Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697629413507.pdf (Australia)
Strengthening Australia’s Relationships with Countries in the Pacific Region SUBMISSION TO JOINT STANDING COMMITTEE ON FOREIGN AFFAIRS, DEFENCE AND TRADE 20 July 2020 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 INTRODUCTION Australian academic Prof. Tim Winter has observed, “in late 2016 it seemed as though the world was united by infrastructure, or to be more precise, its possibilities for future making.”1 By 2017, however, Australia’s Foreign Policy White Paper had pointed out that rather than knitting the world together, the infrastructure financing race would soon begin to destabilise the Indo-Pacific.
As the White Paper argued, the region was already beginning to see “increased competition over regional economic integration, including in the financing of infrastructure projects.”2 By 2018, stories in the Australian media had begun to highlight the risk posed to Australia’s interests and important bilateral relationships in the Pacific by China, Chinese aid, and the Belt and Road Initiative (BRI).
Australia’s response was to launch the Pacific Step-Up in 2019, along with its centrepiece, the Australian Infrastructure Financing Facility for the Pacific (AIFFP) and the other components of the Step-Up that have been detailed by Australian academic Dr Tess Newton Cain.3 Citing an Asian Development Bank estimate that the Pacific would need USD $3.1 billion in infrastructure investment per year to 2030,4 the AIFFP issued a call for Australian and international businesses, state-owned enterprises, and sovereign governments, to come forward with projects to finance.
The AIFFP would select the best of these projects for loans, grants, or both, in key sectors such as telecommunications, energy, transport, water, and other priority infrastructure.5 Almost a year since its launch, the AIFFP is yet to finance an infrastructure project, raising questions about its value for relationship-building.
Recent news reports have suggested the Facility has been preparing to swing behind the US-Japan-Australia-New Zealand Papua New Guinea Electrification Partnership.6 Since these reports, however, Australia’s relationships with the Pacific Island Countries (PICs) have begun to be transformed by the onset of the COVID-19 pandemic and the resulting travel shutdown and economic crisis, due to which PICs are forecast to enter a severe recession.
Indeed, the onset of the pandemic has caused Australia to pause its work on a new International Development Policy (IDP) while it effectively redirects much of its $4 billion official development assistance (ODA) budget towards helping PICs respond to COVID-19.

Several PICs are also picking up the pieces after Tropical Cyclone (TC) Harold, emergency responses to which are being delayed by travel bans and quarantine requirements.
In addition to these immense challenges, climate change and its impacts, including climate-related disasters such as TC Harold, are further transforming our shared future in the region and rewriting the rules of engagement between Australia and the PICs, 1 Winter, Tim.

Geocultural Power: China’s Quest to Revive the Silk Roads for the Twenty-First Century.

University of Chicago Press, 2019: p. xi 2 Australian Government.
‘Foreign Policy White Paper,’ 2017: https://www.fpwhitepaper.gov.au/foreign- policy-white-paper Australian Government.

‘Foreign Policy White Paper,’ 2017: https://www.fpwhitepaper.gov.au/foreign-policy-white-paper 3 Griffith Asia Institute.

‘The State of the Step-Up: Australia’s Engagement with the Pacific.’ Griffith Asia insights, 29 November 2019: https://blogs.griffith.edu.au/asiainsights/the-state-of-the-step-up-australias- engagement-with-the-pacific/ 4 Asian Development Bank.
‘Meeting Asia’s Infrastructure Needs,’ February 2017: https://www.adb.org/publications/asia-infrastructure-needs 5 Australian Government.

‘Australian Infrastructure Financing Facility for the Pacific,’ 20 July 2020: https://www.aiffp.gov.au/ Australian Government.
‘Australian Infrastructure Financing Facility for the Pacific,’ 20 July 2020: https://www.aiffp.gov.au/ 6 See Melissa Clarke, ‘Australia to offer Pacific funds to PNG for ambitious plan to get power to the people,’ ABC News, 17 Feb 2020: https://www.abc.net.au/news/2020-02-17/australia-reveals-first-project-for-big-new- pacific-fund/11965290 2 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 placing underfunded and overstretched health, education, and social protection systems at the centre of new debates about Indo-Pacific nations and states’ capacity to protect populations.
Building this capacity, as we argue in this submission, is where the Pacific Step-Up should focus now in the interest of fostering improved relationships between Australia and the PICs.

Reframing our assistance to Pacific nations in terms of supporting their own capacity would also position Australia better to respond to Pacific criticisms of our Step-Up, including concerns expressed by participants in a recent Whitlam Institute study about Australian paternalism and parochialism.
It does not serve Pacific communities, nor does it serve Australia, for our Pacific neighbours to be reminded of our colonial history when they would rather foreground “their own sovereignty, independence, and … national ownership of their futures.”7 It would be more useful to offer to support that sense of ownership by placing our attention on human security in the Pacific.
Save the Children Australia is a civil society organisation (CSO) with a linked social enterprise creator, Inclusiv Ventures, and local offices and staff in Papua New Guinea (PNG), Solomon Islands, and Vanuatu.

We have a 100-year history of working to protect children and advance children’s rights all around the world, and we have worked in the Pacific for decades.
Our view is that the COVID crisis affords Australia an opportunity to reframe its approach to development cooperation in the region, both in terms of our immediate response to pressing needs and in terms of our broader aims for our own interactions with the region.
We welcome Australia’s new “Partnerships for Recovery” strategy, created in place of a new IDP for the time being, and the regional response to COVID-19 that it sets out.8 At the same time, we argue that Australia should build from this strategy urgently to cast its long-term engagement with the PICs in a new light.
In short, instead of attempting to compete with China and its immense capacity to finance hard infrastructure projects in the region, we should enhance our focus on the “soft” infrastructure systems that support and enhance human security.

The aim of “building back better” from COVID-19 should also apply to our own capacity to reinvent our international development strategy, budget, and programming priorities.
Australia should adopt a human security- and soft power-led, middle-power geo-economic strategy to strengthen our relationships in the Pacific.

