Looking in on the Australian-Indian Aid Tie-up

July 4, 2016Economic Relationsby East Asia Forum

India's partnership with Australia is providing aid to Pacific states.

Maritime links and commercial interests are bringing India and Australia closer, opening opportunities for the two nations to address the clear danger of climate change in the Pacific through trilateral aid partnerships.

Since the turn of the century, development assistance partnerships have emerged as a recognisable tool of Indian foreign policy. The volume of Indian assistance has grown seven-fold since 2000 to US$1.5 billion (in grants and loan-based assistance) in 2015–16. If the growing number of credit lines offered through India’s EXIM Bank is taken into account, India’s total development assistance surpasses the aid volumes of many prominent OECD donors.

Since 2014, Indian Prime Minister Narendra Modi has announced development assistance packages to the Bainimarama regime in Fiji and to other Pacific neighbours. These, combined with aid commitments made during Indian President Pranab Mukherjee’s visit to Papua New Guinea in April 2016, underline the growing use of development partnerships in India’s external engagements.

India’s increased engagement with Pacific nations arises from a mix of geopolitical motives: energy security, access to newer economic markets and a need for support on issues in multilateral negotiations. New Delhi has also been keen to help address climate change concerns in the Pacific.

During the Forum for India–Pacific Islands Cooperation (FIPIC) in 2015, former president of the Marshall Islands Christopher Loeak called India a ‘clean energy crusader’. At the 2014 and 2015 FIPIC summits, Modi reiterated India’s commitments to capacity building designed to help tackle climate change disasters in the Pacific. He also promised to establish a US$1 million climate adaptation fund in the Pacific.

India’s aid-giving history to the Pacific Islands is relatively new, but the amount of aid being channelled by New Delhi into the Pacific is certainly increasing. Soon after India was inducted into the Pacific Island Forum as a dialogue partner, India announced a yearly grant-in-aid of US$100,000 from 2006 to each of the Pacific Island member nations to be used towards development projects.

During the visit of the then Minister of State for External Affairs E. Ahamed to the Cook Islands in 2012, this grant was raised to US$125,000, and subsequently to US$200,000 during Modi’s visit in 2014. On top of credit lines of nearly US$160 million to help develop the Fijian sugar industry, Mukherjee announced a credit line of US$100 million to the PNG government in April 2015.

However, even considering New Delhi’s deepening engagements with the Pacific, India’s aid volumes in the Pacific fall well behind other major donors operating in the region such as Australia, China, Japan, the United States and New Zealand.

Australia has successfully maintained a strong foreign policy focus on the Pacific despite budget cuts to its aid programs. Nearly US$700 million of Australian aid is directed towards key recipients such as Fiji, Vanuatu, Solomon Islands and Papua New Guinea. Countries such as the Cook Islands, Kiribati and Nauru also receive considerable aid support. The rise of assistance efforts from China, India and the EU in the Pacific has allowed these nations to expand their range of development partners even further.

India’s record on aid delivery to the Pacific Islands is undoubtedly improving, but there is plenty of room to enhance New Delhi’s aid presence through trilateral aid cooperation. Trilateral cooperation models use the comparative strengths of each development partner to help deliver aid in the recipient nation. For instance, China is working with Australia to reduce malaria in PNG. China is also partnering with New Zealand to complete a water supply project in the Cook Islands. While New Delhi’s participation in trilateral projects globally has been few and far between, partnering with traditional donors like Australia can help innovate and expand the scope of India’s aid delivery in the region.

It is also in Australia’s interests to work with India to promote climate change adaptation capabilities in the Pacific region. Climate disasters can force climate refugees from neighbouring island nations to make Australia their first port-of-call. Encouraging renewable energy projects in the islands could be one step towards preventing the environmental crises that are likely to cause a climate refugee crisis in the region.

In addition to Australia’s own aid efforts, Canberra should consider supporting India’s growing commitments to tackling climate change. The two countries already focus resources on similar capacity-building measures such as skill-training, building economic infrastructure and improving social conditions in the islands. This could fruitfully be extended to aid programs.

Trilateral aid mechanisms between India, Australia and Pacific states can build on each nation’s varying history of engagement in the region to effectively deliver aid. Such efforts are likely to receive support among the broad domestic constituencies in Australia who desire strong government leadership in tackling climate change. Considering the currently limited volumes of Indian assistance to Pacific Island nations, New Delhi similarly faces few risks in piloting a trilateral initiative.

India and Australia can work together on Pacific aid is republished with permission from East Asia Forum

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