations.The overall position of the paper is that the Southern Leg presents an excitingopportunity for local development and economic connectivity between China andthe South Pacific. In order to achieve this, however, local developmentconditions and existing programs and relationships will need to be consideredcarefully. The paper therefore recommends six areas of joint research betweenChinese, Pacific and Australasian institutions in order to identify potentialSilk Road projects and proactively shape Silk Road activities and governance tosustainable win-win outcomes for the region.

China’sEngagement in the Pacific

China is now a key actor in the South Pacific. Development aid hasincreased significantly,[6] andeconomic relations from trade to investment and economic cooperation,[7]people flows and tourism, natural resource development,[8]and fisheries,[9] have grownconsiderably. China has increased its diplomatic engagement with the SouthPacific and provided opportunities for many Pacific students and officials toreceive training in China. This has led some scholars to pay more attention toChina’s increasing presence in and relations with the region and to questionthe strategic rationale behind this or to even predict the emergence of ‘softbalancing’ and strategic competition between China and the West.[10]China’s engagement in the Pacific should not, however, be overstated as it ‘hasneither the hard power nor the soft power to become a genuine hegemon in theregion’[11] and nospecific ‘grand strategy’ for the South Pacific region.[12]

As relatively small economies in the Asia Pacific region, PacificIsland states have often struggled to connect to the region’s traditionalcenters of growth. It is no surprise then that China’s stepped-up economic anddiplomatic engagement is seen largely as an opportunity to increase theirconnectivity in the Asia Pacific and to develop economic relations that supportlocal development aspirations. China is viewed as an important market forexports and is already a major source of goods sold in the Pacific. Chinesetrade has grown quickly from a relatively low base at the turn of the century.Trade with Fiji, for example, has reached US$340 million and is growing at 12%annually. Chinese tourism is also increasing rapidly as Pacific countries seekout the expanding Chinese market. In Fiji alone, Chinese tourist numbers havegrown sevenfold over the past six years. Chinese enterprises have sped up theirpace of ‘going abroad’  (走出去) to Oceania, with investments in the fields of energy and miningresources, agriculture, aquatic products and tourism co-operation.

These efforts have been supported by sustained diplomatic efforts tostrengthen relations with individual Pacific Island states and the region as awhole. Former Premier Wen Jiabao, for example, attended the inauguralChina-Pacific Island Countries Economic Forum in Fiji in 2006 where he pledgeda raft of co-operation policies including ¥3 billion of preferential loans tothe region. President Xi visited Fiji in November 2014 reaffirming the growingstrategic importance of the region for Chinese policymakers. China recentlybecame the Pacific’s third largest aid donor, bringing a style of aid deliverydifferent to traditional donors and providing flexibility for Pacificrecipients.

This has raised debates over the implications of large preferentialloan debt, the effectiveness of Chinese aid projects and their compatibilitywith existing donors. Investment creates debate over resource extraction andownership of local resources. Chinese small business owners have at times bornthe brunt of local development frustrations, such as during the 2006 riotingand destruction of Chinatown in the Solomon Islands. Overall however, most Pacificleaders strongly support China’s increased engagement in the region and seekmore, not less, economic and diplomatic attention from China.

For example, in 2006 Samoa’s Prime Minister stated China was a truerfriend of Pacific countries. In 2014, the Tongan Prime Minister defendedlow-interest loans from the state-owned Export-Import Bank of China. In 2015,Fiji’s Prime Minister stated China had done a huge amount to improve Fiji'sinfrastructure, including roads, public housing, hydroelectric and solarprojects and hospitals. In a 2015 conference in Samoa on China and the Pacific,the discussions of China’s role, while broad ranging and at times critical ofparticular cases and practices, generally had a ‘positive tone’.[13]

There is, therefore, already a strong Chinese basis in the regionfor developing the Southern Leg of the 21^st Century Maritime SilkRoad. However, in order for this foundation to be built upon, it is necessaryto consider carefully the types of activities and projects that are best suitedto the region. Conditions in the South Pacific differ greatly to, for example,conditions in Southeast Asia. Within the region there is a high level of diversityacross Micronesia, Melanesia and Polynesia as well as between individualcountries and even within many of the small island, or more accurately, smallmulti-island states and ocean territories.

Moreover, Pacific Island Countries (PICs) enjoy strong and enduringrelationships with countries such as Australia and New Zealand and maintainimportant economic, developmental, security and diplomatic relations with theUnited States, the United Kingdom, France and the European Union. Potentialprojects will therefore need to carefully consider these relationships anddevelopment conditions as well as local interests to ensure the Silk Road isviewed as playing a positive role in Pacific development and economicconnectivity in the region.