We should turn our attention to building and financing digitally-enabled, climate-adaptive social protection programs that enhance the PICs’ collective capacity to protect community livelihoods and human security in the context of COVID’s interlocking health and economic crises, along with the impacts of climate change.
These programs should leverage Pacific regional mechanisms and be integrated with existing Disaster Risk Reduction (DRR) and Climate Change Adaptation (CCA) efforts.

They should prioritise jobs, incomes, cash transfers, alleviating poverty and inequality, and building well-functioning health and education systems.

In addition, Australia should pivot its “infrastructure” goals to include such systems.
We should rewrite the rules of the Australian Infrastructure Financing Facility for the Pacific (AIFFP) so that it can help finance and scale pilot projects aimed at building these systems.

This financing effort could see Australia combine forces with partners like Japan, the United States, India, the European Union, New 7 See Leanne Smith.
‘Despite its Pacific “Step-Up,” Australia is Still Not Listening to the Region, New Research Shows.’ The Conversation, 12 February 2020: https://theconversation.com/despite-its-pacific-step-up- australia-is-still-not-listening-to-the-region-new-research-shows-130539.

See also Tess Newton Cain, James Cox, Gier Henning Presterudstuen.
‘Pacific Perspectives on the World: Listening to Australia’s Island Neighbours in Order to Build Strong, Respectful, and Sustainable Relationships.’ Whitlam Institute, Western Sydney University: https://www.whitlam.org/publications/2020/2/13/pacific-perspectives-on-the-world 8 Australian Government.
‘Partnerships for Recovery: Australia’s COVID-19 Development Response.’ Department of Foreign Affairs and Trade, 2020: https://www.dfat.gov.au/sites/default/files/partnerships-for- recovery-australias-covid-19-development-response.pdf 3 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 Zealand and Canada, playing to our comparative advantage as a donor while also responding to genuine need rather than centring our own aims and interests in our messages.
Save the Children is pleased to contribute this submission to the Joint Standing Committee on Foreign Affairs, Defence and Trade’s Inquiry into Strengthening Australia’s Relationships with Countries in the Pacific Region.
Our approach to the Inquiry’s Terms of Reference should be read in terms of our close engagement with Australia’s international development cooperation program and its centrality to the Pacific relationships that the Inquiry is concerned with.9 As they intersect in many critical ways, we address all three Terms of Reference within a single narrative below.

This submission was prepared by Dr Amrita Malhi, Senior Adviser Geo-economics.
Please direct all correspondence to RECOMMENDATIONS Recommendation 1 Reframe the Pacific Step-Up in terms of Pacific communities and their human security.

Recommendation 2 Rewrite the rules of the Australian Infrastructure Financing Facility for the Pacific so that the definition of “infrastructure” is expanded to include the infrastructure of social protection.
Recommendation 3 Collaborate with partners and multilateral donors to scale up the construction of a climate-adaptive social protection system that is organised regionally, leveraging the architecture of Pacific regionalism to cover all the Pacific Island Countries, thereby resolving problems and disincentives created by small economies located far apart from each other.
Recommendation 4 This system should include cash transfers for short-term disaster relief, income support and job protection payments for the medium to long term, investments in new jobs in green and adaptive industries, and strong health and education systems.

It should include a suite of payments created specifically for supporting children.
Recommendation 5 Finance this system via a combination of Official Development Assistance grant support from Australia, its development partners, and multilateral donors, and scaling up social enterprise models shown to be effective through pilot programs organised by donors to date.

Build this system via firmer partnerships between Australian and Pacific civil society organisations.
Recommendation 6 Place this system at the centre of Australia’s medium power geo-economic and soft power strategy for the Pacific.

9 For example, refer to two of our recent submissions on the Pacific.

Save the Children.

‘Activating Greater Trade and Investment with Pacific Island Countries,’ 15 May 2020: https://www.savethechildren.org.au/getmedia/0f368512-8557-4934-ad09-7c875539d390/sub-39-save-the- children-australia_redacted.pdf.aspx.

Save the Children.
Save the Children.

‘Australia’s New International Development Policy,’ February 2020: https://www.savethechildren.org.au/getmedia/3e85a24f-7662-4866-8957- 2c40aef6115c/save-the-children-aid-review-submission-submitted.pdf.aspx 4 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 SUBMISSION 1.
COVID-19, disasters, climate change, and geo-economics are intersecting and restructuring Australia’s relationships with the PICs The approach we recommend to the Australian Government in implementing the Pacific Step-Up will require it to expand and improve its development capacity to respond to the increasingly complex range of intersecting challenges now facing the PICs.

These challenges are now fundamentally restructuring Australia’s relationships with the PICs.
At present, while our Pacific strategy depicts the PICs as “our Pacific family,” and directs a high and growing proportion of our ODA budget into Pacific programs, that budget nevertheless remains at a historic low while our region grows “poorer, more dangerous, and more disorderly.”10 This reality is recognised in Australia’s Defence strategy and budget, which continues to grow in line with forecasts and projections despite the fiscal contraction now in progress, yet it is actively downplayed in our approach to international development.
Indeed, the value of our support for development cooperation has been sliding since FY2013/14.11 This is the context in which we are responding to a global pandemic as well as a world-historic recession, potentially a depression, which is already transforming Australia’s relationship with its Pacific neighbours.

Put succinctly, investing in a new approach to development cooperation that recognises this process now underway is the key to stronger relationships with the PICs.
In this context, the Australian Government’s new Partnerships for Recovery strategy rightly focuses on an urgent time horizon of the next two years, prioritising local partnerships and multilateral cooperation to enable a rapid, health-focused response.12 This is correct for the short term.
Yet, it leaves critical questions unanswered for the medium- to longer-term, including how to respond to geopolitical and economic circumstances that will push large numbers of people into poverty, potentially for many years, as the strategy itself correctly recognises.
For example, the strategy notes that most PICs have a “narrow economic base,” and are now experiencing a “collapse in government revenue, foreign reserves, and cash balances,” along with the “loss of incomes and livelihoods in contexts where formal social safety nets are limited.”13 Indeed, as Australian National University academic Mr Chris Hoy has recently modelled, the number of people living in poverty in the PICs could increase by 1.2 million or more than 40 per cent “in the absence of government or community transfers.”14 To respond to this potentially widespread regression, the Australian Government’s approach in the short-term identifies three priorities: health, security, and economic recovery.
Over the medium- and long-term, it signals that it will shift to prioritising “health security 10 Jade Macmillan.

