By Jenny Hayward-Jones, Director of the Lowy Institute's Melanesia Program, and Phillipa Brant, Research Associate.

The Pacific Islands region has been spared any serious impact from cuts to the Australian aid program revealed in budget documents released yesterday.

Australia's bilateral program in Papua New Guinea has been trimmed by 5% and there has been a 10% cut to the funding Australia provides to Pacific regional organisations and programs delivered on a regional basis.

As a consequence of a 40% cut in Australia's aid funding to Indonesia, Papua New Guinea replaces Indonesia as the largest recipient of Australian aid, receiving $477.4 million. This underlines the special significance of Papua New Guinea for Australia. The Australian media has linked the absence of significant cuts to the Papua New Guinea program to Port Moresby's cooperation on refugee resettlement. But this cooperation, which has been recognised with a special aid allocation of $420 million over four years under the Joint Understanding between Australia and Papua New Guinea on further bilateral cooperation on health, education and law and order in 2013, is only a minor part of Australia's relationship with Papua New Guinea. Our colonial history, geographic proximity, deep trade and investment ties and people-to-people connections mean that Australia has to lead in assisting Papua New Guinea tackle its development challenges.

There are a number of reasons Foreign Minister Julie Bishop would have quarantined the Pacific from the largest cuts ever to Australia's aid program:

  1. Pacific Island countries are Australia's neighbours. Australia has a responsibility to help its neighbours, and this help also ultimately supports Australia's own security and prosperity.  
  2. The development needs of Pacific Island countries are significant. Unlike countries in Southeast Asia, which are moving away from reliance on aid, a number of Pacific Island countries will be aid dependent for the foreseeable future. This research by the ANU's Development Policy Centre shows that eight Pacific Island countries are among the 20 most aid dependent countries in the world, and their dependency has grown in the last decade.
  3. Australia is the leading donor in the region by a large margin. Between 2006 and 2013, Australia provided $6.8 billion in bilateral aid to the region. The US was the next-largest donor, providing US$1.7 billion. Julie Bishop is committed to ensuring that Australia remains the 'partner of choice' for Pacific Island countries. Shoring up current levels of aid is important to maintaining Australia's dominance as a donor in the face of increasing interest in the region from China and other emerging donors. In fact, in the period 2006-2013, China provided more aid to Fiji than Australia did (US$330 million compared with US$250 million), becoming Fiji's largest development partner. In countries like Samoa and Tonga, too, the amount of China's aid is starting to rival Australia's.
  4. The size of Australia's aid program in Pacific Island countries theoretically gives the Australian Government a means of influencing governments in the region, and leverage in pursuing its own regional agenda.

The Australian Government's worthy commitment to maintaining a large aid program in the Pacific in the face of severe pressure on the aid budget will no doubt be welcomed by Pacific Island countries. Australia, as the major power in a region which lacks the capacity to overcome obstacles to development alone, must take a leading role in helping to overcome these obstacles. The fact that the region has survived the most savage cut ever to the aid program sends a strong signal that Australia will not back away from its commitment to development in the Pacific.

But the flipside is that Australia's ability to demand improved outcomes from development projects in the region is limited. While governments are confident of Australia's continued generosity, they are less likely to be motivated to improve efficiencies. Canberra should be conscious that its commitment to the region will not necessarily equate to enhanced accountability and effectiveness for the Australian aid program in the Pacific.

Photo courtesy of Flickr user Department of Foreign Affairs and Trade.