Challengesand Opportunities of Realizing the Southern Leg

This section identifies five challenges toovercome in order to be able to realize the Southern leg of the Maritime SilkRoad. First, seizing the opportunity to shape the types of Silk Road projectsin the South Pacific. Second, understanding China’s strategic rationale forpromoting the Silk Road and integrating that rationale into potential projects.Third, recognizing the differences between China’s developmental approach andthe approaches of existing actors in the region and introducing mechanisms forharmonizing the activities of different actors. Fourth, working with China’sevolutionary and aspirational approach to grand strategy. Fifth, consideringhow local development conditions can impact a variety of Silk Road projects.This is followed by a short discussion of the opportunities the initiativepresents to China and the PICs.

First, the Silk Road initiative in the South Pacific remains in its infancyproviding opportunity for actors in the region to shape the types of futureprojects that are either subsumed under the Silk Road banner or will come aboutas new projects. High-level policy statements suggest the focus should be onconcrete projects and that local interests should be central. For example, atthe 2015 Boao Forum for Asia, President Xi stated ‘The construction of One BeltOne Road is not an empty slogan but observable practical measures to providereal interests for countries and the region’. President Xi also stated, ‘Theconstruction of One Belt One Road will hold fast to the principles of jointdiscussions, co-construction and sharing; it is not closed but open andinclusive’.^[14]Similarly, in February 2014, the Minister of Foreign Affairs, Wang Yi, stated ‘OneBelt One Road, isn’t a solo for China but a symphony for each country tojointly participate in’.^[15]In the early stages of the Silk Road initiative then, research is required toidentify and positively shape the types of projects suited to the South Pacific.

Second, it is necessary for PICs to understand China’s strategicrationale for promoting the Silk Road and to integrate that rationale intoconsideration of Silk Road projects. The strategic rationale for the Silk Roadinitiative remains open to debate. At one level, it is clearly related to theevolution of the Chinese economy. Following three decades of rapid economicgrowth fueled by construction and infrastructure development as well asutilization of foreign direct investment and export-led growth, China’sdomestic economy is making a tricky transition to a consumption driven,service-oriented innovative economy. Over-capacity in the areas of constructionand infrastructure development combined with a need to develop strong linkswith surrounding economies to promote trade, encourage foreign projects toutilize over-capacity and to utilize Chinese capital are clearly strong reasonsto promote the initiative.

At another level, the Silk Road is a product of a more proactiveChinese diplomacy that seeks to ‘strive for some achievement’[16]and to show the world that China can play a constructive role in the provisionof public goods in the region. To this aim, China seeks a ‘community of commondestiny’ (共同的命运共同体) and a ‘new type of major power relations’ (新型大国关系). In short, theSilk Road is part of efforts to develop a more proactive role for China in theregion. Silk Road projects are viewed as an opportunity to strengthen China’srelations with a broad range of countries and to compensate for strategicmistrust and apprehension created by shifting power dynamics following theeconomic rise of China. It is important for PICs, therefore, to recognize andacknowledge both the economic and diplomatic rationales of the Silk Roadinitiative. Moreover, an understanding of concepts such as ‘peacefulcooperation, openness and inclusiveness, mutual learning and mutual benefit andwin-win can facilitate engagement with China and act as a means of holdingproject managers and commercial actors accountable for their activities in thePacific.

The third challenge identified is to recognize the differencesbetween China’s developmental approach and the approaches of existing actors inthe region and to introduce procedures for harmonizing the activities of thesedifferent actors. There is much debate about whether or how Chinese developmentinitiatives, such as the Silk Road, differ from existing western-leddevelopment initiatives. On the back of China’s own impressive growth anddevelopment Chinese scholars and policymakers have put forward an approach thatstresses mutual development and economics first. While these ideas are not newor contradictory to Western development norms and values which also supporteconomic development, Western scholars and policymakers promote economicdevelopment within an increasingly complex and challenging set of developmentparadigms that include measures of good governance, rule of law, multi-party democracyand civil participation.

China’s initiative therefore raises questions over the efficacy of asingularly economic development approach and leads to questions as to how thistype of initiative will coexist with existing development projects in the SouthPacific from countries like Australia, New Zealand or the United States. As one commentator put it, Australian projects in particular work toward ‘thestrengthening of the neo-liberal state in island places’.[17]China’s approach promotes economic connectivity, development and win-wincooperation and does not touch upon governance. China and Pacific Islandcountries (PICs) will therefore need to carefully manage Silk Road projects incooperation with existing actors to ensure they do not compete or work acrosspurposes and have suboptimum development outcomes or lead to heightened strategicmistrust in the region.

Fourth, the flexible and experimental nature of Chinese policymakingis also new for many observers who will need to get used to working withChina’s evolutionary and aspirational approach to grand strategy. Silk Road policydocuments are incredibly broad and lack concrete project details. This reflectsa hallmark of Chinese policymaking. Policy at the central government leveloften remains aspirational or vague allowing experimentation and interpretationat the local level before further refinement by central authorities. ‘Reformand Opening’ (改革开放)and land and residency reform are classic examples of this style of flexibleand evolutionary Chinese policymaking. The Silk Road concept is framed in asimilarly broad and flexible manner. While this makes it hard for potentialpartners in the South Pacific to know how or whether to participate, as anunanswerable question about what exactly they are committing to can act as astumbling block, it also creates the opportunity, through engagement andparticipation, to shape the evolution of China-led development policy in theregion.