‘Australia to Spend $270B Building Larger Military to Prepare for “Poorer, More Dangerous” World and Rise of China.’ ABC News, 30 June 2020: https://www.abc.net.au/news/2020-06-30/australia- unveils-10-year-defence-strategy/12408232 11 Development Policy Centre.

‘Australian Aid Tracker,’ 20 July 2020: http://devpolicy.org/aidtracker/ 12 For a longer discussion, refer to Stephen Howes.
‘Australia’s New COVID-19 Development Response Strategy: Strengths and Contradictions,’ DevPolicy Blog, 4 June 2020: https://devpolicy.org/australias-new- covid-19-development-response-strategy-strengths-and-contradictions-20200604- 1/?utm_source=rss&utm_medium=rss&utm_campaign=australias-new-covid-19-development-response- strategy-strengths-and-contradictions-20200604-1 13 Australian Government.
‘Partnerships for Recovery: Australia’s COVID-19 Development Response.’ Department of Foreign Affairs and Trade, 2020: https://www.dfat.gov.au/sites/default/files/partnerships-for- recovery-australias-covid-19-development-response.pdf 14 Chris Hoy.
‘Poverty and the Pandemic in the Pacific.’ DevPolicy Blog, 15 June 2020: https://devpolicy.org/poverty-and-teh-pandemic-in-the-pacific-20200615-2/ 5 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 and systems,” along with “stability and economic recovery,” including by providing “advice and support” on economic reconstruction across a range of fields.
One of its aims will be to support “inclusive and equitable economic growth,” a laudable ambition.15 Yet to realise this ambition, the hard realities recognised in the strategy must be threaded back into the whole of Australia’s Pacific Step-Up, which now directs a greater proportion of Australian ODA into the Pacific than ever.

Yet the Step-Up now appears dated as it responds to geopolitical and economic developments which predated COVID-19 and appear benign as a result.
Save the Children recognises the importance of the intensifying geopolitical contest the Australian Government aims to respond to in the Pacific, and we recognise the relationship between this contest and Australia’s approach to international development cooperation.
We addressed this relationship in our submission to the Government’s Review of Australia’s IDP.16 We recognise the Pacific infrastructure gap and welcome the Australian Government’s decision to respond to it, especially where it will bring electricity, internet connectivity, climate resilient buildings, and improved water and sanitation facilities to remote or otherwise vulnerable communities.17 At the same time, especially in the context of COVID-19, it is not in Australia’s soft power interests, nor, more importantly, does it best serve the interests of Pacific communities, for the Step-Up to be understood largely as an attempt by Australia and its partners to offer a (limited) alternative to Chinese finance for hard infrastructure.
Instead, given that Pacific leaders and regional organisations are stressing Pacific sovereignty and stewardship of the Blue Pacific, Australia’s Step-Up should place the PICs’ own needs at the centre of its geo-economic strategy.
Adopting this method would deliver benefits to Australia while better serving the PICs’ human security needs, including not only environmental security but also social inclusion, as the Boe Declaration outlines.18 These intersecting human and environmental needs have been growing more complex due to the multiplier effects of climate change.
Now, they are growing more complex still due to the crisis posed by COVID-19, with the risks it poses to health and health systems, and the economic collapse triggered by the resulting quarantine and isolation measures.
While the number of confirmed COVID-19 cases across the PICs remains, thankfully, comparatively low, the World Health Organisation has warned that the PICs possess limited medical supplies and health professionals, drawing attention to the challenge of limited state capacity to cope with the possibility of undetected community transmission.19 In the case of PNG, this assessment is confirmed by Health Minister Jelta Wong, who estimates that PNG has 600 to700 doctors and 3,000 hospital beds, along 15 Australian Government.
‘Partnerships for Recovery: Australia’s COVID-19 Development Response.’ Department of Foreign Affairs and Trade, 2020: https://www.dfat.gov.au/sites/default/files/partnerships-for- recovery-australias-covid-19-development-response.pdf 16 Save the Children Australia.
‘Australia’s New International Development Policy: Submission,’ February 2020: https://www.savethechildren.org.au/getmedia/3e85a24f-7662-4866-8957-2c40aef6115c/save-the-children- aid-review-submission-submitted.pdf.aspx 17 Australian Government.

‘Australian Infrastructure Financing Facility for the Pacific,’ 20 July 2020: https://www.aiffp.gov.au/ 18 Pacific Islands Forum.
‘Boe Declaration on Regional Security’: https://www.forumsec.org/2018/09/05/boe- declaration-on-regional-security/ 19 Natalie Whiting, ‘Is the Pacific Evading Coronavirus, or is it Running a Few Weeks Behind Australia on the Infection Curve?’ ABC News, 26 April 2020: https://www.abc.net.au/news/2020-04-26/is-the-pacific-a-few- weeks-behind-australia-on-covid-19/12174024 6 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 with a shortage of ventilators and Personal Protective Equipment (PPE), a situation which Australia and New Zealand, along with multilateral donors, have stepped in to help rectify.20 The consequences of any potential failure to contain transmission in the PICs would be alarming.
Save the Children Australia has analysed the data accompanying a recent report by a research team at Imperial College London – which modelled numbers of potential COVID-19 deaths around the world in terms of two potential public health response scenarios.

We found that without adopting or maintaining serious suppression measures along the lines modelled by the research team, the PICs could stand to suffer up to 31,293 virus-related deaths.
In contrast, if they did adopt or maintain those measures, they would suffer up to 3,539 deaths, provided the assumptions made by the researchers hold true.
The difference in the two figures is a factor of ten, with the bulk of the numbers concentrated in Papua New Guinea (PNG), due to its population of more than 8 million people, a substantial population size in the context of the sparse populations of the PICs.21 COVID-19 cases have already been detected in the remote Eastern Highlands province, as well as Western Province, which shares a porous border with West Papua province in Indonesia – a nation in which COVID-19 continues to spread rapidly.22 Country Fiji Micronesia (Fed.
States of) Kiribati Samoa Solomon Islands Tonga Vanuatu Papua New Guinea Regional Total Suppression measures at .02 deaths No suppression 203 27 31 45 167 23 61 2,982 3,539 3558 359 344 686 1822 406 816 23,302 31,293 Table 1: Save the Children's Analysis of Potential Pacific Deaths.23 The measures the PICs have taken to date to suppress virus transmission will therefore likely continue to be necessary, barring some opening of humanitarian corridors and travel bubbles for tourists to, and labour migrants from, the PICs.
These measures mean that the impact of the virus on Pacific economies is likely to be serious and enduring, potentially reversing the PICs’ progress over recent years and decades towards eradicating poverty.

20 Kalolaine Fainu, ‘‘We Were Behind the Eight Ball’: Papua New Guinea’s Health Minister on COVID-19,’ The Guardian, 30 April 2020: https://www.theguardian.com/world/2020/apr/30/papua-new-guinea-png-health- minister-covid-19-coronavirus-ppe 21 Patrick G.T.

Walker, Charles Whittaker et al.
‘COVID-19 Report 12 – The Global Impact of COVID-19 and Strategies for Mitigation and Suppression.’ Imperial College London, 26 March 2020: https://www.imperial.ac.uk/mrc-global-infectious-disease-analysis/covid-19/report-12-global-impact-covid- 19/ 22 Anthony Galloway, ‘Fears for PNG as COVID-19 Appears in Different Parts of the Country,’ WA Today, 23 April 2020: https://www.watoday.com.au/politics/federal/fears-for-png-as-covid-19-appears-in-different- parts-of-the-country-20200422-p54m3d.html 23 Patrick G.T.
Walker, Charles Whittaker et al.
‘COVID-19 Report 12 – The Global Impact of COVID-19 and Strategies for Mitigation and Suppression.’ Imperial College London, 26 March 2020: https://www.imperial.ac.uk/mrc-global-infectious-disease-analysis/covid-19/report-12-global-impact-covid- 19/ 7 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 This reversal is likely to be caused by the virus shutting down international travel, effectively shutting down tourism, a critical industry for PICs such as Palau, Vanuatu, and Fiji – which are among the world’s twenty most tourism-dependent economies.24 International tourism has generated much of the recent growth in secure and relatively well-paid jobs in these PICs, as we have outlined in more detail in our submission to the recent Pacific Trade Inquiry held by the Joint Standing Committee on Foreign Affairs, Defence and Trade.25 In addition to the impact on tourism, the World Bank’s analysis has foreshadowed that the combined effects of the downturn and social distancing could also affect infrastructure construction and post-disaster reconstruction projects in some PICs.
In Vanuatu, already badly affected by the tourism downturn, any delay to post-disaster reconstruction projects would have additional severe impacts.

In 2015, TC Pam wiped out around 64 percent of Vanuatu’s GDP – and since then, a pipeline of public infrastructure projects has helped keep its economy performing relatively well, also supporting community aims to “build back better” after the cyclone.
Now, not only could COVID-related disruption place this pipeline at risk, but Vanuatu has also just experienced a new disaster, TC Harold, which has created widespread devastation all over again.

Since TC Harold, Save the Children’s Vanuatu Country Office has released aerial photos revealing large numbers of homes destroyed, debris strewn across the ground, boats grounded, and trees snapped in half.
According to our Vanuatu team, there are areas on Espiritu Santo and Malo Islands where not a single structure has escaped damage.

We estimate that more than 100,000 people have been affected, including tens of thousands of children.

This devastation will require new projects to reconstruct the lives and livelihoods of affected communities.

Yet the need to contain COVID-19 has meant that even mounting a short-term, emergency humanitarian response is much more difficult than usual.
Save the Children can report first-hand that the work of responding to Tropical Cyclone Harold’s impact is greatly affected by Vanuatu’s closed borders and social distancing requirements.

Under normal circumstances, humanitarian responses usually rely on “surges” of local and international staff coming together in affected locations, but in present conditions, only local staff are available in line with the travel shutdown and Vanuatu government policy.
In addition, due to virus control measures, supplies are being fumigated and stored for three days at the airport before being made available to recipients, and the need for special permissions is further slowing down their distribution.

In addition to these factors, local staff are, of course, affected by the cyclone themselves, and are distributing hygiene, shelter, and household kits while dealing with the loss of, or damage to, their own homes.
Save the Children recognises that Australia, with New Zealand, has been transporting relief supplies to Vanuatu, along with the other cyclone-affected nations of Solomon Islands, Fiji, and Tonga, and that Australia has contributed to funding the regional COVID-19 response led by the World Health Organisation (WHO) and the Pacific Community.

These efforts are making a difference in the immediate term.
Given the difficulties we are reporting here, however, namely the intersection between COVID-19 and hurricane-related devastation, communities in Vanuatu will soon need a response that goes beyond this present emergency phase.

Household economies will need direct support in the medium term.

Indeed, this is the case across the Pacific, even in the PICs the cyclone did not pass.

Modelling aimed at estimating the impact of the recession alone has found that 24 Terence Wood.
‘What will COVID-19 Mean for the Pacific: A Problem in Four Parts,’ DevPolicy Blog, The Australian National University, 30 March 2020: https://devpolicy.org/what-will-covid-19-mean-for-the-pacific- a-problem-in-four-parts-20200330/ 25 Save the Children Australia.
‘Activating Greater Trade and Investment with Pacific Island Countries: Submission,’ 15 May 2020: https://www.savethechildren.org.au/getmedia/0f368512-8557-4934-ad09- 7c875539d390/sub-39-save-the-children-australia_redacted.pdf.aspx 8 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 between Papua New Guinea, Timor Leste, Solomon Islands, and Vanuatu, a 5 per cent contraction in household consumption will push the rate of extreme poverty up to over 30 per cent of the population in PNG and Timor Leste, 27 per cent in the Solomon Islands, and 17 per cent in Vanuatu.
If consumption contracts by 20 per cent, an additional 1.2 million people in the Pacific will be pushed into extreme poverty, with especially bad impacts in PNG and Timor Leste.