The fifth challenge is to consider how local development conditionscan impact potential Silk Road projects. An example of the complexity ofdevelopment projects in the Pacific is the holdup in the tripartite developmentproject in Rarotonga, where New Zealand, China and the Cook Islands have beenworking to develop a treated water supply for the island. Chinese contractorshave been hampered in completing the final parts of the first stage of theproject after landowners in Titikaveka had issue with land being bulldozed to installwater pipes.[18] Whilethe tripartite project has general support and can provide a public good to thepeople of Rarotonga, local rights and processes can act as a stumbling blockand need to be carefully considered and managed well. This can lead to lessefficient outcomes but ultimately more socially and politically acceptableoutcomes that can support the long-term viability of Silk Road projects in theregion. Similarly, Silk Road projects should consider carefully the interests oflocal people in the Pacific in order to garner broad and long-term support.

Finally, the opportunities for joint development, infrastructure andeconomic connectivity projects in the South Pacific are many. The region wouldbenefit from suitable investment in ports, roads, airports and construction offishery processing facilities and renewable energy, water purification, schoolbuildings and hospitals, hotels and recreational facilities. These could helpdevelop the fishery, processing and tourist industries in the region and helpconnect China via trade, people flows and joint economic activities andbusinesses. As the final section argues, however, to correctly identifyappropriate projects, a great deal of joint research will be required.

Recommendations

The overarching recommendation of this briefreview of the Southern Leg of the Maritime Silk Road is that the first step torealizing this aspiration is to put in place research projects between Chinese,PICs and Australasian institutions to identify potential Silk Road projects andto proactively shape Silk Road activities to ensure sustainable win-winoutcomes for the region. Such projects will need to address the following typesof research questions:

              First,what complementarities exist between Chinese-led development projects,infrastructure development and regulatory projects and the developmentinterests of Pacific Island governments, companies and peoples? For example,investment in high-speed rail is not suited to PICs, nor is the development of export-ledmanufacturing sectors. It may be that China’s construction capacity could bebest utilized in the development of roads, ports, airports or renewableenergies that can provide development support to the PICs and meet theconnectivity goals of the Silk Road initiative. Alternatively, it may be thatresources should instead be focused on agricultural development or enhancinginfrastructure necessary to resist climate related disasters.  

              Second,in what areas could connectivity between PICs and the region be improved?Airport and port infrastructure is an obvious candidate but raise the thornyissue of which PIC would best be suited to this type of infrastructure?Moreover, is there a need to designate a hub for the region so as to avoidduplication and how would these decisions be made? Similarly, any assessment ofthe suitability of a major infrastructure project would require an assessmentof its viability. What trade and people volumes would be required to makeprojects viable for the host nation?

              Third,what industries in the Pacific Islands can be identified as being well suitedto joint development projects? Should the Silk Road initiative have acomplimentary industrial policy where, for example, projects are designed todevelop a particular industry such as tourism across the entire region? Thiswould allow for a more coherent regional plan and facilitate areas ofinfrastructure to develop but may also draw resources away from other sectorsnecessary to promote connectivity in the region.

              Fourth,what institutional, cultural/social, political or developmental differencesexist that will need to be managed carefully and bridged through creative andsensitive strategies? As the above example of the water systems upgrade in theCook Islands illustrates, local interests and practices can shape projectoutcomes. Research should identify what cultural, social and politicalpractices in PICs need to be incorporated into Silk Road projects. One exampleis the complexities of land tenure through the division of native, freehold andcrown land rights.

Fifth, how can projects on the SouthernLeg of the Maritime Silk Road link up with existing local development projectsand industrial policy, as well as complementing and supporting projects ofother external donors such as Australia, New Zealand, the European Union, theUnited States, and the Asian Development Bank etc.? There is clear scope forcomplimenting and linking with existing institutions and developingmultilateral forums to aid coordination between actors in the region.

Sixth, what governance forums andinstitutional structures are needed to provide feedback and to ensureaccountability and transparency of Silk Road projects? Discussion forums andinstitutional structures will be required to ensure desirable outcomes for allactors and the long-term sustainability of the Silk Road initiative.

Conclusion

Realizing the Southern Leg of the 21^st Century MaritimeSilk Road initiative will require identifying the opportunities for jointdevelopment partnerships and acknowledging the challenges of developinginfrastructure and connectivity partnerships in the region. This will requireextensive joint research to provide a clear picture of local interests and tomatch these to Chinese capabilities. Mechanisms and multilateral institutionsthat can facilitate cooperation with existing actors in the Pacific and provideoversight and governance of Silk Road projects should also be developed. TheSilk Road presents an exciting opportunity for localdevelopment and economic connectivity between China and the South Pacific anddeserves the full attention of Pacific governments.