26 For these reasons, Save the Children Australia urges that the Pacific Step-Up and Partnerships for Recovery strategies must scale up to respond to the PICs’ new economic needs.

Australia needs to begin preparing and implementing this scale-up now.

2.
2.

Australia needs a holistic response including social protection infrastructure Given these considerations, Save the Children Australia recommends that the Australian Government take a more holistic view of the infrastructure that PICs require.
Rather than focus on hard infrastructure in a real or perceived contest with China and its BRI, Australia’s conception of infrastructure must shift to encompass the social protection systems that protect the resilience of Pacific communities through the COVID-19 recession and beyond.
There is a growing evidence base that demonstrates that capable states, with effective social protection systems that reach the poorest households, are effective at managing COVID-19 and at mitigating its economic impacts, independent of political systems or ruling ideologies.27 In addition, debates around the idea of social protection have expanded their focus from safety nets to “longer-term mechanisms designed to combat chronic poverty.”28 Adequate social protection mechanisms are an essential tool for poverty reduction and social risk management, especially in “job-killer” conditions certain to immiserate many.29 Australia could do well to heed this evidence and adopt a position of support for building effective social protection systems across the Pacific, placing this support at the centre of its emerging middle-power geo-economic strategy.
Accordingly, the Australian Government should expand the scope of the AIFFP so that it can be used to finance the creation of social and economic protection schemes that complement the PICs’ own national stimulus packages, parts of which will require access to concessional donor financing.

Whether PICs’ economies depend on tourism, resources, infrastructure construction or combinations of these activities, most cannot finance their economic recoveries single-handedly.
For example, PNG and the Solomon Islands, are experiencing either resource gluts or weakening demand, resulting in reduced revenues from liquefied natural gas (LNG) and timber, respectively.

The PNG government has limited fiscal resources and cannot implement an expansionary, stimulus- based budget based on its own resources, and is urgently seeking loans from development partners like Australia.
According to the World Bank, PNG is headed for zero to negative growth in the short term, while travel bans present the risk that food and healthcare supplies to PNG’s poor, who are largely concentrated in rural areas, will be disrupted.

Likewise, in the Solomon Islands, low government cash reserves exacerbate vulnerability, especially in rural areas, which have experienced 26 Chris Hoy.
‘Poverty and the Pandemic in the Pacific.’ DevPolicy Blog, 15 June 2020: https://devpolicy.org/poverty-and-teh-pandemic-in-the-pacific-20200615-2/ 27 See Francis Fukuyama.

‘The Pandemic and Political Order: It Takes a State,’ Foreign Affairs, July/August 2020: https://www.foreignaffairs.com/articles/world/2020-06-09/pandemic-and-political-order 28 Mark Davies, Christophe Bene, et al.
‘Promoting Resilient Livelihoods Through Adaptive Social Protection: Lessons from 124 Programmes in South Asia,’ Development Policy Review 31:1, 2012: https://doi- org.virtual.anu.edu.au/10.1111/j.1467-7679.2013.00600.x 29 Ben Doherty.
‘”Job-killer of the Century”: Economies of Pacific Islands Face Collapse Over COVID-19,’ The Guardian, 11 July 2020: theguardian.com/world/2020/jul/11/job-killer-of-the-century-economies-of-pacific- islands-face-collapse-over-covid-19 9 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 substantial reductions in development expenditures, resulting in less effective service delivery and little development expenditure.
Like PNG, the Solomon Islands, is looking for more donor-funded infrastructure spending and loans to stimulate the economy.30 Meanwhile, the AIFFP is holding $500 million in ODA funds over four years, with an additional $1.5 billion in the form of a line of credit from the Australian federal budget.

In addition, its administering agency, Export Finance Australia, has access to an additional $1 billion in callable capital, should it be required in an emergency.
31 COVID-19 and its resulting economic devastation is a signal that the emergency has arrived.

The AIFFP could be used to finance a set of packages consisting of cash transfer funds for immediate relief for households, such as those devastated by Tropical Cyclone Harold in Vanuatu, in addition to finance for job and income protection schemes across the region, to support their resilience in the COVID-induced recession.
These packages can be designed at national and regional scales, to assist micro-states like Kiribati, for example, who argue they are at a disadvantage due to their small size, causing them to be overlooked by large infrastructure initiatives like the AIFFP.

32 In addition, even most of the larger PIC economies, whether they depend on tourism, resources, infrastructure construction, or combinations of these activities, cannot finance their economic recoveries singlehandedly.
For example, PNG and the Solomon Islands are experiencing either resource gluts or weakening demand respectively, resulting in reduced revenues from LNG and timber.

The PNG government has limited fiscal resources and cannot implement an expansionary, stimulus-based budget alone, so is urgently seeking loans from development partners like Australia.
As Jeffrey Wall has recently argued, both state capacity to manage the virus and its impacts, and community health and social security, are at stake.33 Likewise, in the Solomon Islands, low government cash reserves exacerbate vulnerability, especially in rural areas, which have experienced substantial reductions in development expenditures, resulting in less effective service delivery and little development expenditure.
Like PNG, the Solomon Islands, is looking for more donor-funded infrastructure spending and loans to stimulate the economy.

The Solomon Islands government has launched a stimulus package of its own, consisting of tax relief measures and concessional loans for Small and Medium Enterprises (SMEs), adopting a strengths-based approach aimed at shoring up smallholder agriculture, for example.
Yet it has also acknowledged its “fiscal instability” and included the proviso that the package “should be seen as an initial response.”34 Importantly, income support for households is not included, and this omission is not surprising.

Even Fiji, with its relative lack of poverty, cannot afford measures such as wage subsidies and wage transfers to households, and is presently suspending its $1,000 parenthood 30 Jonathan Pryke.
‘COVID-19: Averting Economic Disaster in the Pacific,’ The Interpreter, Lowy Institute, 3 April 2020: https://www.lowyinstitute.org/the-interpreter/covid-19-averting-economic-disaster-pacific 31 Stephen Howes: ‘EFIC Reform: A Bad Idea,’ DevPolicy Blog, The Australian National University, 14 February 2019: https://devpolicy.org/efic-reform-a-bad-idea-20190213/ 32 ’Kiribati Response: Australian Aid for Trade Enquiry,’ Submission #32, Parliament of Australia: ‘Submissions,’ Inquiry into Australia Activating Greater Trade and Investment with Pacific Island Countries, Australian Government, 2020: https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Foreign_Affairs_Defence_and_Trade/Tra dewithPacific/Submissions 33 Jeffrey Wall: ‘Australia’s Rescue Package for PNG Must Tackle Much Deeper Problems,’ The Strategist, Australian Strategic Policy Institute, 7 April 2020: https://www.aspistrategist.org.au/australias-rescue-package- for-png-must-tackle-much-deeper-problems/ 34 Solomon Islands Government: ‘Solomon Islands Government Economic Stimulus Package to Address the Impacts of the COVID-19 Pandemic,’ 5 May 2020.
See also ’Prime Minister Sogavare Launch Economic Stimulus Plan,’ Solomon Times, 15 May 2020: https://www.solomontimes.com/news/prime-minister-sogavare-launch- economic-stimulus-plan/9792 10 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 assistance payment.35 This situation affords the Australian Government an opportunity to assist the PICs by funding measures that complement their own.
Save the Children urges the Australian Government to address the PICs’ social protection needs by expanding the focus of its Pacific Step- Up from hard infrastructure to the various forms of soft and human infrastructure that can protect communities facing simultaneous, interlocking, and potentially devastating social security challenges.
The FREO2 Foundation and Save the Children In addition to income measures, Australia should use the AIFFP to finance some of the health capacity expansion that many of the PICs require, in collaboration with multilateral funds.

While the medical supplies and personal protective equipment that Australia is delivering are a good start, longer-term support needs to be considered, including via new initiatives and social enterprises being developed in Australia.
For example, Australia could finance an important Australian initiative aimed at protecting Pacific children (and adults) from acute respiratory infections and pneumonia by providing oxygen in conditions where a constant electricity supply cannot be guaranteed.
Save the Children is calling for support for the FREO2 Foundation, based at the University of Melbourne, which has developed a range of new technologies to ensure 100 per cent availability of oxygen even in low electricity environments, and which, in partnership with Save the Children, plans to establish a pilot of this technology in the Solomon Islands – a country which has some of the highest incidence of pneumonia in the Pacific, even before COVID-19.
36 Some PICs will be able to finance some of these measures themselves.

Several PICs have debt to GDP ratios of less than 50 per cent, or slightly more in Vanuatu’s case, at 52.9 per cent.
Such figures have allowed such economies, like Fiji and Vanuatu, some opportunity to stimulate their own economies, with some of the resulting shortfalls underwritten by their own central banks and superannuation funds.37 In addition to these measures, however, which are likely to be insufficient, some estimates suggest that the PICs might need an additional AUD $5 billion, for which their governments can also approach donors and multilateral development banks (MDBs) for grants and budget support loans.
Many PICs can be shown to be in debt distress, yet the scale of the current crisis justifies borrowing for such purposes, including to protect the tourism industry and its valuable jobs, even if this borrowing forces indicators like the Debt Sustainability Analysis ratings produced by the International Monetary Fund to be revised.38 35 Neelesh Gounder, ‘Fiji’s Economic Freefall, and the Government’s Response,’ DevPolicy Blog, The Australian National University, 17 April 2020: https://devpolicy.org/fijis-economic-freefall-and-the-governments- response-20200417/.
See also Timoci Vula.
‘Budget 2020-2021: Fijian Government Suspends Parenthood Assistance,’ The Fiji Times,’ 18 July 2020: https://www.fijitimes.com/budget-2020-2021-fijian-government- suspends-parenthood-assistance/ 36 For more information on FREO2, see ‘FREO2 Foundation’: https://freo2.org/ 37 Odo Tevi, ‘The Pacific’s Economic Response to COVID-19: Will it be Sustainable?’ DevPolicy Blog, ANU, 23 April 2020: https://devpolicy.org/the-pacifics-economic-response-to-covid-19-will-it-be-sustainable-20200423- 1/.
See also Neelesh Gounder, ‘Fiji’s Economic Freefall, and the Government’s Response,’ DevPolicy Blog, ANU, 17 April 2020: https://devpolicy.org/fijis-economic-freefall-and-the-governments-response-20200417/ 38 Kishti Sen and Tom Kenny, ‘Prepare for Zero Tourists for the Next Three Months,’ Pacific Insight, ANZ Research, 25 March 2020.

See also Alexandre Dayant and Roland Rajah, ‘How Much is Too Much?
COVID Loans for the Pacific,’ The Interpreter, Lowy Institute, 16 April 2020: https://www.lowyinstitute.org/the- interpreter/how-much-too-much-covid-loans-pacific.

For a discussion of PICs’ debt distress, including the source of the loans in question, see Rohan Fox and Matthew Dornan, ‘China in the Pacific: Is China Engaged in Debt-Trap Diplomacy?’ DevPolicy Blog, ANU, 8 November 2018: https://devpolicy.org/is-china-engaged-in- debt-trap-diplomacy-20181108/.
11 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 Other PICs, like Papua New Guinea and the Solomon Islands, are more fragile, with a greater incidence of extreme poverty, and limited fiscal resources to protect rural communities, problems that are compounded by COVID.
The Government of the Solomon Islands has cut rural development spending because of its fiscal shortfall.39 The Government of PNG has borrowed from its central bank, commercial banks, and foreign development partners to develop an economic stimulus package that includes support from the IMF, World Bank, and Asian Development Bank, as well as bilateral donors, including Australia.
These measures are unlikely to be sufficient to protect PNG communities from increased unemployment and running down their retirement savings.40 This capacity notwithstanding, it is not sufficient to create a cohesive system of interlocking social protection schemes as Save the Children Australia now recommends.
These schemes could (and should) consist of cash benefits, sick leave, disability pensions, health care, family allowances, parental leave, early childhood education and care, employment skills training, job-creation incentives, start-up incentives, unemployment benefits, severance pay, and housing assistance.41 They could integrate with DRR and CCA programs, assisting to “shift the time horizon beyond short- term interventions aimed at supporting people’s coping strategies and/or graduation objectives, towards longer-term interventions that can help promote transformation towards climate and disaster resilient livelihood options.”42 Taking a holistic view along these lines would allow Australia – together with multilateral and partner donors like the US, Japan, and possibly India – to create a range of “interventions and instruments” that complement each other, covering cash transfers, microcredit, social enterprises, skills training, and enterprise start-up programs, aimed at providing people with the resources necessary to improve their living standards to a point at which they are no longer dependent upon external sources of assistance.
Existing Pacific social protection systems are poor, with a low breadth of coverage.

In other words, “while a few beneficiaries receive fairly substantial benefits [i.e.
formal sector workers and their pensions and insurance], the great majority receive relatively small benefits, if any.”43 To lessen the burden on PICs which cannot finance the necessary stimulus measures themselves, Save the Children supports calls made by agencies such as the World Bank and IMF for the G20 to suspend interest payments on bilateral credit from International Development Association (IDA) countries, freeing up national resources to support Pacific communities.
These countries include Fiji, Kiribati, Marshall Islands, Micronesia, Papua New Guinea, Samoa, Solomon Islands, Timor Leste (included here as it is eligible for assistance from the Australian Infrastructure Financing Facility for the Pacific), Tonga, Tuvalu, and Vanuatu.44 Supporting these PICs’ economies in this fashion will also help alleviate any pressure they may feel to seek bilateral donor assistance from elsewhere, 39 The World Bank, East Asia and the Pacific in the Time of COVID-19, World Bank East Asia and Pacific Economic Update April 2020, World Bank Group, 2020: https://www.worldbank.org/en/region/eap/publication/east-asia-pacific-economic-update#kf6.
40 Jotam Sinopane, ‘PNG’s Economic Stimulus: An Assessment,’ DevPolicy Blog, ANU, 23 April 2020: https://devpolicy.org/pngs-economic-stimulus-an-assessment-20200423-3/.

41 Refer to OECD.

‘The Future of Social Protection,’ OECD, 7 November 2018: https://www.oecd.org/els/the- future-of-social-protection-9789264306943-en.htm 42 Mark Davies, Christophe Bene, et al.
‘Promoting Resilient Livelihoods Through Adaptive Social Protection: Lessons from 124 Programmes in South Asia,’ Development Policy Review 31:1, 2012: https://doi- org.virtual.anu.edu.au/10.1111/j.1467-7679.2013.00600.x 43 World Bank.
‘The State of Social Safety Nets 2018,’ World Bank Group, 2018: https://openknowledge.worldbank.org/bitstream/handle/10986/29115/9781464812545.pdf?sequence=5&isA llowed=y 44 International Development Association, ‘Borrowing Countries,’ World Bank Group, 2020: https://ida.worldbank.org/about/borrowing-countries 12 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 potentially further sharpening geopolitical competition in the region.45 The amounts involved are modest – around $13 billion for all the IDA countries for 2020 across the G20 membership.
Save the Children also supports the World Bank’s $160 billion financing package across the IDA and International Bank for Reconstruction and Development (IBRD) countries, including PICs.

In addition, Save the Children urges the Australian Government to use its AIFFP to address the PICs’ health and education needs by supporting innovative social enterprises focused on human capital and human development to scale up their work in the Pacific.
The use of social enterprise models means that such initiatives need not impose financial costs on Pacific communities and instead, they could pay for themselves.

The FREO2 pilot, for example, would also test a social enterprise model where local, trained technicians earn an income by servicing oxygen generating technologies in a cluster of health clinics to ensure the long-term sustainability of the solution.
In addition to the FREO2 partnership, Save the Children’s social venture, Inclusiv Ventures, proposes to leverage Australia’s commitment to installing a high-speed undersea internet cable between Australia, PNG, and Solomon Islands.

Its aim is to treble the number of learners in higher education and vocational training in PNG over five years, helping to address the question of access to training and the creation of new jobs in a post-COVID-19 Pacific.
Inclusiv Ventures has been working on an agreement with the PNG Department of Higher Education, Research, Science and Technology to expand inclusion in educational opportunities through eLearning.
The proposed five year project would create a national eLearning platform based on Moodle, the world’s largest open source learning system and an Australian company, along with building a national eLearning community of practice, curriculum and course instructional design and development, delivery including infrastructure solutions taking eLearning to provincial areas, and creating a technology services ecosystem.
Our partners include the PNG Ministry of Education, universities and vocational training institutions, Kumul Industries (the PNG Government Telco provider and owner of the Australian Government-funded undersea internet cable), and international education software providers.

This project would support Australia’s aims in building human capital in the PICs, helping to boost jobs, educational outcomes, and employability.
The use of social enterprise models has the potential to contribute to building the state capacity required to advance health and education outcomes across the Pacific.

Assuming they are successfully de-risked by donor and Pacific governments, such models would not need to impose financial costs on Pacific communities, and instead, they could pay for themselves.
This way of working would also leverage the wide networks of civil society organisations across Australia and the Pacific, as CSOs, a part of a booming “third sector” worth at least USD $2.2 trillion in operating expenditures globally.
This sector also employs at least 56 million workers (full time equivalent) globally, and runs a range of important human services including welfare and health care providers while promoting inclusive social innovation by state and market partners.46 With more support to roll-out pilot projects now, such partnerships could begin to develop the health and education systems that respond to Pacific countries’ social protection needs, and to assist them to navigate their way out of this recession by putting new skills in the hands of children and adolescents.
45 Johnny Moreale, ‘The Emerging Geopolitical Competition in Oceania,’ Interview with Michael Wesley, The National Bureau of Asian Research, 5 February 2020.

46 There is a paucity of accounting in relation to the value of the global third sector and this reference is to Salamon’s figures, which are based on a sample of 40 countries and published nearly a decade ago.
Refer to Lester M. Salamon (2010), ‘Putting the Civil Society Sector on the Economic Map of the World,’ in Annals of Public and Comparative Economics 81:2, pp.
167-210: https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467- 8292.2010.00409.x 13 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 Previous pilot social enterprise programs, such as Pacific RISE, have been shown to be effective and responsive to lessons learned in the field in the Pacific, and point to plausible blended finance models for the future.47 The approach that we advocate here is not strictly the same as the “aid for trade” approach, which aims to grow private sector capacity.
Instead, we argue for Australia to better position the CSO sector, with its associated social enterprises, to enter the services trade across the Pacific, including to stimulate efforts to build and enhance the human infrastructure systems that the PICs fear would be defunded by their loss of tariff revenue in line with PACER Plus.
DFAT’s submission to the Inquiry into Australia Activating Greater Trade and Investment with Pacific Island Countries recognises that services are “an important and growing source of trade between Australia and the Pacific,” and Australia has the opportunity now to position itself not only as a consumer of Pacific tourism – an engine of the services trade to date – but also as an exporter of services that Pacific communities need.48 Pilot models could be developed from the ideas we outline here, and lessons extracted and services scaled up by a regional Pacific service that the PICs could manage in their own interest, with Australian financial support.
Designing the system on a regional basis would also allow the PICs to share the burden of public services across the region, mitigating the disadvantages of small economies with narrow tax bases.

Further, CSOs like Save the Children have traditionally engaged with the PICs under the banner of the Australian aid program.
The decline in ODA funding since FY2013/14, now combined with the redirection of existing Australian ODA finance towards the COVID-19 response, mean that our social enterprises are increasingly a more appropriate footing on which we propose to continue supporting Pacific communities’ development aims.
Further, in the absence of significant uptake of AIFFP investment funds by Australian businesses, CSOs like Save the Children are prepared to seed the businesses that will have the potential to invest in partner PICs, while also working holistically to address the needs of Pacific communities, including, potentially, in knowledge transfers through these social enterprises and their work.

3.
3.

Support Pacific labour mobility in Australia to support remittance flows In addition to the proposals above, Save the Children welcomes recent discussions between Australia, New Zealand, and some interested PICs, aimed at creating a “Pacific bubble” to protect both Pacific tourism jobs and Pacific labour mobility into Australia.
Of course, we expect that such discussions will cover the appropriate quarantine and isolation safeguards, as well as labour protections so that the wages and conditions of Pacific workers in Australia align with Australian community expectations.

In addition to the value of tourism, as discussed above, remittances are a critical source of financial flows into the Pacific, improving the prosperity of the communities they support.
Further, to date, Vanuatu and Solomon Islands have suffered no COVID-19 infections, while Fiji has reported only a small number of cases.

Assuming the PICs (and Australia) continue to contain the virus, implementing a Pacific bubble could permit labour migration between the two locations to continue, helping to ease the burden created by disruptions across other sectors.

Remittances are already a greater share of Pacific economies than aid and represent 5-40 per cent of PICs’ GDP.
The World Bank estimates that due to COVID-19, global remittances are projected to decline by approximately 20 per cent, making this economic shock the largest decline in remittances in 47 Pacific Readiness for Investment in Social Enterprise.
‘Annual Report,’ Pacific RISE, December 2018: https://www.pacificrise.org/wp-content/uploads/2016/12/Pacific-RISE-Annual-Report-2018-Cleared- 20190507.pdf 48 DFAT: ‘Foreign Affairs and Trade Portfolio Submission,’ Submission #14, Parliament of Australia: ‘Submissions,’ Inquiry into Australia Activating Greater Trade and Investment with Pacific Island Countries, Australian Government, 2020.
14 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59 recorded history.

Australia is the source of 26 per cent of remittances to PICs, with Pacific seasonal workers sending home approximately $2,200 each over a six-month period in Australia, and bringing an average of $6,650 in savings back at the end of their period of work in Australia.
The Australian government has allowed Pacific Islanders on labour mobility schemes to stay in Australia during the pandemic and to keep working, allowing this form of trade to continue, and we argue that it should further extend this capacity during the crisis.

The creation of a regional bubble which includes the Pacific would also allow Australian temporary labour programs to continue as agricultural and seasonal labour from other countries dries up.
As a result, Australia can ensure a well-regulated labour supply for key industries such as horticulture, marking a departure from the poorly regulated use of backpacker and other migrant labour in these sectors to date.

It could also give Pacific Islanders a chance to send money back to their families, supporting children to stay in school and continuing their access to healthcare.
Conclusion To conclude, Save the Children reiterates that Australia’s approach to strengthening Australian- Pacific relationships must take into account the nature of the present crisis, and focus on forging genuine partnerships with neighbours who, like Australians, need support to survive the greatest economic downturn since the Depression.
As we have argued in the Lowy Interpreter, that means adapting our approach to the Pacific Step-Up so it supports “relationships which are reciprocal and made between equals, which makes them enduring in a way that donor-recipient bonds are not.”49 Australia may remain the largest donor to PICs, but the constraints imposed on our development cooperation program reduce our capacity to assist the PICs using traditional approaches.
Such approaches, with their focus on projects, could not be expected to generate responses at the national and regional scales required to provide Pacific communities with the safety nets they need to survive the present crisis.

Save the Children is a long-standing partner of Australia’s development cooperation program in the Pacific, and in our view, the Australian Government must adapt its Pacific Step-Up framework to enable the social protection measures required.
49 Joe Rafalowicz, ‘Creating A Pacific Bubble,’ The Interpreter, Lowy Institute, 7 May 2020.

15 Inquiry into strengthening Australia’s relationships with countries in the Pacific regionSubmission 59